<PAGE> 1
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OCCIDENTE Y CARIBE CELULAR S.A.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WESTERN & CARIBBEAN CELLULAR INC.
(TRANSLATION OF REGISTRANT NAME INTO ENGLISH)
COLOMBIA
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
4812
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
CARRERA 55 NO. 49-101
MEDELLIN, COLOMBIA
57-4-512-9090
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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With a copy to:
CT CORPORATION SYSTEM TIMOTHY G. MASSAD, ESQ.
1633 BROADWAY, NEW YORK, NEW YORK 10019 CRAVATH, SWAINE & MOORE
(212) 664-1666 WORLDWIDE PLAZA
(NAME, ADDRESS, INCLUDING ZIP CODE, AND 825 EIGHTH AVENUE
TELEPHONE NUMBER, NEW YORK, NY 10019-7475
INCLUDING AREA CODE, OF AGENT FOR SERVICE OF (212) 474-1000
PROCESS)
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the
Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(2) OFFERING PRICE(2) FEE(3)
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14% Series B Senior Discount
Notes due 2004............ US$190,745,000(1) US$524.26 US$100,000,000 US$35,183
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(1) Represents principal amount at maturity.
(2) Determined solely for the purposes of calculating the registration fee in
accordance with Rule 457 promulgated under the Securities Act of 1933, as
amended (the "Securities Act").
(3) Calculated in accordance with Rule 457(f)(2) under the Securities Act, based
on the accreted value of the securities being registered on July 31, 1996.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"),
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
OCCIDENTE Y CARIBE CELULAR S.A.
CROSS-REFERENCE TABLE
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
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ITEM NO. FORM F-4 CAPTION LOCATION IN PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
Item 1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page of Prospectus
Item 2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front and Outside Back Cover
Pages of Prospectus; Enforcement of
Foreign Judgments in Colombia
Item 3. Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information............ Summary; Risk Factors; Selected
Financial Information; Taxation
Item 4. Terms of the Transaction.................. Summary; The Exchange Offer; Use of
Proceeds; Description of the Notes;
Taxation; Description of Company
Indebtedness
Item 5. Pro Forma Financial Information........... Not Applicable
Item 6. Material Contracts with the Company Being
Acquired.................................. Not Applicable
Item 7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Not Applicable
Item 8. Interests of Named Experts and Counsel.... Legal Matters; Independent Auditors
Item 9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
Item 10. Information with Respect to F-3
Registrants............................... Not Applicable
Item 11. Incorporation of Certain Information by
Reference................................. Not Applicable
Item 12. Information with Respect to F-2 or F-3
Registrants............................... Not Applicable
Item 13. Incorporation of Certain Information by
Reference................................. Not Applicable
Item 14. Information with Respect to Registrants
Other Than F-3 or F-2 Registrants......... Summary; Risk Factors; Capitalization;
Selected Financial Information;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; The Refinancing; Business;
Management; Principal Shareholders;
Certain Transactions with Related
Parties; Description of Company
Indebtedness; Taxation; Foreign Exchange
Controls in Colombia; Regulation;
Exchange Rates; Financial Statements
</TABLE>
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<TABLE>
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ITEM NO. FORM F-4 CAPTION LOCATION IN PROSPECTUS
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C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
Item 15. Information with Respect to F-3
Companies................................. Not Applicable
Item 16. Information with Respect to F-2 or F-3
Companies................................. Not Applicable
Item 17. Information with Respect to Companies
Other Than F-3 or F-2 Companies........... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
Item 18. Information if Proxies, Consents or
Authorizations are to be Solicited........ Not Applicable
Item 19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or
in an Exchange Offer...................... Management; Principal Shareholders
</TABLE>
<PAGE> 4
SUBJECT TO COMPLETION, DATED AUGUST 5, 1996
PRELIMINARY PROSPECTUS
OFFER FOR ALL OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2004,
IN EXCHANGE FOR
14% SERIES B SENIOR DISCOUNT NOTES DUE 2004
OF
OCCIDENTE Y CARIBE CELULAR S.A.
(A CORPORATION ORGANIZED UNDER THE LAWS OF THE REPUBLIC OF COLOMBIA)
The Exchange Offer
and withdrawal rights will expire at 5:00 p.m., New York City time,
on , 1996 (as such date may be extended,
the "Expiration Date").
------------------------
Occidente y Caribe Celular S.A., a Colombian corporation (the "Company" or
"Occel"), is hereby offering to exchange an aggregate principal amount at
maturity of up to US$190,745,000 of its 14% Series B Senior Discount Notes due
2004 (the "New Notes") for a like principal amount at maturity of its 14% Senior
Discount Notes due 2004 (the "Old Notes") outstanding on the date hereof upon
the terms and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together will constitute the "Exchange
Offer"). The New Notes and Old Notes are collectively hereinafter referred to as
the "Notes".
The terms of the New Notes are identical in all material respects to those
of the Old Notes, except for certain transfer restrictions and registration
rights relating to the Old Notes. The New Notes will be issued pursuant to, and
entitled to the benefits of, the Indenture (as defined) governing the Old Notes.
The Accreted Value (as defined herein) of the New Notes initially will be
equal to the Accreted Value of the Old Notes at the time of exchange. Cash
interest will not accrue on the New Notes prior to March 15, 2001, from which
time cash interest will accrue on the New Notes at a rate of 14% per annum.
Interest on the New Notes is payable semiannually on each March 15 and September
15, commencing September 15, 2001. The Company will redeem 50% of the original
aggregate principal amount at maturity of the New Notes, on March 15, 2003, at
100% of the principal amount thereof. The New Notes will mature on March 15,
2004. The New Notes will be redeemable at the option of the Company, in whole or
in part, at 100% of the principal amount thereof if redeemed prior to September
15, 2000 and, thereafter, at the redemption prices set forth herein, in each
case together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time prior to March 15, 1999, the Company may
redeem up to 33% of the original aggregate principal amount at maturity of the
New Notes from the net proceeds of any Public Equity Offering (as defined
herein) at a redemption price equal to 114% of the Accreted Value (as defined
herein) thereof. The New Notes will be redeemable at the option of the Company,
as a whole, but not in part, in the event of certain changes in Colombian tax
law. Upon the occurrence of a Change of Control, each holder of New Notes may
require the Company to purchase all or a portion of such holder's New Notes at a
purchase price in cash equal to 101% of the Accreted Value thereof, together
with accrued and unpaid interest, if any, to the date of purchase. The Company's
ability to redeem the New Notes is subject to certain limitations under
Colombian law. See "Description of the Notes".
The New Notes will be senior unsecured obligations of the Company ranking
pari passu in right of payment with all other existing and future unsubordinated
obligations of the Company (other than obligations preferred by statute or by
operation of law), except as described in the "Description of the
Notes -- Ranking", and senior in right of payment to all existing and future
obligations of the Company expressly subordinated in right of payment to the New
Notes. The New Notes, however, will be effectively subordinated to senior
secured obligations of the Company with respect to the assets of the Company
securing such obligations.
(Continued on next page)
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SEE "RISK FACTORS" BEGINNING ON PAGE 17 HEREIN FOR A DISCUSSION OF CERTAIN
FACTORS THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE
EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OF OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The date of this Prospectus is , 1996.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such state.
<PAGE> 5
(Continued from previous page)
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date (as defined) for the Exchange Offer. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes
with respect to the Exchange Offer, the Company will promptly return such Old
Notes to the holder thereof. See "The Exchange Offer".
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution".
Prior to the Exchange Offer, there has been no public market for the Old
Notes. If a market for the New Notes should develop, such New Notes could trade
at a discount from their accreted value. The Company currently does not intend
to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system and no active public market for
the New Notes is currently anticipated.
The Exchange Offer is not conditioned upon any minimal principal amount of
Old Notes being tendered for exchange pursuant to the Exchange Offer.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Purchase Agreement dated as of May 31, 1996
between the Company and the initial purchasers of the Old Notes (the "Initial
Purchasers") and the Registration Rights Agreement dated June 7, 1996 (the
"Registration Rights Agreement") between the Company and the Initial Purchasers.
The Old Notes were issued in a transaction (the "Offering") pursuant to
which the Company issued US$190,745,000 principal amount at maturity of the Old
Notes. The Old Notes were sold by the Company to the Initial Purchasers on June
7, 1996 (the "Issue Date") pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Units in reliance on Rule 144A and
certain other exemptions under the Securities Act.
<PAGE> 6
THE ISSUANCE OF THE NOTES HAS BEEN APPROVED BY THE COLOMBIAN
SUPERINTENDENCY OF CORPORATIONS (SUPERINTENDENCIA DE SOCIEDADES) (THE
"SUPERINTENDENCY OF CORPORATIONS"). SUCH APPROVAL DOES NOT IMPLY AN APPROVAL OF
THE QUALITY OF THE NOTES OR THE SOLVENCY OF THE COMPANY. THE NOTES MAY NOT BE
OFFERED OR SOLD IN THE REPUBLIC OF COLOMBIA ("COLOMBIA").
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AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "SEC") a Registration Statement (which term includes any
amendments thereto) on Form F-4 under the Securities Act with respect to the New
Notes offered by this Prospectus. This Prospectus does not contain all
information set forth in the Registration Statement and the exhibits thereto, to
which reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement, or other document are not necessarily
complete. With respect to each such contract, agreement, or other document filed
as an exhibit to the Registration Statement, reference is made to such exhibit
for a more complete description of the matter involved.
As a result of the filing of the Registration Statement with the SEC, the
Company will become subject to the informational requirements of the United
States Securities and Exchange Act of 1934, as amended (the "Exchange Act") and
in accordance therewith will be required to file with or furnish to the SEC
certain reports and other information. The Registration Statement, the exhibits
and schedules thereto, reports, and other information filed with or furnished to
the SEC by the Company may be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material may be obtained by mail from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13(a) or 15(d) of the Exchange Act or
otherwise report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations promulgated by
the SEC, the Company has agreed that, for so long as any of the Notes remain
outstanding, it will file with or furnish to the SEC and provide to the Trustee
and the holders of the Notes and potential purchasers of Notes upon written
request to the Trustee by any holder of Notes, potential purchaser of Notes or
Initial Purchaser: (i) within 140 days after the end of each fiscal year, annual
reports on Form 20-F, (ii) within 60 days after the end of each of the first
three fiscal quarters of each fiscal year, reports on Form 6-K containing
substantially the same information required by Form 10-Q, and (iii) promptly
from time to time after the occurrence of an event required to be therein
reported, such other reports on Form 6-K containing substantially the same
information required by Form 8-K. Financial statements of the Company contained
in any such report will be prepared in accordance with Colombian GAAP and each
such report referred to in clauses (i) or (ii) will contain a reconciliation to
U.S. GAAP consistently applied and will be prepared in accordance with the
applicable rules and regulations of the SEC. See "Description of
Notes -- Certain Covenants -- Reports".
As a foreign private issuer, the Company is exempt from certain provisions
of the Exchange Act prescribing the furnishing and content of proxy statements.
2
<PAGE> 7
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a sociedad anonima organized under the laws of Colombia. All
of the directors and officers of the Company and certain of the experts named in
this Prospectus reside outside of the United States, and all or a substantial
portion of the assets of such persons and the Company are located outside the
United States. As a result, it may not be possible for investors to effect
service of process within the United States upon such persons, including with
respect to matters arising under the Securities Act of 1933, as amended (the
"Securities Act"), or to enforce against the Company or any of them judgments
obtained in United States courts predicated upon the civil liability provisions
of the federal securities laws of the United States. The Company has been
advised by its Colombian legal counsel, Holguin, Neira y Pombo, that there is
doubt as to the enforceability, in original actions in Colombian courts, of
liabilities predicated solely on the United States federal securities laws and
as to the enforceability in Colombian courts, of judgments of United States
courts obtained in actions predicated upon the civil liability provisions of the
United States federal securities laws. The Company has appointed CT Corporation
System, New York, New York, as its agent to receive service of process with
respect to any action brought against it in any federal or state court in the
State of New York arising from the Exchange Offer. The Company has been advised
by its Colombian legal counsel that a claim by a holder of Notes or Warrants in
connection with the Exchange Offer may be brought in such courts. See
"Enforcement of Foreign Judgments in Colombia".
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NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT
IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER
OR CLIENT, ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
PARAGRAPH.
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POPULATION DATA
Data regarding population in Colombia and the Western Region (as defined
herein) are based on projections of 1995 population figures calculated by the
Colombian National Administrative Department of Statistics (Departamento
Administrativo Nacional de Estadistica) ("DANE") on the basis of the 1985
census. The results of the 1993 census are not officially available yet. There
can be no assurance that these projections accurately reflect the current
population in the Western Region.
3
<PAGE> 8
EXCHANGE RATES
Until 1991, the Colombian Central Bank (Banco de la Republica) (the
"Central Bank") set an official exchange rate (the "Official Rate") applicable
to all foreign exchange transactions, based on its prevailing economic policy.
Since October 1991, exchange rates have been freely set by the market. The
Colombian Superintendency of Banking (Superintendencia Bancaria) (the
"Superintendency of Banking") calculates and publishes daily the Representative
Market Rate (Tasa Representativa del Mercado) (the "Representative Market Rate")
which is the weighted average of the foreign exchange buy and sell rates quoted
on the previous business day by certain commercial banks and financial
institutions in Santafe de Bogota, Cali, Medellin and Barranquilla for the
purchase and sale of foreign currency. The Representative Market Rate serves as
a basis for establishing the rate used in many foreign exchange transactions
conducted on the foreign exchange market and the free market as defined under
Law 9/1991. From October 1991 through January 1995, the Central Bank set the
Official Rate for certain limited purposes. Since February 1995, the Central
Bank has not established an Official Rate. See "Annex B -- Republic of
Colombia -- Monetary System and Monetary Aggregates -- Foreign Exchange Rates
and International Reserves".
The following table sets forth the Peso/Dollar Official Rate (as defined
below) at the end of each period indicated and, for each such period, the high,
low, average and end of period Representative Market Rate for Dollars. The
Federal Reserve Bank of New York does not report a noon buying rate for Pesos.
<TABLE>
<CAPTION>
PESO/DOLLAR
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OFFICIAL REPRESENTATIVE MARKET(1)
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% CHANGE % CHANGE
PERIOD FROM PRIOR PERIOD FROM PRIOR
END PERIOD END LOW HIGH AVERAGE(2) END PERIOD END
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<S> <C> <C> <C> <C> <C> <C> <C>
1990....... Ps 568.7 31.3% Ps --(1) Ps --(1) Ps --(1) Ps --(1) --%(1)
1991....... 706.9 24.3 620.62(3) 643.42(3) 630.41(4) 632.37 --
1992....... 811.8 14.8 632.37 720.47 682.54 737.98 16.7
1993....... 917.3 13.0 738.65 819.55 786.54 804.33 9.0
1994....... 1,018.8.. 11.0 804.33 843.24 829.44 831.27 3.3
1995....... N/A...... N/A 831.27 1,003.47 987.12 987.65 18.8
</TABLE>
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(1) Did not exist prior to 1991.
(2) The weighted average rate during the relevant period.
(3) This reflects the low and high, as the case may be, for December 1991.
(4) The weighted average rate for the entire year ended 1991.
Sources: Banco de la Republica, Superintendencia Bancaria
The Representative Market Rate calculated by the Superintendency of Banking
for December 31, 1995 and March 31, 1996 was Ps 987.65 for one Dollar and Ps
1,046.00 for one Dollar, respectively. For the convenience of the reader, this
Prospectus contains translations of Peso amounts into Dollars, unless otherwise
indicated, at the Representative Market Rate as of March 31, 1996. The
Representative Market Rate on July 31, 1996, was Ps 1,056.74 for one Dollar.
Unless otherwise noted, all financial information included in this Prospectus
has, for comparability purposes, been restated in constant Pesos as of the
latest balance sheet date (March 31, 1996) by indexing historical amounts using
the Colombian Consumer Price Index (the "Colombian CPI"). No representation is
made that the Peso or Dollar amounts shown in this Prospectus could have been or
could be converted into Dollars or Pesos, as the case may be, at any particular
rate or at all.
4
<PAGE> 9
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, included
elsewhere in this Prospectus. The Company publishes its financial statements in
Colombian pesos and in accordance with Colombian generally accepted accounting
principles. In this Prospectus, unless otherwise indicated, amounts are
expressed in Colombian pesos ("Ps" or "Pesos") and in United States dollars
("US$" or "Dollars"). The term "billion" as used in this Prospectus means one
thousand million (in Dollars and in Pesos). The "Company" or "Occel" means
Occidente y Caribe Celular S.A.
The term "reported subscribers" means subscribers as reported by the
Company to the Colombian Ministry of Communications. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General". Consistent with the Company's interpretation of the
Ministry's reporting guidelines and with what the Company believes to be the
common interpretation of cellular operators in Colombia, the Company currently
includes in such term subscribers who have been temporarily disconnected and are
under evaluation by the Company for reconnection or permanent deactivation.
"Active subscribers" is the Company's internal measure of customers currently
generating revenue. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General" and "-- Price Competition and
Related Matters," for a discussion of the differences between reported and
active subscribers. See also the "Glossary of Certain Telecommunications Terms"
attached as Annex A hereto for a definition of certain terms.
THE COMPANY
GENERAL
Occel is one of only two providers of cellular telecommunications services
in the densely populated western region of Colombia (the "Western Region"). The
Western Region has a population of approximately 12.8 million people (or
approximately 36% of the country's population), and includes the cities of
Medellin and Cali, the second and third largest metropolitan areas in the
country, as well as thirteen other cities with populations in excess of 100,000
each. The Company commenced commercial cellular service in September 1994,
pursuant to a ten-year concession effective as of March 28, 1994, and has
subsequently generated significant growth in total subscribers and revenues. As
of December 31, 1995 and March 31, 1996, the Company had 40,887 and 48,460
reported subscribers, respectively, and realized average monthly revenue per
active subscriber for the quarters ended December 31, 1995 and March 31, 1996 of
US$141.76 and US$143.84, respectively (in actual Pesos translated at the average
Representative Market Rates for the respective quarters). As of June 30, 1996,
the Company had 56,741 reported subscribers.
Since the launch of its service, the Company has sought to rapidly increase
its coverage areas, establish recognition of its "Vozavoz" brand name and
provide a superior quality of service that is equivalent to that provided by
world class operators. As of March 31, 1996, the Company had reached a
penetration level of 0.56% of the population covered by its cellular network,
which included the metropolitan areas of Medellin (with approximately 2.4
million pops), Cali (with approximately 1.8 million pops), Pereira (with
approximately 0.5 million pops), Manizales (with approximately 0.4 million
pops), Armenia (with approximately 0.2 million pops) and other urban areas
(having in the aggregate approximately 0.7 million pops). In addition, the
Company has roaming agreements with other cellular operators which provide its
customers with nationwide coverage throughout Colombia as well as access in
several other countries.
The Company has invested heavily in constructing a state-of-the-art network
which has dual analog and digital capacity and which can support continued
growth in subscribers as well as technologically advanced new services. As of
March 31, 1996, the Company's cellular telecommunications network covered
approximately 67% of the population of the Western Region. The Company had
incurred approximately Ps 57 billion (US$54 million) in capital expenditures
through March 31, 1996 to build its network, and expects to incur approximately
an additional US$51 million to substantially complete its build-out (including
planned upgrades) by 1999.
The Company's headquarters are located at Carrera 55 No. 49-101, Medellin,
Colombia, and its telephone and fax numbers are 574-512-9090 and 574-513-0199,
respectively.
5
<PAGE> 10
SHAREHOLDERS
The Company was organized in 1992 and its shareholders include Cable and
Wireless plc ("C&W"), Itochu Corporation ("Itochu") and, through holding
companies, the second and fourth largest wireline telephone companies in
Colombia as well as several other major Colombian public sector and private
sector enterprises (collectively, the "Shareholders"). C&W is an international
telecommunications company with revenues of L5.5 billion for the fiscal year
ended March 31, 1996 and operations in over 50 countries including the United
Kingdom, Hong Kong, Australia, Colombia and certain Caribbean countries. Itochu
is one of the largest Japanese trading companies with operations in
approximately 90 countries throughout the world, including the United States and
Colombia. In addition, the Company's local shareholders include Empresas
Departamentales de Antioquia (providing telephone services to 102 municipalities
in Antioquia), Telearmenia (a telecommunications company in the city of
Armenia), and Empresas Municipales de Cali, Empresas Publicas de Medellin, de
Manizales and de Pereira (public utility companies providing electric power,
water, telecommunications and gas distribution to Cali, Medellin, Manizales and
Pereira, respectively). Approximately 78% of the Company's capital stock is
beneficially owned by private-sector companies and 22% is beneficially owned by
public sector entities. As of March 31, 1996, the Shareholders had contributed
Ps 96.6 billion (US$115.0 million based on the Representative Market Rate on the
date of each contribution) of equity capital to the Company. The Shareholders
have also provided substantial technical, financial and other expertise to the
Company, and a C&W executive was seconded to, and is employed by, the Company as
a member of the Company's senior management team.
THE COLOMBIAN CELLULAR INDUSTRY
Colombia's cellular industry was launched in early 1994, when the Colombian
government conducted a public auction to grant a limited number of long-term
concessions to operate cellular telecommunications networks. For this purpose,
Colombia was divided into three regions: (i) the Western Region, (ii) the
eastern region, which includes Santafe de Bogota, the capital of Colombia (the
"Eastern Region"), and (iii) the Atlantic coast region, which includes the
cities of Barranquilla, Cartagena and Santa Marta (the "Atlantic Region" and
together with the Western Region and the Eastern Region, the "Regions"). The
government awarded a total of six concessions, with two concessions on two
frequencies (the "A Band" and "B Band") in each of the Regions, as follows:
<TABLE>
<CAPTION>
WESTERN REGION EASTERN REGION ATLANTIC REGION
------------------------------------ ----------------------------------- -----------------------------------
<S> <C> <C> <C>
A Occel Comunicacion Celular S.A ("Comcel") Celcaribe S.A. ("Celcaribe")
Band:..
B Compania Celular de Colombia S.A. Union Temporal Celumovil S.A. y Union Temporal Celumovil de la
Band:.. ("Cocelco") Celumovil de la Costa S.A. Costa S.A. y Celumovil S.A.
("Celumovil") ("Celumovil de la Costa")
</TABLE>
The densely populated Western Region, for which Occel has one of the two
concessions, encompasses 18% of the territory of Colombia and 36% of its
population. The Western Region contributes approximately 36% of Colombia's gross
domestic product (based on 1993 data) and encompasses a large portion of the
nation's commerce and manufacturing and agricultural industries, including many
of the main export-oriented industries of Colombia, such as coffee, bananas,
sugar and textiles. In addition, the Western Region has an extensive
transportation infrastructure, which includes four major airports and Colombia's
most important industrial seaport, the Buenaventura Port, which handles
approximately half of Colombian exports.
The Company believes that Colombia is a very attractive market for cellular
services and provides a substantial business opportunity for the following
reasons:
- Stable, Growing Economy. Colombia is one of the oldest democracies
and most stable economies in Latin America. Since 1950, Colombia has
enjoyed positive real economic growth in every year, with real compounded
average annual growth in its GDP of approximately 4.5% from 1986 to 1995,
one of the highest growth rates in Latin America. In addition, annual
inflation has declined steadily in each of the past five years from 26.8%
in 1991 to 22.6% and 19.5% in 1994 and 1995, respectively. In recent years,
the government's economic growth strategy has encouraged foreign investment
and exports through reduced foreign exchange controls and lower import
quotas and tariffs. The government has also begun to open certain public
services to private sector investment and has commenced privatization of
certain state-owned industries in the power and banking sectors, and is
considering other sectors for privatization.
6
<PAGE> 11
In part as a result of these policies, foreign investment in Colombia has
grown from US$3.5 billion in 1990 to US$6.6 billion in 1995. During the
same period, Colombia has achieved increased diversification of its export
base and the value of its exports has grown from US$6.7 billion to US $9.8
billion. However, Colombia is currently experiencing political turmoil
which could have an adverse effect on the economy. See "Risk
Factors -- Risk Related to Colombian Political, Economic and Social
Factors".
- High Demand Potential. The Company believes there is significant
demand for cellular service in Colombia as evidenced by the growth in the
number of subscribers since the concessions were awarded in 1994. Reported
subscribers in Colombia grew from 81,895 as of December 31, 1994 to 187,514
as of June 30, 1995 and 274,590 as of December 31, 1995, representing
growth rates of 129% and 46% for the respective six-month periods. As of
December 31, 1995, cellular penetration (based on reported subscribers) in
Colombia was 0.78%. This compares favorably with penetration rates achieved
at comparable developmental stages in other Latin American countries and a
penetration rate of 12.96% in the United States. See "Business -- Colombian
Telecommunications Industry". The Company believes that there are several
factors, in addition to the recent growth in Colombia's economy and
particularly its infrastructure, which will support continued growth in
cellular subscribers. For example, Colombia has a low wireline penetration
rate, with an average of only approximately ten telephone lines per 100
persons as of December 31, 1994. Additionally, there is typically a long
waiting time for wireline telephone connection, which ranges from a few
weeks or months in the best markets (including Medellin) to two years or
longer. This can be contrasted with cellular service, where, in the case of
the Company, new customers generally are connected to its cellular network
within a few days (shortly after the completion of a credit check).
Moreover, the Company believes that cellular service is popular even where
wireline service is relatively good because of advantages such as
convenience, personal safety and mobility. This is illustrated by the fact
that Medellin, which has the highest wireline penetration rate in the
country, is also the Company's best market.
- Limited Cellular Competition. The Company faces limited cellular
competition because the cellular industry in each Region is a regulated
duopoly. Each concessionaire has the exclusive right for a minimum of ten
years to use a defined frequency band within its region. The terms of the
concessions provide that the government may not award additional
concessions for cellular services prior to 1999.
- Supportive Regulatory Environment. The Colombian government has
adopted several policies and practices that the Company believes will help
stimulate industry growth. These include the fact that the concessions are
limited to two operators per region through 1999 and are awarded for terms
of ten years, subject to renewal as described herein. The government has
also mandated a "calling party pays" system which requires that the
originator pay for the call. The Company believes that the policy of
calling party pays has resulted in a much higher percentage of incoming
traffic and more usage overall by its subscribers as they are more likely
to give their telephone number to callers since they are not charged for
the incoming call. The policy also encourages subscribers to keep their
phones turned on. In addition, the government does not currently regulate
pricing, although the Company is required to notify the government and its
subscribers of price changes.
- Industry Cooperation. The Company and other Colombian cellular
phone operators benefit from government policies which permit industry
cooperation to facilitate high quality, nationwide service. Through roaming
and other agreements, the Company and the other A Band operators in the
Eastern and Atlantic Regions have formed "REDCEL", a national cellular
network which enables their respective subscribers to make calls from each
other's coverage areas. These companies also cooperate on issues of common
interest including, among other things, customer service, collections,
technical assistance, other services to customers and procedures for fraud
prevention.
COMPANY STRENGTHS
Since its inception in 1992, the Company has capitalized on the market
opportunity created by the aforementioned factors. The Company has constructed a
network that covers most of the major population areas in the Western Region,
built its subscriber base and recognition of its "Vozavoz" brand name, and
developed a variety of service offerings to appeal to diverse groups of
consumers. The Company believes that it
7
<PAGE> 12
is well positioned to achieve continued growth in its subscriber base and cash
flow by virtue of a number of factors, including the following:
- Attractive Concession Area. The Western Region has many
characteristics which create an attractive cellular market, including
principally a diverse and well developed economy. The region generates over
one third of Colombia's gross national product and includes a substantial
part of the country's commerce and manufacturing and agricultural
industries. Approximately 71% of the national coffee production and 55% of
the national banana production, the country's two largest agricultural
commodities, are produced in the Western Region. Approximately half of
Colombia's hydro-electric power is produced in the Western Region and
approximately half of the country's exports pass through the Western
Region's Buenaventura Port. The Western Region also houses the Colombian
headquarters of 21 of the top 50 industrial and commercial companies in
Colombia, including Carvajal S.A., Noel S.A. and Colgate Palmolive y Cia
S.A. In addition, the headquarters of 11 of the top 25 financial
institutions in Colombia, including Banco Industrial Colombiano S.A.,
Conavi S.A. and Banco Popular S.A., are located in the Western Region.
- Favorable Demographics. The metropolitan areas of Medellin and
Cali, with populations of 2.4 million and 1.8 million, respectively, are
major economic centers in the country, are densely populated and have
significant concentrations of affluence. The Company has experienced
considerable demand in these areas despite their relatively high wireline
penetration rates. The Company believes this reflects the advantages of
cellular service, such as personal safety, convenience and mobility, to
diverse segments of the population, including professional workers as well
as small businessmen, contractors and other tradesmen who work on location.
- Superior Customer Service. The Company believes that quality of
customer service is a key competitive factor in the Colombian duopolistic
market. The provision of excellent customer service is an essential element
in the Company's business strategy and an inherent part of its corporate
culture. Staff in all areas of the Company attend a five-day customer
service training program, and the Company's specialized customer service
team (consisting of 91 members as of March 31, 1996) provide service 24
hours per day, responding to telephone queries from three regional centers.
On average, the customer service team answers 2000-3000 calls per working
day (74.2% within 20 seconds in March 1996) and answers 1000 letters per
month. New customers generally receive service within a few days, as well
as individual welcome calls to confirm that they are not experiencing
problems. The Company's dedication to customer service is also illustrated
by the provision of its free "*911" emergency service and by the provision
of nationwide service through roaming agreements.
- High Quality Advanced Network. Due to the recent development of the
cellular telecommunications industry in Colombia, Occel has been able to
construct a dual analog/digital network from inception using state of the
art technology under a TDMA platform with equipment supplied by Northern
Telecom. The Company believes a significant component of offering the
highest quality of customer service entails providing its customers
continual access to its network. The Company measures this in terms of the
customers' ability to make a call whenever desired and the probability that
a call will not fail (a "dropped call") once it is connected. During the
six-month period ended March 31, 1996, the Company connected more than 97%
of attempted calls and dropped less than 3% of total calls made. The
Company believes its dual analog/digital network provides it with the
ability to quickly and cost-effectively offer more digital capacity in its
network as the demand for digital service increases without incurring the
problems and costs experienced by many North American operators who are
encountering operational difficulties and significant expenses as they seek
to upgrade their networks to digital. As of March 31, 1996, approximately
30% of the Company's subscribers used digital handsets and the Company
expects that more than half of its customers will be using digital
equipment by the end of 1997. The Company expects to realize significant
benefits from increasing the usage of digital equipment, such as increased
system capacity, reduced operating expenses and additional revenue from the
sale of digital-specific services such as "caller i.d." and voice mail
message waiting notification. The Company believes its network has
sufficient capacity to accommodate projected growth in subscribers and has
the flexibility to handle new services.
8
<PAGE> 13
- Numerous Service Offerings. The Company provides the basic cellular
service options offered by world class operators, such as call transfer,
call waiting, voice mail and national and international roaming. In
addition, the Company offers several other services that are aimed at the
particular needs of its customer base and that enhance the Company's brand
name and image as a provider of the highest quality service. These include
its free "*911" emergency service (which is trademarked within Colombia),
where a customer can call *911 at any time and be connected to a Company
representative who can then contact the police, the fire department, an
automobile towing service or any other emergency service desired by the
customer. This service has proved especially popular because the Colombian
wireline companies do not have a universal emergency service such as the
911 service in the United States. The Company also offers value-priced
services that it believes attract different segments of the population than
traditional users of cellular services, thereby enhancing its penetration
rate. The Company offers "Beepervoz", a budget service in which the
customer can only receive calls and make outgoing calls to the Company's
*911 emergency service. This service provides a low-cost introduction to
cellular service and is also designed to compete with pagers. In addition,
the Company's "Fijovoz" service provides cellular service from a fixed
wireless phone in the home or office for a lower price than its mobile
cellular service. This option is designed to appeal to customers seeking to
avoid the long waiting time for wireline service or who are otherwise
dissatisfied with wireline service but who do not need the mobility of full
cellular service. The Company also believes a number of these
budget-conscious customers will ultimately upgrade to higher classes of
service over time.
- Management of Churn. The Company's monthly average churn rate for
the year ended December 31, 1995, was 3.2%. This reflected a churn rate of
approximately 2% per month for most of the year, except between August and
October when churn was approximately 8% per month. This temporary increase
in churn resulted from Company-initiated disconnections in order to upgrade
the quality of its customer base. The Company estimates that the monthly
churn rate for the first six months of 1996 averaged 2.9%, in part because
there was a similar month of Company-initiated disconnections, which may
occur from time to time in the future. The Company recognizes that managing
customer churn is an important factor in maximizing revenues and cash flow.
In order to minimize churn caused by customers voluntarily terminating
service, the Company aims to ensure that its services remain competitive
and has one-year customer contracts that contain penalties for early
termination. To reduce Company-initiated disconnections resulting from
non-payment, beginning in August 1995, the Company implemented policies
which require thorough credit checks for new customers, encourage direct
debit payment plans, and impose gradual restrictions on service once
payment dates have been missed. For instance, customers' outgoing calls are
automatically routed to customer service if payment is not received within
ten days of the final due date, and service is temporarily disconnected in
the event payment is not received within ten more days. The Company
believes that these policies reduce the likelihood that customers will run
up excessive debts, thus enhancing the likelihood of settlement and
reconnection.
- Experienced Management Team. The members of the Company's senior
management team have substantial experience in the telecommunications
industry as well as in the public and private sectors in the Western
Region. Many of them worked for local telephone companies and public
utilities in the Western Region and participated in the development of
Colombia's cellular regulatory regime. In addition, an executive of C&W,
was seconded to, and is employed by, the Company as a member of the
Company's senior management.
BUSINESS STRATEGY
The Company's strategy is to continue to capitalize on the high potential
demand for cellular telecommunication services and favorable demographic
characteristics of its concession area to maximize revenues and cash flow from
its cellular business through increased market penetration and subscriber usage.
The Company intends to achieve these objectives by completing construction of
its network, implementing aggressive marketing efforts to attract and retain
additional subscribers and continuing to provide superior customer service,
reliability and a wide range of value-added optional services. The Company's
commercial slogan is "Seriousness, Security and Service", which is intended to
convey the high degree of professionalism with which the Company seeks to
provide its services, the security (i.e., increased personal safety) such
services provide to its customers, and the Company's responsiveness to its
customers. The Company will also evaluate and may participate in future
opportunities in related wireless technology businesses in order to enhance its
position as a leading provider of such services.
9
<PAGE> 14
THE REFINANCING
The Old Notes were issued on June 7, 1996 pursuant to the Offering of
190,745 units (the "Units"), each of which consisted of US$1,000 principal
amount at maturity of Old Notes and four warrants to purchase 5.709 shares of
Class B Common Stock with a par value of 1,000 Pesos per share, at a price of
US$1.00 per share (or, if greater, the U.S. dollar equivalent of 1,000 Pesos),
subject to adjustment (the "Warrants"). The Old Notes and the Warrants will
become separately transferable as of the date of this Prospectus.
Concurrently with the issuance of the Units, the Company borrowed US$80.0
million under the Bank Facility (as defined under "Description of Company
Indebtedness -- Bank Facility"), which loans are secured by security interests
in, among other things, (i) all receivables originated from the provision of
cellular communications and roaming and interconnection services, (ii) the
pledge of 99.99% of the Company's outstanding stock, and (iii) the Concession.
The aggregate net proceeds of the Offering and the borrowings under the Bank
Facility were US$171.5 million. Such net proceeds were used to repay
substantially all existing indebtedness of the Company and for working capital.
See "Description of Company Indebtedness -- Bank Facility".
THE EXCHANGE OFFER
Securities Offered......... Up to US $190,745,000 aggregate principal amount at
maturity of 14% Series B Senior Discount Notes due
2004 (the "New Notes"). The terms of the New Notes
and Old Notes are identical in all material
respects, except for certain transfer restrictions
and registration rights relating to the Old Notes.
The Exchange Offer......... The New Notes are being offered in exchange for a
like principal amount of Old Notes. Old Notes may
be exchanged only in integral multiples of $1,000.
The issuance of the new Notes is intended to
satisfy obligations of the Company contained in the
Registration Rights Agreement.
Expiration Date;
Withdrawal of Tender..... The Exchange Offer will expire 5:00 p.m. New York
City time, on [ ], 1996, or such later
date and time to which it is extended by the
Company. The tender of Old Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to the Expiration Date. Any Old Notes not accepted
for exchange for any reason will be returned
without expense to the tendering holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer.
Certain Conditions
to the Exchange Offer.... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company currently expects that each of the
conditions will be satisfied and that no waivers
will be necessary. See "The Exchange
Offer -- Certain Conditions to the Exchange Offer".
Procedures for Tendering
Old Notes................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instruction contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Old Notes and any other required
documentation, to the Exchange Agent (as defined)
at the address set forth herein. See "The Exchange
Offer -- Procedures for Tendering Old Notes".
10
<PAGE> 15
Use of Proceeds............ There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Exchange Agent............. The Bank of New York (the "Exchange Agent") is
serving as the Exchange Agent in connection with
the Exchange Offer.
Federal Income Tax
Consequences............. The exchange of Notes pursuant to the Exchange
Offer will not be a taxable event for federal
income tax purposes. See "Taxation".
Warrants Not Part
of Exchange Offer........ The Old Notes were originally issued as part of
Units each consisting of US$1,000 principal amount
at maturity of Old Notes and the Warrants. The
Warrants are not part of the Exchange Offer and
should not be tendered to the Exchange Agent. As of
the date of this Prospectus, the Old Notes and the
Warrants are separately transferable.
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the SEC to
third parties in unrelated transactions, holders of Old Notes (other than any
holder who is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) who exchange their Old Notes for New Notes pursuant to the
Exchange Offer generally may offer such New Notes for resale, resell such New
Notes, and otherwise transfer such Notes without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
such New Notes are acquired in the ordinary course of the holders' business and
such holders are not participating in, and have no arrangement or understanding
with any person to participate in, a distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution". If a holder of Old Notes does not exchange such Old
Notes for New Notes pursuant to the Exchange Offer, such Old Notes will continue
to be subject to the restrictions on transfer contained in the legend thereon.
In general, the Old Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. See
"The Exchange Offer -- Consequences of Failure to Exchange; Resale of New
Notes".
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. However, to the extent that Old
Notes are tendered and accepted in connection with the Exchange Offer, any
trading market for remaining Old Notes will be adversely affected. Following
consummation of the Exchange Offer, the New Notes will not be eligible for
PORTAL trading.
THE NEW NOTES
The terms of the New Notes are identical in all material respects to the
Old Notes, except for certain transfer restrictions and registration rights
relating to the Old Notes.
Issuer..................... Occidente y Caribe Celular S.A.
Notes Offered.............. US$190,745,000 principal amount at maturity of 14%
Series B Senior Discount Notes due 2004.
Maturity Date.............. March 15, 2004.
Yield and Interest......... 14% per annum (computed on a semiannual bond
equivalent basis) calculated from June 7, 1996 (the
"Issue Date"). Cash interest will not
11
<PAGE> 16
accrue on the New Notes prior to March 15, 2001, at
which time cash interest will accrue on the New
Notes at a rate of 14% per annum, payable
semiannually on March 15 and September 15 of each
year, commencing September 15, 2001.
Optional Redemption........ The New Notes will be redeemable at the option of
the Company, in whole or in part, at 100% of the
principal amount thereof if redeemed prior to
September 15, 2000 and, thereafter, at the
redemption prices set forth herein together with
accrued and unpaid interest, if any, to the date of
redemption.
In addition, at any time prior to March 15, 1999,
the Company may redeem up to 33% of the original
aggregate principal amount at maturity of the New
Notes from the net proceeds of any Public Equity
Offering (as defined herein), within 45 days of
such Public Equity Offering, at a redemption price
equal to 114% of the Accreted Value thereof,
together with accrued and unpaid interest, if any,
to the date of redemption, provided that no less
than 67% of the original aggregate principal amount
at maturity of the New Notes remains outstanding.
The New Notes will be redeemable at the option of
the Company, as a whole, but not in part, in the
event of certain changes in Colombian tax law. The
Company's ability to redeem the New Notes is
subject to certain limitations under Colombian law.
See "Description of the Notes -- Optional
Redemption".
Mandatory Redemption....... The Company will redeem 50% of the original
aggregate principal amount at maturity of the New
Notes on March 15, 2003 at 100% of the principal
amount thereof.
Colombian Withholding
Taxes...................... Interest on the New Notes, including the accretion
of value thereof, is not currently subject to
Colombian Withholding Taxes (as defined herein).
See "Taxation -- Colombia".
Additional Amounts......... Subject to limited exceptions, if Colombian
Withholding Taxes are deducted or withheld from
payments on the New Notes, the Company will pay
Additional Amounts (as defined herein) to the
extent necessary so that, after such deduction or
withholding, holders of the New Notes receive the
stated amount due. Currently, no Additional Amounts
are required to be paid. See "Description of the
Notes -- Additional Amounts" and
"Taxation -- Colombia".
Change of Control.......... Upon the occurrence of a Change of Control (as
defined herein), each holder of New Notes may
require the Company to purchase all or a portion of
such holder's New Notes at a purchase price in cash
equal to 101% of the Accreted Value thereof,
together with accrued and unpaid interest, if any,
to the date of purchase. The Company's ability to
purchase New Notes upon the occurrence of a Change
of Control is subject to certain limitations under
Colombian law. See "Description of the
Notes -- Certain Covenants -- Purchase of Notes
upon a Change of Control".
Ranking.................... The New Notes will be senior unsecured obligations
of the Company, ranking pari passu in right of
payment with all other existing and future
unsubordinated obligations of the Company (other
than obligations preferred by statute or by
operation of law), except to the extent the
provisions of the Indenture require the Trustee to
turn over to the
12
<PAGE> 17
collateral agents for the lenders under the Bank
Facility all amounts that constitute proceeds of
the Concession received pursuant to a bankruptcy
reorganization (concordato) or liquidation of the
Company until all claims under the Bank Facility
are satisfied during the period from the Issue Date
until the restriction on the right of the Lenders
to exercise their remedies under the pledge of the
Concession expires, and senior in right of payment
to all existing and future obligations of the
Company expressly subordinated in right of payment
to the New Notes. The New Notes, however, will be
effectively subordinated to senior secured
obligations of the Company with respect to the
assets of the Company securing such obligations,
including Indebtedness under the Bank Facility
which is secured by, among other things, (i) all of
the Company's receivables originated from the
provision of cellular communications and roaming
and interconnection services and (ii) the pledge of
the Concession to operate its business, provided
that the Lenders may not exercise any remedies
thereunder prior to March 28, 1997. The
Indebtedness under the Bank Facility is also
secured by a pledge of 99.99% (as of the date
thereof) of the Company's outstanding common stock.
See "Description of Company Indebtedness -- Bank
Facility". As of June 30, 1996, Indebtedness of the
Company was approximately US$181.8 million, of
which US$80.0 million was senior secured
Indebtedness and US$101.8 million was senior
unsecured Indebtedness. Subject to certain
limitations, the Company and any Restricted
Subsidiary (as defined herein) may incur additional
Indebtedness, including secured Indebtedness, in
the future.
Original Issue Discount.... Both the Old Notes and the New Notes will be
treated as having been issued at an original issue
discount for United States federal income tax
purposes. Thus, although cash interest will not
begin to accrue on the Notes until March 15, 2001,
and there will be no periodic payments of interest
on the Notes prior to September 15, 2001, original
issue discount (i.e., the difference between the
stated redemption price at maturity and the portion
of the issue price of the Units allocated, for
federal income tax purposes, to the Notes) will
accrue from the Issue Date and will be includible
as interest income periodically in a Note holder's
gross income for federal income tax purposes in
advance of receipt of the cash payments to which
the income is attributable. See "Taxation -- United
States".
Restrictive Covenants...... The Indenture (as defined herein) contains certain
covenants, including, but not limited to, covenants
with respect to the following matters: (i)
limitation on indebtedness; (ii) limitation on
restricted payments; (iii) limitation on issuances
and sale of capital stock of restricted
subsidiaries; (iv) limitation on transactions with
affiliates; (v) limitation on liens; (vi)
limitation on sale of assets; (vi) limitation on
sale and leaseback transactions; (vii) limitation
on the activities of the Company; (viii) limitation
on dividends and other payment restrictions
affecting subsidiaries; and (ix) reports. See
"Description of the Notes -- Certain Covenants".
Absence of a Public Market
for the New Notes.......... The New Notes are new securities and there is
currently no established market for the New Notes.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the New
Notes. The
13
<PAGE> 18
Company does not intend to apply for listing of the
New Notes on any securities exchange or for
quotation through NASDAQ.
RISK FACTORS
See "Risk Factors" beginning on page 17 for a discussion of certain factors
that holders of Old Notes should consider in connection with the Exchange Offer.
14
<PAGE> 19
SUMMARY FINANCIAL AND OPERATING DATA
The Company was incorporated in 1992 and commenced offering commercial
cellular services in September 1994. Accordingly, the Company has no commercial
operating history prior to such time, and results for 1994 are not directly
comparable to those of 1995. The summary statement of operations data for each
of the fiscal years ended December 31, 1993, 1994 and 1995, and the summary
balance sheet data as of December 31, 1994 and 1995 are derived from financial
statements which are prepared in accordance with Colombian generally accepted
accounting principles and which have been audited by KPMG Peat Marwick,
independent auditors. The historical information for the three months ended
March 31, 1995 and 1996 has been derived from the unaudited financial statements
of the Company included herein. In the opinion of management, the information
for the three months ended March 31, 1995 and 1996 includes all material
adjustments (consisting only of adjustments of a normal and recurring nature)
necessary for a fair presentation of the results for such periods. The results
of operations for any interim period are not necessarily indicative of the
results of operations for a full year. Colombian generally accepted accounting
principles differ in certain significant respects from United States generally
accepted accounting principles. See note 17 to the financial statements of the
Company included elsewhere in this Prospectus. This information should be read
in conjunction with, and is qualified in its entirety by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of the Company, including the notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31,
AS OF AND FOR THE YEAR ENDED DECEMBER 31, (UNAUDITED)
--------------------------------------------- -----------------------------------
1993(1) 1994(2) 1995 1995(3) 1995 1996 1996(3)
-------- --------- --------- ---------- --------- ---------- ----------
(IN MILLIONS OF CONSTANT MARCH 31, 1996 PESOS AND THOUSANDS OF DOLLARS,
EXCEPT NETWORK AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Colombian GAAP
Revenues............................... Ps -- Ps 10,014 Ps 43,020 US$ 41,128 Ps 7,478 Ps 16,961 US$ 16,215
Costs and expenses
Operating costs...................... -- 3,900 20,863 19,945 4,338 7,894 7,547
Marketing and selling expenses....... -- 4,535 11,854 11,333 2,761 2,230 2,132
General and administrative
expenses........................... -- 3,963 18,961 18,127 2,907 4,854 4,640
Depreciation and amortization(4)..... -- 1,591 12,009 11,481 2,489 3,681 3,519
---------- --------- --------- ----------- -------- -------- --------
Total costs and expenses....... -- 13,989 63,687 60,886 12,495 18,659 17,838
---------- --------- --------- ----------- -------- -------- --------
Operating loss......................... -- (3,975) (20,667) (19,758) (5,017) (1,698) (1,623)
Net income (loss)...................... 212(1) (3,084) (43,773) (41,848) (7,868) (5,177) (4,949)
U.S. GAAP
Revenues............................... -- 10,014 43,020 41,128 7,478 16,961 16,215
Operating loss......................... (3,711) (18,895) (26,868) (25,686) (8,423) (7,125) (6,812)
Net loss............................... (3,576) (16,549) (45,004) (43,025) (8,819) (6,779) (6,481)
OTHER FINANCIAL DATA AND RATIOS
EBITDA(5).............................. -- (2,384) (8,658) (8,277) (2,528) 1,983 1,896
EBITDA (U.S. GAAP)..................... (3,711) (12,830) (6,191) (5,919) (2,470) 3,900 3,728
Capital expenditures................... 58 37,857 24,797 23,707 4,194 2,883 2,756
Ratio of earnings to fixed
charges(6)........................... -- -- -- -- -- -- --
PRO FORMA DATA(7)
Pro forma cash interest expense........ -- -- 8,013 7,661 -- 2,003 1,915
Pro forma total interest expense....... -- -- 23,170 22,151 -- 5,664 5,415
NETWORK AND OPERATING DATA
Population covered (at end of period in
millions)............................ -- 7.1 8.6 8.6 8.1 8.6 8.6
Reported subscribers (at end of
period)(8)........................... -- 9,356 40,887 40,887 31,080 48,460 48,460
Penetration (at end of period)(9)...... -- 0.13% 0.48% 0.48% 0.38% 0.56% 0.56%
Total minutes of use during period (in
millions)............................ -- 3.47 69.7 69.7 9.75 22.43 22.43
Average monthly revenue per active
subscriber during period(10)......... Ps -- Ps120,777 Ps111,930 US$ 107.01 Ps 69,101 Ps 154,236 US$ 147.45
</TABLE>
15
<PAGE> 20
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31,
AS OF AND FOR THE YEAR ENDED DECEMBER 31, (UNAUDITED)
1993(1) 1994(2) 1995 1995(3) 1995 1996 1996(3)
---------- --------- --------- ----------- -------- -------- --------
(IN MILLIONS OF CONSTANT MARCH 31, 1996 PESOS AND THOUSANDS OF DOLLARS,
EXCEPT NETWORK AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Colombian GAAP
Property, plant and equipment, net..... Ps 166 Ps 40,701 Ps 63,684 US$ 60,884 Ps 46,653 Ps 63,881 US$ 61,072
Total assets........................... 6,217 262,078 278,572 266,322 260,688 285,921 273,346
Total debt............................. -- 111,687 167,344 159,984 118,452 167,641 160,269
Shareholders' equity................... 5,391 121,866 78,790 75,326 112,905 86,142 82,354
U.S. GAAP
Property, plant and equipment, net..... 166 41,125 84,552 80,834 47,149 83,881 80,192
Total assets........................... 1,308 232,901 263,987 252,377 229,866 264,868 253,220
Total debt............................. -- 111,931 187,023 178,798 138,136 206,320 197,247
Shareholders' equity................... 1,004 103,064 54,944 52,528 91,730 58,548 55,973
</TABLE>
- ---------------
(1) Represents pre-operating period during which the Company earned interest
income on investments.
(2) Represents four months of commercial operations.
(3) Translations of Pesos into Dollars have been made at the rate of Ps
1,046.00 = US$1.00 (the Representative Market Rate on March 31, 1996). Such
translations are provided solely for the convenience of the reader. See
note 1 to the financial statements of the Company included elsewhere in
this Prospectus.
(4) Depreciation and amortization include their respective inflation
adjustments. The Company amortizes the Concession using the units of
activation method. See note 1(e) to the financial statements of the
Company.
(5) EBITDA represents earnings before interest and financial charges, income
taxes, depreciation and amortization. The Company has included information
concerning EBITDA (which is not a measure of financial performance under
generally accepted accounting principles), because it understands that it
is used by certain investors as one measure of an issuer's ability to
service or incur indebtedness. EBITDA should not be construed as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles) as an indicator of the Company's
performance or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. EBITDA is calculated using financial statement information
included herein and, accordingly, is in constant Colombian pesos and
includes inflation adjustments.
(6) The ratio of earnings to fixed charges covers continuing operations, and
for this purpose (i) earnings consist of income (loss) before income taxes
plus fixed charges and (ii) fixed charges consist of interest expense on
all debt (including capitalized interest), amortization of deferred
financing costs and a percentage of rental expense deemed to be interest.
There were no fixed charges in 1993. Earnings were inadequate to cover
fixed charges in 1994 and 1995 and in the three months ended March 31, 1995
and 1996. The fixed charge coverage deficiency for the years ended December
31, 1994 and 1995 amounted to Ps 3.1 billion (US$3.0 million) and Ps 43.8
billion (US$41.8 million), respectively. The fixed charge coverage
deficiency for the three months ended March 31, 1995 and 1996 amounted to
Ps 7.9 billion (US$7.6 million) and Ps 4.8 billion (US$4.6 million),
respectively.
(7) Pro forma for the issuance of the Notes and the borrowings under the Bank
Facility and application of the proceeds thereof as if the same occurred at
the beginning of the periods shown. Pro forma cash interest expense is
based on an assumed annual interest rate of 9.25% applied to an outstanding
balance of US$80 million under the Bank Facility and an average rate of
8.7% on an average letter of credit balance of US$3 million. Pro forma
total interest expense consists of the accretion on the Notes and the pro
forma cash interest expense. Numbers for the year ended December 31, 1995
do not give effect to constant Peso adjustments.
(8) As reported by the Company to the Colombian Ministry of Communications. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "-- Price Competition and Related Matters".
(9) "Penetration" is defined as reported subscribers divided by population
covered within the Concession area. See also the Glossary of Certain
Telecommunications Terms in Annex B hereto.
(10) Represented in constant Pesos. "Active subscribers" is the Company's
internal measure of customers currently generating revenue. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "-- Price Competition and Related Matters".
16
<PAGE> 21
RISK FACTORS
Holders of Old Notes should consider carefully all the information set
forth herein and, in particular, the following risks in connection with the
Exchange Offer. For additional information concerning Colombia and certain
matters discussed below, see "Annex B -- Republic of Colombia". In general,
investing in the securities of issuers in emerging markets such as Colombia
involves a higher degree of risk than investing in the securities of issuers in
the United States and other jurisdictions.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable states securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. See "The Exchange
Offer -- Consequences of Failure to Exchange; Resale of New Notes".
POSSIBLE LIMITATIONS ON SALE OF NEW NOTES
To comply with the securities laws of certain jurisdictions, if applicable,
the New Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from registration or
qualification is available and is complied with. The Company has agreed to
register or qualify the sale of the New Notes in such jurisdictions only in
limited circumstances and subject to certain conditions. See "The Exchange
Offer -- Consequences of Failure to Exchange; Resale of New Notes".
HIGH LEVERAGE AND ABILITY TO SERVICE DEBT
The Company is highly leveraged. As of June 30, 1996, the Company's total
indebtedness was US$181.8 million or, approximately 69% of its total
capitalization. The Exchange Offer will not increase or decrease the Company's
total indebtedness.
The Company's high degree of leverage will have important consequences to
holders of the Notes, including the following: (i) the ability of the Company to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or other purposes, may be impaired; (ii) a
substantial portion of the Company's cash flow from operations will be required
to be dedicated to meet the Company's debt service obligations, which will
reduce the funds available to the Company for its operations and future business
opportunities; (iii) the Company may be more highly leveraged than its
competitors which may place it at a competitive disadvantage; (iv) the Company's
high degree of leverage may make it more vulnerable to a downturn in its
business and may limit its ability to respond to price competition or changes in
the economy generally; (v) the Company may not have sufficient funds to repay
the Notes at maturity or may not be able to refinance the indebtedness
thereunder at maturity; and (vi) the Company's ability to invest in or develop
new technologies or take advantage of new opportunities may be restricted.
The ability of the Company to meet its debt service obligations will depend
on the future operating performance and financial results of the Company
(requiring a significant and sustained growth in cash flow), which will be
subject in part to factors beyond the control of the Company, such as prevailing
economic conditions and financial, business and other factors. Management
believes that the Company's cash flow from operations will be adequate to meet
its anticipated requirements for working capital, capital expenditures, interest
payments and scheduled principal payments. There can be no assurance, however,
that the Company's business will generate cash flow at the necessary levels. If
the Company is unable to generate sufficient cash flow from operations in the
future to service its debt, it may be required to reduce capital expenditures,
refinance all or a portion of its existing debt (including the Notes), or obtain
additional financing. There can be no assurance that any such refinancing would
be possible or that any additional financing can be obtained on satisfactory
terms, in which case the Company might not be able to meet its obligations under
the Notes.
17
<PAGE> 22
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
RISKS RELATED TO COLOMBIAN POLITICAL, ECONOMIC AND SOCIAL FACTORS
Colombia is currently experiencing political turmoil stemming principally
from allegations that President Samper's 1994 election campaign received
contributions from the Cali drug cartel. On December 15, 1995, the Congressional
committee that had been examining evidence of such allegations ruled that there
was insufficient evidence to open a formal investigation against President
Samper. However, on January 22, 1996, the campaign manager and former Minister
of Defense, who (together with two other senior campaign officials) was arrested
in connection with such allegations, made a public statement alleging that
contributions from the Cali drug cartel had, in fact, been received and that
President Samper was aware of them. Consequently, the Attorney General's Office
formally accused the President before Congress and a new investigation began.
This investigation concluded last June with the Congress' decision to preclude
the process against President Samper, as recommended by the Congressional
committee in charge of the investigation. This political crisis has had and may
continue to have an adverse effect on the country's economy. Industry
associations have reported declines in sales, investments and other economic
activities. Many of the country's business leaders have called on President
Samper to resign. Although the crisis has not led to repeal of the actions taken
in recent years to open and liberalize the economy, it has weakened the
government and could result in a change in government. This in turn could lead
to a change in public policy generally regarding economic development and the
economy.
The political crisis has occurred against a backdrop of periodic violence
related to both drug activities and guerilla movements in Colombia and was
aggravated by the announcement by President Clinton on March 1, 1996 that the
United States was "decertifying" Colombia for failing to take sufficient action
to stem the production and export of narcotics. Under United States law, the
President was required to certify to the U.S. Congress which nations that are
major producers or major transit points for drugs were cooperating with efforts
to stem the flow of narcotics into the United States. As a result of such
decertification, the following policies are in effect: (i) the United States
representatives on the boards of certain multilateral development banks, such as
the International Bank for Reconstruction and Development and the Interamerican
Development Bank, are instructed to vote against lending to Colombia, (ii) the
United States government may impose trade sanctions on Colombian products
exported to the United States and (iii) United States credit institutions, such
as the Export-Import Bank and the Overseas Private Investment Corporation, will
not lend funds, or issue insurance (including political risk insurance), for
Colombian projects. For example, subsequent to President Clinton's announcement,
the Export-Import Bank withdrew support for a US$296 million loan to Ecopetrol,
the state-owned oil company, intended to help finance the Cusiana Oil pipeline,
a major development project in Colombia. On July 11, 1996, the United States
government announced the cancellation of President Samper's visa to enter the
United States based on the allegation that Mr. Samper had cooperated with
illegal drug traffickers. Although the United States has not imposed further
sanctions at this time, there can be no assurance that additional sanctions will
not be imposed in the future.
For the past 40 years, various guerrilla groups have waged campaigns
against the Colombian governmental system. The actions of guerilla groups have
included terrorist attacks, kidnapping and extortion. There is no assurance that
continued guerrilla activity will not have a material adverse effect on the
general economic, social or political situation in Colombia and the Company's
operations, in particular.
Medellin and Cali have been the centers of operations of Colombia's most
powerful drug cartel groups and are also the Company's largest markets. These
areas have suffered from the violence and the costs of attempting to curb the
drug trade, but may also have benefitted from the capital generated by it, to
the extent reinvested locally. The Company believes that its business has
historically not been materially adversely affected either by the drug activity
or by efforts to curb it. However, no assurance can be given that drug activity
in the future will not materially adversely affect the Company or that the
efforts to curb such activity will not have an adverse effect on the economy of
the region and thereby on the Company.
It is impossible to predict what effect these events and conditions, which
are entirely outside the control of the Company, will have on the country or the
Company. Holders of the Notes should recognize that these
18
<PAGE> 23
conditions and events create significant uncertainties and risks, which could
result in material adverse effects on the Company and its ability to meet its
obligations, including obligations under the Notes.
INFLATION
Throughout most of the 1980s and 1990s, Colombia experienced high levels of
inflation. While the Colombian government adopted policies which resulted in
reducing the inflation rate from 26.8% in 1991 to 22.6% and 19.5% in 1994 and
1995, respectively, there can be no assurance that the performance of the
Colombian economy or its securities markets, the operating results of the
Company or the value of the Notes will not be adversely affected by continuing
or increased levels of inflation.
LIMITED OPERATING HISTORY; OPERATING LOSSES
The Company is a new enterprise. The Company was incorporated in 1992 and
commenced offering commercial cellular services in September 1994. Since such
commencement date, the Company has experienced cumulative net negative cash flow
resulting principally from high operating expenses associated with the start up
of the Company's business, as well as cumulative net losses resulting from the
foregoing. Although the Company expects to generate positive cash flow from
operations by 1997, it expects to incur net losses in the near-term. There can
be no assurance that the Company will achieve positive cash flow from operations
within its projected time frame, or that it will generate net income upon
completion of its network.
CURRENCY FLUCTUATIONS, FOREIGN EXCHANGE CONTROLS AND DEVALUATION
Substantially all of the Company's debt obligations are denominated in
Dollars while the Company generates revenues in Pesos. In addition, the Company
has incurred and expects to incur a significant portion of its equipment costs
in Dollars. Therefore, the Company is exposed to currency exchange rate risks
which could significantly impact the Company's ability to meet its obligations
and finance its network construction. The Company currently does not plan to
enter into hedging transactions with respect to these foreign currency risks and
it is unlikely that the Company would be able to obtain hedging arrangements on
commercially satisfactory terms with respect to all such risks. The exchange
rate of the Peso to the Dollar has declined in recent years, and any further
decrease in the value of the Peso relative to the Dollar may have a material
adverse effect on the Company and on its ability to meet its obligations under
the Notes.
The Colombian government does not currently restrict the ability of
Colombian persons or entities to convert Pesos into Dollars. See "Foreign
Investment and Exchange Controls in Colombia". However, Colombian law permits
the government to impose foreign exchange controls on dividend payments and
repatriation of capital in the event that the foreign currency reserves of the
Central Bank fall below a level equal to the value of three months of imports
into Colombia. No such foreign exchange controls are currently applicable to
payments on debt instruments such as the Notes. As of December 31, 1995, the
Central Bank's currency reserves were sufficient for approximately seven months
of imports. Nevertheless, there is no assurance such restrictions will not be
imposed in the future, and any such restrictions could prevent or restrict the
Company's access to Dollars with which to meet its obligations, including its
obligations under the Notes.
Colombian law prohibits the prepayment of the Notes within one year of
their issuance, whether by redemption, repurchase, acceleration or otherwise.
Any redemption, repurchase, acceleration or other event requiring repayment
occurring on or prior to the first anniversary of the Issue Date will require
the Company, in lieu of such redemption, repurchase, acceleration or other
prepayment, to deposit with the Trustee cash and/or United States Government
Obligations in an amount (without taking into account the payment of interest
thereon) sufficient to make such prepayment with respect to the Notes on the
first Business Day after the first anniversary of the Issue Date at a price
which the Company would have had to pay with respect to such a prepayment
occurring on the first anniversary date, provided that in the event of an offer
to purchase under a Change of Control, the Company would have to deposit with
the Trustee an amount (without taking into account the payment of interest
thereon) sufficient to repurchase all of the Notes.
Central Bank regulations require that, as a general rule, borrowers
incurring indebtedness in a foreign currency with a term of 36 months or less
make deposits in Pesos at the Central Bank in order to be able to
19
<PAGE> 24
remit payments in such foreign currency. As the scheduled repayment of the Notes
will begin after the third anniversary of the Issue Date, the Company does not
currently have an obligation to make such a deposit. However, if the Company
desires or is required to make a prepayment of the Notes in an amount exceeding
40% of the principal amount thereof prior to the third anniversary of the Issue
Date, the Company would be required to make such a deposit, in which case the
Company may elect to deposit with the Trustee amounts sufficient to redeem the
remainder of the Notes on the first business day after the third anniversary of
the Issue Date. There can be no assurance that the necessary Peso funds for such
a deposit will be available to the Company at the time of any such requirement
to make a prepayment. See "Foreign Investment and Exchange Controls in Colombia"
and "Description of the Notes".
ECONOMY OF COLOMBIA AND THE WESTERN REGION
The Company's operations are dependent upon the performance of the
Colombian economy and the Western Region, in particular. The economy of Colombia
and of the Western Region is in a stage of development and structural reform and
the possibility exists that rapid fluctuations in consumer prices, gross
domestic product and interest rates will occur. The Company's financial results
may be subject to such fluctuations in the economy of Colombia and of the
Western Region and the effect of such fluctuations on the ability of customers
to pay for the Company's services and on the ability of the market to support
the growth of cellular telephone operations.
The Colombian government has historically exercised significant influence
over the Colombian economy. Governmental actions concerning the economy could
continue to have an important effect on Colombian entities, including the
Company, and on market conditions, prices and returns on Colombian securities,
including the Notes. There can be no assurance that recent policies that have
resulted in favorable economic growth in Colombia will be maintained by this
government or any new government or that such growth will continue.
RISKS ASSOCIATED WITH NEW INDUSTRY AND GROWTH
The success of the Company's operating strategy is subject to factors that
are beyond the control of the Company and impossible to predict, in part because
cellular telecommunications is a new industry in Colombia. Although the Company
has experienced significant growth in the number of its subscribers since
commencing operations in 1994, the Company is unable to predict how consumer
demand for cellular telecommunications services may develop over time. The size
of the Colombian market for cellular telecommunications, the rates of
penetration of the market and the sensitivity of potential subscribers to
changes in prices, among other factors, are uncertain. In addition, the
Company's continued rapid growth will require the training of new personnel, the
expansion of its management information systems and effective control of its
expenses related to operations and systems construction and effective controls
over the quality of new subscribers and churn rate. If the Company is unable to
satisfy these requirements, if it is unable to generate sufficient revenue to
meet its current expenses and future obligations or if it is otherwise unable to
manage growth effectively, the Company's ability to meet its obligations under
the Notes may be materially adversely affected.
COMPETITION; RAPID TECHNOLOGICAL CHANGE
The Company faces competition primarily from Cocelco, the other Western
Region cellular operator, and from wireline telephone services. Cocelco's
principal shareholders include the Organizacion Luis Carlos Sarmiento, one of
the largest commercial groups in Colombia, and Telefonica de Espana, a major
Spanish telecommunications organization actively involved in Latin America.
Cocelco may have greater financial and other resources than the Company, and may
be in a better position to fund operating deficits or unexpected capital costs.
Competition in the Western Region between the Company and Cocelco, and to a
lesser extent with wireline telephone services, is based on price, services
offered, quality of service and coverage area. During the first quarter of 1995,
there was significant price competition between the Company and Cocelco, and
there is no assurance that additional periods of price competition will not
follow or that they will not result in substantial operating losses for the
Company. Moreover, there can be no assurance that, in the event of an
20
<PAGE> 25
aggressive price competition resulting in substantial losses, the Company will
be able to raise the necessary capital or financing to finance such losses. See
"Management Discussion and Analysis of Financial Condition and Results of
Operations". In addition, after March 28, 1999, the fifth anniversary of the
Concession, additional concessions for cellular services in the Western Region
may be granted by the Ministry of Communications which could mean that the
Company would no longer enjoy a duopolistic position in the Western Region.
The Company also faces competition from other existing wireless services,
such as mobile radio and beeper services, and may face competition from emerging
technologies and services which might be introduced in the future, including
enhanced specialized mobile radio, Personal Communication Services ("PCS") or
satellite telephone. Insofar as such services require the granting of new
concessions by the Colombian government, it is possible that the government
could grant such concessions prior to 1999 (i.e., prior to the date that
additional concessions for cellular services in the Western Region may be
granted by the Ministry of Communications). In addition, to the extent that
substantial capital is invested in the wireline telephone industry and results
in improved service and increased wireline density, some of the Company's
existing and potential subscribers may choose wireline service rather than the
Company's cellular services. There can be no assurance that the Company will be
able to compete successfully against existing competitors or new entrants.
CHURN RATE RISKS
The Company's churn rate (the rate at which subscribers leave the system,
calculated as a percentage of active subscribers at the end of a calculation
period) in 1995 averaged 2% per month except between August and October when
churn was approximately 8% per month. During the months of August through
October 1995, in order to upgrade the quality of its customer base, the Company
disconnected a number of customers with nonperforming accounts, many of whom
subscribed to the Company's service during promotions offered in the early part
of 1995. The Company estimates that the monthly churn rate for the first six
months of 1996 averaged 2.9%, in part because there was a similar month of
Company-initiated disconnections, which may occur from time to time in the
future. To reduce churn and to deal with its associated risks, such as the
difficulty in collecting receivables, the Company has since implemented more
rigorous customer credit checks, gradual restrictions on service in the event of
nonpayment and other measures to minimize the risk of bad debts. If the Company
is not able to maintain these measures, or is not otherwise able to maintain
churn at a low level, it could have an adverse effect on its financial condition
and may adversely affect its ability to meet its obligations under the Notes.
FUTURE CAPITAL NEEDS
The Company expects to increase operating expenses and capital expenditures
as it continues to pursue its strategy of completing the construction of its
network, increasing its existing base of subscribers and expanding its
operations to provide a wider array of value-added services. The Company expects
to incur capital expenditures of approximately US$51 million to substantially
complete by 1999 the build-out of its network (including planned upgrades). The
Company currently expects to fund all of such capital expenditures with
internally generated cash flow, although there can be no assurance that such
cash flow will be sufficient. In addition, if the Company were to decide to
pursue other investments, including PCS or satellite services, additional
resources would be required. If the Company is unable to fund such expenditures
or investments, or if the Company's cash flow from operations does not increase
from its present level or decreases even further, the Company might not be able
to continue to pursue its network construction and subscriber growth strategy.
Moreover, in any such circumstance, the Company could experience difficulty in
meeting its debt service requirements. If the Company were unable to meet its
debt service requirements in the future, it may, depending upon the
circumstances which then exist, seek additional equity and/or debt financing or
refinance its existing indebtedness. There can be no assurance that the Company
could refinance existing indebtedness or raise sufficient funds. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
21
<PAGE> 26
REGULATORY AND CONCESSION MATTERS
The construction, ownership and operation of the Company's cellular
telephone system, the maintenance and renewal of the Concession, the pricing of
the Company's services and related matters are subject to regulation by the
Ministry of Communications and the Colombian Telecommunications Regulatory
Commission (Comision de Regulacion de Telecomunicaciones) (the "TRC"). Changes
in the regulation of, or the interpretation thereof, the Company's activities
could have a material adverse effect on the Company. Although the TRC has the
authority to determine the pricing of cellular services, cellular operators have
not been subject to tariff regulation. The Company believes that cellular
operators will continue to have the flexibility to set prices freely, although
there can be no assurance that the TRC will not impose price regulation in the
future.
The continued existence and terms of the Concession are subject to ongoing
review by regulatory authorities in Colombia and to interpretation, modification
or termination by such authorities. The terms of the Concession provide for an
initial term of ten years, and the Concession may be renewed for another ten
years if the Company has complied with the terms of the Concession and neither
the Ministry of Communications nor the Company has expressed an intention not to
renew during the eighth year of the Concession's ten-year term. The terms and
conditions of any such renewal, including the amount of any necessary payment to
the Colombian government, are not specified. Although the Company intends to
seek amendments to the Concession to eliminate uncertainties regarding renewal,
there is no assurance such amendments can be obtained. While the Company would
not normally expect to be required to cease operations at or prior to the end of
the ten-year term of the Concession, there can be no assurance that the
Concession will not be terminated or that renewal will be effected at all or on
acceptable economical terms.
The Company's assets that are directly related to the Concession are to
revert to the Ministry of Communications at the end of the Concession's term
without compensation to the Company. The Ministry of Communications is also
entitled to a reversion of such assets upon an event of termination of the
Concession for default in performance by the Company. If such reversion were to
occur, it will have a material adverse effect on the Company's ability to meet
its obligations under the Notes. See "Business -- Regulation -- Termination upon
Default in Performance -- Reversion of Assets".
The Concession, as well as certain other Colombian government contracts, is
subject to unilateral interpretation, modification and termination by the
Colombian government under certain circumstances. In the event of such
unilateral interpretation, modification or termination, based on circumstances
not attributable to the Company, the Company would be entitled to compensation
from the Ministry of Communications. However, there can be no assurance that any
such compensation would be sufficient to enable the Company to meet its
obligations under the Notes. See "Regulation -- Unilateral Interpretation,
Modification and Termination of Government Contracts". In addition, the Ministry
of Communications may, without compensation, terminate the Concession for
certain events of default under the Concession; in the event of such
termination, the Ministry of Communications would also be entitled to a payment
by the Company in the amount of the performance bond posted by the Company under
the Concession. See "Regulation--Termination upon Default in Performance". The
Ministry of Communications may also seek payment from the Company for any
damages suffered in excess of the amount covered by such performance bond.
ASSET ENCUMBRANCES AND PLEDGE OF STOCK
The Company's obligations under the Bank Facility are secured by liens on
the Company's receivables and a pledge of the Concession, provided that the
Lenders may not exercise any remedies with respect to the pledge of the
Concession prior to March 28, 1997. If an event of default occurs under the Bank
Facility, the Lenders will have a prior right to such collateral and may
foreclose upon such collateral to the exclusion of the holders of the Notes,
notwithstanding the existence of an event of default with respect to the Notes.
Accordingly, in such event, such collateral would first be used to repay in full
amounts outstanding under the Bank Facility, and there can be no assurance that
there would be sufficient assets remaining to satisfy the claims of holders of
the Notes.
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<PAGE> 27
For the period until the restriction on the right of the Lenders to
exercise their remedies under the pledge of the Concession expires, the
Indenture provides that should the Company enter into a bankruptcy
reorganization (concordato) or liquidation under the laws of Colombia during
such period, the Trustee will turn over to the collateral agents for the lenders
under the Bank Facility all amounts that constitute proceeds of the Concession
received pursuant to a bankruptcy reorganization (concordato) or liquidation of
the Company until all claims under the Bank Facility are satisfied. The
Shareholders have also pledged substantially all of the capital stock of the
Company to the Lenders. If an event of default occurs under the Bank Facility,
the Lenders could foreclose upon such stock, which could result in a change of
control of the Company.
RESTRICTIONS UNDER DEBT INSTRUMENTS
The Company's operations and financial performance are subject to covenants
contained in the Bank Facility and the Indenture that, among other things, limit
the Company's ability to incur liens, incur additional indebtedness, dispose of
assets, engage in mergers or engage in certain other transactions, and redeem or
purchase the Notes. In addition, the Bank Facility requires the Company to
maintain certain financial ratios and to meet certain financial and operating
performance tests. There can be no assurance that these requirements will be met
in the future. If the covenants under the Bank Facility are not met, the Lenders
will be entitled to declare such indebtedness immediately due and payable. See
"Description of the Notes" and "Description of Company Indebtedness".
TAX LITIGATION
The Company is currently in litigation with the tax authorities of Medellin
with respect to the municipality's efforts to require the Company and Cocelco to
collect a monthly tax on cellular subscribers whose calls use base stations
located in Medellin. As of May 17, 1996, the amount in dispute for the period
through March 30, 1996 was Ps 565 million (US$587,236), including interest
accrued thereon. While the Company believes it will prevail in this litigation,
if it does not the Company believes that it would be able to collect from its
subscribers a portion of this tax. To the extent the Company is unsuccessful in
its attempts to collect such tax from its subscribers, it will pay such amount
to the tax authorities of Medellin. Although no other city has proposed to
implement a similar tax, there is no assurance that other cities will not do so.
An adverse outcome in the legal proceedings and the imposition of a similar tax
in other cities could have an adverse effect on the Company's financial
condition and may adversely affect its ability to meet its obligations under the
Notes. See "Business -- Legal Proceedings -- Medellin's Cellular Services Tax".
LIMITATIONS ON CHANGE OF CONTROL
The Indenture requires the Company, in the event of a Change of Control, to
make an offer to purchase the Notes at 101% of the Accreted Value thereof, plus
accrued interest, if any, to the purchase date. Certain events involving a
Change of Control may be an event of default under the Bank Facility or
indebtedness of the Company that may be incurred in the future. Moreover, the
exercise by the holders of the Notes of their right to require the Company to
purchase the Notes may cause a default under the Bank Facility or such other
indebtedness, even if the Change of Control does not. Finally, there can be no
assurance that the Company will have the financial resources necessary to
repurchase the Notes upon a Change of Control. See "Description of the
Notes -- Certain Covenants -- Change of Control".
ORIGINAL ISSUE DISCOUNT
Both the Old Notes and the New Notes will be treated as having been issued
at a substantial discount from their principal amount at maturity. Consequently,
United States Holders of the Notes generally will be required to include amounts
in gross income for United States federal income tax purposes in advance of
receipt of the cash payments to which such income is attributable. See
"Taxation -- United States -- Notes -- Original Issue Discount" for a more
detailed discussion of the United States federal income tax consequences to
United States Holders of the purchase, ownership and disposition of the Notes.
23
<PAGE> 28
LACK OF ESTABLISHED MARKET FOR THE NOTES
The New Notes are new securities for which there currently is no trading
market. The Company does not intend to apply for listing of the New Notes on any
national securities exchange or to seek admission thereof to trading on the
National Association of Securities Dealers Automated Quotation System. Although
the Initial Purchasers have informed the Company that they currently intend to
make a market in the New Notes, they are not obligated to do so, and any such
market-making may be discontinued at any time without notice. The liquidity of
any market for the New Notes will depend upon the number of holders of the New
Notes, the interest of securities dealers in making a market in the New Notes
and other factors. Accordingly, there can be no assurance as to the development
or liquidity of any trading market for the New Notes. The Old Notes are eligible
for trading in the PORTAL market. To the extent that Old Notes are tendered and
accepted in connection with the Exchange Offer, any trading market for remaining
Old Notes will be adversely affected.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Notes. There can be no assurance that the market, if any, for the
Notes will not be subject to similar disruptions. Any such disruptions may have
an adverse effect on the holders of the Notes. In addition, Colombia is
generally considered by international investors to be an "emerging market".
Political, economic, social and other developments in other "emerging markets"
may have an adverse effect on the market value and liquidity of the Notes.
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<PAGE> 29
USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer.
THE REFINANCING
The Old Notes were issued on June 7, 1996 pursuant to the Offering of the
Units, each of which consisted of US$1,000 principal amount at maturity of Old
Notes and the Warrants. The Old Notes and the Warrants will become separately
transferable as of the date of this Prospectus.
Concurrently with the issuance of the Units, the Company borrowed US$80.0
million under the Bank Facility, which loans are secured by security interests
in, among other things, (i) all receivables originated from the provision of
cellular communications and roaming and interconnection services, (ii) the
pledge of 99.99% of the Company's outstanding stock, and (iii) the Concession.
The aggregate net proceeds of the Offering and the borrowings under the Bank
Facility were US$171.5 million. Such net proceeds were used to repay
substantially all existing indebtedness of the Company and for working capital.
See "Description of Company Indebtedness -- Bank Facility".
25
<PAGE> 30
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996 on an actual basis and as adjusted to give effect to the Offering
and the Bank Facility as if they occurred on such date. This table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
----------------------------------------------------------
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
---------- ----------- ----------- -----------
(MILLIONS OF CONSTANT (THOUSANDS OF US
COLOMBIAN PESOS) DOLLARS)(1)
<S> <C> <C> <C> <C>
Long-term debt (including current
portion of long-term debt and notes
payable)(2):
Peso-denominated loans............. Ps 52,332 Ps -- US$ 50,031 US$ --
U.S. dollar-denominated loans...... 113,619 -- 108,622 --
Other(3)........................... 1,690 1,529 1,616 1,462
Bank Facility...................... -- 83,680 -- 80,000
Notes(4)........................... -- 104,600 -- 100,000
---------- ----------- ----------- -----------
Total long-term debt....... 167,641 189,809 160,269 181,462
Shareholders' equity, net............ 86,142 86,142 82,354 82,354
---------- ----------- ----------- -----------
Total capitalization....... Ps 253,783 Ps 275,951 US$ 242,623 US$ 263,816
========== ========== =========== ===========
</TABLE>
- ---------------
(1) Translations of Pesos into Dollars have been made at the rate of Ps 1,046.00
= US$1.00 (the Representative Market Rate on March 31, 1996). Such
translations are provided solely for the convenience of the reader. See note
1 to the financial statements of the Company.
(2) As of March 31, 1996, the Company also had obligations of Ps 32.1 billion
(US$30.7 million) under leases which are not capitalized in accordance with
Colombian GAAP. This represents the aggregate amount (without discount to
present value) of minimum payments under the lease agreements. See note 7 to
the financial statements of the Company.
(3) Represents bank overdrafts and letters of credit.
(4) Represents US$100.0 million of gross proceeds from the sale of Units. In
accordance with Colombian financial and tax accounting principles no value
has been ascribed to the Warrants. This treatment may be different from that
accorded to the sale of the Units based on United States tax and financial
accounting principles.
26
<PAGE> 31
THE EXCHANGE OFFER
GENERAL
The Company hereby offers upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), to exchange up to US$190,745,000
aggregate principal amount at maturity of New Notes for a like aggregate
principal amount at maturity of Old Notes properly tendered on or prior to the
Expiration Date and not withdrawn as permitted pursuant to the procedures
described below. The Exchange Offer is being made with respect to all of the Old
Notes; the total aggregate principal amount at maturity of Old Notes and New
Notes will in no event exceed US$190,745,000, except as provided in the
Indenture.
As of the date of this Prospectus, US$190,745,000 aggregate principal
amount at maturity of the Old Notes was outstanding. This Prospectus, together
with the Letter of Transmittal, is first being sent on or about [ ],
1996, to all holders of Old Notes known to the Company. The Company's obligation
to accept Old Notes for exchange pursuant to the Exchange Offer is subject to
certain conditions set forth under "-- Certain Conditions to the Exchange Offer"
below and to the terms and provisions of the Registration Rights Agreement.
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were issued by the Company on June 7, 1996 in transactions
exempt from the registration requirements of the Securities Act. Accordingly,
the Old Notes may not be reoffered, resold, or otherwise transferred in the
United States unless so registered or unless an applicable exception from the
registration and prospectus delivery requirements of the Securities Act is
available.
In connection with the issuance and sale of the Old Notes, the Company
entered into an Exchange and Registration Rights Agreement, dated as of June 7,
1996, (the "Registration Rights Agreement"), which requires the Company to use
its best efforts to file with the SEC a registration statement relating to the
Exchange Offer within 60 days after the Issue Date, and to use its best efforts
to cause the registration relating to the Exchange Offer to become effective
under the Securities Act within 150 days after the Issue Date and the Exchange
Offer to be consummated within 180 days after the Issue Date. The Exchange Offer
is being made by the Company to satisfy its obligations with respect to the
Registration Rights Agreement.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on [30
days after mailing of notice], 1996, unless the Company, in its sole discretion,
has extended the period of time for which the Exchange Offer is open (such date,
as it may be extended, is referred to herein as the "Expiration Date"). The
Company expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance for exchange of any Old Notes, by giving oral notice (promptly
confirmed in writing) or written notice to the Exchange Agent and by giving
written notice of such extension to the holders thereof or by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release through the Dow Jones News Service, in each
case, no later than 9:00 a.m. New York City time, on the next business day after
the previously scheduled Expiration Date. During any such extension, all Old
Notes previously tendered will remain subject to the Exchange Offer unless
properly withdrawn.
In addition, the Company expressly reserves the right to terminate or to
amend the Exchange Offer, and not to accept for exchange any Old Notes not
theretofore accepted for exchange, upon the occurrence of any of the events
specified below under "-- Certain Conditions to the Exchange Offer". If any such
termination or amendment occurs, the Company will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the holders
of the Old Notes as promptly as practicable in the manner set forth above with
respect to an extension of the Expiration Date.
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<PAGE> 32
For purposes of the Exchange Offer, a "business day" means any day other
than a Saturday, a Sunday or a date on which banking institutions in New York
City are not required to be open, and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
Except as set forth below, a holder of Old Notes who wishes to tender Old
Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal to the Exchange Agent at one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder of Old Notes
must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO
THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a clearing agency, an insured
credit union, a savings association or a commercial bank or trust company having
an office or a correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered holder thereof with the
signature thereon guaranteed by an Eligible Institution.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by (i) the Old Notes (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange Agent.
Issuances of New Notes in exchange for Old Notes tendered pursuant to a Notice
of Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
timely deposit of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
28
<PAGE> 33
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being acquired
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder, that neither the holder nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such New Notes and that neither the holder nor any such
other person is an "affiliate" as defined under Rule 405 of the Securities Act,
of the Company, or if it is an affiliate it will comply with the registration
and prospectus requirements of the Securities Act to the extent applicable.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution".
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request within two business days after the
date of this Prospectus to establish accounts with respect to the Old Notes at
the Book-Entry Transfer Facility. The Depository Trust Company, for the purpose
of facilitating the Exchange Offer, and subject to the establishment thereof,
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account with respect to the Old Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of Old Notes
may be effected through book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility, an appropriate Letter of Transmittal with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
GUARANTEED DELIVERY PROCEDURES
If a holder of Old Notes desires to accept the Exchange Offer and time will
not permit a Letter of Transmittal or Old Notes to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if the Exchange Agent has
received at its address set forth below on or prior to the Expiration Date, a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the names in which the Old
Notes are registered and, if possible, the certificate numbers of the Old Notes
to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the
29
<PAGE> 34
Expiration Date, the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility, will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
Old Notes being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required documents),
the Company may, at its option, reject the tender. Copies of Notice of
Guaranteed Delivery which may be used by Eligible Institutions for the purposes
described in this paragraph are available from the Exchange Agent.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent prior to the Expiration Date at its address
set forth below. Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the amount of such Old Notes), and (where certificates
for Old Notes have been transmitted) specify the name in which such Old Notes
are registered, if different from that of the withdrawing holder thereof. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder thereof must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such holder is an Eligible
Institution. If Old Notes have been tendered pursuant to the procedure for book-
entry transfer described above, any notice of withdrawal must specify the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Old Notes and otherwise comply with the procedures of such
facility. All questions as to the validity, form and eligibility (including time
of receipt) of such notices will be determined by the Company in its sole
discretion, which determination will be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
Book-Entry Transfer Facility specified by the holder thereof) as soon as
practicable after such withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "-- Procedures for Tendering Old Notes" above
at any time on or prior to the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered prior to 5:00 p.m., New York City time, on the Expiration Date
and will issue the New Notes promptly after such acceptance. See "-- Certain
Conditions to the Exchange Offer" below. For purposes of the Exchange Offer, the
Company shall be deemed to have accepted properly tendered Old Notes for
exchange when, as and if the Company has given oral and written notice thereof
to the Exchange Agent, with written confirmation of any oral notice to be given
promptly thereafter.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and
30
<PAGE> 35
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Old Notes will be returned without expense to the tendering holder
thereof (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Old Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration of the Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, any of the following events shall occur:
(i) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or any governmental agency seeking to restrain or
prohibit or prevent the Company from proceeding with the Exchange Offer or
assessing or seeking any damages as a result thereof, or that might result
in a material adverse effect on the contemplated benefits of the Exchange
Offer to the Company; or
(ii) there shall be proposed, enacted, promulgated or deemed
applicable to the Exchange Offer by any government or governmental agency
or authority any law or regulation, including any applicable interpretation
of the staff of the SEC, that might in the sole judgment of the Company
result in any of the consequences described in clause (i).
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable judgment. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA"). In any such event the Company is required to use every reasonable effort
to obtain the withdrawal of any stop order at the earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All tendered Old Notes, executed Letters of Transmittal, and
other related documents should be directed to the Exchange Agent at one of the
addresses set forth in the Letter of Transmittal. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent at the address set forth in the Letter of
Transmittal.
The Bank of New York also acts as Trustee under the Indenture.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company will also pay brokerage houses
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<PAGE> 36
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this and other related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $[ ], which includes fees and expenses of the Exchange
Agent, Trustee, registration fees, accounting, legal, printing and related fees
and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith except that holders who instruct
the Company to register New Notes in the name of, or request Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
ACCRETED VALUE OF THE NEW NOTES
No cash interest is payable on the Notes prior to March 15, 2001. Thus,
holders of Old Notes that are accepted for exchange will not receive accrued
interest thereon at the time of exchange. The Accreted Value of the New Notes
initially will be equal to the Accreted Value of the Old Notes at the time of
the exchange. See "Description of the Notes -- Certain Definitions" for the
definition of "Accreted Value".
ACCOUNTING TREATMENT
The New Notes will be recorded at the carrying value of the Old Notes as
reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of New Notes for Old Notes. Expenses incurred in
connection with the issuance of the New Notes will be amortized over the term of
the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALE OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. Old Notes not exchanged pursuant to
the Exchange Offer will continue to remain outstanding in accordance with their
terms. In general, the Old Notes may not be offered or sold unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Old
Notes under the Securities Act. However, (i) if the Initial Purchaser so
requests with respect to Old Notes not eligible to be exchanged for New Notes in
the Exchange Offer and held by it following consummation of the Exchange Offer
or (ii) if any holder of Old Notes is not eligible to participate in the
Exchange Offer or, in the case of any holder of Old Notes that participates in
the Exchange Offer, does not receive freely tradeable New Notes in exchange for
Old Notes, the Company is obligated to file a registration statement on the
appropriate form under the Securities Act relating to the Old Notes held by such
persons.
32
<PAGE> 37
Based on certain no-action letters issued by the staff of the SEC to third
parties in unrelated transactions, the Company believes that New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold or otherwise
transferred by holders thereof (other than (i) any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or (ii) any broker-dealer that purchases Notes from the Company to resell
pursuant to Rule 144A or any other available exemption) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding with any
person to participate in the distribution of such New Notes. If any holder has
any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not
rely on the applicable interpretations of the staff of the SEC and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Thus, any New
Notes acquired by such holder will not be freely transferable except in
compliance with the Securities Act. A broker-dealer who holds Old Notes that
were acquired for its own account as a result of market-making or other trading
activities may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of New Notes.
Each such broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
in the Letter of Transmittal that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution".
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specific limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of the Old Notes are
urged to consult their financial and tax advisors in making their own decision
on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights, and limitations applicable thereto, under the Indenture, except for
any such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer. See "Description of Notes". All untendered Old Notes will
continue to be subject to the restrictions on transfer set forth in the
Indenture. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered Old Notes could be adversely
affected.
The Company may in the future seek to acquire untendered Old Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plan to acquire any Old Notes which are
not tendered in the Exchange Offer.
33
<PAGE> 38
SELECTED FINANCIAL AND OPERATING DATA
The selected statement of operations data for each of the fiscal years
ended December 31, 1993, 1994 and 1995, and the balance sheet data dated as of
December 31, 1994 and 1995 are derived from the Company's financial statements
which have been audited by KPMG Peat Marwick, independent auditors. The
historical information for the three months ended March 31, 1995 and 1996 has
been derived from the unaudited financial statements of the Company included
herein. In the opinion of management, the information for the three month
periods ended March 31, 1995 and 1996 includes all material adjustments
(consisting only of adjustments of a normal and recurring nature) necessary for
a fair presentation of the results for such periods. The results of operations
for any interim period are not necessarily indicative of the results of
operations for a full year. This information should be read in conjunction with,
and is qualified in its entirety by reference to, such financial statements,
including the notes thereto, which are included elsewhere in this Prospectus.
The Company was organized in February 1992 to participate in the auctioning
of cellular concessions by the Colombian government. The Company commenced
commercial cellular telephone service operations in September 1994. Accordingly,
the Company had no commercial operating history prior to such time, and results
for 1994 are not directly comparable to those of 1995.
The financial statements included in this Prospectus have been prepared in
conformity with generally accepted accounting principles in Colombia ("Colombian
GAAP"), which differ in certain significant respects from generally accepted
accounting principles in the United States ("U.S. GAAP"). Note 17 to the
financial statements provides a description of the principal differences between
Colombian GAAP and U.S. GAAP as they relate to the Company, as well as a
reconciliation of the Company's net income (loss) and shareholders' equity
calculated in accordance with Colombian GAAP to amounts calculated in accordance
with U.S. GAAP.
In accordance with the requirements of the SEC, the selected financial
information included herein and in the accompanying financial statements and
notes thereto for all periods presented has been restated into constant Pesos as
of the latest balance sheet date (March 31, 1996), using the Colombian consumer
price index, in order to express all financial information in purchasing power
as of the date of the latest balance sheet. Because of such requirements, the
Company's historical financial information will be revised from time to time in
the future when it publishes a new balance sheet so that such information is
restated in constant Pesos as of such latest date.
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31,
AS OF AND FOR THE YEAR ENDED DECEMBER 31, (UNAUDITED)
---------------------------------------------- ----------------------------------
1993(1) 1994(2) 1995 1995(3) 1995 1996 1996(3)
-------- --------- --------- ----------- --------- --------- ----------
(IN MILLIONS OF CONSTANT MARCH 31, 1996 PESOS AND THOUSANDS OF DOLLARS,
EXCEPT NETWORK AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Colombian GAAP
Revenues............................... Ps -- Ps 10,014 Ps 43,020 US$ 41,128 Ps 7,478 Ps 16,961 US$ 16,215
Costs and expenses
Operating costs...................... -- 3,900 20,863 19,945 4,338 7,894 7,547
Marketing and selling expenses....... -- 4,535 11,854 11,333 2,761 2,230 2,132
General and administrative
expenses........................... -- 3,963 18,961 18,127 2,907 4,854 4,640
Depreciation and amortization(4)..... -- 1,591 12,009 11,481 2,489 3,681 3,519
-------- --------- --------- ----------- --------- --------- ----------
Total costs and expenses....... -- 13,989 63,687 60,886 12,495 18,659 17,838
-------- --------- --------- ----------- --------- --------- ----------
Operating loss......................... -- (3,975) (20,667) (19,758) (5,017) (1,698) (1,623)
Other income (expense)
Interest expense..................... -- (4,966) (26,597) (25,427) (3,308) (7,164) (6,849)
Foreign exchange(5).................. -- (2,800) (20,218) (19,329) (5,894) (6,891) (6,588)
Interest income(6)................... 228 5,950 2,242 2,143 377 1,227 1,173
Net monetary correction(7)........... (16) 2,882 21,781 20,823 6,920 11,118 10,629
Other................................ -- (175) (314) (300) (946) (1,434) (1,371)
-------- --------- --------- ----------- --------- --------- ----------
Other income (expense), net.......... 212 891 (23,106) (22,090) (2,851) (3,144) (3,006)
Provision for income taxes............. -- -- -- -- -- (335) (320)
-------- --------- --------- ----------- --------- --------- ----------
Net income (loss).............. Ps 212 Ps (3,084) Ps(43,773) US$(41, 848) (7,868) (5,177) (4,949)
======== ========= ========= =========== ========= ========= ===========
</TABLE>
34
<PAGE> 39
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31,
AS OF AND FOR THE YEAR ENDED DECEMBER 31, (UNAUDITED)
---------------------------------------------- ----------------------------------
1993(1) 1994(2) 1995 1995(3) 1995 1996 1996(3)
-------- --------- --------- ----------- --------- --------- ----------
(IN MILLIONS OF CONSTANT MARCH 31, 1996 PESOS AND THOUSANDS OF DOLLARS,
EXCEPT NETWORK AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Revenues............................... Ps -- Ps 10,014 Ps 43,020 US$ 41,128 Ps 7,478 Ps 16,961 US$ 16,215
Operating loss......................... (3,711) (18,895) (26,868) (25,686) (8,423) (7,125) (6,812)
Net loss............................... (3,576) (16,549) (45,004) (43,025) (8,819) (6,779) (6,481)
OTHER FINANCIAL DATA AND RATIOS
EBITDA(8).............................. -- (2,384) (8,658) (8,277) (2,528) 1,983 1,896
EBITDA (U.S. GAAP)..................... (3,711) (12,830) (6,191) (5,919) (2,470) 3,900 3,728
Capital expenditures................... 58 37,857 24,797 23,707 4,194 2,883 2,756
Ratio of earnings to fixed
charges(9)........................... -- -- -- -- -- -- --
PRO FORMA DATA(10)
Pro forma cash interest expense........ -- -- 8,013 7,661 -- 2,003 1,915
Pro forma total interest expense....... -- -- 23,170 22,151 -- 5,664 5,415
NETWORK AND OPERATING DATA
Population covered (at end of period in
millions)............................ -- 7.1 8.6 8.6 8.1 8.6 8.6
Reported subscribers (at end of
period)(11).......................... -- 9,356 40,887 40,887 31,080 48,460 48,460
Penetration (at end of period)(12)..... -- 0.13% 0.48% 0.48% 0.38% 0.56% 0.56%
Total minutes of use during period (in
millions)............................ -- 3.47 69.7 69.7 9.75 22.43 22.43
Average monthly revenue per active
subscriber during period(13)......... Ps -- Ps120,777 Ps111,930 US$ 107.01 Ps 69,101 Ps154,236 US$ 147.45
BALANCE SHEET DATA
Colombian GAAP
Property, plant and equipment, net..... 166 40,701 63,684 60,884 46,653 63,881 61,072
Total assets........................... 6,217 262,078 278,572 266,322 260,688 285,921 273,346
Total debt............................. -- 111,687 167,344 159,984 118,452 167,641 160,269
Shareholders' equity................... 5,391 121,866 78,790 75,326 112,905 86,142 82,354
U.S. GAAP
Property, plant and equipment, net..... 166 41,125 84,552 80,834 47,149 83,881 80,192
Total assets........................... 1,308 232,901 263,987 252,377 229,866 264,868 253,220
Total debt............................. -- 111,931 187,023 178,798 138,136 206,320 197,247
Shareholders' equity................... 1,004 103,064 54,944 52,528 91,730 58,548 55,973
</TABLE>
- ---------------
(1) Represents pre-operating period during which the Company earned interest
income on investments.
(2) Represents four months of commercial operations.
(3) Translations of Pesos into Dollars have been made at the rate of Ps
1,046.00 = US$1.00 (the Representative Market Rate on March 31, 1996). Such
translations are provided solely for the convenience of the reader. See
note 1 to the financial statements of the Company included elsewhere in
this Prospectus.
(4) Depreciation and amortization include their respective inflation
adjustments. The Company amortizes the Concession using the units of
activation method. See note 1(e) to the financial statements of the
Company.
(5) Includes only foreign exchange losses.
(6) Includes interest income and foreign exchange gains.
(7) Represents net inflation adjustments to the financial statements. See note
15 to the financial statements of the Company.
(8) EBITDA represents earnings before interest and financial charges, income
taxes, depreciation and amortization. The Company has included information
concerning EBITDA (which is not a measure of financial performance under
generally accepted accounting principles), because it understands that it
is used by certain investors as one measure of an issuer's ability to
service or incur indebtedness. EBITDA should not be construed as an
alternative to operating income (as determined in accordance with generally
accepted accounting principles) as an indicator of the Company's
performance or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. EBITDA is calculated using financial statement information
included herein and, accordingly, is in constant Colombian Pesos and
includes inflation adjustments.
35
<PAGE> 40
(9) The ratio of earnings to fixed charges covers continuing operations, and
for this purpose (i) earnings consist of income (loss) before income taxes
plus fixed charges and (ii) fixed charges consist of interest expense on
all debt (including capitalized interest), amortization of deferred
financing costs and a percentage of rental expense deemed to be interest.
There were no fixed charges in 1993. Earnings were inadequate to cover
fixed charges in 1994 and 1995 and in the three months ended March 31, 1995
and 1996. The fixed charge coverage deficiency for the years ended December
31, 1994 and 1995 amounted to Ps 3.1 billion (US$3.0 million) and Ps 43.8
billion (US$ 41.8 million), respectively. The fixed charge coverage
deficiency for the three months ended March 31, 1995 and 1996 amounted to
Ps 7.9 billion (US$7.6 million) and Ps 4.8 billion (US$4.6 million),
respectively.
(10) Pro forma for the issuance of the Notes and the borrowings under the Bank
Facility and application of the proceeds thereof as if the same occurred at
the beginning of the periods shown. Pro forma cash interest expense is
based on an assumed annual interest rate of 9.25% applied to an outstanding
balance of US$80 million under the Bank Facility and an average rate of
8.7% on an average letter of credit balance of US$3 million. Pro forma
total interest expense consists of the accretion on the Notes and the pro
forma cash interest expense. Numbers for the year ended December 31, 1995
do not give effect to constant Peso adjustments.
(11) As reported by the Company to the Colombian Ministry of Communications. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "Price Competition and Related Matters".
(12) "Penetration" is defined as reported subscribers divided by population
covered within the Concession area. See also the Glossary of Certain
Telecommunications Terms in Annex B hereto.
(13) Represented in constant Pesos. "Active subscribers" is the Company's
internal measure of customers currently generating revenue. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "Price Competition and Related Matters".
36
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company as of and for the fiscal years ended December 31, 1995
and December 31, 1994 and the three-month periods ended March 31, 1996 and March
31, 1995. The discussion should be read in conjunction with the financial
statements of the Company and the notes thereto included elsewhere in this
Prospectus. The financial statements have been prepared in accordance with
Colombian GAAP, which differs in certain significant respects from US GAAP. Note
17 to the Company's financial statements provides a description of the
differences between US GAAP and Colombian GAAP, as well as a reconciliation to
US GAAP of the Company's net income (loss) and shareholders' equity. In
accordance with the requirements of the SEC, unless otherwise indicated, the
financial information has been presented in constant Pesos as of the latest
balance sheet date (March 31, 1996) in order to express all financial
information in purchasing power as of such date. See note 1 to the Company's
financial statements for a description of such constant Peso adjustments. The
following discussion gives all amounts in Pesos as well as in U.S. dollars. Such
U.S. dollar amounts are convenience translations of the Peso amounts at the
Representative Market Rate for March 31, 1996, which was 1,046.00 Pesos to one
U.S. dollar.
GENERAL
The Company was awarded the Concession in March 1994 and began its
commercial service in September of the same year. Therefore, the balance sheet
and income statement as of and for the year ended December 31, 1994, reflect the
fact that the Company was in a pre-operative, development stage during the first
eight months of 1994 and was in commercial operation during the last four months
of such year. In light of the foregoing, the financial information for 1994 is
not directly comparable to that for 1995.
On April 13, 1994, the Company paid Ps 123.1 billion (actual Pesos)
(US$148.5 million at the April 13, 1994 Representative Market Rate) to the
government for the Concession. This amount is being amortized over nine years
and seven months beginning September 1994, which period is the remaining term of
the Concession as of such date, using the units of activation method. To
calculate the monthly amortization charge, this method utilizes the sum of the
projected subscribers per month for each month during the term of the Concession
as the denominator and the sum of the subscribers per month for each month in
the reporting period as the numerator. The Company will revise the underlying
projections of subscribers on a periodic basis, and any resulting impact on
amortization expense will be accounted for in subsequent periods. The Company is
also obligated to pay the government a quarterly royalty payment during the term
of the Concession equal to 5% of the sum of activation fees, monthly fixed fees,
airtime charges, interconnection fees and supplementary services, minus
interconnection costs paid by the Company to other telecommunications operators.
Such royalty payment is included in operating costs in the Company's financial
statements.
The Company generates revenue from (i) activation fees, which are the
initial charges paid by a new subscriber for service, (ii) monthly fixed fees,
which vary depending on the tariff plan chosen by the subscriber, (iii) airtime
charges, which are billed based on usage, vary depending upon the tariff plan
chosen and, under Colombia's calling party pays system, include airtime charges
received from other cellular and wireline operators for calls routed to the
Company's network, (iv) revenues from the sale of equipment to subscribers,
consisting of handsets and accessories and (v) other revenues generated from
roaming, domestic long-distance and value-added and supplementary services.
Equipment sales are made directly by the Company to its customers or to its
independent distributors. The Company believes its roaming, long-distance and
value-added and supplementary services are an important element in attracting
customers, although such services have not been a significant component of total
revenue thus far.
The Company has varied the pricing of all the components of its services in
accordance with its marketing plan and in light of competitive factors, and
expects to continue to do so in the future. In particular, the Company
introduced a short-term pricing initiative in the first quarter of 1995 during a
period of price competition with its principal competitor, Cocelco, pursuant to
which it significantly reduced prices in order to capture market share as
discussed below. Following such period, the Company's airtime and monthly fixed
fees have returned to levels approximating those in effect at the end of 1994,
although the Company has kept
37
<PAGE> 42
its activation fees low in order to attract subscribers. In December 1995, the
Company began a promotional campaign pursuant to which it does not charge any
activation fee.
Consistent with cellular start-up environments, the Company believes that
the current fees and airtime tariffs charged by Colombian operators, including
the Company, are generally higher than those charged in more mature cellular
markets outside of Colombia. Accordingly, the Company believes that as the
market for cellular services in Colombia matures, prices will generally fall,
but at the same time the number of subscribers in Colombia should increase.
The term "reported subscribers" means subscribers as reported by the
Company to the Colombian Ministry of Communications. Prior to September 1995, in
accordance with the reporting guidelines of the Ministry of Communications, the
Company filed quarterly reports which did not cover calendar quarters, but
lagged by approximately one month. For purposes of consistency, reported
subscribers set forth herein for periods prior to September 1995 have been
calculated to conform to calendar quarters. Consistent with the Company's
interpretation of the Ministry's reporting guidelines and with what the Company
believes to be the common interpretation of cellular operators in Colombia, the
Company includes in such term subscribers who have been temporarily
disconnected, and are under evaluation by the Company for reconnection or
permanent deactivation. Prior to September 1995, "reported subscribers" also
included permanently deactivated customers. See also the discussion under
"-- Price Competition and Related Matters" in the comparison of 1995 to 1994.
Active subscribers is the Company's internal measure of subscribers
currently generating revenue, and thus is equal to reported subscribers less all
disconnected subscribers. Calculations of revenue per subscriber, monthly fees
per subscriber and usage per subscriber are made on the basis of active
subscribers. Activation fees per new subscriber and equipment sales per new
subscriber for a period are calculated based on the incremental increase in
reported subscribers for such period.
See the discussion under "Price Competition and Related Matters" in the
comparison of 1995 to 1994 for a discussion of the differences between total
reported and active subscribers.
Cellular operators typically experience losses and negative cash flow in
their initial years of operation due to the large capital investments required
for construction of their networks and the significant advertising and other
expenses needed to start the business. Consistent with this pattern, the Company
has incurred cumulative losses and negative cash flow from operations since
inception. The Company reported net losses for the years ended December 31, 1994
and, December 31, 1995 and the quarter ended March 31, 1996 of Ps 3.1 billion
(US$3.0 million), Ps 43.8 billion (US$41. 8 million) and Ps 5.2 billion (US$ 4.9
million), respectively. In addition, the purchase price for the Concession has
been capitalized and is being amortized over its term as described above.
Effective January 1, 1996, according to Law 223/1995, the Company is liable
for income tax at a statutory tax rate of 35%. Before this change in the law,
the Company was not liable for income tax and, therefore, no provision was
recorded for income taxes. Fiscal losses may be carried forward for tax purposes
for five years. In 1996 and future years, the Company's tax liability will be
calculated based on the greater of (i) net taxable income and (ii) presumed
income, which is the greater of 5% of shareholders' fiscal equity and 1.5% of
total assets, in each case at the end of the previous fiscal year.
ACCOUNTING FOR INFLATION
As a Colombian company, the Company maintains its financial records in
Colombian pesos. Effective January 1, 1992, Colombian GAAP required that the
financial statements of Colombian companies be adjusted to account for
inflation. Financial statements are adjusted for the effects of inflation on the
basis of changes in the Colombian CPI. This index is applied, on a one-month
lagging basis, to non-monetary assets and liabilities, shareholders' equity,
revenues and expense accounts. Monetary balances are not adjusted because they
reflect the purchasing power of the currency at the date of the balance sheet.
Foreign currency balances are not adjusted because they are translated into
Pesos at the exchange rate in effect on the date of the balance sheet and
consequently reflect the purchasing power of the currency on that date. The
resulting
38
<PAGE> 43
net gain or loss from exposure to inflation is reflected as "Net monetary
correction" in the income statement for the period in question. See notes 1 and
15 to the Company's financial statements.
RESULTS OF OPERATION
YEAR ENDED DECEMBER 31, 1994 (FOUR MONTHS OF COMMERCIAL OPERATIONS)
For the period from January 1, 1994 through August 31, 1994, the Company
was in a pre-operating phase. Accordingly, the Company did not generate any
revenues (although it had income from investments of excess cash), and
substantially all expenses during this period were capitalized in accordance
with Colombian GAAP. Such preoperating capitalized expenses consisted primarily
of expenses related to the construction of the Company's cellular network as
well as the development of the Company's corporate infrastructure. Such amount,
which is amortized as discussed below, totalled Ps 14.8 billion (US$14.1
million).
Except as noted below, all references to 1994 mean the four months of
commercial operation.
Revenues
Revenues during 1994 were Ps 10.0 billion (US$9.6 million), all of which
were realized during the last four months of the year. Of such total, Ps 4.4
billion (US$4.2 million), or 44%, came from activation fees from new
subscribers, and Ps 3.6 billion (US$3.4 million), or 36%, came from sales of
equipment. The remainder came from airtime charges (8%) and monthly fixed fees
(12%).
As of December 31, 1994, the Company had 9,356 reported subscribers.
Average monthly revenue per subscriber for 1994 was Ps 120,777 (US$115).
Average activation charges per new subscriber in 1994 were Ps 465,781
(US$445). As is typical for cellular operators in the start-up period, this rate
was significantly higher than the rates the Company expects to realize in future
periods. Equipment sales were also made at average prices higher than those the
Company expects to realize in the future. Average airtime per subscriber was 207
minutes. Minutes in excess of those included in the basic service were charged
at an average of Ps 265 (US$0.25) per minute. Average monthly fixed fees per
subscriber were Ps 73,879 (US$71).
Costs and Expenses
Costs and expenses for 1994 were Ps 14.0 billion (US$13.4 million),
substantially all of which were incurred during the last four months of the
year.
Operating costs were Ps 3.9 billion (US$3.7 million), or 39% of revenue.
Such expenses consist of cost of equipment sales, interconnection fees paid to
local wireline operators (for calls routed through their networks) and the
quarterly royalty payment to the government pursuant to the Concession. Cost of
equipment sales, which were Ps 3.1 billion (US$3.0 million), represent costs of
handsets and accessories sold by the Company directly to its subscribers or to
its distributors. Interconnection charges and the royalty payment (which
totalled Ps 0.8 billion (US$0.7 million)) were low because the Company commenced
commercial operations during this period.
The largest component of costs and expenses (32%) was marketing and selling
expenses, which were Ps 4.5 billion (US$4.3 million), reflecting the Company's
emphasis on marketing efforts to build awareness among potential subscribers of
its "Vozavoz" brand name, its services and its image. Such expenses consisted
principally of advertising and publicity costs as well as incentives and
commissions paid to salespeople.
General and administrative expenses were Ps 4.0 billion (US$3.8 million),
or 29% of total costs and expenses.
Depreciation and amortization, which totalled Ps 1.6 billion (US$1.5
million) and represented 11% of total costs and expenses, consisted of (i)
amortization of intangibles (consisting of the purchase price of the
Concession), (ii) amortization of deferred charges (principally pre-operating
expenses) and (iii) depreciation.
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<PAGE> 44
EBITDA
As a result of the foregoing, EBITDA for 1994 was a negative Ps 2.4 billion
(US$2.3 million). See note [8] under "Selected Financial and Operating Data".
Operating Loss
As a result of the foregoing, the Company had an operating loss of Ps 4.0
billion (US$3.8 million) for 1994.
Other Income (Expense)
Other income, net, was Ps 0.9 billion (US$0.9 million). This was comprised
of interest income of Ps 6.0 billion (US$5.7 million), of which 52% resulted
from investments of excess cash and 48% from foreign exchange gains and other
adjustments, and net monetary correction of Ps 2.9 billion (US$2.8 million).
Other income was offset in part primarily by interest expense on indebtedness of
Ps 5.0 billion (US$4.8 million) and foreign exchange losses on the U.S.
dollar-denominated portion of such indebtedness of $2.8 billion (US$2.7
million). Such indebtedness was used to fund capital expenditures, working
capital and other operating costs and a portion of the purchase price of the
Concession. The foreign exchange losses resulted from the devaluation of the
Peso during this period from 816.08 Pesos to one U.S. dollar as of September 1,
1994 to 831.27 Pesos to one U.S. dollar as of December 31, 1994.
Substantially all of the monetary correction, which represents the
aggregate impact of inflation adjustments to non-monetary assets and
liabilities, income statement accounts and shareholders' equity, reflected
inflation adjustments to balance sheet accounts. (See also note 15 to the
financial statements of the Company.)
Net Loss
As a result of the foregoing, the Company incurred a net loss of Ps 3.1
billion (US$3.0 million) during 1994.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Because 1995 reflects a full year of commercial operations, it is not
directly comparable to 1994, which includes only four months of commercial
operations. References to 1994 mean such four months unless otherwise noted.
Revenues
Revenues for 1995 were Ps 43.0 billion (US$41.1 million), an increase of
330% over 1994 revenues of Ps 10.0 billion (US$9.6 million). Such increase
reflected the full year of operations and the significant growth in reported
subscribers, which increased from 9,356 as of December 31, 1994 to 40,887 as of
December 31, 1995.
The composition of revenue changed significantly as a result of the full
year of operations and the significant growth of subscribers, as well as certain
pricing changes and the price competition discussed below. Airtime charges
represented 41% of total revenue in 1995 compared to 8% in 1994, and monthly
fixed fees were 31% of revenue in 1995 compared to 12% in 1994. Equipment sales
represented 23% of revenue in 1995 compared to 36% in 1994, and activation fees
were 3% of revenue in 1995 compared to 44% in 1994. The remaining 2% of revenues
in 1995 consisted of other revenues, principally attributable to roaming charges
for which the Company did not charge prior to 1995.
Revenue in all categories except activation fees increased significantly in
1995 compared to 1994. Airtime charges were Ps 17.5 billion (US$16.7 million) in
1995, compared to Ps 0.8 billion (US$0.8 million) in 1994. This reflected the
full year of operations, the increased number of subscribers, and an increase in
average usage per subscriber. Average minutes per subscriber increased
approximately 18% from 207 minutes in 1994
40
<PAGE> 45
to 244 minutes in 1995. In addition, the average billed rate per minute
increased 41% from Ps 265 (US$0.25) in 1994 to Ps 374 (US$0.36) in 1995
primarily because of the inclusion of interconnection revenues for incoming
calls. This was partially offset by a reduction in prices discussed below.
Monthly fixed fees were Ps 13.3 billion (US$12.7 million) in 1995, compared
to Ps 1.2 billion (US$1.1 million) in 1994. This again reflected the full year
of operations and the increased subscriber base. The average monthly fixed fee
per subscriber was Ps 46,585 (US$45) in 1995, a 37% decrease compared to the
1994 rate of Ps 73,879 (US$71). The Company reduced its monthly fixed fees in
order to increase its subscriber base and stimulate usage.
Revenue from equipment sales was Ps 9.8 billion (US$9.4 million) in 1995,
an increase of 172% over 1994, which reflected the increase in subscribers,
partially offset by certain decreases in equipment prices.
Activation fees were Ps 1.3 billion (US$1.2 million), compared to Ps 4.4
billion (US$4.2 million) in 1994. This reflected the substantial drop in average
activation fees per customer from Ps 465,781 (US$445) in 1994 to Ps 40,473
(US$39) in 1995, the effect of which was offset in part by the growth in
subscribers. Such decline was in part planned as the Company sought to broaden
its subscriber base in order to increase total revenues and was in part due to
price competition discussed below.
Price Competition and Related Matters
Beginning in January 1995, the Company substantially reduced its subscriber
charges in all categories in order to respond to price reductions by its
principal competitor, Cocelco. The Company reduced activation fees from Ps
650,000 (US$621) as of December 31, 1994 to Ps 290,000 (US$277) as of January
31, 1995, kept monthly fixed fees for its basic service at Ps 37,000 (US$35) and
reduced airtime charges for its basic service per peak minute from Ps 370
(US$0.35) as of December 31, 1994 to Ps 250 (US$0.24) as of January 31, 1995 and
per off peak minute from Ps 190 (US$0.18) as of December 31, 1994 to Ps 125
(US$0.12) as of January 31, 1995. Subsequently, the Company charged customers a
fee of Ps 290,000 (US$277) for activation as well as equipment, which
effectively reduced activation fees to zero. The Company believes these
reductions were the primary reason for the substantial increase in reported
customers in the first quarter of 1995, from 9,356 as of December 31, 1994 to
31,080 as of March 31, 1995. The price competition abated in the second quarter
of 1995, and the Company began at the end of the second quarter to increase its
average activation price, monthly fixed fees and airtime charges. The Company
also began to promote the use of digital handsets by setting the activation
charge for digital users lower than the activation charge for analog users. As
of December 31, 1995, airtime and monthly fixed fees returned to approximate
December 31, 1994 levels; however, in December, 1995, the Company began a
promotional campaign pursuant to which it does not charge any activation fee.
The foregoing prices are in actual Pesos and are translated into Dollars at the
Representative Market Rate on March 31, 1996.
In order to rapidly establish awareness of cellular services and to respond
to the price competition, the Company's top priority during this period was to
increase its subscriber base. In order to accomplish this objective, management
did not strictly enforce its policies for managing customer credit checks, late
payments and collections. As a result, the Company found that its customer
accounts receivable were increasing at a fast rate because many of the customers
who joined in the first quarter of 1995 in particular were behind in payments.
The Company believes this reflected, among other things, a lower average credit
quality among those new customers as well as the fact that many of them did not
intend to be long-term customers, especially as prices increased.
Beginning in August 1995, the Company implemented a variety of measures to
deal with late payments, collections and credit standards. The Company took more
aggressive action to temporarily disconnect customers who were behind in their
payments and to evaluate the reasons for late payments. Such actions included
enforcement of gradual restrictions on a subscriber's service, temporary
disconnection generally after 45 days, and, where appropriate, permanent
disconnection after 120 days, following the billing date. The Company also
implemented more thorough credit checks on new subscribers requiring credit
approval before activating service. All these measures were designed to upgrade
the credit quality of the Company's customers, minimize churn and minimize the
risk that subscribers would accumulate large unpaid balances.
41
<PAGE> 46
Through the Company actions described above, as well as voluntary
terminations, the Company expects that a significant number of its subscribers
(including approximately half of the customers who joined in the first quarter
of 1995) will ultimately be permanently deactivated or will otherwise leave its
subscriber base, although this will only be determined over time. As a result,
approximately 12,000 of the approximately 41,000 reported subscribers as of
December 31, 1995 are not considered active subscribers. Approximately 12,500 of
the approximately 48,500 reported subscribers as of March 31, 1996 are not
considered active subscribers.
The Company believes that as a result of its actions it has increased the
overall credit quality of its customers and it has the policies and systems in
place to effectively manage subscriber growth. In connection with these efforts,
the Company in late 1995 implemented a new software package for general
accounting. The Company also expects to implement by the end of the second
quarter of 1996 a new software package designed to further improve the
administration of collections.
Costs and Expenses
Costs and expenses were Ps 63.7 billion (US$60.9 million), an increase of
355% over Ps 14.0 billion (US$13.4 million) in 1994. Such increase reflected the
overall growth in the business and, in particular, an increase in operating
costs because of the substantial increase in the number of subscribers.
Operating costs were Ps 20.9 billion (US$19.9 million), compared to the
1994 amount of Ps 3.9 billion (US$3.7 million), and represented 49% of revenue
compared to 39% in 1994, primarily reflecting the leasing of equipment,
long-distance and interconnection fees and leased lines, none of which were
incurred in 1994. Included in operating costs were cost of equipment sold of Ps
9.4 billion (US$9.0 million) in 1995, compared to Ps 3.1 billion (US$3.0
million) in 1994, and interconnection charges and the quarterly royalty payment
to the government which totalled Ps 4.4 billion (US$4.2 million) in 1995
compared to Ps 0.8 billion (US$0.7 million) in 1994.
Marketing and selling expenses were Ps 11.9 billion (US$11.4 million),
compared to Ps 4.5 billion (US$4.3 million) in 1994. Such costs were 28% of
revenue in 1995 compared to 45% in 1994, reflecting the realization of economies
of scale in sales and marketing.
General and administrative costs were Ps 19.0 billion (US$18.2 million),
compared to the 1994 amount of Ps 4.0 billion (US$3.8 million), reflecting the
growth of the Company. Approximately 27% of such total constituted a provision
for bad debt of Ps 5.1 billion (US$4.9 million) which was related to the actions
by the Company to upgrade the quality of its customer base discussed above.
General and administrative costs were 44% of revenue in 1995 compared to 40% in
1994, primarily because of such provision.
Depreciation and amortization was Ps 12.0 billion (US$11.5 million),
compared to Ps 1.6 billion (US$1.5 million) in 1994. Such charges were 28% of
revenues in 1995 compared to 16% in 1994, primarily because the growth in
subscribers increased amortization of intangibles under the units of activation
method as discussed above, and depreciation increased because of the increase in
property, plant and equipment from Ps $41.1 billion (US$39.3 million) as of
December 31, 1994 to Ps 68.6 billion (US$65.6 million) as of December 31, 1995.
EBITDA
As a result of the foregoing, EBITDA for 1995 was a negative Ps 8.7 billion
(US$8.3 million), compared to a negative Ps 2.4 billion (US$2.3 million) in
1994. See note 8 under "Selected Financial and Operating Data".
Operating Loss
As a result of the foregoing, the Company incurred an operating loss of Ps
20.7 billion (US$19.8 million) in 1995 compared to an operating loss of Ps 4.0
billion (US$3.8 million) in 1994.
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<PAGE> 47
Other Income (Expense)
Other expense, net, in 1995 amounted to Ps 23.1 billion (US$22.1 million),
compared to other income, net, of Ps 0.9 billion (US$0.9 million) in 1994. Other
expense consisted of interest expense on indebtedness of Ps 26.6 billion
(US$25.4 million) in 1995 compared to Ps 5.0 billion (US$4.8 million) in 1994
and foreign exchange losses on U.S. dollar-denominated indebtedness of Ps 20.2
billion (US$19.3 million) in 1995 compared to Ps 2.8 billion (US$2.7 million) in
1994. Such increases were primarily due to the devaluation of the Peso, as well
as the effect of the full year of interest expense in 1995 as opposed to four
months in 1994. The foreign exchange losses reflected devaluation of the Peso
from 831.27 Pesos to one U.S. dollar at December 31, 1994 to 987.65 Pesos to one
U.S. dollar at December 31, 1995. Such other expenses were offset in part
primarily by interest income of Ps 2.2 billion (US$2.1 million) compared to Ps
6.0 billion (US$5.7 million) in 1994, and a net monetary correction of Ps 21.8
billion (US$20.8 million) in 1995 compared to Ps 2.9 billion (US$2.8 million) in
1994. Of the total interest income in 1995, 37% resulted from investments of
excess cash compared to 52% in 1994 and 63% resulted from foreign exchange gains
and other adjustments compared to 48% in 1994.
The increase in the monetary correction resulted primarily from an increase
in the valuation of intangibles and property, plant and equipment, partially
offset by an increase in shareholders' equity in 1994. Of the total monetary
correction, 85% was attributable to balance sheet account adjustments and the
remainder to income statement account adjustments.
Net Loss
As a result of the foregoing, the Company had a net loss of Ps 43.8 billion
(US$41.9 million), compared to a net loss of Ps 3.1 billion (US$3.0 million) in
1994.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Revenues
Revenues for the three-month period ended March 31, 1996 were Ps 17.0
billion (US$16.2 million), an increase of 127% over the revenues for the
three-month period ended March 31, 1995 of Ps 7.5 billion (US$7.2 million). Such
increase reflected the significant growth in reported subscribers, which
increased from 31,080 as of March 31, 1995 to 48,460 as of March 31, 1996.
The composition of revenue changed significantly as a result of an increase
in airtime charges and a decrease in equipment sales in the first quarter of
1996 compared to the first quarter of 1995. Airtime charges increased
principally as a result of higher tariffs and an increase in the number of
subscribers. Equipment sales declined primarily due to an overall market decline
in the price of handsets and a subsidy given by the Company beginning in the
first quarter of 1996 to promote the sale of digital handsets. Airtime charges
represented 51% of total revenue in the three-month period ended March 31, 1996
compared to 15% in 1995, and monthly fixed fees were 26% of revenue in the
three-month period ended March 31, 1996 compared to 23% in the three-month
period ended March 31, 1995. Equipment sales represented 12% of revenue in the
three-month period ended March 31, 1996 compared to 54% in the three-month
period ended March 31, 1995, and activation fees were 1% of revenue in the
three-month period ended March 31, 1996 compared to 8% in the three-month period
ended March 31, 1995. The remaining 11% of revenues in the three-month period
ended March 31, 1996 consisted of other revenues, principally attributable to
roaming charges.
Revenue in all categories, except activation fees and equipment sales,
increased significantly for the quarter ended March 31, 1996 compared to the
quarter ended March 31, 1995. Airtime charges were Ps 8.6 billion (US$8.2
million) for the quarter ended March 31, 1996, compared to Ps 1.1 billion
(US$1.1 million) for the quarter ended March 31, 1995. This reflected the
increased number of subscribers and an increase in fees compared to the quarter
ended March 31, 1995. In addition, the average billed rate per minute increased
136% from Ps 210 (US$0.20) for the quarter ended March 31, 1995 to Ps 497
(US$0.48) for the quarter ended March 31, 1996 primarily because of the increase
in fees compared to the quarter ended March 31,
43
<PAGE> 48
1995 and the inclusion of interconnection revenues for incoming calls. This was
partially offset by a reduction in average minutes per subscriber from 237
minutes to 234 minutes.
Monthly fixed fees were Ps 4.4 billion (US$4.2 million) for the quarter
ended March 31, 1996, compared to Ps 1.7 billion (US$1.6 million) for the
quarter ended March 31, 1995. This increase reflected the increased subscriber
base and the increased average monthly fixed fee per subscriber, which increased
12% from Ps 41,014 (US$39) for the quarter ended March 31, 1995 to Ps 45,947
(US$44) for the quarter ended March 31, 1996.
Revenue from equipment sales decreased from Ps 4.1 billion (US$3.9 million)
for the quarter ended March 31, 1995 to Ps 2.0 billion (US$1.9 million) for the
quarter ended March 31, 1996, due to the factors discussed above.
Activation fees decreased from Ps 0.6 billion (US$0.6 million) for the
quarter ended March 31, 1995 to Ps 0.1 billion (US$0.1 million) for the quarter
ended March 31, 1996, as a result of the promotional campaign commenced by the
Company in December 1995, pursuant to which the Company does not charge any
activation fee.
Costs and Expenses
Costs and expenses were Ps 18.7 billion (US$17.8 million), an increase of
50% over Ps 12.5 billion (US$12.0 million) for the three-month period ended
March 31, 1995. Such increase reflected the overall growth in the business and,
in particular, an increase in operating costs because of the substantial
increase in the number of subscribers.
Operating costs were Ps 7.9 billion (US$7.6 million), an increase over the
amount for the three-month period ended March 31, 1995 of Ps 4.3 billion (US$4.1
million), and represented 46% of revenue compared to 57% for the three-month
period ended March 31, 1995, primarily reflecting the increase in the leasing of
equipment, interconnection costs, roaming fees and the quarterly royalty payment
to the government. Included in operating costs were cost of equipment sold of Ps
2.4 billion (US$2.3 million) for the three-month period ended March 31, 1996,
compared to Ps 3.6 billion (US$3.4 million) for the three-month period ended
March 31, 1995, and interconnection charges and the quarterly royalty payment to
the government which totalled Ps 2.5 billion (US$2.4 million) for the
three-month period ended March 31, 1996 compared to Ps 0.6 billion (US$0.6
million) for the three-month period ended March 31, 1995.
Marketing and selling expenses were Ps 2.2 billion (US$2.1 million),
compared to Ps 2.8 billion (US$2.7 million) for the three-month period ended
March 31, 1995. Such costs were 13% of revenue for the three-month period ended
March 31, 1996 compared to 37% for the three-month period ended March 31, 1995,
reflecting the realization of economies of scale in sales and marketing.
General and administrative costs were Ps 4.9 billion (US$4.7 million),
compared to Ps 2.9 billion (US$2.8 million) for the three-month period ended
March 31, 1995, reflecting the growth of the Company. Approximately 26% of such
total constituted a provision for bad debt of Ps 1.3 billion (US$1.2 million)
which was related to the actions by the Company to upgrade the quality of its
customer base discussed above. General and administrative costs were 29% of
revenue for the three-month period ended March 31, 1996 compared to 39% for the
three-month period ended March 31, 1995, reflecting the economy of scales
achieved by the Company.
Depreciation and amortization was Ps 3.7 billion (US$3.5 million), compared
to Ps 2.5 billion (US$2.4 million) for the three-month period ended March 31,
1995. Such charges were 22% of revenues for the three-month period ended March
31, 1996 compared to 33% for the three-month period ended March 31, 1995,
resulting from an increase in amortization which was offset by a larger increase
in revenues.
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<PAGE> 49
EBITDA
As a result of the foregoing, EBITDA for the three-month period ended March
31, 1996 was Ps 2.0 billion (US$1.9 million), compared to a negative Ps 2.5
billion (US$2.4 million) for the three-month period ended March 31, 1995. See
note 8 under "Selected Financial and Operating Data".
Operating Loss
As a result of the foregoing, the Company incurred an operating loss of Ps
1.7 billion (US$1.6 million) for the three-month period ended March 31, 1996
compared to an operating loss of Ps 5.0 billion (US$4.8 million) for the
three-month period ended March 31, 1995.
Other Income (Expense)
Other expense, net, for the three-month period ended March 31, 1996
amounted to Ps 3.1 billion (US$3.0 million), compared to other expense, net, of
Ps 2.9 billion (US$2.8 million) for the three-month period ended March 31, 1995.
Other expense consisted of interest expense on indebtedness of Ps 7.2 billion
(US$6.9 million) for the three-month period ended March 31, 1996 compared to Ps
3.3 billion (US$3.2 million) for the three-month period ended March 31, 1995 and
foreign exchange losses on U.S. dollar-denominated indebtedness of Ps 6.9
billion (US$6.6 million) for the three-month period ended March 31, 1996
compared to Ps 5.9 billion (US$5.6 million) for the three-month period ended
March 31, 1995. Such increases were primarily due to the devaluation of the
Peso, as well as higher interest expense due to an increase in average
indebtedness. The foreign exchange losses reflected devaluation of the Peso from
987.65 Pesos to one U.S. dollar at December 31, 1995 to 1,046.00 Pesos to one
U.S. dollar at March 31, 1996. Such other expenses were offset in part primarily
by interest income of Ps 1.2 billion (US$1.1 million) for the three-month period
ended March 31, 1996 compared to Ps 0.4 billion (US$0.4 million) for the
three-month period ended March 31, 1995, and a net monetary correction of Ps
11.1 billion (US$10.6 million) for the three-month period ended March 31, 1996
compared to Ps 6.9 billion (US$6.6 million) for the three-month period ended
March 31, 1995. Of the total interest income for the three-month period ended
March 31, 1996, 76% resulted from investments of excess cash compared to 54% for
the three-month period ended March 31, 1995 and 24% resulted from foreign
exchange gains and other adjustments compared to 46% for the three-month period
ended March 31, 1995.
The increase in the monetary correction resulted primarily from an increase
in the valuation of intangibles and property, plant and equipment, partially
offset by an increase in shareholders' equity for the three-month period ended
March 31, 1996. Of the total monetary correction, 94% was attributable to
balance sheet account adjustments and the remainder to income statement account
adjustments.
Net Loss
As a result of the foregoing, the Company had a net loss of Ps 5.2 billion
(US$5.0 million) for the three-month period ended March 31, 1996, compared to a
net loss of Ps 7.9 billion (US$7.6 million) for the three-month period ended
March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As is typical with the commencement of a cellular business, the Company has
required substantial capital to purchase the Concession, construct its network
and fund operations. Because of the start-up nature of its operations, such
requirements have been largely funded through capital contributions from
shareholders and debt financing rather than cash flow.
The Company's uses of funds to date have included Ps 123.1 billion (actual
Pesos) (US$148.5 million at the April 13, 1994 Representative Market Rate) to
pay for the Concession in 1994, capital expenditures to construct the network of
Ps 37.9 billion (US$36.2 million) in 1994 and Ps 24.8 billion (US$23.7 million)
in 1995, and funds for operations. For the years ended December 31, 1994, and
1995 and the quarter ended March 31, 1996, net cash used in operating activities
was Ps 3.7 billion (US$3.5 million), Ps 46.0 billion
45
<PAGE> 50
(US$44.0 million) and Ps 15.2 billion (US$14.5 million), respectively. For the
years ended December 31, 1994 and 1995 and the quarter ended March 31, 1996, net
cash used in investing activities was Ps 207.2 billion (US$198.1 million) and Ps
27.2 billion (US$26.0 million) and Ps 3.2 billion (US$3.0 million),
respectively.
As of March 31, 1996 the Company had raised from its shareholders through
the issuance of common stock an aggregate amount of Ps 96.6 billion (US$92.4
million).
During 1994, the Company borrowed, net of repayments, Ps 111.7 billion
(US$106.8 million) under bank loans, of which approximately 95% was U.S.
dollar-denominated indebtedness. During 1995, the Company borrowed, net of
repayments, Ps 74.3 billion (US$71.1 million), of which approximately 95% was
Peso-denominated indebtedness. During the quarter ended March 31, 1996, the
Company borrowed, net of repayments, Ps 14.2 billion (US$13.6 million, of which
approximately 31% was Peso-denominated indebtedness.
As of December 31, 1995 and March 31, 1996, the Company's total
indebtedness was Ps 167.3 billion (US$160.0 million) and Ps 167.6 billion
(US$160.2 million), respectively. Of such total, Ps 83.7 billion (US$80.0
million) and Ps 84.2 billion (US$80.5 million), respectively was long-term debt
and Ps 83.6 billion (US$80.0 million) and Ps 83.4 billion (US$79.7 million),
respectively was short-term debt. In addition, of the total indebtedness, Ps
53.4 billion and Ps 53.3 billion, respectively, was Peso-denominated debt and Ps
113.9 billion and Ps 114.3 billion, respectively, was U.S. dollar-denominated
debt. The Company's cash and cash equivalents as of December 31, 1995 and March
31, 1996 was Ps 6.7 billion (US$6.4 million) and Ps 15.0 billion (US$14.3
million), respectively.
In June 1996, the Company refinanced US$157 million of its indebtedness
with proceeds of the Offering and the Bank Facility. The Company expects to use
the remaining net proceeds of the Offering and the Bank Facility to fund
construction of the network and for working capital.
In addition to the indebtedness represented by the Notes and the Bank
Facility, the Company as of June 30, 1996 had approximately US$1.8 million of
other indebtedness consisting primarily of letters of credit. The Company also
has obligations under leases which are not capitalized in accordance with
Colombian GAAP. See note 7 to the financial statements of the Company.
The Company expects that the capital expenditures needed to complete
construction of its network (including planned upgrades by 1999) will aggregate
approximately US$54 million, of which approximately US$13.0 million is expected
to be incurred in each of fiscal 1996 and fiscal 1997. The Company expects that
its internally generated funds will be sufficient to satisfy debt service
requirements and operational needs as well as such capital requirements needed
to complete the build-out of its network through 1999, and, therefore, does not
expect to need additional financing. However, there can be no assurance that
such funds will be sufficient to satisfy such requirements and needs, and,
accordingly, the Company may need to obtain additional financing.
46
<PAGE> 51
BUSINESS
Occel is one of only two providers of cellular telecommunications services
in the densely populated western region of Colombia (the "Western Region"). The
Western Region has a population of approximately 12.8 million people (or
approximately 36% of the country's population), and includes the cities of
Medellin and Cali, the second and third largest metropolitan areas in the
country, as well as thirteen other cities with populations in excess of 100,000
each. The Company commenced commercial cellular service in September 1994,
pursuant to a ten-year concession effective as of March 28, 1994, and has
subsequently generated significant growth in total subscribers and revenues. As
of December 31, 1995 and March 31, 1996, the Company had 40,887 and 48,460
reported subscribers, respectively, and realized average monthly revenue per
active subscriber for the quarters ended December 31, 1995 and March 31, 1996 of
US$141.76 and US$143.84, respectively (in actual Pesos translated at the average
Representative Market Rates for the respective quarters).
Since the launch of its service, the Company has sought to rapidly increase
its coverage areas, establish recognition of its "Vozavoz" brand name and
provide a superior quality of service that is equivalent to that provided by
world class operators. As of March 31, 1996, the Company had reached a
penetration level of 0.56% of the population covered by its cellular network,
which included the metropolitan areas of Medellin (with approximately 2.4
million pops), Cali (with approximately 1.8 million pops), Pereira (with
approximately 0.5 million pops), Manizales (with approximately 0.4 million
pops), Armenia (with approximately 0.2 million pops) and other urban areas
(having in the aggregate approximately 0.7 million pops). In addition, the
Company has roaming agreements with other cellular operators which provide its
customers with nationwide coverage throughout Colombia as well as access in
several other countries.
The Company has invested heavily in constructing a state-of-the-art network
which has dual analog and digital capacity and which can support continued
growth in subscribers as well as technologically advanced new services. As of
March 31, 1996, the Company's cellular telecommunications network covered
approximately 67% of the population of the Western Region. The Company had
incurred approximately Ps 57 billion (US$54 million) in capital expenditures
through March 31, 1996 to build its network, and expects to incur approximately
an additional US$51 million to substantially complete its build-out (including
planned upgrades) by 1999.
The Company's headquarters are located at Carrera 55 No. 49-101, Medellin,
Colombia, and its telephone and fax numbers are 574-512-9090 and 574-513-0199,
respectively.
COLOMBIAN TELECOMMUNICATIONS INDUSTRY
Overview
Colombia is one of the oldest democracies and most stable economies in
Latin America. Since 1950, Colombia has enjoyed positive real economic growth in
every year, with real compounded average annual growth in its GDP of
approximately 4.5% from 1986 to 1995, one of the highest growth rates in Latin
America. In addition, annual inflation has declined steadily in each of the past
five years from 26.8% in 1991 to 22.6% and 19.5% in 1994 and 1995, respectively.
In recent years, the government's economic growth strategy has encouraged
foreign investment and exports through reduced foreign exchange controls and
lower import quotas and tariffs. The government has also begun to open certain
public services to private sector investment and has commenced privatization of
certain state-owned industries in the power and banking sectors, and is
considering other sectors for privatization. In part as a result of these
policies, foreign investment in Colombia has grown from US$3.5 billion in 1990
to US$6.6 billion in 1995. During the same period, Colombia has achieved
increased diversification of its export base and the value of its exports has
grown from US $6.7 billion to US $9.8 billion. However, Colombia is currently
experiencing political turmoil which could have an adverse effect on the
economy. See "Risk Factors -- Risks Related to Colombian Political, Economic and
Social Factors".
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<PAGE> 52
Despite the growth in the economy and, in particular, the infrastructure in
Colombia in recent years, the country is significantly underserved by existing
wireline operators and demand for phone service substantially outweighs supply
of wireline phone service. As of December 31, 1994, as reported by International
Telecommunication Union, Colombia had only approximately 10 telephone lines per
100 persons. Colombia's wireline penetration compares with other Latin American
countries as follows:
<TABLE>
<CAPTION>
TELEPHONE
LINES PER
COUNTRY 100 PERSONS
------- --------------
<S> <C>
Argentina..................................................... 14.1
Chile......................................................... 11.0
Venezuela..................................................... 10.9
Colombia...................................................... 9.7
Mexico........................................................ 9.3
Brazil........................................................ 7.4
</TABLE>
Source: International Telecommunication Union: World Telecommunication
Development Report 1995
The Colombian government, recognizing the importance of an effective
telecommunications infrastructure and the role that the telecommunications
industry plays in national development, has taken steps in the last several
years to liberalize Colombia's telecommunications regulatory framework in order
to support the government's goals of increased coverage, modernization and
service diversification. In 1991, the Ministry of Communications opened the
value-added services market to competition. "Value-added services" are defined
as services other than basic telephone service, such as data transmission. In
1992, the Colombian government authorized the granting of cellular
telecommunications service concessions to public-sector, mixed-economy and
private-sector companies and subsequent legislation adopted in 1993 created the
framework for the provision of cellular telecommunications services.
Currently, local wireline telephone service in the Western Region is
provided by six main local and municipal operators, who, through holding
companies, are also shareholders of the Company, as well as by several other
operators which service smaller cities. Wireline penetration in Colombia varies
significantly by city as does the waiting time for wireline service, which
ranges from a few weeks or months in the best markets (including Medellin) to
two years or longer. This can be contrasted with cellular service, where in the
case of the Company to date, service to new customers has generally commenced
within a few days.
Domestic and international long distance wireline service is provided
exclusively by the state-owned Telecom, which has a monopoly on both
international calls and telex services. Cellular operators, pursuant to their
Concessions, can route domestic long-distance calls through their own networks
or through those of the other cellular companies. However, cellular operators
must route all international long distance service through Telecom. In 1995, the
Colombian government announced the opening of the domestic and international
long distance market to competition beginning in 1997, at which time there will
be up to two other licensed operators in addition to Telecom. The Company
believes that the deregulation of the long distance market will, as it has in
other countries, serve to stimulate phone usage, including the usage of cellular
phones, due to the fact that price competition is likely to lower tariffs to the
consumer.
Cellular Concessions
In 1993, the Colombian government initiated an auction process to grant a
limited number of long-term cellular telecommunications concessions throughout
the country. For purposes of this process, Colombia was divided into three
regions (i) the Western Region, (ii) the Eastern Region and (iii) the Atlantic
Region, with each Region having an A Band and a B Band. The government organized
two parallel, but separate, bidding processes for the concessions available in
each Region: (i) public-sector and mixed-economy companies (companies which have
both public sector and private sector shareholders, engage in commercial
activities and are created by special legislation) were permitted to bid for the
A Band concession and (ii) wholly private-sector companies were permitted to bid
for the B Band concession. The Colombian government first
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<PAGE> 53
awarded the B Band concessions and then, forty days later, awarded the A Band
concessions, which were priced at a minimum of 95% of the related winning B Band
bids.
In awarding these concessions, the Colombian government considered not only
financial factors, but the underlying technical and operational capabilities of
the various bidders. The completion of the auction process has resulted in a
cellular duopoly similar to that which characterizes the United States, Canada
and most Latin American countries. The government awarded a total of six
concessions, with two concessions in each of the Regions, as follows:
<TABLE>
<CAPTION>
WESTERN EASTERN ATLANTIC
REGION REGION REGION
----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
A Band: Occel Comcel Celcaribe
B Band: Cocelco Celumovil Celumovil de la Costa
</TABLE>
The concessions were awarded for ten years, with a renewal option, subject
to certain conditions, for an additional ten-year period. The government may
issue additional concessions (though not on the frequencies awarded) after 1999.
The following significant factors distinguish cellular systems in the
Western Region from those in the United States: (i) the early introduction of
digital technology, (ii) the policy of calling party pays and (iii) the ability
to deliver domestic long distance calls without routing such calls through a
long distance carrier. In the United States, cellular networks were originally
constructed using analog technologies. Cellular operators in many United States
markets either have implemented, have begun to implement or today face the need
to implement digital cellular technology, in each case often at significant
cost. In Colombia, the government mandated that cellular operators meet certain
digitalization targets as a condition of their concessions with a requirement
that 10% of the cellular operators' networks be digital by the third year of
operation, 30% by the fifth year and 50% by the eighth year. Cellular networks
in Colombia, including the Company's, are being constructed using TDMA
technology, the most widely used cellular digital standard in North America. The
policy of calling party pays differs from that in the United States where the
cellular subscriber pays for the incoming call. The Company believes that the
policy of calling party pays has resulted in a much higher percentage of
incoming traffic and more usage overall by its subscribers as they are more
likely to give their telephone number to callers since they are not charged for
the incoming call. The policy also encourages people to keep their phones turned
on. In the United States, cellular operators are required to route long-distance
calls through a long distance carrier and then share the resulting revenue. In
contrast, the Concession allows the Company to deliver calls anywhere in the
Western Region when it has the capability to do so, without routing such calls
through a long distance carrier. Accordingly, the Company is not required to
share revenues for such calls with another carrier.
The Western Region
The Western Region includes the departments of Antioquia, Caldas, Cauca,
Choco, Narino, Quindio, Risaralda and Valle. It has an area of 209,000 square
kilometers, representing 18% of the country's total area. The population of 12.8
million inhabitants represents 36% of the total population of Colombia. The
region is bounded by 1,300 kilometers of Pacific and 290 kilometers of Atlantic
coastline making it a strategically important area. The Western Region includes
the metropolitan areas of Medellin and Cali, the second and third largest cities
in Colombia, with populations of 2.4 million and 1.8 million, respectively. The
Western Region includes the Buenaventura Port, on the Pacific coast, which
handles approximately half of all exports of the country.
The Western Region generates one third of Colombia's Gross National
Product, mainly with urban economic activities. Many of the largest national
manufacturing, agricultural and commercial companies are located in the Western
Region. Additionally, 50% of Colombia's hydro-electric power, which represents
76% of the total electric power, is produced in the region.
49
<PAGE> 54
The following are some of the Western Region's principal products and the
estimated percentage of total Colombian production of such products which occurs
in the Western Region for the year ended December 31, 1995:
<TABLE>
<CAPTION>
WESTERN REGION
ECONOMIC SECTORS PRODUCTION
---------------- --------------
<S> <C>
Coffee......................................................... 71.0%(1)
Bananas........................................................ 55.0%(2)
Sugar.......................................................... 99.5%(2)
</TABLE>
- ---------------
(1) Source: 1980 census of Federacion Nacional de Cafeteros de Colombia
(2) Source: Ministry of Agriculture, Ministry of Economic Development
In the Western Region there are four major and many smaller airports, and
four industrial and commercial "free zones" designed to attract industry and
commerce. The Western Railroad, which is undergoing a modernization and
enhancement program, runs through about 75% of the Western Region. In addition,
the Panamerican Highway, which runs from Alaska to the southern tip of Latin
America, covers the entire length of the Western Region.
According to published reports, the headquarters of the following 11 of the
top 25 financial institutions in Colombia are located in the Western Region:
<TABLE>
<CAPTION>
TOTAL REPORTED ASSETS AS OF
DECEMBER 31, 1995
COMPANY NAME (IN BILLIONS OF ACTUAL PESOS)
-------------------------------------------------------------- -----------------------------
<S> <C>
Banco Industrial Colombiano S.A............................... 1,610.8
Conavi S.A.................................................... 1,587.4
Banco Popular S.A............................................. 1,407.3
Seguros Suramericana Generales S.A............................ 1,303.7
Banco Comercial Antioqueno S.A................................ 1,282.1
Corporacion Financiera del Valle S.A.......................... 1,254.1
Banco de Occidente S.A........................................ 1,091.8
Corporacion Financiera Nacional y Suramericana S.A............ 1,072.5
Suramericana Capitalizacion S.A............................... 994.2
Banco del Estado S.A.......................................... 822.3
Suramericana de Seguros de Vida S.A........................... 780.8
</TABLE>
Source: Revista Semana, April 30 to May 7, 1996
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<PAGE> 55
According to published reports, the Colombian headquarters of the following
21 of the top 50 companies (in terms of sales volume) in Colombia are located in
the Western Region:
<TABLE>
<CAPTION>
TOTAL REPORTED SALES
IN 1995
(IN BILLIONS OF
COMPANY NAME TYPE OF BUSINESS ACTUAL PESOS)
---------------------------------------------- ---------------- -----------------------
<S> <C> <C>
Gran Cadena de Almacenes Colombianos S.A...... Retail 618.6
Almacenes Exito S.A........................... Retail 590.3
Carvajal S.A. ................................ Printing 424.9
Cia Nacional de Chocolates S.A................ Food 324.7
Industrias Alimenticias Noel S.A.............. Food 278.7
C.I. Uniban S.A............................... Bananas 270.1
Colgate Palmolive y Cia S.A................... Home Products 252.8
Enka de Colombia S.A.......................... Textiles 245.1
Coltejer S.A.................................. Textiles 242.8
Smurfit Carton de Colombia S.A................ Paper 235.7
Cacharreria La 14 Ltda........................ Retail 231.0
Lloreda Grasas S.A............................ Food 202.8
Productores de Papel S.A...................... Paper 201.5
Industria Colombiana de Llantas S.A........... Tires 180.4
Ingenio del Cauca S.A......................... Sugar 177.5
Colanta Ltda.................................. Food 170.2
Cacharreria Mundial S.A....................... Retail 169.9
Cristaleria Peldar S.A........................ Glass 165.1
Fabricato S.A................................. Textiles 163.4
Gaseosas Posada Tobon S.A..................... Beverages 157.7
Tecnoquimicas S.A............................. Food and drugs 155.4
</TABLE>
Source: Revista Semana, April 30 to May 7, 1996
Other Regions
The Eastern Region covers 73% of Colombia's territory and 44% of its
population. The main economic activities in this region are governmental,
commercial, mining and oil production, and agriculture and its related
industries. The Atlantic Region covers 9% of Colombia's territory and 20% of its
population. The main economic activities in this region are agriculture,
fishing, trading and tourism.
Growth of Cellular Industry
Since the commencement of service in 1994, the Colombian cellular industry
has experienced significant growth. On September 30, 1994, total reported
subscribers in Colombia equaled 25,243. By December 31, 1995, the most recently
available period, the total number of reported subscribers had grown to 274,590,
according to the Ministry of Communications, and represents a penetration rate
for the total Colombian population of 0.78%. This compares favorably with
estimated penetration and growth rates in other Latin
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<PAGE> 56
American countries, most of which began offering cellular service prior to its
introduction in Colombia as evidenced below:
ESTIMATED PENETRATION RATES OF CELLULAR SERVICE IN SELECTED LATIN AMERICAN
COUNTRIES BY YEAR
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ARGENTINA BRAZIL CHILE MEXICO VENEZUELA COLOMBIA
<S> <C> <C> <C> <C> <C> <C>
1989 0.004 0.041 0.009 0.019
1990 0.032 0.112 0.078 0.044
1991 0.071 0.004 0.223 0.206 0.190
1992 0.133 0.020 0.465 0.325 0.429
1993 0.383 0.121 0.641 0.428 0.857
1994 0.714 0.406 0.966 0.616 1.556 0.230
1995 1.275 0.819 1.371 0.747 2.205 0.816
</TABLE>
Source: MTA-EMCI
- ---------------
(1) Colombian figures are based on reported, not active, subscribers. Estimated
penetration rates for countries other than Colombia are based on private
market research, which may be based on different methods of calculating
subscribers than those used in Colombia. Estimated 1994 population figures
are used to calculate penetration rates for all years.
In the past year, the Western Region has experienced significant growth in
the number of reported subscribers as demonstrated in the following table:
<TABLE>
<CAPTION>
COMPOUND
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, GROWTH
1994 1995 1995 1995 1995 RATE
------------ --------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Total Western Region
Subscribers.................. 31,079 69,948 80,958 83,963 88,803 185.7%
Total Colombian Subscribers.... 81,895 145,683 187,514 215,954 274,590 235.3%
</TABLE>
Sources: Ministry of Communications; El Colombiano
On a per subscriber basis, of the reported subscribers for the quarter
ended December 31, 1995, the Company processed more calls and minutes than its
competitor in the Western Region which it believes are the most indicative
measures of revenue generation. The following chart illustrates the reported
subscribers, calls processed, air time, calls processed per reported subscriber
and air time per reported subscriber for the
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<PAGE> 57
Western Region as well as for Colombia as reported to the Ministry of
Communications for the quarter ended December 31, 1995:
<TABLE>
<CAPTION>
AIR TIME CALLS PROCESSED AIR TIME
REPORTED CALLS ------------ PER REPORTED PER REPORTED
SUBSCRIBERS PROCESSED SUBSCRIBER SUBSCRIBER
----------- ---------- (IN MINUTES) --------------- ---------------
Western Region
<S> <C> <C> <C> <C> <C>
Occel...................... 40,887 14,232,156 24,094,514 348 589
Cocelco.................... 47,916 12,239,890 23,514,719 255 491
Total Colombia............... 274,590 79,627,392 157,289,191 290 573
</TABLE>
The Company's market share of the Western Region based on reported
subscribers, calls processed and airtime minutes for the quarter ended December
31, 1995 was 46%, 54%, and 51%, respectively.
Industry Cooperation
The Company is part of REDCEL, a national cellular association composed of
the three mixed-economy operators of the A Band in Colombia: Occel in the
Western Region, Comcel in the Eastern Region, and Celcaribe in the Atlantic
Region. The main purpose of REDCEL is to establish a strong competitive position
for the mixed-economy cellular companies by offering to their users access to
nationwide cellular coverage through roaming agreements. The three companies
also cooperate to provide to their respective customers (i) technical assistance
throughout Colombia, (ii) access to international roaming with a greater number
of North, Central and South American countries, (iii) access to common
information lines and short code access numbers throughout Colombia, (iv) a
nationwide payment system through selected banks and (v) a membership card that
will offer special discounts at selective outlets. They also intend to cooperate
in handling customer complaints and in fraud detection and prevention
procedures.
In July 1995, the Colombian cellular companies formed the Colombian
Cellular Industry Association (Asociacion de la Industria Celular de Colombia)
("ASOCEL"), an industry association, and appointed Carlos Holguin, a former
Minister of Communications and a former President of the Colombian Senate, as
its president. ASOCEL was created to promote the development and consolidation
of the cellular industry in Colombia and focus on common industry concerns.
ASOCEL also plans to (i) address operational issues, including fraud control and
credit checking procedures, (ii) participate in the drafting of and the
promotion of laws and regulations that benefit the cellular industry and (iii)
promote research on cellular and telecommunications issues.
COMPANY STRENGTHS
Since its inception in 1992, the Company has capitalized on the market
opportunity created by the aforementioned factors. The Company has constructed a
network that covers most of the major population areas in the Western Region,
built its subscriber base and recognition of its "Vozavoz" brand name, and
developed a variety of service offerings to appeal to diverse groups of
consumers. The Company believes that it is well positioned to achieve continued
growth in its subscriber base and cash flow by virtue of a number of factors,
including the following:
- Attractive Concession Area. The Western Region has many
characteristics which create an attractive cellular market, including
principally a diverse and well developed economy. The region generates over
one third of Colombia's gross national product and includes a substantial
part of the country's commerce and manufacturing and agricultural
industries. Approximately 71% of the national coffee production and 55% of
the national banana production, the country's two largest agricultural
commodities, are produced in the Western Region. Approximately half of
Colombia's hydro-electric power is produced in the Western Region and
approximately half of the country's exports pass through the Western
Region's Buenaventura Port. The Western Region also houses the Colombian
headquarters of 21 of the top 50 industrial and commercial companies in
Colombia, including Carvajal S.A., Noel S.A. and Colgate Palmolive y Cia
S.A. In addition, the headquarters of 11 of the top 25 financial
institutions in
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<PAGE> 58
Colombia, including Banco Industrial Colombiano S.A., Conavi S.A. and Banco
Popular S.A., are located in the Western Region.
- Favorable Demographics. The metropolitan areas of Medellin and
Cali, with populations of 2.4 million and 1.8 million, respectively, are
major economic centers in the country, are densely populated and have
significant concentrations of affluence. The Company has experienced
considerable demand in these areas despite their relatively high wireline
penetration rates. The Company believes this reflects the advantages of
cellular service, such as personal safety, convenience and mobility, to
diverse segments of the population, including professional workers as well
as small businessmen, contractors and other tradesmen who work on location.
- Superior Customer Service. The Company believes that quality of
customer service is a key competitive factor in the Colombian duopolistic
market. The provision of excellent customer service is an essential element
in the Company's business strategy and an inherent part of its corporate
culture. Staff in all areas of the Company attend a five-day customer
service training program, and the Company's specialized customer service
team (consisting of 91 members as of March 31, 1996) provide service 24
hours per day, responding to telephone queries from three regional centers.
On average, the customer service team answers 2000-3000 calls per working
day (74.2% within 20 seconds in March 1996) and answers 1000 letters per
month. New customers generally receive service within a few days, as well
as individual welcome calls to confirm that they are not experiencing
problems. The Company's dedication to customer service is also illustrated
by the provision of its free "*911" emergency service and by the provision
of nationwide service through roaming agreements.
- High Quality Advanced Network. Due to the recent development of the
cellular telecommunications industry in Colombia, Occel has been able to
construct a dual analog/digital network from inception using state of the
art technology under a TDMA platform with equipment supplied by Northern
Telecom. The Company believes a significant component of offering the
highest quality of customer service entails providing its customers
continual access to its network. The Company measures this in terms of the
customers' ability to make a call whenever desired and the probability that
a call will not fail (a "dropped call") once it is connected. During the
six-month period ended March 31, 1996, the Company connected more than 97%
of attempted calls and dropped less than 3% of total calls made. The
Company believes its dual analog/digital network provides it with the
ability to quickly and cost-effectively offer more digital capacity in its
network as the demand for digital service increases without incurring the
problems and costs experienced by many North American operators who are
encountering operational difficulties and significant expenses as they seek
to upgrade their networks to digital. As of March 31, 1996, approximately
30% of the Company's subscribers used digital handsets and the Company
expects that more than half of its customers will be using digital
equipment by the end of 1997. The Company expects to realize significant
benefits from increasing the usage of digital equipment, such as increased
system capacity, reduced operating expenses and additional revenue from the
sale of digital-specific services such as "caller i.d." and voice mail
message waiting notification. The Company believes its network has
sufficient capacity to accommodate projected growth in subscribers and has
the flexibility to handle new services.
- Numerous Service Offerings. The Company provides the basic cellular
service options offered by world class operators, such as call transfer,
call waiting, voice mail and national and international roaming. In
addition, the Company offers several other services that are aimed at the
particular needs of its customer base and that enhance the Company's brand
name and image as a provider of the highest quality service. These include
its free "*911" emergency service (which is trademarked within Colombia),
where a customer can call *911 at any time and be connected to a Company
representative who can then contact the police, the fire department, an
automobile towing service or any other emergency service desired by the
customer. This service has proved especially popular because the Colombian
wireline companies do not have a universal emergency service such as the
911 service in the United States. The Company also offers value-priced
services that it believes attract different segments of the population than
traditional users of cellular services, thereby enhancing its penetration
rate. The Company offers "Beepervoz", a budget service in which the
customer can only receive calls and make
54
<PAGE> 59
outgoing calls to the Company's *911 emergency service. This service
provides a low-cost introduction to cellular service and is also designed
to compete with pagers. In addition, the Company's "Fijovoz" service
provides cellular service from a fixed wireless phone in the home or office
for a lower price than its mobile cellular service. This option is designed
to appeal to customers seeking to avoid the long waiting time for wireline
service or who are otherwise dissatisfied with wireline service but who do
not need the mobility of full cellular service. The Company also believes a
number of these budget-conscious customers will ultimately upgrade to
higher classes of service over time.
- Management of Churn. The Company's monthly average churn rate for
the year ended December 31, 1995, was 3.2%. This reflected a churn rate of
approximately 2% per month for most of the year, except between August and
October when churn was approximately 8% per month. This temporary increase
in churn resulted from Company-initiated disconnections in order to upgrade
the quality of its customer base. The Company estimates that the monthly
churn rate for the first six months of 1996 averaged 2.9%, in part because
there was a similar month of Company-initiated disconnections, which may
occur from time to time in the future. The Company recognizes that managing
customer churn is an important factor in maximizing revenues and cash flow.
In order to minimize churn caused by customers voluntarily terminating
service, the Company aims to ensure that its services remain competitive
and has one-year customer contracts that contain penalties for early
termination. To reduce Company-initiated disconnections resulting from
non-payment, beginning in August 1995, the Company implemented policies
which require thorough credit checks for new customers, encourage direct
debit payment plans, and impose gradual restrictions on service once
payment dates have been missed. For instance, customers' outgoing calls are
automatically routed to customer service if payment is not received within
ten days of the final due date, and service is temporarily disconnected in
the event payment is not received within ten more days. The Company
believes that these policies reduce the likelihood that customers will run
up excessive debts, thus enhancing the likelihood of settlement and
reconnection.
- Experienced Management Team. The members of the Company's senior
management team have substantial experience in the telecommunications
industry as well as in the public and private sectors in the Western
Region. Many of them worked for local telephone companies and public
utilities in the Western Region and participated in the development of
Colombia's cellular regulatory regime. In addition, an executive of C&W,
was seconded to, and is employed by, the Company as a member of the
Company's senior management.
BUSINESS STRATEGY
The Company's strategy is to continue to capitalize on the high potential
demand for cellular telecommunication services and favorable demographic
characteristics of its concession area to maximize revenues and cash flow from
its cellular business through increased market penetration and subscriber usage.
The Company intends to achieve these objectives by completing construction of
its network, implementing aggressive marketing efforts to attract and retain
additional subscribers and continuing to provide superior customer service,
reliability and a wide range of value-added optional services. The Company's
commercial slogan is "Seriousness, Security and Service", which is intended to
convey the high degree of professionalism with which the Company seeks to
provide its services, the security (i.e., increased personal safety) such
services provide to its customers, and the Company's responsiveness to its
customers. The Company will also evaluate and may participate in, future
opportunities in related wireless technology businesses in order to enhance its
position as a leading provider of such services.
SALES AND MARKETING
In order to implement its business strategy effectively, the Company has
focused its marketing efforts on (i) establishing brandname image and
recognition of its primary "Vozavoz" service and related product offerings, (ii)
targeting high quality, high use customer segments which have specific
identifiable needs through the use of a well trained sales network, and (iii)
differentiating the Company from its competitor on the basis of a superior
quality of service rather than price.
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<PAGE> 60
Marketing Programs
The Company uses both mass media campaigns and direct marketing through its
internal sales force and independent distributors to reach potential customers.
Mass media campaigns have been used by the Company to create awareness and
promote the benefits of cellular services and to position its Vozavoz brandname
and commercial slogan. The Company employs, among other media, billboards,
television, radio and direct mail as well as the sponsorship of sporting events
and educational seminars. Direct marketing efforts have been used by the Company
to reach priority segments of its target market, such as professionals and small
businessmen who travel or work on location. The initial selection of the
priority segments within the Company's target market was made using a demand
model created by the Company with the help of C&W, which has utilized similar
models in other emerging markets. The model took into account factors such as
market size, adoption rate, income levels and the need for mobile
communications, for various segments of the population. Over time, the Company
has identified additional factors that promote the use of cellular services,
such as personal safety, and broadened its marketing efforts to target
additional population groups.
Sales Network
The Company offers its cellular services to potential subscribers
principally through (i) direct marketing activities by its internal sales
representatives, which primarily target corporate accounts, government accounts
and high volume customers, and (ii) through its sales centers and its exclusive
network of independent distributors, both of which target residential customers
and small businesses. The Company believes that this mixed distribution approach
allows the Company to reach a broader customer base while avoiding the cost of a
large direct sales force. It also allows the Company to capitalize on the
distributors' knowledge of local markets and reduce inventory risks. As of
December 31, 1995, approximately 60% of new subscriber activations were effected
through the Company's distributor network and 40% through its internal sales
representatives.
As of March 31, 1996, the Company's sales and distribution network
consisted of approximately 100 internal sales people and approximately 240 sales
people from independent distributors and subdistributors. The Company operates
five primary sales centers which are centrally located in Cali, Medellin,
Pereira, Manizales and Armenia and which provide both sales and customer support
services such as payment reception, repairs, insurance and billing claims
attention. The independent distributors operate 23 satellite distribution sales
offices primarily serving regional areas, suburbs and smaller towns. Although
most of the distributors' sales offices do not provide customer support
services, customers needing assistance are referred to centralized customer
service representatives. In addition to the Company-owned and operated sales
offices and the independent distributors' sales offices, customers can sign up
for the Company's service through 36 subdistributors, who operate 20 retail
stores selling cellular services, telephones and complementary products. The
breadth and diversity of the Company's sales and distribution network provide
its potential and existing customers with the benefits of convenient locations,
extended service hours, comprehensive phone and accessory selection and highly
trained sales and service staff.
The Company's current independent distributors are locally established
firms, most of them dedicated to the communications business. Some specialized
distributors, such as Cellstar, are new in the Colombian market and are
dedicated exclusively to the cellular business. The independent distributors may
not represent the Company's competitor in the Western Region, but may and do
engage in other related businesses. The Company has contracts with the
independent distributors which are subject to certain sales, service and quality
standards. The independent distributors are paid a commission for upfront
revenues which could be affected if performance standards are not met. The
independent distributors also receive an ongoing residual commission which is
based on the collected revenues of airtime charges and monthly fixed fees. A
portion of the independent distributors' sales commission is pooled and used for
promotion and advertising pursuant to a cooperative marketing program. The
Company believes these arrangements encourage its distributors to attract and
retain long-term, high-quality customers. Subdistributors have contracts with
the independent distributors. The subdistributors are paid a commission based on
their sales, directly by the independent distributors.
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<PAGE> 61
Customer Service and Expanded Service Offerings
The Company's commitment to the provision of excellent customer service, as
reflected in the slogan, "Service, Seriousness and Security" is an intrinsic
element of its corporate strategy. The Company believes that in the cellular
market, the provision of superior customer service is the only differentiating
factor which can be continuously sustained, and has accordingly developed a
strategy which is service orientated. The high levels of service which the
Company provides and will continue to provide have been realized by setting
exacting service related performance objectives, by employing a skilled and
qualified workforce which is trained to rapidly resolve problems, by providing
customer service training for all staff and by investing in the technology,
products and processes required to deliver world class performance levels.
Service related performance targets relate to the times required for
responding to customer queries and requests, to the quality of such responses
and to the performance of the network. The Company's specialized customer
service team of 91 members (as of March 31, 1996) provides 24 hour response to
telephone queries from three regional centers, answering 2000-3000 calls per
working day (74.2% within 20 seconds during March 1996), answering 1000 letters
per month and attending customer queries in eight different sales and service
locations.
To aid its customer service team, the Company has invested in an advanced
Automatic Call Distribution system (ACD) for managing customers' calls, and a
state of the art Network Management Center which is staffed 24 hours a day to
enable rapid identification and resolution of network problems. An electronic
network links the Company's main sites providing access to E-mail and to the
main databases to provide rapid access to information required to solve customer
problems. Customer handset repairs are carried out by trained staff at the main
repair center in Medellin and at local centers in Cali and Pereira with only the
more complex problems being sent to the manufacturers for resolution. Customers
are typically activated within an hour of credit approval, and time for the
credit approval takes between an hour and a couple of days depending on the
complexity of the case and the amount of supplementary information required. In
addition, the network has been designed and is maintained for optimum
reliability, and during the six-month period prior to March 1996 the Company
connected more than 97% of attempted calls and dropped less than 3% of total
calls made.
All Company employees attend a five-day customer service training program
which provides standards and formal skills to support the Company's commitment
to achieving the highest customer service standards. Employees are also actively
encouraged to take initiative to facilitate the resolution of customer problems.
OPERATIONS
Services Offered
In addition to basic incoming and outgoing service, the Company currently
provides all of the supplemental types of cellular services, such as call
transfer, call waiting, three-way conference calling and voice mail, that are
typically offered by most cellular operators in major industrial economies. In
addition to these services, the Company currently offers services not
customarily offered by cellular operators in other countries which are specially
suited to the needs of the Colombian market. Furthermore, certain of these
services are not available to Colombian wireline customers generally. By
offering such services, the Company believes it enhances its image as a provider
of the highest quality service. Some of these services are value-priced services
that the Company believes attract a different segment of the population than the
typical customer of traditional United States cellular services, thereby
enhancing the Company's penetration rate and generating additional revenue. The
Company also believes a number of the budget-conscious customers who currently
subscribe to the value-priced services offered by the Company will upgrade to
higher classes of service over time. In the future, the Company also plans to
offer additional services that capitalize on the digital capabilities of its
TDMA network, as described below.
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The Company's current primary and supplemental services are listed
below:
Primary Services
Vozavoz. The Company's basic cellular service consists primarily of its
"Vozavoz" service. The basic features of Vozavoz include local cellular
service, national coverage and 24-hour customer service. The Company
offers to its Vozavoz customers automatic roaming coverage services
throughout Colombia in association with the A Band operators. In
addition, the Company offers automatic connection with wireline services
and local and long distance wireline providers, giving its customers
access to all Colombian wireline subscribers. In addition, the Company
offers personalized customer service and information services 24 hours a
day, seven days a week, which can be reached by cellular and wireline
telephones.
Fijovoz. Fijovoz is a value-priced basic service offered by the Company
that consists of a fixed cellular phone. Fijovoz is designed to appeal
in particular to customers in areas with waiting lists for wireline
services or who are otherwise dissatisfied with wireline services and
who do not need the mobility of a traditional cellular phone. This
service offers the same cellular technology of mobile handsets but using
a set that is fixed at the subscriber location, providing an
economically priced cellular service to subscribers which can be
activated generally within a few days.
Beepervoz. With Beepervoz, which is another value-priced primary
service offered by the Company, the subscriber receives a handset that
is programmed only to receive incoming calls and to make outgoing calls
only to the Company's *911 emergency service, customer service and,
optionally, voice mail. This service is designed to appeal in particular
to customers with safety and security concerns, customers with
travelling sales forces and customers who need permanent contact with
their offices. Beepervoz provides a low-cost introduction to cellular
service and is also designed to compete with paging services. Certain of
the Company's Beepervoz customers have upgraded to higher classes of
service, and the Company believes that additional Beepervoz customers
will ultimately upgrade in the future.
Supplemental Services
In addition to traditional premium cellular services such as call
transfer, call waiting and three-way conference calling, which the
Company offers its subscribers for an additional cost, the Company
currently offers the following supplemental services, some of which
produce additional revenue for the Company as noted below:
Vozexpress. Vozexpress is a voice mail service which receives and
stores messages for subscribers when they do not answer the incoming
calls. Vozexpress can be obtained for a fee as a supplement to any of
the Company's basic services.
*911 Vozavoz Emergency Service. Centralized emergency services like the
"911" emergency service in the United States are not available in
Colombia, where the population has to call directly to the respective
emergency service. The Company offers to its subscriber its "*911"
service, in which a subscriber can call the Company at any time by
dialing *911 and then be transferred by one of the Company's operators
to the appropriate emergency service, including the fire department,
police, medical emergency services and vehicle towing services. The
Company's *911 service is trademarked within Colombia. The Company
believes that this service, which is free to its customers who have
purchased any of its basic services, is particularly important to, and
is a primary driver in attracting, many of its customers given the high
value placed on security and safety in Colombia.
Detailed Billing Services. As part of its customer service orientation,
the Company provides free of charge a wide array of billing details to
its subscribers. This information includes a list of all calls made
(including free calls), the date and time of calls and the duration and
the cost of calls. By contrast, local wireline companies typically
provide such information only for long distance calls.
International Roaming. As a convenience to its Vozavoz customers who
are travelling, the Company offers roaming services in other countries,
including currently the United States, Canada,
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Venezuela, Ecuador and certain countries in the Caribbean where C&W is
the mobile operator. This service allows the Company's customers to
place calls from another country to participating countries or to
Colombia. In some cases, the Company has roaming arrangements with
operators in such countries pursuant to which the Company collects from
the subscriber and forwards to such operators the charges for such
calls. In other cases, the Company's subscribers pay for such calls
directly. The Company does not charge an additional fee for this
service.
International Long Distance. The Company offers connection to the
Colombian international long distance operator, Telecom. This service
allows calls to be made from Colombia to another country. The Company
conducts a supplementary credit check on any customer applying for this
service. However, the Company does not charge any fee (other than
airtime) for the provision of this service.
Vozseguro. Vozseguro is an insurance service for the cellular handsets
and other supplementary equipment which protects against theft and
damage. More than 40% of new customers purchase this service.
Future Services
The Company is also planning to introduce new value-added services such
as data transmission, internet access, caller identification and
messaging services. These products capitalize on the digital
capabilities of TDMA and make use of the handset screen to display
information such as the calling party's identification, a brief message
or information from a central data base.
Pricing Plans
The pricing structure of the Company's services consists of four basic
components: (i) activation fees, (ii) monthly service fees, (iii) airtime fees
and roaming charges and (iv) fees for supplemental value-added services. In
addition, subscribers are required to purchase a mobile cellular telephone and
to pay usage charges with respect to interconnection to the national wireline
network.
Currently, the Company's subscribers pay a monthly service fee which ranges
from Ps 17,500 (US$16.73) for Beepervoz to Ps 44,000 (US$42.07) for Vozavoz or
as much as Ps 80,000 (US$76.48) for Vozavoz with 155 free minutes of service per
month. Airtime charges for outgoing calls range from Ps 275 (US$0.26) per minute
to Ps 790 (US$0.76) per minute during peak hours and from Ps 230 (US$0.22) per
minute to Ps 630 (US$0.60) per minute during nonpeak hours, in each case
depending on the tariff plan selected. As of December, 1995, the Company began a
promotional campaign pursuant to which it does not charge any activation fee.
See "Management's Discussion and Analysis of Financial Conditions and Results of
Operations".
The Company modifies its prices from time to time to correspond with
marketing campaigns, to respond to competitive pressures, as well as to adjust
to inflation. In the first quarter of 1995, there was a significant price
competition between the Company and Cocelco, which resulted in significant,
temporary reductions in most categories of charges. The Company's prices have
since returned to levels approximating those in effect at the end of 1994. Such
price competition resulted in a significant increase in subscribers, although
many of these were later removed by the Company from its active subscriber
rolls. Currently, both the Company and Cocelco are offering promotions in which
activation fees are free, but airtime charges have actually been raised. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Although the rates and fees charged by cellular operators in Colombia are
currently not fixed by the Colombian government, cellular operators must
communicate to the TRC all their rates and fees and advise existing customers of
any changes.
Billing and Subscriber Management
The Company uses a billing and customer management system developed by SEMA
UK Limited, a specialized United Kingdom company whose systems are utilized by
numerous international cellular companies. The accuracy and flexibility of the
Company's billing and customer management system are key to
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efficiently serve its subscribers and to generate subscriber information vital
to the Company's management. The system currently permits the Company to bill
its customers monthly with a detailed billing statement, including itemized
local and long-distance calls. In contrast, local wireline companies typically
give equivalent details only with respect to long-distance calls, and Cocelco
currently charges a fee for such service. The Company also uses information from
the system to analyze the effects of price changes and promotional and
advertising campaigns as well as subscriber use patterns and to prevent fraud.
Management of Churn
The Company's monthly average churn rate for the year ended December 31,
1995, was 3.2%. This reflected a churn rate of approximately 2% per month for
most of the year, except between August and October when churn was approximately
8% per month. This temporary increase in churn resulted from Company-initiated
disconnections in order to upgrade the quality of its customer base. In
particular, the Company disconnected many customers who joined during the price
competition of the first quarter of 1995 who were behind in payments. The
Company estimates that the monthly churn rate for the first six months of 1996
averaged 2.9%, in part because there was a similar month of Company-initiated
disconnections, which may occur from time to time in the future. The Company
recognizes that managing customer churn is an important factor in maximizing
revenues and cash flow. In order to minimize churn caused by customers
voluntarily terminating service, the Company aims to ensure that its services
remain competitive and has one-year customer contracts that contain penalties
for early termination. To reduce Company-initiated disconnections resulting from
non-payment, beginning in August 1995, the Company implemented policies which
require thorough credit checks for new customers, encourage direct debit payment
plans, and impose gradual restrictions on service once payment dates are missed.
For instance, customers' outgoing calls are automatically routed to customer
service if payment is not received within ten days of the final due date, and
service is temporarily disconnected in the event payment is not received within
ten more days. The Company believes that these policies should reduce the
likelihood that customers will run up excessive debts, thus enhancing the
likelihood of settlement and reconnection.
Fraud Detection and Prevention
The Company currently uses a fraud detection system developed by C&W which
analyzes call data records to identify abnormal calling patterns and cloned
cellular phones and to take corrective actions promptly. In addition, the
Company's billing system generates daily reports on customers that have exceeded
their preassigned credit limits. Based on these reports, customers are contacted
by credit control staff of the Company or deactivated, depending on the
circumstances.
To reduce the incidence of fraud in its operations, the Company has
developed a fraud prevention program that includes (i) background checks of its
employees, (ii) fraud awareness and prevention training, (iii) restrictions on
international calls to certain high risk destinations and restrictions on
three-way calling by customers with international direct dial access. The latter
restrictions prevent a caller from calling a cloned phone with three-way calling
and international access and thereby make an unbillable international call.
In addition to the mentioned fraud detection and prevention methods, the
Company conducts credit checks and verifies the identity of each new subscriber
to reduce the incidence of fraudulent application. Moreover, as mandated by the
Colombian government, the Company is required to ensure that, at the time of
activation, all its subscribers register their phone with the police and carry
an identification card with the phone specifications. The Company and the other
A Band operators also share information on bad accounts and cooperate in
developing and implementing fraud detection systems.
Equipment Supply
The mobile equipment used by the Company consists of handsets and
accessories which are available for purchase from multiple sources. In order to
achieve significant cost savings from volume purchases, the Company currently
purchases its mobile equipment from Cellstar (a distributor for Motorola) and
Nokia under short-term arrangements. The Company has not experienced material
disruptions in supply and
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anticipates that equipment will continue to be available to the Company from
many sources in the foreseeable future.
Although the Company generally sells digital handsets at cost, it has
offered subsidies for purchasing such handsets during specific promotional
periods. At present, the Company sells only digital handsets to new Vozavoz
customers, and encourages its existing customers to trade in analog handsets.
Analog handsets are currently sold principally to Beepervoz and Fijovoz
subscribers. In addition, the Company recently commenced a handset leasing
program to expand its subscriber base.
NETWORK DESIGN AND OPERATION
Network Design
The Company developed its network design in conjunction with C&W. The
Company also incorporated service quality, redundancy and coverage objectives
based on the best practices in North America. To help meet these objectives, the
Company has employed sophisticated network design tools such as PLANET, a
software-based planning tool developed by Mobile System International ("MSI").
In addition, the Company's network was designed to take advantage of its
microwave transmission system along with multiple interconnect points with
wireline telephone companies in order to ensure that the Company has the ability
to carry a significant portion of its traffic on its own network and,
correspondingly, to reduce the Company's reliance on other networks over which
the Company has no control. In addition, the Company's design objectives require
that the network be sufficiently versatile to support a variety of desired
value-added cellular services such as call forwarding, call transfer, call
waiting, three-way conference calling, voice mail, caller identification,
cellular data transmission and technical support for fixed cellular operations.
Capacity
Each cellular telecommunications network is planned and constructed to meet
a certain level of subscriber density and traffic demand. Once this level is
exceeded, a cellular operator must take steps to increase network capacity in
order to maintain service standards. Such capacity increases can be accomplished
by increasing digital penetration and by using such techniques as sectorization
and cell splitting. Other techniques have been developed by operators and
infrastructure manufacturers to ensure service quality at minimal cost,
including microcells. Cellular telecommunications networks are typically
characterized by relatively high fixed costs and relatively low variable costs.
Until technological limitations on network capacity are reached, additional
capacity can usually be added in increments that closely match demand and at
less than the proportionate cost of initial capacity. At December 31, 1995, the
Company had a capacity margin of approximately 20%, with 65% of the network
capacity being analog and the rest digital.
Network Expansion and Coverage
The Company develops its cellular service areas by building new base
stations and adding cells to existing base stations. Such development is done
for the purpose of increasing capacity and improving coverage in direct response
to projected subscriber demand. The Company initially focused on providing
service to the top five cities in the Western Region -- Medellin, Cali, Pereira,
Manizales and Armenia -- and their surrounding metropolitan areas. The Company
continues to expand its network to cover as broad a geographical area as is
economically feasible, as geographic coverage is a key variable in the consumer
purchasing decision. Expansion of the network capacity also enhances the
Company's ability to provide service in the Cali and Medellin metropolitan areas
where the demand for cellular services continues to increase. As of December 31,
1995 the Company's network covered 65% of the population of the Western Region.
The Company has incurred approximately Ps 57 billion (US$54 million) in capital
expenditures through March 31, 1996 to build its network, and expects to incur
an additional US$51 million to substantially complete the build-out (including
planned upgrade) by 1999.
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Digitalization
In building its cellular network, the Company, along with the majority of
other Colombian cellular operators, selected TDMA technology and offered digital
cellular service from the commencement of operations. Colombian subscribers have
bought digital handsets in significant quantities. Because of the benefits of
digitalization, including additional revenue through the sale of
digital-specific value-added cellular services, reduced operating expenses and
greater network capacity, the Company has sought to increase the digitalization
of its subscriber base. Under the Concession, the Company's network is required
to have 10% digital voice channels by the third year of operation, 30% by the
fifth year and 50% by the eighth year. As of December 31, 1995, 35% of the voice
channels in the Company's network were programmed to be digital. Digitalization
represents one of the key marketing and technical variables in the Company's
ongoing network rollout plan.
Equipment
In building its cellular network, the Company has purchased cellular
equipment manufactured by Northern Telecom. Each of the Company's three
switching centers, located in Medellin, Cali and Pereira, respectively, is
equipped with a Super Node SE DMS-MTX. As of December 31, 1995, the Company's
cellular telecommunications network consisted of three cellular switching
centers, 65 base stations, 125 cells and four cellular repeaters. The network is
connected primarily by its own microwave transmission system provided by
Microwave Network Incorporated and Ericsson consisting of 70 microwave hops as
of December 31, 1995. Interconnection with local PSTNs occurs at six locations.
The Company has recently introduced a new software package which increases
network efficiency and provides new services. In addition, the Company maintains
a network management center in Medellin capable of monitoring the performance of
the switching centers in Medellin, Cali and Pereira, the radio base stations,
the microwave transmission links and the leased circuits provided by third
parties. The Company also had a supply agreement with Nortel for network
equipment which expired on April 15, 1996, although the Company intends, and is
currently in negotiations, to renew such agreement until December 31, 1999. The
supply agreement with Nortel contains provisions for guaranteed prices and
volume-related discounts. Although the Company is not bound by the provisions of
any supply agreement to purchase from a particular supplier, the compatibility
of any newly acquired equipment with the Company's existing equipment
effectively may limit the Company's options.
Performance Monitoring
The Company continuously monitors the network's performance to ensure that
cellular telecommunications service quality meets its published standards. These
standards are derived from the standards specified by the Colombian government
and are in line with high international standards.
As of December 31, 1995, the Company was able to limit average dropped
calls (which reflects the ability of the system to sustain a call in progress)
to less than 3% and achieved an average call blockage rate (which reflects the
percentage of subscriber calls that are unable to access the network during peak
usage periods) between 1% to 2%.
COMPETITION
The cellular telecommunications business in the Western Region is a
regulated duopoly. Each of the two operators awarded a concession for the
Western Region has the exclusive use for 10 years of a defined frequency band
within the region. Competition is principally based on price, network coverage
and technical quality, value-added cellular services, quality and responsiveness
of customer service. The Company's primary competitor, Cocelco, is the holder of
the other concession for the Western Region. Cocelco is controlled by
Organizacion Luis Carlos Sarmiento-Angulo Ltda., one of Colombia's largest
conglomerates, and counts Telefonica de Espana and Chile's CTC
telecommunications groups among its other shareholders. The Company may also
face additional cellular competition after 1999 when the Colombian government
may auction additional cellular concessions in the Western Region, depending on
the technical availability at that time.
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The Company also competes with traditional wireline telephone service
operators. Wireline density in Colombia as of December 31, 1994 is estimated by
the International Telecommunication Union at approximately 10 telephone lines
per 100 persons compared to a wireline density of approximately 60 lines per 100
persons in the United States. If substantial capital were to be invested in the
wireline telephone industry, resulting in increased wireline density and
improved service, certain of the Company's existing and potential subscribers
might shift to wireline service providers due to a number of factors, some of
which are price related. Empresas Publicas de Medellin ("EPM") has reported that
its wireline density in Medellin was 30 lines per 100 persons as of December 31,
1995 and is expected to increase to approximately 34 lines per 100 persons by
the year 2000. Empresas Municipales de Cali ("EMCALI"), on the other hand, has
reported that its wireline density in Cali was approximately 20 lines per 100
persons as of December 31, 1995, and is expected to increase to approximately 30
lines per 100 persons by the year 2000. Although competition in local wireline
services was authorized in 1990, first with the previous authorization from the
Ministry of Communications and in 1994 with free entrance into the market, no
new wireline operators have entered into the industry. The entrance of new
wireline operators would result in additional competition for the Company.
The Company also competes with certain other wireless communication
services, such as mobile radio, paging or beeper services, which are widely used
in Colombia as a substitute for wireline services in order to improve
productivity and to address security concerns. These services have certain
disadvantages compared to cellular services because of factors such as lack of
coverage, lack of handset portability, lack of privacy, lower transmission
quality, network overloading and lack of customer service. These competing
wireless communication services are nevertheless considerably less expensive
than cellular services.
Technological advances in the communications field, such as the possible
introduction of PCS and mobile satellite services, continue to occur and make it
difficult to predict the extent of additional future competition for cellular
systems. For example, several mobile satellite-based phone systems are planning
to initiate service by the year 2000. While such services may offer worldwide
coverage, significant technological and other hurdles need to be overcome before
such services may be offered in Colombia.
OPERATING AGREEMENTS
Interconnection Agreements
The Company has executed interconnection agreements with EPM, EMCALI,
Empresas Publicas de Manizales, Telearmenia and Empresas Publicas de Pereira,
the wireline companies serving such areas, and has letters of intent to enter
into interconnection agreements with other wireline operators, such as Telecom
and Empresas Departamentales de Antioquia ("EDA"). All these operators other
than Telecom are also shareholders of the Company. The terms of the
interconnection agreements include provisions for the number of connection
points, the method by which signals must be received and transmitted, fraud
control, billing, damage liability, and the assumption of responsibility for the
costs of interconnection. Under such interconnection agreements, which reflect
regulations issued by the TRC, wireline telephone companies charge cellular
operators a fee per minute when a cellular subscriber places a call to a
wireline subscriber. The Company believes the terms of the interconnection
agreements are similar to those of interconnection agreements executed by such
companies and Cocelco.
Currently, negotiations are in process for leasing transmission
infrastructure with Empresa Cafetera Celular S.A. ("ECCEL S.A.") for the coffee
region and Empresa Regional de Telecomunicaciones del Valle S.A. ("ERT").
Roaming Agreements
Agreements for automatic roaming have been entered into with the other two
A Band concessionaires in Colombia, Comcel and Celcaribe. See "-- Industry
Cooperation". The Company also has roaming agreements that permit its
subscribers to use their cellular telephones in the United States, Canada and
Ecuador and subscribers can roam in Venezuela pursuant to a letter of intent. In
addition, the Company has understandings regarding the provision of roaming
services with certain countries in the Caribbean where
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C&W is the mobile operator. See "-- Operations -- Services
Offered -- Supplemental Services -- International Roaming".
Other Agreements
The Company is currently in negotiations to regulate the billing process
for cellular calls from wireline telephone companies to the Company's cellular
customers with several wireline telephone operators such as ETB, Empresas
Publicas de Popayan, Empresas Publicas de Palmira and Empresas Publicas de
Buenaventura. These operators do not require interconnection agreements.
LEGAL PROCEEDINGS
Medellin's Cellular Services Tax
On August 17, 1994, the municipality of Medellin through Resolution No. 019
imposed a monthly tax (the "Cellular Services Tax") on cellular subscribers
placing calls through base stations located in Medellin. Subsequently, the Mayor
of Medellin, on January 23, 1995, regulated the billing and collection of the
Cellular Services Tax through Municipal Decree 1244 (the "Decree"), which
imposed upon the two cellular operators of the Western Region the obligation to,
in each of their billing systems, determine, bill, collect and transfer the
Cellular Services Tax. Both regulations have been judicially challenged on the
grounds of not being consistent and in conformity with current higher ranking
law. Medellin's tax authorities through Resolution No. 005 and Resolution No.
006, issued on March 6, 1996 and May 17, 1996, respectively, determined that
Occel's transfer obligation under the Decree for the period through March 30,
1996, together with interest through May 17, 1996, is Ps 565 million
(US$587,236). The Company appealed this determination on March 14, 1996 and June
11, 1996, and a decision is still pending. Occel has not collected the Cellular
Services Tax from its customers because it believes that the tax is illegal and
that the challenges against Resolution No. 019 and the Decree will be successful
and, consequently, Resolution No. 005 and Resolution No. 006 will not be upheld.
In the event of unfavorable decisions in the referred cases, the Company
believes that it would be able to collect from its customers a portion of the
Cellular Services Tax. See "Risk Factors -- Tax Litigation".
Other
The Company is involved in other litigation from time to time in the
ordinary course of business. In management's opinion, the litigation in which
the Company is currently involved, individually and in the aggregate, is not
material to the Company's financial condition or results of operations.
EMPLOYEES
As of December 31, 1995, the Company had 490 permanent full-time employees
and an additional 82 temporary full-time employees. None of the Company's
employees are unionized. The Company believes its employee relations are good.
PROPERTIES
The Company has offices in Medellin, Cali, Pereira, Manizales and Armenia.
The Company owns the building in Medellin where its headquarters are located
(approximately 3,000 square meters) and leases approximately 2,500 square meters
of office space in Cali, Pereira, Manizales, Armenia, Rionegro, Cartago and
Apartado.
The Company also owns or leases the sites where its cellular network
equipment is installed. As of December 31, 1995, the Company had 65 sites, 18 of
which were owned by the Company and the remainder of which were leased. Most of
these leases do not expire prior to 2000. In addition, the Company leases nine
and owns one of the sites where its cellular repeater (including its microwave
repeater) stations are located.
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REGULATION
Regulatory Authorities and Legislation
The Ministry of Communications and the Telecommunications Regulation
Commission ("TRC") are responsible for the regulation and oversight of the
telecommunications sector, including cellular operations. The Ministry of
Communications, which granted the cellular concessions in 1994, supervises and
audits the performance of the concessionaires' legal and contractual
obligations, in particular those related to the technical standards established
in the bid conditions and to the concessionaires' duty to answer their
subscribers' questions and complaints. The Ministry of Communications also has
general authority to issue regulations for cellular operations, subject to their
being in accordance with applicable law. The TRC is chaired by the Minister of
Communications and its other members are the Director of the National Planning
Department (Departamento Nacional de Planeacion) and three full-time experts
appointed by the President of Colombia. The TRC, which has jurisdiction over the
pricing of cellular services, has decided that tariffs be freely set by the
cellular operators with prior notice to the TRC and their subscribers. The TRC
is also charged with issuing regulations intended to promote free competition in
the cellular industry. In addition, the TRC regulates the pricing aspects of the
relationship between cellular and wireline operators, including interconnection
terms and tariffs.
The Company's activities are also subject to the oversight of the Colombian
Superintendency of Industry and Commerce (Superintendencia de Industria y
Comercio) ("SIC"), which is empowered to enforce anti-trust regulations, protect
free competition in the marketplace and protect consumer rights on a
case-by-case basis.
Finally, the Superintendency of Corporations (Superintendencia de
Sociedades) is entitled by Colombian Commercial Law to exercise legal control
over certain activities of the Company such as shares issuance, bonds placement
and equity reductions.
The operations of the Company as a cellular operator are principally
governed by Law 37 of 1993 ("Law 37") and Decree 741 of 1993 ("Decree 741") and
the terms and conditions of the Concession and related documents. Law 37 sets
forth the basic framework for the introduction of cellular telecommunications
services in Colombia. Law 37 established a public bidding process open to
private-sector, public-sector and mixed-economy companies. Mixed-economy
companies have both public-sector and private-sector shareholders, engage in
commercial business activities and are created pursuant to special legislation.
For purposes of the bidding process, the country was divided into three regions,
(i) the Eastern Region, (ii) the Western Region, and (iii) the Atlantic Region.
Each Region has two competing operators: (i) one public-sector or mixed-economy
company and (ii) one wholly private-sector company. This effectively resulted in
a cellular duopoly similar to that which characterizes the United States, Canada
and most Latin American countries. Law 37 also authorized foreign investment in
certain areas of the telecommunications industry, including cellular operations.
Subsequently, Decree 741 established detailed rules for the bidding process and
developed provisions contained in Law 37 regarding matters such as the corporate
structure of cellular operators, the assignment of frequencies, the concession
agreements to be entered into between the winner of the bidding process and the
Ministry of Communications and the rules for interconnection between wireline
and cellular operators. Cellular operators are also subject to Decree 1900 of
1990 ("Decree 1900"), which regulates telecommunications services in general, to
the extent that Decree 1900 does not contradict the terms of Law 37.
Terms of the Concession
The Concession consists of the right to establish and develop a cellular
telecommunications business in the Western Region over a ten-year period in
exchange for a one-time Concession fee combined with quarterly royalty payments
to the Ministry of Communications for the use of cellular frequencies. The
Company was awarded the Concession in a competitive bidding process, based upon
not only the price offered by the Company, but also its technical capabilities
and operational capacity, the mobile cellular experience of its affiliates, and
its financial and planning capability. The Concession's term is 10 years
commencing March 28,
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1994. The purchase price for the Concession was Ps 123.1 billion (actual Pesos)
(US$148.5 million at the April 13, 1994 Representative Market Rate), of which Ps
105.8 billion (US$127.7 million at the April 13, 1994 Representative Market
Rate) represented the actual fee paid for the Concession, while the remaining Ps
17.3 billion (actual Pesos) (US$20.8 million at the April 13, 1994
Representative Market Rate) represented the amount contributed by the Company to
a special expansion plan for municipalities with unsatisfied basic needs. In
addition, the Company makes a quarterly royalty payment to the Ministry of
Communications for the right to use its assigned frequencies in an amount equal
to 5% of the sum of activation fees, monthly fixed fees, airtime charges,
interconnection fees and supplementary services, minus interconnection costs
paid by the Company to other telecommunications operators.
The Concession may be renewed for an additional 10-year term provided that
the Company has met the terms of the Concession and neither the Ministry of
Communications nor the Company has expressed an intention not to renew during
the Concession's eighth year. If renewed, an extension of the concession
agreement will be executed during the first year of renewal, containing the
economic conditions agreed upon by the licensees and the government.
The Concession requires the Company to guarantee the performance of its
obligations thereunder and the payment of any liquidated damages or fines (as
described below) by obtaining a performance bond from a Colombian insurance
company or bank in an amount equal to approximately Ps 11.4 billion (US$10.9
million) (the "Performance Bond"). The Company has also obtained third party
liability insurance for Ps 1.1 billion (US$1.1 million) as required by the
Concession. Finally, the Company obtained a renewal bond of approximately Ps 1.0
billion (US$1.0 million) to support its obligation to maintain in force the
Performance Bond and the third party liability insurance policy.
The Company and Cocelco, the Company's Western Region competitor, will
operate their cellular networks with no additional competition for five years.
After March 1999, the fifth anniversary of the Concession, the Ministry of
Communications may grant additional concessions for cellular telecommunications
services or other competing services in each of the Regions, depending on
technical availability at that time.
The ability to provide national roaming (between concessioned cellular
telecommunications networks) is required by the Concession. Cellular companies
are also required to enter into interconnection agreements with wireline
telephone companies.
The terms of the Concession and applicable Colombian law prohibit the
Company from assigning the Concession, and the shareholders from transferring
any shares of capital stock of the Company, for a period of three years.
Thereafter, assignment of the Concession is permitted only with the prior
approval of the Ministry of Communications, and shares of capital stock of the
Company may be transferred pursuant to the Company's Bylaws.
The terms of the Concession bid required the Company to submit a detailed
timetable of its expansion plan, identifying the key cities, highways and other
areas to be covered by its network in the Western Region. During the second half
of the fifth year of the Concession, the Ministry of Communications, together
with the Company, will review the expansion plan. During this review, the
parties will determine if adjustments to the timetable are needed as a result of
developments in Colombia during the intervening years.
Colombia is one of three Latin American countries which mandate "calling
party pays" policy. Contrary to North American practice, where a cellular user
generally pays for both outgoing and incoming calls, the "calling party pays"
policy requires the originator of the call to pay for the total cost of the
call. This policy reduces the cost of cellular services to cellular users. The
Company believes that the policy of calling party pays stimulates additional
usage by effectively spreading the cost of cellular service among cellular phone
subscribers and wireline phone subscribers.
The Concession allows the Company to provide certain services not typically
permitted to be offered by cellular operators in North America. Unlike the North
American model, the Company is permitted to deliver calls anywhere in the
Western Region when it has the capability to do so, without routing such calls
through a long distance carrier and then sharing the resulting revenue. The
Company may also deliver calls to any
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Region provided that it has a reciprocal agreement with an operator in such
Region. In addition, the bid conditions contemplated the possibility of
providing cellular service to subscribers using fixed equipment rather than
mobile handsets. The Company is thus offering fixed cellular services under the
trade name "Fijovoz". The Company has also successfully marketed the product
"Beepervoz" which enables the user to have a cellular phone only for incoming
calls, outgoing calls only to the Company's *911 emergency service and
optionally, voice mail (for an additional charge).
Service Standards. The Company files a written quarterly report on
technical performance indicators designed by the Ministry of Communications to
ensure that the service provided to subscribers is consistent with the
concession standards. Performance indicators include network congestion levels,
percentage of dropped calls, cell availability and microwave availability. The
Company also provides general network indicators such as details of cellular
traffic flows, cell site traffic loads and network status updates. Additionally,
the Ministry of Communications requires from all cellular companies to provide a
quarterly report on adjusted gross revenues for the period in order to liquidate
the 5% amount due to the Ministry.
Digital Technology Requirements. In its bidding specifications, the
Colombian government required the initial use of analog AMPS technology or
AMPS-compatible technology in order to ensure compatibility with cellular
systems in neighboring countries and in North America. There are two types of
digital multiplexing technologies: (i) TDMA, which is currently commercially
available and is being deployed in Colombia and in North America and (ii) CDMA,
which is under development. Pursuant to the Concession, on March 28, 1996 (the
second anniversary thereof), the Ministry of Communications decided that each
cellular operator is free to choose between TDMA and CDMA. Under the terms of
the Concession, the Company's network is required to have 10% digital voice
channels by the third year of operation, 30% by the fifth year and 50% by the
eighth year. As of December 31, 1995, 35% of the voice channels in the Company's
network were programmed to be digital.
Social Sector Participation. Colombian law requires that concessionaires
operating cellular telecommunications systems authorize for issuance 10% of
their total share capital (on a fully-diluted basis) to organizations belonging
to the "Social Solidarity Sector", of the economy consisting of unions,
foundations, non-profit or charitable corporations, employees' funds, credit
unions and savings cooperatives. The issuance of shares is to be made at the
option of the Social Solidarity Sector entities and may be exercised at any time
prior to March 28, 1998. The exercise price of this option would be at fair
market value. The Ministry of Communications has not issued complete regulations
for the implementation of this requirement.
Restriction on Transfer of Shares by Certain Shareholders. Pursuant to the
terms of the Concession, the shareholders of the Company are subject to
restrictions in the transfer of shares of common stock. The Concession requires
that the aggregate percentage of the capital stock of the Company held by
shareholders registered as "operators" and "traders" during the license
auctioning process remain constant for the term of the Concession. Consequently,
absent the Ministry of Telecommunications' approval, no transfers of shares of
the Company by those shareholders registered as "operators" or "traders",
respectively, are allowed if as a result such aggregate percentages would vary.
Fines. The Ministry of Communications may impose fines for noncompliance
with the terms and conditions of the Concession. The fine for nonperformance
depends on the gravity of the offense, the damage done and any recurrence and
can reach up to Ps 142 million (US$143,800) upon the occurrence of any event of
default. Breaches that may subject the Company to fines include: (i)
nonperformance or delay in the performance of the timetable established for the
expansion of the cellular services after the Ministry of Communications has
formally notified the Company that compliance is required, except where non-
performance or delays are caused by force majeure or by acts of God; (ii) the
installation or connection of equipment with wireline networks that does not
meet interconnection standards and plans, or damages the wireline network as a
result of using unauthorized connections or installations, without prejudice to
compensation due to injured parties; (iii) the Company unjustifiably fails to
provide the information and cooperation required by the Ministry of
Communications; and (iv) the Company fails to perform its obligations under the
Concession and applicable regulations that, in the Ministry of Communications'
opinion, do not justify the termination of the Concession.
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Termination upon Default in Performance. Defaults which directly and
materially impair the ability of the Company to perform the services under the
Concession constitute grounds for its termination by the Ministry of
Communications. In addition, certain specific events are defined as constituting
grounds for such termination, including (i) providing false information at the
time of submission of the bid or prequalification document; (ii) assigning of
the Concession without the Ministry of Communications' approval; (iii)
suspending service without the Ministry of Communications' approval or without a
justifying cause; (iv) defaulting on required payments to the Ministry of
Communications; (v) providing false information which affects the calculation of
required payments to the Ministry of Communications; (vi) transferring shares
during the first three years of the concession and (vii) anti-competitive
behaviors. In the event of termination for default in performance, the Company
would not be entitled to compensation for loss of the Concession for the
remaining term. In addition, the Ministry of Communications would be entitled to
reversion of the assets directly related to the Concession and to payment of the
Performance Bond. The Ministry of Communications may also seek payment from the
Company for any damages suffered in excess of the amount covered by the
Performance Bond.
Reversion of Assets. At the end of the Concession's term, the Company's
assets directly related to the Concession are to revert to the Ministry of
Communications without compensation. During the concession bidding process, most
bidders expressed their concern regarding the extent of any such reversion. The
bidders, including the Company, argued that the interpretation of this clause
should be limited to the cellular frequencies assigned to each concessionaire
which are the basis for the concessions and for which each concessionaire pays a
quarterly fee. There can be no assurance that the concessionaires will be
successful in persuading the Ministry of Communications to limit this
interpretation to cellular frequencies. However, as a support to the Company's
interpretation, under recently issued regulations enacted in relation to the
long distance bidding process that will take place in 1996, reversion of assets
will not apply to such concessions. Although these rules apply only to long
distance service concessions, the Company believes they may establish the
government's policy on the interpretation of the reversion of assets issue. See
"Risk Factors -- Regulatory and Concession Matters".
Unilateral Interpretation, Modification and Termination of Government
Contracts. The Concession is subject to unilateral interpretation, modification
and termination under Law 80 of 1993 ("Law 80"), which is applicable to
Colombian government contracts. Pursuant to Law 80, in the event that a dispute
arises as to the interpretation of the Concession between the Ministry of
Communications and the Company, and an agreement cannot be reached between the
parties, the Ministry of Communications has the right to unilaterally interpret
the Concession if necessary in order to prevent a suspension of cellular service
to the public. If during the performance of the Concession, the need arises to
modify it in order to avoid a suspension of the public service contemplated
therein, and agreement cannot be reached between the parties, then the
government may unilaterally modify the relevant provisions. In addition, the
Ministry of Communications may unilaterally terminate the Concession in the
event that public service or public policy so requires, or if the Company
becomes legally unable (because of bankruptcy or dissolution of the Company or
attachment of a substantial portion of its assets which has a material adverse
effect on the Company's ability to render its cellular services) of performing
its obligations under the Concession. In the event of unilateral interpretation,
modification or termination, based on circumstances not attributable to the
Company, the Company may judicially challenge such decision and demand fair
compensation from the Ministry of Communications. In addition, the Ministry of
Communications may, without compensation, terminate the concession for certain
events of default under the Concession; in the event of such termination, the
Ministry of Communications would also be entitled to a payment by the Company in
the amount of the performance bond posted by the Company under the Concession.
See "Risk Factors -- Regulatory and Concession Matters".
Arbitration. Except for those disputes discussed above under
"-- Termination Upon Default in Performance" and "-- Unilateral Interpretation,
Modification and Termination of Government Contracts", any other disputes
related to the granting, execution, development or termination and liquidation
of the Concession, which cannot be directly resolved between the Company and the
Ministry of Communications, must be submitted to a three-member arbitration
panel which will decide in accordance with Colombian law.
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MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors is composed of nine principal members, each with one
vote. Each principal director has two alternates who replace the principal
director during any absences. The principal and alternate members of the Board
of Directors are elected for one-year terms and may be removed by the
Shareholders' General Assembly. Any member may be reelected indefinitely.
The following table sets forth the current members of the Board of
Directors of the Company.
<TABLE>
<CAPTION>
DIRECTORS AGE DIRECTOR SINCE
------------------------------------- --- --------------
<S> <C> <C>
Julio M. Ayerbe-Munoz............................................ 51 1994
Raul Canal-Cardenas.............................................. 51 1992
Ana I. Jaramillo-Mejia........................................... 35 1994
Luis F. Dangond-Lacoutoure....................................... 29 1992
Jabib Char Abdala................................................ 54 1992
Mauricio Restrepo-Gutierrez...................................... 32 1995
Luis Esteban Echavarria.......................................... 49 1992
Jon R. Hill...................................................... 55 1995
Dominic Crolla................................................... 35 1996
</TABLE>
EXECUTIVE OFFICERS
The current executive officers of the Company are set forth below. The
President and the General Secretary are appointed and can be removed by the
Board of Directors; the other officers are appointed and can be removed by the
President.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION HELD SINCE
- ------------------------------------------ --- --------------------------- ----------
<S> <C> <C> <C>
Gilberto Echeverri-Mejia.................. 60 President 1992
Mauricio Campillo-Orozco.................. 33 General Secretary & 1992
Administrative Vice
President
Jorge Ospina-Restrepo..................... 44 Technical Vice President 1992
Juan Carlos Barvo-Barcenas................ 41 Regions Vice President 1993
Alvaro Munoz-Ramirez...................... 42 Financial Vice President 1993
David Paul Whitten........................ 49 Operations Vice President 1994
Jorge Echandia-Tobon...................... 43 Sales & Marketing Vice 1995
President
</TABLE>
The following is certain information regarding the current directors and
executive officers of the Company.
DIRECTORS:
Julio M. Ayerbe-Munoz, B.A. in Industrial Economics from Universidad de los
Andes. He joined Corporacion Financiera del Valle in 1969 and was appointed
President in 1984, after serving in a number of positions with the Company. He
has also served as representative of the President of Colombia in the Board of
Fogafin, the entity established in 1985 to deal with financial institutions in
distress. Currently, he is also a director of Capital International Inc.,
Icollantas S.A., Sucromiles S.A., Cementos Rio Claro S.A., and Hoteles Estelares
S.A.
Raul Canal-Cardenas, B.S. in Electronic Engineering from Pontificia
Universidad Javeriana. Since October 1995, he has been the Senior General
Manager in the Area of the Information and Telecommunications of Sycom S.A. He
worked with Carvajal S.A. and held several positions, including General Manager
of
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the Control Department, General Manager for Panama and Venezuela and Senior
General Manager for the Electronic Department.
Ana I. Jaramillo-Mejia, B.S. in Civil Engineering from Universidad del
Quindio. She is currently the General Manager of Eccel S.A. Formerly, she was
General Manager of La Cronica Ltda., a local newspaper in Armenia, Chief of the
Economic Department of and Manager of Camacol, Quindio.
Luis F. Dangond-Lacoutoure, B.S., in Mining Engineering from The
Pennsylvania State University. He is member of the Board of Directors of
Promotora de Empresas Agroexportadoras S.A. and Sociedad Promotora Hotel Holiday
Inn Select Barranquilla S.A.
Jabib Char Abdala. Mr. Char is a merchant and owner of several companies
in the country, including Supertiendas y Droguerias Olimpicas S.A., one of the
largest supermarkets in the country. Currently, Mr. Char is member of the Board
of Directors of Supertiendas y Droguerias Olimpicas S.A., Char Hermanos Ltda.,
Servicios Financieros S.A. SERFINANSA Compania de Financiamiento Comercial, and
Organizacion Radial Olimpica S.A.
Mauricio Restrepo-Gutierrez, B.S. Degree in Civil Engineering from
Universidad de Medellin. He has been the General Manager of the EPM since
January 1995. He has held several positions with municipal and state
governments, including Chief of the Planning Department, Public Works Secretary
for Medellin and Public Works Secretary for the state of Antioquia.
Luis Esteban Echavarria, B.A. in Economics from Universidad de Antioquia,
and M.B.A. from Boston University. From 1978 to 1981, he was General Manager of
Federacion Antioquena de Ganaderos, FADEGAN. Since 1981 he has been President of
Gilseguros Ltda. which has issued insurance policies for the Company. The
Company has paid approximately US$680,000 in respect of such policies for the
six months ended June 1996 and approximately US$376,000 in the year 1995.
Currently, Mr. Echavarria is a member of the Board of Directors of Cadenalco
S.A., Ancel S.A., Bedout Editores S.A., and Agroindustrias Colombianas S.A.
Jon R. Hill. He joined C&W 26 years ago, and is currently Regional
Director, Regional Business, Cable & Wireless Mobile. Mr. Hill was appointed
Regional Director, Regional Business following the formation of the mobile line
of business in April 1995. Previously he had been Director of Mobile for C&W
since 1993. He had held several positions in C&W including Managing Director of
Compunet Corporation and officer of Hong Kong Telecom Limited.
Dominic Crolla, B. Comm Hons in Business Studies and Spanish from the
University of Edinburgh. He joined C&W five years ago to advise on, structure
and negotiate project and asset financings. He is currently a Corporate Finance
Manager for C&W where he is involved in the world-wide mergers and acquisition
activity of the C&W Group as well as providing advice on the funding needs of
the subsidiary and associated companies of C&W. Prior to joining C&W he worked
for five years for Midland Montagu in London in the field of export and project
finance.
EXECUTIVE OFFICERS:
Gilberto Echeverri-Mejia, President. B.S. Degree in Electrical Engineering
from Universidad Pontificia Bolivariana. From 1975 to 1977 he was Ambassador of
Colombia to Ecuador. From 1978 to 1980, he was Minister of Economic Development.
From 1980 to 1988, he was President of Proantioquia, a private entity that
promotes the economic and commercial interests of the state of Antioquia. From
1990 to 1991, he was governor of the state of Antioquia and during the first
semester of 1992 served as Presidential Adviser for Social Issues to the
President of Colombia. He was appointed to his current position in August 1992.
Mauricio Campillo-Orozco, Corporate General Secretary/Administrative Vice
President, J.D. from Universidad de Medellin. Degrees in Public Law from
Universita di Estudi Europei di Torino, Italy, in Commercial Law from Pontificia
Universidad Bolivariana, and in Tax Law from EAFIT. He joined the EPM in 1987 as
attorney in the Legal Department and held other positions such as Human
Resources Manager and Head of the Legal Department. He is also Professor of
Administrative Law and Telecommunications Law in Universidad de Medellin and
Universidad Libre de Pereira.
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Jorge Ospina-Restrepo, Technical Vice President. B.S. Degree in Electrical
Engineering from Universidad Pontificia Bolivariana. From 1975 to 1991, he
served as EPM's Director of the Planning Division. He was also Ancel S.A.'s
General Manager and Professor of Telecommunications at the Universidad
Pontificia Bolivariana. He was appointed to his current position in August,
1992.
Juan Carlos Barvo-Barcenas, Regions' Vice President. B.S. Degree in
Economics from Pontificia Universidad Javeriana and A.L.M. in French Literature
from Harvard University. From 1981 to 1987 he worked with The Gillette Company
in Boston and Cali as Brand Manager. From 1987 to 1992, he was Head of the
National Marketing Office of Familia Products (formerly Scott Paper
Corporation). He joined the Company in 1993, first as Sales & Marketing Vice
President and from July 1995 as Regions' Vice President.
Alvaro Munoz-Ramirez. Financial Vice President. B.S. Degree in Industrial
Engineering from Universidad Autonoma Latinoamericana and Degree in Financial
Principles from the American Institute of Banking. From 1977 to 1993, he worked
at Trust Company Bank in Atlanta, Georgia, serving in several departments such
as international transactions, operations, marketing, and human resources. His
last position was Assistant to the International Department Vice President. He
was appointed to his current position in November 1993.
David Paul Whitten, Operations Vice President. B.S. Degree in Electric
Engineering from The University of Surrey in the United Kingdom. He has 26 years
of experience in various positions with Cable & Wireless, plc. and Mercury
Communications, one of its affiliates. From 1987 to 1994 he held several
positions with Mercury Communications including Manager of the Microwave
Department, Manager of Trunk, PCN Interconnect and Technological Planning
Departments. From 1984 to 1987, he served as Chief Officer of the Radio Studies
Department. From 1982 to 1984, he served as Manager of Radio Transmission. From
1972 to 1978 he was Radio Project Manager. He was seconded from C&W and has been
employed by the Company since 1994.
Jorge Echandia-Tobon, Marketing and Sales Vice President. B.S. Degree in
Electronic Engineering from the Pontificia Universidad Bolivariana. Degrees in
Finance, Foreign Trade and Marketing from Universidad Javeriana and EAFIT. From
1985 to 1994 he worked with Carvajal S.A. as Sales Manager for Medellin,
National Marketing Manager and Commercial Manager for Cali, Medellin and
Barranquilla. He joined the Company in 1994 as assistant to the Presidency and
later on he was appointed to his current position.
STATUTORY AUDITOR
The Company, as required by the Colombian Code of Commerce (Codigo de
Comercio) (the "Code of Commerce"), has a statutory auditor ("Revisor Fiscal").
The statutory auditor is elected by the Shareholders' General Assembly for a
one-year period beginning on the date of election. The statutory auditor may be
reelected indefinitely. Pursuant to the Code of Commerce, the statutory auditor
has the obligation to review the Company's financial statements, its tax filings
and all other related documents in order to attest to their conformity with the
accounting records. The statutory auditor also verifies the Company's compliance
with shareholders and board of directors resolutions, applicable Colombian laws
and regulations and orders or requests by Colombian government entities. The
statutory auditor, who has no power over the Company's operations, is authorized
to investigate and require correction of any irregularities, including by
convening an extraordinary session of the Board of Directors or the
Shareholders' General Assembly. The current statutory auditor is KPMG Peat
Marwick, independent auditors.
MANAGEMENT COMPENSATION; PENSION
While the Company's directors are not compensated for their services, as of
December 31, 1995, the Company's officers were compensated according to the
Colombian salary standards for executive officers in the telecommunications
sector.
For the year ended December 31, 1995, the aggregate compensation of all
directors and executive officers of the Company was approximately Ps666 million.
The Company is obligated by law to pay 10.125% of an employee's salary to
the pension system chosen by the employee. The Company has no other retirement
plan for employees.
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PRINCIPAL SHAREHOLDERS
Based upon the Company's shareholder's register, the following table sets
forth, as of March 31, 1996, each owner of more than 5% of any class of the
Company's voting securities. No shares of the Company's voting securities are
owned by the Company's directors or officers. See "Description of Capital
Stock".
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
OWNED OF CAPITAL STOCK
---------- ----------------
<S> <C> <C>
CLASS B SHARES:
Antioquia Celular S.A.................................... 19,864,154 24.00%
Empresa Regional de Telecomunicaciones Celulares S.A..... 19,864,248 24.00%
Empresa Cafetera Celular S.A............................. 8,069,863 9.75%
Caribe Celular S.A....................................... 14,277,451 17.25%
Cable and Wireless plc................................... 18,457,226 22.30%
</TABLE>
Antioquia Celular S.A., which owns 24.00% of the Company's outstanding
voting securities, has among its principal shareholders Empresas Publicas de
Medellin, the second largest public utility company in Colombia ("EPM"), and
Empresas Departamentales de Antioquia, a state telecommunications company.
Empresa Regional de Telecommunicaciones Celulares S.A., which owns 24.00% of the
Company's outstanding voting securities, has among its principal shareholders
Empresas Municipales de Cali, the fourth largest public utility company in
Colombia ("EMCALI"), and private companies such as Carvajal S.A., one of the
largest industrial companies in Colombia, and Corporacion Financiera del Valle
S.A. ("Corfivalle"), one of the largest financial institutions in Colombia.
Empresa Cafetera Celular S.A. ("ECCEL S.A."), which owns 9.75% of the Company's
outstanding voting securities, has among its principal shareholders, Empresas
Publicas de Pereira, Empresas Publicas de Manizales and Telearmenia, three
telecommunication public utilities in the Western Region. Caribe Celular S.A.,
which owns 17.25% of the Company's outstanding voting securities, has among its
principal shareholders many of the largest private enterprises that operate in
the Caribbean region. C&W, which owns 22.30% of the Company's outstanding voting
securities, is an international telecommunications company with revenues of L5.5
billion for the fiscal year ended March 31, 1996 and operations in over 50
countries including the United Kingdom, Hong Kong, Australia, Colombia and
certain Caribbean countries. A C&W executive was seconded to, and is employed
by, the Company as a member of the Company's senior management team.
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CERTAIN TRANSACTIONS WITH RELATED PARTIES
INTERCONNECTION AGREEMENTS
The Company has entered into interconnection agreements with wireline
operators which include EPM, EMCALI, Empresas Publicas de Manizales, Telearmenia
and Empresas Publicas de Pereira and has executed a letter of intent to enter
into an interconnection agreement with Empresas Departamentales de Antioquia and
Telecom. All of these wireline operators beneficially own capital stock of the
Company. The terms of the interconnection agreements include provisions for,
among other things, the number of connection points, the method by which signals
must be received and transmitted, and the assumption of responsibility for the
cost of interconnection. The Company believes that these interconnection
agreements contain terms substantially similar to the terms of the
interconnection agreements between Cocelco and such wireline operators. In
addition, the Company is currently negotiating lease agreements with ECCEL S.A.,
which owns 9.75% of the capital stock of the Company, and ERT (a shareholder of
Empresa Regional de Telecomunicaciones Celulares S.A.), which beneficially owns
approximately 3.84% of the capital stock of the Company, for the leasing of
transmission capacity.
AGREEMENTS WITH CABLE AND WIRELESS PLC
The Company has had in the past several consulting arrangements with C&W
for the provision of technical, commercial, financial, marketing and billing
support. Although currently the Company does not have any consulting arrangement
with C&W, the latter continues to provide advice with respect to technical,
financial and equipment purchasing matters. As of December 31, 1995, the Company
had paid C&W an aggregate amount of approximately, Ps2.1 billion (US$2.0
million) for services rendered in the last three years.
DESCRIPTION OF COMPANY INDEBTEDNESS
BANK FACILITY
The description set forth below does not purport to be complete and is
qualified in its entirety by reference to the definitive documentation for the
Credit Agreement entered into by the Company, ING Baring (U.S.) Securities, Inc.
and Merrill Lynch & Co., as arrangers (the "Arrangers"), ING Bank, N.V. and ING
(U.S.) Capital Corporation, as administrative and collateral agents (the
"Agents"), and the financial institutions party thereto (the "Credit
Agreement"), which is filed as exhibits to the Registration Statement of which
this Prospectus is a part.
The Agents and the Arrangers have provided the Company with a term loan in
an aggregate principal amount of U.S.$80.0 million (the "Term Loan"). The
principal amount of the Term Loan is scheduled to be repaid in four semiannual
amortizations, each equal to 10% of the principal amount thereof, commencing on
the third anniversary of the closing date under the Credit Agreement, with the
remaining 60% of the principal amount of the Term Loan due five years and one
day after disbursement thereof. The interest rate per annum applicable to the
Bank Facility is the sum of the Applicable Margin plus the applicable Eurodollar
Rate. Such sum was equal to 9.3125% as of June 30, 1996. The Applicable Margin
shall be 3.75%; provided, however, that if the Company satisfies certain
leverage ratios, the Applicable Margin may be reduced by as much as 1%.
The Company is required to make mandatory prepayments of the Term Loan in
amounts, at times and subject to certain exceptions, (i) in respect of 100% of
the cash proceeds of the issuance of equity in the Borrower in excess of
U.S.$30.0 million or the issuance or incurrence of indebtedness not permitted
pursuant to the Credit Agreement and (ii) in respect of 50% of the excess cash
flow of the Company.
The obligations of the Company under the Credit Agreement are secured by,
among other things, (i) all of the Company's receivables originated from the
provision of cellular communications and roaming and interconnection services,
(ii) the pledge of 99.99% (as of the date thereof) of the Company's outstanding
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common stock and (iii) the pledge of the Concession to operate its business,
provided that the Lenders may not exercise any remedies thereunder prior to
March 28, 1997.
For the period described above until the restriction on the right of the
Lenders to exercise their remedies under the pledge of the Concession expires,
the Indenture will provide that should the Company enter into a bankruptcy
reorganization (concordato) or liquidation under the laws of Colombia during
such period, the Trustee will turn over to the Agents for the lenders under the
Bank Facility all amounts that constitute proceeds of the Concession received
pursuant to a bankruptcy reorganization (concordato)or liquidation until all the
claims under the Bank Facility are satisfied.
The Credit Agreement contains a number of significant covenants that, among
other things, restrict the ability of the Company to create liens on assets, pay
dividends, incur additional indebtedness, make investments or advances, engage
in mergers or consolidations and otherwise restrict corporate activities. In
addition, under the Credit Agreement, the Company is required to comply with
specified financial ratios and tests, including quarterly recurring revenue,
fixed charge coverage, interest coverage and maximum leverage.
The Credit Agreement also contains provisions that limit the Company's
ability to modify the Indenture relating to the Notes and to refinance the
Notes.
OTHER INDEBTEDNESS
As of June 30, 1996, the Company also had Ps 36.6 billion (US$34.2 million)
of aggregate payments (without discount to present value) relating to leases and
US$1.8 million of letters of credit.
DESCRIPTION OF THE NOTES
The Old Notes were issued and the New Notes offered hereby will be issued
under an indenture dated as of June 1, 1996 (the "Indenture") between the
Company, as issuer, and The Bank of New York, as trustee (the "Trustee"), a copy
of which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Indenture is subject to and governed by the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of the material provisions of the Indenture does not purport to be
complete and is subject to, and qualified in its entirety by reference to, the
provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act. For definitions of certain capitalized terms used in the
following summary, see "-- Certain Definitions".
GENERAL
The Notes will mature on March 15, 2004, will be limited to US$190,745,000
aggregate principal amount at maturity and will be general senior unsecured
obligations of the Company. Based on the issue price thereof, the yield to
maturity of the Notes is 14% per annum (computed on a semiannual bond equivalent
basis) calculated from June 7, 1996.
The Old Notes have been offered at a substantial discount from their
principal amount at maturity. Cash interest will not accrue on the Notes prior
to March 15, 2001. Thereafter, cash interest on the Notes will be payable at the
applicable rate set forth on the front cover of this Prospectus, semiannually in
arrears on each March 15 and September 15, commencing September 15, 2001, until
the principal thereof is paid or duly provided for, to the Person in whose name
the Note (or any predecessor Note) is registered at the close of business on the
March 1 or September 1 next preceding such interest payment date. Cash interest
will accrue from the most recent interest payment date to which interest has
been paid or, if no interest has been paid, from March 15, 2001. Cash interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the Trustee); provided, however, that, at the option of the
Company, interest may be paid by check mailed to the address of the Person
entitled thereto as such address shall appear on the security register.
(Sections 301, 305 and 1002) The Old Notes have been and the New Notes will be
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<PAGE> 79
issued only in registered form without coupons and only in denominations of
US$1,000 and any integral multiple thereof. (Section 302) No service charge will
be made for any registration of transfer or exchange or redemption of Notes, but
the Company may require payment in certain circumstances of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith. (Section 305)
ADDITIONAL AMOUNTS
The Notes provide that any and all payments thereunder will be made free
and clear of and without deduction for or on account of any and all present or
future taxes, levies, imposts, deductions, charges or withholdings and all
liabilities with respect thereto imposed by Colombia or any political
subdivision thereof excluding any taxes, levies, imposts, deductions, charges or
withholdings and all liabilities with respect thereto (i) resulting from the
holder of a Note having some connection with Colombia or any political
subdivision thereof other than the mere holding of or enforcement of or receipt
of any payment with respect to such Note, (ii) the payment of which may be
avoided by the holder of a Note complying with any certification, declaration or
other reporting requirement concerning the nationality, residence, identity or
connection with any taxing authority of such holder as the beneficial owner of
such Note, (iii) that would not have been imposed but for the presentation
(where presentation is required) of such Note for payment more than 30 days
after the date such payment became due and payable or was duly provided for,
whichever occurs later, (iv) in the nature of estate, inheritance, gift, sale,
transfer, personal property or similar taxes, or (v) imposed on or with respect
to any payment by the Company to the holder of a Note if such holder is a
fiduciary or partnership or person other than the sole beneficial owner of such
payment to the extent such tax, levy, impost, deduction, charge or withholding
would not have been imposed on a beneficiary or settlor with respect to such
fiduciary, member of such partnership or the beneficial owner of such payment
had such beneficiary, settlor, member or beneficial owner been the holder of
such Note (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being referred to collectively or individually as
"Colombian Withholding Taxes"). If the Company is required by law to deduct any
Colombian Withholding Taxes from or in respect of any sum payable under a Note,
the sum payable thereunder shall be increased by the amount necessary so that
after making all required deductions the holder of a Note will receive an amount
equal to the sum it would have received had no such deductions been made (such
additional amounts to be paid by the Company in accordance with the foregoing
being "Additional Amounts").
At least 30 calendar days prior to each date on which any payment under or
with respect to the Notes is due and payable, if the Company will be obligated
to pay Additional Amounts with respect to such payment, the Company will deliver
to the Trustee an Officers' Certificate stating the fact that such Additional
Amounts will be payable and the amounts so payable and will set forth such other
information necessary to enable the Trustee to pay such Additional Amounts to
holders of Notes on the payment date. Whenever in the Indenture or in this
"Description of the Notes" there is mentioned, in any context, the payment of
principal, interest, if any, or any other amount payable, under or with respect
to any Note, such mention shall be deemed to include mention of the payment of
Additional Amounts to the extent that, in such context, Additional Amounts are,
were or would be payable in respect thereof.
RANKING
The Notes are senior unsecured obligations of the Company, and the
Indebtedness evidenced by the Notes ranks pari passu in right of payment with
all other existing and future unsubordinated obligations of the Company (other
than obligations preferred by statute or by operation of law), except to the
extent that the provisions of the Indenture require the Trustee, during the
period from the Issue Date until the restriction on the right of the Lenders to
exercise their remedies under the pledge of the Concession expires, to turn over
to the collateral agents for the lenders under the Bank Facility all amounts
that constitute proceeds of the Concession received pursuant to a bankruptcy
reorganization (concordato) or liquidation of the Company until all claims under
the Bank Facility are satisfied, and senior in right of payment to all existing
and future Indebtedness of the Company expressly subordinated in right of
payment to any other Indebtedness of the Company. The Company currently has no
subordinated Indebtedness outstanding. The Notes, however, are effectively
subordinated to senior secured obligations of the Company with respect to the
assets of the
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Company securing such obligations, including Indebtedness under the Bank
Facility, which are secured by, among other things, (i) all of the Company's
receivables originated from the provision of cellular communications and roaming
and interconnection services and (ii) when such pledge is permitted by law, but
not earlier than May 1, 1997, the Concession to operate its business. The
Indebtedness under the Bank Facility is also secured by a pledge of 99.99% of
the Company's outstanding common stock. See "Description of Company
Indebtedness -- Bank Facility". As of June 30, 1996, Indebtedness of the Company
was approximately US$181.8 million, of which US$80.0 million was senior secured
Indebtedness and US$101.8 million was senior unsecured Indebtedness. Subject to
certain limitations, the Company and any Restricted Subsidiary may incur
additional Indebtedness, including secured Indebtedness, in the future.
MANDATORY REDEMPTION
The Company will redeem 50% of the original aggregate principal amount at
maturity of the Notes on March 15, 2003 at 100% of the principal amount thereof,
together with accrued and unpaid interest to the redemption date on a pro rata
basis from Persons in whose name the Notes (or any predecessor Note) are
registered at the close of business on March 1, 2003. Notice of redemption will
be mailed, first-class postage prepaid, at least 30 but not more than 60 days
before the redemption date to each holder of Notes to be redeemed at its
registered address. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption and accepted for
payment.
OPTIONAL REDEMPTION
Redemption at the Option of the Company. The Notes are redeemable at the
option of the Company, as a whole or from time to time in part, on not less than
30 nor more than 60 days' prior notice (i) at 100% of the principal amount
thereof if redeemed prior to September 15, 2000, (ii) 107.5% of the Accreted
Value thereof if redeemed during the six months beginning September 15, 2000 and
(iii) at the redemption prices (expressed as percentages of principal amount)
set forth below, in each case together with accrued interest, if any, to the
redemption date, if redeemed during the 12-month period beginning on March 15 of
the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------------------------------------------------------------------- ----------
<S> <C>
2001...................................................................... 107.0%
2002...................................................................... 103.5%
2003 and thereafter....................................................... 100.0%
</TABLE>
In addition, at any time prior to March 15, 1999 the Company may redeem up
to 33% of the original aggregate principal amount at maturity of the Notes
within 45 days of one or more Public Equity Offerings with the net proceeds of
such offering at a redemption price equal to 114% of the Accreted Value thereof,
provided that no less than 67% of the original aggregate principal amount at
maturity of the Notes remains outstanding.
For certain restrictions on the Company's ability to redeem the Notes, see
"-- Prepayment Events Prior to First Anniversary", "-- Prepayment Events Prior
to Third Anniversary" and "Foreign Investment and Exchange Controls".
Redemption at the Option of the Company for Changes in Colombian
Withholding Tax. The Notes are redeemable at the option of the Company, as a
whole, but not in part, at any time upon not less than 30 nor more than 60 days'
prior notice at 100% of the Accreted Value on the date of redemption, together
with accrued interest, if any, to the date of redemption, in the event the
Company has become or would be obligated to pay, on any date on which any amount
would be payable with respect to the Notes, any Additional Amounts as a result
of a change in the laws (including any regulations promulgated thereunder) of
Colombia (or any political subdivision or taxing authority thereof or therein),
or any change in any official position regarding the application or
interpretation of such laws or regulations, which change is announced or becomes
effective on or after the Issue Date (a "Tax Redemption").
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<PAGE> 81
For certain restrictions on the Company's ability to redeem the Notes, see
"-- Prepayment Events Prior to First Anniversary", "-- Prepayment Events Prior
to Third Anniversary" and "Foreign Investment and Exchange Controls in
Colombia".
Selection and Notice. If less than all the Notes are to be redeemed, the
particular Notes to be redeemed will be selected not more than 60 days prior to
the redemption date by the Trustee by such method as the Trustee deems fair and
appropriate; provided, however, that no such partial redemption will reduce the
principal amount of a Note not redeemed to less than US$1,000. Notice of
redemption will be mailed, first-class postage prepaid, at least 30 but not more
than 60 days before the redemption date to each holder of Notes to be redeemed
at its registered address. On and after the redemption date, interest will cease
to accrue on Notes or portions thereof called for redemption and accepted for
payment. (Sections 1104, 1105, 1107 and 1108).
Prepayment Events Prior to First Anniversary. Colombian law currently
prohibits the prepayment of the Notes within one year of their issuance, whether
by redemption, repurchase, acceleration or otherwise. Accordingly, the Company
will not be able to effect an optional redemption, including a Tax Redemption,
during such period as long as such limitation is in effect. In addition, as long
as such limitation under Colombian law is in effect, in the event any mandatory
redemption, repurchase, acceleration or other event requiring repayment occurs
on or prior to the first anniversary of the Issue Date, in lieu of such
redemption, repurchase, acceleration or other prepayment, the Company will be
required to deposit with the Trustee cash and/or United States Government
Obligations in an amount (without taking into account the payment of interest
thereon) sufficient to make such prepayment with respect to the Notes on the
first Business Day after the first anniversary of the Issue Date ("First
Anniversary Date") at a price which the Company would have had to pay with
respect to such a prepayment occurring on the First Anniversary Date; provided,
however, that in the event of an offer to purchase described under "Certain
Covenants -- Purchase of Notes upon a Change of Control," the Company would have
to deposit with the Trustee an amount (without taking into account the payment
of interest thereon) sufficient to repurchase all of the Notes. Any funds
deposited with the Trustee (together with any additional funds provided by the
Company, if necessary) will be used by the Trustee to make the required
prepayment on the Notes on the First Anniversary Date. If the Company shall have
made the deposit with the Trustee as described in this paragraph, it will not be
in default of its obligations to redeem or repurchase the Notes prior to the day
on which the Notes are to be redeemed or repurchased as provided in the
preceding sentence.
Prepayment Events Prior to Third Anniversary. Colombian law currently
imposes certain deposit requirements on the Company upon a redemption,
repurchase, acceleration or other event requiring repayment on or prior to the
third anniversary of the Issue Date. See "Foreign Investment and Exchange
Controls in Colombia". Accordingly, in the event of an optional redemption,
including a Tax Redemption, a repurchase described under "Certain
Covenants -- Purchase of Notes upon a Change of Control" or any prepayment of
Notes upon acceleration on or prior to the third anniversary of the Issue Date
and after the one-year period described in the preceding paragraph, the Company
must comply with applicable law, including making the deposit required by the
Central Bank as described under "Foreign Investment and Exchange Controls in
Colombia" should such requirement then exist, prior to such redemption, purchase
or acceleration of the Notes. In addition, the Indenture provides that in the
event of any Excess Proceeds Offer from any Asset Sale on or prior to the third
anniversary of the Issue Date in which more than 40% of the aggregate principal
amount at maturity of the Notes (or such lesser amount that, when added to the
Notes previously redeemed or purchased, would exceed 40% of the aggregate
principal amount at maturity of the Notes) have been tendered for purchase, the
Company may (i) make the deposit required by the Central Bank as described under
"Foreign Investment and Exchange Controls in Colombia" and thereafter complete
the repurchase pursuant to the Excess Proceeds Offer or (ii) purchase pro rata
40% of the aggregate principal amount at maturity of the Notes (or such lesser
amount that would result, together with any prior redemption or purchase, in an
aggregate of 40% of the aggregate principal amount at maturity of the Notes
having been redeemed or purchased) and in lieu of the redemption of the
remainder of such tendered Notes, deposit with the Trustee cash or United States
Government Obligations in an amount (without taking into account the payment of
interest thereon) sufficient to purchase such remaining Notes on the first
Business Day after the
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<PAGE> 82
third anniversary of the Issue Date at a purchase price equal to the Accreted
Value of the Notes together with accrued interest to the date of purchase. Any
funds deposited with the Trustee (together with any additional funds provided by
the Company, if necessary) will be used by the Trustee to make the required
prepayment on the Notes on the first Business Day after the third anniversary of
the Issue Date. If the Company shall have made the deposit with the Trustee as
described in this paragraph, it will not be in default of its obligations to
redeem or repurchase the Notes prior to the day on which the Notes are to be
redeemed or repurchased as provided in the preceding sentence.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. (a) The Company will not create, issue,
assume, guarantee or in any manner become directly or indirectly liable for the
payment of, or otherwise incur (collectively, "incur"), any Indebtedness
(including any Acquired Indebtedness), other than Permitted Indebtedness, unless
at the time of such incurrence the ratio of (x) the aggregate consolidated
principal amount of Indebtedness of the Company and its Restricted Subsidiaries
outstanding as of the most recent available quarterly or annual balance sheet,
after giving pro forma effect to the incurrence of such Indebtedness and any
other Indebtedness incurred since such balance sheet date and the receipt and
application of the proceeds thereof and the repayment of any other Indebtedness
repaid since such balance sheet date to (y) Annualized Pro Forma Consolidated
Cash Flow would be less than or equal to (i) 7.5 to 1 from the Issue Date until
June 7, 1998 and (ii) 6.5 to 1 thereafter. (Section 1010(a))
(b) The Company will not permit any Restricted Subsidiary to incur any
Indebtedness (including any Acquired Indebtedness), other than Permitted
Subsidiary Indebtedness. (Section 1010(b))
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, take any of the
following actions:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company (other than
dividends or distributions payable solely in shares of its Qualified
Capital Stock or in options, warrants or other rights to acquire such
shares of Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock of the Company or any
Capital Stock of any Restricted Subsidiary (other than Capital Stock of any
Wholly Owned Restricted Subsidiary or Capital Stock of the Company held by
any Wholly Owned Restricted Subsidiary) or any options, warrants or other
rights to acquire such shares of Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
or
(iv) make any Investment (other than any Permitted Investment) in any
Person (such payments or other actions described in (but not excluded from)
clauses (i) through (iv) are collectively referred to as "Restricted
Payments"), unless at the time of, and immediately after giving effect to,
the proposed Restricted Payment (the amount of any such Restricted Payment,
if other than cash, as determined by the Board of Directors of the Company,
whose determination shall be conclusive and evidenced by a Board
Resolution) (1) no Default or Event of Default shall have occurred and be
continuing, (2) the Company could incur at least US$1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Indebtedness" covenant and (3) the aggregate amount of all
Restricted Payments declared or made after the Issue Date shall not exceed
the sum of:
(A) the remainder of (x) cumulative Consolidated Cash Flow of the
Company during the period (taken as a single accounting period) beginning
on the first day of the fiscal quarter of the Company beginning after the
Issue Date and ending on the last day of the last full fiscal quarter
immediately preceding the date of such Restricted Payment for which
quarterly or annual financial statements of the
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Company are available minus (y) the product of 1.75 times cumulative
Consolidated Interest Expense of the Company during such period, plus
(B) the aggregate Net Cash Proceeds and the Fair Market Value of
marketable securities and property received after the Issue Date by the
Company as capital contributions or from the issuance or sale (other than
to any Restricted Subsidiary) of shares of Qualified Capital Stock of the
Company or warrants, options or rights to purchase shares of Qualified
Capital Stock of the Company, plus
(C) the aggregate Net Cash Proceeds and the Fair Market Value of
marketable securities and property received after the Issue Date by the
Company from the issuance or sale (other than to any Restricted Subsidiary)
of debt securities or Redeemable Capital Stock that have been converted
into or exchanged for Qualified Capital Stock of the Company, together with
the aggregate Net Cash Proceeds and the Fair Market Value of property
received by the Company at the time of such conversion or exchange, plus
(D) to the extent not otherwise included in the Consolidated Cash Flow
of the Company, an amount equal to the sum of (i) the net reduction in
Investments in any Person (other than the Permitted Investments) resulting
from the payment in cash of dividends, repayments of loans or advances or
other transfers of assets, in each case to the Company or any Restricted
Subsidiary after the Issue Date from such Person and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the
fair market value of the net assets of any Unrestricted Subsidiary at the
time such Unrestricted Subsidiary is designated a Restricted Subsidiary;
provided, however, that in the case of (i) or (ii) above the foregoing sum
shall not exceed the amount of Investments previously made (and treated as
a Restricted Payment) by the Company or any Restricted Subsidiary in such
Person or Unrestricted Subsidiary, plus
(E) US$2.5 million.
(b) Notwithstanding paragraph (a) above, the Company and any Restricted
Subsidiary may take the following actions so long as (with respect to clauses
(ii), (iii), (iv) and (v) below) no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration the payment of such
dividend would have complied with the provisions of paragraph (a) above
(such payment will be deemed to have been paid on such date of declaration
for purposes of the calculation required by paragraph (a) above), provided,
however, that such dividend (but not the declaration thereof) shall be
included in the calculation of the amount of Restricted Payments;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company in exchange for, or out
of the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Restricted Subsidiary) of, shares of Qualified Capital
Stock of the Company, provided, however, that (A) such purchase, redemption
or other acquisition or retirement shall be excluded in the calculation of
the amount of Restricted Payments, and (B) the aggregate net cash proceeds
(to the extent used for such purchase, redemption, acquisition or
retirement) and the Fair Market Value of such Capital Stock received by the
Company from such issuance and sale shall be excluded from the calculation
of amounts available for Restricted Payments under clause (3) of paragraph
(a) above;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Restricted Subsidiary) of, shares of Qualified
Capital Stock of the Company, provided, however, that (A) such purchase,
redemption, defeasance or other acquisition or retirement shall be excluded
in the calculation of the amount of Restricted Payments, and (B) the
aggregate net cash proceeds (to the extent used for such purchase,
redemption, defeasance, acquisition or retirement) and the Fair Market
Value of such Subordinated Indebtedness received by the Company from such
issuance and sale shall be excluded from the calculation of amounts
available for Restricted Payments under clause (3) of paragraph (a) above;
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<PAGE> 84
(iv) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out
of the net cash proceeds of a substantially concurrent incurrence (other
than to a Restricted Subsidiary) of, new Subordinated Indebtedness so long
as (A) the principal amount of such new Indebtedness does not exceed (1)
the principal amount (or, if such Subordinated Indebtedness being
refinanced was incurred with original issue discount, the aggregate
accreted value as of the date of determination) of the Subordinated
Indebtedness being so purchased, redeemed, defeased, acquired or retired,
plus (2) the lesser of the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Subordinated
Indebtedness being refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refinancing plus
(3) the amount of any fees and expenses incurred to accomplish such
refinancing, (B) such new Subordinated Indebtedness is subordinated to the
Notes to the same extent as such Subordinated Indebtedness so purchased,
redeemed, defeased, acquired or retired and (C) such new Subordinated
Indebtedness has an Average Life equal to or greater than the Average Life
of the Indebtedness being refinanced and a final Stated Maturity of
principal later than the final Stated Maturity of principal of the
Indebtedness being refinanced, provided, however, that such purchase,
redemption, defeasance or other acquisition or retirement shall be excluded
in the calculation of the amount of Restricted Payments; and
(v) the repurchase of Warrants in accordance with the terms of the
Warrant Agreement, provided, however, that such repurchase shall be
excluded in the calculation of the amount of Restricted Payments.
(c) In computing Consolidated Cash Flow and Consolidated Interest Expense
of the Company under paragraph (a) above, (1) the Company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (2) the
Company shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment would in the
good faith determination of the Company be permitted under the requirements of
the Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Cash
Flow and Consolidated Interest Expense of the Company for any period. (Section
1011)
Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries. The Company (a) will not permit any Restricted Subsidiary to
issue any Capital Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (b) will not permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary) to own any Capital Stock of any Restricted
Subsidiary; provided, however, that this covenant shall not prohibit (i) the
sale or other disposition of all, but not less than all, of the issued and
outstanding Capital Stock of any Restricted Subsidiary owned by the Company and
all Restricted Subsidiaries in compliance with the other provisions of the
Indenture and (ii) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law. (Section 1012)
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to enter into or suffer to exist, directly
or indirectly, any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with, or for the benefit of, any Affiliate of the Company or any
Restricted Subsidiary (other than the Company or a Wholly Owned Restricted
Subsidiary) unless such transaction is entered into in good faith and (i) such
transaction or series of transactions are fair and reasonable to the Company or
such Restricted Subsidiary, as the case may be, and are on terms that are no
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could have been obtained in an arm's-length transaction with a
third party that is not an Affiliate, (ii) with respect to any transaction or
series of related transactions involving aggregate consideration equal to or
greater than US$5 million, the Company will deliver an Officers' Certificate to
the Trustee certifying that such transaction or series of transactions complies
with clause (i) above and such transaction or series of related transactions has
been approved by a majority of the Disinterested Directors of
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the Company or, in the event no members of the Board of Directors of the Company
are Disinterested Directors with respect to such transaction or series of
transactions, the Company will obtain a written opinion from an internationally
recognized United States, United Kingdom or European investment banking firm to
the effect that such transaction or series of related transactions is fair to
the Company or its Restricted Subsidiary, as the case may be, from a financial
point of view and (iii) with respect to any transaction or series of related
transactions involving aggregate consideration in excess of US $10 million, the
Board of Directors will approve the fairness of such transaction after the
Company has obtained a written opinion from an internationally recognized United
States, United Kingdom or European investment banking firm to the effect set
forth in the preceding clause (ii); provided, however, that no opinion from an
investment banking firm will be required with respect to interconnection
agreements entered into by the Company or any Restricted Subsidiary in the
ordinary course of business and provided further that this covenant will not
restrict (1) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted Subsidiary
who are not employees of the Company or any Restricted Subsidiary, (2) the
performance of the Company's obligations under agreements existing on the Issue
Date and listed on a schedule to the Indenture; provided that any amendments or
modifications to the terms of such agreements shall be no less favorable to the
Company than the terms existing on the Issue Date, (3) the grant of stock
options or similar rights to acquire Capital Stock to employees and directors of
the Company pursuant to plans approved by the Board of Directors provided that,
in the aggregate, the shares underlying such options or similar rights issued
since the Issue Date (exclusive of any shares underlying such options or similar
rights required to be issued by law) shall not exceed 5% of the outstanding
Common Stock of the Company on a fully diluted basis at the date of
determination, (4) loans or advances to employees in the ordinary course of
business in an aggregate amount not to exceed US$1 million at any one time
outstanding and (5) any Restricted Payment permitted to be paid pursuant to the
covenant described under "-- Limitation on Restricted Payments". (Section 1013)
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind (other than Permitted Liens) on or with
respect to any of its property or assets, including any shares of stock or
indebtedness of any Restricted Subsidiary, whether owned at the date of the
Indenture or thereafter acquired, or any income, profits or proceeds therefrom,
or assign or otherwise convey any right to receive income thereon, unless (x) in
the case of any Lien securing Subordinated Indebtedness, the Notes are secured
by a Lien on such property, assets or proceeds that is senior in priority to
such Lien and (y) in the case of any other Lien, the Notes are equally and
ratably secured with the obligation or liability secured by such Lien. (Section
1014)
Purchase of Notes upon a Change of Control. If a Change of Control shall
occur at any time, then each holder of Notes will have the right to require that
the Company purchase such holder's Notes, in whole or in part in integral
multiples of US$1,000, at a purchase price (the "Change of Control Purchase
Price") in cash in an amount equal to 101% of the Accreted Value thereof plus
accrued interest, if any, to the date of purchase (the "Change of Control
Purchase Date"), pursuant to the offer described below (the "Change of Control
Offer") and the other procedures set forth in the Indenture.
Within 15 days following any Change of Control, the Company shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Notes by first-class mail, postage prepaid, at the address of such
holder appearing in the security register, stating, among other things, (i) the
purchase price and the purchase date, which shall be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is mailed, or such
later date as is necessary to comply with requirements under the Exchange Act or
any applicable securities laws or regulations; (ii) that any Note not tendered
will continue to accrue interest or accrete in value, as the case may be; (iii)
that, unless the Company defaults in the payment of the purchase price, any
Notes accepted for payment pursuant to the Change of Control Offer shall cease
to accrue interest or accrete in value after the Change of Control Purchase
Date; and (iv) certain other procedures that a holder of Notes must follow to
accept a Change of Control Offer or to withdraw such acceptance. (Section 1015)
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by
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holders of the Notes seeking to accept the Change of Control Offer. The failure
of the Company to make or consummate the Change of Control Offer or pay the
Change of Control Purchase Price when due would result in an Event of Default
and would give the Trustee and the holders of the Notes the rights described
under "-- Events of Default".
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change of Control.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to incur additional Indebtedness are contained in the
covenants described under "-- Certain Covenants -- Limitation on Indebtedness",
"-- Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries", "-- Limitation on Liens" and "-- Limitation on Sale and Leaseback
Transactions". Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the Notes then outstanding. Except
for the limitations contained in such covenants, however, the Indenture will not
contain any covenants or provisions that may afford holders of the Notes
protection in the event of a highly leveraged transaction.
As indicated under "-- Prepayment Events Prior to First Anniversary," the
Company is currently prohibited under Colombian law from making any prepayment
of the Notes, including pursuant to a Change of Control Offer, on or prior to
the first anniversary of the Issue Date, and if the Company is required to make
a Change of Control Offer while such prohibition is in effect, the Company will
be required to deposit with the Trustee cash and/or United States Government
Obligations in an amount sufficient (without taking into account the payment of
interest thereon) to acquire all of the Notes on the first Business Day after
the first anniversary of the Issue Date. Under current Colombian law, any
prepayment of the Notes within three years of the Issue Date and after the
one-year period described in the preceding sentence resulting in more than 40%
of the aggregate principal amount at maturity of the Notes being redeemed would
impose certain deposit requirements on the Company, and the Company will be
required to comply with applicable law, including making such deposit should
such requirement then exist, prior to consummating any Change of Control Offer.
See "-- Prepayment Events Prior to Third Anniversary" and "Foreign Investment
and Exchange Controls in Colombia".
The Company will comply with any applicable securities laws and regulations
in connection with a Change of Control Offer. (Section 1015)
The Company will not enter into any agreement (other than the Bank Credit
Agreement or agreements governing Indebtedness in effect on the date of the
Indenture) that would prohibit the Company from making a Change of Control Offer
to purchase the Notes or, if such Change of Control Offer is made, to pay for
the Notes tendered for purchase. (Section 1015)
Limitation on Sale of Assets. (a) The Company will not, and will not
permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) the
consideration received by the Company or such Restricted Subsidiary for such
Asset Sale is not less than the Fair Market Value of the assets subject to such
Asset Sale (as determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board Resolution), (ii) the
consideration received by the Company or the relevant Restricted Subsidiary in
respect of such Asset Sale consists of at least 85% cash or Cash Equivalents and
(iii) immediately before and immediately after giving effect to such Asset Sale,
no Default or Event of Default shall have occurred and be continuing or be
anticipated to occur.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may use the Net Cash Proceeds thereof, within 12 months after the
later of such Asset Sale or the receipt of such Net
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Cash Proceeds, to (i) permanently repay or prepay any then outstanding secured
Indebtedness of the Company under the Bank Credit Agreement or other secured
Indebtedness of the Company that is not subordinated to payment of the Notes or
Indebtedness of any Restricted Subsidiary or (ii) invest (or enter into a
legally binding agreement to invest) in properties and assets that will be used
in businesses of the Company or its Restricted Subsidiaries, as the case may be,
that (x) existed on the date of the Indenture or (y) is a Permitted
Telecommunications Business. If any such legally binding agreement to invest
such Net Cash Proceeds is terminated, then the Company may, within 90 days of
such termination or within 12 months of such Asset Sale, whichever is later,
invest such Net Cash Proceeds as provided in clause (i) or (ii) (without regard
to the parenthetical contained in such clause (ii)) above. The amount of such
Net Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds".
(c) When the aggregate amount of Excess Proceeds exceeds US$10 million, the
Company shall, within 15 business days, make an offer to purchase (an "Excess
Proceeds Offer") from all holders of Notes, on a pro rata basis, in accordance
with the procedures set forth below, the maximum principal amount of Notes that
may be purchased with the Excess Proceeds (rounded down to the nearest multiple
of $1,000). The offer price as to each Note shall be payable in cash in an
amount equal to 100% of the Accreted Value of such Note plus accrued interest,
if any, to the date such Excess Proceeds Offer is consummated. To the extent
that the aggregate principal amount of Notes tendered pursuant to an Excess
Proceeds Offer is less than the Excess Proceeds, the Company may use such
deficiency for general corporate purposes. If the aggregate principal amount of
Notes validly tendered and not withdrawn by holders thereof exceeds the Excess
Proceeds, Notes to be purchased will be selected on a pro rata basis. Upon
completion of such Excess Proceeds Offer, the amount of Excess Proceeds shall be
reset to zero. (Section 1016)
As indicated under "-- Prepayment Events Prior to First Anniversary," the
Company's ability to prepay the Notes, including pursuant to an Excess Proceeds
Offer, on or prior to the first anniversary of the Issue Date is prohibited by
Colombian law, and if the Company is required to make an Excess Proceeds Offer
while such prohibition is in effect, the Company will be required to deposit
with the Trustee cash and/or United States Government Obligations in an amount
sufficient (without taking into account the payment of interest thereon) to
acquire the Notes on the first Business Day after the first anniversary of the
Issue Date. Under current Colombian law, any purchase of the Notes within three
years of the Issue Date and after the one-year period described in the preceding
sentence resulting in more than 40% of the aggregate principal amount at
maturity of the Notes being redeemed or repurchased would impose certain deposit
requirements on the Company, and the Company may elect to make such deposits or
purchase the Notes up to such limit and deposit with the Trustee amounts
sufficient to acquire the remainder of the Notes on the first Business Day after
the third anniversary of the Issue Date. If the Company shall have made the
deposit with the Trustee as described in this paragraph, it will not be in
default of its obligations to make an Excess Proceeds Offer prior to the day on
which the applicable Notes are to be acquired pursuant to this paragraph. See
"-- Prepayment Events Prior to Third Anniversary" and "Foreign Investment and
Exchange Controls in Colombia".
Limitation on Sale and Leaseback Transactions. The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
any Sale and Leaseback Transaction with respect to any property or assets
(whether now owned or hereafter acquired), unless the sale or transfer of such
property or assets to be leased is treated as an Asset Sale and the Company
complies with the "Limitation on Sale of Assets" covenant. (Section 1017)
Limitation on the Activities of the Company. The Company and its
Restricted Subsidiaries will not engage in any business other than the business
of the Company or its Restricted Subsidiaries existing on the Issue Date and any
Permitted Telecommunications Business and the making of Investments permitted by
Section 1011. (Section 1018)
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock, (b) pay
any Indebtedness owed to the Company or any other Restricted
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Subsidiary that, directly or indirectly, owns any Capital Stock of such
Restricted Subsidiary, (c) make loans or advances to the Company or any other
Restricted Subsidiary that, directly or indirectly, owns any Capital Stock of
such Restricted Subsidiary or (d) transfer any of its properties or assets to
the Company or any other Restricted Subsidiary that, directly or indirectly,
owns any Capital Stock of such Restricted Subsidiary (other than customary
restrictions on transfers of property subject to a Lien permitted under the
Indenture that would not materially adversely affect the Company's ability to
satisfy its obligations under the Notes and the Indenture), except, in each
case, for such encumbrances or restrictions existing under or by reason of (i)
the Notes and the Indenture, (ii) any agreement in effect on the Issue Date,
(iii) applicable law, (iv) customary provisions restricting subletting or
assignment of any lease or assignment of any other contract to which the Company
or any Restricted Subsidiary is a party or to which any of their respective
properties or assets are subject, (v) any agreement or other instrument of a
Person, or pertaining to property or assets, acquired by the Company or any
Restricted Subsidiary in existence at the time of such acquisition (but not
created in contemplation thereof), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, (vi) any Lien
permitted by the "Limitation on Liens" covenant, (vii) any encumbrance or
restriction contained in contracts for sales of assets or Capital Stock of a
person with respect to the assets or Capital Stock to be sold (or the assets
owned by the Person whose Capital Stock is to be sold) pursuant to such contract
that terminates upon the earlier of the termination of such agreement or the
consummation of such sale and (viii) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses (i), (ii)
and (v); provided that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the holders of the Notes than
those under or pursuant to the agreement so extended, renewed, refinanced or
replaced. (Section 1019)
Reports. The Company will file with the Trustee and provide the holders of
Notes, within 15 days after it files them with the SEC, copies of its annual and
quarterly reports and other information, documents and other reports (or copies
of such portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13(a) or 15(d) of the Exchange Act. Notwithstanding that the Company may
not be required to remain subject to the reporting requirements of Section 13(a)
or 15(d) of the Exchange Act or otherwise report on an annual and quarterly
basis on forms provided for such annual and quarterly reporting pursuant to
rules and regulations promulgated by the SEC, the Company will file with or
furnish to the SEC and provide to the Trustee and to the holders of Notes and
potential purchasers of Notes upon written request to the Trustee by any holder
of Notes, potential purchaser of Notes or Initial Purchaser: (i) within 140 days
after the end of each fiscal year, annual reports on Form 20-F (or any successor
form) containing the information required to be contained therein (or required
in such successor form); (ii) within 60 days after the end of each of the first
three fiscal quarters of each fiscal year, reports on Form 6-K (or any successor
form) containing substantially the same information required to be contained in
Form 10-Q (or required in any successor form); and (iii) promptly from time to
time after the occurrence of an event required to be therein reported, such
other reports on Form 6-K (or any successor form) containing substantially the
same information required to be contained in Form 8-K (or required in any
successor form). Financial statements of the Company contained in any such
report will be prepared in accordance with Colombian GAAP and each such report
referred to in clauses (i) and (ii) above will contain a reconciliation to U.S.
GAAP consistently applied and will be prepared in accordance with the applicable
rules and regulations of the SEC. (Section 1009)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not, in a single transaction or through a series of
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets as an entirety to any other Person or Persons or
permit any of its Restricted Subsidiaries to enter into any such transaction or
series of transactions if such transaction or series of transactions, in the
aggregate, would result in the sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company and its Restricted Subsidiaries on a consolidated basis as an
entirety to any other Person or Persons, unless at the time and immediately
after
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giving effect thereto (i) either (a) the Company will be the continuing
corporation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company or such Restricted Subsidiary is merged
or the Person that acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all the properties and assets of the Company
and its Restricted Subsidiaries on a consolidated basis as an entirety (the
"Surviving Entity") (1) will be a corporation duly organized and validly
existing under the laws of Colombia and (2) will expressly assume, by a
supplemental indenture in form satisfactory to the Trustee, the Company's
obligation for the due and punctual payment of the principal of, premium, if
any, and interest on all the Notes and the performance and observance of every
covenant of the Indenture on the part of the Company to be performed or
observed; (ii) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating any
obligation of the Company or any Restricted Subsidiary incurred in connection
with or as a result of such transaction or series of transactions as having been
incurred at the time of such transaction), no Default or Event of Default will
have occurred and be continuing; (iii) immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating any
obligation of the Company or any Restricted Subsidiary incurred in connection
with or as a result of such transaction or series of transactions as having been
incurred at the time of such transaction), the Consolidated Net Worth of the
Company (or of the Surviving Entity if the Company is not the continuing obligor
under the Indenture) is equal to or greater than the Consolidated Net Worth of
the Company immediately prior to such transaction or series of transactions; and
(iv) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (on the assumption that the transaction or
series of transactions occurred on the first day of the most recent full fiscal
quarter for which financial statements are available prior to the consummation
of such transaction or series of transactions with the appropriate adjustments
with respect to the transaction or series of transactions being included in such
pro forma calculation), the Company (or the Surviving Entity if the Company is
not the continuing obligor under the Indenture) could incur at least US$1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the provisions
of the "Limitation on Indebtedness" covenant. (Section 801)
In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, the Company or the Surviving
Entity shall have delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate (attaching the authentic
computations to demonstrate compliance with clauses (iii) and (iv) above) and an
opinion of counsel, each stating that such consolidation, merger, sale,
assignment, conveyance, transfer, lease or other disposition, and if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture, comply with the requirements of the Indenture and that
all conditions precedent therein provided for relating to such transaction have
been complied with. (Section 801)
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company in accordance with the immediately preceding paragraphs in
which the Company is not the continuing obligor under the Indenture, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor had been named as the Company therein. When a successor
assumes all the obligations of its predecessor under the Indenture or the Notes,
the predecessor shall be released from those obligations; provided that in the
case of a transfer by lease, the predecessor shall not be released from the
payment of principal and interest on the Notes. (Section 802)
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of any interest on any Note when it becomes
due and payable and continuance of such default for a period of 30 days;
(ii) default in the payment of the principal of or premium, if any, on
any Note at its Maturity (upon acceleration, optional redemption, required
purchase or otherwise);
(iii) default in the performance, or breach, of the provisions
described in "Consolidation, Merger and Sale of Assets," the failure to
make or consummate a Change of Control Offer in accordance with
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the provisions of the "Purchase of Notes upon a Change of Control" covenant
or the failure to make or consummate an Excess Proceeds Offer in accordance
with the provisions of the "Limitation on Disposition of Proceeds of Asset
Sales" covenant;
(iv) default in the performance, or breach, of any covenant or
warranty of the Company contained in the Indenture (other than a default in
the performance, or breach, of a covenant or warranty which is specifically
dealt with in clauses (i), (ii) or (iii) above) and continuance of such
default or breach for a period of 30 days after written notice shall have
been given to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in aggregate principal amount of the Notes
then outstanding;
(v) (A) one or more defaults in the payment of principal of or
premium, if any, on Indebtedness of the Company or any Subsidiary
aggregating US$3 million or more, when the same becomes due and payable at
the stated maturity thereof, and such default or defaults shall have
continued after any applicable grace period and shall not have been cured
or waived or (B) Indebtedness of the Company or any Subsidiary aggregating
US$3 million or more shall have been accelerated or otherwise declared due
and payable, or required to be prepaid or repurchased (other than by
regularly scheduled required prepayment prior to the stated maturity
thereof);
(vi) any holder of any Indebtedness in excess of US$3 million in the
aggregate of the Company or any Subsidiary shall commence judicial
proceedings, or take other action to foreclose on any assets of the Company
or any Subsidiary that have been pledged to or for the benefit of such
Person to secure such Indebtedness pursuant to the terms of any agreement
or instrument evidencing any such Indebtedness of the Company or any
Subsidiary or in accordance with applicable law subsequent to a default in
the performance, or breach, of any covenant or warranty of the Company
contained in any agreement or instrument evidencing any such Indebtedness;
(vii) one or more final judgments or orders shall be rendered against
the Company or any Subsidiary for the payment of money, either individually
or in an aggregate amount, in excess of US$3 million and shall not be
discharged and either (A) an enforcement proceeding shall have been
commenced by any creditor upon such judgment or order and shall not have
been stayed or (B) there shall have been a period of 60 consecutive days
during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, was not in effect;
(viii) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Subsidiary; or
(ix) the Company does not continue to be the holder of the Concession
(provided that the pledge of the Concession as security under the Bank
Facility shall not be deemed to be a transfer of the Concession) or the
Concession to provide cellular service is not in full force and effect.
(Section 501)
If an Event of Default (other than as specified in clause (viii) above)
shall occur and be continuing, the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding, by written notice
to the Company (and to the Trustee if such notice is given by the holders), may,
and the Trustee upon the written request of such holders shall, declare the
principal of, premium, if any, and accrued interest on all of the outstanding
Notes immediately due and payable, and upon any such declaration all such
amounts payable in respect of the Notes shall become immediately due and
payable. If an Event of Default specified in clause (viii) above occurs and is
continuing, then the principal of, premium, if any, and accrued interest on all
of the outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes. (Section 502)
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration and its consequences if (a) the Company has paid or deposited
with the Trustee a sum sufficient to pay (i) all overdue interest on all Notes,
(ii) all unpaid principal of and premium, if any, on any outstanding Notes that
has become due otherwise than by such declaration of acceleration and interest
thereon at the rate
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borne by the Notes, (iii) to the extent that payment of such interest is lawful,
interest upon overdue interest and overdue principal at the rate borne by the
Notes, (iv) all sums paid or advanced by the Trustee under the Indenture and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and (b) all Events of Default, other than the
non-payment of amounts of principal of, premium, if any, or interest on the
Notes that has become due solely by such declaration of acceleration, have been
cured or waived. No such rescission shall affect any subsequent default or
impair any right consequent thereon. (Section 502)
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the holders of all the Notes, waive any
past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding. (Section 513)
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within 30 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of,
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the holders of such Notes if a committee of its trust officers in good faith
determines that withholding the notice is in the interests of the holders of the
Notes. (Section 601)
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company of its obligations under the Indenture and as to
any default in such performance. The Company is also required to notify the
Trustee within five Business Days of the occurrence of any Default.
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided that if it acquired any conflicting interest, it
must eliminate such conflict upon the occurrence of an Event of Default or else
resign.
BANKRUPTCY ("CONCORDATO")
Under Colombian law, the procedure for bankruptcy differs from that in the
United States. Under Law 222/1995, which will come into effect as of June 21,
1996, upon admittance of the Company to the "concordato" proceeding the Company
cannot make any payment or settle any of its obligations (including the Notes
and the Bank Facility) without obtaining a written consent of the
Superintendency of Corporations. Furthermore, the Company is restricted from
making any payments, as from the same date of admission to "concordato" and
until (i) the "concordato" proceeding is terminated by the Superintendency of
Corporations because of failure to reach any agreement or (ii) an agreement is
reached between the Company and its creditors during the "concordato" and is
declared by the Superintendency of Corporations to have been (x) fulfilled or
(y) terminated due to a breach of obligations under such agreement. Any creditor
who fails to file a timely claim under the "concordato" will be barred from the
"concordato" proceeding (except if during any hearing such creditor is accepted
to be a party of the "concordato" agreement) and cannot receive any payment from
the debtor during the period referred to in the preceding sentence, although the
statute of limitations applicable to such creditor's claim will be tolled during
such period. The Concession cannot be terminated by the Ministry of
Communications based on the grounds that the Company is then the subject of a
"concordato" proceeding (See "Regulation -- Termination Upon Default in
Performance").
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company upon the Notes discharged with respect to the
outstanding Notes ("legal defeasance"). Such defeasance means that the Company
will be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes and to have satisfied all their other obligations under
such Notes and the Indenture insofar as such Notes are concerned except for (i)
the rights of holders of outstanding Notes to receive payments in
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respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (ii) the Company's obligations to issue temporary Notes,
register the transfer or exchange of any Notes, replace mutilated, destroyed,
lost or stolen Notes, maintain an office or agency for payments in respect of
the Notes and segregate and hold such payments in trust, (iii) the rights,
powers, trusts, duties and immunities of the Trustee and (iv) the defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company released with respect to
certain covenants set forth in the Indenture, and any omission to comply with
such obligations will not constitute a Default or an Event of Default with
respect to the Notes ("covenant defeasance"). (Sections 1301, 1302 and 1303)
In order to exercise either legal defeasance or covenant defeasance, (i)
the Company must irrevocably deposit or cause to be deposited with the Trustee,
as trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the holders of the Notes, cash in United States
dollars, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay and
discharge the principal of, premium, if any, and interest on the outstanding
Notes on the Stated Maturity (or upon redemption, if applicable) of such
principal, premium, if any, or installment of interest; (ii) no (a) Default in
the payment of principal of or premium, if any, or interest on any Note or a
Default resulting from the occurrence of certain events of bankruptcy,
insolvency or reorganization, or (b) Event of Default with respect to the Notes
(other than as a result of a breach of the provisions described under
"Consolidation, Merger and Sale of Assets" arising from a merger or
consolidation occurring contemporaneously with such defeasance) will have
occurred and be continuing on the date of, or immediately after, such deposit
or, insofar as an event of bankruptcy, insolvency or reorganization is
concerned, at any time during the period ending on the 91st day after the date
of such deposit; (iii) such legal defeasance or covenant defeasance will not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company is a party or by which it is bound;
(iv) in the case of legal defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel stating that the Company has received from, or
there has been published by, the Internal Revenue Service a ruling, or since May
31, 1996, there has been a change in applicable federal income tax law, in
either case to the effect that, and based thereon such opinion shall confirm
that, the holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had not occurred; (v)
in the case of covenant defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the holders of the Notes
outstanding will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred; and (vi)
the Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent provided for
relating to either the legal defeasance or the covenant defeasance, as the case
may be, have been complied with. (Section 1304)
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes as expressly
provided for in the Indenture) and the Trustee, at the expense of the Company,
will execute proper instruments acknowledging satisfaction and discharge of the
Indenture when (i) either (a) all the Notes theretofore authenticated and
delivered (other than destroyed, lost or stolen Notes which have been replaced
or paid and Notes for whose payment money has been deposited in trust with the
Trustee or any Paying Agent or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust as provided for
in the Indenture) have been delivered to the Trustee for cancellation or (b) all
Notes not theretofore delivered to the Trustee for cancellation (x) have become
due and payable, (y) will become due and payable at Stated Maturity within one
year or (z) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee as trust funds
in trust for such purpose an amount sufficient to pay and discharge the entire
Indebtedness on such Notes not theretofore delivered to the
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Trustee for cancellation, for principal of, premium, if any, and interest on the
Notes to the date of such deposit (in the case of Notes which have become due
and payable) or to the Stated Maturity or Redemption Date, as the case may be;
(ii) the Company has paid or caused to be paid all sums payable under the
Indenture by the Company; and (iii) the Company has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided in the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with. (Section 401)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by a supplemental
indenture entered into by the Company and the Trustee with the consent
(including consents obtained in connection with a tender offer or exchange for
the Notes) of the holders of a majority in aggregate outstanding principal
amount of the Notes then outstanding; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby: (i) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, or reduce the
principal amount thereof (or premium, if any) or the rate of interest thereon or
change the coin or currency in which the principal of any Note or any premium or
the interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in the
case of redemption, on or after the Redemption Date); (ii) amend, change or
modify in any material respect the obligation of the Company to make and
consummate an Excess Proceeds Offer with respect to any Asset Sale in accordance
with the "Limitation on Sale of Assets" covenant or the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control in accordance with the "Purchase of Notes Upon a Change of
Control" covenant, including, in each case, amending, changing or modifying in
any material respect any definition relating thereto; (iii) reduce the
percentage in principal amount of outstanding Notes, the consent of whose
holders is required for any such supplemental indenture or the consent of whose
holders is required for any waiver of compliance with certain provisions of the
Indenture; (iv) modify any of the provisions relating to supplemental indentures
requiring the consent of holders or relating to the waiver of past defaults or
relating to the waiver of certain covenants, except to increase the percentage
of outstanding Notes required for such actions or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each Note affected thereby; or (v) except as otherwise permitted
under "Consolidation, Merger and Sale of Assets," consent to the assignment or
transfer by the Company of any of its obligations under the Indenture. (Sections
901 and 902)
Notwithstanding the foregoing, without the consent of any holder of the
Notes, the Company and the Trustee may modify or amend the Indenture: (a) to
evidence the succession of another Person to the Company or any other obligor on
the Notes, and the assumption by any such successor of the covenants of the
Company or such obligor in the Indenture and in the Notes in accordance with
"-- Consolidation, Merger, Sale of Assets;" (b) to add to the covenants of the
Company or any other obligor upon the Notes for the benefit of the holders of
the Notes or to surrender any right or power conferred upon the Company or any
other obligor upon the Notes, as applicable, in the Indenture or in the Notes;
(c) to cure any ambiguity, or to correct or supplement any provision in the
Indenture or the Notes which may be defective or inconsistent with any other
provision in the Indenture or the Notes or make any other provisions with
respect to matters or questions arising under the Indenture or the Notes;
provided that, in each case, such provisions shall not adversely affect the
interest of the holders of the Notes; (d) to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act; (e) to add a guarantor of the Notes under the
Indenture; (f) to evidence and provide the acceptance of the appointment of a
successor Trustee under the Indenture; or (g) to mortgage, pledge, hypothecate
or grant a security interest in favor of the Trustee for the benefit of the
holders of the Notes as additional security for the payment and performance of
the Company's and any guarantor's obligations under the Indenture, in any
property, or assets, including any of which are required to be mortgaged,
pledged or hypothecated, or in which a security interest is required to be
granted to the Trustee pursuant to the Indenture or otherwise. (Section 901)
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1021)
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THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent Person
would exercise under the circumstances in the conduct of such Person's own
affairs. (Section 602)
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined) it must eliminate such conflict
or resign.
GOVERNING LAW AND SUBMISSION TO JURISDICTION
The Indenture and the Notes are governed by, and construed in accordance
with, the laws of the State of New York. The Indenture is subject to the
provisions of the Trust Indenture Act of 1939, as amended, that are required to
be part of the Indenture and shall, to the extent applicable, be governed by
such provisions. The Company has submitted to the jurisdiction of any United
States federal or state court located in New York, New York for the purposes of
all legal actions and proceedings instituted in connection with Notes and the
Indenture. The Company has appointed CT Corporation System as its authorized
agent upon which process may be served in any such action. See "Enforceability
of Civil Liabilities" and "Enforcement of Foreign Judgments in Colombia".
CERTAIN DEFINITIONS
"Accreted Value" is defined to mean, for any specified date, the amount
provided below for each US $1,000 principal amount at final maturity of Notes:
(i) if the specified date occurs on one of the following dates (each a
"Semiannual Accrual Date"), the Accreted Value will equal the amount set
forth below for such Semiannual Accrual Date:
<TABLE>
<CAPTION>
SEMIANNUAL ACCRUAL DATE ACCRETED VALUE
----------------------- --------------
<S> <C>
September 15, 1996............................................. US $543.93
March 15, 1997................................................. 582.01
September 15, 1997............................................. 622.75
March 15, 1998................................................. 666.34
September 15, 1998............................................. 712.99
March 15, 1999................................................. 762.90
September 15, 1999............................................. 816.30
March 15, 2000................................................. 873.44
September 15, 2000............................................. 934.58
March 15, 2001................................................. 1,000.00
</TABLE>
(ii) if the specified date occurs before the first Semiannual Accrual
Date, the Accreted Value will equal the sum of (a) US$524.26 and (b) an
amount equal to the product of (1) the Accreted Value for the first
Semiannual Accrual Date less US$524.26 multiplied by (2) a fraction, the
numerator of which is the number of days from the Issue Date to the
specified date, using a 360-day year of twelve 30-day months, and the
denominator of which is the number of days from the Issue Date to the first
Semiannual Accrual Date, using a 360-day year of twelve 30-day months;
(iii) if the specified date occurs between two Semiannual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semiannual Accrual Date immediately preceding such specified date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semiannual Accrual Date less the Accreted Value for
the immediately preceding Semiannual
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Accrual Date multiplied by (2) a fraction, the numerator of which is the
number of days from the immediately preceding Semiannual Accrual Date to
the specified date, using a 360-day year of twelve 30-day months, and the
denominator of which is 180; or
(iv) if the specified date occurs after the last Semiannual Accrual
Date, the Accreted Value will equal US$1,000.
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person becomes a Restricted Subsidiary or (b) assumed in connection
with the acquisition of assets from such Person. Acquired Indebtedness shall be
deemed to be incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Restricted Subsidiary.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person that
owns, directly or indirectly, 10% or more of such specified Person's voting
Capital Stock or any executive officer or director of any such specified Person
or other Person. For the purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Annualized Pro Forma Consolidated Cash Flow" of the Company means the
Consolidated Cash Flow of the Company for the most recent full fiscal quarter
for which consolidated financial statements are available giving pro forma
effect to the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business acquired or disposed of by the Company or its Restricted Subsidiaries,
as the case may be, since the first day of such fiscal quarter, as if such
acquisition or disposition occurred on the first day of such fiscal quarter,
multiplied by four.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (a) any shares of
Capital Stock of any Restricted Subsidiary (other than directors' qualifying
shares or shares required by applicable law to be held by a Person other than
the Company or a Restricted Subsidiary); (b) all or substantially all of the
properties and assets of any division or line of business of the Company or its
Restricted Subsidiaries; or (c) any other properties or assets of any division
or line of business of the Company or any Restricted Subsidiary, other than in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any transfer of properties or assets (i) that is
governed by the provisions of the Indenture described under "Consolidation,
Merger, Conveyance, Transfer or Lease," (ii) by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Restricted Subsidiary, or (iii) having a Fair Market Value per transaction or
series of related transactions of less than US$750,000.
"Attributable Value" means, with respect to any lease at the time of
determination, the present value (discounted at the interest rate implicit in
the lease or, if not known, at the Company's incremental borrowing rate) of the
obligations of the lessee of the property subject to such lease for rental
payments during the remaining term of the lease included in such transaction,
including any period for which such lease has been extended or may, at the
option of the lessor exercisable unilaterally, be extended, or until the
earliest date on which the lessee may terminate such lease without penalty or
upon payment of penalty (in which case the rental payments shall include such
penalty), after excluding from such rental payments all amounts required to be
paid on account of maintenance and repairs, insurance, taxes, assessments,
water, utilities and similar charges.
"Average Life" means, as of the date of determination with respect to any
Indebtedness, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from the date of determination to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
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<PAGE> 96
"Bank Credit Agreement" means the credit agreement dated as of June 7, 1996
among the Company, the Banks and ING Baring (U.S.) Securities, Inc. and Merrill
Lynch & Co., as arrangers, and ING Bank N.V. and ING (U.S.) Capital Corporation,
as administrative and collateral agents, as such agreement may be amended,
renewed, extended, substituted, restated, refinanced, restructured, supplemented
or otherwise modified from time to time (including, without limitation, any
successive amendments, renewals, extensions, substitutions, restatements,
refinancings, restructurings, supplements or other modifications of the
foregoing, including by more than one agreement,); provided that with respect to
any agreement providing for the refinancing of Indebtedness under the Bank
Credit Agreement, such agreement shall be a Bank Credit Agreement under the
Indenture only if a notice to that effect is delivered by the Company to the
Trustee.
"Banks" means the banks and other financial institutions from time to time
that are lenders under the Bank Credit Agreement.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification.
"Business Day" means a day other than a Saturday, a Sunday or a day on
which banking institutions in New York City are not required to be open.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, partnership interests, participations, rights in or other equivalents
(however designated) of such Person's capital stock, and any rights (other than
debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the date of the Indenture.
"Capitalized Lease Obligation" means any obligation of the Company or a
Restricted Subsidiary under a lease of (or other agreement conveying the right
to use) any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose of the Indenture, the amount of such obligation at any date shall be
the capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness with a maturity
of 365 days or less issued or directly and fully guaranteed or insured by the
United States of America or the Republic of Colombia or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America or the Republic of Colombia, as the case may be, is pledged in
support thereof); (b) certificates of deposit or acceptances with a maturity of
180 days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than US$500 million; (c) commercial paper with a maturity of 180 days or
less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-l by Moody's; (d)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, as the case may be, in each case maturing within
one year from the date of acquisition; provided that the terms of such
agreements comply with the guidelines set forth in the United States Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the United States Comptroller of the Currency; (e)
Colombian Peso deposits, with maturities of not more than 12 months from the
date of acquisition, in (i) Banco de Colombia, Banco Ganadero, Banco Industrial
Colombiano or Banco de Bogota or (ii) any other bank or financial institution
incorporated under the laws of the Republic of Colombia with total assets
exceeding the equivalent of US$350 million, provided that the aggregate
principal amount of any such deposits in banks described in this subclause (ii)
shall not exceed the equivalent of US$10 million at any time outstanding; (f)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the Republic of
Colombia and backed by the full faith and credit of the Republic of Colombia
maturing within one year from the date of acquisition, in each case entered into
with any of the Colombian banks specified in the preceding clause (e), provided
that such agreement with banks described in subclause (e)(ii) shall be deemed a
deposit for purposes of the US$10 million limit in such subclause; and (g)
investments in money market funds all of the assets of which consist of
securities of the types described in the foregoing clauses (a) through (f).
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<PAGE> 97
For the purposes only of the covenant described under "-- Certain
Covenants -- Limitations on Sales of Assets" and the definition of Net Cash
Proceeds, the assumption of Indebtedness of the Company or any Restricted
Subsidiary and the release of the Company and all Restricted Subsidiaries from
all liability on such Indebtedness in connection with such Asset Sale shall be
deemed to be a Cash Equivalent.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total outstanding Voting Stock of the
Company; (b) the Company consolidates with, or merges with or into, another
Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction (i) where the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) cash, securities and other property
(other than Capital Stock of the Surviving Entity) in an amount that could be
paid by the Company as a Restricted Payment as described under the "Limitation
on Restricted Payments" covenant and (ii) where immediately thereafter no
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), other than Permitted Holders, is the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the total outstanding Voting Stock of the surviving or transferee corporation;
(c) a majority of the Board of Directors of the Company has been nominated by
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), other than Permitted Holders or a depositary or custodian for
any depositary receipts in respect of shares of Voting Stock of the Company,
provided that such depositary or custodian is not acting at the direction of any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) other than one or more Permitted Holders; (d) Colombia or any of
its instrumentalities (including, without limitation, departments, districts and
municipalities), including government-owned corporations or public entities,
owns more than 50% of the Voting Stock of the Company; or (e) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution other
than in a transaction which complies with the provisions described under
" -- Consolidation, Merger, and Sale of Assets."
"Common Stock" means the Class A Common Stock, the Class B Common Stock and
the Class C Common Stock, in each case, par value 1,000 Pesos per share, of the
Company.
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and all Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding, without
duplication, (a) any net after-tax extraordinary gains or losses (less all fees
and expenses relating thereto), (b) any net after-tax gains or losses (less all
fees and expenses relating thereto) attributable to asset dispositions other
than in the ordinary course of business, (c) the portion of net income (or loss)
of any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any Restricted Subsidiary has
an ownership interest, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any Restricted Subsidiary in cash
dividends or distributions during such period, (d) the net income (or loss) of
any Person combined with the Company or any Restricted Subsidiary on a "pooling
of interests" basis attributable to any period prior to the date of such
combination, (e) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary to another Restricted Subsidiary or to the Company is not
at the date of determination permitted, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary or its stockholders and (f) any non-cash
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items of the Company and any Restricted Subsidiary (including monetary
corrections) increasing Consolidated Adjusted Net Income for such period (other
than items that will result in the receipt of cash payments).
"Consolidated Cash Flow" of the Company means, for any period, the sum of
Consolidated Adjusted Net Income, Consolidated Interest Expense, Consolidated
Income Tax Expense and Consolidated Non-cash Charges deducted in computing
Consolidated Adjusted Net Income, in each case, for such period.
"Consolidated Income Tax Expense" means, for any period, the provision for
Colombian national, local and foreign income taxes of the Company and all
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without duplication,
the sum of (a) the interest expense of the Company and its Restricted
Subsidiaries for such period, including, without limitation, (i) amortization of
debt discount, (ii) the net cost of interest rate contracts (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation and (iv) amortization of debt issuance costs, plus (b) the interest
component of Capitalized Lease Obligations of the Company and its Restricted
Subsidiaries during such period, plus (c) cash and non-cash dividends (other
than in the form of Qualified Capital Stock of the Company) paid on Redeemable
Capital Stock by the Company and any Restricted Subsidiary (to any Person other
than the Company and any Wholly Owned Restricted Subsidiary), in each case as
determined on a consolidated basis in accordance with GAAP; provided that (x)
the Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a floating interest rate shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying at the option of the Company, either the fixed or floating rate, and
(y) in making such computation, the Consolidated Interest Expense attributable
to interest on any Indebtedness under a revolving credit facility computed on a
pro forma basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period; provided further that,
notwithstanding the foregoing, the interest rate with respect to any
Indebtedness covered by any Interest Rate Agreement shall be deemed to be the
effective interest rate with respect to such Indebtedness after taking into
account such Interest Rate Agreement.
"Consolidated Net Worth" means, at any date, the stockholders' equity of
the Company less the amount of such stockholders' equity attributable to
Redeemable Capital Stock or treasury stock of the Company and any Restricted
Subsidiary, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and any
Restricted Subsidiary (including monetary corrections) reducing Consolidated
Adjusted Net Income for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such non-cash charge that requires an
accrual of or reserve for cash charges for any future period).
"Currency Agreements" means any spot or forward foreign exchange agreements
and currency swap, currency option or other similar financial agreements or
arrangements entered into by the Company or any of its Restricted Subsidiaries
designed to protect against or manage exposure to fluctuations in currency
exchange rates.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Fair Market Value" means, with respect to any asset or property, a price
which could be negotiated in an arm's length transaction, for cash, between a
willing seller and a willing buyer, neither of whom is under undue pressure to
complete the transaction. Fair Market Value shall be determined by the Board of
Directors of the Company acting in good faith and shall be evidenced by a Board
Resolution.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in Colombia consistently applied, that are in
effect on the Issue Date.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection or deposit in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication, (a) all liabilities of such Person for
borrowed money (including overdrafts) or for the deferred purchase price of
property or services, excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business, but including, without
limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit and acceptances issued under letter of
credit facilities, acceptance facilities or other similar facilities (other than
obligations with respect to trade letters of credit securing obligations entered
into in the ordinary course of business of such Person for the import of
equipment used in the business of such Person or inventory for sale to customers
to the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit), (b) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade payables arising in the ordinary course of business, (d) all Capitalized
Lease Obligations of such Person, (e) all obligations of such Person under or in
respect of Interest Rate Agreements or Currency Agreements, (f) all Indebtedness
referred to in (but not excluded from) the preceding clauses of other Persons
and all dividends of other Persons, the payment of which is secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or with respect to property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness (the amount of such obligation being deemed to be the
lesser of the value of such property or asset or the amount of the obligation so
secured), (g) all guarantees by such Person of Indebtedness referred to in this
definition of any other Person and (h) all Redeemable Capital Stock of such
Person valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value shall
be determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Interest Rate Agreements" means any interest rate protection agreements
and other types of interest rate hedging agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar agreements).
"Investment" means, with respect to any Person, any direct or indirect
advance, loan or other extension of credit or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any purchase, acquisition or
ownership by such Person of any Capital Stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued
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or owned by, any other Person and all other items that would be classified as
investments on a balance sheet prepared in accordance with GAAP. In addition,
the fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall
be deemed to be an "Investment" made by the Company in such Unrestricted
Subsidiary at such time. Notwithstanding the foregoing, "Investments" shall
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Issue Date" means June 7, 1996.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind, real or personal, movable or immovable, now owned or hereafter
acquired. A Person shall be deemed to own subject to a Lien any property which
such Person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement.
"Maturity" means, with respect to any Note, the date on which any principal
of such Note becomes due and payable as therein or herein provided, whether at
the Stated Maturity with respect to such principal or by declaration of
acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or Cash Equivalents (except to the extent that
such obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary), net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of legal counsel, accountants and
investment banks) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of, or is otherwise required by the terms of, such Asset
Sale, (iv) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP against any liabilities associated with such Asset Sale and retained
by the Company or any Restricted Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"Permitted Holders" means C&W, ERT Celular S.A., Caribe Celular S.A., Ancel
S.A. and Eccel S.A., and their respective successors.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company under the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed US$80
million.
(b) Indebtedness of the Company pursuant to the Notes;
(c) Indebtedness of the Company outstanding on the Issue Date and listed on
a schedule thereto;
(d) Indebtedness of the Company owing to any Wholly Owned Restricted
Subsidiary; provided that any Indebtedness of the Company owing to any such
Restricted Subsidiary is unsecured and is subordinated in right of payment from
and after such time as the Notes shall become due and payable (whether at Stated
Maturity, acceleration or otherwise) to the payment and performance of the
Company's obligations under the Notes; provided further that any (i)
disposition, pledge or transfer of any such Indebtedness to a Person (other than
a disposition, pledge or transfer to the Company or another Wholly Owned
Restricted Subsidiary) or (ii) event which causes such Restricted Subsidiary to
cease to be a Restricted Subsidiary shall be deemed to be an incurrence of such
Indebtedness by the Company not permitted by this clause (d);
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(e) obligations of the Company entered into in the ordinary course of
business (i) pursuant to bona fide Interest Rate Agreements designed to protect
the Company or any Restricted Subsidiary against fluctuations in interest rates
in respect of Indebtedness of the Company or any Restricted Subsidiary, which
obligations do not exceed the aggregate principal amount of such Indebtedness,
and (ii) pursuant to bona fide Currency Agreements entered into by the Company
or any of its Restricted Subsidiaries and designed to protect such Person
against fluctuation in currency values in respect of its (x) assets or (y)
obligations;
(f) any renewals, extensions, substitutions, refinancings or replacements
(each, for purposes of this clause, a "refinancing") of Indebtedness incurred
pursuant to clause (c) of this definition, including any successive
refinancings, so long as (i) any such new Indebtedness shall be in a principal
amount that does not exceed (1) the principal amount (or, if such Indebtedness
being refinanced was incurred with original issue discount, the aggregate
accreted value as of the date of determination) so refinanced, plus (2) the
lesser of the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness refinanced or the amount
of any premium reasonably determined as necessary to accomplish such
refinancing, plus (3) the amount of any fees and expenses incurred to accomplish
such refinancing, (ii) in the case of any refinancing of Subordinated
Indebtedness, such new Indebtedness is made subordinate to the Notes at least to
the same extent as the Indebtedness being refinanced and (iii) such new
Indebtedness has an Average Life equal to or greater than the Average Life of
the Indebtedness being refinanced and a final Stated Maturity later than the
final Stated Maturity of the Indebtedness being refinanced; and
(g) Indebtedness of the Company in an aggregate principal amount not in
excess of US$35 million at any one time outstanding, of which an amount not in
excess of US$25 million at any one time outstanding may be Secured Indebtedness.
For the purposes of the foregoing definition, (i) in the event that an item
of Indebtedness meets the criteria of more than one of the types of Indebtedness
in the definition of Permitted Indebtedness, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such categories and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness referred to above.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any Wholly Owned Restricted Subsidiary;
(c) intercompany Indebtedness to the extent permitted under clause (d) of
the definition of "Permitted Indebtedness" and clause (a) of the definition of
"Permitted Subsidiary Indebtedness";
(d) Investments by the Company or any Restricted Subsidiary in another
Person, if as a result of such Investment (i) such other Person becomes a Wholly
Owned Restricted Subsidiary or (ii) such other Person is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets to,
the Company or a Restricted Subsidiary;
(e) loans and advances to employees in the ordinary course of business in
an aggregate amount not to exceed US$1 million at any one time outstanding;
(f) Investments in Unrestricted Subsidiaries or any other Person that is
not a Restricted Subsidiary in an amount not to exceed $15 million in aggregate,
which Unrestricted Subsidiaries or Persons are in the business of the Company or
its Restricted Subsidiaries existing on the Issue Date or in any
Telecommunications Business;
(g) receivables owing to the Company or any Restricted Subsidiary,
including receivables arising from the sale of handsets to customers and
distributors, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; or
(h) payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business.
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"Permitted Liens" means the following types of Liens:
(a) Liens (other than Liens securing Indebtedness under the Bank Credit
Agreement) existing as of the Issue Date;
(b) Liens on property or assets of the Company or any Restricted Subsidiary
securing Indebtedness under the Bank Credit Agreement in a principal amount not
to exceed the principal amount of the outstanding Indebtedness permitted by
clause (a) of the definition of "Permitted Indebtedness".
(c) Liens on property or assets of the Company or any Restricted Subsidiary
securing Secured Indebtedness in a principal amount not to exceed the principal
amount of Secured Indebtedness permitted by clause (g) of the definition of
"Permitted Indebtedness;"
(d) Liens on any property or assets of a Restricted Subsidiary granted in
favor of the Company or any Wholly Owned Restricted Subsidiary;
(e) Liens on any property or assets of the Company or any Restricted
Subsidiary securing the Notes;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or Sale and Leaseback Transaction so long as the Attributable Value
secured by such Lien does not exceed US$2 million;
(g) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the ordinary
course of business of the Company or any Restricted Subsidiary and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
proceeding;
(h) Liens for taxes, assessments, government charges or claims that are
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted;
(i) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, government
contracts, performance bonds and other obligations of a like nature incurred in
the ordinary course of business (other than contracts for the payment of money);
(j) survey exceptions, title defects, easements, rights-of-way,
restrictions and other similar charges or encumbrances not interfering in any
material respect with the business of the Company or any Restricted Subsidiary
incurred in the ordinary course of business;
(k) Liens arising by reason of any judgment, decree or order of any court
so long as such Lien is adequately bonded and any appropriate legal proceedings
that may have been duly initiated for the review of such judgment, decree or
order shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(l) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness by
the Company or any Restricted Subsidiary; provided that such Lien does not
extend to any property or assets of the Company or any Restricted Subsidiary
other than the assets acquired in connection with the incurrence of such
Acquired Indebtedness;
(m) Liens securing obligations of the Company under Interest Rate
Agreements or Currency Agreements or any collateral for the Indebtedness to
which such Interest Rate Agreements or Currency Agreements relate;
(n) Liens on property or shares of Capital Stock of another Person at the
time such other Person becomes a Subsidiary of such Person; provided, however,
that such Liens are not created, incurred or assumed in connection with, or in
contemplation of, such other Person becoming such a Subsidiary; provided
further, however, that such Lien may not extend to any other property owned by
such Person or any of its Subsidiaries or by the Person acquiring such assets;
(o) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security;
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(p) Liens securing Indebtedness incurred to finance the construction,
purchase or lease of, or improvements or additions to, property of the Company
or any Restricted Subsidiary (other than Liens under any Capitalized Lease
Obligation or Sale and Leaseback Transaction described in clause (f) above);
provided, however, that (i) the Lien may not extend to any other property owned
by the Company or any Restricted Subsidiary at the time the Lien is incurred and
(ii) the Lien securing such Indebtedness shall be created within 120 days of
such construction, purchase, lease, improvement or addition; and
(q) any extension, renewal or replacement, in whole or in part, of any Lien
described in the foregoing clauses (a) through (p); provided that any such
extension, renewal or replacement shall be no more restrictive in any material
respect than the Lien so extended, renewed or replaced and shall not extend to
any additional property or assets.
"Permitted Subsidiary Indebtedness" means any of the following:
(a) Indebtedness of a Restricted Subsidiary owing to the Company or to a
Wholly Owned Restricted Subsidiary; provided that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a disposition, pledge
or transfer to the Company or a Wholly Owned Restricted Subsidiary) shall be
deemed to be an incurrence of such Indebtedness by such Restricted Subsidiary
not permitted by this clause (a);
(b) Indebtedness incurred by a Person prior to the time (i) such Person
became a Restricted Subsidiary of the Company, (ii) such Person merges into or
consolidates with a Restricted Subsidiary of the Company or (iii) another
Restricted Subsidiary of the Company merges into or consolidates with such
Person (in a transaction in which such Person becomes a Restricted Subsidiary of
the Company), which Indebtedness was not incurred in anticipation of such
transaction and was outstanding prior to such transaction; and
(c) any renewals, extensions, substitutions, refinancings or replacements
(each, for purposes of this clause, a "refinancing") by a Restricted Subsidiary
of any Indebtedness of such Restricted Subsidiary incurred pursuant to clause
(b) of this definition, including any successive refinancings by such Restricted
Subsidiary, so long as any such new Indebtedness shall be in a principal amount
that does not exceed (1) the principal amount (or, if such Indebtedness being
refinanced provides for an amount less than the principal amount thereof to be
due and payable upon a declaration of acceleration thereof, such lesser amount
as of the date of determination) so refinanced, plus (2) the lesser of the
amount of any premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of any
premium reasonably determined by such Restricted Subsidiary as necessary to
accomplish such refinancing plus (3) the amount of any fees and expenses
incurred to accomplish such refinancing.
For purposes of the foregoing definition, (i) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness in
the definition of Permitted Subsidiary Indebtedness, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such categories and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness referred to above.
"Permitted Telecommunications Business" means any nonwireline
telecommunications business, including cellular, satellite, data transmission
and personal communications businesses.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Equity Offering" means a bona fide offer and sale of Common Stock
of the Company or American Depositary Receipts representing such Common Stock
pursuant to a registration statement that has been declared effective by the
Commission pursuant to the Securities Act (other than a registration statement
on Form S-8 or otherwise relating to equity securities issuable under any
employee benefit plan of the
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Company); provided that at least 50% or, if less, US$35 million, of the shares
or American Depositary Receipts issued and sold in such offering are listed or
quoted on the Nasdaq Stock Market or a stock exchange in the United States.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to such final Stated
Maturity.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which the Company or a Restricted Subsidiary sells or
transfers any property or asset in connection with the leasing, or the resale
against installment payments, of such property or asset to the seller or
transferor.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc., and its successors.
"Secured Indebtedness" means Indebtedness of the Company secured by
property or assets of the Company or any Restricted Subsidiary.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means any Person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company or
by one or more other Subsidiaries or by the Company and one or more other
Subsidiaries.
"Telecommunications Business" means any wireline or nonwireline
telecommunications business, including cellular, satellite, data transmission
and personal communications businesses.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the time of
determination shall be an Unrestricted Subsidiary (as designated by the Board of
Directors of the Company, as provided below) and (b) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors of the Company may designate any
Subsidiary (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary so long as (i) neither the Company nor any Restricted
Subsidiary is directly or indirectly liable for any Indebtedness of such
Subsidiary, (ii) no default with respect to any Indebtedness of such Subsidiary
would permit (upon notice, lapse of time or otherwise) any holder of any other
Indebtedness of the Company or any Restricted Subsidiary to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity, (iii) neither the Company nor any
Restricted Subsidiary has a contract, agreement, arrangement, understanding or
obligation of any kind, whether written or oral, with such Subsidiary other than
those that might be obtained at the time from persons who are not Affiliates of
the Company, and (iv) neither the Company nor any Restricted Subsidiary has any
obligation (1) to subscribe for additional shares of Capital Stock or other
equity interest in such Subsidiary, or (2) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of Directors of
the Company shall be evidenced to the Trustee by filing a Board Resolution with
the Trustee giving effect to such designation. The Board of Directors of the
Company
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may designate any Unrestricted Subsidiary as a Restricted Subsidiary if,
immediately after giving effect to such designation, there would be no Default
or Event of Default under the Indenture and the Company could incur US$1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Indebtedness" covenant.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly Owned" means, with respect to any Subsidiary of any Person, such
Subsidiary if all of the outstanding Capital Stock of such Subsidiary (other
than a de minimis number of director's qualifying shares or de minimis
Investments by non-U.S. nationals mandated by applicable law) is owned by such
Person or one or more Wholly Owned Subsidiaries of such Person.
BOOK-ENTRY, DELIVERY AND FORM PROCEDURES
GENERAL
The Old Notes offered and sold in reliance on Regulation S under the
Securities Act were initially represented by a single, permanent Global Note in
definitive, fully registered book-entry form (the "Regulation S Global Note")
which was registered in the name of a nominee of DTC and deposited on behalf of
the purchasers of the Notes represented thereby with the Trustee as custodian
for DTC for credit to the respective accounts of the purchasers (or to such
other accounts as they may direct) at the Euroclear System ("Euroclear") or
Cedel Bank S.A. ("CEDEL"). The Old Notes offered and sold to "qualified
institutional buyers" ("QIBs") in reliance on Rule 144A under the Securities Act
were initially represented by a single, permanent Global Note in definitive,
fully registered book-entry form (the "Rule 144A Global Note," and, together
with the Regulation S Global Note, the "Old Global Notes") which was registered
in the name of a nominee of DTC and deposited on behalf of purchasers of the
Notes represented thereby with the Trustee as custodian for DTC for credit to
the respective accounts of the purchasers (or to such other accounts as they may
direct) at DTC. The Old Notes offered and sold to institutional "accredited
investors" as defined in Rule 501(a)(1), (2), (3) and (7) under the Securities
Act were initially delivered in certificated fully registered form only (the
"Restricted Certificated Notes"). Except as set forth below, it is expected that
the New Notes Issued pursuant to the Exchange Offer will be issued in global
form (the "New Global Notes", and, with the Old Global Notes, the "Global
Notes").
GLOBAL NOTES
Upon the issuance of the New Global Notes, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such New Global Note to the
accounts of persons who have accounts with such depositary. Such accounts
initially will be designated by the Exchange Agent. Ownership of beneficial
interests in a New Global Note will be limited to persons who are members of, or
participants in, DTC (the "Agent Members") or persons who hold interests through
Agent Members. Ownership of beneficial interests in the New Global Notes will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of Agent
Members) and the records of Agent Members (with respect to interests of persons
other than Agent members).
So long as DTC, or its nominee, is a registered holder of a Global Note,
DTC or such nominee, as the case may be, will be considered the absolute owner
or holder of the Notes represented by such Global Note for all purposes under
the Indenture and the Notes, and Agent Members, as well as any other persons on
whose behalf Agent Members may act (including Euroclear and CEDEL and account
holders and participants therein), will have no rights under the Indenture or
under a Global Note. Owners of beneficial interests in a Global Note will not be
considered to be the owners or holders of any Notes under the Indenture or the
Notes.
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In addition, no beneficial owner of an interest in a Global Note will be able to
exchange or transfer that interest, except in accordance with the applicable
procedures of DTC (the "Applicable Procedures").
Payments in respect of each Global Note registered in the name of DTC's
nominee will be made to the order of DTC's nominee as the registered owner of
such Global Note. None of the Company, the Trustee or the Warrant Agent will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial interests in the Global Notes or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will immediately credit the
accounts of Agent Members with payments in the amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by Agent Members to owners of beneficial interests in such Global Note
held through such Agent Members be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such Agent Members.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with the Applicable Procedures and will be settled in same-day
funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more Agent Members to whose
account the DTC interests in the Global Notes is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such Agent
Member or Agent Members has or have given such direction.
The Company understands: DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the Uniform Commercial Code and a
"Clearing Agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among participants of DTC,
it is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company, the
Trustee nor the Warrant Agent will have any responsibility for the performance
by DTC, its participants or indirect participants of their respective
obligations under rules and procedures governing its operations.
CERTIFICATED NOTES
New Notes issued in exchange for Old Notes held by institutional
"accredited investors" which are not QIBs within the meaning of Rule 144A of the
Securities Act will be issued in the form of registered definitive certificates
("Certificated Notes"). Upon transfer of Certificated Notes to a QIB, such
Certificated Notes may be transferred to a Global Note upon delivery of
appropriate certifications to the Trustee.
In addition, interests in a Global Note will be exchangeable or
transferable, as the case may be, for Certificated Notes if (i) DTC notifies the
Company that it is unwilling or unable to continue as depositary for such Global
Notes, or DTC ceases to be a "Clearing Agency" registered under the Exchange
Act, and a successor depositary is not appointed by the Company within 90 days,
or (ii) an Event of Default has occurred and is continuing with respect to such
Notes and Noteholders who hold more than 25% in aggregate principal amount of
the Notes at the time outstanding represented by the Global Notes advise the
Trustee through DTC in writing that the continuation of a book-entry system
through DTC (or a successor thereto) with respect to the Global Notes is no
longer required. Upon the occurrence of any of the events described in the
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preceding sentence, the Company will cause the appropriate Certificated Notes to
be delivered. Upon the transfer, exchange or replacement of Old Notes bearing
such legend, or upon specific request for removal of such legend, the Company
shall deliver only Notes that bear a legend as to restrictions on transfer of
such Note, or shall refuse to remove such legend, as the case may be, unless
there is delivered to the Company and the Trustee a certificate in the form
provided in the Indenture or such satisfactory evidence as may reasonably be
required by the Company, which may include an opinion of United States counsel,
that neither the legend nor the restrictions on transfer set forth therein are
required to ensure compliance with the provisions of the Securities Act.
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TAXATION
The following discussion summarizes certain Colombian and United States
federal income tax consequences of the acquisition, ownership and disposition of
Notes. Although the following discussion does not purport to describe all of the
tax considerations that may be relevant to holders of the Notes such discussion,
it summarizes the material Colombian tax consequences to Non-Colombian Holders
(as defined herein) of holding Notes and the material United States federal
income tax consequences to United States Holders (as defined herein) of holding
Notes.
The statements regarding United States and Colombian tax laws and practices
set forth below are based on the laws in force and as applied in practice on the
date of this Prospectus and are subject to changes to those laws and practices,
and any relevant judicial decision, subsequent to the date of this Prospectus
which changes may be retroactive.
As used herein, a "Non-Colombian Holder" means a holder that is not a
citizen or a resident of Colombia or a company or other entity not organized
under the laws of Colombia and that has no connection to Colombia other than its
investment in the Notes.
As used herein, a "United States Holder" means a holder that is a citizen
or resident of the United States, a corporation created or organized in or under
the laws of the United States or any political subdivision thereof or a person
that otherwise is subject to United States federal income tax on a net income
basis in respect of the Notes.
HOLDERS OF THE OLD NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS
TO THE UNITED STATES, COLOMBIAN OR OTHER TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE EFFECT OF ANY STATE OR
LOCAL TAX LAWS.
COLOMBIA
The following summary is a general description of certain Colombian tax
aspects of the Notes and does not purport to be a comprehensive description of
Colombian tax aspects of the Notes. No information is provided regarding the tax
aspects of owning, holding or disposing of the securities under applicable tax
laws of any jurisdiction other than Colombia.
Notes
Non-Colombian Resident Holders will not be required to file any tax returns
in Colombia solely by reason of their investments in the Notes, and will not be
subject to Colombian income and remittance withholding taxes to the extent
payments on the Notes do not constitute Colombian source income. Article 25 of
the Estatuto Tributario (the "Colombian Tax Code") provides that credits
obtained abroad (including bank loans and debt securities) by Colombian
companies carrying out activities deemed to be of interest to the social and
economic development of the country, as per policies adopted by the National
Council on Economic and Social Policies (CONPES), do not generate Colombian
source income and will not be considered to be possessed in Colombia. Resolution
54 of 1992 ("Resolution 54") from CONPES establishes that all activities
pertaining to the primary, manufacturing and service sector are deemed to be of
interest to the social and economic development of the country. Under Colombian
law, the Company's activities would be categorized as being part of the service
sector. As a result, no income or remittance tax will be withheld from interest
payments on the Notes by the Company to Non-Colombian Holders.
Resolution 54 may be rescinded or modified. In the event the Company's
activities were not deemed to be of interest for the social and economic
development of the country, interest payments on the Notes from the Company to
Non-Colombian Holders could be subject to withholding of income tax at the rate
of 35% and withholding of remittance tax at the rate of 7% on the net amount of
the payment after deducting the withholding of income tax. Due to the imposition
of such taxes on interest payments on the Notes, the Company generally would be
required to pay Additional Amounts to Non-Colombian Holders. See "Description of
the Notes -- Additional Amounts." Any gain realized on the sale, transfer,
exchange or other
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disposition of a Note by a Non-Colombian Holder would not be subject to
Colombian capital gain taxes nor to Colombian income tax.
The exchange of the Old Notes for the New Notes in the Exchange Offer, see
"The Exchange Offer", will not constitute a taxable event to Non-Colombian
Holders for Colombian income tax purposes. There are no regulations in Colombia
with regard to inheritance, gift or wealth taxes applicable to the Notes.
UNITED STATES
The following deals only with Units and Notes that are held by United
States Holders, and does not deal with persons that are subject to special tax
rules, such as dealers in securities or currencies, financial institutions, life
insurance companies, tax-exempt entities, persons holding Units or Notes as a
part of a hedging or conversion transaction or a straddle, persons that own (or
are deemed for United States tax purposes to own) 10% or more of the total
combined voting power of all classes of voting stock of the Company, persons
that have a principal place of business or "tax home" outside the United States
or persons whose "functional currency" is not the U.S. dollar. The discussion
below is based upon the provisions of the United States Internal Revenue Code of
1986, as amended (the "Internal Revenue Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof; any such authority may be
repealed, revoked or modified, perhaps with retroactive effect, so as to result
in federal income tax consequences different from those discussed below.
Units
The issue price of the Units is equal to the first price at which a
substantial amount of Units is sold to persons other than bond houses, brokers
or similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The Company has been informed by the Initial
Purchasers that the issue price of the Units as so determined, was US$524.26 per
Unit. The issue price of a Unit must then be allocated for United States tax
purposes between the Note and Warrants that comprise the Unit based on their
relative fair market values at the time of issuance. The Company has allocated
US$464.49 per Unit to the Note and US$59.77 per Unit to the Warrants. The
portion of the issue price of the Unit that is allocated to the Note is the
issue price of the Note. The Company's allocation of the issue price of the
Units between the Notes and the Warrants for United States tax purposes will be
binding on each holder of a Unit, unless the holder explicitly discloses its use
of a different allocation in a manner prescribed by applicable regulations. A
holder of Units or Notes may contact the Company's Vice President -- Finance at
(574) 510-9410, in order to obtain information as to the allocation of issue
price made by the Company, as well as any other relevant information.
Notes
Exchange of Notes
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange or other taxable event to United States
Holders. Consequently, no gain or loss should be realized by a United States
Holder upon receipt of a New Note; the holding period of the New Note should
include the holding period of the Old Note exchanged therefor and the adjusted
tax basis of the New Note should be the same as the adjusted tax basis of the
Old Note exchanged therefor.
Original Issue Discount
General. The Old Notes and New Notes will be treated as having been issued
with original issue discount ("OID"). The amount of OID on a Note will be equal
to the excess of (i) the aggregate amount payable on the Note (whether
denominated as principal or as interest) over (ii) the issue price of the Note
(determined in the manner described above).
The Code and the OID Regulations provide rules that require a United States
Holder of a Note to include OID in income, as ordinary interest income, before
the receipt of cash attributable to such income
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without regard to the holder's method of accounting for tax purposes. The amount
of OID includible in gross income by a United States Holder of a Note is the sum
of the "daily portions" of OID with respect to the Note for each day during the
taxable year or portion of the taxable year in which the United States Holder
holds such Note ("accrued OID"). The daily portion is determined by allocating
to each day in any "accrual period" a pro rata portion of the OID allocable to
that accrual period. Under the OID Regulations, accrual periods with respect to
a Note may be any set of periods (which may be of varying lengths) selected by
the United States Holder as long as (i) no accrual period is longer than one
year and (ii) each scheduled payment of interest or principal on the Security
occurs on the first day or final day of an accrual period.
The amount of OID allocable to an accrual period equals the product of the
Note's adjusted issue price at the beginning of the accrual period and the
Note's yield to maturity (determined on the basis of compounding at the close of
each accrual period and properly adjusted for the length of the accrual period).
The "adjusted issue price" of a Note at the beginning of the first accrual
period is the issue price and at the beginning of any accrual period thereafter
is (x) the sum of the issue price of such Note and the accrued OID for each
prior accrual period (determined without regard to the amortization of any
acquisition premium or bond premium), less (y) any prior payments on the Notes.
If a payment is made on the first day of an accrual period, then the adjusted
issue price at the beginning of such accrual period is reduced by the amount of
the payment.
The OID Regulations contain certain special rules that generally allow any
reasonable method to be used in determining the amount of OID allocable to a
short initial accrual period (if all other accrual periods are of equal length),
and require that the amount of OID allocable to the final accrual period equal
the excess of the amount payable at the maturity of the Note over the Note's
adjusted issue price as of the beginning of such final accrual period.
U.S. Holders of Notes generally will have to include in income increasingly
greater amounts of OID over the life of the Notes.
Acquisition Premium
A United States Holder that purchases a Note at its original issuance for
an amount in excess of its issue price but less than its stated redemption price
at maturity (any such excess being "acquisition premium") is permitted to reduce
the daily portions of OID by a fraction, the numerator of which is the excess of
the sum of all amounts payable on the Note after the purchase date, other than
payments of qualified stated interest, over the Note's issue price.
Alternatively, a United States Holder may elect to compute OID accruals as
described under "Original Issue Discount -- General" above, treating the United
States Holder's purchase price as the issue price.
Election to Treat all Interest as Original Issue Discount
Any United States Holder may elect to include in gross income all interest
that accrues on a Note using the constant yield method described above under the
heading "Original Issue Discount -- General", with the modifications described
below. For purposes of this election, interest includes stated interest, OID, de
minimis OID, market discount, de minimis market discount and unstated interest,
as adjusted by any acquisition premium.
In applying the constant yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
United States Holder's adjusted basis in the Note immediately after its
acquisition, and the issue date of the Note will be the date of its acquisition
by the electing United States Holder. This election is generally applicable only
to the Note with respect to which it is made and may not be revoked without the
consent of the IRS.
If the election described above to apply the constant yield method to all
interest on a Note is made with respect to a Market Discount Note, as defined
below, then the electing United States Holder will be treated as having made the
election discussed below under "Notes Purchased at a Market Discount" to include
market discount in income currently over the life of all debt instruments held
or thereafter acquired by such United States Holder.
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Notes Purchased at a Market Discount
A Note will be treated as issued at a market discount (a "Market Discount
Note") if the amount for which a United States Holder purchased a Note is less
than the Note's issue price by more than a de minimis amount.
In general, any partial payment of principal on, or gain recognized on the
maturity or disposition of, a Market Discount Note will be treated as ordinary
income to the extent that such gain does not exceed the accrued market discount
on such Note. Alternatively, a United States Holder of a Market Discount Note
may elect to include market discount in income currently over the life of the
Market Discount Note. Such an election applies to all debt instruments with
market discount acquired by electing United States Holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
Market discount accrues on a straight-line basis, unless the United States
Holder elects to accrue such discount on a constant yield to maturity basis.
Such an election is applicable only to the Note with respect to which it is made
and is irrevocable. A U.S. Holder of a Market Discount Note that does not elect
to include market discount in income currently generally will be required to
defer deductions for interest on borrowings allocable to such Note in an amount
not exceeding the accrued market discount on such Note, until the maturity or
disposition of such Note.
Purchase, Sale and Retirement of the Notes
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost increased by the amount of any OID or market discount included in
the United States Holder's income with respect to the Note and the amount, if
any, of income attributable to de minimis OID included in the United States
Holder's income with respect to the Note, and reduced by the sum of (i) the
amount of any payments on the Note and (ii) the amount of any amortizable bond
premium applied to reduce interest on the Note. A United States Holder generally
will recognize gain or loss on the sale or retirement of a Note equal to the
difference between the amount realized on the sale or retirement and the tax
basis of the Note. The amount realized on a sale or retirement for an amount in
foreign currency will be the U.S. dollar value of such amount on the date of
sale or retirement. Except to the extent described above under "Market Discount"
and except to the extent attributable to accrued but unpaid interest, gain or
loss recognized on the sale or retirement of a Note will be capital gain or loss
and will be long-term capital gain or loss if the Note was held for more than
one year.
Foreign Tax Credit
For United States foreign tax credit purposes, OID on a Note generally will
be treated as foreign-source income and as passive income, subject to the
separate foreign tax credit limitation (basket) for passive income. However, if
such OID becomes subject to Colombian withholding tax at a rate of five percent
or more, then such OID instead will be segregated in the separate foreign tax
credit basket for high withholding tax interest.
Gain realized on the sale, exchange or retirement of a Note by the United
States Holder generally will be treated as United States-source income. The IRS
is authorized to issue regulations to govern the source of losses recognized on
the sale of personal property (such as the Notes); however, to date, no such
regulations have been issued. While there can be no assurance in the matter,
relevant legislative history suggests that the regulations, when and if issued,
generally should treat loss recognized by a United States Holder on the sale,
exchange or retirement of a Note as United States-source loss.
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FOREIGN INVESTMENT AND EXCHANGE CONTROLS IN COLOMBIA
The current legal framework for foreign investment in Colombia was
established by Law 9 of 1991, Resolution 51 of October 1991 (the Foreign
Investment Statute) of the CONPES, and Resolution 21 of 1993 as amended by
several resolutions issued by Banco de la Republica (Central Bank). The main
guiding principles of the current regulatory framework are: (i) Equality of
Treatment: foreign and domestic investment in Colombia must receive equal
treatment and discrimination is illegal; (ii) Freedom of Access: foreign
investment is permitted in any sector of the economy except defense, national
security, the processing, disposal, and discharge of toxic, hazardous, or
radioactive waste not produced in Colombia, and real estate; (iii) Automatic
procedures: foreign investors need not follow any special authorization
procedure to invest in Colombia. However, investors should register their
investments with the Central Bank to preserve certain foreign-exchange-related
rights.
Under Colombian law there are three types of foreign capital investment:
First, direct investment, which is defined as any contribution (i.e., cash and
debt capitalization) by a foreigner into the capital of an existing or newly
formed company in Colombia. Second, indirect investment, which involves any acts
or contracts by which a foreign investor makes a contribution to a company
without taking an equity position, but the income derived by the foreign
investor nevertheless depends on the profits generated by the Company. Finally,
portfolio investment which is made through a foreign capital investment fund for
the acquisition of shares and other securities traded on Colombian stock
exchanges. Foreign investment can be made in different ways, including the
transfer of foreign currency for conversion into Colombian currency as a direct
contribution to the equity of an existing or newly formed company, the
acquisition of rights, shares, or other securities, the capitalization of funds
with remittance rights, the importation of capital goods; and contributions in
kind such as technologies, trademarks, and patents.
Registration of foreign capital investment (registration must be made
within the following three months, but could be extended to six months, to avoid
fines), entitles the holder to repatriate all net profits in freely convertible
currency based on the financial statements of the company, reinvest profits or
retain undistributed surpluses, capitalize the remittable amounts produced by
the investment, and remit, in freely convertible currency, the capital
reductions, portfolio liquidation, or the proceeds of the sale of investments
within Colombia. Repatriation and remittance rights can be temporarily modified
if foreign currency reserve levels fall below the equivalent of three months'
imports.
Resolution 21 establishes two distinct foreign exchange markets: (i) the
formal foreign exchange market, which is conducted through authorized financial
intermediaries (each an "Authorized Intermediary") and subject to the procedures
established by Resolution 21, as amended, which requires certain specified
transactions to be carried out through such market and (ii) the free market,
which is available for all transactions not required to be conducted on the
foreign exchange market, including the exchange of foreign currency relating to
professional services, donations and sales of goods and services to tourists.
Transactions conducted through the foreign exchange market are conducted at
market rates freely negotiated with authorized intermediaries (banks, financial
corporations and others). The payment of the Exercise Price of the Warrants, the
distribution by the Company of dividends of the Warrant Shares and the
remittance abroad of the proceeds of the sale in Colombia of any Warrant Shares
must be conducted through the foreign exchange market. To carry out an exchange
transaction, an exchange declaration (declaracion de cambio) must be prepared
and filed with an authorized intermediary. Conversion from Pesos to Dollars for
payments of principal and interest of the Notes will be required to be made on
the foreign exchange market through an Authorized Intermediary.
Resolution 21, as amended, allows Colombian residents to incur indebtedness
in foreign currency but requires that borrowers incurring indebtedness in a
foreign currency with a term of 36 months or less, in addition to registration,
make deposits in Pesos at the Central Bank in order to be able to remit payments
in such foreign currency. Such deposits must be maintained for a term of 18
months and the deposit amount equals 50% of the total amount borrowed,
liquidated at the market representative exchange rate of the day of
constitution.
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There are some exceptions to the deposit requirement, including: (i)
borrowings with a final maturity of more than 36 months, but with repayments not
exceeding 40% of principal within the initial 36-month period. (If repayments
exceed 40% of principal within the initial 36-month period, a 50% deposit must
be made with respect to the portion of principal repaid during such initial
period); and (ii) borrowings obtained by Colombian residents to finance payments
to public entities (a) to buy shares or shares' preference subscription rights
in privatization processes and (b) to pay concession or license fees.
In addition, any partial or total prepayment or redemption of indebtedness
in foreign currency can be done without the making of a previous deposit in
Pesos at the Central Bank after the initial 36-month period, or before that
term, without the making of a deposit, in the following cases:
(i) if an authorization is obtained from the Central Bank on the basis of
an existing "justified cause" which allows the prepayment;
(ii) if the substitution of foreign currency indebtedness agreements with
other foreign currency indebtedness agreements or through the issuance and
placement of securities in international capital markets, provided such other
foreign currency indebtedness agreements or securities have a term greater than
36 months;
(iii) if the mandatory prepayment arises pursuant to a foreign indebtedness
agreement incurred to finance a private project through a BOT (build, operate
and transfer), BOM (build, operate and manage), BOMT (build, operate, manage and
transfer), BOOM (build, own, operate and manage) or any similar agreement in the
event of (a) the early termination of such agreement, (b) the total or partial
loss of the assets of the project such that its continuation is no longer
economical or (c) the expropriation of assets or goods of the project;
(iv) if prepayment is made after half of the agreed term for payment has
elapsed with the proceeds of a foreign investment obtained through (a) placement
of ADRs or BOCEAS of Colombian companies or (b) capitalization of external debt
through acquisition of shares of the debtor company; or
(v) if the prepayment relates to indebtedness that was recorded without
having made a previous deposit or if the terms of the indebtedness has a term of
36 months or less.
There can be no assurance that the deposit requirements of Resolution 21,
as amended by Resolution 005, 1996, will not be amended or that additional
foreign exchange controls which are applicable to the Notes will not be enacted.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver this Prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer who
holds Old Notes acquired for its own account as a result of market-making
activities or other trading activities (a "Participating Broker-Dealer") in
connection with resales of New Notes received in exchange for Old Notes. For a
period of 180 days after the Expiration Date, the Company will make this
Prospectus, amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale, provided that such
Participating Broker-Dealer indicates in the Letter of Transmittal that it is a
broker-dealer. In addition, until , 1996, (90 days after the date of
this Prospectus), all dealers affecting transactions in the New Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from the exchange of Old Notes
for New Notes by broker-dealers. New Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, or at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through broker-dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any person that participates in the distribution of such New
Notes may be deemed an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of New Notes and any commissions or
concessions received by any such broker-dealers may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions of
any broker-dealers and will indemnify the holders of the Old Notes (including
Participating Broker-Dealers) participating in the Exchange Offer against
certain liabilities, including liabilities under the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives New
Notes pursuant to the Exchange Offer agrees that, upon receipt of notice from
the Company of the happening of any event which makes any statement in this
Prospectus untrue in any material respect or which requires the making of any
changes in this Prospectus in order to make the statements therein not
misleading (which notice the Company agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of this Prospectus until the
Company has amended or supplemented this Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented Prospectus
to such broker-dealer. If the Company gives any such notice to suspend the use
of the Prospectus, it will extend the 180-day period referred to above by the
number of days during the period from and including the date of the giving of
such notice up to and including when broker-dealers shall have received copies
of the supplemented or amended Prospectus necessary to permit resales of New
Notes.
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ENFORCEMENT OF FOREIGN JUDGMENTS IN COLOMBIA
The courts of Colombia give effect to and enforce judgments obtained in
non-Colombian courts through a process provided for under Colombian law known as
exequatur, subject to the provisions of Articles 693 through 695 of the
Colombian Code of Civil Procedure (Codigo de Procedimiento Civil). Such articles
provide for enforcement by Colombian courts of foreign judgments which are
obtained without fraud and rendered after due notice, provided that either (a)
Colombia and the country where the foreign judgment has been issued are parties
to a treaty which recognized the enforceability of foreign judgments or (b) a
judgment rendered by a court of Colombia would be enforceable on a reciprocal
basis in the country where such foreign judgment is obtained, and that the
foreign judgment (i) does not relate to "in rem" rights vested in assets that
were located in Colombia at the time the suit was filed, (ii) does not
contravene any public policy laws or regulations of Colombia, other than those
governing judicial procedures, (iii) is a final judgment not subject to appeal
in accordance with the applicable foreign laws and an original certified copy of
such judgment is filed with the court, (iv) does not refer to any matter upon
which Colombian courts have exclusive jurisdiction, (v) does not refer to any
matter subject to a lawsuit presently ongoing in Colombia or already decided by
any court of Colombia, (vi) was obtained upon complying with the applicable
foreign laws relating to service of process to the defendant, which compliance
is presumed if the judgment is final, and (vii) be submitted to the exequatur
procedure before the Supreme Court of Colombia, which requires that the party
proposing to enforce the foreign judgment give prior judicial notice to any
person or entity that may be affected by the judgment.
Of those requirements imposed by the Colombian Code of Civil Procedure, the
two issues which are most likely to generate controversy in exequatur
proceedings are (i) whether there exists an applicable treaty or reciprocity
between the two countries, as described in the previous paragraph and (ii)
whether the foreign judgment contravenes Colombia's public policy laws and
regulations. Occel has been advised by its Corporate Secretary General and
Administrative Vice President that the United States and Colombia do not have a
treaty providing for reciprocal recognition and enforcement of judgments in
civil and commercial matters; however, there is a precedent (a ruling issued on
July 19, 1994) in which the Supreme Court of Colombia recognized the existence
of such reciprocity based upon (i) evidence that a court in the State of Florida
had accepted the validity of a Colombian judgment in a certain case and (ii)
declarations by the United States lawyers acting as expert witnesses to the
effect that courts in the State of Florida had enforced judgments issued in
Latin American countries other than Colombia and that judgments issued by
Colombian courts would be enforced under the same principles. The Company can
provide no assurance, however, that this interpretation will prevail in future
exequatur proceedings. The Company does not believe, in the case of the Notes,
that a foreign judgment ordering the payment of money would conflict with any of
Colombia's current public policy laws or regulations.
The Company has been advised by its Corporate Secretary General and
Administrative Vice President that there can be no assurance as to the
enforceability, in original actions in Colombian courts, of liabilities
predicated solely on the United States federal or other non-Colombian securities
laws.
LEGAL MATTERS
Certain legal matters with respect to the Notes offered hereby will be
passed upon for the Company by Cravath, Swaine & Moore, New York, New York, with
respect to matters of United States law, and by Holguin, Neira y Pombo, Santafe
de Bogota, Colombia, and Mauricio Campillo-Orozco, Medellin, Colombia, with
respect to matters of Colombian law. A member of Holguin, Neira y Pombo is an
alternate director of the Company.
EXPERTS
The financial statements of the Company as of December 31, 1994 and 1995
and for the years ended December 31, 1993, 1994 and 1995 have been included
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick, independent public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Balance Sheets at December 31, 1994 and 1995 and unaudited as of March 31, 1995 and
1996................................................................................ F-3
Statements of Income (Loss) for the years ended December 31, 1993, 1994 and 1995 and
unaudited for the three months ended March 31, 1995 and 1996........................ F-4
Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and
1995 and unaudited for the three months ended March 31, 1996........................ F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and
unaudited for the three months ended March 31, 1995 and 1996........................ F-6
Statements of Changes in Financial Position for the years ended December 31, 1993,
1994 and 1995 and unaudited for the three months ended March 31, 1995 and 1996...... F-7
Notes to Financial Statements......................................................... F-8
</TABLE>
F-1
<PAGE> 117
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Occidente y Caribe Celular S.A.:
We have audited the accompanying balance sheets of Occidente y Caribe
Celular S.A. as of December 31, 1995 and 1994, and the related statements of
income (loss), shareholders' equity, cash flows and changes in financial
position for each of the years in the three-year period ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Colombia. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Occidente y Caribe Celular
S.A. as of December 31, 1995 and 1994, and the results of its operations, cash
flows and changes in its financial position for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles in Colombia.
Generally accepted accounting principles in Colombia vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected results of operations for each of the years in the
three-year period ended December 31, 1995 and shareholders' equity as of
December 31, 1995 and 1994, to the extent summarized in note 17 to the financial
statements.
(signed) KPMG PEAT MARWICK
Luis Eduardo Nino Cortes
T.P. 3164-T
Medellin, Colombia
February 20, 1996, except for the fourth
paragraph of note 14 which is as of
March 14, 1996 and note 1(a) which
is as of May 23, 1996
F-2
<PAGE> 118
OCCIDENTE Y CARIBE CELULAR S.A.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF MARCH 31,
AS OF DECEMBER 31, UNAUDITED
--------------------------------------- ---------------------------------------
1994 1995 1995 1995 1996 1996
--------- ------- --------------- --------- ------- ---------------
THOUSANDS THOUSANDS
OF U.S. DOLLARS MILLIONS OF CONSTANT OF U.S. DOLLARS
MILLIONS OF CONSTANT (CONVENIENCE COLOMBIAN PESOS (CONVENIENCE
COLOMBIAN PESOS TRANSLATION) TRANSLATION)
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents (note
2)............................. Ps 7,274 6,749 US$ 6,452 Ps 338 15,035 US$ 14,374
Accounts receivable, net (note
3)............................. 11,843 9,697 9,271 11,439 14,115 13,494
Inventories...................... 815 2,270 2,170 4,790 2,403 2,297
Prepaid expenses................. 305 1,807 1,728 655 1,627 1,555
--------- ------- ----------- -------- ------- ----------
Total current assets...... 20,237 20,523 19,621 17,222 33,180 31,720
--------- ------- ----------- -------- ------- ----------
Property, plant and equipment (note
4)............................... 41,096 68,602 65,586 47,906 70,272 67,182
Less accumulated depreciation.... 395 4,918 4,702 1,253 6,391 6,110
--------- ------- ----------- -------- ------- ----------
Property, plant and
equipment, net.......... 40,701 63,684 60,884 46,653 63,881 61,072
--------- ------- ----------- -------- ------- ----------
Intangible assets, net (note 5).... 176,809 174,015 166,362 174,114 170,133 162,651
Deferred charges, net (note 6)..... 24,331 20,350 19,455 22,699 18,727 17,903
--------- ------- ----------- -------- ------- ----------
Ps262,078 278,572 US$266,322 Ps260,688 285,921 273,346
========= ======= =========== ========= ======= ==========
Memorandum accounts (note 7)....... Ps 8,082 65,649 US$ 62,762 Ps 7,967 33,434 US$ 31,933
========= ======= =========== ========= ======= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (note
8)............................. 17,270 1,871 1,789 4,647 1,690 1,616
Current installments of long-term
debt (note 9).................. 32,517 81,796 78,199 16,660 81,778 78,182
Accounts payable (notes 10 and
13)............................ 15,268 19,202 18,358 17,567 18,975 18,141
Accrued expenses (note 11)....... 2,638 2,818 2,694 1,381 3,289 3,142
--------- ------- ----------- -------- ------- ----------
Total current
liabilities............. 67,693 105,687 101,040 40,255 105,732 101,081
Long-term debt, excluding current
installments (note 9)............ 61,900 83,677 79,996 97,145 84,173 80,471
Deferred monetary correction....... 10,619 10,418 9,960 10,383 9,874 9,440
--------- ------- ----------- -------- ------- ----------
Total liabilities......... 140,212 199,782 190,996 147,783 199,779 190,992
--------- ------- ----------- -------- ------- ----------
Shareholders' equity (notes 1 and
12):
Common stock one thousand pesos
par value.
Authorized 77,520,000 in 1994
and
91,964,254 shares in 1995;
issued and paid 69,767,829
in 1994 and 1995............. 69,768 69,768 66,700 69,768 82,768 79,128
Additional paid-in capital....... 13,832 13,832 13,224 13,832 13,832 13,224
Reserves......................... 238 238 228 238 238 228
Equity revaluation............... 41,112 41,305 39,489 39,783 36,987 35,360
Accumulated deficit.............. (3,084) (46,353) (44,315) (10,716) (47,683) (45,586)
--------- ------- ----------- -------- ------- ----------
Shareholders' equity,
net..................... 121,866 78,790 75,326 112,905 86,142 82,354
--------- ------- ----------- -------- ------- ----------
Commitments and contingencies (note 14)
Ps262,078 278,572 US$266,322 Ps260,688 285,921 273,346
========= ======= =========== ========= ======= ==========
Memorandum accounts (note 7)....... Ps 8,082 65,649 US$ 62,762 Ps 7,967 33,434 US$ 31,933
========= ======= =========== ========= ======= ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 119
OCCIDENTE Y CARIBE CELULAR S.A.
STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEARS ENDED DECEMBER 31, UNAUDITED
-------------------------------------------------- ----------------------------------------
1993 1994 1995 1995 1995 1996 1996
-------- ------ ------- ------------- --------- ------ -------------
THOUSANDS OF THOUSANDS OF
U.S. DOLLARS MILLIONS OF CONSTANT U.S. DOLLARS
MILLIONS OF CONSTANT COLOMBIAN (CONVENIENCE COLOMBIAN PESOS (CONVENIENCE
PESOS TRANSLATION) TRANSLATION)
(EXCEPT PER SHARE DATA) (EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues (note 13)............. Ps -- 10,014 43,020 US$ 41,128 Ps 7,478 16,961 US$ 16,215
Costs and expenses (note 13):
Operating costs.............. -- 3,900 20,863 19,945 4,338 7,894 7,547
Marketing and selling
expenses................... -- 4,535 11,854 11,333 2,761 2,230 2,132
General and administrative... -- 3,963 18,961 18,127 2,907 4,854 4,640
Depreciation and
amortization............... -- 1,591 12,009 11,481 2,489 3,681 3,519
------- ------ -------- ---------- --------- ------ ----------
Total costs and
expenses............. -- 13,989 63,687 60,886 12,495 18,659 17,838
------- ------ -------- ---------- --------- ------ ----------
Operating loss......... -- (3,975) (20,667) (19,758) (5,017) (1,698) (1,623)
------- ------ -------- ---------- --------- ------ ----------
Other income (expense) (note
13):
Interest expense............. -- (4,966) (26,597) (25,427) (3,308) (7,164) (6,849)
Foreign exchange............. -- (2,800) (20,218) (19,329) (5,894) (6,891) (6,588)
Interest income.............. 228 5,950 2,242 2,143 377 1,227 1,173
Net monetary correction (note
15)........................ (16) 2,882 21,781 20,823 6,920 11,118 10,629
Other........................ -- (175) (314) (300) (946) (1,434) (1,371)
------- ------ -------- ---------- --------- ------ ----------
Other income (expense),
net.................. 212 891 (23,106) (22,090) ( 2,851) (3,144) (3,006)
------- ------ -------- ---------- --------- ------ ----------
Income (loss) before
income taxes......... 212 (3,084) (43,773) (41,848) (7,868) (4,842) (4,629)
------- ------ -------- ---------- --------- ------ ----------
Provision for income taxes..... -- -- -- -- -- (335) (320)
------- ------ -------- ---------- --------- ------ ----------
Net income (loss)...... Ps 212 (3,084) (43,773) US$(41,848) Ps (7,868) (5,177) US$ (4,949)
======= ====== ======== ========== ========= ====== ==========
Net income (loss) per
share................ Ps111.58 (55.17) (627.12) US $ (0.60) Ps(112.72) (67.41) US$ (0.06)
======= ====== ======== ========== ========= ====== ==========
Weighted average number of
shares in millions......... 1.9 55.9 69.8 69.8 69.8 76.8 76.8
======= ====== ======== ========== ========= ====== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 120
OCCIDENTE Y CARIBE CELULAR S.A.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
(IN MILLIONS OF CONSTANT COLOMBIAN PESOS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL RESERVE FOR EARNINGS
COMMON PAID-IN LEGAL ACQUISITION EQUITY (ACCUMULATED SHAREHOLDERS'
STOCK CAPITAL RESERVE OF ASSETS REVALUATION DEFICIT) EQUITY, NET
--------- ---------- ------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992........ Ps 1,600 -- -- -- 1,709 206 3,515
Distribution of net income,
1992............................ -- -- 10 95 -- (105) --
Issuance of 1,000,000 shares
Ps1,000 par value............... 1,000 -- -- -- 591 -- 1,591
Equity inflation adjustment....... -- -- -- -- 461 -- 461
Net income, 1993.................. -- -- -- -- -- 212 212
Constant peso adjustment.......... -- -- -- -- (287) (101) (388)
--
--------- ------ --- --- ------- ------- -------
Balance at December 31, 1993........ 2,600 -- 10 95 2,474 212 5,391
Distribution of net income,
1993............................ -- -- 14 119 -- (133) --
Issuance of 35,000,000 shares,
Ps1,000 par value............... 35,000 -- -- -- 10,619 -- 45,619
Issuance of 32,167,826 shares,
Ps1,000 par value and additional
paid-in capital Ps430........... 32,168 13,832 -- -- 13,956 -- 59,956
Equity inflation adjustment....... -- -- -- -- 11,476 -- 11,476
Net loss, 1994.................... -- -- -- -- -- (3,084) (3,084)
Constant peso adjustment.......... -- -- -- -- 2,587 (79) 2,508
--
--------- ------ --- --- ------- ------- -------
Balance at December 31, 1994........ 69,768 13,832 24 214 41,112 (3,084) 121,866
Equity inflation adjustment....... -- -- -- -- 18,893 -- 18,893
Net loss, 1995.................... -- -- -- -- -- (43,773) (43,773)
Constant peso adjustment.......... -- -- -- -- (18,700) 504 (18,196)
--
--------- ------ --- --- ------- ------- -------
Balance at December 31, 1995........ Ps 69,768 13,832 24 214 41,305 (46,353) 78,790
========= ====== === === ======= ======= =======
Thousands of U.S. dollars
(convenience translation)
Balance at December 31, 1995........ US$66,700 13,224 23 205 39,489 (44,315) 75,326
========= ====== === === ======= ======= =======
Balance at December 31, 1995........ Ps 69,768 13,832 24 214 41,305 (46,353) 78,790
Issuance of 13,000,000 shares
Ps1,000 par value (Unaudited)... 13,000 -- -- -- -- -- 13,000
Equity inflation adjustment
(Unaudited)..................... -- -- -- -- 6,068 -- 6,068
Net loss, first quarter 1996
(Unaudited)..................... -- -- -- -- -- (5,177) (5,177)
Constant peso adjustment
(Unaudited)..................... -- -- -- -- (10,386) 3,847 (6,539)
--
--------- ------ --- --- ------- ------- -------
Balance at March 31, 1996
(Unaudited)....................... Ps 82,768 13,832 24 214 36,987 (47,683) 86,142
========= ====== === === ======= ======= =======
Thousands of U.S. dollars
(convenience translation).........
Balance at March 31, 1996
(Unaudited)....................... US$79,128 13,224 23 205 35,360 (45,586) 82,354
========= ====== === === ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 121
OCCIDENTE Y CARIBE CELULAR S.A.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995 AND 1996
YEARS ENDED DECEMBER 31, (UNAUDITED)
----------------------------------------------- ------------------------------------
1993 1994 1995 1995 1995 1996 1996
-------- -------- ------- --------------- -------- ------- ---------------
THOUSANDS MILLIONS OF THOUSANDS
OF U.S. DOLLARS OF U.S. DOLLARS
MILLIONS OF CONSTANT (CONVENIENCE CONSTANT (CONVENIENCE
COLOMBIAN PESOS TRANSLATION) COLOMBIAN PESOS TRANSLATION)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................... Ps 212 (3,084) (43,773) US$(41,849) Ps (7,868) (5,177) US$ (4,949)
Adjustments to reconcile net loss to
net cash provided (used) by
operating activities:
Inflation adjustments.............. -- (2,848) (18,492) (17,679) (6,652) (10,573) (10,108)
Depreciation and amortization...... -- 1,591 12,009 11,481 2,489 3,681 3,519
Allowance for doubtful accounts.... -- -- 5,109 4,884 -- 1,282 1,226
Decrease (increase) in operating
assets:
Accounts receivable.............. (3) (7,289) (4,592) (4,390) (3,334) (6,315) (6,037)
Inventories...................... -- (815) (1,095) (1,047) (3,974) (184) (176)
Prepaid expenses................. -- (302) (1,552) (1,484) (373) 32 31
Increase (decrease) in operating
liabilities:
Accounts payable................. -- 7,682 6,071 5,804 3,468 1,368 1,308
Accrued expenses................. (5) 1,350 280 268 (1,056) 705 674
-------- -------- ------- ---------- -------- ------- ----------
Net cash provided (used) by
operating activities........... 204 (3,715) (46,035) (44,012) (17,300) (15,181) (14,512)
-------- -------- ------- ---------- -------- ------- ----------
Cash flows from investing activities:
Purchases of property, plant and
equipment............................ (58) (37,857) (24,797) (23,707) (4,194) (2,883) (2,756)
Purchase of concession................. -- (160,474) -- -- -- -- --
Deferred charges....................... (3,008) (8,832) (2,407) (2,301) (202) (274) (262)
-------- -------- ------- ---------- -------- ------- ----------
Net cash used in investing
activities..................... (3,066) (207,163) (27,204) (26,008) (4,396) (3,157) (3,018)
-------- -------- ------- ---------- -------- ------- ----------
Cash flows from financing activities:
Proceeds from notes payable and
long-term debt....................... -- 111,907 117,697 112,521 28,211 15,653 14,964
Repayments of notes payable and
long-term debt....................... -- (222) (43,363) (41,456) (12,894) (1,469) (1,404)
Issuance of common stock............... 1,591 105,575 -- -- -- 13,000 12,428
-------- -------- ------- ---------- -------- ------- ----------
Net cash provided by financing
activities..................... 1,591 217,260 74,334 71,065 15,317 27,184 25,988
-------- -------- ------- ---------- -------- ------- ----------
Net increase (decrease) in cash
and cash equivalents........... (1,271) 6,382 1,095 1,045 (6,379) 8,846 8,458
Cash and cash equivalents at beginning of
period................................. 2,904 1,087 7,274 6,954 7,274 6,749 6,452
Constant peso adjustment................. (546) (195) (1,620) (1,547) (557) (560) (536)
-------- -------- ------- ---------- -------- ------- ----------
Cash and cash equivalents at end
of period...................... Ps 1,087 7,274 6,749 US$ 6,452 Ps 338 15,035 US$ 14,374
======== ======== ======= ========== ======== ======= ==========
Supplemental disclosure of cash flow
information -- cash paid:
Interest and exchange loss............. Ps -- 4,620 41,520 US$ 39,694 Ps 3,138 11,406 US$ 10,904
======== ======== ======= ========== ======== ======= ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 122
OCCIDENTE Y CARIBE CELULAR S.A.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995 AND 1996
YEARS ENDED DECEMBER 31, (UNAUDITED)
----------------------------------------------- ------------------------------------
1993 1994 1995 1995 1995 1996 1996
-------- -------- ------- --------------- -------- ------- ---------------
THOUSANDS MILLIONS OF THOUSANDS
OF U.S. DOLLARS OF U.S. DOLLARS
MILLIONS OF CONSTANT (CONVENIENCE CONSTANT (CONVENIENCE
COLOMBIAN PESOS TRANSLATION) COLOMBIAN PESOS TRANSLATION)
<S> <C> <C> <C> <C> <C> <C> <C>
Sources of working capital:
Net income (loss)...................... Ps 212 -- -- US$ -- Ps -- -- US$ --
Items that do not use working
capital:
Depreciation and amortization...... -- -- -- -- -- -- --
Inflation adjustments, net......... -- -- -- -- -- -- --
-------- ------- ------- --------- ------- ------- ----------
Working capital provided by
operations..................... 212 -- -- -- -- -- --
Issuance of common stock............... 1,591 105,576 -- -- -- 13,000 12,428
Increase in notes payable to banks..... -- 61,900 31,888 30,486 39,985 7,440 7,113
Decrease in deferred charges........... -- -- 173 165 330 168 161
Decrease in working capital............ 1,519 48,127 45,460 43,461 -- -- --
-------- ------- ------- --------- ------- ------- ----------
Ps 3,322 215,603 77,521 US$ 74,112 Ps40,315 20,608 US$ 19,702
======== ======= ======= ========= ======= ======= ==========
Uses of working capital:
Net loss............................... -- 3,084 43,773 41,849 7,868 5,177 4,949
Items that do not (use) provide
working capital:
Depreciation and amortization...... -- (1,591) (12,009) (11,481) (2,489) (3,681) (3,519)
Inflation adjustments, net......... -- 2,848 18,492 17,679 6,652 10,573 10,108
-------- ------- ------- --------- ------- ------- ----------
Working capital used by
operations..................... -- 4,341 50,256 48,047 12,031 12,069 11,538
Purchase of property, plant and
equipment............................ 58 40,376 27,265 26,065 7,492 2,994 2,862
Purchase of concession................. -- 160,473 -- -- -- -- --
Deferred charges....................... 3,264 10,413 -- -- -- -- --
Increase in working capital............ -- -- -- -- 20,792 5,545 5,302
-------- ------- ------- --------- ------- ------- ----------
Ps 3,322 215,603 77,521 US$ 74,112 Ps40,315 20,608 US$ 19,702
======== ======= ======= ========= ======= ======= ==========
Changes in components of working capital:
Increase (decrease) in current assets:
Cash and cash equivalents............ (1,270) 6,384 662 633 (6,379) 8,846 8,458
Accounts receivable.................. (3) 11,815 (213) (204) 503 5,224 4,994
Inventories.......................... -- 815 1,589 1,519 4,038 321 307
Prepaid expenses..................... -- 302 1,552 1,484 374 (30) (29)
-------- ------- ------- --------- ------- ------- ----------
(1,273) 19,316 3,590 3,432 (1,464) 14,361 13,730
-------- ------- ------- --------- ------- ------- ----------
Increase (decrease) in current
liabilities:
Notes payable to banks................. -- 17,270 (12,578) (12,025) (11,302) (26) (25)
Current installments of long-term
debt................................. -- 32,517 54,591 52,190 (13,367) 6,770 6,472
Accounts payable....................... 221 15,039 6,427 6,145 3,468 1,367 1,307
Accrued expenses....................... 25 2,617 610 583 (1,054) 705 674
-------- ------- ------- --------- ------- ------- ----------
246 67,443 49,050 46,893 (22,255) 8,816 8,428
-------- ------- ------- --------- ------- ------- ----------
Increase (Decrease) in working capital... Ps(1,519) (48,127) (45,460) US$(43,461) Ps20,791 5,545 US$ 5,302
======== ======= ======= ========= ======= ======= ==========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 123
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(EXPRESSED IN MILLIONS OF CONSTANT COLOMBIAN PESOS)
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Operations
Occidente y Caribe Celular S.A. (the Company or Occel) is a mixed economy
company (owned by public and private sector shareholders) established under
public deed No. 378 dated February 14, 1992 of the only Notary in Soledad
(Atlantic Department). The Company was incorporated for a period ending on
December 31, 2092.
The Company provides mobile cellular telephone and other related
telecommunication services in the western region of Colombia (the "Western
Region") pursuant to a ten-year concession, subject to renewal for an additional
10 years (the "Concession"), awarded under contract No. 000005 dated March 28,
1994 by the Ministry of Communications.
Cellular operators typically experience losses and negative cash flow in
their initial years of operation due to the large capital investments required
for construction of their networks and the significant advertising and other
expenses needed to start the business. Consistent with this pattern, the Company
has incurred cumulative losses and negative cash flows from operations since
September 1, 1994. In addition, the Company has accumulated a significant
working capital deficiency due to these factors as well as the scheduled
maturities of its notes payable and long-term debt. The Company is currently
pursuing a debt offering and new banking facility which will enable the Company
to repay substantially all its existing indebtedness and fund its working
capital and capital expenditure needs. Should this plan not succeed, the Company
would be dependent upon capital contributions from its shareholders or other
financing in order to fund any working capital deficiencies and capital
expenditures. (See note 18 -- Subsequent event -- unaudited.)
Financial statements
During 1992, 1993 and through August 31, 1994, the Company was a
development stage enterprise. The financial statements for 1994 and 1993,
provided herein, reflect the results for such pre-operating period. Results for
the year ended December 31, 1994 may not be comparable as the Company commenced
commercial operations in September 1994. The financial statements as of March
31, 1995 and 1996 and for the three months ended March 31, 1995 and 1996 are
unaudited. In the opinion of management the interim financial statements include
all material adjustments (consisting only of adjustments of a normal and
recurring nature) necessary for a fair presentation of the results for such
periods. The results of operations for any interim period are not necessarily
indicative of the results of operations for a full year.
Convenience translation (unaudited)
For the convenience of the reader, the financial statements of the Company
contain translations of certain Colombian peso amounts into US dollars at the
March 31, 1996 exchange rate of 1,046.00 pesos per US dollar, the rate reported
by the Superintendency of Banking. No representation is made that the Colombian
peso amounts have been, could have been, or could be converted into US dollars
at such a rate or any other rates.
Significant accounting principles
(A) INFLATION ACCOUNTING
Financial statements are adjusted for the effects of inflation on the basis
of changes in the official Colombian middle-income Consumer Price Index ("CPI")
established by the National Administrative Statistics Department. This index is
applied, on a one-month lagging basis, to non-monetary assets and liabilities,
shareholders' equity and revenue and expense accounts. Monetary balances are not
adjusted because they reflect purchasing power of the currency as of the balance
sheet date. Foreign currency balances are not adjusted since they are translated
into Colombian pesos as of the date of the balance sheet and, consequently,
reflect the purchasing power of the currency on that date.
F-8
<PAGE> 124
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The resulting net gain or loss from exposure to inflation is reflected as
"Net Monetary Correction" in the statements of operations. Accordingly, the "Net
Monetary Correction" reflected in the statements of operations of the Company is
the result of netting or offsetting the following items:
- a credit for inflation affecting non-monetary assets;
- a charge for inflation affecting non-monetary liabilities and
shareholders' equity; and
- charges and credits representing inflation adjustments made to revenue
and expense items, respectively. Such adjustments are included within the
individual expense and income captions in the statements of operations.
Since monetary inflation adjustments contained within the individual
expense and income captions are offset in the Net Monetary Correction account in
the statements of operations, the net effect on net income or loss from the
expense and income inflation adjustments is zero. Therefore, the only impact on
the statements of operations of the effects of inflation is attributable to the
restatement of non-monetary assets, liabilities and shareholders' equity
accounts.
Unless expressly stated otherwise, the financial information included in
the accompanying financial statements and notes thereto for all periods
presented has been restated into constant Colombian pesos as of March 31, 1996
in order to express all financial information in purchasing power as of that
date. The rate of inflation and the CPI factor applied to the Company's nominal
financial statements data for each period is as follows:
<TABLE>
<CAPTION>
RATE OF INFLATION CPI CONSTANT
FOR THE FISCAL YEAR PESO FACTOR
------------------- ------------
<S> <C> <C>
Year ended December 31, 1992..................... 1.9592
Year ended December 31, 1993..................... 23.13% 1.5912
Year ended December 31, 1994..................... 22.08% 1.3034
Year ended December 31, 1995..................... 19.52% 1.0905
Three months ended March 31, 1995................ 8.29% 1.2036
Three months ended March 31, 1996................ 9.05% 1.0000
</TABLE>
(b) CASH AND CASH EQUIVALENTS
Short-term investments with original maturities of three months or less are
considered cash equivalents for the purposes of the cash flow statements due to
their high liquidity.
(c) INVENTORIES
Inventories primarily consist of telephones and accessories and are
recorded at the lower of average cost or market, adjusted for inflation.
(d) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost, adjusted for inflation.
Depreciation is calculated on the straight-line method over the estimated useful
lives of the assets, as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings............................................ 20
Machinery and equipment.............................. 10
Office equipment..................................... 10
Computers and communication equipment................ 5
Vehicles............................................. 5
</TABLE>
F-9
<PAGE> 125
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(e) INTANGIBLE ASSET
Intangible asset corresponds to the acquisition cost of the Concession to
provide cellular mobile telephone service in the Western region of Colombia and
is recorded at inflation-adjusted cost less accumulated amortization. The
Concession cost is amortized over nine years and seven months from September
1994, the start date of the Company's commercial operations, based on the units
of activation method. To calculate the monthly amortization charge, this method
utilizes the sum of the projected subscribers per month for each month during
the term of the Concession as the denominator and the sum of the subscribers per
month for each month in the reporting period as the numerator. The Company will
revise the underlying projections of subscribers on a periodic basis, and any
resulting impact on amortization expense will be accounted for in subsequent
periods.
(f) DEFERRED CHARGES
Deferred charges consist of organization and preoperating expense, deferred
monetary correction, software and leasehold improvements.
Costs and expenses incurred during the preoperating period are amortized by
the straight-line method over five years starting September 1, 1994, the start
date of the Company's commercial operations.
Deferred monetary correction represents the inflation adjustments on the
Company's non-monetary assets and equity during the preoperating phase, i.e.,
through August 31, 1994. The amounts are amortized over the life of the
Concession using the same method for amortization as that used for intangible
assets.
Purchased software is amortized over three years. Leasehold improvements
are amortized over the life of the rental agreement.
(g) ASSET REVALUATIONS
In addition to inflation adjustments, changes in the market value of
property, plant and equipment, for reasons other than inflation, are recorded
periodically. Positive revaluations related to inflation-adjusted net book value
are recorded in compensating balance sheet accounts which are shown in the asset
caption and the shareholders' equity caption "Revaluations". Should a
devaluation result, a provision is made in the statement of income (loss) and
the value of the asset is reduced.
Revaluations of assets must be made and recorded whenever management
becomes aware of a material difference between the market value and the
inflation-adjusted net book value of the assets. The revaluations are based on
the difference between technical appraisals of the replacement costs of such
assets and the respective inflation-adjusted net book values. Such appraisals
should be made every three years. As the Company commenced operations in 1994,
no appraisal has yet been made.
(h) FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions and balances denominated in a currency other
than Colombian pesos are translated monthly into Colombian pesos at market rates
certified by the Banking Superintendency. The exchange rate used to adjust the
resulting balance in US dollars at December 31, 1993, 1994 and 1995 was
Ps804.33, Ps831.60 and Ps987.65 per US$1.00, respectively. The resulting
difference is charged or credited to the statement of income (loss).
(i) RELATED PARTIES
The Company classifies any balances and transactions with its affiliates
and principal owners as related party transactions.
F-10
<PAGE> 126
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(j) REVENUE RECOGNITION
Cellular service revenues based upon subscriber usage and access and
special feature cellular service revenues are recognized at the time the service
is provided. Equipment sales are recognized at the time equipment is delivered
to the subscriber or to an agent.
(k) LEASE PAYMENTS
Lease payments are recorded as an expense. The total liability under lease
contracts is recorded in the memorandum accounts. The leased asset is only
booked when the purchase option is exercised.
(l) INCOME TAX
Effective from 1996, according to Law 223 of December 20, 1995, the Company
is liable for income tax at a statutory tax rate of 35%. Before this change in
the law, the Company was not liable for income tax and, therefore, no provision
has been recorded for income taxes. Fiscal losses may be carried forward for tax
purposes for five years. In 1996 and future years, the Company's tax liability
will be calculated on the greater of (i) net taxable income and (ii) presumed
income, which is the greater of 5% of shareholders' fiscal equity or 1.5% of
total assets, in each case at the beginning of the taxable year.
(m) NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during each year
presented.
(n) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturity
of three months or less to be cash equivalents. Substantially all of the
Company's cash and cash equivalents are denominated in Colombian Pesos. A
summary follows:
<TABLE>
<CAPTION>
1994 1995
------- -----
<S> <C> <C>
Cash....................................................... Ps 303 55
Bank accounts.............................................. 762 1,130
Repurchase agreements...................................... 3,965 5,276
Certificates of deposit.................................... -- 274
Bonds...................................................... 2,244 14
-------- -----
Ps7,274 6,749
======== =====
</TABLE>
Short-term investments earned interest at an average effective rate from
25.14% to 36.78% and 26.68% to 40.77% during the years ended December 31, 1994
and 1995, respectively.
F-11
<PAGE> 127
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) ACCOUNTS RECEIVABLE
The following is a summary of accounts receivable as of December 31:
<TABLE>
<CAPTION>
1994 1995
-------- ------
<S> <C> <C>
Customers................................................ Ps 5,505 11,545
Telephone company interconnection charges................ -- 1,575
Roaming.................................................. -- 1,059
Equipment and construction advances...................... 6,251 457
Other.................................................... 87 170
--------- ------
11,843 14,806
Allowance for doubtful accounts.......................... -- 5,109
--------- ------
Ps11,843 9,697
========= ======
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
1994 1995
-------- -------
<S> <C> <C>
Land.................................................. Ps -- 67
Construction in progress.............................. 10,865 6,620
Buildings............................................. -- 5,264
Equipment............................................. 29,785 55,867
Furniture and fixtures................................ 446 784
-------- -------
Ps41,096 68,602
======== =======
</TABLE>
(5) INTANGIBLE ASSET
Intangible asset consists of the following:
<TABLE>
<CAPTION>
1994 1995
--------- -------
<S> <C> <C>
Cellular concession.................................. Ps177,022 178,035
Less accumulated amortization........................ 213 4,020
--------- -------
Ps176,809 174,015
========= =======
</TABLE>
The Concession consists of the right to establish and develop a cellular
telephone communications business in the western region over a 10-year period in
exchange for a one-time concession fee, combined with quarterly royalty payments
in the amount of 5% of adjusted gross revenues to the Ministry of Communications
for the use of the cellular frequencies. The Company was awarded the Concession
in a competitive bidding process, based upon not only the price offered by the
Company, but also the technical capabilities and operational capacity, the
mobile cellular experience of its affiliates, and its financial and planning
capability. The Concession commenced March 28, 1994 and may be renewed for an
additional 10-year term. The purchase price for the Concession was Ps 123.1
billion (actual pesos). The Concession may not be assigned during the first
three years from the date of signing. However, once this period has elapsed, it
may be assigned subject to authorization by the Ministry of Communications. At
the end of the Concession's term, those Company assets that are directly related
to the Concession are to revert to the Ministry of Communications without
compensation.
F-12
<PAGE> 128
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) DEFERRED CHARGES
Deferred charges consist of:
<TABLE>
<CAPTION>
1994 1995
-------- ------
<S> <C> <C>
Organization and preoperating.......................... Ps14,832 14,677
Deferred monetary correction........................... 10,440 8,735
Software............................................... 156 1,358
Leasehold improvements................................. 49 459
------- -------
25,477 25,229
Less accumulated amortization.......................... 1,146 4,879
------- -------
Ps24,331 20,350
======= =======
</TABLE>
Deferred monetary correction represents the inflation adjustment on the
portion of the Company's shareholders' equity used to finance the Concession,
deferred charges and construction in progress. Since debt is a monetary
liability, no inflation adjustment is required, however, since shareholders'
equity is non-monetary, inflation adjustments are applied. Such resulting
charges were capitalized during the preoperating period and are amortized using
the same method for amortization or depreciation as that used for the respective
asset.
(7) MEMORANDUM ACCOUNTS
Memorandum accounts represent additional disclosures mandated by Colombian
generally accepted accounting principles. Such items include guarantees and
commitments.
A summary of memorandum accounts as of December 31, follows:
<TABLE>
<CAPTION>
1994 1995
-------- ------
<S> <C> <C>
Debtor:
Goods and securities used as collateral.............. Ps 4,432 --
Unused lines of credit............................... -- 1,349
Purchase and sale agreements......................... 2,411 --
Leased assets(1)..................................... 281 41,954
Inflation adjustments on assets...................... 18,894 56,063
------- -------
26,018 99,366
Creditor:
Inflation adjustment on shareholders' equity......... 34,100 33,717
------- -------
Ps 8,082 65,649
======= =======
</TABLE>
- ---------------
(1) This represents the aggregate amount (without discount to present value) of
minimum payments under the lease agreements.
F-13
<PAGE> 129
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(8) NOTES PAYABLE TO BANKS
Notes payable to banks as of December 31, consist of the following:
<TABLE>
<CAPTION>
1994 1995
-------- -----
<S> <C> <C>
Bank overdrafts......................................... Ps 516 261
Letters of credit, in U.S. dollars, interest rate
between 7.60% and 14.75%.............................. 16,698 1,610
Bank acceptances........................................ 56 --
-------- -----
Ps17,270 1,871
======== =====
</TABLE>
(9) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1994 1995
-------- -------
<S> <C> <C>
Loans payable to banks and corporations in Colombian
pesos, interest rate between 33.48% and 40.24%,
maturing
in 2001............................................. Ps 4,237 53,167
Loans payable to banks and corporation in US dollars
with interest between 8.06% and 14.06%, maturing in
2000................................................ 90,180 112,306
-------- -------
94,417 165,473
Less current installments............................. 32,517 81,796
-------- -------
Long-term debt, excluding current installments........ Ps61,900 83,677
======== =======
</TABLE>
Maturities of long-term debt follow:
<TABLE>
<S> <C>
1997.............................................. Ps28,032
1998.............................................. 26,889
1999.............................................. 23,333
2000.............................................. 5,069
Thereafter........................................ 354
--------
Ps83,677
========
</TABLE>
A guaranty trust was set up to serve as the main guaranty for the Company's
financing obligations. The trust was set up by eleven trust companies, all of
them subsidiaries of Occel's lender banks. To facilitate the operation of the
trust, one of the trust companies was appointed by the others to serve as a
leader and administrator of the trust.
The value of the trust is 70% of the net present value of the revenues of
the Company for the first 10 years of operations. The value of the trust is
revised every six months. The value of the trust is divided proportionally among
all the participating trust companies; each company issues certificates of
guarantee as requested. When Occel arranges a loan, both Occel and the creditor
bank, request the leader of the trust for the issuance of a certificate of
guaranty in the name of the creditor bank. The leader selects in turn, one trust
company to issue such certificate. The certificate is issued in the same amount
of the loan. The difference between the value of the trust and the total of the
certificates issued is available for the issuance of more certificates if
needed.
Additionally, US$50,000,000 are guaranteed by certain Colombian banks
including certain indirect shareholders of the Company and are backed by assets
of the trust.
F-14
<PAGE> 130
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(10) ACCOUNTS PAYABLE
Accounts payable consist of the following:
<TABLE>
<CAPTION>
1994 1995
-------- ------
<S> <C> <C>
Trade.................................................. Ps14,617 16,718
Advance received from shareholders..................... -- 2,245
Other.................................................. 651 239
-------- ------
Ps15,268 19,202
======== ======
</TABLE>
The advance received from shareholders was converted into additional common
stock subsequent to December 31, 1995 (see note 16).
(11) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1994 1995
------- -----
<S> <C> <C>
Value added tax.......................................... Ps 242 1,837
Due to Municipality of Medellin (see note 14)............ -- 329
Labor liabilities........................................ 133 219
Deferred income.......................................... 73 215
Technical services....................................... 1,268 65
Other.................................................... 922 153
------- -----
Ps2,638 2,818
======= =====
</TABLE>
(12) SHAREHOLDERS' EQUITY
On September 5, 1995 the Shareholders increased the authorized capital to
Ps 91,964, representing 91,964,254 shares, with a nominal value of one thousand
pesos each.
In accordance with current regulations, the Company is required to maintain
a legal reserve, setting aside a minimum of 10% of net income each year until
the reserve reaches 50% of the subscribed capital. Amounts appropriated to legal
reserve cannot be reduced below 50% of the subscribed capital unless they are
applied to losses in excess of retained earnings.
In accordance with exchange control provisions in effect, there is no limit
on dividend remittances abroad. Article 133 of the law 6 of 1992 established a
rate of 10% withholding at source on remittance of dividends or equity earned by
companies or other foreign entities without a domicile in the country. This rate
was effective through 1994, decreased to 8% for 1995 and will be reduced to 7%
for 1996 and thereafter.
(13) OPERATIONS WITH RELATED PARTIES
The following is a summary of the balances with related parties as of
December 31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
-------- ------
<S> <C> <C>
Accounts receivable.................................... Ps 176 333
Property, plant and equipment.......................... 306 308
Deferred charges....................................... 4,205 --
Memorandum accounts.................................... 281 3,989
Notes payable to banks and long-term debt.............. 27,592 23,671
Accounts payable....................................... 2,550 4,851
</TABLE>
F-15
<PAGE> 131
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Notes payable to banks and long-term debt represent amounts borrowed from
Colombian financial institutions affiliated with certain shareholders of the
Company on terms similar to borrowings from non-related party financial
institutions.
The following is a summary of the transactions with related parties during
the years ended December 31, 1993, 1994 and 1995:
<TABLE>
<CAPTION>
1993 1994 1995
---- ----- -----
<S> <C> <C> <C>
Revenues............................................ Ps -- 686 3,383
Cost and expenses................................... -- 918 4,413
Other expenses:
Interest.......................................... -- 1,483 3,731
Foreign exchange difference....................... -- 398 2,797
</TABLE>
(14) COMMITMENTS AND CONTINGENCIES
The Company has agreements with telephone companies in the Western Region
of the Country which establish the technical, operative, administrative,
economic, financial and judicial rights and obligations that regulate the access
and use of the public switched telephone and the cellular mobile telephone
networks, as well as the billing and collection conditions.
The Company signed a letter of intent to enter into an interconnection
agreement in 1995 with the "Empresa Nacional de Telecomunicaciones-Telecom".
Such letter of intent includes provisions for the number of connection points,
the method by which signals must be received and transmitted, fraud control,
billing, damage liability and the assumption of responsibility for the costs of
interconnection.
The Company has signed financial leasing agreements with purchase options
for the acquisition of base stations, microwave links and vehicles, with
maturities up to the year 2000. The minimum leasing payments as of December 31,
1995 are as follows:
<TABLE>
<S> <C>
1996.............................................. Ps 9,162
1997.............................................. 9,110
1998.............................................. 8,311
1999.............................................. 7,201
2000.............................................. 8,170
--------
Ps41,954
========
</TABLE>
On August 17, 1994, the municipality of Medellin through Resolution No. 019
imposed a monthly tax on cellular subscribers (the "Cellular Services Tax")
whose calls use base stations located in Medellin. Subsequently, the mayor of
Medellin, on January 23, 1995, regulated the billing and collection of this tax
through Municipal Decree 1244 (the "Decree"), which imposed upon the two
cellular operators of the Western Region the obligation to, in each of their
billing systems, determine, bill, collect and transfer this tax. Both
regulations have been challenged in court by the Company on the grounds of not
being consistent and in conformity with current higher ranking law. Medellin's
tax authorities through Resolution No. 005, issued on March 6, 1996, determined
that Occel's transfer obligation under the Decree, together with interest, for
the period through October 31, 1995 was Ps 317 million (US$303,000). The Company
appealed this determination on March 14, 1996, and a decision is still pending.
Occel has not collected the Cellular Services Tax from its customers because it
believes that the tax is illegal and that the challenges against Resolution No.
019 and the Decree will be successful and, consequently, Resolution No. 005 will
not be upheld. In the event of an unfavorable decision, the Company believes
that it would be able to collect from its registered customers a portion of the
Cellular Services Taxes. At December 31, 1995 the Company recorded Ps 329
million
F-16
<PAGE> 132
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(US$315,000), excluding interest, as accounts receivable and accrued expenses.
No provision has been made for any amounts that may not be recoverable from
customers.
When the proposal for the Concession was presented to the Ministry of
Communications, "A" Band cellular operators, including Occel, were not subject
to income taxes. However, as mentioned in note 1(l), "A" Band cellular operators
are now subject to income taxes. As this affects the economic return on the
Concession, the Company has filed a claim against the Ministry of
Communications. Should this claim not be accepted by the Ministry, or should the
Ministry not recognize an adequate compensation, the Company will go to an
arbitration tribunal as established under the Concession. There is no income tax
liability for 1995 or earlier years. The Company's net losses may be carried
forward for five years.
(15) MONETARY CORRECTION
The principal effects of inflation on the affected accounts in the
financial statements follow:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Balance sheets:
Inventories............................................. Ps -- -- 514
Property, plant and equipment, net...................... 30 539 8,764
Intangible asset, net................................... -- 16,543 29,698
Deferred charges........................................ 1,218 1,383 2,204
Deferred monetary correction............................ (514) (660) (2,085)
Revaluation of shareholders' equity..................... (734) (14,957) (20,603)
-------- -------- --------
-- 2,848 18,492
-------- -------- --------
Operations:
Revenues................................................ -- (114) (2,118)
Cost and expenses....................................... -- 334 3,048
Other (income) expense, net............................. (16) (186) 2,359
-------- -------- --------
(16) 34 3,289
-------- -------- --------
Net monetary correction income (expense)................ Ps (16) 2,882 21,781
======== ======== ========
</TABLE>
During the preoperating period, the inflationary effect calculated on
intangible assets and deferred charges was recorded as a deferred credit for
monetary correction, and the inflationary effect arising from the adjustment to
shareholders' equity that financed such assets was recorded as a deferred charge
for monetary correction. Deferred balances are amortized using the same method
as for the Concession. Starting in September, 1994, when the Company commenced
operations, all inflationary effects are recognized as monetary correction in
the statements of income (loss).
(16) SUBSEQUENT EVENT
In January and February 1996, the shareholders subscribed and paid for Ps
13,000 (12,999,999 shares) of additional common stock.
(17) SUMMARY OF THE SIGNIFICANT DIFFERENCES BETWEEN COLOMBIAN AND UNITED STATES
ACCOUNTING PRINCIPLES
The Company's financial statements are prepared in accordance with
Colombian generally accepted accounting principles (Colombian GAAP), which
differ in certain significant respects from accounting principles generally
accepted in the United States (U.S. GAAP) as described below. The effects of
inflation adjustments have not been eliminated in the reconciliation to U.S.
GAAP nor has the Company reflected monetary gains or losses associated with the
various U.S. GAAP adjustments.
F-17
<PAGE> 133
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
All material differences between Colombian GAAP and U.S. GAAP and the
effect on net income/loss and total shareholders' equity are presented below.
The explanation of the adjustments follows.
RECONCILIATION OF NET INCOME (LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
----------- ------- -------
(EXPRESSED IN MILLIONS OF CONSTANT
COLOMBIAN PESOS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net income/(loss) reported under Colombian GAAP............ Ps 212 (3,084) (43,773)
U.S. GAAP adjustments for:
(a) Capitalized interest.............................. -- 7 437
(b) Capitalization of leased assets................... -- 173 572
(c) Amortization of intangible asset.................. -- (5,464) (11,190)
(d) Preoperating expenses............................. (3,711) (9,762) 3,265
(e) Deferred charges and credits for monetary
correction.......................................... (189) 631 1,872
(f) Effect in revaluation of Shareholders' equity..... 112 950 3,813
------------ ------- -------
Net loss under U.S. GAAP................................... Ps (3,576) (16,549) (45,004)
============ ======= =======
Net loss per share......................................... Ps(1,882.11) (296.05) (644.76)
Weighted average shares outstanding in millions............ 1.9 55.9 69.8
</TABLE>
RECONCILIATION OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
--------- -------
<S> <C> <C>
Shareholders' equity reported under Colombian GAAP..................... Ps121,866 78,790
U.S. GAAP adjustments for:
(a) Capitalized interest.......................................... 7 444
(b) Capitalization of leased assets............................... 173 745
(c) Amortization of intangible asset.............................. (5,464) (16,654)
(d) Preoperating expenses......................................... (13,796) (10,531)
(e) Deferred charges and credits for monetary correction.......... 278 2,150
(f) Effect in revaluation of Shareholders' equity:
From net loss................................................... 1,062 4,875
From effects of inflation accounting............................ (1,062) (4,875)
--------- -------
Shareholders' equity under U.S. GAAP................................... Ps103,064 54,944
========= =======
</TABLE>
ANALYSIS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- ------- -------
<S> <C> <C> <C>
Balance at beginning of year................................. Ps 3,028 1,004 103,064
Issuance of common stock................................... 1,463 97,426 --
Effects of inflation accounting............................ 349 10,526 15,080
Effects of constant peso restatement....................... (260) 10,657 (18,196)
Net income (loss).......................................... (3,576) (16,549) (45,004)
------- ------- -------
Balance at end of year....................................... Ps 1,004 103,064 54,944
======= ======= =======
</TABLE>
F-18
<PAGE> 134
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(a) CAPITALIZED INTEREST
Under Colombian GAAP, interest was not capitalized relating to the
construction of buildings as there were no loans specifically related to the
buildings.
Under U.S. GAAP, in accordance with the provisions of SFAS 34, interest
incurred on borrowings is capitalized to extent that borrowings do not exceed
construction in progress. Such treatment increases the amount capitalized and
reduces interest expense. Additionally, the U.S. GAAP interest expense
adjustment excludes foreign exchange gains and losses on foreign currency
borrowings.
(b) CAPITAL LEASES
Under Colombian GAAP, lease payments are recorded as an expense. The total
liability under lease contracts is recorded in memorandum accounts. The leased
asset is only booked when the purchase option is exercised.
Under U.S. GAAP, equipment under capital leases is recorded as an asset and
a liability is recorded for the present value of minimum lease payments at the
inception of the lease. This equipment is depreciated over the estimated useful
life of the asset.
(c) INTANGIBLE ASSETS
Under Colombian GAAP, the intangible asset, consisting of the Concession,
is amortized over the life of the Concession using the units of activation
method. Under U.S. GAAP, amortization is calculated over the life of the
Concession using the straight-line method.
(d) PREOPERATING EXPENSES
Under Colombian GAAP, preoperating expenses are capitalized during the
preoperating period and amortized when commercial operations begin. Under U.S.
GAAP such costs would be expensed as incurred.
(e) DEFERRED CHARGES AND CREDITS FOR MONETARY CORRECTION
In accordance with Colombian GAAP for inflation accounting, the effects of
inflation on preoperating activities, construction in process and the respective
portion of shareholders' equity used to finance such charges are deferred and
amortized over the life of the related assets when the Company becomes
operational.
Under U.S. GAAP, such amounts may not be deferred. Accordingly, they are
expensed when incurred and the related amortization is reversed and financial
statements are prepared in accordance with the historical cost convention.
(f) EFFECT IN REVALUATION OF SHAREHOLDERS' EQUITY
This adjustment gives effect to the revaluation of shareholders' equity
arising from the above reconciling items.
ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of accounts receivable
resulting from customer financing plans and other receivables from customers and
distributors. Concentration of credit risk with respect to such receivables is
limited to a large number of customers comprising the Company's customer base.
However, the Company's customers are concentrated in Colombia and the ability of
the customers to pay amounts due depends, in part, upon the
F-19
<PAGE> 135
OCCIDENTE Y CARIBE CELULAR S.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
general condition of the Colombian economy. Generally, the Company does not
require collateral or other security to support receivables.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF
Effective for fiscal years beginning after December 15, 1995 SFAS No. 121
requires that long-lived assets and certain identifiable intangibles held by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company has determined that adoption of SFAS 121 will not have any material
impact on Occel's financial position or results of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, trade and other receivables and accounts
payables: the carrying amount approximates fair value because of the short
maturity of these instruments.
Long and short-term debt: the carrying amounts of the Company's variable
rate borrowings under its credit agreements approximate their fair value. The
fair value of the Company's fixed rate debt is estimated using discounted cash
flow analyses, based on the Company's current incremental borrowing rates.
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- ----------
<S> <C> <C>
Variable rate loans..................................... Ps160,411 160,411
Fixed rate loans........................................ 5,062 5,084
--------- -------
Ps165,473 165,495
========= =======
</TABLE>
(18) SUBSEQUENT EVENT (UNAUDITED)
On June 7, 1996, pursuant to an offering of 190,745 units each of which
consisted of US$1,000 principal amount at maturity of 14% Senior Discount Notes
due 2004 and four warrants to purchase 5.709 shares of Class B common stock, the
Company raised US$100.0 million (gross proceeds). Concurrently with the issuance
of the units, the Company borrowed US$80.0 million under a bank facility, which
loans are secured by security interests in, among other things, (i) all
receivables originated from the provision of cellular communications and roaming
and interconnection services, (ii) the pledge of 99.99% of the Company's
outstanding stock and (iii) the Concession. The aggregate net proceeds of the
Offering and the borrowings under the Bank Facility were US$171.5 million. Such
net proceeds were used to repay substantially all existing indebtedness of the
Company and for working capital.
F-20
<PAGE> 136
ANNEX A
GLOSSARY OF CERTAIN TELECOMMUNICATIONS TERMS
<TABLE>
<S> <C>
active subscribers: Reported subscribers currently generating
revenue, which consist of reported subscribers
minus disconnected subscribers.
Analog: A transmission method employing a continuous
electrical signal that varies in amplitude or
frequency in response to changes in sound, light,
position, etc., impressed on transducer in the
sending device.
Band: A range of frequencies between two defined
limits.
Bandwidth: The relative range of frequencies that can be
passed through a transmission medium without
distortion. The greater the bandwidth, the
greater the information carrying capacity.
Bandwidth is measured in hertz.
Base Station: In mobile telecommunications, the central radio
transmitter/receiver that maintains
communications with the cellular telephone sets
within a given cell. Each cell or microcell has
its own base station; each base station in turn
is interconnected with other cells' base stations
and with the public switched telephone network.
CDMA: Code Division Multiple Access, a standard of
digital cellular technology which allows for
multiple conversations to be transported on a
single radio carrier using digital "tags".
Systems using this standard have not been placed
into widespread commercial use.
Cell Site: The location of a transmitting/receiving station
serving a given geographic area in a cellular
communications system.
Channel: A pathway for the transmission of information
between a sending point and a receiving point.
Churn: Monthly disconnections expressed as a percentage
of active subscribers at the beginning of the
month.
Covered pops: The number of pops in a defined area for whom a
cellular signal is accessible.
CPE: Customer Premises Equipment.
deactivated subscribers Subscribers who have been permanently
(deactivations): deactivated, excluded from the billing system and
referred to the legal area for account
settlement. These subscribers are no longer
included in the total of reported subscribers.
Digital: A method of storing, processing and transmitting
information through the use of distinct
electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission and
switching technologies employ a sequence of
discrete, distinct pulses to represent
information, as opposed to the continuous analog
signal.
</TABLE>
A-1
<PAGE> 137
<TABLE>
<S> <C>
disconnected subscribers Subscribers whose access to the network has been
(disconnections): temporarily disconnected and are under evaluation
by the Company for reconnection or permanent
deactivation, but who nevertheless remain
included in the total of reported subscribers.
Hand-off: The act of switching a call in progress from one
weak-signal site to a strong-signal site without
disrupting the call. In current cellular systems,
this function is performed by the MTSO, which
monitors the signal strength of ongoing calls
continuously. In cellular networks, both the MTSO
and the user's equipment participate in the
hand-off process.
Hertz: The unit measuring the frequency with which an
alternating electromagnetic signal cycles between
its lowest and highest states. One hertz
(abbreviated Hz) equals one cycle per second. kHz
(kilohertz) stands for thousands of hertz; MHz
(megahertz) stands for millions of hertz and hz
(gigahertz) stands for billions of hertz.
Microwave: The radio band transmission between 300 MHz -- 32
hz.
Microwave Hop: The basic microwave transmission path (link),
constituted by a couple of
transmitters/receivers. The microwave frequency
band requires "line of sight" between the two
sides of the hop. Depending on the distance and
topographical conditions, more than one "hop"
could be necessary to establish a complete
microwave transmission link.
MTSO: Mobile Telephone Switching Office; the computer-
controlled MTSO selects the appropriate path for
the transmission of a cellular call and monitors
the hand-off process. The MTSO allows cellular
telephone users to move freely from one cell to
another across the service area while continuing
their calls.
Penetration: A cellular operator's subscribers within a
defined area divided by total pops within that
area. Colombian figures are based on reported,
not active, subscribers. Penetration rates for
countries other than Colombia are based on
publicly available figures, which may calculate
subscribers differently than in Colombia.
pops: pops is the established population of the market
and it is currently the most common technique for
the measuring the relative size of a cellular
telecommunications business.
PSTN: Public Switched Telephone Network.
REDCEL: A national cellular association composed of the A
Band operators in the Western, Eastern and
Atlantic Regions to enable their respective
subscribers to make calls throughout the country
and to enhance their competitive position.
</TABLE>
A-2
<PAGE> 138
<TABLE>
<S> <C>
reported subscribers: The subscribers as reported by the Company to the
Colombian Ministry of Communications. Prior to
September 1995, in accordance with the reporting
guidelines of the Ministry of Communications, the
Company filed quarterly reports which did not
cover calendar quarters, but lagged by
approximately one month. For purposes of
consistency, reported subscribers set forth
herein for periods prior to September 1995 have
been calculated to conform to calendar quarters.
Consistent with the Company's interpretation of
the Ministry's reporting guidelines and with what
the Company believes to be the common
interpretation of cellular operators in Colombia,
the Company currently includes in such term
subscribers who have been temporarily
disconnected and are under evaluation by the
Company for reconnection or permanent
deactivation. Prior to September 1995, reported
subscribers also included permanently deactivated
subscribers.
Repeater: A device which automatically retransmits received
signals on an outbound circuit, generally in an
amplified form.
Roaming: A service offered by mobile communications
providers which allows a subscriber to use his or
her cellular telephone while in the service area
of another carrier.
Site or Cell Splitting The process of dividing sites or cells into
or Sectorization: smaller coverage areas by reducing their power
output and the antenna height of the station
transmitter. Site or cell splitting (or
sectoring) allows for the further reuse of
frequencies by a mobile communications system.
Switch: A device that opens or closes circuits or selects
the paths or circuits to be used for transmission
of information. Switching is the process of
interconnecting circuits to form a transmission
path between users.
TDMA: Time Division Multiple Access, like AMPS, divides
the radio spectrum into 30 kHz channels. The
distinguishing feature of TDMA is it employs
digital techniques at the base station and in the
cellular radio to subdivide each channel into
time slots which can be assigned to different
users. Voice, data and access information are
converted to digital information that is sent and
received in bursts over the time slots. These
bursts can be encoded, transmitted and decoded in
a fraction of the time required to produce sound.
The result is that only a fraction of the air
time is used, and other subscribers can use the
remaining time on a radio channel. Current IS-54
TDMA technology allows three subscribers to share
one channel without interference. With improved
compression techniques, six subscribers could
share a channel.
</TABLE>
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<PAGE> 139
<TABLE>
<S> <C>
TRC: Colombian Telecommunications Regulatory
Commission.
VOZAVOZ: The Company's primary cellular service.
Wireline Telephone: Conventional landline telephone.
</TABLE>
A-4
<PAGE> 140
ANNEX B
The following information has been made public by the Republic of Colombia
and has not been prepared or independently verified by the Company or the
Initial Purchasers or any of their respective affiliates or advisers.
The Company is including such information solely because it is readily
available and may be useful to a reader. Such information is not, nor is its
inclusion herein meant to suggest that it is, all the information concerning
Colombia that is or may be material to an investor. Moreover, such information
pertains to Colombia as a whole and is not specific to the Western Region, the
location of the Company's business, and should not be viewed as reflective of
the Western Region. The following information should be read in conjunction with
the information set forth under "Risk Factors -- Risks Related to Colombian
Political, Economic and Social Factors". Investors who wish to know more about
Colombia are urged to consult the wide variety of information available from
public sources.
REPUBLIC OF COLOMBIA
A. OVERVIEW
Since 1950, Colombia has enjoyed positive real economic growth in every
year (ranging from a low of 0.95% in 1982 to a high of 8.47% in 1978) and
relatively stable rates of inflation (with a low of 2.2% in 1955 and a high of
32.6% in 1963). Inflation (as measured by the Colombian consumer price index
("CPI")) averaged 25.9% between 1990 and 1994. Unlike other major Latin American
countries, Colombia was not forced to restructure its debt with foreign
creditors during the 1980s, and instead entered into voluntarily syndicated loan
agreements to refinance certain maturities of its commercial bank debt. During
the same period, Colombia maintained access to new borrowings through
multilateral and bilateral credits. Colombia has regularly paid all principal
and interest payments on its external debt for over 60 years.
Former President Cesar Gaviria, upon taking office in August 1990,
introduced a program called Apertura (opening), designed to transform the
economy from a relatively protected one to a modern, open economy, and to
redefine the government's role in the economy. Under Apertura, the government,
among other measures:
- Removed restrictions on foreign investment generally, and eliminated
restrictions on remittances of capital and dividends;
- Eliminated import quotas and, during the 1989-1994 period, reduced
tariffs from an average effective rate of 43.7% to 11.6% and entered into
free trade agreements with Venezuela and some of its other regional
trading partners;
- Granted greater independence to Banco de la Republica, the country's
central bank;
- Reduced foreign exchange controls;
- Began to liberalize labor laws, permitting greater flexibility in labor
contracts and eliminating restrictions on severance and furloughs of
workers, and partially privatized the pension system; and
- Undertook a program of privatizing certain state-owned companies and
financial institutions.
Under the Samper administration, the Apertura has been modified, and
investors should consult other sources for an evaluation of the success of the
program to date.
GEOGRAPHY
Colombia is the fourth largest country in South America, with a territory
of 441,020 square miles (1,141,748 square kilometers). Located on the
northwestern corner of the South American continent, Colombia borders Panama and
the Caribbean Sea on the north, Peru and Ecuador on the south, Venezuela and
Brazil on the east and the Pacific Ocean on the west.
B-1
<PAGE> 141
GOVERNMENT AND POLITICAL PARTIES
The Republic of Colombia is one of the oldest democracies in the Americas,
with regular transitions of power between successive administrations since 1957.
The main political parties are the Liberal Party (to which President Samper
belongs) and the Partido Social Conservador. There are other minority parties,
including the Alianza Democratica M-19, a former guerrilla organization that
recently became a recognized political party.
In 1991, a popularly elected Constitutional Assembly approved a new
Constitution, replacing the Constitution of 1886. The main features of the new
Constitution include further governmental decentralization, increased
Congressional powers and the creation of several new public agencies. A number
of judicial reforms were also introduced to improve the government's ability to
combat the guerrilla and narcotic-related violence, and to enhance control and
supervision over public officials.
B. ECONOMY
GROSS DOMESTIC PRODUCT
Traditionally, agriculture has played a large role in the Colombian
economy, accounting for an estimated 19.7% of GDP in 1994, compared to 20.0% of
GDP for industry. In 1994, agricultural activity increased by 2.0% in real terms
(despite a decrease in coffee production of 11.8%), industrial activity
increased by 2.8% (due to a 4.7% increase in manufacturing partly offset by an
11.7% decrease in coffee processing), construction increased by 11.8%, and
services increased by 8.3%. Between 1990 and 1994, GDP grew at an average annual
rate of 4.2%. Real GDP growth for 1994 was 5.7%, which was achieved despite
lower prices for commodities, especially oil.
The following table sets forth the annual change in Colombia's real GDP by
sector for the periods indicated.
REAL GDP GROWTH BY SECTOR
<TABLE>
<CAPTION>
1990 1991 1992 1993(1) 1994(1)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Agriculture, Livestock, Fishing,
Forestry and Hunting
Coffee............................................................ 28.4% 15.3% (0.5)% (15.6)% (11.8)%
Other Agriculture and Livestock................................... 3.2 2.5 (2.2) 5.3 3.7
Fishing, Forestry and Hunting..................................... 3.9 5.5 1.3 (2.5) 7.6
------- ------- ------- ------- -------
Total Agriculture........................................... 5.8 4.2 (1.8) 2.1 2.0
Industry
Coffee Processing................................................. 21.9 (7.2) 22.9 (17.0) (11.7)
Manufacturing..................................................... 2.0 2.1 1.9 5.0 4.7
------- ------- ------- ------- -------
Total Industry.............................................. 4.2 0.8 4.5 1.8 2.8
Mining(2)........................................................... 5.9 (0.6) (3.9) (4.0) 0.6
Construction........................................................ (13.1) 0.2 7.3 6.0 11.8
Services
Transportation and Storage........................................ 1.7 2.6 5.9 3.1 5.8
Communications.................................................... 12.0 6.4 3.1 5.0 11.6
Retail, Restaurants and Hotels.................................... 2.8 0.4 2.6 7.4 5.0
Financial Services................................................ 9.3 6.2 4.1 11.0 15.0
Housing........................................................... 2.9 3.5 2.9 5.0 5.0
Personal Services................................................. 2.6 3.7 1.0 3.1 5.5
Government........................................................ 2.9 (0.3) 12.5 5.0 11.7
Domestic Services................................................. 2.0 3.7 1.0 3.1 3.0
Utilities......................................................... 3.8 3.1 (5.8) 11.0 6.6
------- ------- ------- ------- -------
Total Services...................................................... 4.0 2.5 4.7 6.2 8.3
------- ------- ------- ------- -------
Subtotal............................................................ 3.9 2.3 2.9 4.0 5.7
Minus: Imputed Banking Services..................................... (3.4) 9.3 (3.6) 15.7 20.8
</TABLE>
B-2
<PAGE> 142
<TABLE>
<CAPTION>
1990 1991 1992 1993(1) 1994(1)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Plus: Duties and Tariffs on Imports................................. 9.8 (1.4) 36.7 46.0 16.0
------- ------- ------- ------- -------
Real GDP............................................................ 4.3 2.0 4.0 5.2 5.7
======= ======= ======= ======= =======
</TABLE>
- ---------------
(1) Estimated
(2) Includes petroleum.
Source: DANE
FOREIGN TRADE
Colombia's trade has historically been, and continues to be, dominated by
the export of raw materials and the import of intermediate and capital goods.
The following table shows the composition of Colombia's exports for the
periods indicated.
EXPORTS (FOB) BY GROUPS OF PRODUCTS
<TABLE>
<CAPTION>
JAN.-
AUGUST % OF
1990 1991 1992 1993 1994 1995(1) TOTAL
---------- ---------- ---------- ---------- ---------- ---------- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Mining
Oil and its Derivatives............ US$1,951.0 US$1,460.5 US$1,395.6 US$1,323.0 US$1,318.2 US$1,296.6 19.4 %
Coal............................... 544.8 630.2 555.4 567.0 552.9 349.5 5.2
Emeralds........................... 112.4 142.9 179.7 399.6 422.3 387.7 5.8
Nickel............................. 146.3 143.5 125.1 101.8 118.8 122.8 1.8
Gold(2)............................ 374.4 408.5 363.5 312.5 304.7 182.4 2.7
Platinum........................... 1.0 2.3 0.1 15.4 37.2 12.1 0.2
Others(3).......................... 14.0 25.7 17.4 14.4 21.1 15.6 0.2
-------- -------- -------- -------- -------- -------- -----
3,143.9 2,813.6 2,636.8 2,733.9 2,775.2 2,366.7 35.5
Agriculture, Livestock, Forestry and
Fishing, except Coffee............. 812.3 1,103.0 1,095.6 1,062.7 1,239.0 827.1 12.4
Coffee............................... 1,399.2 1,323.6 1,258.9 1,139.7 1,990.1 1,212.8 18.2
Industry
Foods, Beverages and Tobacco....... 274.6 254.3 345.1 334.1 425.3 380.0 5.7
Textiles and Apparel(4)............ 817.3 1,013.7 905.8 1,042.8 1,033.9 772.3 11.6
Wood and its Derivatives........... 9.9 17.0 18.7 18.9 13.8 10.1 0.2
Paper and its Byproducts........... 122.9 175.6 184.0 198.5 214.1 163.2 2.4
Chemicals.......................... 233.2 345.1 389.8 441.0 544.8 543.9 8.2
Nonmetallic Minerals............... 79.4 120.7 105.0 109.5 119.5 84.5 1.3
Iron and Steel Industries.......... 69.6 109.0 101.7 90.8 126.1 108.8 1.6
Machinery and Equipment............ 74.5 144.4 152.5 155.9 164.0 113.0 1.7
Other Industries(5)................ 43.2 87.4 69.8 101.3 110.4 86.5 1.3
-------- -------- -------- -------- -------- -------- -----
1,724.6 2,267.2 2,272.4 2,492.8 2,751.9 2,262.3 33.9
-------- -------- -------- -------- -------- -------- -----
Total Exports........................ US$7,080.0 US$7,507.4 US$7,263.7 US$7,429.1 US$8,756.2 US$6,668.9 100.0%
======== ======== ======== ======== ======== ======== =====
</TABLE>
- ---------------
(1) Estimated.
(2) Includes domestic purchases of gold by Banco de la Republica.
(3) Includes salt, clay and sand mining and manufacture of fertilizers,
chemicals and other products.
(4) Includes leather, leather products and plastic.
(5) Includes jewelry, musical instruments, sporting goods and other products.
Source: Banco de la Republica, based on information provided by DANE.
B-3
<PAGE> 143
The following table shows the composition of Colombia's major imports for
the periods indicated.
IMPORTS (CIF)
<TABLE>
<CAPTION>
JAN.-
JUNE % OF
1990 1991 1992 1993 1994(1) 1995(1) TOTAL
---------- ---------- ---------- ---------- ----------- ---------- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
Consumer Goods
Non-Durable....................... US$ 243.0 US$ 280.4 US$ 445.2 US$ 676.5 US$ 1,010.1 US$ 564.0 8.4%
Durable
Autos........................... 103.8 164.2 276.1 787.1 989.1 490.0 7.3
Arms and Military
Equipment(2).................. 132.3 104.6 40.0 125.5 30.8 16.0 0.2
Others(3)....................... 72.1 73.6 167.0 226.1 305.1 174.0 2.6
-------- -------- -------- -------- --------- -------- -----
308.2 342.4 483.1 1,138.7 1,325.0 680.0 10.2
-------- -------- -------- -------- --------- -------- -----
551.1 622.8 928.3 1,815.2 2,335.1 1,244.0 18.6
Raw Materials and Intermediate Goods
Fuels(4).......................... 327.6 283.7 344.3 361.5 322.2 213.1 3.2
Agricultural...................... 251.1 197.6 251.2 228.4 296.1 167.8 2.5
Industrial
Chemical and Pharmaceutical
Products...................... 1,135.7 1,101.5 1,241.5 1,529.6 1,788.5 1,140.0 17.0
Mineral Products................ 704.4 693.4 817.2 1,066.1 1,264.0 749.2 11.2
Non-food Agricultural
Products...................... 334.2 351.1 514.2 676.6 759.3 463.0 6.9
Food Products................... 213.9 147.0 225.5 317.2 368.2 257.0 3.8
-------- -------- -------- -------- --------- -------- -----
2,388.2 2,293.0 2,798.4 3,589.5 4,180.0 2,609.2 39.0
-------- -------- -------- -------- --------- -------- -----
2,966.9 2,774.3 3,393.9 4,179.4 4,798.3 2,990.1 44.7
Capital Goods
Construction Materials............ 161.0 55.3 61.4 119.4 194.0 118.9 1.8
Agricultural...................... 40.0 27.7 26.7 51.4 73.2 34.1 0.5
Industrial
Industrial Machinery............ 680.8 514.4 824.2 1,112.8 1,197.8 681.0 10.2
Office and Technical
Machinery..................... 215.8 234.0 308.0 523.2 598.0 314.6 4.7
Others(5)....................... 398.0 383.8 443.8 601.5 927.4 603.2 9.0
-------- -------- -------- -------- --------- -------- -----
1,294.6 1,132.2 1,576.0 2,237.5 2,723.2 1,598.8 23.9
Transportation.................... 518.5 354.5 590.4 1,426.4 1,751.1 701.0 10.5
-------- -------- -------- -------- --------- -------- -----
2,014.1 1,569.7 2,254.5 3.834.7 4,741.5 2,452.8 36.7
Unclassified........................ 56.5 0.3 2.3 2.2 8.4 2.0 0.0
-------- -------- -------- -------- --------- -------- -----
Total............................... US$5,588.7 US$4,967.1 US$6,579.0 US$9,831.4 US$11,883.3 US$6,688.9 100.0%
======== ======== ======== ======== ========= ======== =====
</TABLE>
- ---------------
(1) Estimated.
(2) Beginning in 1992, certain goods formerly classified as Arms and Military
Equipment were reclassified.
(3) Includes furniture, household goods, home appliances, domestic utensils and
ornamental objects.
(4) Includes oil derivatives and coal.
(5) Includes parts and accessories for industrial machinery and other equipment.
Source: Direccion de Impuestos y Aduanas Nacionales (National Directorate of
Customs and Taxes).
B-4
<PAGE> 144
DIRECT FOREIGN INVESTMENT
The following table sets forth information on net foreign investment by
sector (excluding petroleum) for the periods indicated below.
<TABLE>
<CAPTION>
NET DIRECT FOREIGN INVESTMENT BY SECTOR(1)
-----------------------------------------------------------------------------
JAN.-JUNE
1990 1991 1992 1993 1994 1995
-------- -------- -------- -------- ---------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Agriculture and
Fishing........ US$5.3 US$1.5 US$5.4 US$12.9 US$ 12.4 US$ 23.5
Mining........... 48.3 (42.8) 75.5 6.0 25.8 74.3
Manufacturing.... 118.0 132.0 69.8 197.9 364.9 228.5
Public
Services....... 0.0 0.0 0.1 0.0 6.3 3.1
Construction..... 41.7 (1.0) 19.3 18.9 33.0 18.5
Commerce......... 12.1 7.4 19.4 31.3 81.2 59.4
Transportation
and
Communications.. 0.0 (0.3) 6.6 5.8 157.2 102.1
Finance(2)....... 4.8 4.2 153.6 159.3 701.1 229.4
Social
Services....... 0.1 0.5 0.4 1.4 1.8 16.7
Others........... 0.0 0.4 0.4 3.0 5.8 0.8
----- ----- ----- ----- -------
Total (excluding
petroleum)..... US$230.3 US$101.9 US$350.4 US$436.5 US$1,389.6 US$ 756.3
===== ===== ===== ===== =======
</TABLE>
- ---------------
(1) Net foreign investment registered with Banco de la Republica, less
remittances of capital. The figures provided in this table represent the
amount officially registered for foreign investment with Banco de la
Republica. They may differ from the amounts actually invested in Colombia.
(2) Includes portfolio investment of $61.1 million in 1992, $43.7 million in
1993, $587.7 million in 1994 and $128.5 million in the first six months of
1995.
Source: Banco de la Republica.
C. MONETARY SYSTEM AND MONETARY AGGREGATES
Banco de la Republica, Colombia's central bank, was chartered in 1923.
Following ratification of the new Constitution in 1991, Banco de la Republica
was granted greater independence from the government in the formulation of
monetary policy.
Monetary and exchange rate policy is set by Banco de la Republica's Board
of Directors. The Board of Directors is composed of seven members, five of whom
are permanent members appointed by the President for four-year terms, although
at the expiration of their terms, the President may not replace more than two
such members. The Minister of Finance, the sixth member of the Board of
Directors, is the sole representative of the government on the Board of
Directors. The seventh member, who is the Governor of Banco de la Republica, is
elected by the other six members. Unless all seven members of the Board of
Directors vote to do so, Banco de la Republica may not finance the government's
budget deficits, and Banco de la Republica is prohibited from making loans to
the private sector (except to provide liquidity to the financial system or for
the intermediation of foreign indebtedness).
B-5
<PAGE> 145
INFLATION AND INTEREST RATES
The following table shows changes in the CPI and the producer price index
("PPI") and average deposit rates for the periods indicated.
INFLATION AND INTEREST RATES
<TABLE>
<CAPTION>
SHORT-TERM
REFERENCE RATE
PERIOD CPI (1) PPI (1) (DTF) (2)
---------------------------------------------------- ------- ------- --------------
<S> <C> <C> <C>
1990................................................ 32.4% 29.9% 36.4%
1991................................................ 26.8 23.1 37.2
1992................................................ 25.1 17.9 26.7
1993................................................ 22.6 13.2 25.8
1994................................................ 22.6 20.7 29.4
1995
January............................................. 21.0 18.7 32.3
February............................................ 20.9 18.4 34.3
March............................................... 21.3 18.7 35.2
April............................................... 21.2 19.7 35.7
May................................................. 21.3 20.0 34.8
June................................................ 21.7 21.5 34.0
July................................................ 21.5 19.4 30.2
August.............................................. 21.1 17.8 29.1
September........................................... 20.8 17.2 30.1
October............................................. 20.5 15.6 29.4
November............................................ 20.1 15.8 29.4
</TABLE>
- ---------------
(1) For annual periods from 1990-1994, percentage change over the twelve months
ending December 31 of each year; for monthly periods in 1995, percentage
change over the previous twelve months at end of each month indicated. The
Wholesale Price Index was changed to the PPI in January 1991.
(2) Average for each of the years 1990-1994, and for each month in 1995, of the
short-term composite reference rate (Depositos a termino fijo ("DTF")), as
calculated by the Superintendency of Banks.
Sources: DANE; Banco de la Republica.
FOREIGN EXCHANGE RATES AND INTERNATIONAL RESERVES
Colombia's official monetary unit is the peso, the value of which was
established against foreign currencies under a crawling peg system between 1967
and 1991. Under this system, the nominal exchange rate was determined by Banco
de la Republica.
In February 1994, Banco de la Republica instituted a mechanism, which
consists of a 15% band within which the exchange rate is allowed to fluctuate.
Banco de la Republica intervenes by selling or purchasing its debt securities in
order to maintain the exchange rate within the 15% band. Such band is allowed to
depreciate by small amounts to meet an annual target devaluation rate.
Foreign exchange transactions today occur at free, or market, exchange
rates. During 1994, the nominal exchange rate devalued by 3.6%, while
appreciating 8.9% in real terms.
B-6
<PAGE> 146
International Reserves
As of December 31, 1994, net international reserves were US$8,002 million,
representing coverage of approximately nine months of imports of goods and
approximately six months of imports of goods and services.
The following table shows the composition of international reserves of
Banco de la Republica at each of the dates indicated.
INTERNATIONAL RESERVES
<TABLE>
<CAPTION>
SEPTEMBER 30,
1990 1991 1992 1993(1) 1994(2) 1995(2)
-------- -------- -------- -------- -------- -------------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Gross International Reserves
Monetary Gold.................. US $248 US $324 US $172 US $119 US $112 US $99
Special Drawing Rights......... 129 129 48 158 170 172
Andean Pesos................... 20 20 20 20 20 20
Foreign Exchange............... 4,049 5,866 7,231 7,299 7,439 7,749
Others(3)...................... 149 161 257 337 361 413
-------- -------- -------- -------- -------- ------
4,595 6,500 7,728 7,932 8,102 8,453
Less: Short and Medium-Term
Liabilities of Banco de la
Republica...................... 94 80 15 63 100 128
-------- -------- -------- -------- -------- ------
Net International Reserves... US$4,501 US$6,420 US$7,713 US$7,869 US$8,002 US $8,325
======== ======== ======== ======== ======== ======
Reserves (Months of Imports (FOB))
Goods........................ 11 17 15 10 9 8
Goods and Services........... 6 9 9 7 6 5
</TABLE>
- ---------------
(1) Preliminary. Beginning in 1993, Colombia's method of valuing gold and
foreign currencies was changed from historical cost to market value at end
of period. In addition, the methodology for valuing international monetary
assets and liabilities was changed from a cash to an accrual basis. The
combined effect of these two changes was an increase in international
reserves of US$254 million at December 31, 1993.
(2) Estimated.
(3) Includes deposits in Latin American Reserve Fund and Andean Reserve Fund and
compensation agreements.
Source: Banco de la Republica.
SECURITIES MARKETS
Colombia has three stock exchanges, one located in each of the cities of
Bogota, Medellin and Cali. The stock exchanges are owned by member firms that
are responsible for developing and implementing regulations governing trade on
their exchanges. Although self-regulating, they remain subject to the approval
and supervision of the Superintendency of Securities, the principal securities
market regulatory agency. According to the Superintendency of Securities, the
market capitalization of the three exchanges as of December 31, 1994 was US$18.5
billion, with an average daily value of shares traded during 1994 of US$11.6
million.
The total value of securities traded on the three Colombian stock exchanges
during 1994 was Ps18,652 billion (approximately US$22.6 billion), representing
nominal growth of 75.4% over the value of securities traded in 1993. Both debt
and equity securities are traded on the three stock exchanges, including stocks
and bonds of private-sector corporations, although the vast majority of
securities traded are fixed income debt securities.
At the end of 1994, over 216 stocks were listed on the three exchanges. In
October 1995, the five companies with most actively traded shares on the three
exchanges represented 29.9% of the total value of stocks traded on the three
exchanges.
B-7
<PAGE> 147
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR AN OFFER TO
BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... 2
Exchange Rates............................. 4
Prospectus Summary......................... 5
Risk Factors............................... 17
Use of Proceeds............................ 25
The Refinancing............................ 25
Capitalization............................. 26
The Exchange Offer......................... 27
Selected Financial and Operating Data...... 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 37
Business................................... 47
Regulation................................. 65
Management................................. 69
Principal Shareholders..................... 72
Certain Transactions with Related
Parties.................................. 73
Description of Company Indebtedness........ 73
Description of the Notes................... 74
Book-Entry, Delivery, and Form
Procedures............................... 101
Taxation................................... 104
Foreign Investment and Exchange Controls in
Colombia................................. 108
Plan of Distribution....................... 110
Enforcement of Foreign Judgments in
Colombia................................. 111
Legal Matters.............................. 111
Independent Auditors....................... 111
Index to Financial Statements.............. F-1
Annex A -- Glossary of Certain
Telecommunications Terms................. A-1
Annex B -- Republic of Columbia............ B-1
</TABLE>
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE ORIGINAL DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
LOGO
OCCIDENTE Y CARIBE
CELULAR S.A.
EXCHANGE OFFER
14% SERIES B SENIOR DISCOUNT NOTES
DUE 2004
-----------------
PROSPECTUS
-----------------
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 148
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors and officers are severally liable to the Company, the
shareholders and third parties for any damages they cause as a result of their
negligence or fraud in the execution of their duties. There is a presumption of
negligence in cases where they breach their duties or violate the law or by-laws
of the Company. Directors and officers also have criminal liability where they
mislead the authorities, provide false information or permit, tolerate, order or
cover up misinterpretations in the financial statements of the Company.
Under Colombian law, the Company can indemnify its directors and officers
and purchase director and officer insurance. However, the Company's by-laws
currently do not provide for indemnification of directors or officers, and the
Company presently does not have any director and officer insurance in effect.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- ------------------------------------------------------------------------------
<C> <C> <S>
3.01 -- By-laws of Occidente y Caribe Celular S.A., as amended.
4.01 -- Indenture dated as of June 1, 1996, between Occidente y Caribe Celular S.A.
and The Bank of New York, as Trustee.
4.02 -- Form of Old Note.
4.03 -- Form of New Note (contained in Exhibit 4.02).
4.04 -- Registration Rights Agreement dated as of June 7, 1996, among Occidente y
Caribe Celular S.A., and Merrill Lynch & Co. and ING Baring (U.S.) Securities,
Inc.
4.05 -- Letter of Transmittal to The Bank of New York as Exchange Agent for the
exchange of 14% Series B Senior Discount Notes due 2004 which have been
registered under the United States Securities Act of 1933 for 14% Senior
Discount Notes due 2004.
4.06 -- Form of Notice of Guaranteed Delivery.
*5.01 -- Opinion and Consent of Cravath, Swaine & Moore as to the legality of
securities being registered.
*5.02 -- Opinion of Holguin, Neira y Pombo Abogados as to the legality of securities
being registered.
10.01 -- Purchase Agreement dated May 31, 1996, among Occidente y Caribe Celular S.A.,
and Merrill Lynch & Co. and ING Baring (U.S.) Securities, Inc.
10.02 -- Credit Agreement dated as of June 6, 1996, among Occidente y Caribe Celular
S.A., the lenders named therein, ING Bearing (U.S.) Securities, Inc. and
Merrill Lynch & Co., as Arrangers, and ING Bank, N.V. and ING (U.S.) Capital
Corporation, as Administrative and Collateral Agents.
10.03 -- Concession Agreement dated March 28, 1994, between Occidente y Caribe Celular
S.A. and the Colombian Ministry of Communications.
10.04 -- Interconnection Agreement dated August 8, 1994, between Occidente y Caribe
Celular S.A. and Empresas Publicas de Medellin.
</TABLE>
II-1
<PAGE> 149
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- ------------------------------------------------------------------------------
<C> <C> <S>
10.05 -- Interconnection Agreement dated April 17, 1995, between Occidente y Caribe
Celular S.A. and Empresas Municipales de Cali.
10.06 -- Interconnection Agreement dated December 26, 1994, between Occidente y Caribe
Celular S.A. and Empresas Publicas de Manizales.
10.07 -- Interconnection Agreement dated November 3, 1995, between Occidente y Caribe
Celular S.A. and Empresas Publicas de Pereira.
10.08 -- Interconnection Agreement dated November 9, 1995, between Occidente y Caribe
Celular S.A. and Empresa de Telecomunicaciones de Armenia.
10.09 -- Interconnection Letter of Intent dated January 25, 1995, between Occidente y
Caribe Celular S.A. and Empresas Departamentales de Antioquia.
10.10 -- Interconnection Letter of Intent dated April 10, 1995, between Occidente y
Caribe Celular S.A. and Telecom.
10.11 -- Warrant Agreement dated as of June 7, 1996, between Occidente y Caribe Celular
S.A. and The Bank of New York, as Warrant Agent.
*23.01 -- Consent of Cravath, Swaine & Moore (contained in Exhibit 5.01).
*23.02 -- Consent of Holguin, Neira y Pombo Abogados (contained in Exhibit 5.02).
23.03 -- Consent of KPMG Peat Marwick.
25.01 -- Statement of Eligibility of Trustee on Form T-1.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(b)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant, will unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE> 150
(4) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed to be underwriters, in addition to the information
called for by the other Items of the applicable form.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (4) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 151
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Medellin, Colombia on August 5, 1996.
OCCIDENTE Y CARIBE CELULAR S.A.
/s/GILBERTO ECHEVERRI-MEJiA
By:
Gilberto Echeverri-Mejia
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities
indicated on August 5, 1996.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ------------------------------------------
<C> <S>
/s/ GILBERTO ECHEVERRI-MEJiA President (principal executive officer)
- ---------------------------------------------
Gilberto Echeverri-Mejia
/s/ ALVARO H. MUNOZ R. Vice President-Finance (principal
- --------------------------------------------- financial officer)
Alvaro H. Munoz R.
/s/ CARLOS H. RAMiREZ Director of Accounting (principal
- --------------------------------------------- accounting officer)
Carlos H. Ramirez
Director
- ---------------------------------------------
Julio M. Ayerbe-Munoz
/s/ RAUL CANAL-CARDENAS Director
- ---------------------------------------------
Raul Canal-Cardenas
/s/ ANA I. JARAMILLO-MEJiA Director
- ---------------------------------------------
Ana I. Jaramillo-Mejia
/s/ LUIS F. DANGOND-LACOUTOURE Director
- ---------------------------------------------
Luis F. Dangond-Lacoutoure
/s/ JABIB CHAR ABDALA Director
- ---------------------------------------------
Jabib Char Abdala
Director
- ---------------------------------------------
Mauricio Restrepo-Gutierrez
/s/ LUIS ESTEBAN ECHAVARRiA Director
- ---------------------------------------------
Luis Esteban Echavarria
Director
- ---------------------------------------------
Jon R. Hill
Director
- ---------------------------------------------
Dominic Crolla
/s/ DONALD J. PUGLISI Authorized Representative in the United
- --------------------------------------------- States
Donald J. Puglisi
</TABLE>
II-4
<PAGE> 152
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ------------------------------------------------------------------ ------------
<C> <C> <S> <C>
3.01 -- By-laws of Occidente y Caribe Celular S.A., as amended............
4.01 -- Indenture dated as of June 1, 1996, between Occidente y Caribe
Celular S.A. and The Bank of New York, as Trustee.................
4.02 -- Form of Old Note..................................................
4.03 -- Form of New Note (contained in Exhibit 4.02)......................
4.04 -- Registration Rights Agreement dated as of June 7, 1996, among
Occidente y Caribe Celular S.A., and Merrill Lynch & Co. and ING
Baring (U.S.) Securities, Inc.....................................
4.05 -- Letter of Transmittal to The Bank of New York as Exchange Agent
for the exchange of 14% Series B Senior Discount Notes due 2004
which have been registered under the United States Securities Act
of 1933 for 14% Senior Discount Notes due 2004....................
4.06 -- Form of Notice of Guaranteed Delivery.............................
*5.01 -- Opinion and Consent of Cravath, Swaine & Moore as to the legality
of securities being registered....................................
*5.02 -- Opinion of Holguin, Neira y Pombo Abogados as to the legality of
securities being registered.......................................
10.01 -- Purchase Agreement dated May 31, 1996, among Occidente y Caribe
Celular S.A., and Merrill Lynch & Co. and ING Baring (U.S.)
Securities, Inc...................................................
10.02 -- Credit Agreement dated as of June 6, 1996, among Occidente y
Caribe Celular S.A., the lenders named therein, ING Bearing (U.S.)
Securities, Inc. and Merrill Lynch & Co., as Arrangers, and ING
Bank, N.V. and ING (U.S.) Capital Corporation, as Administrative
and Collateral Agents.............................................
10.03 -- Concession Agreement dated March 28, 1994, between Occidente y
Caribe Celular S.A. and the Colombian Ministry of
Communications....................................................
10.04 -- Interconnection Agreement dated August 8, 1994, between Occidente
y Caribe Celular S.A. and Empresas Publicas de Medellin...........
10.05 -- Interconnection Agreement dated April 17, 1995, between Occidente
y Caribe Celular S.A. and Empresas Municipales de Cali............
10.06 -- Interconnection Agreement dated December 26, 1994, between
Occidente y Caribe Celular S.A. and Empresas Publicas de
Manizales.........................................................
10.07 -- Interconnection Agreement dated November 3, 1995, between
Occidente y Caribe Celular S.A. and Empresas Publicas de
Pereira...........................................................
10.08 -- Interconnection Agreement dated November 9, 1995, between
Occidente y Caribe Celular S.A. and Empresa de Telecomunicaciones
de Armenia........................................................
10.09 -- Interconnection Letter of Intent dated January 25, 1995, between
Occidente y Caribe Celular S.A. and Empresas Departamentales de
Antioquia.........................................................
10.10 -- Interconnection Letter of Intent dated April 10, 1995, between
Occidente y Caribe Celular S.A. and Telecom.......................
10.11 -- Warrant Agreement dated as of June 7, 1996, between Occidente y
Caribe Celular S.A. and The Bank of New York, as Warrant Agent....
*23.01 -- Consent of Cravath, Swaine & Moore (contained in Exhibit 5.01)....
*23.02 -- Consent of Holguin, Neira y Pombo Abogados (contained in Exhibit
5.02).............................................................
23.03 -- Consent of KPMG Peat Marwick......................................
25.01 -- Statement of Eligibility of Trustee on Form T-1...................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibit 3.01
(2,225)
NUMBER: TWO THOUSAND TWO HUNDRED AND TWENTY-FIVE
CAPITAL INCREASE
AMENDMENT OF
BY-LAWS OF OCCIDENTE AND CARIBE CELULAR S.A.
In the municipality of Itagui, Department of Antioquia, Republic of Colombia, on
the first (1st) of July of nineteen hundred and ninety-four (1994), before me,
DARIO A. RESTREPO GOMEZ, sole Notary of the Circuit of Itagui, there appeared
doctor GILBERTO ECHEVERRI MEJIA, of legal age, resident of Medellin, identified
with citizens card No. 3.302.711 of Medellin, resident of this city and
declared: FIRST: That he acts herein as the legal representative of the
corporation OCCIDENTE Y CARIBE CELULAR S.A. - OCCEL S.A. in his capacity as
President, mixed economy corporation, with primary domicile in the city of
Pereira. SECOND: Acting in the aforementioned capacity and duly empowered for
that purpose, he proceeds to amend the by-laws of the corporation OCCIDENTE Y
CARIBE CELULAR S.A. - OCCEL S.A., an amendment approved by the General meeting
of Shareholders in its session of the 25th day of the month of March 1994, as
evidenced by Minutes No. 008 which, in its pertinent part, is attached to this
instrument and consists of the complete amendment of the same. THIRD: That in
execution of the orders of the General Meeting of Shareholders the entire text
of the amendment is transcribed as follows: CHAPTER I: NAME - DOMICILE - TERM -
OBJECT ARTICLE FIRST - NAMES: The name of the corporation is "OCCIDENTE Y
CARIBE CELULAR S.A.", but it may validly use the abbreviated name of "OCCEL
S.A.", it is a mixed economy Company pursuant to article 461 of the Commercial
Code, of a municipal level, a business entity according to its object, organized
as a public stock Company and of Colombian nationality. ARTICLE SECOND -
DOMICILES The corporate domicile is the city of Pereira, Department of
Risaralda, Republic of Colombia, but the Board of Directors may, whenever it may
consider it appropriate and subject to these by-laws and to the Law, create
branches or agencies in other place or places of the country or abroad, as well
as to establish representations and open business establishments. ARTICLE THIRD
- - TERM: The term of the corporation will be until December 31st, of the year
2092. ARTICLE FOURTH - OBJECT: The corporate object is: The design,
construction, establishment and operation of cellular telephone services. For
the performance of the corporate object it may perform all acts that may be
appropriate or necessary for this purpose and especially those that for
illustrative purposes only are listed next: a) To acquire assets of any nature
and to sell the assets owned by it by any means; b) To erect constructions on
its properties and to perform improvements to same in order to link one and the
other to the operation, benefit or functioning of any of the activities that
represent its corporate object; c) To set up industrial establishments fit for
the performance of its corporate object; ch) To open business establishments for
the performance of the corporate object; d) To export and import; e) To borrow
money with or without interest in order to finance and carry out its corporate
object; f) To
<PAGE> 2
secure its obligations with its movable or real estate assets, or take or give
under a lease those that may be susceptible of such contractual object, as well
as to give or take under an option assets of any nature; g) To create, issue,
accept, be beneficiary of, endorse and negotiate securities of any nature and
kind; h) To enter into current account deposit agreements with banks and all
other banking agreements, as well as to enter into all kinds of financial
transactions with banks, storage warehouses, financial corporations or any
other person or entity which engages in similar activities; i) To subscribe
shares or acquire shares or corporate interest in corporations engaged in
activities similar or related to its own activities, or that shall serve as a
complement or may contribute to the performance of its corporate object, and j)
to establish with other people corporations of any type, to become a member of
corporations already established, to merge with them or to absorb them,
provided that their object may be related or similar to its own object, shall
serve as a complement or facilitates the performance of the corporate object.
CHAPTER II: AUTHORIZED CAPITAL ARTICLE FIFTH - AUTHORIZED CAPITAL: The capital
authorized is of SEVENTY SEVEN BILLION FIVE HUNDRED TWENTY MILLION COLOMBIAN
PESOS ($77.520.000.000) divided into SEVENTY SEVEN MILLION AND FIVE HUNDRED
TWENTY THOUSAND Columbian pesos ($77.520.000) ordinary and nominative shares
for a face value of One Thousand Colombian Pesos (P$1,000) each. ARTICLE SIXTH
- - INCREASE OF AUTHORIZED CAPITAL: The General Stockholders Meeting may decree
the increase of the authorized capital by the favorable vote of shareholders
representing seventy percent (70%) of the subscribed shares. CHAPTER III:
ISSUANCE AND SUBSCRIPTION OF SHARES ARTICLE SEVENTH - The corporation shall not
issue shares of a price lower than their nominal value. ARTICLE EIGHTH - The
Board of Directors shall regulate the issuance, offer and placement of shares
and especially the exercise of the right of preference corresponding to
shareholders. ARTICLE NINTH - The shareholders shall be entitled to subscribe
in a preferential manner to the shares of every new issue in the proportion
provided in the same regulation, unless the General Stockholders Meeting, by
the favorable vote of a plurality of shareholders representing seventy percent
(70%) of the shares subscribed had decided that the shares corresponding to
that issue be placed without being subject to the preferential right. ARTICLE
TENTH - Within fifteen (15) business days following the approval of the
regulation by the Superintendency of Corporations, the President of the
Corporation shall offer to the shareholders the shares issued by means of a
notice given in the manner provided in these by-laws for calling ordinary
stockholders meetings. The corporation shall grant to the shareholders a term
of sixty (60) calendar days to proceed to the subscription of the shares, but
this term may be amended by the Board of Directors in the Regulation by a
unanimous decision. ARTICLE ELEVENTH - Whenever the regulation provides the
payment by installment at least one third (1/3) of the value of each share
subscribed must be paid at the time of subscription. The term for the total
payment of outstanding installments shall not exceed one (1) year, counted as
of the date of subscription. ARTICLE TWELFTH - When shares are
<PAGE> 3
subscribed, their payment had been provided by installments and a delay occurs
in such payment, the corporation may choose any of the following options, as
selected by the Board of Directors: a) To enforce the payment of installments
due by legal means; b) To allocate the amount paid to the release of the number
of shares corresponding to such amounts, subject to deduction of twenty percent
(20%) as indemnification for damages, which shall be presumed to have been
incurred, and to recover from the delinquent shareholders the remaining shares
which shall be immediately placed; and, c) To sell for the account and at the
risk of the delinquent shareholder and through a stock broker, the shares that
he may have subscribed. ARTICLE THIRTEENTH -- Without prejudice of the options
and rights of the corporation, whenever the shareholder is past due in the
payment of the installments for the balance of the price of the Shares that he
may have subscribed, he shall be entitled to exercise the rights inherent to
such shares. CHAPTER IV: SHARES AND RIGHTS OF SHAREHOLDERS ARTICLE FOURTEENTH
- -- The shares represent portions of an equal value of the corporate capital or
equity. ARTICLE FIFTEENTH -- The corporate shares are ordinary and nominative
and shall be represented by negotiable certificates that shall be issued in
different series for private shareholders (Type B shares) and for shareholders
who have a public entity condition (Type A shares) and for shareholders who
belong to solidary social sector and had acquired the shares with rights
pursuant paragraph of article twenty second herein (Type C shares). FIRST
PARAGRAPH For the effects of this article and those where solidary social
sector is mentioned it is understood that this sector is composed of syndicate
organizations, foundations, corporations and not-for-profit associations,
employees funds, mutual funds and co-operative institutions. SECOND PARAGRAPH
Type C shares, pursuant this article, shall never exceed ten (10) percent of
subscribed capital at any time. The corporate Board of Directors shall take
into account when adopting a resolution for the placement of shares the number
of type C shares which pursuant to the Law, if it is the case, must be offered
to shareholders belonging to the solidary social sector. CHAPTER SIXTEENTH --
Every shareholder shall be issued only one certificate for the total number of
shares owned by him, unless any one of them may prefer unit or partially
collective certificates, in which case the expenses and costs incurred for the
issuance of the certificates in such manner shall be for the account of the
shareholders. ARTICLE SEVENTEENTH -- With the differentiation provided by
article Sixteenth, the certificates shall be issued in a numbered and
continuous series and shall bear the signatures of the President of the
corporation and the Secretary and shall fulfill, in addition, the requirements
provided by the law. ARTICLE EIGHTEENTH -- Until the value of the shares is
fully paid in, the corporation may only issue provisional certificates to the
subscribers. ARTICLE NINETEENTH -- In the case of theft of a certificate, the
corporation shall replace same by giving a duplicate to the owner appearing in
the stock register, after the theft has been proven before the President of the
corporation and its Board of Directors. In any event, an authenticated copy of
the corresponding document evidencing the notification given to the
<PAGE> 4
authorities of such theft must be presented. ARTICLE TWENTIETH - In the event a
certificate is lost, the corporation shall issue a duplicate to the owner
appearing in the stock register, provided he has previously issued the
guarantee required by the Board of Directors. ARTICLE TWENTY-FIRST - In the
event of deterioration, the issuance of a duplicate certificate shall require
the surrender by the shareholder of the certificates, in order that they may be
cancelled by the corporation. ARTICLE TWENTY-SECOND - The shares grant their
legitimate holders their condition as shareholders and entitle them, at
minimum, to the following essential rights; 1st) To participate in the
deliberations of the General Stockholders Meeting and to vote in them. 2nd) To
receive a proportional part of the corporate benefits established by the end of
period balance sheet, subject to the provisions of the law and in these
by-laws. 3rd) To freely inspect, either personally or through a delegate, the
books and documents of the corporation within fifteen (15) working days prior
to the General Stockholders Meeting at which the end of period balance sheets
are examined. 4th) To receive a proportional part of the corporate assets at
the time of liquidation and once the external liabilities of the corporation
have been paid. ARTICLE TWENTY-THIRD - The shares are indivisible in respect of
the corporation and therefore, whenever for any legal or contractual reasons
two (2) or more people would become owners of one share, they must designate a
common and single representative who shall exercise the rights inherent to the
condition as shareholders. ARTICLE TWENTY-FOURTH - The corporation shall open
and keep a stock register ledger, where the provisional certificates as well as
the final certificates corresponding to the subscribed shares shall be
registered, and any transfers, establishment of rights or real guarantees on
such shares, judicial attachments and civil suits that may affect them shall be
noted. ARTICLE TWENTY-FIFTH - The pledge established on the certificate shall
not grant the guaranteed creditor the rights inherent to the condition as
shareholder, but by virtue of an express stipulation or agreement shall only
grant the credit or the right to receive the profits that shall correspond
to the shares encumbered, except as otherwise provided. However, the usufruct,
except as expressly provided otherwise, shall grant its beneficiary all rights
inherent to the condition as shareholder, except the right to dispose of and
encumber them and that of their reimbursement at the time of liquidation.
ARTICLE TWENTY-SIXTH - The shareholder must register at the corporate offices
their address and the place to which the notices and communications from the
Company should be addressed. CHAPTER V ARTICLE TWENTY-SEVENTH - With the
restriction related to the right of preference hereinafter regulated, the
shares of the corporation are freely negotiable, and for this purpose only the
agreement by the contracting parties shall be sufficient; however, the
assignment shall not produce any effects in respect of the corporation or third
parties, but only after registration in the stock register, which shall be made
based on a written order by the assignor who may give it by means of a letter
of transfer or the endorsement of the relevant certificates. In order to make
the new registration and issue the certificate to the new holder,
<PAGE> 5
the prior cancellation of the certificates sold shall be required. Public
entities which are shareholders expressly waive their right of preference
provided by article 10 of Decree law 130 of 1976, but the right of preference
provided by the Commercial Code shall be admitted, whereby the shareholders have
the privilege of acquiring the shares that anyone intends to sell, all in
accordance with the procedure and regulations stated next: a) The shareholder
who intends to assign his shares shall immediately give notice to the
corporation, by means of a letter addressed to the President indicating the
price, term and all other conditions of the disposal. The notice is considered
duly informed when the letter has been delivered to the President, which shall
be evidenced by a receipt from him or other means of proof. b) The President
shall inform all shareholders of the offer of the shares, which may be purchased
by them proportionately to the number of shares owned by them. This preferential
right of purchase may be exercised by the shareholders within twenty (20)
business days following the communication given by the President. c) The shares
that are not the object of preferential right may be sold by the shareholder
subject to the price, term and all other conditions contained in the offer, but
the assignment shall be made within sixty (60) business days following the
expiration of the term that the shareholders had for the acceptance of the
offer; therefore, every transaction executed subsequently shall require the
repetition of the procedure provided by this article. d) The shareholders that
may have exercised the right of preference shall have the obligation to execute
the transaction; but if the conditions of the offer would seem to them very
onerous, they shall be entitled to request a revision of such conditions. The
decision shall be binding upon the parties, but they may previously agree that
the conditions of the offer shall prevail if those established by the experts
would turn out to be more unfavorable for the purchasers. The qualified
revisions shall be performed by three experts who may be appointed directly and
by mutual agreement by the parties or the latter may delegate the total or
partial designation to a third party. Notwithstanding the foregoing, the parties
may agree to designate only one expert. In lieu of an agreement for the
appointment of the expert or when the third party delegated does not make the
designation in the time indicated by the parties for this purpose, any one of
them may request the judge to require the party reluctant to reach an agreement,
or the third party, to carry out the designation. If any of the parties does not
attend the hearing scheduled by the judge or an agreement or the designation is
not reached, the Judge shall proceed to appoint the corresponding experts, from
the list of the Chamber of Commerce of Santafe de Bogota. The request must
contain a clear and summarized statement of the relevant facts. For the purposes
of this item, by party is understood to be the offering shareholder, on the one
side, and those who have exercised the right of preference, on the other. e) The
right of preference shall be applicable even through the transaction covered by
the intended disposal may not be a purchase or sale but a different one, such as
an exchange, a contribution to a corporation, or also a delivery as payment,
etc.; in addition, if the transaction
<PAGE> 6
that the offering party intends to perform with a third party, in the event
that the right of preference is not exercised, were an interchange or a
donation, the offerer shall in any event state in his offer to the corporation
and to the shareholders, the value in money for which he estimates his shares,
since the preferential acquisition shall always have as a basis a purchase/sale
transaction. The shares may be the object of attachment and compulsory
disposal, but in this event, because the right of preference is expressly
agreed, the shareholders may acquire them in the manner and term indicated in
the Commercial and Civil Procedure Code. g) The right of preference shall not
be applicable when the transfer of the shares is made by a method that excludes
it, such as from the estate of a deceased person and the liquidation of the
joint properties of a married couple. h) The right of preference shall not be
applied either when the General Stockholders Meeting authorized its non-
applicability for a specific case, by a majority representing seventy percent
(70%) of the subscribed shares of the corporation. i) The share certificates
shall make express mention of the right of preference and of the conditions
provided in order to exercise such right. j) While the statutory right of
preference exists, the corporation cannot register its shares in the stock
market. PARAGRAPH When entities of the solidary social sector wish to totally
or partially transfer Type C shares which they own, they must offer them in
first term to other entities of the same solidary social sector and only in the
event that after four (4) years from the first offer have elapsed and their
transfer has not been possible, may they transfer them to another person who
has a different quality than that of the solidary social sector. In this last
case, that is, after four (4) years have elapsed without effecting the transfer
of Type C shares on the part of the solidary entity or entities to other
entities of the same sector, the transfer of these shares must be effected by
offering them preferentially to the Corporation and to the Shareholders of the
Corporation pursuant to the terms and steps described in this article. These
shares shall change series depending on the quality of the Shareholders
acquiring them. ARTICLE TWENTY-EIGHT - The Corporation shall not refuse to make
the registration in the stock register except by order of a competent authority
and if it were the case of Type C shares, their inscription could be denied
when solidary social sector entities have not fulfilled the procedures
established in the previous article. ARTICLE TWENTY NINTH - The transfer of
provisional certificates shall be made following the regulations indicated by
this same regulation for the transfer of final certificates representative of
shares. But in such a case, the assignor and assignee shall be jointly liable
to the corporation for the unpaid value of the subscribed shares represented by
said provisional certificates. CHAPTER VI: DIRECTION AND MANAGEMENT OF THE
CORPORATION SECTION I - GENERAL STOCKHOLDERS MEETINGS ARTICLE THIRTIETH -
The General Stockholders Meeting consists of the shareholders registered in the
stock register ledger or their representatives or proxies, meeting in the place
and time and with the quorum to be provided hereinafter. ARTICLE THIRTY-FIRST
- - Every shareholder may be represented at the
<PAGE> 7
General Stockholders Meetings by special proxy established by means of a written
document indicating the name of the proxy, the person for whom he may substitute
and date of the meeting for which it is granted. This representation shall not
be granted to a legal entity, except if done under a trust negotiation. The
proxy granted by public instrument or by legally accepted document may include
two (2) or more Stockholders Meetings. ARTICLE THIRTY-SECOND -- Every
shareholder may designate only one person to represent him at the Stockholders
Meeting, whatever the number of shares held by him. And the proxy, in turn,
cannot divide the vote, which means that he is not permitted to vote with a
group of shares represented in a certain way or for certain people and with
another group belonging to the same shareholder, in another way or for other
people. Notwithstanding the foregoing, if the proxy represents several
shareholders, he may vote or elect following the instructions of each
shareholder, even through they may be contrary. ARTICLE THIRTY-THIRD -- The
General Stockholders Meeting may be ordinary or extraordinary. ARTICLE
THIRTY-FOURTH -- The Ordinary General Stockholders Meetings shall be held on any
business day of the first three (3) months of each year, on the day, time and
place that for that purpose may be indicated by the President of the Company,
who shall call them. If not called, the General Stockholders Meeting shall be
held by its own right in the officers of the main place of business at ten in
the morning (10:00 a.m.) of the first business day of the month of April.
ARTICLE THIRTY-FIFTH -- The Extraordinary General Stockholders Meeting shall be
held when considered appropriate by the Board of Director, the President, the
Fiscal Auditor, or the Superintendency of Corporations, which may call them. In
addition, they shall be held by a calls made by the President, the Fiscal
Auditor or at the request of one or more shareholders representing at least one
fourth of the subscribed shares. ARTICLE THIRTY-SIXTH -- The calls for Ordinary
General Stockholders Meetings and in general, for all those at which the end of
period balance sheets are to be considered, shall be made by the President by
means of a notice to be published in a newspaper of wide national circulation
communicated in writing to each shareholder, at least fifteen (15) business days
in advance. To call Extraordinary Meetings the same means as for the calls to
Ordinary Meetings shall be used, but a notice ten (10) days in advance shall be
sufficient and the agenda must be included in it. ARTICLE THIRTY-SEVENTH --
Notwithstanding the provisions of the preceding article, the General
Stockholders Meetings may be held validly and take decisions when at any time
and place the holders of the total number of shares subscribed are present or
duly represented. ARTICLE THIRTY-EIGHTH -- Within fifteen (15) business days
prior to the General Stockholders Meeting the shareholders or their
representatives may exercise their right of inspection of the accounting,
minutes and share registration books and all other relevant documents. The
President of the corporation and the members of the Board of Directors shall
make during the term such documents available to the shareholders and shall have
the obligation to allow the free examination of same. ARTICLE THIRTY-NINTH --
There shall be a quorum to deliberate at the Ordinary and Extraordinary
<PAGE> 8
General Stockholders Meetings with the presence of a plural number of people
representing at least fifty-one percent (51%) of the subscribed shares. If on
the date for which the Meeting was called such quorum is not obtained a new
Meeting shall be called which shall be held not less than ten (10) and not
later than thirty (30) business days counted from the date fixed for the first
meeting, which shall validly meet with a plural number of people and whatever
the number of subscribed shares represented. ARTICLE FORTIETH -- The General
Stockholders Meetings shall be presided over by the Chairman of the Board of
Directors and in his absence, by the Vice Chairman of the same Board. ARTICLE
FORTY-FIRST -- The Ordinary General Stockholders Meeting shall be in charge of
examining the economic and financial condition of the corporation, electing
members of the Board of Directors, designating the Fiscal Auditor, determining
the economic directions of the Company, considering the accounts and balances
of the last period, deciding on the distribution of profit, amending the
by-laws and agreeing as to all decisions tending to secure the performance of
the corporate object. The Extraordinary General Stockholders Meetings shall not
engage in matters different from those indicated in the agenda accompanying the
calls, but a decision taken by the favorable vote of a number of shareholders
representing at least seventy percent (70%) of the shares represented in the
meeting, may deliberate on different matters, once the agenda has been
completed. In any event, it may remove the members of the Board of Directors
and other officers that are selected by it. ARTICLE FORTY-SECOND -- The duties
of the General Stockholders Meeting are: 1) To amend the corporate by-laws. 2)
To select for one (1) year periods and through the system of electoral
quotient, the nine (9) principal members of the Board of Directors and their
nine (9) personal first and second substitutes and to remove them freely. 3) To
designate for one (1) year periods the Fiscal Auditor of the corporation and
his alternates. 4) To examine, approve or reject the balance sheets presented
by the President of the Company and the Board of Directors. 5) To indicate the
compensation of the members of the Board of Directors and the Fiscal Auditor.
6) To decree the distribution of profits and to establish the amount of the
dividends as well as the method and term for their payment. 7) To decree the
establishment of occasional reserves in the manner indicated by article
Seventy-seventh. 8) To order any corresponding actions against the management,
the directors or the Fiscal Auditor. 9) To provide that a certain issue
ordinary shares be placed not subject to the right of preference. 10) To
provide that the payment of dividends be made through the transfer of released
shares owned by the corporation. 11) To decide all matters related to the
merger with or absorption by another corporation and also to decide all matters
related to the absorption by the corporation of other corporation or
corporations. 12) To decide on the disposal or lease of the total corporation
or the total corporate assets. 13) To adopt all measures in the interest of the
corporation and to carry out all other duties that may be indicated by law or
the by-laws and those that may naturally correspond to it as the supreme
directive body of the corporation. ARTICLE FORTY-THIRD -- With the exceptions
<PAGE> 9
provided by the law, the decisions shall be made by the General Stockholders
Meeting with the favorable vote by a number of members present representing at
least seventy percent (70%) of the shares represented in the meeting. The
following decisions shall require the favorable vote seventy percent (70%) of
the subscribed shares of the corporation: a) Every amendment of the corporate
by-laws; b) The approval for the disposal or lease of the corporation as a
whole or the total assets of the corporation. ARTICLE FORTY-FOURTH - No
shareholder shall have any restriction in his right to vote, whatever the
number of shares held by him and whatever the percentage represented by him in
the General Stockholders Meeting at the time of the voting. ARTICLE FORTY-FIFTH
- - The elections, voting and counting of votes shall be ruled by the following
regulations: a) Before the votes are cast the Secretary of the Meeting shall
verify and announce the number of shares represented at that moment; b) The
electoral quotient shall be determined by dividing the total number of votes
cast by the number of people to be elected. The counting of votes shall start
with the list that has obtained the largest number of votes and so on, by
descending order. From each list shall be elected as many names as the times
the quotient shall go into the number of votes cast therefor and if there are
any positions which remain to be filled, these shall correspond to the highest
remaining numbers, in the same descending order; c) In any event of a tie the
decision shall be made by chance; and d) In no event may the members of the
Board of Directors be replaced in partial elections, but it shall be necessary
to proceed to elect the total number of members through the systems of
electoral quotient, unless the vacancies are filled unanimously by those
present. ARTICLE FORTY-SIXTH - The deliberations by the General Stockholders
Meeting may be adjourned to be resumed later, as many times as decides by any
plurality of shareholders present representing at least 51% of the shares
represented in the meeting. However, the deliberations shall not extend for
more than three (3) days if the total shares subscribed are not represented.
ARTICLE FORTY-SEVENTH - The list of attendees present, indicating the number of
shares owned or represented, the summary of the deliberations, the agreements,
the decisions, voting, electing, designations and other tasks of the General
Stockholders Meeting shall be evidenced in the Minutes which shall be
authorized by the Chairman of the Meeting and its Secretary, or in lieu of them
by the Fiscal Auditor, and which must meet all requirements of law. SECTION II
- - BOARD OF DIRECTORS ARTICLE FORTY-EIGHT - COMPOSITION: The Board of Directors
consists of nine (9) members who may be shareholders or not, elected by the
General Stockholders Meeting for periods of one (1) year through the system of
electoral quotient, but they may be freely removed or reelected by the same
General Stockholders Meeting and through the same election system. ARTICLE
FORTY-NINTH - ALTERNATES: Each of the nine (9) members of the Board of Directors
shall have two (2) personal alternates, who shall be elected jointly with the
principals and in the manner indicated by these by-laws. The alternate members
of the Board of Directors shall replace, according to their order, the principal
members during their temporary or permanent absences or when the
<PAGE> 10
principal refrains or excuses himself from attending the corresponding meeting.
ARTICLE FIFTIETH - There shall not be in the Board of Directors any majority
formed by people connected by marriage, legal or free union, or by any
relationship within the third degree of consanguinity, second of affinity or
first civil. If a Board of Directors is elected which is contrary to this
provisions, it shall not be able to act and the previous Board shall continue
performing its duties, which shall immediately call a General Stockholders
Meeting to proceed with a new election. In any event, the decisions adopted by
the Board of Directors with the vote of a majority formed by persons connected
by the relationships provided in this article shall be ineffective. ARTICLE
FIFTY-FIRST - QUORUM AND MAJORITY TO DECIDE: The Board of Directors shall
deliberate and decide with the attendance and votes by the majority of its
members. ARTICLE FIFTY-SECOND - ATTENDANCE BY ALTERNATES: The alternate members
of the Board of Directors may be called to attend meetings, even in the cases
when it does not correspond to them to attend, when in the judgement of the
President of the Corporation the importance of the matter to be discussed may
require their attendance. In such cases, they shall be entitled to speak but
not to vote, except, of course, when they attend in the place of any one or
more of the principal members. ARTICLE FIFTY-THIRD - The Board of Directors
shall meet ordinarily every month on the date and time indicated by the
President of the Corporation, who shall call its members. However, it may be
called at any time by the Board itself, by the President, by the Fiscal Auditor
or by (2) of its members acting as principals. ARTICLE FIFTY-FOURTH - The
President of the Corporation shall not be a member of the Board of Directors.
If appointment of the President is made from among the members of the Board he
shall cease to be a member of it and if a principal member his personal
alternate shall replace him immediately and in full right. ARTICLE FIFTY-FIFTH
- - The President may speak but not vote during the deliberations of the Board
and his attendance shall be compulsory at all meetings, except as otherwise
provided by the Board. ARTICLE FIFTY-SIXTH - Those who may be elected by the
Board itself shall act as Chairman and Vice Chairman of the Board of Directors.
ARTICLE FIFTY-SEVENTH - DUTIES: The following are the duties of the Board of
Directors: 1) To designate, for periods of one (1) year, the President of the
Corporation and his two (2) alternates and to fix their compensation. 2) To
create the technical and administrative positions that it may consider
necessary and to establish their corresponding compensations. 3) To call to
Extraordinary General Stockholders Meetings when considered appropriate by it.
4) To decide on the creation of branches or agencies within or outside the
country. 5) To issue shares in reserve and to prepare the regulations for the
placement of shares. 6) To determine the administrative, economic and financial
policies of the corporation. 7) To authorize the President of the Corporation
to dispose of properties owned by the corporation, whatever their value may be.
8) To design the policy for the marketing of the goods produced and services
rendered by the Company. 9) To authorize the President of the Corporation for
all joint proposals that shall mean the
<PAGE> 11
participation of its solidary and unlimited liability and to agree with the
other proponent or proponents as to the terms of the internal division of the
responsibilities, obligations and rights. 10) To present to the ordinary
Stockholders Meetings the balance sheet and accounts for each period, a
reasoned report on the economic and financial situation of the corporation and
the respective plan for disposition or distribution of profits, together with
the documents and annexes required by law. 11) To ensure the strict fulfillment
of all acts and contracts that may be considered necessary and which
are included within the corporate object and to take the necessary decisions
for the full performance of the corporate objects. 12) To designate the General
Secretary of the corporation. 13) To give its prior approval to the following
acts: a) The division, separation, antichresis, lending of corporate goods. b)
The acquisition of real estate, construction and establishment of real liens
and all other limitations of ownership pertaining to the corporate assets in an
amount which exceeds five hundred (500) minimum monthly legal salaries. c) The
settlements or waivers in an amount which exceeds five hundred (500) minimum
monthly legal salaries. d) The incorporation of companies or the participation
in corporations already established, with the exception of business
partnerships or limited partnerships as constituent, in which it can neither
participate nor enter. e) The assignment of shares or corporate interest quotas
owned in another corporation, whatever the amount represented by the disposal.
f) The encumbrance of movable goods. g) All acts other than the above
corresponding to the ordinary corporate business, in an amount which exceeds
one thousand (1,000) minimum monthly legal salaries. 14) All other acts provided
by these by-laws or delegated upon it by the General Stockholders Meeting.
ARTICLE FIFTY-FOURTH - MINUTES: Evidence of the discussions, resolutions and
appointments made at the meetings of the Board of Directors shall be recorded
in minutes to be drawn up in strict chronological order and which are to be
authorized by the signatures of the President of the Board of Directors and the
Secretary, or in their absence by the Fiscal Auditor. The minutes shall be
recorded in a special book registered and paged at the Chamber of Commerce.
SECTION III - PRESIDENT ARTICLE FIFTY-NINTH - DESIGNATION: The government and
the direct management of the corporation shall be performed by the President,
designated by the Board of Directors for one (1) year periods. ARTICLE SIXTIETH
- - ALTERNATES: The Board of Directors shall designate a first and second
alternate to the President, who in their sequence shall replace him during his
temporary or permanent absences. ARTICLE SIXTY-FIRST - In the performance of
his duties and within the limitation contemplated by article fifty-seventh of
these by-laws, the President of the Corporation shall perform all acts that may
be appropriate or necessary for the achievement of the objectives and
especially, those listed in Article Fourth. He may also, either personally or
through special authorized agents, take part in all kinds of judicial,
administrative, government or police acts or processes, whether the company
participates as plaintiff, defendant, or as accessory party and provided that
it is necessary to defend its rights and to achieve
<PAGE> 12
their acceptance, but in the case of settlements or waivers in matters for an
amount equal to or exceeding the equivalent to five hundred (500) minimum
monthly legal salaries, he shall require the authorization from the Board of
Directors. ARTICLE SIXTY-SECOND -- The following, in addition to those indicated
by the preceding paragraph, are duties of the President of the corporation and
shall be fulfilled within the limits established in Article Fifth-Seventh of
these by-laws: 1) To enforce the resolutions and decisions of the General
Stockholders Meeting and of the Board of Directors. 2) To enforce the
administrative, economic and financial policies of the corporation. 3) To
appoint the technical and administrative employees required by the corporation
and which positions have been created by the Board of Directors, and in
addition, all other employees of the company. 4) To authorize agents of the
corporation to act in or out of court to represent the corporation in any acts
that may be necessary. 5) To prepare the administrative organization plan of the
corporation and submit it for the approval of the Board of Directors. He may, in
accordance with it and without prejudice of his responsibilities, delegate part
of his duties, as it may become necessary for a better efficiency in the
performance of the tasks of the corporate business. 6) To present to the General
Assembly in their ordinary meeting, a detailed report about Social Company
performance and a memory of the actions performed during the fiscal year. 7) To
present to the Ordinary General Stockholders Meetings and jointly with the Board
of Directors, the balance sheet for each period accompanied by the annexes and
documents required by the law. 8) To keep the Board of Directors informed about
the business and operations performed or ordered by him and to inform it
permanently of the progress of the corporate business. 9) To present to the
Board of Directors, within the first three (3) months of every year, the balance
sheet, inventory and financial statements for the preceding period, together
with the relevant explanations and the suggestion for the distribution and
disposal of profits, if any, and their form of payment. ARTICLE SIXTY-THIRD --
In the performance of their duties the company employees shall be subordinate
and dependent upon the President. ARTICLE SIXTY-FOURTH -- The President of the
corporation shall render justified accounts of his management when so required
by the General Stockholders Meeting or the Board of Directors, at the end of
every year and when he leave his position. CHAPTER VII: FISCAL AUDITOR ARTICLE
SIXTY-FIFTH -- DESIGNATION: The General Stockholders Meeting shall designate the
Fiscal Auditor and his alternate for one (1) year periods. He may be freely
removed or reelected indefinitely by the Stockholders Meeting. His alternate
shall replace him during his temporary or permanent absence. ARTICLE SIXTY-SIXTH
- -- The Fiscal Auditor and his alternate shall necessarily have to be public
accountants. In the case that the Stockholders Meeting designates accounting
associations or firms, these must designate a public account who shall
personally perform the duties of the position. ARTICLE SIXTY-SEVENTH -- The
Fiscal Auditor shall neither by himself nor through a third person be a
shareholder of the Company, or partner or shareholder of any of its subordinate
<PAGE> 13
companies and his employment is fully incompatible with any other position in
them. Nor shall he directly or indirectly enter into contracts with the
corporation or its subordinates. ARTICLE SIXTY-EIGHT -- The Fiscal Auditor shall
not be the spouse either legally or be related within the fourth degree of
consanguinity, second of affinity or first civil, with the President of the
corporation, any member of the Board of Directors, with the Secretary, the
Cashier, the Auditor or any other Director or administrative officer, and can
not be a partner, joint holder of an interest, or private dependent of any of
them. ARTICLE SIXTY-NINTH -- The duties and obligations of the Fiscal Auditor
are those indicated by the law and those imposed on him by the General
Stockholders Meeting and compatible with the law. CHAPTER VIII: GENERAL
SECRETARY ARTICLE SEVENTIETH -- The corporation shall have a General Secretary
freely appointed and removed by the Board of Directors who shall also be
Secretary of the General Stockholders Meeting and the Board of Directors.
ARTICLE SEVENTY-FIRST -- The General Secretary must prepare the minutes for the
General Stockholders Meetings and the Board of Directors meetings, authorize
them by his signature, record them in the corresponding books and issue copies
of same when necessary to meet the requirements of formality and publication
indicated by the law or to evidence any special authorization. ARTICLE
SEVENTY-SECOND -- The general secretary is in charge of keeping the stock
register ledger and to record in it the matters ordered by -- laws and the law.
ARTICLE SEVENTY-THIRD -- In addition to the above mentioned duties, the General
Secretary shall have those assigned to him by the Board of Directors and the
President of the corporation. CHAPTER IX: ACCOUNTING -- BALANCE SHEETS --
PROFITS -- RESERVE FUNDS DIVIDENDS ARTICLE SEVENTY-FOURTH -- ACCOUNTING; The
corporate accounting shall be organized and shall operate in accordance with the
provisions of the Law. ARTICLE SEVENTY-FIFTH -- BALANCE SHEETS; Every year, on
the 31st of December, the accounts of the company shall be closed to make the
corresponding inventory and the balance sheet, which must be presented by the
President of the corporation and the Board of Directors to the General
Stockholders Meeting. ARTICLE SEVENTY-SIXTH -- LEGAL RESERVES: From the net
profits obtained for each period a ten percent (10%) shall be intended to form
the legal reserve fund. This percentage shall continue to be reserved yearly
from the net profits until fifty percent (50%) of the subscribed capital is
completed. The obligation to reserve ten percent (10%) per year shall cease when
the reserve reaches the mentioned level of fifty percent (50%) of the subscribed
capital, but it shall be compulsory again in the event that due to any
circumstance such level shall decrease. ARTICLE SEVENTY-SEVENTH -- OTHER
RESERVES: The General Stockholders Meeting may decree the establishment of other
reserves, provided they have a specific destination and which shall be
compulsory only for the period for which they are made. The General Stockholders
Meeting may vary their destination and order their distribution. ARTICLE
SEVENTY-EIGHT -- PROFITS: Once the inventory and balance sheet corresponding to
the annual period have been approved and the reserves and provisions made, the
General Stockholders Meeting may decree the distribution of profits
<PAGE> 14
and agree on the method of payment of the dividends. ARTICLE SEVENTY-NINTH -
The profits shall be divided among the shareholders proportionately to the
portion paid of the shares subscribed owned by each one of them. ARTICLE
EIGHTIETH - DIVIDENDS - Except as provided otherwise, approved by a number of
shareholders representing seventy percent (70%) of the shares represented at
the meeting, the Corporation shall distribute as dividends not less than fifty
per cent (50%) of the net profits obtained in each period, or of the balance of
such profit, if it would be necessary to offset losses for previous periods.
However, if the amount of the legal and occasional reserves would exceed one
hundred per cent (100%) of the subscribed capital, the compulsory percentage of
the net profits that must be distributed by the corporation shall be increased
to seventy percent (70%), unless the General Stockholders Meeting itself by the
vote of seventy percent (70%) of the shares represented in the meeting, decides
otherwise. ARTICLE EIGHTY-FIRST - The payment of dividends shall be made in
cash. Notwithstanding the foregoing, the dividend may be paid in released
shares of stock of the corporation, if so determined by the General
Stockholders Meeting with the vote by eighty percent (80%) of the total shares
represented in the meeting. If such majority is not obtained, such shares can
only be delivered as dividends to shareholders who accept it. ARTICLE
EIGHTY-SECOND - The losses shall be offset with the reserves especially
intended for this purpose and otherwise, with the legal reserve. The reserves
intended to absorb certain losses cannot be used to cover different losses,
except when so decided by the General Stockholders Meeting. If the legal
reserve would be insufficient to offset the capital shortage, the corporate
benefits from the following fiscal years shall be applied to this purpose.
CHAPTER X: DISSOLUTION AND LIQUIDATION OF THE CORPORATION ARTICLE EIGHTY-THIRD
- - The Corporation shall be dissolved: a) By the expiration of the term agreed
for the corporate agreement, if not validly extended prior to its expiration;
b) By decision taken by the shareholders prior to the expiration of the term
and with the quorum established for by-law reforms; c) When losses occur which
shall reduce the net worth below fifty percent (50%) of subscribed shares when
ninety (90%) percent or more of the subscribed shares belong to only one
shareholder; and d) For the occurrence of all other events or causes provided
by the Law. ARTICLE EIGHTY-FOURTH - When the losses indicated in item C) of the
preceding article occur, the management shall refrain from initiating new
operations and shall immediately call the General Stockholders Meeting in order
to inform it fully and in a documented manner of such situation. The
infringement of this provision shall made the directors jointly and severally
liable for the damages that may be caused to the shareholders or to third
parties for the performance of operations initiated and carried out after the
date on which the mentioned losses are evidenced. ARTICLE EIGHTY-FIFTH - In the
event of the preceding article, the General Stockholders Meeting may take or
order measures leading to the re-establishment of the net worth above fifty
percent (50%) of the subscribed capital. The measures must be taken within six
(6) months following the date on which the losses indicated in the preceding
articles
<PAGE> 15
are consummated. If such measures are not adopted, the General Stockholders
Meeting shall declare the corporation dissolved in order to proceed with the
liquidation of its assets. ARTICLE EIGHTY-SIXTH - Upon dissolution of the
corporation, the liquidation of the corporate assets shall be immediately
carried out. The General Stockholders Meeting shall designate the liquidator and
his alternate. ARTICLE EIGHTY-SEVENTH - The liquidator shall proceed in the
performance of his duties in accordance with the Law and shall have the duties
and obligations indicated by it, especially those related to calling the General
Stockholders Meeting, rendering of accounts, balance sheet and reports and to
the right of inspection and supervision applicable to the shareholders
themselves. ARTICLE EIGHTY-NINTH - In the distribution of any remaining assets
among the shareholders, the regulations of the law shall be followed. General
Stockholders Meeting shall decide the time for final closing of the liquidation
and approve the final account of said liquidation. ARTICLE NINETIETH - The
liquidator may allocate to the shareholders assets other than money in cash.
ARTICLE NINETY-FIRST - By agreement of all shareholders it may be possible to
dispense with making the liquidation and to establish, with the formalities of
law, a new corporation that shall continue the corporate business. CHAPTER XI:
ARBITRATION CLAUSE - SUPPLEMENTARY PROVISIONS. ARTICLE NINETY-SECOND - The
controversies susceptible of settlement that may arise between the shareholders
and the corporation and among the shareholders in their capacity as such and
because of the establishment of the corporation, during the term thereof, or of
its dissolution or during the liquidation period, shall be submitted to the
decision by three (3) arbitrators, who shall be Colombian citizens in exercise
of their rights and attorneys at law with the authority to practice their
profession, designated by the Chamber of Commerce of Santafe de Bogota. ARTICLE
NINETY-THIRD - Upon occurrence of the controversy, any of the parties may go to
the Chamber of Commerce of Santafe de Bogota to request the appointment of the
arbitrators. The request shall be made in writing and it shall state the
differences which are the object of the arbitration. PARAGRAPH. The person or
group of persons that may have similar claims shall be designated as party.
ARTICLE NINETY-FOURTH - If within the following ten (10) ordinary days, Chamber
of Commerce of Santafe de Bogota does not make such designation, the provisions
of Law 23 of 1991, Decree 2651 of 1991 and all other provisions that may
complement them or substitute them shall be applied. ARTICLE NINETY-FIFTH - The
Court of Arbitration shall operate in the City of Santafe de Bogota and the
arbitration shall decide de jure. ARTICLE NINETY-SIXTH - SUPPLEMENTARY
PROVISIONS: In the matters not provided by these by-laws, the corporation shall
be ruled by the regulations of the Commercial Code that govern stock
corporations and in any event, the hierarchical order of the regulations shall
be observed. Read by the appearing party, it is approved and he signs in
testimony thereof. Notice of the registration was issued to the Chamber of
Commerce of Pereira. Notarial fees $11.306.350,oo Decree 172 of 1992. It was
recorded on pages DAR 0006857, 0006858, 0006860, AB 35274508, 35274509,
<PAGE> 16
35274510, 35274511, 35274512, 35274513, 35274514, DAR
0006854 and 0006855.
(signature)
GILBERTO ECHEVERRI MEJIA
C.C. No. 3.302.711
Legal Representative
OCCEL S.A.
(seal) (signature)
<PAGE> 17
CA-6353746
NUMBER: ZERO FOUR (04)
In the municipality of Colon, Republic of Panama, on the eleventh (11th) day of
the month of December of nineteen hundred and ninety-five (1995), before me,
EDGARDO PUPO PUPO, Consul of Colombia in this city, vested with notarial
functions by operation of the law, there appeared: doctor MAURICIO A. CAMPILLO
OROZCO, of legal age, of Colombian nationality, resident of the city of
Medellin, in transit in this city, identified with citizens card No. 71.628.314
issued in Medellin, who acts herein as the special authorized representative of
the corporation OCCIDENTE Y CARIBE CELULAR S.A. - OCCEL S.A., a mixed economy
corporation, with primary domicile in the city of Pereira (Colombia) who
declared: FIRST: That he acts herein in the name of and in representation of
the corporation OCCIDENTE Y CARIBE CELULAR S.A. - OCCEL S.A. in his capacity as
special authorized representative thereof, which he evidences with the power of
attorney granted to him by Dr. GILBERTO ECHEVERRI MEJIA, President of the
aforementioned Corporation, and with the original of the certificate of
existence and representation issued by the Chamber of Commerce of Pereira which
are attached to this instrument. SECOND: In execution of the orders of the
General Meeting of Shareholders of the Corporation and in the exercise of the
aforementioned power, he proceeds to issue a public instrument containing the
amendment of the by-laws approved by that corporate body in its session of the
5th day of the month of September 1995, as evidenced by Minutes No. 012, a copy
of which, in its pertinent part, is attached to this instrument. THIRD: In
accordance with the resolution, Article Fifth of the by-laws is amended, to be
worded as follows: ARTICLE FIFTH - AUTHORIZED CAPITAL: The capital authorized
is of NINETY ONE BILLION NINE HUNDRED AND SIXTY FOUR MILLION TWO HUNDRED AND
FIFTY-FOUR THOUSAND COLOMBIAN PESOS ($91.964.254.000) divided into NINETY ONE
BILLION ONE HUNDRED AND SIXTY FOUR MILLION TWO HUNDRED AND FIFTY-FOUR THOUSAND
(91.964.254.) ordinary and nominative shares for a face value of One Thousand
Colombian Pesos (P$1,000) each. Upon reading and approval of this instrument,
it is signed by the parties which took part, subject to notification of its
registration to the Chamber of Commerce of the city of Pereira. Fees:
The present instrument was recorded in conformity with the record made by the
appearing party and the sheets of official paper distinguished with the
numbers: CA-6353746 were used.
Three (03) copies are issued.
The third copy is for the Corporation.
(signature)
MAURICIO A. CAMPILLO OROZCO
C.C. 71.628.314 of Medellin
(fingerprint)
<PAGE> 18
(signature)
EDGARDO PUPO PUPO
Consul General (seal)
This is a conformed copy of its original.
(seal) (signature)
EDGARDO PUPO PUPO
Consul of Colombia
<PAGE> 19
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 4.01
EXECUTION COPY
================================================================================
OCCIDENTE Y CARIBE CELULAR S.A.
and
THE BANK OF NEW YORK
Trustee
---------------
INDENTURE
Dated as of June 1, 1996
---------------
US$190,745,000
14% Senior Discount Notes
due 2004
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
OCCIDENTE Y CARIBE CELULAR S.A.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE, DATED AS OF JUNE 1, 1996
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
Section 310(a)(1) ....................................................... 607
(a)(2) ....................................................... 607
(b) ....................................................... 608
Section 312(c) ....................................................... 701
Section 314(a) ....................................................... 703
(a)(4) ....................................................... 1008(a)
(c)(1) ....................................................... 102
(c)(2) ....................................................... 102
(e) ....................................................... 102
Section 315(b) ....................................................... 601
Section 316(a)(last
sentence) ....................................................... 101 ("Outstanding")
(a)(1)(A) ....................................................... 502, 512
(a)(1)(B) ....................................................... 513
(b) ....................................................... 508
(c) ....................................................... 104(d)
Section 317(a)(1) ....................................................... 503
(a)(2) ....................................................... 504
(b) ....................................................... 1003
Section 318(a) ....................................................... 111
</TABLE>
- -----------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of this Indenture.
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
PARTIES.................................................................................. 1
RECITALS OF THE COMPANY.................................................................. 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions ............................................................... 2
Accreted Value............................................................. 2
Acquired Indebtedness...................................................... 3
Act .................................................................. 3
Affiliate.................................................................. 4
Annualized Pro Forma Consolidated Cash Flow................................ 4
Asset Sale................................................................. 4
Attributable Value......................................................... 4
Average Life............................................................... 5
Bank Credit Agreement...................................................... 5
Bank Facility.............................................................. 5
Banks .................................................................. 5
Board Resolution........................................................... 5
Business Day............................................................... 5
Capital Stock.............................................................. 5
Capitalized Lease Obligation............................................... 5
Cash Equivalents........................................................... 6
Change of Control.......................................................... 6
Collateral Agents.......................................................... 7
Colombian GAAP............................................................. 7
Commission................................................................. 7
Common Stock............................................................... 8
Company .................................................................. 8
Company Request" or "Company Order......................................... 8
Concession................................................................. 8
Concession Agreement....................................................... 8
Concession Proceeds........................................................ 8
Consolidated Adjusted Net Income........................................... 8
</TABLE>
- --------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE> 4
ii
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Cash Flow..................................................... 9
Consolidated Income Tax Expense............................................ 9
Consolidated Interest Expense.............................................. 9
Consolidated Net Worth..................................................... 9
Consolidated Non-cash Charges.............................................. 10
Corporate Trust Office..................................................... 10
Currency Agreements........................................................ 10
Default .................................................................. 10
Defaulted Interest......................................................... 10
Depositary................................................................. 10
Disinterested Director..................................................... 10
Event of Default........................................................... 10
Exchange Act............................................................... 10
Exchange Offer............................................................. 10
Exchange Offer Registration Statement...................................... 11
Exchange Securities........................................................ 11
Fair Market Value.......................................................... 11
Federal Bankruptcy Code.................................................... 11
Global Security............................................................ 11
guarantee.................................................................. 11
Holder .................................................................. 11
Indebtedness............................................................... 11
Indenture.................................................................. 12
Initial Purchasers......................................................... 12
Initial Securities......................................................... 12
Institutional Accredited Investor.......................................... 12
Interest Payment Date...................................................... 12
Interest Rate Agreements................................................... 12
Investment................................................................. 13
Issue Date................................................................. 13
Lien .................................................................. 13
Maturity .................................................................. 13
Moody's .................................................................. 13
Net Cash Proceeds.......................................................... 13
Non-U.S. Person............................................................ 14
Officers' Certificate...................................................... 14
Offshore Global Security................................................... 14
Offshore Physical Security................................................. 14
Outstanding................................................................ 14
Paying Agent............................................................... 15
Permitted Holders.......................................................... 15
Permitted Indebtedness..................................................... 15
</TABLE>
<PAGE> 5
iii
<TABLE>
<CAPTION>
PAGE
<S> <C>
Permitted Investments...................................................... 16
Permitted Liens............................................................ 17
Permitted Subsidiary Indebtedness.......................................... 19
Permitted Telecommunications Business...................................... 20
Person .................................................................. 20
Physical Security.......................................................... 20
Pledge Effective Date...................................................... 20
Pledge of the Concession Agreement......................................... 20
Predecessor Security....................................................... 21
Preferred Stock............................................................ 21
Public Equity Offering..................................................... 21
Purchase Agreement......................................................... 21
Qualified Capital Stock.................................................... 21
Qualified Institutional Buyer.............................................. 21
Redeemable Capital Stock................................................... 21
Redemption Date............................................................ 21
Redemption Price........................................................... 22
Registration Rights Agreement.............................................. 22
Registration Statement..................................................... 22
Regular Record Date........................................................ 22
Regulation S............................................................... 22
Responsible Officer........................................................ 22
Restricted Subsidiary...................................................... 22
Rule 144A.................................................................. 22
Sale and Leaseback Transaction............................................. 22
S&P .................................................................. 22
Secured Indebtedness....................................................... 22
Securities................................................................. 22
Securities Act............................................................. 23
Security Register" and "Security Registrar................................. 23
Separation Date............................................................ 23
Shelf Registration Statement............................................... 23
Special Record Date........................................................ 23
Stated Maturity............................................................ 23
Subordinated Indebtedness.................................................. 23
Subsidiary................................................................. 23
Telecommunications Business................................................ 23
Trust Indenture Act" or "TIA............................................... 23
Trustee .................................................................. 23
Units .................................................................. 23
Unrestricted Subsidiary.................................................... 23
U.S. GAAP.................................................................. 24
</TABLE>
<PAGE> 6
iv
<TABLE>
<CAPTION>
PAGE
<S> <C>
U.S. Global Security....................................................... 24
U.S. Person................................................................ 24
U.S. Physical Security..................................................... 24
Vice President............................................................. 24
Voting Stock............................................................... 24
Warrant Agreement.......................................................... 24
Warrants .................................................................. 24
Wholly Owned............................................................... 25
SECTION 102. Compliance Certificates and Opinions....................................... 25
SECTION 103. Form of Documents Delivered to Trustee..................................... 25
SECTION 104. Acts of Holders............................................................ 26
SECTION 105. Notices, Etc., to Trustee and Company...................................... 27
SECTION 106. Notice to Holders; Waiver ............................................ 27
SECTION 107. Effect of Headings and Table of Contents................................... 28
SECTION 108. Successors and Assigns..................................................... 28
SECTION 109. Separability Clause........................................................ 28
SECTION 110. Benefits of Indenture...................................................... 28
SECTION 111. Governing Law.............................................................. 29
SECTION 112. Legal Holidays............................................................. 29
SECTION 113. Agent for Service; Submission to Jurisdiction; Waiver of Immunities........ 29
SECTION 114. Judgment Currency.......................................................... 30
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally............................................................ 30
SECTION 202. Restrictive Legends........................................................ 32
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms............................................................ 34
SECTION 302. Denominations.............................................................. 35
SECTION 303. Execution, Authentication, Delivery and Dating............................. 35
SECTION 304. Temporary Securities....................................................... 36
SECTION 305. Registration, Registration of Transfer and Exchange........................ 37
SECTION 306. Book-Entry Provisions for Global Securities................................ 38
SECTION 307. Special Transfer Provisions................................................ 40
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities........................... 43
SECTION 309. Payment of Interest; Interest Rights Preserved............................. 43
</TABLE>
<PAGE> 7
v
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 310. Persons Deemed Owners...................................................... 45
SECTION 311. Cancellation............................................................... 45
SECTION 312. Computation of Interest.................................................... 45
SECTION 313. Wire Transfers............................................................. 45
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.................................... 46
SECTION 402. Application of Trust Money................................................. 47
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.......................................................... 47
SECTION 502. Acceleration of Maturity; Rescission and Annulment......................... 49
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............ 50
SECTION 504. Trustee May File Proofs of Claim........................................... 51
SECTION 505. Trustee May Enforce Claims Without Possession of Securities................ 52
SECTION 506. Application of Money Collected ............................................ 52
SECTION 507. Limitation on Suits........................................................ 53
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest................................................................. 54
SECTION 509. Restoration of Rights and Remedies......................................... 54
SECTION 510. Rights and Remedies Cumulative ............................................ 54
SECTION 511. Delay or Omission Not Waiver............................................... 54
SECTION 512. Control by Holders......................................................... 54
SECTION 513. Waiver of Past Defaults.................................................... 55
SECTION 514. Waiver of Stay or Extension Laws........................................... 55
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults......................................................... 56
SECTION 602. Certain Rights of Trustee.................................................. 56
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Securities............. 57
SECTION 604. May Hold Securities........................................................ 58
SECTION 605. Money Held in Trust........................................................ 58
SECTION 606. Compensation and Reimbursement ............................................ 58
</TABLE>
<PAGE> 8
vi
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 607. Corporate Trustee Required; Eligibility; Conflicting Interests............. 59
SECTION 608. Resignation and Removal; Appointment of Successor.......................... 59
SECTION 609. Acceptance of Appointment by Successor..................................... 60
SECTION 610. Merger, Conversion, Consolidation or Succession to Business................ 61
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders............................... 61
SECTION 702. Reports by Trustee......................................................... 62
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms....................... 62
SECTION 802. Successor Substituted...................................................... 63
SECTION 803. Securities to Be Secured in Certain Events................................. 64
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders......................... 64
SECTION 902. Supplemental Indentures with Consent of Holders............................ 65
SECTION 903. Execution of Supplemental Indentures....................................... 66
SECTION 904. Effect of Supplemental Indentures.......................................... 66
SECTION 905. Conformity with Trust Indenture Act........................................ 67
SECTION 906. Reference in Securities to Supplemental Indentures......................... 67
SECTION 907. Notice of Supplemental Indentures.......................................... 67
SECTION 908. Effect on Bank Indebtedness................................................ 67
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest....................... 67
SECTION 1002. Maintenance of Office or Agency........................................... 68
SECTION 1003. Money for Security Payments to Be Held in Trust........................... 68
SECTION 1004. Corporate Existence .................................................... 69
SECTION 1005. Payment of Taxes and Other Claims......................................... 70
</TABLE>
<PAGE> 9
vii
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1006. Maintenance of Properties ............................................ 70
SECTION 1007. Insurance ............................................ 70
SECTION 1008. Statement by Officers as to Default....................................... 70
SECTION 1009. Provision of Reports and Financial Statements............................. 71
SECTION 1010. Limitation on Indebtedness ............................................ 72
SECTION 1011. Limitation on Restricted Payments......................................... 72
SECTION 1012. Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries.............................................................. 75
SECTION 1013. Limitation on Transactions with Affiliates................................ 76
SECTION 1014. Limitation on Liens ............................................ 77
SECTION 1015. Purchase of Securities upon a Change of Control........................... 77
SECTION 1016. Limitation on Sale of Assets ............................................ 79
SECTION 1017. Limitation on Sale and Leaseback Transactions............................. 82
SECTION 1018. Limitation on the Activities of the Company............................... 83
SECTION 1019. Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries................................................... 83
SECTION 1020. Payment of Additional Amounts ............................................ 84
SECTION 1021. Waiver of Certain Covenants ............................................ 85
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Mandatory and Optional Redemption......................................... 85
SECTION 1102. Applicability of Article ............................................ 86
SECTION 1103. Notice to Trustee of Redemption........................................... 86
SECTION 1104. Selection by Trustee of Securities to Be Redeemed......................... 87
SECTION 1105. Notice of Redemption ............................................ 87
SECTION 1106. Deposit of Redemption Price ............................................ 88
SECTION 1107. Securities Payable on Redemption Date..................................... 88
SECTION 1108. Securities Redeemed in Part ............................................ 89
ARTICLE TWELVE
[Reserved]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance.............. 89
</TABLE>
<PAGE> 10
viii
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1302. Defeasance and Discharge.................................................. 89
SECTION 1303. Covenant Defeasance....................................................... 90
SECTION 1304. Conditions to Defeasance or Covenant Defeasance........................... 90
SECTION 1305. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions..................................... 92
SECTION 1306. Reinstatement............................................................. 93
ARTICLE FOURTEEN
CONCESSION PRIORITY
SECTION 1401. Concession Proceeds to Be Turned Over to the Collateral Agents............ 93
SECTION 1402. Events of Turnover........................................................ 94
SECTION 1403. In Furtherance of Concession Priority..................................... 94
SECTION 1404. Rights of Subrogation..................................................... 95
SECTION 1405. Further Assurances........................................................ 95
SECTION 1406. Agreements in Respect of the Securities................................... 95
SECTION 1407. Expenses.................................................................. 95
SECTION 1408. Continuing Agreement...................................................... 95
SECTION 1409. Trust Moneys Not Subject to Concession Priority........................... 96
TESTIMONIUM.............................................................................. 101
SIGNATURES AND SEALS......................................................................101
SCHEDULE I Indebtedness Outstanding on the Issue Date
SCHEDULE II Agreements Not Restricted Under Section 1013
EXHIBIT A Form of Note
EXHIBIT B Form of Certificate to Be Delivered upon Termination of Restricted Period
EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers to Non-
QIB Institutional Accredited Investors
EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers Pursuant
to Regulation S
</TABLE>
<PAGE> 11
EXECUTION COPY
INDENTURE, dated as of June 1, 1996, between Occidente y Caribe Celular
S.A., a sociedad anonima de economia mixta existing under the laws of the
Republic of Colombia (herein called the "Company"), having its principal office
at Calle 50 No. 55-01, Medellin, Colombia, and The Bank of New York, a New York
banking corporation, as Trustee (hereinafter called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 14% Senior
Discount Notes due 2004 (herein called the "Initial Securities") and 14% Series
B Senior Discount Notes due 2004 (the "Exchange Securities" and, together with
the Initial Securities, the "Securities"), of substantially the tenor and
amount hereinafter set forth, and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture.
Upon the issuance of the Exchange Securities, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the Trust Indenture Act of 1939,
as amended, that are required to be part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
Pursuant to the terms of a Purchase Agreement dated as of May 31, 1996
(the "Purchase Agreement") between the Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated and ING Baring (U.S.) Securities, Inc., as Initial
Purchasers (the "Initial Purchasers"), the Company has agreed to issue and sell
190,745 units (the "Units"), each Unit consisting of US$1,000 principal amount
of the Securities and four Warrants (each, a "Warrant") entitling the holder
thereof to purchase 5.709 shares of Class B Common Stock, par value 1,000
Pesos per share, of the Company from the Company at an exercise price of
US$1.00 per share, subject to adjustment as provided in the Warrant Agreement
dated as of the date hereof (the "Warrant Agreement") between the Company and
The Bank of New York, as warrant agent. The Securities and the Warrants will
become separately transferable on the earlier of (i) 90 days after issuance,
(ii) the occurrence of a Change of Control (as defined herein) and (iii) the
date on which the Exchange Offer Registration Statement (as defined herein) is
declared effective (the "Separation Date").
All things necessary have been done to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, in accordance with their and its
terms.
<PAGE> 12
2
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the
singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in Colombia; and
(d) the words "herein," "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Accreted Value" means, for any particular Redemption Date, any
date of purchase for any purchase of Securities at the option of the Holders
pursuant to Sections 1015 and 1016 or any date on which the Securities first
become due and payable after an Event of Default (any such date being herein
referred to as a "specified date"), the amount provided below for each $1,000
principal amount at final maturity of Securities Outstanding:
(i) if the specified date occurs on one of the following dates
(each a "Semiannual Accrual Date"), the Accreted Value will equal the
amount set forth below for such Semiannual Accrual Date:
<PAGE> 13
<PAGE> 14
3
<TABLE>
<CAPTION>
SEMIANNUAL ACCRUAL DATE ACCRETED VALUE
<S> <C>
September 15, 1996........................................................... US$543.93
March 15, 1997............................................................... US$582.01
September 15, 1997........................................................... US$622.75
March 15, 1998............................................................... US$666.34
September 15, 1998........................................................... US$712.99
March 15, 1999............................................................... US$762.90
September 15, 1999........................................................... US$816.30
March 15, 2000............................................................... US$873.44
September 15, 2000........................................................... US$934.58
March 15, 2001............................................................... US$1,000.00
</TABLE>
(ii) if the specified date occurs before the first Semiannual
Accrual Date, the Accreted Value will equal the sum of (a) US$524.26
and (b) an amount equal to the product of (1) the Accreted Value for
the first Semiannual Accrual Date less US$524.26 multiplied by (2) a
fraction, the numerator of which is the number of days from the Issue
Date to the specified date, using a 360-day year of twelve 30-day
months, and the denominator of which is the number of days from the
Issue Date to the first Semiannual Accrual Date, using a 360-day year
of twelve 30-day months;
(iii) if the specified date occurs between two Semiannual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value
for the Semiannual Accrual Date immediately preceding such specified
date and (b) an amount equal to the product of (1) the Accreted Value
for the immediately following Semiannual Accrual Date less the Accreted
Value for the immediately preceding Semiannual Accrual Date multiplied
by (2) a fraction, the numerator of which is the number of days from
the immediately preceding Semiannual Accrual Date to the specified
date, using a 360-day year of twelve 30-day months, and the denominator
of which is 180; or
(iv) if the specified date occurs after the last Semiannual
Accrual Date, the Accreted Value will equal US$1,000.
"Acquired Indebtedness" means Indebtedness of a Person (a)
existing at the time such Person becomes a Restricted Subsidiary or (b) assumed
in connection with the acquisition of assets from such Person. Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary.
"Act," when used with respect to any Holder, has the meaning
specified in Section 104.
<PAGE> 15
4
"Affiliate" means, with respect to any specified Person, (a) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person or (b) any other Person
that owns, directly or indirectly, 10% or more of such specified Person's voting
Capital Stock or any executive officer or director of any such specified Person
or other Person. For the purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Annualized Pro Forma Consolidated Cash Flow" of the Company means
the Consolidated Cash Flow of the Company for the most recent full fiscal
quarter for which consolidated financial statements are available giving pro
forma effect to the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business acquired or disposed of by the Company or its Restricted Subsidiaries,
as the case may be, since the first day of such fiscal quarter, as if such
acquisition or disposition occurred on the first day of such fiscal quarter,
multiplied by four.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease
or other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (a) any
shares of Capital Stock of any Restricted Subsidiary (other than directors'
qualifying shares or shares required by applicable law to be held by a Person
other than the Company or a Restricted Subsidiary); (b) all or substantially all
of the properties and assets of any division or line of business of the Company
or its Restricted Subsidiaries; or (c) any other properties or assets of any
division or line of business of the Company or any Restricted Subsidiary, other
than in the ordinary course of business. For the purposes of this definition,
the term "Asset Sale" shall not include any transfer of properties or assets (i)
that is governed by Article Eight of this Indenture, (ii) by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Wholly Owned Restricted Subsidiary, or (iii) having a Fair Market Value per
transaction or series of related transactions of less than US$750,000.
"Attributable Value" means, with respect to any lease at the time
of determination, the present value (discounted at the interest rate implicit in
the lease or, if not known, at the Company's incremental borrowing rate) of the
obligations of the lessee of the property subject to such lease for rental
payments during the remaining term of the lease included in such transaction,
including any period for which such lease has been extended or may, at the
option of the lessor exercisable unilaterally, be extended, or until the
earliest date on which the lessee may terminate such lease without penalty or
upon payment of penalty (in which case the rental payments shall include such
penalty), after excluding from such rental payments all amounts required to be
paid on account of maintenance and repairs, insurance, taxes, assessments,
water, utilities and similar charges.
<PAGE> 16
5
"Average Life" means, as of the date of determination with respect
to any Indebtedness, the quotient obtained by dividing (a) the sum of the
products of (i) the number of years from the date of determination to the date
or dates of each successive scheduled principal payment (including, without
limitation, through a mandatory redemption) of such Indebtedness multiplied by
(ii) the amount of each such principal payment by (b) the sum of all such
principal payments.
"Bank Credit Agreement" means the Bank Facility, as such agreement
may be amended, renewed, extended, substituted, restated, refinanced,
restructured, supplemented or otherwise modified from time to time (including,
without limitation, any successive amendments, renewals, extensions,
substitutions, restatements, refinancings, restructurings, supplements or other
modifications of the foregoing including by more than one agreement); provided
that with respect to any agreement providing for the refinancing of Indebtedness
under the Bank Credit Agreement, such agreement shall be a Bank Credit Agreement
under this Indenture only if a notice to that effect is delivered by the Company
to the Trustee.
"Bank Facility" means the credit agreement dated as of June 7,
1996 among the Company, the Banks and ING Baring (U.S.) Securities, Inc. and
Merrill Lynch & Co., as managers, and ING Bank N.V. and ING (U.S.) Capital
Corporation, as administrative and collateral agents.
"Banks" means the banks and other financial institutions from time
to time that are lenders under the Bank Facility.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification.
"Business Day" means a day other than a Saturday, a Sunday or a
day on which banking institutions in New York City are not required to be open.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or other
equivalents (however designated) of such Person's capital stock, and any rights
(other than debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock, whether now outstanding
or issued after the Issue Date.
"Capitalized Lease Obligation" means any obligation of the Company
or a Restricted Subsidiary under a lease of (or other agreement conveying the
right to use) any property (whether real, personal or mixed) that is required to
be classified and accounted for as a capital lease obligation under Colombian
GAAP, and, for the purpose of this Indenture, the amount of such obligation at
any date shall be the capitalized amount thereof at such date, determined in
accordance with Colombian GAAP.
<PAGE> 17
6
"Cash Equivalents" means (a) any evidence of Indebtedness with a
maturity of 365 days or less issued or directly and fully guaranteed or insured
by the United States of America or the Republic of Colombia or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America or the Republic of Colombia, as the case may be, is pledged in
support thereof); (b) certificates of deposit or acceptances with a maturity of
180 days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than US$500,000,000; (c) commercial paper with a maturity of 180 days or
less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-1 by Moody's; (d)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, as the case may be, in each case maturing within
one year from the date of acquisition; provided that the terms of such
agreements comply with the guidelines set forth in the United States Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the United States Comptroller of the Currency; (e)
Colombian Peso deposits, with maturities of not more than 12 months from the
date of acquisition, in (i) Banco de Colombia, Banco Ganadero, Banco Industrial
Colombiano or Banco de Bogota or (ii) any other bank or financial institution
incorporated under the laws of the Republic of Colombia with total assets
exceeding the equivalent of US$350,000,000, provided that the aggregate
principal amount of any such deposits in banks described in this subclause (ii)
shall not exceed the equivalent of US$10,000,000 at any time outstanding; (f)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the Republic of
Colombia and backed by the full faith and credit of the Republic of Colombia
maturing within one year from the date of acquisition, in each case entered into
with any of the Colombian banks specified in the preceding clause (e), provided
that such agreements with banks described in subclause (e)(ii) shall be deemed a
deposit for purposes of the US$10,000,000 limit in such subclause; and (g)
investments in money market funds all of the assets of which consist of
securities of the types described in the foregoing clauses (a) through (f).
For the purposes only of Section 1016 of this Indenture and the
definition of "Net Cash Proceeds," the assumption of Indebtedness of the Company
or any Restricted Subsidiary and the release of the Company and all Restricted
Subsidiaries from all liability on such Indebtedness in connection with such
Asset Sale shall be deemed to be a Cash Equivalent.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
<PAGE> 18
7
directly or indirectly, of more than 50% of the total outstanding Voting Stock
of the Company; (b) the Company consolidates with, or merges with or into,
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction (i) where the outstanding Voting Stock of the Company is not
converted or exchanged at all (except to the extent necessary to reflect a
change in the jurisdiction of incorporation of the Company) or is converted into
or exchanged for (A) Voting Stock (other than Redeemable Capital Stock) of the
surviving or transferee corporation or (B) cash, securities and other property
(other than Capital Stock of the Surviving Entity) in an amount that could be
paid by the Company as a Restricted Payment under Section 1011 of this Indenture
and (ii) where immediately thereafter no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), other than Permitted
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total outstanding Voting Stock
of the surviving or transferee corporation; (c) a majority of the Board of
Directors of the Company has been nominated by any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than one
or more Permitted Holders, other than Permitted Holders or a depositary or
custodian for any depositary receipts in respect of shares of Voting Stock of
the Company, provided that such depositary or custodian is not acting at the
direction of any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) other than one or more Permitted Holders; (d)
Colombia or any of its instrumentalities (including, without limitation,
departments, districts and municipalities), including government-owned
corporations or public entities, owns more than 50% of the Voting Stock of the
Company; or (e) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with the
provisions of Article Eight of this Indenture.
"Collateral Agents" means ING Bank N.V. and ING (U.S.) Capital
Corporation acting as Collateral Agents appointed by the lenders under the Bank
Facility.
"Colombian GAAP" means generally accepted accounting principles in
Colombia consistently applied, that are in effect on the Issue Date.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
<PAGE> 19
8
"Common Stock" means the Class A Common Stock, the Class B Common
Stock and the Class C Common Stock, in each case par value 1,000 Pesos per
share, of the Company.
"Company" means the Person named as the "Company" in the heading
of this Indenture, until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Concession" means the 10-year renewable cellular
telecommunications concession granted by the Colombian Ministry of
Communications to the Company pursuant to the Concession Agreement.
"Concession Agreement" means the contract dated March 28, 1994
between the Company and the Colombian Ministry of Communications pursuant to
which the Concession was granted to the Company.
"Concession Proceeds" means any proceeds, payment or distribution
of any kind (whether in cash, property or securities) in respect of the
Concession or the Concession Agreement, as specified by the applicable
governmental authority supervising the proceedings pursuant to which such
Concession Proceeds are distributed, or if such governmental authority does not
so specify, the amount reasonably determined to be the Concession Proceeds by an
internationally recognized investment bank expert in the cellular
telecommunications business approved by the Collateral Agents and reasonably
acceptable to the Company.
"Consolidated Adjusted Net Income" means, for any period, the
consolidated net income (or loss) of the Company and all Restricted Subsidiaries
for such period as determined in accordance with Colombian GAAP, adjusted by
excluding, without duplication, (a) any net after-tax extraordinary gains or
losses (less all fees and expenses relating thereto), (b) any net after-tax
gains or losses (less all fees and expenses relating thereto) attributable to
asset dispositions other than in the ordinary course of business, (c) the
portion of net income (or loss) of any Person (other than the Company or a
Restricted Subsidiary), including Unrestricted Subsidiaries, in which the
Company or any Restricted Subsidiary has an ownership interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Company or any Restricted Subsidiary in cash dividends or distributions during
such period, (d) the net income (or loss) of any Person combined with the
Company or any Restricted Subsidiary on a "pooling of interests" basis
attributable to any period prior to the date of such combination, (e) the net
income of any Restricted Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Restricted Subsidiary to
another Restricted Subsidiary or to the Company is not at
<PAGE> 20
9
the date of determination permitted, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary or its stockholders and (f) any non-cash items of the Company and any
Restricted Subsidiary (including monetary corrections) increasing Consolidated
Adjusted Net Income for such period (other than items that will result in the
receipt of cash payments).
"Consolidated Cash Flow" of the Company means, for any period, the
sum of Consolidated Adjusted Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense and Consolidated Non-cash Charges deducted in
computing Consolidated Adjusted Net Income, in each case for such period.
"Consolidated Income Tax Expense" means, for any period, the
provision for Colombian national, local and foreign income taxes of the Company
and all Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with Colombian GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, the sum of (a) the interest expense of the Company and its
Restricted Subsidiaries for such period, including, without limitation, (i)
amortization of debt discount, (ii) the net cost of interest rate contracts
(including amortization of discounts), (iii) the interest portion of any
deferred payment obligation and (iv) amortization of debt issuance costs, plus
(b) the interest component of Capitalized Lease Obligations of the Company and
its Restricted Subsidiaries during such period, plus (c) cash and non-cash
dividends (other than in the form of Qualified Capital Stock of the Company)
paid on Redeemable Capital Stock by the Company and any Restricted Subsidiary
(to any Person other than the Company and any Wholly Owned Restricted
Subsidiary), in each case as determined on a consolidated basis in accordance
with Colombian GAAP; provided that (x) the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma basis and
(A) bearing a floating interest rate shall be computed as if the rate in effect
on the date of computation had been the applicable rate for the entire period
and (B) which was not outstanding during the period for which the computation is
being made but which bears, at the option of the Company, a fixed or floating
rate of interest shall be computed by applying, at the option of the Company,
either the fixed or floating rate, and (y) in making such computation, the
Consolidated Interest Expense attributable to interest on any Indebtedness under
a revolving credit facility computed on a pro forma basis shall be computed
based upon the average daily balance of such Indebtedness during the applicable
period; provided further that, notwithstanding the foregoing, the interest rate
with respect to any Indebtedness covered by any Interest Rate Agreement shall be
deemed to be the effective interest rate with respect to such Indebtedness after
taking into account such Interest Rate Agreement.
"Consolidated Net Worth" means, at any date, the stockholders'
equity of the Company less the amount of such stockholders' equity attributable
to Redeemable Capital
<PAGE> 21
10
Stock or treasury stock of the Company and any Restricted Subsidiary, as
determined on a consolidated basis in accordance with Colombian GAAP.
"Consolidated Non-cash Charges" means, for any period, the
aggregate depreciation, amortization and other non-cash expenses of the Company
and any Restricted Subsidiary (including monetary corrections) reducing
Consolidated Adjusted Net Income for such period, determined on a consolidated
basis in accordance with Colombian GAAP (excluding any such non-cash charge that
requires an accrual of or reserve for cash charges for any future period).
"Corporate Trust Office" means the office of the Trustee, at which
at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 101 Barclay Street, New York, N.Y. 10286, except that with respect to
presentation of Securities for payment or for registration of transfer or
exchange, such term shall mean the office or agency of the Trustee at which, at
any particular time, its corporate agency business shall be conducted.
"Currency Agreements" means any spot or forward foreign exchange
agreements and currency swap, currency option or other similar financial
agreements or arrangements entered into by the Company or any of its Restricted
Subsidiaries designed to protect against or manage exposure to fluctuations in
currency exchange rates.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Defaulted Interest" has the meaning provided in Section 309.
"Depositary" means, with respect to Securities issued in the form
of one or more Global Securities, The Depository Trust Company or another Person
designated as depositary by the Company, which must be a clearing agency
registered under the Exchange Act.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under this Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Event of Default" has the meaning provided in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
<PAGE> 22
11
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first recital
of this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that such Exchange
Securities shall not contain terms with respect to transfer restrictions) that
are issued and exchanged for the Initial Securities pursuant to the Registration
Rights Agreement and this Indenture.
"Fair Market Value" means, with respect to any asset or property,
a price which could be negotiated in an arm's-length transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure to complete the transaction. Fair Market Value shall be determined by
the Board of Directors of the Company acting in good faith and shall be
evidenced by a Board Resolution.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of
the United States Code, as amended from time to time.
"Global Security" has the meaning provided in Section 201.
"guarantee" means, as applied to any obligation, (a) a guarantee
(other than by endorsement of negotiable instruments for collection or deposit
in the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation and (b) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of credit.
"Holder" means a Person in whose name a Security is registered in
the Security Register.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication, (a) all liabilities of such Person for
borrowed money (including overdrafts) or for the deferred purchase price of
property or services, excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business, but including, without
limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit and acceptances issued under letter of
credit facilities, acceptance facilities or other similar facilities (other than
obligations with respect to trade letters of credit securing obligations entered
into in the ordinary course of business of such Person for the import of
equipment used in the business of such Person or inventory for sale to customers
to the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit), (b) all obligations of such Person evidenced by bonds,
notes, debentures or
<PAGE> 23
12
other similar instruments, (c) all indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade payables arising in
the ordinary course of business, (d) all Capitalized Lease Obligations of such
Person, (e) all obligations of such Person under or in respect of Interest Rate
Agreements or Currency Agreements, (f) all Indebtedness referred to in (but not
excluded from) the preceding clauses of other Persons and all dividends of other
Persons the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness (the amount of
such obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (g) all guarantees by such
Person of Indebtedness referred to in this definition of any other Person and
(h) all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed and as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" has the meaning provided in the recitals to
this Indenture.
"Initial Securities" has the meaning provided in the recitals to
this Indenture.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Interest Rate Agreements" means any interest rate protection
agreements and other types of interest rate hedging agreements (including,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements).
<PAGE> 24
13
"Investment" means, with respect to any Person, any direct or
indirect advance, loan or other extension of credit or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase,
acquisition or ownership by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued or owned by,
any other Person and all other items that would be classified as investments on
a balance sheet prepared in accordance with Colombian GAAP. In addition, the
fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary shall
be deemed to be an "Investment" made by the Company in such Unrestricted
Subsidiary at such time. Notwithstanding the foregoing, "Investments" shall
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Issue Date" means June 7, 1996.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own subject to a Lien
any property which such Person has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Maturity" means, with respect to any Security, the date on which
any principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of, or stock
or other assets when disposed for, cash or Cash Equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary), net of (i) brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel, accountants and
investment banks) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of, or is otherwise required by the terms of, such Asset
Sale, (iv) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with Colombian GAAP against any liabilities associated with such Asset Sale and
<PAGE> 25
14
retained by the Company or any Restricted Subsidiary, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Non-U.S. Person" means a Person that is not a "U.S. person" as
defined in Regulation S.
"Officers' Certificate" means a certificate signed by the
Chairman, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee.
"Offshore Global Security" has the meaning provided in Section
201.
"Offshore Physical Security" has the meaning provided in Section
201.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company (which counsel may be an employee of the Company) or
outside counsel for the Company, who, in each case shall be acceptable to the
Trustee.
"Outstanding," when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the Company
shall act as its own Paying Agent) for the Holders of such Securities;
provided that, if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Securities, except to the extent provided in Sections 1302
and 1303, with respect to which the Company has effected defeasance
and/or covenant defeasance as provided in Article Thirteen; and
(iv) Securities which have been paid pursuant to Section 308 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
<PAGE> 26
15
bona fide purchaser in whose hands the Securities are valid obligations
of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 316, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any) or interest on any Securities on behalf of the Company.
"Permitted Holders" means Cable and Wireless, plc, ERT Celular
S.A., Caribe Celular S.A., Ancel S.A. and Eccel S.A. and their respective
successors.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company under the Bank Credit Agreement in
an aggregate principal amount at any one time outstanding not to exceed
US$80,000,000;
(b) Indebtedness of the Company pursuant to the Securities;
(c) Indebtedness of the Company outstanding on the Issue Date and
listed on Schedule I hereto;
(d) Indebtedness of the Company owing to any Wholly Owned
Restricted Subsidiary; provided that any Indebtedness of the Company
owing to any such Restricted Subsidiary is unsecured and is
subordinated in right of payment from and after such time as the
Securities shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the
Company's obligations under the Securities; provided further that any
(i) disposition, pledge or transfer of any such Indebtedness to a
Person (other than a disposition, pledge or transfer to the Company or
another Wholly Owned Restricted Subsidiary) or (ii) event which causes
such Restricted Subsidiary to cease to be a Restricted Subsidiary shall
be deemed to be an incurrence of such Indebtedness by the Company not
permitted by this clause (d);
<PAGE> 27
16
(e) obligations of the Company entered into in the ordinary course
of business (i) pursuant to bona fide Interest Rate Agreements designed
to protect the Company or any Restricted Subsidiary against
fluctuations in interest rates in respect of Indebtedness of the
Company or any Restricted Subsidiary, which obligations do not exceed
the aggregate principal amount of such Indebtedness, and (ii) pursuant
to bona fide Currency Agreements entered into by the Company or any of
its Restricted Subsidiaries and designed to protect such Person against
fluctuation in currency values in respect of its (x) assets or (y)
obligations;
(f) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of
Indebtedness incurred pursuant to clause (c) of this definition,
including any successive refinancings, so long as (i) any such new
Indebtedness shall be in a principal amount that does not exceed (1)
the principal amount (or, if such Indebtedness being refinanced was
incurred with original issue discount, the aggregate accreted value as
of the date of determination) so refinanced, plus (2) the lesser of the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined as necessary to accomplish
such refinancing, plus (3) the amount of any fees and expenses incurred
to accomplish such refinancing, (ii) in the case of any refinancing of
Subordinated Indebtedness, such new Indebtedness is made subordinate to
the Securities at least to the same extent as the Indebtedness being
refinanced and (iii) such new Indebtedness has an Average Life equal to
or greater than the Average Life of the Indebtedness being refinanced
and a final Stated Maturity later than the final Stated Maturity of the
Indebtedness being refinanced; and
(g) Indebtedness of the Company in an aggregate principal amount
not in excess of US$35,000,000 at any one time outstanding, of which an
amount not in excess of US$25,000,000 at any one time outstanding may
be Secured Indebtedness.
For the purposes of the foregoing definition, (i) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness in
the definition of "Permitted Indebtedness," the Company, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of such categories and (ii) an item
of Indebtedness may be divided and classified into more than one of the types of
Indebtedness referred to above.
"Permitted Investments" means any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in the Company or any Wholly Owned Restricted
Subsidiary;
<PAGE> 28
17
(c) intercompany Indebtedness to the extent permitted under clause
(d) of the definition of "Permitted Indebtedness" and clause (a) of the
definition of "Permitted Subsidiary Indebtedness";
(d) Investments by the Company or any Restricted Subsidiary in
another Person if as a result of such Investment (i) such other Person
becomes a Wholly Owned Restricted Subsidiary or (ii) such other Person
is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Restricted
Subsidiary;
(e) loans and advances to employees in the ordinary course of
business in an aggregate amount not to exceed US$1,000,000 at any one
time outstanding;
(f) Investments in Unrestricted Subsidiaries or in any other
Person that is not a Restricted Subsidiary in an amount not to exceed
US$15,000,000 in aggregate, which Unrestricted Subsidiaries or Persons
are in the business of the Company or its Restricted Subsidiaries
existing on the Issue Date or in any Telecommunications Business;
(g) receivables owing to the Company or any Restricted Subsidiary,
including receivables arising from the sale of handsets to customers
and distributors, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary
trade terms; or
(h) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary
course of business.
"Permitted Liens" means the following types of Liens:
(a) Liens (other than Liens securing Indebtedness under the Bank
Credit Agreement) existing as of the Issue Date;
(b) Liens on property or assets of the Company or any Restricted
Subsidiary securing Indebtedness under the Bank Credit Agreement in a
principal amount not to exceed the principal amount of the outstanding
Indebtedness permitted by clause (a) of the definition of "Permitted
Indebtedness";
(c) Liens on property or assets of the Company or any Restricted
Subsidiary securing Secured Indebtedness in a principal amount not to
exceed the principal amount of Secured Indebtedness permitted by clause
(g) of the definition of "Permitted Indebtedness";
<PAGE> 29
18
(d) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any Wholly Owned Restricted
Subsidiary;
(e) Liens on any property or assets of the Company or any
Restricted Subsidiary securing the Securities;
(f) any interest or title of a lessor under any Capitalized Lease
Obligation or Sale and Leaseback Transaction so long as the
Attributable Value secured by such Lien does not exceed US$2,000,000;
(g) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen and repairmen or other like Liens
arising in the ordinary course of business of the Company or any
Restricted Subsidiary and with respect to amounts not yet delinquent or
being contested in good faith by appropriate proceedings;
(h) Liens for taxes, assessments, government charges or claims
that are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted;
(i) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than
contracts for the payment of money);
(j) survey exceptions, title defects, easements, rights-of-way,
restrictions and other similar charges or encumbrances not interfering
in any material respect with the business of the Company or any
Restricted Subsidiary incurred in the ordinary course of business;
(k) Liens arising by reason of any judgment, decree or order of
any court so long as such Lien is adequately bonded and any appropriate
legal proceedings that may have been duly initiated for the review of
such judgment, decree or order shall not have been finally terminated
or the period within which such proceedings may be initiated shall not
have expired;
(l) Liens securing Acquired Indebtedness created prior to (and not
in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary; provided that
such Lien does not extend to any property or assets of the Company or
any Restricted Subsidiary other than the assets acquired in connection
with the incurrence of such Acquired Indebtedness;
<PAGE> 30
19
(m) Liens securing obligations of the Company under Interest Rate
Agreements or Currency Agreements or any collateral for the
Indebtedness to which such Interest Rate Agreements or Currency
Agreements relate;
(n) Liens on property or shares of Capital Stock of another Person
at the time such other Person becomes a Subsidiary of such Person;
provided, however, that such Liens are not created, incurred or assumed
in connection with, or in contemplation of, such other Person becoming
such a Subsidiary; provided further, however, that such Lien may not
extend to any other property owned by such Person or any of its
Subsidiaries or by the Person acquiring such assets;
(o) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security;
(p) Liens securing Indebtedness incurred to finance the
construction, purchase or lease of, or improvements or additions to,
property of the Company or any Restricted Subsidiary (other than Liens
under any Capitalized Lease Obligation or Sale and Leaseback
Transaction described in clause (f) above); provided, however, that (i)
the Lien may not extend to any other property owned by the Company or
any Restricted Subsidiary at the time the Lien is incurred and (ii) the
Lien securing such Indebtedness shall be created within 120 days of
such construction, purchase, lease, improvement or addition; and
(q) any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses (a) through (p); provided
that any such extension, renewal or replacement shall be no more
restrictive in any material respect than the Lien so extended, renewed
or replaced and shall not extend to any additional property or assets.
"Permitted Subsidiary Indebtedness" means any of the following:
(a) Indebtedness of a Restricted Subsidiary owing to the Company
or to a Wholly Owned Restricted Subsidiary; provided that any
disposition, pledge or transfer of any such Indebtedness to a Person
(other than a disposition, pledge or transfer to the Company or a
Wholly Owned Restricted Subsidiary) shall be deemed to be an incurrence
of such Indebtedness by such Restricted Subsidiary not permitted by
this clause (a);
(b) Indebtedness incurred by a Person prior to the time (i) such
Person became a Restricted Subsidiary of the Company, (ii) such Person
merges into or consolidates with a Restricted Subsidiary of the Company
or (iii) another Restricted Subsidiary of the Company merges into or
consolidates with such Person (in a transaction in which such Person
becomes a Restricted Subsidiary of the Company),
<PAGE> 31
20
which Indebtedness was not incurred in anticipation of such transaction
and was outstanding prior to such transaction; and
(c) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by a
Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary
incurred pursuant to clause (b) of this definition, including any
successive refinancings by such Restricted Subsidiary, so long as any
such new Indebtedness shall be in a principal amount that does not
exceed (1) the principal amount (or, if such Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) so
refinanced, plus (2) the lesser of the amount of any premium required
to be paid in connection with such refinancing pursuant to the terms of
the Indebtedness refinanced or the amount of any premium reasonably
determined by such Restricted Subsidiary as necessary to accomplish
such refinancing, plus (3) the amount of any fees and expenses incurred
to accomplish such refinancing.
For purposes of the foregoing definition, (i) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness in
the definition of "Permitted Subsidiary Indebtedness," the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such categories and
(ii) an item of Indebtedness may be divided and classified into more than one of
the types of Indebtedness referred to above.
"Permitted Telecommunications Business" means any nonwireline
telecommunications business, including cellular, satellite, data transmission
and personal communications businesses.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Physical Security" has the meaning provided in Section 201.
"Pledge Effective Date" means the date on which the restriction on
the right of the Banks to exercise their remedies under the Pledge of the
Concession Agreement expires as evidenced by a notice thereof in writing from
the Collateral Agents to the Trustee.
"Pledge of the Concession Agreement" means the Prenda Abierta Sin
Tenencia Sobre la Concesion, a pledge agreement entered into between the Company
and the Collateral Agents with respect to the pledge of the Concession.
<PAGE> 32
21
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 308 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock," as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Equity Offering" means a bona fide offer and sale of
Common Stock of the Company or American Depositary Receipts representing such
Common Stock pursuant to a registration statement that has been declared
effective by the Commission pursuant to the Securities Act (other than a
registration statement on Form S-8 or otherwise relating to equity securities
issuable under any employee benefit plan of the Company); provided that at least
50%, or if less, US$35,000,000, of the shares or American Depositary Receipts
issued and sold in such offering are listed or quoted on the Nasdaq Stock Market
or a stock exchange in the United States.
"Purchase Agreement" has the meaning provided in the recitals to
this Indenture.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Redeemable Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A.
"Redeemable Capital Stock" means any class or series of Capital
Stock that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Securities or is redeemable at the option of
the holder thereof at any time prior to such final Stated Maturity, or is
convertible into or exchangeable for debt securities at any time prior to such
final Stated Maturity.
"Redemption Date," when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
<PAGE> 33
22
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Initial Purchasers named therein, dated as
of June 7, 1996, relating to the Securities.
"Registration Statement" means the Registration Statement as
defined in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the March 1 or September 1 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer," when used with respect to the Trustee,
means any officer of the Trustee employed within the corporate trust department,
including any vice president, any assistant vice president, any assistant
secretary, any assistant treasurer, any trust officer or assistant trust officer
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above-designated officers, and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" means any Subsidiary other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any transaction or series
of related transactions pursuant to which the Company or a Restricted Subsidiary
sells or transfers any property or asset in connection with the leasing, or the
resale against installment payments, of such property or asset to the seller or
transferor.
"S&P" means Standard and Poor's Ratings Services, a division of
McGraw-Hill, Inc., and its successors.
"Secured Indebtedness" means Indebtedness of the Company secured
by property or assets of the Company or any Restricted Subsidiary.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
<PAGE> 34
23
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Separation Date" has the meaning provided in the recitals to this
Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and, when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company that is
expressly subordinated in right of payment to the Securities.
"Subsidiary" means any Person a majority of the equity ownership or
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries or by the Company and one or more
other Subsidiaries.
"Telecommunications Business" means any wireline or nonwireline
telecommunications business, including cellular, satellite, data transmission
and personal communications businesses.
"Trust Indenture Act" or "TIA" (except as provided in Section 905)
means the Trust Indenture Act of 1939 as in force at the date as of which this
Indenture is executed and, to the extent required by law, as amended.
"Trustee" means the Person named as the "Trustee" in the heading of
this Indenture until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Units" has the meaning provided in the recitals to this Indenture.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the time of
determination shall be an Unrestricted Subsidiary (as designated by the Board of
Directors of the Company, as provided below) and (b) any Subsidiary of an
Unrestricted Subsidiary. The
<PAGE> 35
24
Board of Directors of the Company may designate any Subsidiary (including any
newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary so
long as (i) neither the Company nor any Restricted Subsidiary is directly or
indirectly liable for any Indebtedness of such Subsidiary, (ii) no default with
respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse
of time or otherwise) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity,
(iii) neither the Company nor any Restricted Subsidiary has a contract,
agreement, arrangement, understanding or obligation of any kind, whether written
or oral, with such Subsidiary other than those that might be obtained at the
time from persons who are not Affiliates of the Company, and (iv) neither the
Company nor any Restricted Subsidiary has any obligation (1) to subscribe for
additional shares of Capital Stock or other equity interest in such Subsidiary,
or (2) to maintain or preserve such Subsidiary's financial condition or to cause
such Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing a Board Resolution with the Trustee giving effect to such
designation. The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving
effect to such designation, there would be no Default or Event of Default under
this Indenture and the Company could incur US$1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 1010.
"U.S. GAAP" means generally accepted accounting principles in the
United States consistently applied, as may be in effect from time to time.
"U.S. Global Security" has the meaning provided in Section 201.
"U.S. Person" has the meaning provided in Regulation S.
"U.S. Physical Security" has the meaning provided in Section 201.
"Vice President," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Warrant Agreement" has the meaning provided in the recitals to this
Indenture.
"Warrants" has the meaning provided in the recitals to this Indenture.
<PAGE> 36
25
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if all of the outstanding Capital Stock of such Subsidiary
(other than a de minimis number of director's qualifying shares or de minimis
Investments by non-U.S. nationals mandated by applicable law) is owned by such
Person or one or more Wholly Owned Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture (including any covenant compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
<PAGE> 37
26
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section .
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by any
Person, and the date of holding the same, shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at
<PAGE> 38
27
its option, by or pursuant to a Board Resolution, fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. Such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of Holders
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion of Outstanding
Securities have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Securities shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on such
record date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than 120 days after the record
date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee at its Corporate Trust Office, Attention: Corporate Trust
Administration, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed
to it at the address of its principal office specified in the heading of
this Indenture, or at any other address previously furnished in writing to
the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by the
Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein
<PAGE> 39
28
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice mailed to a
Holder in the manner herein prescribed shall be conclusively deemed to have been
received by such Holder, whether or not such Holder actually receives such
notice. Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder and the Holders, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
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SECTION 111. Governing Law.
This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York. Upon the issuance of the
Exchange Securities or the effectiveness of the Shelf Registration Statement,
this Indenture shall be subject to the provisions of the Trust Indenture Act
that are required to be part of this Indenture and shall, to the extent
applicable, be governed by such provisions; and, if and to the extent that any
provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture which is required to be included in this
Indenture by any of Sections 310 to 318, inclusive, of the Trust Indenture Act,
such required provision shall control.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, or Stated
Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal (or premium, if any) or interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, or at the
Stated Maturity or Maturity; provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Stated
Maturity or Maturity, as the case may be.
SECTION 113. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities.
By the execution and delivery of this Agreement, the Company (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (the
"Process Agent") (and any successor entity), as its authorized agent upon which
process may be served in any suit or proceeding arising out of or relating to
this Indenture, the Securities, the Purchase Agreement, the Registration Rights
Agreement and the Warrant Agreement and, if issued, the Exchange Securities and
the Warrant Shares that may be instituted in any federal or state court in The
City of New York, Borough of Manhattan, State of New York or brought under
federal or state securities laws, and acknowledges that the Process Agent has
accepted such designation, (ii) submits to the jurisdiction of any such court in
any such suit or proceeding and (iii) agrees that service of process upon the
Process Agent and written notice of said service to the Company in accordance
with Section 105 of this Indenture shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. The Company
further agrees to take any and all action, including the execution and filing of
any and all such documents and instruments, as may be necessary to continue such
designation and appointment of the Process Agent in full force and effect so
long as any of the Securities or Exchange Securities shall be outstanding;
provided that the Company may (and, to the extent the Process Agent ceases to be
able to be served on the basis
<PAGE> 41
30
contemplated herein, shall), by written notice to the Trustee in accordance with
Section 105 of this Indenture, designate such additional or alternative agent
for service of process under this Section 113 that (i) maintains an office
located in The City of New York, Borough of Manhattan, State of New York, and
(ii) is a corporate service company which acts as agent for service of process
for other persons in the ordinary course of its business. Such written notice
shall identify the name of such agent for service of process and the address of
the office of such agent for service of process in The City of New York, Borough
of Manhattan, State of New York. Notwithstanding the foregoing, any suit, action
or proceeding based upon this Agreement may be instituted by the Trustee or any
Holder of any Security in any competent court in the Republic of Colombia.
To the extent that the Company has or hereafter may acquire any
sovereign immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such sovereign immunity in respect of its
obligations under the above-referenced documents.
SECTION 114. Judgment Currency.
The Company agrees to indemnify the Trustee and each Holder of the
Securities against any loss incurred by any of them as a result of any judgment
or order being given or made for any amount due under this Indenture and such
judgment or order being expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any variation as
between (i) the rate of exchange at which the United States dollar amount is
converted into the Judgment Currency for the purpose of such judgment or order
and (ii) the spot rate of exchange in The City of New York at which any such
person on the date of payment of such judgment or order is able to purchase
United States dollars with the amount of the Judgment Currency actually received
by such person. The foregoing indemnity shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, United States dollars.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The definitive Securities shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Securities may be listed, all as
<PAGE> 42
31
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form annexed hereto as Exhibit A. The Securities may have
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters,
notations, numbers or other marks of identification and such legends or
endorsements placed thereon as the Company may deem appropriate (and as are not
prohibited by the terms of this Indenture) or as may be required or appropriate
to comply with any law or with any rules made pursuant thereto or with any rules
of any securities exchange on which such Securities may be listed, or to conform
to general usage, or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of such
Securities. Any portion of the text of any Security may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the
Security. The Company shall approve the form of the Securities and any notation,
legend or endorsement on the Securities. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. Each of the Company and the Trustee, by its execution
and delivery of this Indenture, expressly agrees to the terms and provisions of
the Securities applicable to it and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A shall be
issued in the form of a single permanent global Security in registered form,
substantially in the form set forth in Exhibit A (the "U.S. Global Security"),
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount at maturity of the U.S. Global Security may from time
to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Initial Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued in the form of a single global
Security, initially in temporary form and after the Private Placement Legend is
no longer required pursuant to Section 202, in permanent global form, in each
case in registered form substantially in the form set forth in Exhibit A (the
"Offshore Global Security") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount at maturity of the Offshore
Global Security may from time to time be increased or decreased by adjustments
made in the records of the Trustee, as custodian for the Depositary or its
nominee, as herein provided.
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Initial Securities which are offered and sold to Institutional
Accredited Investors which are not QIBs (excluding Non-U.S. Persons) shall be
issued in the form of permanent certificated Securities in registered form in
substantially the form set forth in Exhibit A (the "U.S. Physical Securities").
Securities issued pursuant to Section 306 in exchange for interests in the U.S.
Global Security or the Offshore Global Security shall be in the form of U.S.
Physical Securities or in the form of permanent certificated Securities in
registered form substantially in the form set forth in Exhibit A (the "Offshore
Physical Securities"), respectively.
The Offshore Physical Securities and U.S. Physical Securities are
sometimes collectively herein referred to as the "Physical Securities." The U.S.
Global Security and the Offshore Global Security are sometimes collectively
referred to as the "Global Securities."
SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, (A) each U.S. Global Security and
each U.S. Physical Security shall bear the following legend set forth below (the
"Private Placement Legend") on the face thereof and (B) the Offshore Physical
Securities and the Offshore Global Security shall bear the legend set forth
below on the face thereof until at least 41 days after the Issue Date and
receipt by the Company and the Trustee of a certificate substantially in the
form of Exhibit B hereto.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY, OR ANY AFFILIATE OF THE COMPANY, WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER"
<PAGE> 44
33
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR", FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT
TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
Each Global Security, whether or not an Initial Security, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
<PAGE> 45
34
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO DTC OR NOMINEES OF DTC OR TO A SUCCESSOR OF
DTC OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
Prior to the Separation Date, each Security shall bear the following
legend on the face of thereof:
THIS NOTE IS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE
"UNITS"), EACH OF WHICH CONSISTS OF US$1,000 PRINCIPAL AMOUNT OF 14%
SENIOR DISCOUNT NOTES DUE 2004 (THE "SECURITIES") OF OCCIDENTE Y CARIBE
CELULAR S.A. (THE "ISSUER") AND FOUR WARRANTS (EACH, A "WARRANT")
ENTITLING THE HOLDER THEREOF TO PURCHASE 5.709 SHARES OF CLASS B COMMON
STOCK, PAR VALUE 1,000 PESOS PER SHARE, OF THE ISSUER. PRIOR TO THE
CLOSE OF BUSINESS ON THE EARLIER OF (1) SEPTEMBER 5, 1996, (2) A CHANGE
OF CONTROL (AS DEFINED IN THE INDENTURE RELATED HERETO (THE
"INDENTURE")), AND (3) THE DATE ON WHICH THE EXCHANGE OFFER
REGISTRATION STATEMENT (AS DEFINED IN THE INDENTURE) IS DECLARED
EFFECTIVE, THIS NOTE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY
FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE
WARRANTS.
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
The aggregate principal amount at final maturity of Securities which
may be authenticated and delivered under this Indenture is limited to
$190,745,000, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 304, 305, 308, 906, 1015, 1016 or 1108.
The Initial Securities shall be known and designated as the "14% Senior
Discount Notes due 2004" and the Exchange Securities shall be known as the "14%
Series B Senior Discount Notes due 2004," in each case of the Company. Their
Stated Maturity shall be March 15, 2004 and, except as may be otherwise provided
for in the Securities, they shall bear interest at the rate of 14% per annum
from March 15, 2001, or from the most recent
<PAGE> 46
35
Interest Payment Date to which interest has been paid or duly provided for,
payable on September 15, 2001 and semiannually thereafter on March 15 and
September 15 in each year and at said Stated Maturity, until the principal
thereof is paid or duly provided for.
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose; provided, however, that, at the
option of the Company, interest may be paid by check mailed to addresses of the
Persons entitled thereto as such addresses shall appear on the Security
Register.
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subject to the provisions of Article Fourteen
relating to the payment of proceeds of the Concession to the Banks in certain
circumstances.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman, its President or a Vice President, under its corporate seal reproduced
thereon. The signature of any of these officers on the Securities may be manual
or facsimile signatures of the present or any future such authorized officer and
may be imprinted or otherwise reproduced on the Securities. The seal of the
Company, if any, may be in the form of a facsimile thereof and may be impressed,
affixed, imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities. In addition, any Security may
be signed on behalf of the Company by such Persons as, at the actual date of the
execution of such Security, shall be the proper officers of the Company,
although at the date of such Security or of the execution of this Indenture any
such Person was not such officer.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities.
<PAGE> 47
36
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be consolidated
or merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or the
Person which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article Eight, any of the Securities authenticated
or delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount at maturity; and the Trustee, upon Company
Request of the successor Person, shall authenticate and deliver Securities as
specified in such Request for the purpose of such exchange. If Securities shall
at any time be authenticated and delivered in the name of a successor Person
pursuant to this Section in exchange or substitution for or upon registration of
transfer of any Securities, such successor Person, at the option of the Holders
but without expense to them, shall provide for the exchange of all Securities at
the time Outstanding for Securities authenticated and delivered in such name.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002,
without charge to the Holder (except as provided in Section 305). Upon surrender
for cancellation of any one or more temporary Securities, the
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37
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount at maturity of definitive Securities of
authorized denominations. Until so exchanged, the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall keep or cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 1002 being herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers and exchanges of Securities. The
Security Register shall be in written form or any other form capable of being
converted into written form within a reasonable time. At all reasonable times,
the Security Register shall be open to inspection by the Trustee. The Trustee is
hereby initially appointed as security registrar (the "Security Registrar") for
the purpose of registering Securities and transfers and exchanges of Securities
as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount at
maturity.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount at maturity, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive; provided
that no exchange of Initial Securities for Exchange Securities shall occur until
an Exchange Offer Registration Statement shall have been declared effective by
the Commission and that the Initial Securities to be exchanged for the Exchange
Securities shall be cancelled by the Trustee.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer, in form satisfactory to the
Company and the Security Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.
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No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906, 1015, 1016 or 1108 not involving
any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the selection of Securities to be redeemed under Section 1104 and
ending at the close of business on the day of mailing of the relevant notice of
redemption, or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
SECTION 306. Book-Entry Provisions for Global Securities. (a) The U.S.
Global Security and Offshore Global Security initially shall (i) be registered
in the name of the Depositary for such Global Securities or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under any
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a beneficial owner of any Security.
(b) Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the applicable rules and
procedures of the Depositary and the provisions of Section 307. In addition,
U.S. Physical Securities or Offshore Physical Securities shall be transferred to
all beneficial owners in exchange for their beneficial interests in the U.S.
Global Security or the Offshore Global Security, respectively, if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the U.S. Global Security or the Offshore Global Security, as the
case may be, or the Depositary ceases to be a "Clearing Agency" registered under
the Exchange Act and a successor depositary is not appointed by the Company
within 90 days or (ii) an Event of Default has occurred and Holders of more than
25% in aggregate principal amount of the Securities at the time outstanding
represented by the Global Securities advise the Trustee through the Depositary
in
<PAGE> 50
39
writing that the continuation of a book-entry system through the Depositary with
respect to the Global Securities is no longer required.
(c) Any beneficial interest in one of the Global Securities that is
transferred to a person who takes delivery in the form of an interest in the
other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Security for as long as it remains such an interest.
(d) In connection with any transfer pursuant to paragraph (b) of this
Section of a portion of the beneficial interests in the U.S. Global Security to
beneficial owners who are required to hold U.S. Physical Securities, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount at maturity of the U.S. Global Security in an amount equal to
the principal amount at maturity of the beneficial interest in the U.S. Global
Security to be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more U.S. Physical Securities of like tenor and
amount.
(e) In connection with the transfer of the entire U.S. Global Security
or Offshore Global Security to beneficial owners pursuant to paragraph (b) of
this Section , the U.S. Global Security or Offshore Global Security, as the case
may be, shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the U.S. Global Security or Offshore Global Security, as
the case may be, an equal aggregate principal amount at maturity of U.S.
Physical Securities or Offshore Physical Securities, as the case may be, of
authorized denominations.
(f) Any U.S. Physical Security delivered in exchange for an interest in
the U.S. Global Security pursuant to paragraph (b) or (d) of this Section shall,
except as otherwise provided by paragraph (a)(i)(x) or paragraph (e) of Section
307, bear the legend regarding transfer restrictions applicable to the U.S.
Physical Security set forth in Section 202.
(g) The registered holder of a Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
(h) Beneficial owners of interests in a Global Security may receive
Physical Securities (which shall bear the Private Placement Legend if required
by Section 202) in accordance with the procedures of the Depositary. In
connection with the execution, authentication and delivery of such Physical
Securities, the Registrar shall reflect on its books and records a decrease in
the principal amount at maturity of the relevant Global Security
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40
equal to the principal amount at maturity of such Physical Securities and the
Company shall execute and the Trustee shall authenticate and deliver one or more
Physical Securities having an equal aggregate principal amount at maturity.
SECTION 307. Special Transfer Provisions. Unless and until (i) an
Initial Security is sold under an effective Registration Statement, or (ii) an
Initial Security is exchanged for an Exchange Security in connection with an
effective Registration Statement, in each case pursuant to the Registration
Rights Agreement, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Security,
whether or not such Security bears the Private Placement Legend, if
(x) the requested transfer is at least three years after the original
issue date of the Initial Securities or (y) the proposed transferee
has delivered to the Registrar a certificate substantially in the form
of Exhibit C hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i), and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and a decrease in the principal amount of
the U.S. Global Security in an amount equal to the principal amount of
the beneficial interest in the U.S. Global Security to be transferred,
and the Company shall execute, and the Trustee shall authenticate and
deliver, one or more U.S. Physical Securities of like tenor and
amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a U.S. Physical
Security or an interest in the U.S. Global Security to a QIB (excluding
Non-U.S. Persons):
(i) If the Security to be transferred consists of (x) U.S.
Physical Securities, the Security Registrar shall register the
transfer if such transfer is being made by a proposed transferor who
has checked the box provided for on the form of Initial Security
stating, or has otherwise advised the Company and the Security
Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Initial Security stating, or
has otherwise advised the Company and the Security Registrar in
writing, that it is purchasing the Initial Security for its own
account or an account with respect
<PAGE> 52
41
to which it exercises sole investment discretion and that it and any
such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A or (y) an
interest in the U.S. Global Security, the transfer of such interest
may be effected only through the book-entry system maintained by the
Depositary.
(ii) If the proposed transferee is an Agent Member, and the
Security to be transferred consists of U.S. Physical Securities, upon
receipt by the Security Registrar of the documents referred to in
clause (i) and instructions given in accordance with the Depositary's
and the Security Registrar's procedures, the Security Registrar shall
reflect on its books and records the date and an increase in the
principal amount at maturity of the U.S. Global Security in an amount
equal to the principal amount at maturity of the U.S. Physical
Securities to be transferred, and the Trustee shall cancel the
Physical Securities so transferred.
(c) Transfers of Interests in the Offshore Global Security or Offshore
Physical Securities to U.S. Persons. The following provisions shall apply
with respect to any transfer of interests in the Offshore Global Security
or Offshore Physical Securities to U.S. Persons:
(i) prior to the removal of the Private Placement Legend from
the Offshore Global Security or Offshore Physical Securities pursuant
to Section 202, the Security Registrar shall refuse to register such
transfer; and
(ii) after such removal, the Security Registrar shall register
the transfer of any such Security without requiring any additional
certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following provisions
shall apply with respect to any transfer of an Initial Security to a
Non-U.S. Person:
(i) The Security Registrar shall register any proposed
transfer to any Non-U.S. Person if the Security to be transferred is a
U.S. Physical Security or an interest in the U.S. Global Security only
upon receipt of a certificate substantially in the form of Exhibit D
from the proposed transferor.
(ii) (x) If the proposed transferee is an Agent Member holding
a beneficial interest in the U.S. Global Security, upon receipt by the
Security Registrar of (1) the documents required by paragraph (i) and
(2) instructions in accordance with the Depositary's and the Security
Registrar's procedures, the
<PAGE> 53
42
Security Registrar shall reflect on its books and records the date and
a decrease in the principal amount at maturity of the U.S. Global
Security in an amount equal to the principal amount at maturity of the
beneficial interest in the U.S. Global Security to be transferred, and
(y) if the proposed transferee is an Agent Member, upon receipt by the
Security Registrar of instructions given in accordance with the
Depositary's and the Security Registrar's procedures, the Security
Registrar shall reflect on its books and records the date and an
increase in the principal amount at maturity of the Offshore Global
Security in an amount equal to the principal amount at maturity of the
U.S. Physical Security or the U.S. Global Security, as the case may be,
to be transferred, and the Trustee shall cancel the Physical Security,
if any, so transferred or decrease the amount of the U.S. Global
Security.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Security Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Security Registrar shall deliver
only Securities that bear the Private Placement Legend unless either (i)
the Private Placement Legend is no longer required by Section 202 or (ii)
there is delivered to the Security Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(f) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of, or beneficial owner of an interest in,
such Security acknowledges the restrictions on transfer of such Security
set forth in this Indenture and in the Private Placement Legend and agrees
that it will transfer such Security only as provided in this Indenture. The
Security Registrar shall not register a transfer of any Security unless
such transfer complies with the restrictions on transfer of such Security
set forth in this Indenture. In connection with any transfer of Securities
to an Institutional Accredited Investor, each such Holder or beneficial
owner agrees by its acceptance of the Securities to furnish the Security
Registrar or the Company such certifications, legal opinions or other
information as such Person may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided
that the Security Registrar shall not be required to determine (but may
rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
Every replacement Security is an additional obligation of the Company
and shall be entitled to the benefits of this Indenture.
<PAGE> 54
43
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee, or (ii)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor, form, terms
and principal amount, bearing a number not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay or authorize the payment of such
Security.
Upon the issuance of any new Security under this Section , the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
All Securities shall be held and owned upon the express condition that
the foregoing provisions of this Section are exclusive with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities, and
shall preclude any and all other rights or remedies, notwithstanding any law or
statute existing or hereinafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
SECTION 309. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company maintained for such purpose pursuant to Section
1002; provided, however, that each installment of interest may at the Company's
option be paid by (i) mailing a check for such interest, payable to or upon the
written order of the Person entitled thereto pursuant to Section 310, to the
address of such Person as it appears in the Security Register at the close of
business on the Regular
<PAGE> 55
44
Record Date for such interest payment or (ii) transfer to an account located in
the United States maintained by the payee the details of which account are
notified to the Security Registrar prior to the close of business on the Record
Date for such interest payment.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date, and in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be given in the manner provided for in
Section 106, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so given, such Defaulted Interest shall be
paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may
be required by such exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
<PAGE> 56
45
Subject to the foregoing provisions of this Section , each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 310. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Sections 305 and 309) interest on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and none
of the Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 311. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Section , except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that cancelled Securities be returned
to it.
SECTION 312. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 313. Wire Transfers.
Notwithstanding any other provision to the contrary in this Indenture,
the Company may make any payment of monies required to be deposited with the
Trustee on account of principal of, or premium, if any, or interest on, the
Securities (whether pursuant
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46
to optional or mandatory redemption payments, interest payments or otherwise) by
wire transfer in immediately available funds to an account designated by the
Trustee on or before 10:00 a.m. (New York City time) the date such moneys are to
be paid to the Holders of the Securities in accordance with the terms hereof.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to surviving rights and obligations of the Trustee expressly provided
for in this Indenture and the surviving rights of registration of transfer or
exchange of Securities expressly provided for herein or pursuant hereto) and the
Trustee, at the direction and expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture when
(1) either
(a) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 308 and
(ii) Securities for whose payment money has theretofore been deposited
in trust with the Trustee or any Paying Agent or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1003) have been delivered to
the Trustee for cancellation; or
(b) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust for
<PAGE> 58
47
such purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal of (and premium, if any) and
interest to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section , the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law. So long as no Event of Default shall have occurred and
be continuing, all interest allowed on any such moneys shall be paid from time
to time to the Company upon a Company Order.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
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48
(1) default in the payment of any interest on any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of or premium, if any, on
any Security at its Maturity (upon acceleration, optional redemption,
required purchase or otherwise); or
(3) default in the performance, or breach, of the provisions of Article
Eight of this Indenture, the failure to make or consummate a Change of
Control Offer in accordance with the provisions of Section 1015 or the
failure to make or consummate an Excess Proceeds Offer in accordance with
the provisions of Section 1016; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a default in the performance,
or breach, of a covenant or warranty which is specifically dealt with in
clause (1), (2) or (3) above), and continuance of such default or breach
for a period of 30 days after written notice of such failure requiring the
Company to remedy the same shall have been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities; or
(5) (A) there shall have occurred one or more defaults by the Company
or any Subsidiary in the payment of the principal of or premium, if any, on
Indebtedness of the Company or any Subsidiary aggregating US$3,000,000 or
more, when the same becomes due and payable at the stated maturity thereof,
and such default or defaults shall have continued after any applicable
grace period and shall not have been cured or waived or (B) Indebtedness of
the Company or any Subsidiary aggregating US$3,000,000 or more shall have
been accelerated or otherwise declared due and payable, or required to be
prepaid or repurchased (other than by regularly scheduled required
prepayment prior to the stated maturity thereof); or
(6) any holder of any Indebtedness in excess of US$3,000,000 in the
aggregate of the Company or any Subsidiary shall commence judicial
proceedings, or take other action to foreclose on any assets of the Company
or any Subsidiary that have been pledged to or for the benefit of such
Person to secure such Indebtedness pursuant to the terms of any agreement
or instrument evidencing any such Indebtedness of the Company or any
Subsidiary or in accordance with applicable law subsequent to a default in
the performance, or breach, of any covenant or warranty of the Company
contained in any agreement or instrument evidencing any such Indebtedness;
or
(7) one or more final judgments or orders rendered against the Company
or any Subsidiary for the payment of money, either individually or in an
aggregate amount, in excess of US$3,000,000 and shall not be discharged and
either (a) an enforcement proceeding shall have been commenced by any
creditor upon such
<PAGE> 60
49
judgment or order and shall not have been stayed or (b) there shall have
been a period of 60 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, was not
in effect; or
(8) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Subsidiary under the Federal Bankruptcy Code or any
other applicable federal or state or Colombian or other foreign law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or any Subsidiary or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(9) the institution by the Company or any Subsidiary of proceedings to
be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other applicable federal or
state or Colombian or other foreign law, or the consent by it to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company
or any Subsidiary or of any substantial part of its property, or the making
by it of an assignment for the benefit of creditors, or the admission by it
in writing of its inability to pay its debts generally as they become due;
or
(10) the Company does not continue to be the holder of the Concession
(provided that the pledge of the Concession as security under the Bank
Facility shall not be deemed to be a transfer of the Concession) or the
Concession to provide cellular service is not in full force and effect.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(8) or (9)) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Securities Outstanding may declare the principal of all the Securities to be due
and payable immediately in an amount equal to (i) the Accreted Value of the
Securities as of the date on which the Securities first become due and payable,
if such date occurs prior to March 15, 2001, or (ii) the Accreted Value of the
Securities as of the date on which the Securities first become due and payable
plus accrued and unpaid interest, if any, to such date, if such date occurs on
or after March 15, 2001, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal shall
become immediately due and payable. If an Event of Default specified in Section
501(8) or (9) occurs and is continuing,
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50
then the principal of all the Securities shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder in an amount equal to (i) the Accreted Value of the
Securities as of the date on which the Securities first become due and payable,
if such date occurs prior to March 15, 2001, or (ii) the Accreted Value of the
Securities as of the date on which the Securities first become due and payable
plus accrued and unpaid interest, if any, to such date, if such date occurs on
or after March 15, 2001.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in principal amount of the Securities Outstanding, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay,
(A) all overdue interest on all Outstanding Securities,
(B) all unpaid principal of and premium, if any, on any
Outstanding Securities which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal at
the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest and overdue principal at the rate borne
by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts of
principal of or premium, if any, on or interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
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51
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of or premium, if
any, on any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file
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such other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceeding,
and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
and as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Fourteen, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment, if only partially paid, and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 606;
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SECOND: To the payment of the amounts then due and unpaid for principal
of (and premium, if any) and interest on the Securities in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Securities for principal (and premium, if any) and interest, respectively;
and
THIRD: The balance, if any, to the Company, its successors or assigns,
or to any other Person or Persons lawfully entitled thereto.
SECTION 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such action or
proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority or
more in principal amount of the Outstanding Securities;
it being understood and intended, and being expressly covenanted by the Holder
of every Security with every other Holder and the Trustee, that no one or more
Holders shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders, or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all the
Holders.
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SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article Thirteen)
and in such Security of the principal of (and premium, if any) and (subject to
Section 309) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment on or after
such respective dates, and such rights shall not be impaired without the consent
of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 308, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. Control by Holders.
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Subject to the provisions of Section 602(5), the Holders of not less
than a majority in principal amount of the Outstanding Securities shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may, on behalf of the Holders of all the Securities,
waive any past Default hereunder and its consequences, except a Default
(1) in respect of the payment of the principal of (or premium, if any)
or interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within 30 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in the
case of a Default in the payment of the principal of (or premium, if any) or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders; and provided further that in the case
of any Default of the character specified in Section 501(4) no such notice to
Holders shall be given until at least 30 days after the occurrence thereof.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order (unless other
evidence in respect thereof is herein specifically prescribed) and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence is herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
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(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(6) prior to the occurrence of an Event of Default and after the curing
of all Events of Default which may have occurred, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and that the statements made by
it in any Statement of Eligibility on Form T-1 supplied to the Company will be
true and accurate, subject to the qualifications set forth therein. The Trustee
shall not be accountable for the use or application by the Company of Securities
or the proceeds thereof.
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SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to the Trust
Indenture Act, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Paying Agent, Security Registrar or such other
agent.
SECTION 605. Money Held in Trust.
Subject to the provisions of Section 506, all moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company. So long as no Event of Default shall have occurred and
be continuing, all interest allowed on any such moneys shall be paid from time
to time to the Company upon a Company Order.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as the
Company and the Trustee shall agree in writing for all services rendered by
it hereunder (which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of investigating or
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the resignation or removal
of the Trustee and/or the satisfaction and discharge of this Indenture. As
security for the performance of such obligations of the Company, the Trustee
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shall have a claim prior to the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the payment of
principal of (and premium, if any) or interest on particular Securities.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(8) or (9), the expenses (including
the reasonable charges and expenses of its counsel) of and the compensation for
such services are intended to constitute expenses of administration under any
applicable federal or state bankruptcy, insolvency or other similar Colombian or
other foreign law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 607. Corporate Trustee Required; Eligibility; Conflicting
Interests.
There shall be at all times a Trustee hereunder which shall be eligible
to act as Trustee under TIA Section 310(a)(1) and 310(a)(5) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section , the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section , it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If the instrument of acceptance by a successor Trustee required
by Section 609 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of not
less than a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
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(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 607 and shall
fail to resign after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to the Holders of
Securities in the manner provided for in Section 106. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested
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with all the rights, powers, trusts and duties of the retiring Trustee; but, on
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder. Upon request of any
such successor Trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified under the TIA and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities. In
case at that time any of the Securities shall not have been authenticated, any
successor Trustee may authenticate such Securities either in the name of any
predecessor hereunder or in the name of the successor Trustee. In all such cases
such certificates shall have the full force and effect which this Indenture
provides for the certificate of authentication of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Securities in the name of any
predecessor Trustee shall apply only to its successor or successors by merger,
conversion or consolidation.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that none of the Company or the Trustee or any
agent of either of
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them shall be held accountable by reason of the disclosure of any information as
to the names and addresses of the Holders in accordance with TIA Section 312,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first May
15 after the first issuance of Securities, the Trustee shall transmit to the
Holders, in the manner and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not, in a single transaction or through a series of
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets substantially as an entirety to any other Person or
Persons or permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis as an entirety to any other Person or Persons, unless:
(1) either (A) the Company shall be the continuing corporation or (B)
the Person (if other than the Company) formed by such consolidation or into
which the Company or such Restricted Subsidiary is merged or the Person
which acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all of the properties and assets of the
Company and its Restricted Subsidiaries on a consolidated basis as an
entirety (the "Surviving Entity") (i) shall be a corporation duly organized
and validly existing under the laws of the Republic of Colombia and (ii)
shall expressly assume, by a supplemental indenture in form satisfactory to
the Trustee, the Company's obligation for the due and punctual payment of
the principal of, premium, if any, and interest on all the Securities and
the performance and observance of every covenant of this Indenture on the
part of the Company to be performed or observed;
(2) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and treating
any obligation
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of the Company or any Restricted Subsidiary incurred in connection with or
as a result of such transaction or series of transactions as having been
incurred at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing;
(3) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (and treating any obligation of the
Company or any Restricted Subsidiary incurred in connection with or as a
result of such transaction or series of transactions as having been
incurred at the time of such transaction), the Consolidated Net Worth of
the Company (or of the Surviving Entity if the Company is not the
continuing obligor under this Indenture) is equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction
or series of transactions;
(4) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (on the assumption that the transaction
or series of transactions occurred on the first day of the most recent full
fiscal quarter for which financial statements are available prior to the
consummation of such transaction or series of transactions with the
appropriate adjustments with respect to the transaction or series of
transactions being included in such pro forma calculation), the Company (or
the Surviving Entity if the Company is not the continuing obligor under
this Indenture) could incur at least US$1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the provisions of Section 1010.
(5) the Company or the Surviving Entity shall have delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate (attaching the authentic computations to demonstrate
compliance with clauses (3) and (4) above) and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition, and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the requirements of this Indenture and that all conditions
precedent therein provided for relating to such transaction have been
complied with.
SECTION 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company in accordance with Section 801 in which the Company is not
the continuing obligor under this Indenture, the Surviving Entity shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor had been
named as the Company herein and, in the event of any such conveyance or
transfer, the Company (which term shall for this purpose mean the Person named
as the "Company" in the first paragraph of this Indenture or any successor
Person
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which shall theretofore become such in the manner described in Section 801),
except in the case of a transfer by lease, shall be discharged of all
obligations and covenants under this Indenture and the Securities and may be
dissolved and liquidated.
SECTION 803. Securities to Be Secured in Certain Events.
If, upon any such consolidation of the Company with or merger of the
Company into any other corporation, or upon any sale, assignment, conveyance,
lease, transfer or disposition of all or substantially all of the properties and
assets of the Company substantially as an entirety to any other Person or
Persons, any property or assets of the Company would thereupon become subject to
any Lien, then unless such Lien could be created pursuant to Section 1014
without equally and ratably securing the Securities, the Company, prior to or
simultaneously with such consolidation, merger, conveyance, lease or transfer,
will as to such property or assets, secure the Securities Outstanding (together
with, if the Company shall so determine any other Indebtedness of the Company
now existing or hereinafter created which is not subordinate in right of payment
to the Securities) equally and ratably with (or prior to) the Indebtedness which
upon such consolidation, merger, conveyance, lease or transfer is to become
secured as to such property or assets by such Lien, or will cause such
Securities to be so secured.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company or any
other obligor on the Securities and the assumption by any such successor of
the covenants of the Company or such obligor contained herein and in the
Securities in accordance with Article Eight; or
(2) to add to the covenants of the Company or any other obligor on the
Securities for the benefit of the Holders or to surrender any right or
power herein conferred upon the Company or any other obligor on the
Securities; or
(3) to add any additional Events of Default; or
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(4) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee pursuant to the requirements of Section 609; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions or changes with respect to matters
or questions arising under this Indenture; provided that such action shall
not adversely affect the interests of the Holders in any material respect;
or
(6) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act; or
(7) to add a guarantor of the Securities; or
(8) to mortgage, pledge, hypothecate or grant a security interest in
favor of the Trustee for the benefit of the Holders of the Securities as
additional security for the payment and performance of the Company's and
any guarantor's obligations under this Indenture in any property or assets,
including any of which are required to be mortgaged, pledged or
hypothecated, or in which a security interest is required to be granted to
the Trustee pursuant to Section 803 or 1014 or otherwise.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof (or
premium, if any) or the rate of interest thereon or reduce the amount of
the principal of the Securities that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502
or the amount thereof provable in bankruptcy pursuant to Section 504, or
change the coin or currency in which any Security or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date), or
(2) amend, change or modify in any material respect the obligation of
the Company to make and consummate an Excess Proceeds Offer with respect to
any
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Asset Sale in accordance with Section 1016 or the obligation of the Company
to make and consummate a Change of Control Offer in the event of a Change
of Control in accordance with Section 1015, including, in each case,
amending, changing or modifying in any material respect any definition
relating thereto, or
(3) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture,
or
(4) modify any of the provisions of this Section or Sections 513 and
1021, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby, or
(5) except as otherwise provided by Article Eight, consent to the
assignment or transfer by the Company of any of its obligations under this
Indenture.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which adversely affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
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SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities. Failure to make the appropriate notation or to issue a
new Security shall not affect the validity of such amendment.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Security affected,
in the manner provided for in Section 106, setting forth in general terms the
substance of such supplemental indenture. Failure to provide such notice shall
not affect the validity of such amendment.
SECTION 908. Effect on Bank Indebtedness.
Prior to the Pledge Effective Date, no supplemental indenture shall
materially and adversely affect the rights of the Banks under Article Fourteen
without the consent of the Collateral Agents.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holders that it
will duly and punctually pay or cause to be paid the principal of (and premium,
if any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
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SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in The City of New York, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Corporate Trust Office of the Trustee shall be such
office or agency of the Company, unless the Company shall designate and maintain
some other office or agency for one or more of such purposes. The Company will
give prompt written notice to the Trustee of any change in the location of any
such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes and may from time
to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (or premium, if any) or interest
on any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal of (or premium,
if any) or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and will promptly notify the
Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before 10:00 a.m. on each due date of the principal
of (or premium, if any) or interest on any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section , that
such Paying Agent will:
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(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal (and
premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
Notwithstanding anything in this Section 1003 to the contrary, the
Company may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (or premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal, premium or interest has become due and payable shall be paid to
the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and each
Subsidiary; provided, however, that the Company shall not be required to
preserve any such right or franchise if the Board of
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Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Subsidiaries as a whole
and that the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a material lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
The Company will at all times keep all of its and its Subsidiaries
properties which are of an insurable nature insured with insurers, believed by
the Company to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
SECTION 1008. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year, a brief certificate from the principal executive
officer, principal financial officer or principal accounting officer as to his
or her knowledge of the Company's compliance with all conditions and covenants
under this Indenture. For purposes of this
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Section 1008(a), such compliance shall be determined without regard to any
period of grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $3,000,000), the Company shall
deliver to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an Officers' Certificate specifying such event, notice or
other action within five Business Days of its occurrence.
SECTION 1009. Provision of Reports and Financial Statements.
(a) The Company shall file with the Trustee and provide the Holders of
Securities, within 15 days after it files them with the Commission, copies of
its annual and quarterly reports and other information, documents and other
reports (or copies of such portions of any of the foregoing as the Commission
may by rules and regulations prescribe) which the Company is required to file
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act.
(b) Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange
Act or otherwise report on an annual and quarterly basis on forms provided for
such annual and quarterly reporting pursuant to rules and regulations
promulgated by the Commission, the Company shall file with or furnish to the
Commission and provide to the Trustee and to the Holders of Securities and
potential purchasers of Securities upon written request to the Trustee by any
Holder of Securities, potential purchaser of Securities or Initial Purchaser:
(i) within 140 days after the end of each fiscal year, annual reports on Form
20-F (or any successor form) containing the information required to be contained
therein (or required in such successor form); (ii) within 60 days after the end
of each of the first three fiscal quarters of each fiscal year, reports on Form
6-K (or any successor form) containing substantially the same information
required to be contained in Form 10-Q (or required in any successor form); and
(iii) promptly from time to time after the occurrence of an event required to be
therein reported, such other reports on Form 6-K (or any successor form)
containing substantially the same information required to be contained in Form
8-K (or required in any successor form). Prior to the filing of the Exchange
Offer Registration Statement with the Commission and in the event that the
Company never becomes subject to the reporting requirements of Section 13(a) or
15(d) of the Exchange Act, the Company shall provide to the Trustee and to the
Holders of Securities and potential purchasers of Securities upon written
request to the Trustee by any Holder of Securities, potential purchaser of
Securities or Initial Purchaser, all of the information that would have been
required to have been provided to the Commission pursuant to clauses (i), (ii)
and (iii) above at such time as the Company would have been required to provide
such information to the Commission pursuant to such clauses (i), (ii) and (iii)
above. Financial statements of the Company
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contained in any such report shall be prepared in accordance with generally
accepted accounting principles in Colombia and each such report referred to in
clauses (i) and (ii) above shall contain a reconciliation to U.S. GAAP
consistently applied and shall be prepared in accordance with the applicable
rules and regulations of the Commission.
SECTION 1010. Limitation on Indebtedness.
(a) The Company shall not create, issue, assume, guarantee or in any
manner become directly or indirectly liable for the payment of, or otherwise
incur (collectively, "incur"), any Indebtedness (including any Acquired
Indebtedness), other than Permitted Indebtedness, unless at the time of such
incurrence the ratio of (x) the aggregate consolidated principal amount of
Indebtedness of the Company and its Restricted Subsidiaries outstanding as of
the most recent available quarterly or annual balance sheet, after giving pro
forma effect to the incurrence of such Indebtedness and any other Indebtedness
incurred since such balance sheet date and the receipt and application of the
proceeds thereof and the repayment of any other Indebtedness repaid since such
balance sheet date, to (y) Annualized Pro Forma Consolidated Cash Flow would be
less than or equal to (i) 7.5 to 1 from the Issue Date until June 7, 1998 and
(ii) 6.5 to 1 thereafter.
(b) The Company shall not permit any Restricted Subsidiary to incur any
Indebtedness (including any Acquired Indebtedness), other than Permitted
Subsidiary Indebtedness.
SECTION 1011. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, take any of the following actions:
(i) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Capital Stock of the Company (other than dividends or
distributions payable solely in shares of its Qualified Capital Stock or in
options, warrants or other rights to acquire such shares of Qualified
Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock of the Company or any
Capital Stock of any Restricted Subsidiary (other than Capital Stock of any
Wholly Owned Restricted Subsidiary or Capital Stock of the Company held by
any Wholly Owned Restricted Subsidiary) or any options, warrants or other
rights to acquire such shares of Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment or maturity, any Subordinated Indebtedness; or
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(iv) make any Investment (other than any Permitted Investment) in any
Person
(such payments or other actions described in (but not excluded from) clauses (i)
through (iv) are collectively referred to as "Restricted Payments"), unless at
the time of, and immediately after giving effect to, the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than cash, as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and evidenced by a Board Resolution) (1) no Default or Event of
Default shall have occurred and be continuing, (2) the Company could incur at
least US$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the Section 1010 and (3) the aggregate amount of all Restricted
Payments declared or made after the Issue Date shall not exceed the sum of:
(A) the remainder of (x) cumulative Consolidated Cash Flow of
the Company during the period (taken as a single accounting period)
beginning on the first day of the fiscal quarter of the Company
beginning after the Issue Date and ending on the last day of the last
full fiscal quarter immediately preceding the date of such Restricted
Payment for which quarterly or annual financial statements of the
Company are available minus (y) the product of 1.75 times cumulative
Consolidated Interest Expense of the Company during such period, plus
(B) the aggregate Net Cash Proceeds and the Fair Market Value
of marketable securities and property received after the Issue Date by
the Company as capital contributions or from the issuance or sale
(other than to any Restricted Subsidiary) of shares of Qualified
Capital Stock of the Company or warrants, options or rights to purchase
shares of Qualified Capital Stock of the Company, plus
(C) the aggregate Net Cash Proceeds and the Fair Market Value
of marketable securities and property received after the Issue Date by
the Company from the issuance or sale (other than to any Restricted
Subsidiary) of debt securities or Redeemable Capital Stock that have
been converted into or exchanged for Qualified Capital Stock of the
Company, together with the aggregate Net Cash Proceeds and the Fair
Market Value of property received by the Company at the time of such
conversion or exchange, plus
(D) to the extent not otherwise included in the Consolidated
Cash Flow of the Company, an amount equal to the sum of (i) the net
reduction in Investments in any Person (other than the Permitted
Investments) resulting from the payment in cash of dividends,
repayments of loans or advances or other transfers of assets, in each
case to the Company or any Restricted Subsidiary after the Issue Date
from such Person, and (ii) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net
assets of any Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided, however,
that in the case of (i) or (ii) above the foregoing sum shall not
exceed the
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amount of Investments previously made (and treated as a Restricted
Payment) by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary, plus
(E) US$2,500,000.
(b) Notwithstanding paragraph (a) above, the Company and any
Restricted Subsidiary may take the following actions so long as (with respect to
clauses (ii), (iii), (iv) and (v) below) no Default or Event of Default shall
have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such date of declaration the payment of
such dividend would have complied with the provisions of paragraph (a)
above (such payment shall be deemed to have been paid on such date of
declaration for purposes of the calculation required by paragraph (a)
above), provided, however, that such dividend (but not the declaration
thereof) shall be included in the calculation of the amount of
Restricted Payments;
(ii) the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of the Company in
exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to a Restricted Subsidiary)
of, shares of Qualified Capital Stock of the Company, provided,
however, that (A) such purchase, redemption or other acquisition or
retirement shall be excluded in the calculation of the amount of
Restricted Payments, and (B) the aggregate net cash proceeds (to the
extent used for such purchase, redemption, acquisition or retirement)
and the Fair Market Value of such Capital Stock received by the Company
from such issuance and sale shall be excluded from the calculation of
amounts available for Restricted Payments under clause (3) of paragraph
(a) above;
(iii) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Subordinated Indebtedness in
exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to a Restricted Subsidiary)
of, shares of Qualified Capital Stock of the Company, provided,
however, that (A) such purchase, redemption, defeasance or other
acquisition or retirement shall be excluded in the calculation of the
amount of Restricted Payments, and (B) the aggregate net cash proceeds
(to the extent used for such purchase, redemption, defeasance,
acquisition or retirement) and the Fair Market Value of such
Subordinated Indebtedness received by the Company from such issuance
and sale shall be excluded from the calculation of amounts available
for Restricted Payments under clause (3) of paragraph (a) above;
(iv) the purchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Indebtedness in exchange for,
or out of the net cash proceeds of a substantially concurrent
incurrence (other than to a Restricted Subsidiary) of, new Subordinated
Indebtedness so long as (A) the principal amount of
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such new Indebtedness does not exceed (1) the principal amount (or, if
such Subordinated Indebtedness being refinanced was incurred with
original issue discount, the aggregate accreted value as of the date of
determination) of the Subordinated Indebtedness being so purchased,
redeemed, defeased, acquired or retired, plus (2) the lesser of the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Subordinated Indebtedness
being refinanced or the amount of any premium reasonably determined by
the Company as necessary to accomplish such refinancing, plus (3) the
amount of any fees and expenses incurred to accomplish such
refinancing, (B) such new Subordinated Indebtedness is subordinated to
the Securities to the same extent as such Subordinated Indebtedness so
purchased, redeemed, defeased, acquired or retired and (C) such new
Subordinated Indebtedness has an Average Life equal to or greater than
the Average Life of the Indebtedness being refinanced and a final
Stated Maturity of principal later than the final Stated Maturity of
principal of the Indebtedness being refinanced, provided, however, that
such purchase, redemption, defeasance or other acquisition or
retirement shall be excluded in the calculation of the amount of
Restricted Payments; and
(v) the repurchase of Warrants in accordance with the terms of
the Warrant Agreement, provided, however, that such repurchase shall be
excluded in the calculation of the amount of Restricted Payments.
(c) In computing Consolidated Cash Flow and Consolidated
Interest Expense of the Company under paragraph (a) above, (1) the Company shall
use audited financial statements for the portions of the relevant period for
which audited financial statements are available on the date of determination
and unaudited financial statements and other current financial data based on the
books and records of the Company for the remaining portion of such period and
(2) the Company shall be permitted to rely in good faith on the financial
statements and other financial data derived from the books and records of the
Company that are available on the date of determination. If the Company makes a
Restricted Payment which, at the time of the making of such Restricted Payment,
would in the good faith determination of the Company be permitted under the
requirements of this Indenture, such Restricted Payment shall be deemed to have
been made in compliance with this Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial statements affecting
Consolidated Cash Flow and Consolidated Interest Expense of the Company for any
period.
SECTION 1012. Limitation on Issuances and Sales of Capital
Stock of Restricted Subsidiaries.
The Company (a) shall not permit any Restricted Subsidiary to
issue any Capital Stock (other than to the Company or a Wholly Owned Restricted
Subsidiary) and (b) shall not permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary) to own any Capital Stock of any Restricted
Subsidiary; provided, however, that this covenant shall not prohibit (i) the
sale or other disposition of all, but not less than all, of
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the issued and outstanding Capital Stock of any Restricted Subsidiary owned by
the Company and all Restricted Subsidiaries in compliance with the other
provisions of this Indenture and (ii) the ownership by directors of director's
qualifying shares or the ownership by foreign nationals of Capital Stock of any
Restricted Subsidiary, to the extent mandated by applicable law.
SECTION 1013. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into or suffer to exist, directly or indirectly, any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with, or
for the benefit of, any Affiliate of the Company or any Restricted Subsidiary
(other than the Company or a Wholly Owned Restricted Subsidiary) unless such
transaction is entered into in good faith and (i) such transaction or series of
transactions is fair and reasonable to the Company or such Restricted
Subsidiary, as the case may be, and is on terms that are no less favorable to
the Company or such Restricted Subsidiary, as the case may be, than those that
could have been obtained in an arm's-length transaction with a third party that
is not an Affiliate, (ii) with respect to any transaction or series of related
transactions involving aggregate consideration equal to or greater than
US$5,000,000, the Company shall deliver an Officers' Certificate to the Trustee
certifying that such transaction or series of transactions complies with clause
(i) above and such transaction or series of related transactions has been
approved by a majority of the Disinterested Directors of the Company or, in the
event no members of the Board of Directors of the Company are Disinterested
Directors with respect to such transaction or series of transactions, the
Company shall obtain a written opinion from an internationally recognized United
States, United Kingdom or European investment banking firm to the effect that
such transaction or series of related transactions is fair to the Company or its
Restricted Subsidiary, as the case may be, from a financial point of view and
(iii) with respect to any transaction or series of related transactions
involving aggregate consideration in excess of US$10,000,000, the Board of
Directors shall approve the fairness of such transaction after the Company has
obtained a written opinion from an internationally recognized United States,
United Kingdom or European investment banking firm to the effect set forth in
the preceding clause (ii); provided, however, that no opinion from an investment
banking firm will be required with respect to interconnection agreements entered
into by the Company or any Restricted Subsidiary in the ordinary course of
business and provided further that this covenant shall not restrict (1) the
Company from paying reasonable and customary regular compensation and fees to
directors of the Company or any Restricted Subsidiary who are not employees of
the Company or any Restricted Subsidiary, (2) the performance of the Company's
obligations under agreements existing on the Issue Date and listed on Schedule
II hereto; provided that any amendments or modifications to the terms of such
agreements shall be no less favorable to the Company than the terms existing on
the Issue Date, (3) the grant of stock options or similar rights to employees
and directors of the Company pursuant to plans approved by the Board of
Directors, provided that, in the aggregate, the shares underlying such options
or similar rights issued on or after the Issue Date (exclusive of any
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shares underlying such options or similar rights required to be issued by law)
shall not exceed 5% of the outstanding Common Stock of the Company on a fully
diluted basis at the date of determination, (4) loans or advances to employees
in the ordinary course of business in an aggregate amount not to exceed
US$1,000,000 at any one time outstanding and (5) any Restricted Payment
permitted to be paid pursuant to Section 1011.
SECTION 1014. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien of any kind (other than Permitted Liens) on or with respect to any of
its property or assets, including any shares of stock or indebtedness of any
Restricted Subsidiary, whether owned at the Issue Date or thereafter acquired,
or any income, profits or proceeds therefrom, or assign or otherwise convey any
right to receive income thereon, unless (x) in the case of any Lien securing
Subordinated Indebtedness, the Securities are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Lien and (y) in
the case of any other Lien, the Securities are equally and ratably secured with
the obligation or liability secured by such Lien.
SECTION 1015. Purchase of Securities upon a Change of Control.
(a) If a Change of Control shall occur at any time, then each
Holder of Securities shall have the right to require that the Company purchase
such Holder's Securities, in whole or in part in integral multiples of US$1,000
principal amount at final maturity, at a purchase price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of the Accreted Value
thereof plus accrued interest, if any, to the date of purchase (the "Change of
Control Purchase Date"), in accordance with the procedures set forth in
paragraphs (b) and (c) of this Section (the "Change of Control Offer").
(b) Within 15 days following any Change of Control, the
Company shall notify the Trustee thereof and give written notice of such Change
of Control to each Holder of Securities in the manner provided in Section 106,
stating:
(1) that a Change in Control has occurred and that such Holder
has the right to require the Company to repurchase such Holder's
Securities at the Change of Control Purchase Price;
(2) the circumstances and relevant facts regarding such Change
in Control (including but not limited to information with respect to
pro forma historical income, cash flow and capitalization after giving
effect to such Change in Control);
(3) the Change of Control Purchase Price and the Change of
Control Purchase Date, which shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed, or
such later date as is necessary to
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comply with requirements under the Exchange Act or any applicable
securities laws or regulations;
(4) that all Securities validly tendered will be accepted for
payment and that any Security not tendered shall continue to accrue
interest or accrete in value, as the case may be;
(5) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Securities accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
or accrete in value after the Change of Control Purchase Date;
(6) the instructions that a Holder of Securities must follow
to accept a Change of Control Offer or to withdraw such acceptance in
accordance with paragraph (c) of this Section; and
(7) if applicable, that the prohibition under Colombian law
described in paragraph (f) below is in effect and that the Company is
making the deposit with the Trustee required by such paragraph (f) and
stating the date on which the purchase will be completed.
(c) Holders electing to have Securities purchased will be
required to surrender such Securities to the Company at the address specified in
the notice at least five Business Days prior to the Change of Control Purchase
Date (or such later date as provided in paragraph (f) below). Holders will be
entitled to withdraw their election if the Company receives, not later than
three Business Days prior to the Change of Control Purchase Date (or such later
date as provided in paragraph (f) below), a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Securities delivered for purchase by the Holder as to which his
election is to be withdrawn and a statement that such Holder is withdrawing his
election to have such Securities purchased. Holders whose Securities are
purchased only in part will be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered.
(d) The Company shall comply with any applicable securities
laws and regulations in connection with a Change of Control Offer.
(e) The Company shall not enter into any agreement (other than
the Bank Credit Agreement or agreements governing Indebtedness as in effect on
the Issue Date) that would prohibit the Company from making a Change of Control
Offer to purchase the Securities or, if such Change of Control Offer is made, to
pay for the Securities tendered for purchase.
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(f) If any redemption or prepayment of the Securities pursuant
to a Change of Control Offer on or prior to the first anniversary of the Issue
Date is prohibited by Colombian law, and if the Company is required to make a
Change of Control Offer with a Change of Control Purchase Date (determined
pursuant to clause (b)(3) above) on or prior to the first anniversary of the
Issue Date, the Company shall be required to deposit with the Trustee cash in
United States dollars and/or United States Government Obligations in an amount
sufficient (without taking into account the payment of interest thereon) to
acquire all of the Outstanding Securities on the first Business Day after the
first anniversary of the Issue Date. Such funds deposited with the Trustee
(together with any additional funds provided by the Company, if necessary) shall
be used by the Trustee to purchase the Securities on the first Business Day
after the first anniversary of the Issue Date. If the Company shall have (i)
delivered an Opinion of Counsel to the Trustee confirming such prohibition under
Colombian law and (ii) made such deposit with the Trustee prior to such Change
of Control Purchase Date, the Company shall not be in default of its obligations
to make a Change of Control Offer prior to the first Business Day after the
first anniversary of the Issue Date. If the notice sent pursuant to paragraph
(b) above is sent more than 60 days prior to the date of purchase provided in
this paragraph, the Company shall send an additional notice providing the
information required by paragraph (b) not less than 30 nor more than 60 days
prior to the date of purchase provided in this paragraph.
(g) If any redemption of the Securities within three years of
the Issue Date resulting in more than 40% of the aggregate principal amount at
maturity of the Securities being redeemed would impose certain deposit
requirements on the Company under Colombian law, the Company shall make such
deposit prior to consummating any Change of Control Offer.
SECTION 1016. Limitation on Sale of Assets.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) the consideration received by
the Company or such Restricted Subsidiary for such Asset Sale is not less than
the Fair Market Value of the assets subject to such Asset Sale (as determined by
the Board of Directors of the Company, whose determination shall be conclusive
and evidenced by a Board Resolution), (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 85% cash or Cash Equivalents and (iii) immediately before
and immediately after giving effect to such Asset Sale, no Default or Event of
Default shall have occurred and be continuing or be anticipated to occur.
(b) If the Company or any Restricted Subsidiary engages in an
Asset Sale, the Company may use the Net Cash Proceeds thereof, within 12 months
after the later of such Asset Sale or the receipt of such Net Cash Proceeds, to
(i) permanently repay or prepay any then outstanding secured Indebtedness of the
Company under the Bank Credit Agreement or other secured Indebtedness that is
not subordinated to payment of the Securities or Indebtedness of any Restricted
Subsidiary or (ii) invest (or enter into a legally binding
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agreement to invest) in properties and assets that will be used in businesses of
the Company or its Restricted Subsidiaries, as the case may be, that (x) existed
on the Issue Date or (y) is a Permitted Telecommunications Business. If any such
legally binding agreement to invest such Net Cash Proceeds is terminated, then
the Company may, within 90 days of such termination or within 12 months of such
Asset Sale, whichever is later, invest such Net Cash Proceeds as provided in
clause (i) or (ii) (without regard to the parenthetical contained in such clause
(ii)) above. The amount of such Net Cash Proceeds not so used as set forth above
in this paragraph (b) constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds
US$10,000,000, the Company shall, within 15 Business Days, make an offer to
purchase (an "Excess Proceeds Offer") from all Holders of Securities, on a pro
rata basis, in accordance with the procedures set forth below, the maximum
principal amount of Securities that may be purchased with the Excess Proceeds
(rounded down to the nearest multiple of US$1,000). The offer price as to each
Security shall be payable in cash in an amount equal to 100% of the Accreted
Value of such Security plus accrued interest, if any, to the date such Excess
Proceeds Offer is consummated (the "Offered Price"). To the extent that the
aggregate principal amount of Securities tendered pursuant to an Excess Proceeds
Offer is less than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. If the aggregate principal amount of Securities
validly tendered and not withdrawn by Holders thereof exceeds the Excess
Proceeds, Securities to be purchased shall be selected on a pro rata basis, with
such adjustments as may be deemed appropriate by the Trustee, so that only
Securities in denominations of U.S.$1,000, or integral multiples thereof, shall
be purchased. Upon completion of such Excess Proceeds Offer, the amount of
Excess Proceeds shall be reset to zero.
(d) The Company shall, within the time period provided in
paragraph (c) above, notify the Trustee of any Excess Proceeds Offer and shall
give written notice of such Excess Proceeds Offer to each Holder of Securities
in the manner provided in Section 106 stating:
(1) that the Holder has the right to require the Company to
repurchase such Holder's Securities at the Offered Price, subject to
proration in the event the Excess Proceeds are less than the aggregate
Offered Price of all Securities tendered;
(2) the date of purchase of Securities pursuant to the Excess
Proceeds Offer (the "Asset Sale Purchase Date"), which shall be no
earlier than 30 days nor later than 60 days from the date such notice
is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act or any applicable securities laws
or regulations;
(3) that any Security not tendered will continue to accrue
interest or accrete in value, as the case may be;
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(4) that, unless the Company defaults in the payment of the
Offered Price, any Security accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest or accrete in value after
the Asset Sale Purchase Date;
(5) the instructions a Holder must follow to accept an Excess
Proceeds Offer or to withdraw such acceptance in accordance with
paragraph (e) of this Section;
(6) if applicable, that the prohibition under Colombian law
described in paragraph (f) below is in effect and that the Company is
making the deposit with the Trustee required by such paragraph (f) and
stating the date on which the purchase will be completed; and
(7) if applicable, that redemption or repurchase of 40% or
more of the aggregate principal amount at maturity of the Securities
would impose certain deposit requirements on the Company under
Colombian law and describing the proration procedures or deposits with
the Trustee that the Company may elect, as the case may be, pursuant to
paragraphs (f) and (g).
(e) Holders electing to have Securities purchased will be
required to surrender such Securities to the Company at the address specified in
the notice at least five Business Days prior to the Asset Sale Purchase Date.
Holders will be entitled to withdraw their election if the Company receives, not
later than three Business Days prior to the Asset Sale Purchase Date (or such
later date as provided in paragraph (f) or (g) below, as the case may be), a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities delivered for purchase by the
Holder as to which his election is to be withdrawn and a statement that such
Holder is withdrawing his election to have such Securities purchased. Holders
whose Securities are purchased only in part will be issued new Securities equal
in principal amount to the unpurchased portion of the Securities surrendered.
(f) If any redemption or prepayment of the Securities pursuant
to an Excess Proceeds Offer on or prior to the first anniversary of the Issue
Date is prohibited by Colombian law, and if the Company is required to make an
Excess Proceeds Offer with an Asset Sale Purchase Date (determined pursuant to
clause (d)(2) above) on or prior to the first anniversary of the Issue Date, the
Company shall be required to deposit with the Trustee cash in United States
dollars and/or United States Government Obligations in an amount sufficient
(without taking into account the payment of interest thereon) to acquire all of
the Securities tendered pursuant to such Excess Proceeds Offer on the first
Business Day after the first anniversary of the Issue Date. Such funds deposited
with the Trustee (together with any additional funds provided by the Company, if
necessary) shall be used by the Trustee to purchase the Securities on the first
Business Day after the first anniversary of the Issue Date. If the Company shall
have (i) delivered an Opinion of Counsel to the Trustee confirming such
prohibition under Colombian law and (ii) made such deposit with the Trustee
prior to
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such Asset Sale Purchase Date, the Company shall not be in default of its
obligations to make an Excess Proceeds Offer prior to the first Business Day
after the first anniversary of the Issue Date. If the notice sent pursuant to
paragraph (d) above is sent more than 60 days prior to the date of purchase
provided in this paragraph, the Company shall send an additional notice
providing the information required by paragraph (d) not less than 30 nor more
than 60 days prior to the date of purchase provided in this paragraph.
(g) If any redemption of the Securities within three years of
the Issue Date resulting in more than 40% of the aggregate principal amount at
maturity of the Securities being redeemed or repurchased would impose certain
deposit requirements on the Company under Colombian law and the Securities
tendered pursuant to an Excess Proceeds Offer with an Asset Sale Purchase Date
(determined pursuant to clause (d)(2) above) on or prior to the third
anniversary of the Issue Date exceed 40% of the aggregate principal amount at
maturity of the Securities (or such lesser amount that, when added to the
Securities previously redeemed or purchased, would exceed 40% of the aggregate
principal amount at maturity of the Securities), the Company may (i) make the
deposit required by the Central Bank and thereafter complete the purchase of the
Securities pursuant to the Excess Proceeds Offer or (ii) purchase pro rata 40%
of the aggregate principal amount at maturity of the Securities (or such lesser
amount that would result, together with any prior redemption or purchase, in an
aggregate of 40% of the aggregate principal amount at maturity of the Securities
having been redeemed or purchased) and, in lieu of the purchase of the remainder
of such tendered Securities, deposit with the Trustee cash in United States
dollars and/or United States Government Obligations in an amount sufficient
(without taking into account the payment of interest thereon) to purchase the
remaining Securities on the first Business Day after the third anniversary of
the Issue Date at the Offered Price (which shall be calculated with respect to
the actual date of purchase provided in this paragraph (g)). Such funds
deposited with the Trustee (together with any additional funds provided by the
Company, if necessary) shall be used by the Trustee to redeem the Securities on
the first Business Day after the third anniversary of the Issue Date. If the
Company shall have (i) delivered an Opinion of Counsel to the Trustee confirming
such deposit requirement under Colombian law and (ii) made such deposit with the
Trustee prior to the applicable Asset Sale Purchase Date, the Company shall not
be in default of its obligations to make an Excess Proceeds Offer prior to the
first Business Day after the third anniversary of the Issue Date. The Company
shall promptly notify the Holders of any election to make the deposit with the
Trustee provided in this paragraph, providing information with respect to any
proration and the date of, and procedures for, the purchase of any remaining
Securities tendered pursuant to the Excess Proceeds Offer. If the notice sent
pursuant to paragraph (d) above is sent more than 60 days prior to the date of
purchase provided in this paragraph, the Company shall send an additional notice
providing the information required by paragraph (d) not less than 30 nor more
than 60 days prior to the date of purchase provided in this paragraph.
SECTION 1017. Limitation on Sale and Leaseback Transactions.
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83
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into any Sale and Leaseback
Transaction with respect to any property or assets (whether owned at the date
hereof or hereafter acquired), unless the sale or transfer of such property or
assets to be leased is treated as an Asset Sale and the Company complies with
Section 1016 with respect thereto.
SECTION 1018. Limitation on the Activities of the Company.
The Company and its Restricted Subsidiaries shall not engage
in any business other than the business of the Company or its Restricted
Subsidiaries existing on the Issue Date and any Permitted Telecommunications
Business and the making of Investments permitted by Section 1011.
SECTION 1019. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distributions on or in respect of its Capital Stock, (b) pay
any Indebtedness owed to the Company or any other Restricted Subsidiary that,
directly or indirectly, owns any Capital Stock of such Restricted Subsidiary,
(c) make loans or advances to the Company or any other Restricted Subsidiary
that, directly or indirectly, owns any Capital Stock of such Restricted
Subsidiary or (d) transfer any of its properties or assets to the Company or any
other Restricted Subsidiary that, directly or indirectly, owns any Capital Stock
of such Restricted Subsidiary (other than customary restrictions on transfers of
property subject to a Lien permitted under this Indenture that would not
materially adversely affect the Company's ability to satisfy its obligations
under the Securities and this Indenture), except, in each case, for such
encumbrances or restrictions existing under or by reason of (i) the Securities
and this Indenture, (ii) any agreement in effect on the Issue Date, (iii)
applicable law, (iv) customary provisions restricting subletting or assignment
of any lease or assignment of any other contract to which the Company or any
Restricted Subsidiary is a party or to which any of their respective properties
or assets are subject, (v) any agreement or other instrument of a Person, or
pertaining to property or assets, acquired by the Company or any Restricted
Subsidiary in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person, or
the property or assets of the Person, so acquired, (vi) any Lien permitted under
Section 1014, (vii) any encumbrance or restriction contained in contracts for
sales of assets or Capital Stock of a person with respect to the assets or
Capital Stock to be sold (or the assets owned by the Person whose Capital Stock
is to be sold) pursuant to such contract that terminates upon the earlier of the
termination of such agreement or the consummation of such sale and (viii) any
encumbrance or restriction existing under any agreement that extends, renews,
refinances or replaces the agreements containing the encumbrances or
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restrictions in the foregoing clauses (i), (ii) and (v); provided that the terms
and conditions of any such encumbrances or restrictions are not materially less
favorable to the Holders of the Securities than those under or pursuant to the
agreement so extended, renewed, refinanced or replaced.
SECTION 1020. Payment of Additional Amounts.
(a) Any and all payments made by the Company under the
Securities will be made free and clear of and without deduction for or on
account of any and all present or future taxes, levies, imposts, deductions,
charges or withholdings and all liabilities with respect thereto imposed by the
Republic of Colombia or any political subdivision thereof excluding any taxes,
levies, imposts, deductions, charges or withholdings and all liability with
respect thereto (i) resulting from the Holder having some connection with the
Republic of Colombia or any political subdivision thereof other than the mere
holding of or enforcement of or receipt of any payment with respect to such
Security, (ii) the payment of which may be avoided by the Holder complying with
any certification, declaration or other reporting requirement concerning the
nationality, residence, identity or connection with any taxing authority of such
Holder as the beneficial owner of such Security, (iii) that would not have been
imposed but for the presentation (where presentation is required) of such
Security for payment more than 30 days after the date such payment became due
and payable or was duly provided for, whichever occurs later, (iv) in the nature
of estate, inheritance, gift, sale, transfer, personal property or similar taxes
or (v) imposed on or with respect to any payment by the Company to the Holder if
such Holder is a fiduciary or partnership or person other than the sole
beneficial owner of such payment to the extent such tax, levy, impost,
deduction, charge or withholding would not have been imposed on a beneficiary or
settlor with respect to such fiduciary, member of such partnership or the
beneficial owner of such payment had such beneficiary, settlor, member or
beneficial owner been the Holder of such Security (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
referred to collectively or individually as "Colombian Withholding Taxes"). If
the Company is required by law to deduct any Colombian Withholding Taxes from or
in respect of any sum payable under a Security, the sum payable thereunder shall
be increased by the amount necessary so that after making all required
deductions the Holder will receive an amount equal to the sum it would have
received had no such deductions been made (such additional amounts to be paid by
the Company in accordance with the foregoing being "Additional Amounts").
(b) At least 30 calendar days prior to each date on which any
payment under or with respect to the Securities is due and payable, if the
Company will be obligated to pay Additional Amounts with respect to such
payment, the Company will deliver to the Trustee an Officers' Certificate (i)
stating the fact that such Additional Amounts will be payable and the amounts so
payable; (ii) certifying the amount required to be withheld on such date; (iii)
certifying that the Company shall withhold such amount on such date and shall
pay such amount with any required penalty or interest to the appropriate
governmental authorities; and (iv) setting forth such other information
necessary to enable the Trustee to
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pay such Additional Amounts to Holders on the payment date. The Company agrees
to indemnify each of the Trustee and Paying Agents for, and to hold each
harmless against, any loss, liability or expense reasonably incurred without
negligence or bad faith on its part arising out of or in connection with actions
taken or omitted by it in reliance on any certificate furnished pursuant to this
Section 1020 or the failure of the Company to furnish any such certificate.
Whenever in this Indenture there is mentioned, in any context, the payment of
principal, interest, if any, or any other amount payable under or with respect
to any Security or Securities, such mention shall be deemed to include mention
of the payment of Additional Amounts provided for in this Section 1020, to the
extent that, in such context, Additional Amounts are, were or would be payable
in respect thereof pursuant to the provisions of this Section 1020 and express
mention of the payment of Additional Amounts (if applicable) in any provisions
hereof shall not be construed as excluding Additional Amounts in those
provisions hereof where such express mention is not made (if applicable).
(c) The obligations of the Company under this Section 1020
shall survive the termination of this Indenture, the resignation or removal of
the Trustee or any Paying Agent and the payment of all amounts under or with
respect to the Securities.
SECTION 1021. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any term, provision or condition set forth in Section 803 or Section 1007 or
Sections 1010 through 1014, inclusive, or Sections 1017 through 1019, inclusive,
if before or after the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities, by Act of such
Holders, waive such compliance in such instance with such term, provision or
condition, but no such waiver shall extend to or affect such term, provision or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full force
and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Mandatory and Optional Redemption.
(a) The Company shall redeem 50% of the original aggregate
principal amount at maturity of the Securities on March 15, 2003 at 100% of the
principal amount thereof, together with accrued and unpaid interest to the
redemption date, on a pro rata basis from the Holders of the Securities at the
close of business on March 1, 2003.
(b) The Securities may be redeemed at the election of the
Company, as a whole or from time to time in part, at any time. In addition, at
any time prior to March 15,
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1999, the Company may redeem up to 33% of the original aggregate principal
amount at maturity of the Securities within 45 days of one or more Public Equity
Offerings with the net proceeds of such offering at a redemption price equal to
114% of the Accreted Value thereof, provided that no less than 67% of the
original aggregate principal amount at maturity of the Notes remain outstanding.
In each case, redemption shall be subject to the conditions and at the
Redemption Prices specified in the form of Security, together with accrued
interest, if any, to the Redemption Date.
(c) If, as a result of any change in, or amendment to, the
laws (including any regulations promulgated thereunder) of the Republic of
Colombia (or any political subdivision or taxing authority thereof or therein),
or any change in, or amendment to, any official position regarding the
application or interpretation of such laws or regulations, which change or
amendment is announced or becomes effective on or after the Issue Date, the
Company has become or would be obligated to pay, on any date on which any amount
would be payable under or with respect to the Securities, any Additional Amounts
in accordance with Section 1020 hereof, then the Company may, at its option,
redeem the Securities, as a whole but not in part, at any time at a redemption
price equal to 100% of the Accreted Value thereof, together with accrued and
unpaid interest thereon, if any, to the redemption date.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
SECTION 1103. Notice to Trustee of Redemption.
(a) In the case of the mandatory redemption pursuant to
paragraph (a) of Section 1101, the Company shall, at least 60 days prior to the
Redemption Date (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Securities to be redeemed and shall deliver to the Trustee such documentation
and records as shall enable the Trustee to select the Securities to be redeemed
pro rata pursuant to Section 1104.
(b) The election of the Company to redeem any Securities
pursuant to paragraph (b) or (c) of Section 1101 shall be evidenced by a Board
Resolution. In case of any redemption at the election of the Company, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Securities to
be redeemed and shall deliver to the Trustee such documentation and records as
shall enable the Trustee to select the Securities to be redeemed pursuant to
Section 1104.
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SECTION 1104. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate (or, in the case of a mandatory redemption pursuant to paragraph
(a) of Section 1101, on a pro rata basis with such adjustments as may be deemed
appropriate by the Trustee to comply with the proviso below) and which may
provide for the selection for redemption of portions of the principal of
Securities; provided, however, that no such partial redemption shall reduce the
portion of the principal amount of a Security not redeemed to less than
US$1,000.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for
in Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed. The notice if given in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the Holder receives such notice. In any case, failure to give
such notice or any defect in the notice to the Holder of any Security designated
for redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to
the Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Securities are to be
redeemed, the identification (and, in the case of a partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the
notice which relates to such Security shall state that on and after the
Redemption Date, upon
<PAGE> 99
88
surrender of such Security, the holder will receive, without charge, a
new Security or Securities of authorized denominations for the
principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided in
Section 1107) will become due and payable upon each such Security, or
the portion thereof, to be redeemed, and that interest thereon will
cease to accrue on and after said date, and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued interest,
if any.
Notice of redemption of Securities to be redeemed shall be
given by the Company or, at the Company's request, by the Trustee in the name
and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
On or prior to 10:00 a.m. (New York City time) on any
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 1003) an amount of money sufficient to pay the
Redemption Price of, and accrued interest on, all the Securities which are to be
redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to accrete in value or bear interest. Upon
surrender of any such Security for redemption in accordance with said notice,
such Security shall be paid by the Company at the Redemption Price, together
with accrued interest, if any, to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
309.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest, or the Security shall accrete in value, as the
case may be, from the Redemption Date at the rate borne by the Securities.
<PAGE> 100
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SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities of like tenor and form, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
[RESERVED]
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option by Board Resolution, at any
time, with respect to the Securities, elect to have Section 1302 or Section 1303
be applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Securities on
the date the conditions set forth in Section 1304 are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Securities, which shall thereafter be deemed to
be "Outstanding" only for the purposes of Section 1305 and the other Sections of
this Indenture referred to in (A) and (B) below, and to have satisfied all its
other obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following,
which shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of Outstanding Securities to receive, solely from the trust
fund
<PAGE> 101
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described in Section 1304 and as more fully set forth in such Section, payments
in respect of the principal of (and premium, if any, on) and interest on such
Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 304, 305, 308, 1002 and 1003, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article Thirteen. Subject to compliance with this Article Thirteen, the
Company may exercise its option under this Section 1302 notwithstanding the
prior exercise of its option under Section 1303 with respect to the Securities.
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company shall be released from its
obligations under any covenant contained in Section 801(3) and Section 801(4)
and Section 803 and in Sections 1007 through 1019, inclusive, and the operation
of Sections 501(4) (to the extent it relates to Section 801(3), Section 801(4),
Section 803 and Sections 1007 through 1019, inclusive), 501(8) with respect to
Subsidiaries only) and 501(9) (with respect to Subsidiaries only) with respect
to the Outstanding Securities on and after the date the conditions set forth
below are satisfied (hereinafter, "covenant defeasance"), and the Securities
shall thereafter be deemed not to be "Outstanding" for the purposes of any
direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Outstanding
Securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 501(4), but,
except as specified above, the remainder of this Indenture and such Securities
shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) cash in United States dollars, or (B)
U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than
<PAGE> 102
91
one day before the due date of any payment, money in an amount, or (C)
a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, (i) the principal of (and
premium, if any) and interest on the Outstanding Securities on the
Stated Maturity (or Redemption Date, if applicable) of such principal
(and premium, if any) or installment of interest and (ii) any mandatory
redemption or analogous payments applicable to the Outstanding
Securities on the day on which such payments are due and payable in
accordance with the terms of this Indenture and of such Securities;
provided that the Trustee shall have been irrevocably instructed to
apply such cash in United States dollars or the proceeds of such U.S.
Government Obligations to said payments with respect to the Securities;
and provided further that upon the effectiveness of this Section 1304,
the cash in United States dollars or U.S. Government Obligations
deposited shall not be subject to the rights of the Banks pursuant to
the provisions of Article Fourteen. Before such a deposit, the Company
may give to the Trustee, in accordance with Section 1103 hereof, a
notice of its election to redeem all of the Outstanding Securities at a
future date in accordance with Article Eleven hereof, which notice
shall be irrevocable. Such irrevocable redemption notice, if given,
shall be given effect in applying the foregoing. For this purpose,
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (y) obligations of a
Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended), as
custodian with respect to any such U.S. Government Obligation or a
specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation
or the specific payment of principal of or interest on the U.S.
Government Obligation evidenced by such depository receipt.
(2) No (a) Default in the payment of principal of or premium,
if any, or interest on any Security or a Default resulting from the
occurrence of a Default specified in Section 501(8) or (9) (without
regard to any passage of time specified therein) or (b) Event of
Default with respect to the Securities (other than as a result of a
breach of the provisions of Article Eight arising from a merger or
consolidation occurring contemporaneously with such defeasance) shall
have occurred and be continuing on the date of, or immediately after,
such deposit or, insofar as paragraphs (8) and (9) of Section 501
hereof are concerned, at any time during the
<PAGE> 103
92
period ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(3) Such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any
material agreement or instrument to which the Company is a party or by
which it is bound.
(4) In the case of an election under Section 1302, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since May 31, 1996, there has
been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion shall confirm that,
the Holders of the Outstanding Securities will not recognize income,
gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred.
(5) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize
income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the legal
defeasance under Section 1302 or the covenant defeasance under Section
1303 (as the case may be) have been complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in
respect of the Outstanding Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
<PAGE> 104
93
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1304 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1306. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1302 or 1303, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1305; provided, however, that if the Company makes any payment of
principal of (or premium, if any) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE FOURTEEN
CONCESSION PRIORITY
SECTION 1401. Concession Proceeds to Be Turned Over to the
Collateral Agents.
The Company agrees, and each Holder of any Security, by its
acceptance of such Security, also agrees, that prior to the Pledge Effective
Date the Concession Proceeds shall be paid directly to the Collateral Agents,
net of reasonable costs and expenses incurred by the Trustee in connection with
collecting the Concession Proceeds and exercising its rights and powers and
performing under this Article Fourteen, by the person making such payment,
whether a trustee in bankruptcy, a receiver or liquidating trustee, or
otherwise, to the extent and in the manner hereinafter set forth.
<PAGE> 105
94
SECTION 1402. Events of Turnover.
(a) In the event of the adoption of a plan of reorganization
(acuerdo concordatario), any reorganization (concordato) or sale of assets in a
liquidation of the Company or its debts, whether voluntary or involuntary, in
any bankruptcy, insolvency, reorganization (concordato), receivership,
liquidation, relief or other similar case or proceeding under any applicable
Colombian bankruptcy or similar law which occurs on or before the Pledge
Effective Date, any Concession Proceeds that otherwise would be payable or
deliverable upon or with respect to the Securities in any such case or
proceeding or otherwise shall be paid or delivered directly to the Collateral
Agents for the payment or prepayment of the Bank Facility until the Bank
Facility shall have been paid in full. The Company shall cause the Collateral
Agents to notify the Trustee in writing as to the amount of Concession Proceeds
that shall be paid to the Collateral Agents pursuant to this Section 1402 if any
amount other than all Concession Proceeds shall be required to be paid to the
Collateral Agents in order for the Bank Facility to have been paid in full.
(b) The Company shall cause the Collateral Agents to provide
notice to the Trustee of the Pledge Effective Date.
SECTION 1403. In Furtherance of Concession Priority.
(a) Each Holder of any Securities by its acceptance thereof
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the payments of Concession
Proceeds to the Collateral Agents as provided in this Article Fourteen and
appoints the Trustee its attorney-in-fact for any and all such purposes.
(b) If any proceeding referred to in Section 1402 above is
commenced by or against the Company, and the Trustee is not permitted, refuses
or is unable to file claims or proofs of claims, the Collateral Agents is hereby
irrevocably authorized and empowered (in its own name or in the name of the
Holders of the Securities or otherwise), but shall have no obligation, to
demand, sue for, collect and receive every payment or distribution of the
Concession Proceeds referred to in Section 1402 and give acquittance therefor
and to file claims and proofs of claim and take such other action as it may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Collateral Agents under this Article Fourteen; and
(c) All Concession Proceeds received by the Trustee or any
Holder of any Security contrary to the provisions of this Article shall be
received in trust for the benefit of the Collateral Agents, shall be segregated
on the books and records of the Trustee or shall be segregated from other funds
and property of such Holder of a Security and shall be forthwith paid over to
the Collateral Agents in the same form as so received (with any necessary
indorsement) for the payment or prepayment of the Bank Facility until the Bank
Facility shall have been paid in full. The Company shall cause the Collateral
Agents to notify the Trustee
<PAGE> 106
95
in writing as to the amount of Concession Proceeds that shall be paid to the
Collateral Agents pursuant to this Section 1403 if any amount other than all
Concession Proceeds shall be required to be paid to the Collateral Agents in
order for the Bank Facility to have been paid in full.
SECTION 1404. Rights of Subrogation.
No payment or distribution to the Collateral Agents pursuant
to the provisions of this Article Fourteen shall entitle any Holder of the
Securities to exercise any right of subrogation in respect of any payment or
distribution until the Bank Facility shall have been paid in full.
SECTION 1405. Further Assurances.
The Holders of the Securities, the Trustee and the Company
each will, at the Company's expense and at any time and from time to time,
promptly execute and deliver all reasonable further instruments and documents,
and take all further reasonable action, that may be necessary or desirable to
carry out the obligations set forth in this Article Fourteen.
SECTION 1406. Agreements in Respect of the Securities.
(a) Prior to the Pledge Effective Date, no amendment, waiver
or other modification of this Article Fourteen, and no indenture supplemental to
this Indenture amending, waiving or modifying this Article Fourteen, may
materially and adversely affect the rights or interests of the Collateral Agents
without the prior written consent of the Collateral Agents.
(b) Prior to the Pledge Effective Date, the Trustee shall
promptly notify the Collateral Agents of the occurrence of any default under the
Securities.
SECTION 1407. Expenses.
The Trustee shall be entitled to deduct its reasonable costs
and expenses incurred in connection with collecting the Concession Proceeds and
exercising its rights and powers and performing under this Article Fourteen from
the Concession Proceeds prior to paying over such Concession Proceeds to the
Collateral Agents.
SECTION 1408. Continuing Agreement.
The provisions of this Article Fourteen constitute a
continuing agreement and shall (i) remain in full force and effect until the
Pledge Effective Date, (ii) be binding upon the Holders of the Securities, the
Trustee, the Company and their respective successors and assigns, and (iii)
inure to the benefit of, and be enforceable by, the Collateral Agents and its
<PAGE> 107
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successors, transferees and assigns. Each Holder of any Security by its
acceptance of such Security agrees and consents to each and any provision of
this Article Fourteen.
SECTION 1409. Trust Moneys Not Subject to Concession Priority.
Notwithstanding anything contained herein to the contrary,
payments from cash or the proceeds of U.S. Government Obligations held in trust
under Article Thirteen hereof by the Trustee (or other qualifying trustee) and
which were deposited in accordance with the terms of Article Thirteen hereof and
not in violation of Section 1402 or 1403 hereof for the payment of principal of
(and premium, if any) and interest on the Securities shall not be subject to the
Concession Priority or subject to the restrictions set forth in this Article
Fourteen, and none of the Holders shall be obligated to pay over any such amount
to the Collateral Agents or any other creditor of the Company.
---------------
<PAGE> 108
97
This Indenture may be signed in any number of counterparts
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
OCCIDENTE Y CARIBE CELULAR S.A.
By /s/ Mauricio Campillo
---------------------------------------
Name: Mauricio Campillo
Title: General Secretary and
Administrative Vice President
THE BANK OF NEW YORK
By /s/ Lloyd A. McKenzie
--------------------------------------
Name: Lloyd A. McKenzie
Title: Assistant Vice President
<PAGE> 109
Exhibit A
[FACE OF NOTE]
OCCIDENTE Y CARIBE CELULAR S.A.
[Series B]* Senior Discount Note due 2004
CUSIP [ ]
No. ____ US$__________
OCCIDENTE Y CARIBE CELULAR S.A., a sociedad anonima
existing under the laws of the Republic of Colombia (the "Company," which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to ____________, or its registered assigns, the
principal sum of ______________ dollars ($__________) on _________, 2004.
[Initial Interest Rate: 14% per annum.]**
[Interest Rate: 14% per annum.]*
Interest Payment Dates: March 15 and September 15, commencing
September 15, 2001.
Regular Record Dates: March 1 and September 1.
Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
THE ISSUANCE OF THE 14% SENIOR DISCOUNT NOTES HAS
BEEN APPROVED BY THE COLOMBIAN SUPERINTENDENCY OF CORPORATIONS (SUPERINTENDENCIA
DE SOCIEDADES). SUCH APPROVAL DOES NOT IMPLY AN APPROVAL OF THE QUALITY OF THE
14% SENIOR DISCOUNT NOTES OR THE SOLVENCY OF THE COMPANY. THE 14% SENIOR
DISCOUNT NOTES MAY NOT BE OFFERED OR SOLD IN THE REPUBLIC OF COLOMBIA.
- ---------------
* Include only for Exchange Securities.
** Include only for Initial Securities.
<PAGE> 110
A-2
IN WITNESS WHEREOF, the Company has caused this Note
to be signed manually or by facsimile by its duly authorized officers.
Date: ______________________ OCCIDENTE Y CARIBE CELULAR S.A.
By: _______________________________________
Title:
Attest: ___________________________________
Title:
<PAGE> 111
A-3
(Form of Trustee's Certificate of Authentication)
This is one of the [Series B]* Senior Discount Notes due 2004 described in the
within-mentioned Indenture.
[______________________________________],
as Trustee
By: _____________________________________
Authorized Signatory
- ---------------
* Include only for Exchange Securities
<PAGE> 112
A-4
[REVERSE SIDE OF NOTE]
OCCIDENTE Y CARIBE CELULAR S.A.
[Series B]* Senior Discount Note due 2004
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2004.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, [at the rate of
14% per annum (subject to adjustment as provided below)]** [at the rate of 14%
per annum, except that interest accrued on this Note (or the predecessor Note
hereto) pursuant to the second succeeding paragraph of this Section 1 for
periods prior to the applicable Exchange Date (as such term is defined in the
Registration Rights Agreement referred to below) will accrue at the rate or
rates borne by the predecessor Note hereto from time to time during such periods
pursuant to the Registration Rights Agreement as set forth below].*
Interest will be payable semiannually (to the holders of
record of the Notes (or any predecessor Notes) at the close of business on the
March 1 or September 1 immediately preceding the Interest Payment Date) on each
Interest Payment Date, commencing September 15, 2001; provided that no interest
shall accrue on the principal amount of this Note prior to March 15, 2001 and no
interest shall be paid on this Note prior to September 15, 2001 except as
provided in the next paragraph.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated June 7, 1996, between the Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated and ING Baring (U.S.)
Securities, Inc. (the "Registration Rights Agreement"). In the event that either
(a) the Exchange Offer Registration Statement (as such term is defined in the
Registration Rights Agreement) is not filed with the Securities and Exchange
Commission on or prior to the 60th calendar day following the date of original
issue of the Notes, (b) the Exchange Offer Registration Statement has not been
declared effective on or prior to the 150th calendar day following the date of
original issue of the Notes; (c) the Exchange Offer (as such term is defined in
the Registration Rights Agreement) is not consummated on or prior to the 180th
calendar day following the date of original issue of the Notes or, as the case
may be, a Shelf Registration Statement (as such term is defined
- --------
* Include only for Exchange Securities.
** Include only for Initial Securities.
<PAGE> 113
A-5
in the Registration Rights Agreement) is not declared effective on or prior to
the 210th calendar day following the date of original issue of the Notes, or (d)
the Exchange Offer Registration Statement or the Shelf Registration Statement is
declared effective, but thereafter ceases to be effective or usable except as
provided in Section 2(d)(ii) of the Registration Rights Agreement (each such
event referred to in clause (a) through (d) above, a "Registration Default")
interest (in addition to the accrual of original issue discount during the
period ending March 15, 2001 and in addition to the interest otherwise due on
the Notes after such date) will accrue on this Note at a rate of one-half of one
percent per annum of the Accreted Value on the immediately preceding semiannual
accrual date (for purposes of this paragraph, "semiannual accrual date" means
each March 15 or September 15 of each year (or, if such immediately preceding
March 15 or September 15 occurs before September 15, 1996 at a rate of one-half
of one percent of the Accreted Value of this Note on June 7, 1996)) with respect
to the first 90-day period following such Registration Default, and the amount
of such additional interest will increase by an additional one-half of one
percent per annum for each subsequent 90-day period until such Registration
Default has been cured, payable in cash semiannually, in arrears, on March 15
and September 15 of each year; provided, however, that in no event shall the
rate of such additional interest be more than one and one-half of one percent.
Upon the cure of all applicable Registration Defaults, such additional interest
shall cease to accrue.
Any and all payments made by the Company under this Note will
be made free and clear of and without deduction for or on account of any and all
present or future taxes, levies, imposts, deductions, charges or withholdings
and all liabilities with respect thereto imposed by the Republic of Colombia or
any political subdivision thereof excluding any taxes, levies, imposts,
deductions, charges or withholdings and all liability with respect thereto (i)
resulting from the Holder having some connection with the Republic of Colombia
or any political subdivision thereof other than the mere holding of or
enforcement of or receipt of any payment with respect to such Note, (ii) the
payment of which may be avoided by the Holder complying with any certification,
declaration or other reporting requirement concerning the nationality,
residence, identity or connection with any taxing authority of such Holder as
the beneficial owner of such Note, (iii) that would not have been imposed but
for the presentation (where presentation is required) of such Note for payment
more than 30 days after the date such payment became due and payable or was duly
provided for, whichever occurs later, (iv) in the nature of estate, inheritance,
gift, sale, transfer, personal property or similar taxes or (v) imposed on or
with respect to any payment by the Company to the Holder if such Holder is a
fiduciary or partnership or person other than the sole beneficial owner of such
payment to the extent such tax, levy, impost, deduction, charge or withholding
would not have been imposed on a beneficiary or settlor with respect to such
fiduciary, member of such partnership or the beneficial owner of such payment
had such beneficiary, settlor, member or beneficial owner been the Holder of
such Note (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being referred to collectively or individually as
"Colombian Withholding Taxes"). If the Company is required by law to deduct any
Colombian Withholding Taxes from or in respect of any sum payable under this
Note, the sum payable hereunder shall be increased by the amount
<PAGE> 114
A-6
necessary so that after making all required deductions the Holder will receive
an amount equal to the sum it would have received had no such deductions been
made.
From and after March 15, 2001, interest on this Note will
accrue from the most recent date to which interest has been paid [on this Note
or the Note surrendered in Exchange herefor]* or, if no interest has been paid,
from March 15, 2001; provided that, if there is no existing default in the
payment of interest and if this Note is authenticated between a Regular Record
Date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such Interest Payment Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum equal to the rate of interest applicable to the
Notes.
2. Method of Payment.
The Company will pay interest (except Defaulted Interest) on
the principal amount of the Notes on each March 15 and September 15 to the
persons who are Holders (as reflected in the Security Register at the close of
business on the March 1 and September 1 immediately preceding the Interest
Payment Date), in each case, even if the Note is cancelled on registration of
transfer or registration of exchange after such record date; provided that, with
respect to the payment of principal, the Company will make payment to the Holder
that surrenders this Note to any Paying Agent on or after March 15, 2004.
The Company will pay principal, premium, if any, and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal,
premium, if any, and interest by its check payable in such money. The Company
may mail an interest check to a Holder's registered address (as reflected in the
Security Register). The Company may also make any payment of monies required to
be deposited with the Trustee on account of principal of, or premium, if any, or
interest on, this Note by wire transfer in immediately available funds to an
account designated by the Trustee on or before the date such monies are to be
paid to the Holder. If a payment date is a date other than a Business Day,
payment may be made on the next succeeding day that is a Business Day and no
interest shall accrue for the intervening period.
- --------
* Include only for Exchange Securities.
<PAGE> 115
A-7
3. Priority of Concession Proceeds.
Prior to the Pledge Effective Date (as defined in the
Indenture), the indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subject in right of payment to the prior
payment in full of indebtedness under the Bank Facility to the extent of the
Concession Proceeds (in each case, as defined in the Indenture). Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate in order to effectuate such provisions
and (c) appoints the Trustee his attorney-in-fact for such purpose.
4. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar upon written notice thereto. The Company, any
Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or
co-registrar.
5. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
June 1, 1996 (the "Indenture"), between the Company and The Bank of New York, as
trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise indicated. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company.
The Indenture limits the aggregate principal amount of the Notes to
US$190,745,000.
6. Redemption.
Mandatory Redemption. The Company will redeem 50% of the
original aggregate principal amount at maturity of the Notes on March 15, 2003
at 100% of the principal amount thereof, together with accrued and unpaid
interest to the redemption date, on a pro rata basis from the Holders of the
Notes at the close of business on March 1, 2003.
<PAGE> 116
A-8
Optional Redemption. The Notes may be redeemed at the election
of the Company, in whole or in part, at any time and from time to time (i)
before September 15, 2000 at 100% of the principal amount thereof, (ii) during
the six months beginning September 15, 2000 at 107.5% of the Accreted Value
thereof, and (iii) on or after March 15, 2000, at the following Redemption
Prices (expressed in percentages of the principal amount), plus accrued interest
to the Redemption Date, if any (subject to the right of Holders of record on the
relevant Regular Record Date to receive interest due on the applicable Interest
Payment Date), if redeemed during the 12-month period beginning March 15 of each
of the years set forth below:
<TABLE>
<CAPTION>
Principal
Year Amount
---- ---------
<S> <C>
2001 ....................................................107.0%
2002 ....................................................103.5%
2003 and thereafter......................................100.0%
</TABLE>
Optional Redemption upon a Public Equity Offering. On or prior
to March 15, 1999, the Company may redeem up to 33% of the original aggregate
principal amount at maturity of the Notes, within 45 days after a Public Equity
Offering, using the net proceeds of such sale, at a redemption price of 114% of
the Accreted Value of Notes so redeemed; provided that no less than 67% of the
original aggregate principal amount at maturity of the Notes remains
outstanding.
Optional Redemption for Changes in Colombian Withholding Tax.
The Notes may be redeemed at the election of the Company if, as a result of any
change in, or amendment to, the laws (including any regulations promulgated
thereunder) of Colombia (or any political subdivision or taxing authority
thereof or therein), or any change in, or amendment to, any official position
regarding the application or interpretation of such laws or regulations, which
change or amendment is announced or becomes effective on or after the Issue
Date, the Company has become or would be obligated to pay, on any date on which
any amount would be payable under or with respect to the Securities, any
Additional Amounts as a result of certain changes affecting Colombian
Withholding Tax, then the Company may, at its option, redeem the Notes, as a
whole but not in part, at any time at a redemption price equal to 100% of the
Accreted Value thereof, together with accrued and unpaid interest thereon, if
any, to the redemption date.
Notice of a redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's last address as it appears in the Security Register.
Notes in original denominations larger than US$1,000 principal amount at
maturity may be redeemed in part in integral multiples of US$1,000 principal
amount at maturity. On and after the Redemption Date, interest ceases to accrue
on Notes or portions of Notes called for redemption, unless the Company defaults
in the payment of the Redemption Price.
<PAGE> 117
A-9
7. Repurchase upon a Change of Control.
Upon the occurrence of a Change in Control, each Holder shall
have the right to require that the Company repurchase such Holder's Notes, in
whole or in part, in integral multiples of $1,000 principal amount at final
Maturity, at a purchase price in cash in an amount equal to 101% of the Accreted
Value thereof, plus accrued interest (if any) to the date of purchase (the
"Change of Control Purchase Price").
A notice of each Change in Control will be mailed within 15
days after such Change of Control occurs to each Holder at his last address as
it appears in the Security Register. On and after the Change of Control Payment
Date, interest ceases to accrue on Notes or portions of Notes surrendered for
purchase by the Company, unless the Company defaults in the payment of the
Change of Control Purchase Price.
8. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons, in
denominations of $1,000 principal amount at maturity and multiples of $1,000 in
excess thereof. A Holder may register the transfer or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not register the transfer or exchange of any Notes selected for redemption
(except the unredeemed portion of any Note being redeemed in part). Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before a selection of Notes to be redeemed is made.
9. Persons Deemed Owners.
A Holder may be treated as the owner of a Note for all
purposes.
10. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
11. Amendment; Supplement; Waiver.
<PAGE> 118
A-10
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount at final Maturity of the Notes then
outstanding, and any existing default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount at final Maturity of the Notes then outstanding. Without notice to or the
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, or inconsistency
provided such change does not materially adversely affect the rights of any
Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Subsidiaries, among other things, to incur additional
Indebtedness, grant Liens, make Restricted Payments, issue Capital Stock of
Restricted Subsidiaries, use the proceeds from Asset Sales, engage in
transactions with Affiliates, engage in Sale and Leaseback Transactions, engage
in other businesses, restrict payments from Restricted Subsidiaries or merge,
consolidate or transfer substantially all of its assets. At the end of each
fiscal year, the Company must report to the Trustee on compliance with such
limitations.
13. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of any interest on any Note when it
becomes due and payable and continuance of such default for a period of 30 days;
(b) default in the payment of the principal of or premium, if any, on any Note
at its Maturity (upon acceleration, optional redemption, required purchase or
otherwise); (c) default in the performance, or breach, of the covenant regarding
consolidation, merger and sale of assets in Article Eight of the Indenture, the
failure to make or consummate a Change of Control offer in accordance with
Section 1015 of the Indenture or the failure to make or consummate an Excess
Proceeds Offer in accordance with Section 1016 of the Indenture; (d) default in
the performance, or breach, of any covenant or warranty of the Company contained
in the Indenture (other than a default in the performance, or breach, of a
covenant or warranty which is specifically dealt with in clauses (a), (b) or (c)
above) and continuance of such default or breach for a period of 30 days after
written notice shall have been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate principal
amount of the
<PAGE> 119
A-11
Notes then outstanding; (e) (i) one or more defaults in the payment of principal
of or premium, if any, on Indebtedness of the Company or any Subsidiary
aggregating US$3,000,000 or more, when the same becomes due and payable at the
stated maturity thereof, and such default or defaults shall have continued after
any applicable grace period and shall not have been cured or waived or (ii)
Indebtedness of the Company or any Subsidiary aggregating US$3,000,000 or more
shall have been accelerated or otherwise declared due and payable, or required
to be prepaid or repurchased (other than by regularly scheduled required
prepayment prior to the stated maturity thereof); (f) any holder of any
Indebtedness in excess of US$3,000,000 in the aggregate of the Company or any
Subsidiary shall commence judicial proceedings, or take other action to
foreclose on any assets of the Company or any Subsidiary that have been pledged
to or for the benefit of such Person to secure such Indebtedness pursuant to the
terms of any agreement or instrument evidencing any such Indebtedness of the
Company or any Subsidiary or in accordance with applicable law subsequent to a
default in the performance, or breach, of any covenant or warranty of the
Company contained in any agreement or instrument evidencing any such
Indebtedness; (g) one or more final judgments or orders shall be rendered
against the Company or any Subsidiary for the payment of money, either
individually or in an aggregate amount, in excess of US$3,000,000 and shall not
be discharged and either (i) an enforcement proceeding shall have been commenced
by any creditor upon such judgment or order and shall not have been stayed or
(ii) there shall have been a period of 60 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, was not in effect; (h) the occurrence of certain events of
bankruptcy, insolvency or reorganization with respect to the Company or any
Subsidiary; or (i) the Company does not continue to be the holder of the
Concession (provided that the pledge of the Concession as security under the
Bank Facility shall not be deemed to be a transfer of the Concession) or the
Concession to provide cellular service is not in full force and effect.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount at final Maturity of the Notes then outstanding may declare all
the Notes to be immediately due and payable. If a bankruptcy or insolvency
default with respect to the Company or any of its Subsidiaries occurs and is
continuing, the Notes automatically become immediately due and payable. Holders
may not enforce the Indenture or the Notes except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in aggregate principal amount at final Maturity of the Notes then
outstanding may direct the Trustee in its exercise of any trust or power.
<PAGE> 120
A-12
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
16. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
17. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
18. Defeasance.
The Indenture contains provisions for defeasance, at any time,
of the Indebtedness represented by this Note or the covenants governing the
Indebtedness represented by this Note, upon compliance by the Company with
certain conditions set forth in the Indenture.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to Occidente y
Caribe Celular S.A., Calle 50, No. 55-01, Medellin, Colombia, Attention:
Mauricio Campillo.
<PAGE> 121
A-13
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
_________________________________________________
_________________________________________________
(Please print or typewrite name and address including zip code of assignee)
_________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
_________________________________________________
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Note occurring prior to
the date which is the earlier of the date of an effective Registration Statement
or June 7, 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ](a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
[ ](b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions
of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless
<PAGE> 122
A-14
and until the conditions to any such transfer of registration set forth herein
and in Section 307 of the Indenture shall have been satisfied.
Date: _______________________
________________________
NOTICE: The signature to
this assignment must
correspond with the name
as written upon the face
of the within-mentioned
instrument in every
particular, without
alteration or any change
whatsoever.
Signature Guarantee:(1) _______________________________________
(signature must be guaranteed)
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:____________________________ ______________________________
NOTICE: To be executed by an
executive officer
- --------
(1) Guarantor must be a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the New York Stock Exchange Medallion
Signature Program ("MSP") or the Stock Exchange Medallion Program
("SEMP").
<PAGE> 123
A-15
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 1015 or Section 1016 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1015 or Section 1016 of the Indenture, state the
amount in original principal amount (must be an integral multiple of $1,000)
below:
$_________.
Date: _____________
Your Signature: _____________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:(1) ________________________________________
(signature must be guaranteed)
- --------
(1) Guarantor must be a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the New York Stock Exchange Medallion
Signature Program ("MSP") or the
Stock Exchange Medallion Program ("SEMP").
<PAGE> 124
Exhibit B
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
On or after __________, 1996
The Bank of New York
101 Barclay Street
Floor 21W
New York, NY 10286
Attention: Corporate Trust Administration
Re: Occidente y Caribe Celular S.A. (the "Company") ____% Senior
Discount Notes due 2004 (the "Securities")
Ladies and Gentlemen:
This letter relates to U.S. $________ principal amount of Securities
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 202 of the Indenture dated as of __________,
1996 relating to the Securities (the "Indenture"), we hereby certify that (1) we
are the beneficial owner of such principal amount of Securities represented by
the Temporary Certificate and (2) we are a person outside the United States to
whom the Securities could be transferred in accordance with Rule 904 of
Regulation S promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to issue a Certificated Security
representing the undersigned's interest in the principal amount of Securities
represented by the Temporary Certificate, all in the manner provided by the
Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
-------------------------------------
Authorized Signature
<PAGE> 125
Exhibit C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
------------ , ------------
Occidente y Caribe Celular S.A.
Calle 50, No. 55-01
Medellin, Colombia
c/o
The Bank of New York
101 Barclay Street
Floor 21W
New York, NY 10286
Attention: Corporate Trust Administration
Re: Occidente y Caribe Celular S.A. (the "Company") ___% Senior
Discount Notes due 2004 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed purchase of $____________ aggregate
principal amount of the Securities:
1. We understand that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
sold except as permitted in the following sentence. We agree on our own
behalf and on behalf of any investor account for which we are purchasing
the Securities to offer, sell or otherwise transfer such Securities prior
to the date which is three years after the later of the date of original
issue and the last date on which the Company or any affiliate of the
Company was the owner of such Securities, or any predecessor thereto (the
"Resale Restriction Termination Date") only (a) to the Company, (b)
pursuant to a registration statement which has been declared effective
under the Securities Act, (c) for so long as the Securities are eligible
for resale pursuant to Rule 144A under the Securities Act, to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a
"QIB") that purchases for its own account or for the account of a QIB to
whom notice is given that the transfer is being made in reliance on Rule
144A, (d) pursuant to offers and sales to non-U.S. Persons that occur
outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3)
<PAGE> 126
C-2
or (7) of Rule 501 under the Securities Act that is acquiring the
Securities for its own account or for the account of such an institutional
"accredited investor" for investment purposes and not with a view to, or
for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or (f) pursuant to any other available exemption from
the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our
property and the property of such investor account or accounts be at all
times within our or their control and to compliance with any applicable
state securities laws. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause
(e) above prior to the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in the form of
this letter to the Trustee, which shall provide, among other things, that
the transferee is an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (2), (3) or (7) or Rule 501 under the Securities
Act and that it is acquiring such Securities for investment purposes and
not for distribution in violation of the Securities Act. We acknowledge
that the Company and the Trustee reserve the right prior to any offer, sale
or other transfer prior to the Resale Restriction Termination Date of the
Securities pursuant to clauses (d), (e) and (f) above to require the
delivery of an opinion of counsel, certifications and/or other information
satisfactory to the Company and the Trustee.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with,
any distribution in violation of the Securities Act and we have such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and
we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
3. We are acquiring the Securities purchased by us for our own account
or for one or more accounts as to each of which we exercise sole investment
discretion.
4. We acknowledge and agree that, as specified on the face of the
Securities, (i) the issuance of the Securities has been approved by the
Colombian Superintendency of Corporations (Superintendencia de Sociedades),
but that such approval does not imply an approval of the quality of the
Securities, and (ii) the Securities may not be offered or sold in the
Republic of Colombia.
<PAGE> 127
C-3
5. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
-------------------------------------
(NAME OF PURCHASER)
Date:
-----------------------------------
Upon transfer, the Securities should be registered in the name of the
new beneficial owner as follows:
Name:
--------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Taxpayer ID Number:
------------------------------------------------------------
<PAGE> 128
Exhibit D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------, ------
The Bank of New York
101 Barclay Street
Floor 21W
New York, NY 10286
Attention: Corporate Trust Administration
Re: Occidente y Caribe Celular S.A. (the "Company") ____% Senior
Discount Notes due 2004 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended ("Regulation S"; capitalized terms used but not defined herein shall
have the meanings given them in Regulation S), and, accordingly, we represent
that:
1. the offer of the Securities was not made to or for the account or
benefit of a United States Person or to a person in the United States;
2. either (a) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting
on our behalf knows that the transaction has been pre-arranged with a buyer
in the United States;
3. no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
<PAGE> 129
D-2
We acknowledge and agree that, as specified on the face of the
Securities, (i) the issuance of the Securities has been approved by the
Colombian Superintendency of Corporations (Superintendencia de Sociedades), but
that such approval does not imply an approval of the quality of the Securities,
and (ii) the Securities may not be offered or sold in the Republic of Colombia.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------------
Authorized Signature
<PAGE> 1
Exhibit 4.02
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO DTC OR NOMINEES OF DTC OR TO A SUCCESSOR OF DTC OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTIONS 306 AND 307 OF THE INDENTURE.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY, OR ANY AFFILIATE OF THE COMPANY, WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
<PAGE> 2
2
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
THIS NOTE IS INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE
"UNITS"), EACH OF WHICH CONSISTS OF US$1,000 PRINCIPAL AMOUNT OF 14% SENIOR
DISCOUNT NOTES DUE 2004 (THE "SECURITIES") OF OCCIDENTE Y CARIBE CELULAR S.A.
(THE "ISSUER") AND FOUR WARRANTS (EACH, A "WARRANT") ENTITLING THE HOLDER
THEREOF TO PURCHASE 5,709 SHARES OF CLASS B COMMON STOCK, PAR VALUE 1,000 PESOS
PER SHARE, OF THE ISSUER. PRIOR TO THE CLOSE OF BUSINESS ON THE EARLIER OF (1)
SEPTEMBER 5, 1996, (2) A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE RELATED
HERETO (THE "INDENTURE")), AND (3) THE DATE ON WHICH THE EXCHANGE OFFER
REGISTRATION STATEMENT (AS DEFINED IN THE INDENTURE) IS DECLARED EFFECTIVE. THIS
NOTE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED
OR EXCHANGED ONLY TOGETHER WITH, THE WARRANTS.]**
- -------------
** Include Only For Initial Securities.
<PAGE> 3
[FACE OF NOTE]
OCCIDENTE Y CARIBE CELULAR S.A.
[Series B]* Senior Discount Note due 2004
CUSIP [ ]
No. ____ US$__________
OCCIDENTE Y CARIBE CELULAR S.A., a sociedad anonima
existing under the laws of the Republic of Colombia (the "Company," which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to ____________, or its registered assigns, the
principal sum of ______________ dollars ($__________) on _________, 2004.
[Initial Interest Rate: 14% per annum.]**
[Interest Rate: 14% per annum.]*
Interest Payment Dates: March 15 and September 15, commencing
September 15, 2001.
Regular Record Dates: March 1 and September 1.
Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
THE ISSUANCE OF THE 14% SENIOR DISCOUNT NOTES HAS
BEEN APPROVED BY THE COLOMBIAN SUPERINTENDENCY OF CORPORATIONS (SUPERINTENDENCIA
DE SOCIEDADES). SUCH APPROVAL DOES NOT IMPLY AN APPROVAL OF THE QUALITY OF THE
14% SENIOR DISCOUNT NOTES OR THE SOLVENCY OF THE COMPANY. THE 14% SENIOR
DISCOUNT NOTES MAY NOT BE OFFERED OR SOLD IN THE REPUBLIC OF COLOMBIA.
- ---------------
* Include only for Exchange Securities.
** Include only for Initial Securities.
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Note
to be signed manually or by facsimile by its duly authorized officers.
Date: ______________________ OCCIDENTE Y CARIBE CELULAR S.A.
By: _______________________________________
Title:
Attest: ___________________________________
Title:
<PAGE> 5
(Form of Trustee's Certificate of Authentication)
This is one of the [Series B]* Senior Discount Notes due 2004 described in the
within-mentioned Indenture.
[______________________________________],
as Trustee
By: _____________________________________
Authorized Signatory
- ---------------
* Include only for Exchange Securities
<PAGE> 6
[REVERSE SIDE OF NOTE]
OCCIDENTE Y CARIBE CELULAR S.A.
[Series B]* Senior Discount Note due 2004
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2004.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, [at the rate of
14% per annum (subject to adjustment as provided below)]** [at the rate of 14%
per annum, except that interest accrued on this Note (or the predecessor Note
hereto) pursuant to the second succeeding paragraph of this Section 1 for
periods prior to the applicable Exchange Date (as such term is defined in the
Registration Rights Agreement referred to below) will accrue at the rate or
rates borne by the predecessor Note hereto from time to time during such periods
pursuant to the Registration Rights Agreement as set forth below].*
Interest will be payable semiannually (to the holders of
record of the Notes (or any predecessor Notes) at the close of business on the
March 1 or September 1 immediately preceding the Interest Payment Date) on each
Interest Payment Date, commencing September 15, 2001; provided that no interest
shall accrue on the principal amount of this Note prior to March 15, 2001 and no
interest shall be paid on this Note prior to September 15, 2001 except as
provided in the next paragraph.
The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated June 7, 1996, between the Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated and ING Baring (U.S.)
Securities, Inc. (the "Registration Rights Agreement"). In the event that either
(a) the Exchange Offer Registration Statement (as such term is defined in the
Registration Rights Agreement) is not filed with the Securities and Exchange
Commission on or prior to the 60th calendar day following the date of original
issue of the Notes, (b) the Exchange Offer Registration Statement has not been
declared effective on or prior to the 150th calendar day following the date of
original issue of the Notes; (c) the Exchange Offer (as such term is defined in
the Registration Rights Agreement) is not consummated on or prior to the 180th
calendar day following the date of original issue of the Notes or, as the case
may be, a Shelf Registration Statement (as such term is defined
- --------
* Include only for Exchange Securities.
** Include only for Initial Securities.
<PAGE> 7
in the Registration Rights Agreement) is not declared effective on or prior to
the 210th calendar day following the date of original issue of the Notes, or (d)
the Exchange Offer Registration Statement or the Shelf Registration Statement is
declared effective, but thereafter ceases to be effective or usable except as
provided in Section 2(d)(ii) of the Registration Rights Agreement (each such
event referred to in clause (a) through (d) above, a "Registration Default")
interest (in addition to the accrual of original issue discount during the
period ending March 15, 2001 and in addition to the interest otherwise due on
the Notes after such date) will accrue on this Note at a rate of one-half of one
percent per annum of the Accreted Value on the immediately preceding semiannual
accrual date (for purposes of this paragraph, "semiannual accrual date" means
each March 15 or September 15 of each year (or, if such immediately preceding
March 15 or September 15 occurs before September 15, 1996 at a rate of one-half
of one percent of the Accreted Value of this Note on June 7, 1996)) with respect
to the first 90-day period following such Registration Default, and the amount
of such additional interest will increase by an additional one-half of one
percent per annum for each subsequent 90-day period until such Registration
Default has been cured, payable in cash semiannually, in arrears, on March 15
and September 15 of each year; provided, however, that in no event shall the
rate of such additional interest be more than one and one-half of one percent.
Upon the cure of all applicable Registration Defaults, such additional interest
shall cease to accrue.
Any and all payments made by the Company under this Note will
be made free and clear of and without deduction for or on account of any and all
present or future taxes, levies, imposts, deductions, charges or withholdings
and all liabilities with respect thereto imposed by the Republic of Colombia or
any political subdivision thereof excluding any taxes, levies, imposts,
deductions, charges or withholdings and all liability with respect thereto (i)
resulting from the Holder having some connection with the Republic of Colombia
or any political subdivision thereof other than the mere holding of or
enforcement of or receipt of any payment with respect to such Note, (ii) the
payment of which may be avoided by the Holder complying with any certification,
declaration or other reporting requirement concerning the nationality,
residence, identity or connection with any taxing authority of such Holder as
the beneficial owner of such Note, (iii) that would not have been imposed but
for the presentation (where presentation is required) of such Note for payment
more than 30 days after the date such payment became due and payable or was duly
provided for, whichever occurs later, (iv) in the nature of estate, inheritance,
gift, sale, transfer, personal property or similar taxes or (v) imposed on or
with respect to any payment by the Company to the Holder if such Holder is a
fiduciary or partnership or person other than the sole beneficial owner of such
payment to the extent such tax, levy, impost, deduction, charge or withholding
would not have been imposed on a beneficiary or settlor with respect to such
fiduciary, member of such partnership or the beneficial owner of such payment
had such beneficiary, settlor, member or beneficial owner been the Holder of
such Note (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being referred to collectively or individually as
"Colombian Withholding Taxes"). If the Company is required by law to deduct any
Colombian Withholding Taxes from or in respect of any sum payable under this
Note, the sum payable hereunder shall be increased by the amount
<PAGE> 8
necessary so that after making all required deductions the Holder will receive
an amount equal to the sum it would have received had no such deductions been
made.
From and after March 15, 2001, interest on this Note will
accrue from the most recent date to which interest has been paid [on this Note
or the Note surrendered in Exchange herefor]* or, if no interest has been paid,
from March 15, 2001; provided that, if there is no existing default in the
payment of interest and if this Note is authenticated between a Regular Record
Date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such Interest Payment Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum equal to the rate of interest applicable to the
Notes.
2. Method of Payment.
The Company will pay interest (except Defaulted Interest) on
the principal amount of the Notes on each March 15 and September 15 to the
persons who are Holders (as reflected in the Security Register at the close of
business on the March 1 and September 1 immediately preceding the Interest
Payment Date), in each case, even if the Note is cancelled on registration of
transfer or registration of exchange after such record date; provided that, with
respect to the payment of principal, the Company will make payment to the Holder
that surrenders this Note to any Paying Agent on or after March 15, 2004.
The Company will pay principal, premium, if any, and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal,
premium, if any, and interest by its check payable in such money. The Company
may mail an interest check to a Holder's registered address (as reflected in the
Security Register). The Company may also make any payment of monies required to
be deposited with the Trustee on account of principal of, or premium, if any, or
interest on, this Note by wire transfer in immediately available funds to an
account designated by the Trustee on or before the date such monies are to be
paid to the Holder. If a payment date is a date other than a Business Day,
payment may be made on the next succeeding day that is a Business Day and no
interest shall accrue for the intervening period.
- --------
* Include only for Exchange Securities.
<PAGE> 9
3. Priority of Concession Proceeds.
Prior to the Pledge Effective Date (as defined in the
Indenture), the indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subject in right of payment to the prior
payment in full of indebtedness under the Bank Facility to the extent of the
Concession Proceeds (in each case, as defined in the Indenture). Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate in order to effectuate such provisions
and (c) appoints the Trustee his attorney-in-fact for such purpose.
4. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar upon written notice thereto. The Company, any
Subsidiary or any Affiliate of any of them may act as Paying Agent, Registrar or
co-registrar.
5. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
June 1, 1996 (the "Indenture"), between the Company and The Bank of New York, as
trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise indicated. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company.
The Indenture limits the aggregate principal amount of the Notes to
US$190,745,000.
6. Redemption.
Mandatory Redemption. The Company will redeem 50% of the
original aggregate principal amount at maturity of the Notes on March 15, 2003
at 100% of the principal amount thereof, together with accrued and unpaid
interest to the redemption date, on a pro rata basis from the Holders of the
Notes at the close of business on March 1, 2003.
<PAGE> 10
Optional Redemption. The Notes may be redeemed at the election
of the Company, in whole or in part, at any time and from time to time (i)
before September 15, 2000 at 100% of the principal amount thereof, (ii) during
the six months beginning September 15, 2000 at 107.5% of the Accreted Value
thereof, and (iii) on or after March 15, 2000, at the following Redemption
Prices (expressed in percentages of the principal amount), plus accrued interest
to the Redemption Date, if any (subject to the right of Holders of record on the
relevant Regular Record Date to receive interest due on the applicable Interest
Payment Date), if redeemed during the 12-month period beginning March 15 of each
of the years set forth below:
<TABLE>
<CAPTION>
Principal
Year Amount
---- ---------
<S> <C>
2001 ....................................................107.0%
2002 ....................................................103.5%
2003 and thereafter......................................100.0%
</TABLE>
Optional Redemption upon a Public Equity Offering. On or prior
to March 15, 1999, the Company may redeem up to 33% of the original aggregate
principal amount at maturity of the Notes, within 45 days after a Public Equity
Offering, using the net proceeds of such sale, at a redemption price of 114% of
the Accreted Value of Notes so redeemed; provided that no less than 67% of the
original aggregate principal amount at maturity of the Notes remains
outstanding.
Optional Redemption for Changes in Colombian Withholding Tax.
The Notes may be redeemed at the election of the Company if, as a result of any
change in, or amendment to, the laws (including any regulations promulgated
thereunder) of Colombia (or any political subdivision or taxing authority
thereof or therein), or any change in, or amendment to, any official position
regarding the application or interpretation of such laws or regulations, which
change or amendment is announced or becomes effective on or after the Issue
Date, the Company has become or would be obligated to pay, on any date on which
any amount would be payable under or with respect to the Securities, any
Additional Amounts as a result of certain changes affecting Colombian
Withholding Tax, then the Company may, at its option, redeem the Notes, as a
whole but not in part, at any time at a redemption price equal to 100% of the
Accreted Value thereof, together with accrued and unpaid interest thereon, if
any, to the redemption date.
Notice of a redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's last address as it appears in the Security Register.
Notes in original denominations larger than US$1,000 principal amount at
maturity may be redeemed in part in integral multiples of US$1,000 principal
amount at maturity. On and after the Redemption Date, interest ceases to accrue
on Notes or portions of Notes called for redemption, unless the Company defaults
in the payment of the Redemption Price.
<PAGE> 11
7. Repurchase upon a Change of Control.
Upon the occurrence of a Change in Control, each Holder shall
have the right to require that the Company repurchase such Holder's Notes, in
whole or in part, in integral multiples of $1,000 principal amount at final
Maturity, at a purchase price in cash in an amount equal to 101% of the Accreted
Value thereof, plus accrued interest (if any) to the date of purchase (the
"Change of Control Purchase Price").
A notice of each Change in Control will be mailed within 15
days after such Change of Control occurs to each Holder at his last address as
it appears in the Security Register. On and after the Change of Control Payment
Date, interest ceases to accrue on Notes or portions of Notes surrendered for
purchase by the Company, unless the Company defaults in the payment of the
Change of Control Purchase Price.
8. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons, in
denominations of $1,000 principal amount at maturity and multiples of $1,000 in
excess thereof. A Holder may register the transfer or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not register the transfer or exchange of any Notes selected for redemption
(except the unredeemed portion of any Note being redeemed in part). Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before a selection of Notes to be redeemed is made.
9. Persons Deemed Owners.
A Holder may be treated as the owner of a Note for all
purposes.
10. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
11. Amendment; Supplement; Waiver.
<PAGE> 12
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount at final Maturity of the Notes then
outstanding, and any existing default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount at final Maturity of the Notes then outstanding. Without notice to or the
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, or inconsistency
provided such change does not materially adversely affect the rights of any
Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Subsidiaries, among other things, to incur additional
Indebtedness, grant Liens, make Restricted Payments, issue Capital Stock of
Restricted Subsidiaries, use the proceeds from Asset Sales, engage in
transactions with Affiliates, engage in Sale and Leaseback Transactions, engage
in other businesses, restrict payments from Restricted Subsidiaries or merge,
consolidate or transfer substantially all of its assets. At the end of each
fiscal year, the Company must report to the Trustee on compliance with such
limitations.
13. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of any interest on any Note when it
becomes due and payable and continuance of such default for a period of 30 days;
(b) default in the payment of the principal of or premium, if any, on any Note
at its Maturity (upon acceleration, optional redemption, required purchase or
otherwise); (c) default in the performance, or breach, of the covenant regarding
consolidation, merger and sale of assets in Article Eight of the Indenture, the
failure to make or consummate a Change of Control offer in accordance with
Section 1015 of the Indenture or the failure to make or consummate an Excess
Proceeds Offer in accordance with Section 1016 of the Indenture; (d) default in
the performance, or breach, of any covenant or warranty of the Company contained
in the Indenture (other than a default in the performance, or breach, of a
covenant or warranty which is specifically dealt with in clauses (a), (b) or (c)
above) and continuance of such default or breach for a period of 30 days after
written notice shall have been given to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate principal
amount of the
<PAGE> 13
Notes then outstanding; (e) (i) one or more defaults in the payment of principal
of or premium, if any, on Indebtedness of the Company or any Subsidiary
aggregating US$3,000,000 or more, when the same becomes due and payable at the
stated maturity thereof, and such default or defaults shall have continued after
any applicable grace period and shall not have been cured or waived or (ii)
Indebtedness of the Company or any Subsidiary aggregating US$3,000,000 or more
shall have been accelerated or otherwise declared due and payable, or required
to be prepaid or repurchased (other than by regularly scheduled required
prepayment prior to the stated maturity thereof); (f) any holder of any
Indebtedness in excess of US$3,000,000 in the aggregate of the Company or any
Subsidiary shall commence judicial proceedings, or take other action to
foreclose on any assets of the Company or any Subsidiary that have been pledged
to or for the benefit of such Person to secure such Indebtedness pursuant to the
terms of any agreement or instrument evidencing any such Indebtedness of the
Company or any Subsidiary or in accordance with applicable law subsequent to a
default in the performance, or breach, of any covenant or warranty of the
Company contained in any agreement or instrument evidencing any such
Indebtedness; (g) one or more final judgments or orders shall be rendered
against the Company or any Subsidiary for the payment of money, either
individually or in an aggregate amount, in excess of US$3,000,000 and shall not
be discharged and either (i) an enforcement proceeding shall have been commenced
by any creditor upon such judgment or order and shall not have been stayed or
(ii) there shall have been a period of 60 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, was not in effect; (h) the occurrence of certain events of
bankruptcy, insolvency or reorganization with respect to the Company or any
Subsidiary; or (i) the Company does not continue to be the holder of the
Concession (provided that the pledge of the Concession as security under the
Bank Facility shall not be deemed to be a transfer of the Concession) or the
Concession to provide cellular service is not in full force and effect.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount at final Maturity of the Notes then outstanding may declare all
the Notes to be immediately due and payable. If a bankruptcy or insolvency
default with respect to the Company or any of its Subsidiaries occurs and is
continuing, the Notes automatically become immediately due and payable. Holders
may not enforce the Indenture or the Notes except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in aggregate principal amount at final Maturity of the Notes then
outstanding may direct the Trustee in its exercise of any trust or power.
<PAGE> 14
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
16. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
17. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
18. Defeasance.
The Indenture contains provisions for defeasance, at any time,
of the Indebtedness represented by this Note or the covenants governing the
Indebtedness represented by this Note, upon compliance by the Company with
certain conditions set forth in the Indenture.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to Occidente y
Caribe Celular S.A., Calle 50, No. 55-01, Medellin, Colombia, Attention:
Mauricio Campillo.
<PAGE> 15
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
_________________________________________________
_________________________________________________
(Please print or typewrite name and address including zip code of assignee)
_________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
_________________________________________________
attorney to transfer such Note on the books of the Company with full power of
substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Note occurring prior to
the date which is the earlier of the date of an effective Registration Statement
or June 7, 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ](a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided
by Rule 144A thereunder.
or
[ ](b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions
of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless
<PAGE> 16
and until the conditions to any such transfer of registration set forth herein
and in Section 307 of the Indenture shall have been satisfied.
Date: _______________________
________________________
NOTICE: The signature to
this assignment must
correspond with the name
as written upon the face
of the within-mentioned
instrument in every
particular, without
alteration or any change
whatsoever.
Signature Guarantee:(1) _______________________________________
(signature must be guaranteed)
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:____________________________ ______________________________
NOTICE: To be executed by an
executive officer
- --------
(1) Guarantor must be a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the New York Stock Exchange Medallion
Signature Program ("MSP") or the Stock Exchange Medallion Program
("SEMP").
<PAGE> 17
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 1015 or Section 1016 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1015 or Section 1016 of the Indenture, state the
amount in original principal amount (must be an integral multiple of $1,000)
below:
$_________.
Date: _____________
Your Signature: _____________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:(1) ________________________________________
(signature must be guaranteed)
- --------
(1) Guarantor must be a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the New York Stock Exchange Medallion
Signature Program ("MSP") or the
Stock Exchange Medallion Program ("SEMP").
<PAGE> 1
Exhibit 4.04
EXECUTION COPY
==========================================================
Registration Rights Agreement
Dated as of June 7, 1996
among
Occidente y Caribe Celular S.A.
and
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
and
ING Baring (U.S.) Securities, Inc.
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated June 7, 1996
is made and entered into among OCCIDENTE Y CARIBE CELULAR S.A. (the "Company"),
a sociedad anonima existing under the laws of the Republic of Colombia
("Colombia"), and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and ING
BARING (U.S.) SECURITIES, INC. (the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated May 31,
1996 among the Company and the Initial Purchasers (the "Purchase Agreement"),
which provides for the sale by the Company to the Initial Purchasers of an
aggregate of 190,745 units consisting of US$190,745,000 principal amount at
maturity of the Company's 14% Senior Discount Notes due 2004 (the "Securities")
and 762,980 warrants entitling the holders thereof to purchase, under certain
circumstances 4,355,852 Warrant Shares (as defined in the Warrant Agreement
dated as of June 7, 1996 between the Company and The Bank of New York as warrant
agent). In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide to the Initial Purchasers and their
direct and indirect transferees the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the closing under
the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Closing Date" shall mean the Closing Time as defined in the Purchase
Agreement.
"Colombia" shall have the meaning set forth in the preamble.
"Company" shall have the meaning set forth in the preamble and also
includes the Company's successors.
"Depositary" shall mean the Depository Trust Company, or any other
depositary appointed by the Company; provided, however, that such
depositary must have an address in the Borough of Manhattan in the City of
New York.
<PAGE> 3
2
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form F-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Exchange Securities" shall mean 14% Series B Senior Discount Notes due
2004 issued by the Company under the Indenture containing terms identical
to the Securities (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Securities or, if no such
interest has been paid, from the date on which interest first began to
accrue on the Securities (ii) the transfer restrictions thereon pertaining
to United States Securities laws shall be eliminated and (iii) certain
provisions relating to an increase in the stated rate of interest thereon
shall be eliminated), to be offered to Holders of Registrable Securities in
exchange for Securities pursuant to the Exchange Offer.
"Holders" shall mean the Initial Purchasers, for so long as they own
any Registrable Securities, and each of their successors, assigns and
direct and indirect transferees who become registered owners of Registrable
Securities under the Indenture.
"Indenture" shall mean the Indenture relating to the Securities dated
as of June 1, 1996 between the Company and The Bank of New York as trustee,
as the same may be amended from time to time in accordance with the terms
thereof.
"Initial Purchaser" shall have the meaning set forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities; provided
that whenever the consent or approval of Holders of a specified percentage
of Registrable Securities is required hereunder, Registrable Securities
held by the Company shall be disregarded in determining whether such
consent or approval was given by the Holders of such required percentage or
amount.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
<PAGE> 4
3
"Purchase Agreement" shall have the meaning set forth in the preamble.
"Registrable Securities" shall mean the Securities; provided, however,
that the Securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to such Securities shall have been
declared effective under the 1933 Act and such Securities shall have been
disposed of pursuant to such Registration Statement, (ii) such Securities
shall have been sold to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the 1933 Act, (iii) such
Securities shall have ceased to be outstanding or (iv) such Securities have
been exchanged for Exchange Securities upon consummation of the Exchange
Offer.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all
fees and expenses incurred in connection with compliance with state
securities or blue sky laws and compliance with the rules of the NASD
(including reasonable fees and disbursements of United States and local
counsel for any underwriters or Holders in connection with blue sky
qualification of any of the Exchange Securities or Registrable Securities),
(iii) all expenses of the Company in preparing or assisting in preparing,
word processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency
fees, (v) all fees and expenses incurred in connection with the listing, if
any, of any of the Registrable Securities on any securities exchange or
exchanges, (vi) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, (vii) the fees and expenses of
the Trustee, and any escrow agent or custodian, and (viii) in the case of
any Underwritten Offering, any fees and disbursements of the underwriters
customarily required to be paid by issuers or sellers of securities and the
reasonable fees and expenses of any special experts retained by the Company
in connection with any Registration Statement, but excluding (except as
otherwise provided herein) fees of United States and Colombian counsel to
the underwriters or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of the
Company which covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement, and all amendments
and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble and shall
include the Exchange Securities and the Registrable Securities.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
<PAGE> 5
4
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Securities on an appropriate
form under Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Securities under
the Indenture.
"Underwritten Offering" shall mean an underwritten offering of a
minimum of US$15 million aggregate principal amount of Securities.
2. Registration Under the 1933 Act. (a) Exchange Offer Registration. To
the extent not prohibited by any applicable law or applicable interpretation of
the Staff of the SEC, the Company shall use its best efforts (A) to file within
60 days after the Closing Date an Exchange Offer Registration Statement covering
the offer by the Company to the Holders to exchange all of the Registrable
Securities for Exchange Securities, (B) to cause such Exchange Offer
Registration Statement to be declared effective by the SEC within 150 days after
the Closing Date, (C) to cause such Registration Statement to remain effective
until the closing of the Exchange Offer and (D) to consummate the Exchange Offer
within 180 days following the Closing Date. The Exchange Securities will be
issued under the Indenture. As soon as practicable, but in no event later than
one week, after the effectiveness of the Exchange Offer Registration Statement,
the Company shall commence the Exchange Offer, it being the objective of such
Exchange Offer to enable each Holder (other than Participating Broker-Dealers
(as defined in Section 3(f)) eligible and electing to exchange Registrable
Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of Rule 405 under the 1933 Act,
acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements or understandings with any Person to
participate in the Exchange Offer for the purpose of distributing the Exchange
Securities) to trade such Exchange Securities from and after their receipt
without any limitations or restrictions under the 1933 Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days after the
date notice thereof is mailed to the Holders (or longer if required by
applicable law);
(iii) use the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Registrable Securities at any
time prior to 5:00 P.M. New York City time, on the last business day on
which the Exchange Offer shall remain open, by sending to the institution
specified in the notice, a telegram, telex,
<PAGE> 6
5
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Registrable Securities delivered for exchange, and a
statement that such Holder is withdrawing his election to have such
Securities exchanged; and
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange Registrable Securities duly tendered
and not validly withdrawn pursuant to the Exchange Offer in accordance
with the terms of the Exchange Offer Registration Statement and the
letter of transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Securities to each Holder of Registrable Securities equal in
Accreted Value (as defined in the Indenture) to the Accreted Value of
the Registrable Securities of such Holder so accepted for exchange.
Interest on each Exchange Security will accrue from the last
date on which interest was paid on the Registrable Securities surrendered in
exchange therefor or, if no interest has been paid on the Registrable
Securities, from the date on which interest first began to accrue on the
Registrable Securities. The Exchange Offer shall not be subject to any
conditions, other than (i) that the Exchange Offer, or the making of any
exchange by a Holder, does not violate applicable law or any applicable
interpretation of the Staff of the SEC (ii) the due tendering of Registrable
Securities in accordance with the Exchange Offer, (iii) that no action or
proceeding shall have been instituted or threatened in any court or by or before
any governmental agency with respect to the Exchange Offer which, in the
Company's judgment, would reasonably be expected to impair the ability of the
Company to proceed with the Exchange Offer, (iv) that there shall not have been
adopted or enacted any law, statute, rule or regulation which, in the Company's
judgment, would reasonably be expected to impair the ability of the Company to
proceed with the Exchange Offer, (v) that there shall not have been declared by
U.S. federal, New York State or Colombian authorities a banking moratorium
which, in the Company's judgment, would reasonably be expected to impair the
ability of the Company to proceed with the Exchange Offer, (vi) that trading
generally on either the American Stock Exchange, the New York Stock Exchange or
the over-the-counter market shall not have been suspended by order of the SEC or
any other governmental authority, which, in the Company's judgment, would
reasonably be expected to impair the ability of the Company to proceed with the
Exchange Offer and (vii) that each Holder of Registrable Securities (other than
Participating Broker-Dealers) who wishes to exchange such Registrable Securities
for Exchange Securities in the Exchange Offer shall have represented that (A) it
is not an affiliate of the Company, (B) any Exchange Securities to be received
by it will be acquired in the ordinary course of business and (C) at the time of
the commencement of the Exchange Offer it has no arrangement with any Person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Securities and shall have made such other representations as may be
reasonably necessary under applicable SEC rules, regulations or interpretations
to render the use of Form F-4 or another appropriate form under the 1933 Act
available. To the extent permitted by law, the Company shall inform the Initial
Purchasers
<PAGE> 7
6
of the names and addresses of the Holders to whom the Exchange Offer is made,
and the Initial Purchasers shall have the right to contact such Holders and
otherwise facilitate the tender of Registrable Securities in the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change in law or
applicable interpretations thereof by the Staff of the SEC, the Company is not
permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof,
or (ii) if for any other reason the Exchange Offer is not consummated within 180
days after the Closing Date, or (iii) if any Holder (other than an Initial
Purchaser) is not eligible to participate in the Exchange Offer or (iv) upon the
request of any Initial Purchaser (with respect to any Registrable Securities
which it acquired directly from the Company) following the consummation of the
Exchange Offer if such Initial Purchaser shall hold Registrable Securities which
it acquired directly from the Company and if such Initial Purchaser is not
permitted, in the opinion of counsel to such Initial Purchaser, pursuant to
applicable law or applicable interpretation of the Staff of the SEC to
participate in the Exchange Offer, the Company shall, at its cost,
(A) as promptly as practicable, file with the SEC a Shelf Registration
Statement relating to the offer and sale of the Registrable Securities by
the Holders from time to time in accordance with the methods of
distribution elected by the Majority Holders of such Registrable Securities
and set forth in such Shelf Registration Statement, and use its best
efforts to cause such Shelf Registration Statement to be declared effective
by the SEC within 210 days after the Closing Date. In the event that the
Company is required to file a Shelf Registration Statement upon the request
of any Holder (other than an Initial Purchaser) not eligible to participate
in the Exchange Offer pursuant to clause (iii) above or upon the request of
any Initial Purchaser pursuant to clause (iv) above, the Company shall file
and have declared effective by the SEC both an Exchange Offer Registration
Statement pursuant to Section 2(a) with respect to all Registrable
Securities and a Shelf Registration Statement (which may be a combined
Registration Statement with the Exchange Offer Registration Statement) with
respect to offers and sales of Registrable Securities held by such Holder
or such Initial Purchaser after completion of the Exchange Offer.
(B) use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part
thereof to be usable by Holders for a period of three years from the date
the Shelf Registration Statement is declared effective by the SEC (or one
year from the date the Shelf Registration Statement is declared effective
if such Shelf Registration Statement is filed upon the request of any
Initial Purchaser pursuant to clause (iv) above) or such shorter period
which will terminate when all of the Registrable Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement.
(C) notwithstanding any other provisions hereof, use its best efforts
to ensure that (i) any Shelf Registration Statement and any amendment
thereto and any Prospectus forming part thereof and any supplement thereto
comply in all material respects with the 1933 Act and the rules and
regulations thereunder, (ii) any Shelf Registration Statement and any
amendment thereto do not, upon effectiveness, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein
<PAGE> 8
7
not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any supplement to such Prospectus (as amended
or supplemented from time to time), do not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements, in light of the circumstances under which they were made,
not misleading.
The Company further agrees, if necessary, to supplement or
amend the Shelf Registration Statement if reasonably requested by the Majority
Holders with respect to information relating to the Holders and otherwise as
required by Section 3(b) below, to use all reasonable efforts to cause any such
amendment to become effective and such Shelf Registration to become usable as
soon as thereafter practicable and to furnish to the Holders of Registrable
Securities copies of any such supplement or amendment promptly after its being
used or filed with the SEC.
(c) Expenses. The Company shall pay all Registration Expenses
in connection with the registration pursuant to Section 2(a) or 2(b) and, in the
case of any Shelf Registration Statement, will reimburse the Holders or Initial
Purchasers for the reasonable fees and disbursements of one United States firm
or counsel and one Colombian firm or counsel designated in writing by the
Majority Holders to act as counsel for the Holders of the Registrable Securities
in connection therewith. Each Holder shall pay all expenses of its counsel other
than as set forth in the preceding sentence, underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to the Shelf Registration
Statement.
(d) Effective Registration Statement. (i) The Company will be
deemed not to have used its best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
to become, or to remain, effective during the requisite period if it voluntarily
takes any action that would result in any such Registration Statement not being
declared effective or in the Holders of Registrable Securities covered thereby
not being able to exchange or offer and sell such Registrable Securities during
that period unless (A) such action is required by applicable law or (B) such
action is taken by the Company in good faith and for valid business reasons (not
including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly complies
with the requirements of Section 3(k) hereof, if applicable.
(ii) The Company may suspend the availability of the Shelf
Registration Statement and the use of the Prospectus for a period not to exceed
30 days in any three month period or four periods not to exceed an aggregate of
60 days in any 12 month period if such suspension is effected in good faith and
for valid business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, the filing of
public reports with the SEC and during the pendency of material corporate
developments, so long as the Company promptly complies with the requirements of
Section 3(k) hereof (including compliance with the obligation to prepare a
supplement or amendment to a Registration Statement and related Prospectus if
necessary) promptly after the termination of such suspension.
(iii) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has
<PAGE> 9
8
been declared effective, the offering of Registrable Securities pursuant to a
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that (i) the
Exchange Offer Registration Statement is not filed with the SEC on or prior to
the 60th calendar day after the Closing Date, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to the 150th
calendar day after the Closing Date, (iii) the Exchange Offer is not consummated
on or prior to the 180th calendar day after the Closing Date or a Shelf
Registration Statement with respect to the Registrable Securities is not
declared effective on or prior to the 210th day after the Closing Date or (iv)
the Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable except pursuant to Section 2(d)(ii), the
Company shall pay additional interest on the Securities (in addition to the
accrual of original issue discount pursuant to the terms of the Securities and
in addition to the interest otherwise due thereon) with respect to the first
90-day period from and including the first day immediately following such 60-day
period in the case of (i) above, such 150-day period in the case of (ii) above,
such 180-day or 210-day period in the case of (iii) above, or such event
described in (iv) above, at a rate of one-half of one percent (0.5%) per annum
of the Accreted Value (as defined in the Indenture), payable in cash on each
Semiannual Accrual Date (as defined in the Indenture) (or, after the fifth
anniversary of the Closing Date, on each interest payment date), such interest
rate to increase by an additional one-half of one percent (0.5%) for each
subsequent 90-day period, up to a maximum increase of one and one-half percent
(1.5%) per annum of the Accreted Value. Upon (x) the filing of the Exchange
Offer Registration Statement after the 60-day period described in clause (i)
above, (y) the effectiveness of the Exchange Offer Registration Statement after
the 150-day period described in clause (ii) above or the period during which it
ceases to be effective or usable as described in clause (iv) above or (z) the
consummation of the Exchange Offer after the 180-day period or the effectiveness
of a Shelf Registration Statement after the 210-day period, as the case may be,
described in clause (iii) above, and provided that none of the conditions set
forth in clauses (i), (ii), (iii) and (iv) above continues to exist, such
additional interest shall cease to accrue on the Securities from the date of
such filing, effectiveness or consummation, as the case may be.
(f) Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section
2(a) and Section 2(b) hereof may result in material irreparable injury to the
Initial Purchasers or the Holders for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, the Initial Purchasers or any Holder may
obtain such relief as may be required to specifically enforce the Company's
obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations
of the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
<PAGE> 10
9
(a) prepare and file with the SEC a Registration Statement,
within the time period specified in Section 2, on the appropriate form
under the 1933 Act, which form (i) shall be selected by the Company, (ii)
shall, in the case of a Shelf Registration, be available for the sale of
the Registrable Securities by the selling Holders thereof and (iii) shall
comply as to form in all material respects with the requirements of the
applicable form and include or incorporate by reference all financial
statements required by the SEC to be filed therewith, and use its best
efforts to cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary under applicable law to keep such Registration Statement
effective for the applicable period; cause each Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the 1933 Act; and comply with the
provisions of the 1933 Act with respect to the disposition of all
Securities covered by each Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by
the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities, at least five days prior to filing, that
a Shelf Registration Statement with respect to the Registrable Securities
is being filed and advising such Holders that the distribution of
Registrable Securities will be made in accordance with the method elected
by the Majority Holders; and (ii) furnish to each Holder of Registrable
Securities, to counsel for the Initial Purchasers, to counsel for the
Holders and to each underwriter of an Underwritten Offering of Registrable
Securities, if any, without charge, as many copies of each Prospectus,
including each preliminary Prospectus, and any amendment or supplement
thereto and such other documents as such Holder or underwriter may
reasonably request, including financial statements and schedules and, if
the Holder so requests, all exhibits (including those incorporated by
reference) in order to facilitate the public sale or other disposition of
the Registrable Securities; and (iii) subject to the last paragraph of this
Section 3, hereby consent to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Registrable Securities
in connection with the offering and sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue sky"
laws of such jurisdictions as any Holder of Registrable Securities covered
by a Registration Statement and each underwriter of an Underwritten
Offering of Registrable Securities shall reasonably request by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with the Holders in connection with any filings required to be
made with the NASD, and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Registrable Securities owned
by such Holder; provided, however, that the Company shall not be required
to (i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d) or (ii) take any action
<PAGE> 11
10
which would subject it to general service of process or taxation in any
such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities and U.S. counsel for the Initial Purchasers promptly
and, if requested by such Holder or counsel, confirm such advice in writing
promptly (i) when a Registration Statement has become effective and when
any post-effective amendments and supplements thereto become effective,
(ii) of any request by the SEC or any state securities authority for
post-effective amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration Statement
and the closing of any sale of Registrable Securities covered thereby, the
representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to such offering cease to be true and correct in all material
respects, (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose, (vi) of the suspension of the availability
of the Shelf Registration Statement and the use of the Prospectus pursuant
to Section 2(d)(ii) hereof or of the happening of any event or the
discovery of any facts during the period a Shelf Registration Statement is
effective which makes any statement made in such Registration Statement or
the related Prospectus untrue in any material respect or which requires the
making of any changes in such Registration Statement or Prospectus in order
to make the statements therein not misleading and (vii) of any
determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Securities for Exchange Securities for the resale of such
Exchange Securities, (ii) furnish to each broker-dealer who desires to
participate in the Exchange Offer, without charge, as many copies of each
Prospectus included in the Exchange Offer Registration Statement, including
any preliminary prospectus, and any amendment or supplement thereto, as
such broker-dealer may reasonably request, (iii) include in the Exchange
Offer Registration Statement a statement that any broker-dealer who holds
Registrable Securities acquired for its own account as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer"), and who receives Exchange Securities for Registrable
Securities pursuant to the Exchange Offer, may be a statutory underwriter
and must deliver a Prospectus meeting the requirements of the 1933 Act in
connection with any resale of such Exchange Securities, (iv) subject to the
last paragraph of this Section 3, hereby consent to the use of the
Prospectus forming part of the Exchange Offer Registration Statement or any
amendment or supplement thereto, by any broker-dealer in connection with
the sale or transfer of the Exchange Securities covered by the Prospectus
or any amendment or supplement thereto, and (v) include in the transmittal
letter or similar documentation to be executed by an exchange offeree in
order to participate in the Exchange Offer (x) the following provision:
<PAGE> 12
11
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Securities. If the
undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Registrable
Securities, it represents that the Registrable Securities to
be exchanged for Exchange Securities were acquired by it as a
result of market-making activities or other trading activities
and acknowledges that it will deliver a Prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Securities pursuant to the Exchange Offer;
however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the exchange of registrable Securities,
the broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the 1933 Act; and
(B) to the extent any Participating Broker-Dealer participates
in the Exchange Offer, the Company shall use its best efforts to cause
to be delivered at the request of an entity representing the
Participating Broker-Dealers (which entity shall be one of the Initial
Purchasers, unless they elect not to act as such representative) only
one, if any, "cold comfort" letter with respect to the Prospectus in
the form existing on the last date for which exchanges are accepted
pursuant to the Exchange Offer and with respect to each subsequent
amendment or supplement, if any, effected during the period specified
in clause (C) below; and
(C) to the extent any Participating Broker-Dealer participates
in the Exchange Offer, the Company shall use its best efforts to
maintain the effectiveness of the Exchange Offer Registration Statement
for a period of 180 days following the closing of the Exchange Offer or
such shorter period which will terminate when the Participating
Broker-Dealers have completed all resales subject to applicable
prospectus-delivery requirements; and
(D) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement
as would otherwise be contemplated by Section 3(b) hereof, or take any
other action as a result of this Section 3(f), for a period exceeding
180 days after the last date for which exchanges are accepted pursuant
to the Exchange Offer (as such period may be extended by the Company)
and Participating Broker-Dealers shall not be authorized by the Company
to, and shall not, deliver such Prospectus after such period in
connection with resales contemplated by this Section 3.
(g) in the case of an Exchange Offer or a Shelf Registration,
furnish U.S. counsel for the Initial Purchasers copies of any request
by the SEC or any state securities authority for amendments or
supplements to a Registration Statement and Prospectus or for
additional information;
<PAGE> 13
12
(h) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement as
soon as practicable and provide immediate notice to each Holder of the
withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends
pertaining to U.S. securities laws; and cause such Registrable
Securities to be in such denominations (consistent with the provisions
of the Indenture) and registered in such names as the selling Holders
or the underwriters, if any, may reasonably request at least two
business days prior to the closing of any sale of Registrable
Securities;
(k) in the case of a Shelf Registration, upon the occurrence
of any event or the discovery of any facts, each as contemplated by
Section 3(e)(vi) hereof, use its best efforts to prepare a supplement
or post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will not
contain at the time of such delivery any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company agrees to notify each Holder to suspend use of
the Prospectus as promptly as practicable after the occurrence of such
an event, and each Holder hereby agrees to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission. At such time as such public
disclosure is otherwise made or the Company determines that such
disclosure is not necessary, in each case to correct any misstatement
of a material fact or to include any omitted material fact, the Company
agrees promptly to notify each Holder of such determination and to
furnish each Holder such numbers of copies of the Prospectus, as
amended or supplemented, as such Holder may reasonably request;
(l) obtain a CUSIP number for all Exchange Securities, or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement, and provide the Trustee
with printed certificates for the Exchange Securities or the
Registrable Securities, as the case may be, in a form eligible for
deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities, or Registrable Securities, as
the case may be, (ii) cooperate with the Trustee and the Holders to
effect such changes to the Indenture as may be required for the
Indenture to be so qualified in accordance with the terms of the TIA
and (iii) execute, and use its best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes, and
all other
<PAGE> 14
13
forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested by the
Majority Holders) in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(i) make such representations and warranties to the
Holders of such Registrable Securities and the underwriters,
if any, in form, substance and scope as are customarily made
by issuers to underwriters in similar underwritten offerings
as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the Holders of a majority
in principal amount of the Registrable Securities being sold)
addressed to each selling Holder and the underwriters, if any,
covering the matters customarily covered in opinions requested
in sales of securities or underwritten offerings and such
other matters as may be reasonably requested by such Holders
and underwriters;
(iii) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public
accountants addressed to the underwriters, if any, and will
use reasonable best efforts to have such letter addressed to
the selling Holders of Registrable Securities, such letters to
be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters
in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the
Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders
for the purpose of soliciting purchases of Registrable
Securities, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into in
the case of an Underwritten Offering, cause the same to set
forth indemnification provisions and procedures substantially
equivalent to the indemnification provisions and procedures
set forth in Section 5 hereof with respect to the underwriters
and all other parties to be indemnified pursuant to said
Section ; and
(vi) deliver such documents and certificates as may
be reasonably requested and as are customarily delivered in
similar offerings.
<PAGE> 15
14
The above shall be done at (i) the effectiveness of such
Registration Statement (and, if appropriate, each post-effective
amendment thereto) and (ii) each closing under any underwriting or
similar agreement as and to the extent required thereunder. In the case
of any Underwritten Offering, the Company shall provide written notice
to the Holders of all Registrable Securities of such Underwritten
Offering at least 30 days prior to the filing of a prospectus
supplement for such Underwritten Offering. Such notice shall (x) offer
each such Holder the right to participate in such Underwritten
Offering, (y) specify a date, which shall be no earlier than 10 days
following the date of such notice, by which such Holder must inform the
Company of its intent to participate in such Underwritten Offering and
(z) include the instructions such Holder must follow in order to
participate in such Underwritten Offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable
Securities and any underwriters participating in any disposition
pursuant to a Shelf Registration Statement and any U.S. counsel or
accountant retained by such Holders or underwriters, all financial and
other records, pertinent corporate documents and properties of the
Company reasonably requested by any such persons, and cause the
respective officers, directors, employees, and any other agents of the
Company to supply all information reasonably requested by any such
representative, underwriter, special counsel or accountant in
connection with a Registration Statement; provided that any such
records, documents, properties and such information that is designated
in writing by the Company, in good faith, as confidential at the time
of delivery of such records, documents, properties or information shall
be kept confidential by any such representative, underwriter, special
counsel or accountant and shall be used only in connection with such
Registration Statement, unless disclosure thereof is made in connection
with a court proceeding or required by law, or such information has
become available (not in violation of this agreement) to the public
generally or through a third party without an accompanying obligation
of confidentiality, and the Company shall be entitled to request that
such representative, underwriter, special counsel or accountant sign a
confidentiality agreement to the foregoing effect;
(p) (i) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof,
any amendment to an Exchange Offer Registration Statement or amendment
or supplement to a Prospectus, provide copies of such document to the
Initial Purchasers, and make such changes in any such document prior to
the filing thereof as any of the Initial Purchasers or their U.S.
counsel may reasonably request; (ii) in the case of a Shelf
Registration, a reasonable time prior to filing any Shelf Registration
Statement, any Prospectus forming a part thereof, any amendment to such
Shelf Registration Statement or amendment or supplement to such
Prospectus, provide copies of such document to the Holders of
Registrable Securities, to the Initial Purchasers, to U.S. counsel on
behalf of the Holders and to the underwriter or underwriters of an
Underwritten Offering of Registrable Securities, if any, and make such
changes in any such document prior to the filing thereof as the Holders
of Registrable Securities, the Initial Purchasers on behalf of such
Holders, their counsel and any underwriter may reasonably request; and
(iii) cause the representatives of the Company to be available for
discussion of such document as shall be reasonably requested by the
Holders of Registrable Securities, the Initial Purchasers on behalf of
such Holders or any
<PAGE> 16
15
underwriter and shall not at any time make any filing of any such
document of which such Holders, the Initial Purchasers on behalf of
such Holders, their U.S. counsel or any underwriter shall not have
previously been advised and furnished a copy or to which such Holders,
the Initial Purchasers on behalf of such Holders, their counsel or any
underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Securities to be listed on any securities
exchange on which similar debt securities issued by the Company are
then listed if requested by the Majority Holders or by the underwriter
or underwriters of an Underwritten Offering of Registrable Securities,
if any;
(r) in the case of a Shelf Registration, use its best efforts
to cause the Registrable Securities to be rated with the appropriate
rating agencies, if so requested by the Majority Holders or by the
underwriter or underwriters of an Underwritten Offering of Registrable
Securities, if any, unless the Registrable Securities are already so
rated;
(s) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
and
(t) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter and its U.S. counsel.
In the case of a Shelf Registration Statement, the Company may
(as a condition to such Holder's participation in the Shelf Registration)
require each Holder of Registrable Securities to furnish to the Company such
information regarding such Holder and the proposed distribution by such Holder
of such Registrable Securities as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. If the Company shall give any such notice to suspend the disposition of
Registrable Securities pursuant to a Shelf Registration Statement as a result of
the happening of any event or the discovery of any facts, each of the kind
described in Section 3(e)(vi) hereof, the Company shall be deemed to have used
its best efforts to keep the Shelf Registration Statement effective during such
period of suspension provided that the Company shall use its best efforts to
file and have declared effective (if an amendment) as soon as practicable an
amendment or supplement to the Shelf Registration Statement and shall extend the
period during which the Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days during the period from and
including the date of the giving of such
<PAGE> 17
16
notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such dispositions.
4. Underwritten Registrations. If any of the Registrable
Securities covered by any Shelf Registration are to be sold in an Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Majority Holders of such
Registrable Securities included in such offering and shall be reasonably
acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) The Company shall
indemnify and hold harmless each Initial Purchaser, each Holder, including
Participating Broker-Dealers, each underwriter who participates in an offering
of Registrable Securities, their respective affiliates, and the respective
directors, officers, employees, agents and each Person, if any, who controls any
of such parties within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Exchange Securities or Registrable Securities were registered under the
1933 Act, including all documents incorporated therein by reference, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 5(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of United States and Colombian
counsel chosen by any indemnified party), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened in
<PAGE> 18
17
connection with, or any claim whatsoever based upon, any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a);
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent (A) arising out of an untrue statement or
omission or alleged untrue statement or omission (i) made in or omitted from a
preliminary Prospectus or registration statement and corrected or cured in a
subsequent Prospectus or registration statement or any amendment or supplement
thereto, (ii) made in reliance upon and in conformity with information furnished
to the Company by the Initial Purchasers, any Holder, including Participating
Broker-Dealers, or any underwriter expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto), or (B) resulting from the use of the Prospectus during a
period when the use of the Prospectus has been suspended in accordance with
Section 2(d)(ii) or Section 3(e)(vi) hereof, provided, in each case, that
Holders received prior notice of such suspension;
(b) In the case of a Shelf Registration, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
Initial Purchasers, each underwriter who participates in an offering of
Registrable Securities and the other selling Holders and each of their
respective directors and officers (including each officer of the Company who
signed the Registration Statement) and each Person, if any, who controls the
Company, the Initial Purchasers, any underwriter or any other selling Holder
within the meaning of Section 15 of the 1933 Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
Section 5(a) hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with information
furnished to the Company by such Holder, as the case may be, expressly for use
in the Registration Statement (or any amendment thereto), or the Prospectus (or
any amendment or supplement thereto);
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of any such action and
will be entitled, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, also be counsel to the indemnifying party),
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that counsel to the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel, in addition to any Colombian counsel, for all indemnified parties in
connection with any one action or separate but similar or
<PAGE> 19
18
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 5 hereof (whether or not the indemnified parties
are actual or potential parties thereof), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel for which they are entitled to indemnification hereunder, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 5(a)(ii) hereof effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such indemnifying
party shall not have reimbursed such indemnified party for such fees and
expenses of counsel in accordance with such request prior to the date of such
settlement.
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 5 is for any reason unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand, the Initial Purchasers on
another hand, and the Holders on another hand, from the offering of the Exchange
Securities or Registrable Securities included in such offering or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand, the Initial Purchasers on another hand, and the Holders on another hand,
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand, the
Initial Purchasers on another hand, and the Holders on another hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company, the
Initial Purchasers or the Holders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Initial Purchasers and the Holders of the Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 5 were determined by pro rata allocation (even if the
Initial Purchasers were treated as one entity, and the Holders were treated as
one entity, for such purpose) or by another method of allocation which does not
take account of the equitable considerations referred to above in Section 5. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 5 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
<PAGE> 20
19
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by an governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1993 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5, each Person, if any, who
controls an Initial Purchaser or Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Initial Purchaser or Holder, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each Person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company. The parties hereto agree that any underwriting
discount or commission or reimbursement of fees paid to any Initial Purchaser
pursuant to the Purchase Agreement shall not be deemed to be a benefit received
by any Initial Purchaser in connection with the offering of the Exchange
Securities or Registrable Securities included in such offering.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as
the Company is subject to the reporting requirements of Section 13 or 15 of the
1934 Act, the Company covenants that it will file or furnish the reports
required to be filed or furnished by it under the 1933 Act and Section 13(a) or
15(d) of the 1934 Act and the rules and regulations adopted by the SEC
thereunder, that if it ceases to be so required to file or furnish such reports,
it will upon the request of any Holder of Registrable Securities (i) make
publicly available such information as is necessary to permit sales pursuant to
Rule 144 under the 1933 Act, (ii) deliver such information to a prospective
purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933
Act and it will take such further action as any Holder of Registrable Securities
may reasonably request, and (iii) take such further action that is reasonable in
the circumstances, in each case, to the extent required from time to time to
enable such Holder to sell its Registrable Securities without registration under
the 1933 Act within the limitation of the exemptions provided by (x) Rule 144
under the 1933 Act, as such Rule may be amended from time to time, (y) Rule 144A
under the 1993 Act, as such Rule may be amended from time to time, or (z) any
similar rules or regulations hereafter adopted by the SEC.
(b) No Inconsistent Agreements. The Company has not entered
into and the Company on or after the date of this Agreement will not enter into
any agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure; provided, however, that no amendment, modification,
supplement or waiver or consent to any departure from the provisions of Section
5 hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder.
<PAGE> 21
20
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any air courier (i) if to a Holder, at
the most current address given by such Holder to the Company by means of a
notice given in accordance with the provisions of this Section 6(d), which
address initially is, with respect to an Initial Purchaser, the address set
forth in the Purchase Agreement; and (ii) if to the Company, initially at the
Company's address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 6(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; at the
time received, if mailed or sent by air courier; when answered back, if telexed;
and when receipt is acknowledged, by recipient's telecopy operator, if
telecopied.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Securities,
in any manner, whether by operation of law or otherwise, such Registrable
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Securities, such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. The Initial Purchasers shall be
third party beneficiaries to the agreements made hereunder between the Company,
on the one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
UNITED STATES OF AMERICA.
<PAGE> 22
21
(j) Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, the Company (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (the
"Agent") (and any successor entity), as its authorized agent upon which process
may be served in any suit or proceeding arising out of or relating to this
Agreement, the Securities or the Exchange Securities that may be instituted in
any federal or state court in The City of New York, Borough of Manhattan, State
of New York or brought under federal or state securities laws, and acknowledges
that the Agent has accepted such designation, (ii) submits to the jurisdiction
of any such court in any such suit or proceeding and (iii) agrees that service
of process upon the Agent and written notice of said service to the Company in
accordance with Section 6(d) hereof shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. The Company
further agrees to take any and all action, including the execution and filing of
any and all such documents and instruments, as may be necessary to continue such
designation and appointment of the Agent in full force and effect so long as any
of the Securities or Exchange Securities shall be outstanding; provided that the
Company may (and, to the extent the Agent ceases to be able to be served on the
basis contemplated herein, shall), by written notice to the Initial Purchasers
and the Holders of Securities and Exchange Securities in accordance with Section
6(d) hereof, designate such additional or alternative agent for service of
process under this Section 6(j) (including counsel to the Company) that (i)
maintains an office located in The City of New York, Borough of Manhattan, State
of New York and (ii) is a corporate service company which acts as agent for
service of process for other persons in the ordinary course of its business.
Such written notice shall identify the name of such agent for service of process
and the address of the office of such agent for service of process in The City
of New York, Borough of Manhattan, State of New York.
To the extent that the Company has or hereafter may acquire
any sovereign immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such sovereign immunity in respect of its
obligations, to the extent permitted by law, under this Agreement, the
Securities, the Exchange Securities, the Indenture (or any similar agreement
used in connection with the Exchange Offer), the Purchase Agreement or the
separate written instrument referenced in this Section 6(j).
(k) Judgment Currency. The Company agrees to indemnify the
Initial Purchasers, each holder of the Securities and the Exchange Securities
and each indemnified party against any loss incurred by any of them as a result
of any judgment or order being given or made for any amount due to them under
this Agreement and such judgment or order being expressed and paid in a currency
(the "Judgment Currency") other than United States dollars and as a result of
any variation as between (i) the rate of exchange at which the United States
dollar amount is converted into the judgment Currency for the purpose of such
judgment or order and (ii) the spot rate of exchange in The City of New York at
which any such Person on the date of payment of such judgment in order is able
to purchase United States dollars with the amount of the Judgment Currency
actually received by such person. The foregoing indemnity shall continue in full
force and effect notwithstanding any such judgment or order as aforesaid. The
term "spot rate of exchange" shall include any premiums and costs of exchange
payable in connection with the purchase of, or conversion into, United States
dollars.
<PAGE> 23
22
(l) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE> 24
23
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
OCCIDENTE Y CARIBE CELULAR S.A.
By: /s/ Mauricio Campillo
-------------------------------------
Name: Mauricio Campillo
Title: General Secretary and
Administrative Vice President
Confirmed and accepted as of
the date first above
written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
ING BARING (U.S.) SECURITIES, INC.
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By:
--------------------------------
Name: Marisa D. Drew
Title: Vice President
<PAGE> 25
23
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
OCCIDENTE Y CARIBE CELULAR S.A.
By:
-------------------------------------
Name: Mauricio Campillo
Title: General Secretary and
Administrative Vice President
Confirmed and accepted as of
the date first above
written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
ING BARING (U.S.) SECURITIES, INC.
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By: /s/ Marisa D. Drew
--------------------------------
Name: Marisa D. Drew
Title: Vice President
<PAGE> 1
Exhibit 4.05
LETTER OF TRANSMITTAL
OCCIDENTE Y CARIBE CELULAR S.A.
OFFER FOR ALL OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2004 (THE "OLD NOTES")
IN EXCHANGE FOR
14% SERIES B SENIOR DISCOUNT NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "NEW NOTES") PURSUANT TO THE
PROSPECTUS DATED [ ], 1996.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
[ ] , 1996 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE
EXTENDED BY THE COMPANY (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO THE EXPIRATION DATE.
To: The Bank of New York, Exchange Agent
By Hand or Overnight Courier: By Registered or Certified Mail:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10274-0084 New York, New York 10286
Attention: Securities Processing Window Attention: Enrique Lopez
Ground Level Reorganization, 7E Corporate Trust Operations, 7E
By Facsimile:
(212) 571-3080
Enrique Lopez
Confirm by Telephone:
(212) 815-2742
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
------------------------------------
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the certificate numbers and principal
amount of Old Notes should be listed on a separate schedule affixed hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES (1) (2) (3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Principal Amount
Principal at Maturity
Amount at Maturity of Old Notes
Name(s) and Address(es) of Registered Holder(s) Certificate of Tendered
(Please fill in, if blank) Number(s)* Old Notes (if less than all)**
- -------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Old Notes represented by the Old Notes indicated in
column 2. See instruction 2. Old Notes tendered hereby must be in
denominations of principal amount at maturity of $1,000 and any integral
multiple thereof. See instruction 1.
<PAGE> 2
The undersigned acknowledges that he or she has received and reviewed
the Prospectus, dated [ ], 1996 (the "Prospectus"), of Occidente y Caribe
Celular S.A., a Colombian corporation (the "Company"), and this Letter of
Transmittal (the "Letter"), which together constitute the Company's offer (the
"Exchange Offer") to exchange up to US$190,745,000 aggregate principal amount at
maturity of 14% Series B Senior Discount Notes due 2004 (the "New Notes"), for a
like principal amount at maturity of the Company's issued and outstanding 14%
Senior Discount Notes due 2004 (collectively, the "Old Notes").
The undersigned has completed the appropriate boxes above and below and
signed this Letter to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
This Letter is to be used either if certificates of Old Notes are to be
forwarded herewith or if delivery of Old Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company, pursuant to the procedures set forth in "The Exchange Offer--Procedures
for Tendering Old Notes" and "The Exchange Offer--Book-Entry Transfer" in the
Prospectus. Delivery of this Letter and any other required documents should be
made to the Exchange Agent. Delivery of documents to a book-entry transfer
facility does not constitute delivery to the Exchange Agent.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date must tender their Old Notes according
to the guaranteed delivery procedure set forth in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1.
\ \ CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution \ \ The Depository Trust Company
-----------------
Account Number
------------------------------------------------------------------
Transaction Code Number
---------------------------------------------------------
\ \ CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
---------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
--------------------------
If delivered by book-entry transfer:
Account Number
------------------------------------------------------------------
Date of execution of Notice of Guaranteed Delivery
------------------------------
\ \ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
--------------------------------------------------------------------
Address:
-----------------------------------------------------------------
2
<PAGE> 3
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the sale, assignment and transfer of the Old Notes tendered hereby.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "SEC") that the New Notes issued in exchange for the
Old Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than (i) any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act") or (ii) any
broker-dealer that purchase Notes from the Company to resell pursuant to Rule
144A under the Securities Act ("Rule 144A") or any other available exemption)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such New Notes. The undersigned
acknowledges that any holder of Old Notes using the Exchange Offer to
participate in a distribution of the New Notes (i) cannot rely on the position
of the staff of the SEC enunciated in its interpretive letter with respect to
Exxon Capital Holdings Corporation (available April 13, 1989) or similar letters
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction.
The undersigned represents that (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of such holder's
business, (ii) such holder has no arrangements with any person to participate in
the distribution of such New Notes, and (iii) such holder is not an "affiliate,"
as defined in Rule 405 under the Securities Act, of the Company or, if such
holder is an affiliate, that such holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading, it acknowledges that it will deliver
a prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned, if a California resident, hereby further represents
and warrants that the undersigned (or the beneficial owner of the Old Notes
tendered hereby, if not the undersigned) (i) is a bank, savings and loan
association, trust company, insurance company, investment company registered
under the Investment Company Act of 1940, pension or profit-sharing trust (other
than a pension or profit-sharing trust of the Company, a self-employed
individual retirement plan, or individual retirement account), or a corporation
which has a net worth on a consolidated basis according to its most recent
audited financial statement of not less than $14,000,000, and (ii) is acquiring
the
3
<PAGE> 4
New Notes for its own account for investment purposes (or for the account of the
beneficial owner of such New Notes for investment purposes).
All authority conferred or agreed to be conferred in this Letter and
every obligation of the undersigned hereunder shall be binding upon the
successors, assigns, heirs, executors, administrators, trustees in bankruptcy
and legal representatives of the undersigned and shall not be affected by, and
shall survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in the instructions
contained in this Letter.
The undersigned understands that tenders of the Old Notes pursuant to
any one of the procedures described under "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth
in the Prospectus under "The Exchange Offer--Certain Conditions to the Exchange
Offer," the Company may not be required to accept for exchange any of the Old
Notes tendered. Old Notes not accepted for exchange or withdrawn will be
returned to the undersigned at the address set forth below unless otherwise
indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) in the name
of the undersigned. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please deliver the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
THE BOOK-ENTRY TRANSFER FACILITY, AS THE HOLDER OF RECORD OF CERTAIN
OLD NOTES, HAS GRANTED AUTHORITY TO BOOK-ENTRY TRANSFER FACILITY PARTICIPANTS
WHOSE NAMES APPEAR ON A SECURITY POSITION LISTING WITH RESPECT TO SUCH OLD NOTES
AS OF THE DATE OF TENDER OF SUCH OLD NOTES TO EXECUTE AND DELIVER THE LETTER OF
TRANSMITTAL AS IF THEY WERE THE HOLDERS OF RECORD. ACCORDINGLY, FOR PURPOSES OF
THIS LETTER OF TRANSMITTAL, THE TERM "HOLDER" SHALL BE DEEMED TO INCLUDE SUCH
BOOK-ENTRY TRANSFER FACILITY PARTICIPANTS.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" ABOVE AND SIGNING THIS LETTER AND DELIVERING SUCH NOTES AND THIS LETTER
TO THE EXCHANGE AGENT, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET
FORTH IN SUCH BOX ABOVE.
4
<PAGE> 5
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
<TABLE>
<S> <C>
Dated: ....................................................................................
X............................................... .......................................
X............................................... .......................................
SIGNATURE(S) OF OWNER(S)/OR AUTHORIZED SIGNATORY DATE
</TABLE>
Area Code and Telephone Number....................
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE TYPE OR PRINT)
Capacity: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(INCLUDE ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by
an Eligible Institution: . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(AUTHORIZED SIGNATURE)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(TITLE)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(NAME OF FIRM)
Dated:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
<PAGE> 6
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for New Notes are to be issued in the
name of and sent to someone other than the person or persons whose signature(s)
appear on this Letter above or if Old Notes delivered by book-entry transfer
which are not accepted for exchange are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than the account indicated
above.
Issue: New Notes and/or Old Notes to:
Name(s):. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE TYPE OF PRINT)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE TYPE OF PRINT)
Address: . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
\ \ Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set below.
- -----------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for New Notes are to be sent to
someone other than the person or persons whose signature(s) appear(s) on this
Letter above or to such person or persons at an address other than shown in the
box entitled "Description of Old Notes" on this Letter above.
Mail: New Notes and/or Old Notes to:
Name(s):. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE TYPE OF PRINT)
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(PLEASE TYPE OF PRINT)
Address: . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(ZIP CODE)
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH,
THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S) FOR OLD
NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT
PRIOR TO THE EXPIRATION DATE.
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURE.
Except as set forth below, a holder of Old Notes who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed copy of this Letter, including all other documents
required by this Letter to the Exchange Agent at one of the addresses set forth
below under "Exchange Agent" on or prior to the Expiration Date. In addition,
either (i) certificates for such Old Notes must be received by the Exchange
Agent along with this Letter, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder of Old Notes must comply with the
guaranteed delivery procedures described below.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If such delivery is by mail, it is recommended that registered
mail properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to permit timely delivery.
If a holder desires to tender Old Notes and such holder's Old Notes are
not immediately available or time will not permit such holder's Letter of
Transmittal, Old Notes (or a confirmation of book-entry transfer of Old Notes
into the Exchange Agent's account at the book-entry transfer facility) or other
required documents to reach the Exchange Agent on or before the Expiration Date,
such holder's tender may be effected if:
(a) such tender is made by or through an Eligible Institution (as
defined below);
(b) on or prior to the Expiration Date, the Exchange Agent has received
a telegram, facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) or letter from such
Eligible Institution setting forth the name and address of the holder of
such Old Notes and the principal amount of Old Notes tendered and stating
that the tender is being made thereby and guaranteeing that, within three
business days after the Expiration Date, a duly executed Letter of
Transmittal, or facsimile thereof, together with the Old Notes (or a
confirmation of book-entry transfer of such Old Notes into the Exchange
Agent's account at the book-entry transfer facility), and any other
documents required by this Letter and the instructions hereto, will be
deposited by such Eligible Institution with the Exchange Agent; and
(c) this Letter, or a facsimile hereof, and Old Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Old Notes
into the Exchange Agent's account at the book-entry transfer facility) and
all other required documents are received by the Exchange Agent within
three business days after the Expiration Date.
See "The Exchange Offer--Procedures for Tendering Old Notes," "The Exchange
Offer--Book-Entry Transfer," and "The Exchange Offer--Guaranteed Delivery
Procedures" in the Prospectus.
7
<PAGE> 8
2. WITHDRAWALS.
Any holder who has tendered Old Notes may withdraw the tender by
delivering written notice of withdrawal (which may be sent by telegram,
facsimile (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier)) to the Exchange Agent prior to the Expiration
Date. For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent prior to the Expiration Date at its address
set forth below. Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the amount of such Old Notes), and (where certificates
for Old Notes have been transmitted) specify the name in which such Old Notes
are registered, if different from that of the withdrawing holder thereof. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder thereof must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
guaranteed by an Eligible Institution unless such holder is an Eligible
Institution. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. See "The Exchange Offer--Withdrawal Rights" in the Prospectus.
3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
The signatures on this Letter or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" in this Letter or (ii) for the account of an Eligible
Institution. In the event that the signatures in this Letter or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by a firm which is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc., a clearing
agency, an insured credit union, a savings association or by a commercial bank
or trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If Old Notes are registered in the name
of a person other than the signer of this Letter, the Old Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box
the name and address to which New Notes issued pursuant to the Exchange Offer
are to be issued or sent, if different from the name or address of the person
signing this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. If no such instructions are given, any New Notes will be issued
8
<PAGE> 9
in the name of, and delivered to, the name or address of the person signing this
Letter and any Old Notes not accepted for exchange will be returned to the name
or address of the person signing this Letter.
5. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9.
Under the federal income tax laws, payments that may be made by the
Company on account of New Notes issued pursuant to the Exchange Offer may be
subject to backup withholding at the rate of 31%. In order to avoid such backup
withholding, each tendering holder should complete and sign the Substitute Form
W-9 included in this Letter and either (a) provide the correct taxpayer
identification number ("TIN") and certify, under penalties of perjury, that the
TIN provided is correct and that (i) the holder has not been notified by the
Internal Revenue Service (the "IRS") that the holder is subject to backup
withholding as a result of failure to report all interest or dividends or (ii)
the IRS has notified the holder that the holder is no longer subject to backup
withholding; or (b) provide an adequate basis for exemption. If the tendering
holder has not been issued a TIN and has applied for one, or intends to apply
for one in the near future, such holder should write "Applied For" in the space
provided for the TIN in Part 1 of the Substitute Form W-9, sign and date the
Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part 1, the Company (or
the Paying Agent under the Indenture governing the New Notes) shall retain 31%
of payments made to the tendering holder during the sixty (60) day period
following the date of the Substitute Form W-9. If the holder furnishes the
Exchange Agent or the Company with his or her TIN within sixty (60) days after
the date of the Substitute Form W-9, the Company (or the Paying Agent) shall
remit such amounts retained during the sixty (60) day period to the holder and
no further amounts shall be retained or withheld from payments made to the
holder thereafter. If, however, the holder has not provided the Exchange Agent
or the Company with his or her TIN within such sixty (60) day period, the
Company (or the Paying Agent) shall remit such previously retained amounts to
the IRS as backup withholding. In general, if a holder is an individual, the
taxpayer identification number is the Social Security number of such individual.
If the Exchange Agent or the Company is not provided with the correct taxpayer
identification number, the holder may be subject to a $50 penalty imposed by the
IRS. Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such holder must submit a statement (generally, IRS Form W-8), signed
under penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Exchange Agent. For further information
concerning backup withholding and instructions for completing the Substitute
Form W-9 (including how to obtain a taxpayer identification number if you do not
have one and how to complete the Substitute Form W-9 if Old Notes are registered
in more than one name), consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Old Notes to be deemed invalidly tendered, but may require the Company (or the
Paying Agent) to withhold 31% of the amount of any payments made on account of
the New Notes. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, New Notes and/or substitute Old Notes not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the transfer of Old
Notes to the Company or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered
9
<PAGE> 10
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither the Company nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. INADEQUATE SPACE.
If the space provided herein is inadequate, the aggregate principal
amount of Old Notes being tendered and the certificate number or numbers (if
applicable) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter.
10. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
If any certificate has been lost, mutilated, destroyed or stolen, the
holder should promptly notify The Bank of New York, as Exchange Agent, at the
address indicated above. The holder will then be instructed as to the steps that
must be taken to replace the certificate(s). This Letter of Transmittal and
related documents cannot be processed until the Old Notes have been replaced.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter may be directed to the
Exchange Agent at the address and telephone number indicated above.
10
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: OCCIDENTE Y CARIBE CELULAR S.A.
<TABLE>
<S> <C> <C>
SUBSTITUTE PART I--TAXPAYER IDENTIFICATION
NUMBER
FORM W-9 ----------------------
DEPARTMENT OF THE TREASURY ENTER YOUR TAXPAYER IDENTIFICATION SOCIAL SECURITY NUMBER
INTERNAL REVENUE SERVICE NUMBER IN THE APPROPRIATE BOX. FOR
MOST INDIVIDUALS, THIS IS YOUR SOCIAL
SECURITY NUMBER. IF YOU DO NOT HAVE A OR
NUMBER, SEE HOW TO OBTAIN A "TIN" IN
THE ENCLOSED GUIDELINES.
------------------------------
NOTE: IF THE ACCOUNT IS IN MORE THAN EMPLOYER IDENTIFICATION NUMBER
ONE NAME, SEE THE CHART ON PAGE 2 OF
THE ENCLOSED GUIDELINES TO DETERMINE
WHAT NUMBER TO GIVE.
--------------------------------------------------------------------------
PART II--FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING (SEE ENCLOSED
GUIDELINES)
--------------------------------------------------------------------------
PAYOR'S REQUEST FOR TAXPAYER CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY
IDENTIFICATION NUMBER (TIN) AND THAT:
CERTIFICATION
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION
NUMBER (OR I AM WAITING FOR A NUMBER TO BE ISSUED TO ME), AND
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE I HAVE NOT
BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (THE "IRS") THAT I AM
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL
INTEREST OR DIVIDENDS OR THE IRS HAS NOTIFIED ME THAT I AM NO LONGER
SUBJECT TO BACKUP WITHHOLDING.
SIGNATURE DATE
-------------------------------------- ------------------
</TABLE>
CERTIFICATION GUIDELINES--YOU MUST CROSS OUT ITEM (2) OF THE ABOVE CERTIFICATION
IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING
BECAUSE OF UNDERREPORTING OF INTEREST OR DIVIDENDS ON YOUR TAX RETURN. HOWEVER,
IF AFTER BEING NOTIFIED BY THE IRS THAT YOU WERE SUBJECT TO BACKUP WITHHOLDING,
YOU RECEIVED ANOTHER NOTIFICATION FROM THE IRS THAT YOU ARE NO LONGER SUBJECT TO
BACKUP WITHHOLDING, DO NOT CROSS OUT ITEM (2).
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer
Identification Number has not been issued to me, and that I mailed or delivered
an application to receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service Center or Social Security Administration Office (or I
intend to mail or deliver an application in the near future). I understand that
if I do not provide a Taxpayer Identification Number to the payor, 31 percent of
all payments made to me on account of the New Notes shall be retained until I
provide a Taxpayer Identification Number to the payor and that, if I do not
provide my Taxpayer Identification Number within sixty (60) days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31 percent of all reportable payments made to me thereafter will be withheld
and remitted to the Internal Revenue Service until I provide a Taxpayer
Identification Number.
SIGNATURE DATE
---------------------------- -------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE NEW NOTES. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE> 12
OCCIDENTE Y CARIBE CELULAR S.A.
OFFER FOR ALL OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2004
IN EXCHANGE FOR
14% SERIES B SENIOR DISCOUNT NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED
To: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Occidente y Caribe Celular S.A. (the "Company") is offering, upon and
subject to the terms and conditions set forth in the Prospectus dated [ ], 1996
(the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 14% Series B Senior
Discount Notes Due 2004, which have been registered under the Securities Act of
1933, as amended, for its outstanding 14% Senior Discount Notes Due 2004 (the
"Old Notes"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement dated as of June 7, 1996, by and among the Company and the initial
purchasers referred to therein.
We are requesting that you contact your clients for whom you hold Old
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Old Notes registered in your name or in the name
of your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated [ ], 1996;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Bank of New York, the Exchange
Agent for the Old Notes.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON [ ], 1996, UNLESS EXTENDED BY THE COMPANY (THE
"EXPIRATION DATE"). OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE
WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be delivered
to the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and the Prospectus.
<PAGE> 13
If holders of Old Notes wish to tender, but it is impracticable for
them to forward their certificates for Old Notes prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under "The Exchange Offer--Procedures for Tendering
Old Notes" and "The Exchange Offer--Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed to
The Bank of New York, the Exchange Agent for the Old Notes, at its address and
telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
OCCIDENTE Y CARIBE CELULAR S.A.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
<PAGE> 14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
GIVE THE SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------ ------------------------
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult, or if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. A. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
B. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION NUMBER
FOR THIS TYPE OF ACCOUNT: OF--
- ------------------------------ ------------------------
<C> <S> <C>
8. Sole proprietorship The owner(4)
account
9. A valid trust, estate or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show your individual name. You may also enter your business name. You may
use either your Social Security number of your Employer Identification
number.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE
CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE> 15
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
including the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under Section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1) of the Code.
- An entity registered at all times during the tax year under the
Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under Section 1441
of the Code.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding including
the following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under Section 852) of the Code.
- Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
- Payments on tax-free covenant bonds under Section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN
AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESDIDENT ALIEN
OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A
COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041(a), 6045, 6050A and 6050N of
the Code and the regulations promulgated thereunder.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividends, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, your are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
<PAGE> 16
OCCIDENTE Y CARIBE CELULAR S.A.
OFFER FOR ALL OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2004
IN EXCHANGE FOR
14% SERIES B SENIOR DISCOUNT NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus dated [ ], 1996 (the
"Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Occidente y
Caribe Celular S.A. (the "Company") to exchange its 14% Series B Senior Discount
Notes Due 2004, which have been registered under the Securities Act of 1933, as
amended (the "New Notes"), for its outstanding 14% Senior Discount Notes Due
2004 (the "Old Notes"), upon the terms and subject to the conditions described
in the Prospectus and the Letter of Transmittal. The Exchange Offer is being
made in order to satisfy certain obligations of the Company contained in the
Exchange and Registration Rights Agreement dated as of June 7, 1996, by and
among the Company and the initial purchasers referred to therein.
This material is being forwarded to you as the beneficial owner of the
Old Notes carried by us in your account but not registered in your name. A
TENDER OF SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to
tender on your behalf the Old Notes held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on [ ], [ ], 1996, unless extended by the Company. Any Old
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set
forth in the Prospectus in the section captioned "The Exchange
Offer--Certain Conditions to the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Notes
from the holder to the Company will be paid by the Company, except as
otherwise provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time,
on [ ], [ ], 1996, unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
<PAGE> 17
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Occidente y
Caribe Celular S.A. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated
below:
<TABLE>
<S> <C>
AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF OLD NOTES
14% Senior Discount Notes Due 2004. ----------------------------------------------------
/ / Please do not tender any Old Notes held
by your for my account
Dated: , 1996
------------------- ----------------------------------------------------
Signature(s)
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Please print name(s) here
----------------------------------------------------
----------------------------------------------------
Address(es)
----------------------------------------------------
Area Code and Telephone Number
----------------------------------------------------
Tax Identification or Social Security No(s).
</TABLE>
None of the Old Notes held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Old Notes held by us for
your account.
2
<PAGE> 1
EXHIBIT 4.06
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
14% SENIOR DISCOUNT NOTES
DUE 2004
IN EXCHANGE FOR NEW
14% SERIES B SENIOR DISCOUNT NOTES DUE 2004
OF
OCCIDENTE Y CARIBE CELULAR S.A.
Registered holders of outstanding 14% Senior Discount Notes due 2004
(the "Old Notes") who wish to tender their Old Notes in exchange for a like
principal amount of new 14% Series B Senior Discount Notes due 2004 (the "New
Notes") and whose Old Notes are not immediately available or who cannot deliver
their Old Notes and Letter of Transmittal (and any other documents required by
the Letter of Transmittal) to The Bank of New York (the "Exchange Agent") prior
to the Expiration Date, may use this Notice of Guaranteed Delivery or one
substantially equivalent hereto. This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight courier) or letter
to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering Old
Notes" and "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
BY HAND/OVERNIGHT COURIER: BY MAIL:
The Bank of New York
Reorganization Section The Bank of New York
Corporate Trust Services Window Reorganization Section
101 Barclay Street (7 East) 101 Barclay Street (7 East)
New York, New York 10286 New York, New York 10286
Attention: Enrique Lopez Attention: Enrique Lopez
BY FACSIMILE:
(212) 571-3080
CONFIRM BY TELEPHONE:
(212) 815-2742
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount at maturity of Old
Notes indicated below, upon the terms and subject to the conditions contained in
the Prospectus dated [ ], 1996 of Occidente y Caribe Celular S.A. (the
"Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
Name and address of
registered holder as it
appears on the 14% Senior Aggregate Principal Principal Amount at
Discount Notes due 2004 Amount at Maturity Maturity of
("Old Notes") Certificate Number(s) of Represented by Old Notes
(Please Print) Old Notes Tendered Old Notes Tendered
<S> <C> <C> <C>
- ------------------------- ------------------------ ------------------- -------------------
- ------------------------- ------------------------ ------------------- -------------------
- ------------------------- ------------------------ ------------------- -------------------
- ------------------------- ------------------------ ------------------- -------------------
- ------------------------- ------------------------ ------------------- -------------------
</TABLE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Old Notes, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, and any other documents required by the Letter of Transmittal within
three New York Stock Exchange, Inc. trading days after the date of execution of
this Notice of Guaranteed Delivery.
Name of Firm:
---------------------- -----------------------------------
(Authorized Signature)
Address: Title:
---------------------------- -----------------------------
Name:
- ------------------------------------ -----------------------------
(Zip Code) (Please type or print)
Area Code and Telephone Number: Date:
-----------------------------
- -------------------------------------
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE> 1
EXHIBIT 10.01
EXECUTION COPY
================================================================================
OCCIDENTE Y CARIBE CELULAR S.A.
(a Colombian sociedad anonima de economia mixta)
190,745 Units
Consisting of
US$190,745,000 14% Senior Discount Notes due 2004
and 762,980 Warrants to Purchase
4,355,852 shares of Class B Common Stock
PURCHASE AGREEMENT
Dated: May 31, 1996
================================================================================
<PAGE> 2
OCCIDENTE Y CARIBE CELULAR S.A.
(a Colombian sociedad anonima de economia mixta)
190,745 Units
Consisting of
US$190,745,000 14% Senior Discount Notes due 2004
and 762,980 Warrants to Purchase
4,355,852 shares of Class B Common Stock
PURCHASE AGREEMENT
May 31, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1201
ING BARING (U.S.) SECURITIES, INC.
667 Madison Avenue
New York, New York 10021
Ladies and Gentlemen:
Occidente y Caribe Celular S.A. (the "Company"), a sociedad anonima de
economia mixta existing under the laws of the Republic of Colombia ("Colombia"),
proposes to issue and sell to each of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and ING Baring (U.S.) Securities, Inc. (each an
"Initial Purchaser" and together the "Initial Purchasers") 190,745 units (the
"Units") consisting of (x) US$190,745,000 aggregate principal amount at maturity
of the Company's 14% Senior Discount Notes due 2004 (the
<PAGE> 3
2
"Notes") and (y) 762,980 warrants (the "Warrants") entitling the holders thereof
to purchase, under certain circumstances, an aggregate of 4,355,852 shares of
class B common stock, par value one thousand Pesos per share, of the Company
(the "Class B Common Stock"), subject to adjustment (the "Warrant Shares"),
either as (i) American Depositary Receipts ("ADRs"), or (ii) if ADRs are not
available, such Warrant Shares. The Notes are to be issued pursuant to an
indenture to be dated as of June 1, 1996 (the "Indenture") between the Company
and The Bank of New York, as trustee (the "Trustee"). The Warrants are to be
issued pursuant to a warrant agreement to be dated as of June 7, 1996, in
substantially the form attached hereto as Exhibit A with such changes as shall
be agreed to by the parties hereto (the "Warrant Agreement") between the Company
and The Bank of New York, as warrant agent (the "Warrant Agent"). The Notes and
the Warrants will initially be represented by 762,980 Units, each Unit
consisting of US$1,000 principal amount at maturity of the Notes and 4 Warrants,
each Warrant entitling the holder thereof to purchase 5.709 shares of Class B
Common Stock, at a price of US$1.00 per share (or, if greater, the U.S. dollar
equivalent of 1,000 Pesos) either as ADRs (each ADR representing 25 shares of
Class B Common Stock), or, in certain circumstances as set forth in the Offering
Memorandum, such Warrant Shares. If a holder of Warrants exercises such Warrants
for ADRs and the number of Warrant Shares entitled to be so purchased by such
holder is not a multiple of 25, the Company will pay to the holder of such
Warrants at the time of exercise an amount in cash equal to the then current
market value of that number of shares that exceeds the largest possible multiple
of 25. The Notes, the Warrants and the Units are collectively referred to herein
as the "Securities." The Securities, the Indenture and the Warrant Agreement are
more fully described in the Offering Memorandum (as hereinafter defined).
Capitalized terms used herein and not otherwise defined herein have the
respective meanings specified in the Offering Memorandum.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the "1933
Act"), in reliance on an exemption therefrom. The Company has prepared a
preliminary offering memorandum, dated May 9, 1996 (such preliminary offering
memorandum being hereinafter referred to as the "Preliminary Offering
Memorandum"), and is preparing a final offering memorandum, dated May 31, 1996
(such final offering memorandum, in the form first furnished to the Initial
Purchasers for use in connection with the offering of the Securities, being
hereinafter referred to as the "Offering Memorandum"), each setting forth
information regarding the Company and the Securities. The Company hereby
confirms that it has authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum to the extent described therein in connection with
the offering and resale of the Securities.
The Company understands that the Initial Purchasers propose to make an
offering of the Securities only on the terms set forth in the Offering
Memorandum, as soon
<PAGE> 4
3
as they deem advisable after this Agreement has been executed and delivered, (i)
to persons in the United States whom the Initial Purchasers reasonably believe
to be qualified institutional buyers ("Qualified Institutional Buyers") as
defined in Rule 144A under the 1933 Act, as such rule may be amended from time
to time ("Rule 144A"), in transactions under Rule 144A, (ii) to a limited number
of other institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under Regulation D ("Regulation D") of the 1933 Act ("Accredited
Investors")) in exempt private sales under the 1933 Act and/or (iii) to non-U.S.
persons outside the United States to whom the Initial Purchasers reasonably
believe offers and sales of the Securities may be made in reliance upon
Regulation S ("Regulation S") under the 1933 Act in transactions meeting the
requirements of Regulation S.
The holders of the Notes will be entitled to the benefits of a
registration rights agreement, in substantially the form attached hereto as
Exhibit B with such changes as shall be agreed to by the parties hereto (the
"Notes Registration Rights Agreement"), pursuant to which the Company will file
a registration statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") registering the Notes or the Exchange
Notes referred to in the Notes Registration Rights Agreement under the 1933 Act.
The Initial Purchasers and other holders of the Warrants will have, with respect
to the Warrants, the registration rights set forth in the Warrant Agreement.
Section 1. Representations and Warranties. (a) The Company represents
and warrants to and agrees with the Initial Purchasers as of the date hereof and
as of the Closing Time as follows:
(i) As of their respective dates, none of the Preliminary
Offering Memorandum, the Offering Memorandum or any amendment or
supplement thereto and, as of the Closing Time, none of the Offering
Memorandum, or any amendment or supplement thereto, included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; except that this representation and warranty does not
apply to statements or omissions made in the Preliminary Offering
Memorandum that are corrected in the Offering Memorandum or any
amendment or supplement thereto or to statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by the Initial Purchasers expressly for use in the
Preliminary Offering Memorandum, the Offering Memorandum or any
amendment or supplement thereto.
(ii) There are no debt securities of the Company registered
under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
or listed on a
<PAGE> 5
4
national securities exchange or quoted in a U.S. automated inter-dealer
quotation system.
(iii) There is no "substantial U.S. market interest" (as such
term is defined in Regulation S) in the Securities or any security of
the same class or series as the Securities.
(iv) Assuming (A) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof and (B) the
due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 2 hereof, none of the Company or any
affiliate (as such term is defined in Rule 501(b) of Regulation D) of
the Company or any person acting on behalf thereof has engaged in any
directed selling efforts (as such term is defined in Regulation S) with
respect to any Securities offered and sold in reliance on Rule 903 of
Regulation S, and the Company and such affiliates and such other
persons acting on behalf thereof have complied with the offering
restrictions requirement of Regulation S with respect to the
Securities.
(v) Assuming (A) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof and (B) the
due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 2 hereof, none of the Company or any
affiliate of the Company (as defined in Rule 501(b) under the 1933 Act)
has directly or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the 1933 Act) by or for the Company that are of the same or
similar class as the Securities (other than with respect to the
Exchange Notes) in a manner that would require the registration of the
Securities under the 1933 Act.
(vi) Assuming (A) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof and (B) the
due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 2 hereof, none of the Company or any
affiliate of the Company or any person acting on their behalf has (x)
engaged, in connection with the offering of the Securities, in any form
of general solicitation or general advertising (as those terms are used
within the meaning of Regulation D); or (y) solicited offers for, or
offered or sold, such Securities by means of any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the 1933 Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the 1933 Act.
(vii) KPMG Peat Marwick, which is reporting upon the audited
financial statements and related notes included in the Offering
Memorandum, are independent
<PAGE> 6
5
auditors with respect to the Company within the meaning of the
standards established for independent public accountants in Colombia
and under rule 101 of the AICPA's Code of Professional Conduct, and its
interpretations and rulings.
(viii) The financial statements included in the Offering
Memorandum present fairly the financial position of the Company as of
the dates indicated and the results of operations and cash flows of the
Company for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles in
Colombia applied on a consistent basis ("Colombian GAAP") and contain a
reconciliation of net income (loss) and shareholders equity under
Colombian GAAP to the amounts in accordance with generally accepted
accounting principles in the United States ("U.S. GAAP") throughout the
periods involved. The financial statement schedules, if any, included
in the Offering Memorandum present fairly the information required to
be stated therein. The selected financial data included in the Offering
Memorandum present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Offering Memorandum. The pro forma financial
information included in the Offering Memorandum present fairly the
information shown therein in accordance with the assumptions and
adjustments described therein, have been properly compiled on the pro
forma bases described therein and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(ix) The Company is a sociedad anonima de economia mixta duly
organized and existing under the laws of Colombia with the requisite
power and authority under such laws to own, lease and operate its
properties and to carry on the business of providing cellular
telecommunications services as described in the Offering Memorandum,
and the Company does not own or hold any material properties or assets
other than those incidental to its cellular telecommunications
business; the Company is duly qualified to transact business as a
foreign corporation and is in good standing in each jurisdiction in
which it owns or leases property of a nature, or transacts business of
a type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the Company; and the Company has no
subsidiaries.
(x) The Company does not, directly or indirectly, own any
equity or long term debt securities of any corporation, company, firm,
partnership, joint venture or other entity.
<PAGE> 7
6
(xi) The Company had, at the date indicated in the Offering
Memorandum, a duly authorized, issued and outstanding capitalization as
set forth in the Offering Memorandum under the caption
"Capitalization."
(xii) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable; and, except as described in the Offering
Memorandum, are free of any liens, claims or encumbrances of any kind;
and none of the outstanding shares of capital stock of the Company was
issued in violation of the preemptive rights of any stockholder of the
Company. Except as described in the Offering Memorandum, there are no
outstanding options to purchase, or any rights or warrants to subscribe
for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell, any shares of the Company's
capital stock or any such warrants, convertible securities or
obligations; the shareholders of the Company have no preemptive or
other rights to acquire the Warrant Shares that have not been waived;
and there are no restrictions on transfer of any class of the Company's
capital stock except with respect to the right of first refusal to
purchase shares from any shareholder as described in the Offering
Memorandum.
(xiii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xiv) The Notes Registration Rights Agreement has been duly
authorized by the Company and, as of the Closing Time, will be duly
executed and delivered by the Company and will constitute a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms except as (x) the enforceability thereof may
be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium
or similar laws affecting creditors' rights generally, (y) the
enforcement thereof may be subject to general equitable principles
(regardless of whether enforcement is considered in a proceeding in
equity or at law) and (z) any rights to indemnity and contribution may
be limited by federal and state securities laws and public policy
considerations; and the Notes Registration Rights Agreement conforms in
all material respects to the description thereof in the Offering
Memorandum.
(xv) The Indenture has been duly authorized by the Company,
will be substantially in the form heretofore delivered to the Initial
Purchasers and, when duly executed and delivered by the Company and the
Trustee, will constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
<PAGE> 8
7
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except as
enforcement thereof may be subject to general equitable principles
(regardless of whether enforcement is considered in a proceeding in
equity or at law); and the Indenture conforms in all material respects
to the description thereof in the Offering Memorandum.
(xvi) The Notes have been duly authorized by the Company. When
executed, authenticated, issued and delivered in the manner provided
for in the Indenture and sold and paid for as provided in this
Agreement, the Notes will constitute valid and binding obligations of
the Company entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof may be subject to general equitable principles (regardless of
whether enforcement is considered in a proceeding in equity or at law);
and the Notes conform in all material respects to the description
thereof in the Offering Memorandum.
(xvii) The Warrants have been duly authorized by the Company
and, when duly executed and countersigned in accordance with the
provisions of the Warrant Agreement, and delivered and attached to the
Notes in the manner provided for herein, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Warrant
Agreement; and the Warrants conform in all material respects to the
description thereof in the Offering Memorandum.
(xviii) The Company will have prior to the Exercise
Commencement Date duly reserved a sufficient number of shares of Class
B Common Stock to enable the exercise in full of the Warrants prior to
the Exercise Commencement Date; and the Warrant Shares, when paid for
and delivered in accordance with the terms of the Warrants and the
Warrant Agreement, will be validly issued, fully paid and nonassessable
Class B Common Stock, and not subject to preemptive or similar rights
of any other person.
(xix) The Warrant Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms except as (x) the enforceability thereof may
be limited by bankruptcy, insolvency (including,
<PAGE> 9
8
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors' rights
generally, (y) the enforcement thereof may be subject to general
equitable principles (regardless of whether enforcement is considered
in a proceeding in equity or at law) and (z) any rights to indemnity
and contribution may be limited by federal and state securities laws
and public policy considerations; and the Warrant Agreement conforms in
all material respects to the description thereof in the Offering
Memorandum.
(xx) Since the respective dates as of which information is
given in the Offering Memorandum, except as otherwise stated therein or
contemplated thereby, there has not been (A) any material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company (a "Material Adverse
Change") whether or not arising in the ordinary course of business, (B)
any transaction entered into by the Company, other than in the ordinary
course of business, that is material to the Company or (C) any dividend
or distribution of any kind declared, paid or made by the Company on
its capital stock.
(xxi) The Concession is in full force and effect, and no
material default exists under any of the terms thereof. The Company has
prepared and filed all documents required to be filed by it pursuant to
the Concession and has paid all fees, charges and assessments payable
by it which have become due pursuant to the Concession other than those
of which the failure to pay, individually or in the aggregate, would
not result in any Material Adverse Change or otherwise result in the
suspension or revocation of the Concession; and the Concession conforms
to the description thereof included in the Offering Memorandum.
(xxii) The Company is not (x) in violation of its estatutos
sociales, (y) in default (nor, with notice or lapse of time or both,
would it be in default) in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease, license,
authorization, permit, certificate or other agreement or instrument to
which it is a party or by which it may be bound or to which any of its
properties may be subject except for such defaults that in the
aggregate would not result in any Material Adverse Change or (z) in
violation of any law, rule, regulation, judgment, order or decree of
any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its properties,
or, to the actual knowledge of the Company, other governmental or
regulatory authority, agency or other body except in all cases as
otherwise disclosed in the Offering Memorandum and except for such
violations that in the aggregate would not result in any Material
Adverse Change. The execution and delivery by the Company of this
Agreement, the
<PAGE> 10
9
Notes Registration Rights Agreement, the Indenture and the Warrant
Agreement, the issuance, sale and delivery of the Notes and, if issued,
the Exchange Notes, the Warrants, the Warrant Shares and the Units by
the Company, the consummation by the Company of the transactions
contemplated in this Agreement and the Offering Memorandum and the
compliance by the Company with the terms of this Agreement, the Notes
Registration Rights Agreement, the Indenture and the Warrant Agreement
(i) have been duly authorized by all necessary corporate action on the
part of the Company, (ii) do not and will not result in any violation
of the estatutos sociales of the Company, and (iii) do not and will not
conflict with, or give rise to any right to accelerate the maturity or
require the prepayment of any indebtedness under, or result in a breach
of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company under, (A) any contract,
indenture, mortgage, loan agreement, note, lease, license,
authorization, permit, certificate or other agreement or instrument to
which the Company is a party or by which it may be bound or to which
any of its properties may be subject or (B) any existing applicable
law, rule, regulation, judgment, order or decree of any government,
governmental instrumentality, court or arbitrator, domestic or foreign,
having jurisdiction over the Company or any of its properties, or, to
the actual knowledge of the Company, other governmental or regulatory
authority, agency or other body except in all cases as otherwise
disclosed in the Offering Memorandum and except for those violations,
defaults, breaches, conflicts, liens, charges or encumbrances that in
the aggregate would not result in any Material Adverse Change.
(xxiii) Assuming (A) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof and (B) the
due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 2 hereof, no authorization, approval,
consent, exemption, order, decree or license of any government,
governmental instrumentality, court or arbitrator, domestic or foreign
(other than such as may be required under the 1933 Act and the rules
and regulations thereunder with respect to the Notes Registration
Rights Agreement and the Warrant Agreement and the transactions
contemplated thereunder and the securities or "blue sky" laws of the
various states) is (x) required (1) for the valid authorization,
issuance, sale and delivery of the Notes, the Warrants and the Warrant
Shares, and the Units, respectively, (2) for the execution, delivery or
performance by the Company of this Agreement, the Notes Registration
Rights Agreement, the Indenture and the Warrant Agreement or (3) for
the consummation by the Company of the transactions contemplated in
this Agreement and the Offering Memorandum, or (y) required to permit
the Company to (1) effect payments of principal of and premium and
interest on the Notes and, if issued, the Exchange Notes, or (2)
perform
<PAGE> 11
10
its other obligations under the Indenture or the Warrant Agreement,
except, in all cases, the registration of the terms of the Notes and
the Notes with Banco de la Republica which shall be completed at or
prior to the Closing Time, the approvals from the Ministry of
Communications with respect to the exercise of the Warrants and the
Colombian Superintendency of Securities as to the ADRs and the
corporate and governmental approvals or actions necessary for the
issuance of the ADRs and the Warrant Shares as described in the
Offering Memorandum and except, in all cases, such other authorizations
are approvals as have been obtained and are in full force and effect.
(xxiv) Except as disclosed in the Offering Memorandum, there
is no action, suit or proceeding before or by any government,
governmental instrumentality, court or arbitrator, domestic or foreign,
now pending or, to the knowledge of the Company, threatened against the
Company or any of its officers, in their capacity as such, or to which
any of the Company's assets are subject that, individually or in the
aggregate, could result in any Material Adverse Change or that could
adversely affect the consummation of the transactions contemplated in
this Agreement and the Offering Memorandum.
(xxv) There are no contracts or documents of a character that
would be required to be described in the Offering Memorandum, if it
were a prospectus filed as part of a registration statement on Form S-1
under the 1933 Act, that are not described as would be so required. All
such contracts to which the Company is party have been duly authorized,
executed and delivered by the Company and constitute valid and binding
agreements of the Company.
(xxvi) The Company has good and marketable title to all
properties and assets described in the Offering Memorandum as owned by
it, free and clear of all liens, charges, encumbrances, pledges,
mortgages or security interests, except such as (A) are described in
the Offering Memorandum or (B) are neither material in amount nor
materially significant in relation to the business of the Company; all
of the leases and subleases material to the business of the Company,
and under which the Company holds properties described in the Offering
Memorandum, are in full force and effect, and the Company has not
received any notice of any claims with respect thereto that
individually or in the aggregate, if the subject of an unfavorable
decision, could result in any Material Adverse Change.
(xxvii) The Company owns, possesses or has obtained all
material governmental licenses, permits, certificates, consents,
orders, approvals and other authorizations necessary to own or lease
its properties, or to hold all concessions, as
<PAGE> 12
11
the case may be, including the Concession, and to operate its
properties and to carry on its business as presently conducted, and the
Company has not received any notice of proceedings relating to
revocation or modification in any materially adverse respect of any
such concessions, licenses, permits, certificates, consents, orders,
approvals or authorizations.
(xxviii) The Company owns, possesses or has the right to use
adequate patents, patent licenses, trademarks, service marks and
service and trade names necessary to carry on its business as presently
conducted (collectively, "Intellectual Property"), and the Company has
not received any notice of infringement of or conflict with asserted
rights of others with respect to any Intellectual Property that in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, could result in any Material Adverse Change.
(xxix) To the best knowledge of the Company, no labor problem
exists with its employees or is imminent that could result in any
Material Adverse Change.
(xxx) Each of this Agreement, the Indenture, the Notes
Registration Rights Agreement and the Warrant Agreement and any other
document required to be furnished hereunder or thereunder is in proper
legal form under the laws of Colombia for the enforcement thereof
against the Company in Colombia without further action on the part of
the Initial Purchasers, the Trustee or the Warrant Agent (provided that
an official Spanish translation of any agreement or instrument is
required to bring an action thereon in the courts of Colombia); and to
ensure the validity, enforceability or admissibility in evidence in
Colombia of this Agreement, the Indenture, the Notes, the Notes
Registration Rights Agreement, the Warrant Agreement, the Warrants or
any other document required to be furnished hereunder or thereunder, it
is not necessary that this Agreement, the Indenture, the Notes, the
Notes Registration Rights Agreement, the Warrant Agreement, the
Warrants or such related document be submitted to or filed or recorded
with any court or governmental agency or body in Colombia, with the
exception of the registration of the terms of the Notes and the
Warrants with Banco de la Republica which will have been obtained at or
prior to the Closing Time, or any tax, imposition or charge be paid on
or in respect of this Agreement, the Indenture, the Notes, the Notes
Registration Rights Agreement, the Warrant Agreement, the Warrants or
such related document with respect to the institution of any judicial
proceeding to enforce such agreement or instrument in Colombia or to
obtain an exequatur in order to be able to enforce the foreign judgment
in Colombia.
<PAGE> 13
12
(xxxi) No event with respect to the Company has occurred and
is continuing which, upon issuance of the Notes, the Warrants or the
Units would (whether or not with the giving of notice and/or the
passage of time and/or the fulfillment of any other requirement)
constitute an event of default, or breach under, as described in the
Indenture or the Warrant Agreement, respectively.
(xxxii) The Company is subject to civil and commercial law
with respect to its obligations hereunder, and the execution, delivery
and performance of this Agreement, the Indenture, the Notes, the Notes
Registration Rights Agreement, the Warrant Agreement and the Warrants
by the Company constitute private and commercial acts rather than
public or governmental acts. Neither the Company nor any of its
properties has any sovereign immunity from jurisdiction or suit of any
court or from set-off or from any legal process or remedy (whether
through service, notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) under the laws of Colombia.
(xxxiii) The Company has not taken and will not take, directly
or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the
price of the Securities.
(xxxiv) Assuming (A) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof and (B) the
due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 2 hereof, it is not necessary in
connection with the offer, sale and delivery of the Securities to the
Initial Purchasers under, or in connection with the initial resale of
such Securities by the Initial Purchasers in accordance with, this
Agreement to register the Securities under the 1933 Act or to qualify
any indenture in respect of the Securities under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
(xxxv) The Company has complied with all applicable provisions
of Florida H.B. 1771, codified as Section 517.057 of the Florida
Statutes, and all regulations promulgated thereunder relating to
issuers doing business in Cuba.
(xxxvi) No part of the proceeds of the sale of the Securities
will be used for any purpose that violates the provisions of any of
Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System or any other regulation of such Board of Governors.
(xxxvii) Except as described in the Offering Memorandum, the
Company has filed all tax returns that are required to have been filed
by it, and has paid all
<PAGE> 14
13
taxes due pursuant to such returns or pursuant to any assessment
received by the Company, except for such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been
provided. The charges, accruals and reserves on the books of the
Company in respect of any income and corporation tax liability for any
years not finally determined are adequate to meet any assessments or
re-assessments for additional income tax for any years not finally
determined, except to the extent of any inadequacy that would not
result in any Material Adverse Change and such as do not materially
adversely affect the ability of the Company to repay the Notes on a
timely basis. Except as described in the Offering Memorandum, there are
no disputes pending or, to its knowledge, threatened, between the
Company and any governmental taxing authority which could result in any
Material Adverse Change.
(xxxviii) Except as described in the Offering Memorandum, as
of the date hereof, no income, stamp or other taxes or levies, imposts,
deductions, charges, compulsory loans or withholdings whatsoever are or
will be, under applicable law in Colombia, imposed, assessed, levied or
collected by Colombia or any political subdivision or taxing authority
thereof or therein or on or in respect of principal, interest,
premiums, dividends or other distributions and penalties or other
amounts payable under the Notes and, if issued, the Exchange Notes, the
Warrants or the Warrant Shares or on account of this Agreement or any
payments hereunder.
(xxxix) Except as set forth in the Offering Memorandum under
"Description of the Notes -- Ranking," the obligations of the Company
under the Indenture and the Notes issued thereunder, are and shall at
all times be general senior unsecured obligations of the Company,
ranking pari passu in right of payment with all other existing and
future unsecured and unsubordinated indebtedness of the Company
outstanding from time to time (other than obligations preferred by
statute or operation of law).
(xl) Except as described in the Offering Memorandum, it is not
necessary under the laws of Colombia that any of the holders of the
Securities be licensed, qualified or entitled to carry on business in
Colombia by reason solely of the execution, delivery, performance or
enforcement of this Agreement, the Indenture, the Notes Registration
Rights Agreement or the Warrant Agreement.
(xli) Except as described in the Offering Memorandum,
non-Colombian holders of Notes or Warrants will not be deemed resident,
domiciled, carrying on business or subject to taxation in Colombia
solely by reason of the execution, delivery, performance or enforcement
of this Agreement, the Indenture, the Notes Registration Rights
Agreement or the Warrant Agreement, except as described in the
<PAGE> 15
14
Offering Memorandum. Non-Colombian holders of the Warrant Shares will
be subject to Colombian taxes and Colombian foreign investment
registration and regulations, as described in the Offering Memorandum.
(xlii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A)
transactions are generally executed in accordance with management's
general or specific authorization; (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with Colombian GAAP and to maintain accountability for assets; (C)
access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(xliii) Except as disclosed in the Offering Memorandum, there
are no holders of securities of the Company who have the right to
require the Company to register securities held by them under the 1933
Act.
(xliv) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(xlv) Except as disclosed in the Offering Memorandum and
except as would not individually or in the aggregate result in a
Material Adverse Change, to the Company's knowledge (A) the Company is
in compliance with all applicable Environmental Laws, (B) the Company
has obtained all permits, authorizations and approvals required under
any applicable Environmental Laws and is in compliance with their
requirements, (C) there are no pending or threatened Environmental
Claims against the Company, and (D) there are no circumstances with
respect to any property or operations of the Company that could
reasonably be anticipated to form the basis of an Environmental Claim
against the Company.
For purposes of this Agreement, the following terms shall have
the following meanings: "Environmental Law" means any Colombian (or
other applicable jurisdiction's) national, regional, local or municipal
statute, law, rule, regulation, ordinance, code, policy or rule of law
and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent, decree or judgment,
relating to the environment, health, safety or any chemical, material
or substance, exposure to which is prohibited, limited or regulated by
any governmental authority. "Environmental Claims" means any and all
administrative, regulatory or judicial
<PAGE> 16
15
actions, suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigations or proceedings relating in any way to any
Environmental Law.
(b) Any certificate signed by any officer of the Company and
delivered to the Initial Purchasers or to counsel for the Initial Purchasers
shall be deemed a representation and warranty by the Company to the Initial
Purchasers as to the matters covered thereby.
Section 2. Purchase, Sale and Resale of the Securities;
Closing; Representations and Warranties of the Initial Purchasers. (a) On the
basis of the representations and warranties herein contained, and subject to the
terms and conditions herein set forth, the Company agrees to sell to each of the
Initial Purchasers, severally and not jointly, and each of the Initial
Purchasers severally agrees to purchase from the Company, at a purchase price of
US$508.532 per Unit, Securities in the principal amount set forth opposite each
name on Schedule I.
(b) Payment of the purchase price for, and delivery of, the
Securities shall be made at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022, or at such other place as shall be agreed upon
by the Company and the Initial Purchasers, at 10:00 A.M., New York time, on June
7, 1996 or at such other time not more than ten full business days thereafter as
the Initial Purchasers and the Company shall determine (such date and time of
payment and delivery being herein called the "Closing Time"). The Securities
shall be in such denominations and registered in such names as the Initial
Purchasers may request in writing at least two business days before the Closing
Time. The Securities, which may be in temporary form, will be made available in
New York City for examination and packaging by the Initial Purchasers not later
than 10:00 A.M. on the last business day prior to the Closing Time.
(c) At the Closing Time, payment shall be made to the Company
in the aggregate amount of US$96,999,937 by certified or official bank check or
checks in New York Clearing House or similar next day funds payable to the order
of the Company against delivery of the Units to the Initial Purchasers.
(d) Each Initial Purchaser has advised the Company that it
proposes to and hereby represents and warrants to and agrees with the Company
that it will offer the Units for sale upon the terms and conditions set forth in
this Agreement and in the Offering Memorandum. Each Initial Purchaser hereby
severally represents and warrants to the Company that it is a Qualified
Institutional Buyer as defined in Rule 144A and an "Accredited Investor" as
defined in Rule 501 of Regulation D. Each Initial Purchaser severally represents
and agrees with the Company that it and each of its affiliates and any
<PAGE> 17
16
person acting on its behalf (i) has not and will not solicit offers for, or
offer or sell, the Units by means of any form of general solicitation or general
advertising or in any manner involving a public offering within the meaning of
Section 4(2) of the 1993 Act, or, with respect to Units sold in reliance on
Regulation S, by means of any directed selling efforts (as defined in Rule 902
of Regulation S) in the United States and (ii) has and will solicit offers for
the Units only from, and will offer, sell or deliver the Units, as part of its
initial offering, only to (A) persons in the United States whom the Initial
Purchasers reasonably believe to be Qualified Institutional Buyers (or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
such Initial Purchaser that each such account is a Qualified Institutional
Buyer) to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A, and, in each case, in a transaction under Rule 144A, (B)
other institutional investors that the Initial Purchasers reasonably believe to
be Accredited Investors (or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to such Initial Purchaser that each such
account is an Accredited Investor), provided, however that each such Accredited
Investor executes and delivers to such Initial Purchaser and the Company, prior
to the consummation of any sale of Units to such Accredited Investor, an
investor letter in substantially the form attached hereto as Annex A (an
"Investor Letter") and (C) non-U.S. persons outside the United States to whom
the Initial Purchasers reasonably believe offers and sales of the Units may be
made in reliance upon Regulation S, in transactions meeting the requirements of
Regulation S under the 1933 Act; provided that, with respect to clause (B), each
such transfer of Units is effected by the delivery to such purchaser of Units in
definitive form and registered in its name (or its nominee's name) on the books
maintained by the Trustee.
(e) Each Initial Purchaser has advised the Company and hereby
represents and warrants to and agrees with the Company that it has not offered
or sold and will not offer or sell, any Units, directly or indirectly, in
Colombia. Each Initial Purchaser further agrees to send to any dealer who
purchases Units from such Initial Purchaser a notice to the effect that, by
purchasing such Units, such dealer represents and agrees that it has not offered
or sold, and will not offer or sell, directly or indirectly, such Units in
Colombia, and that such dealer will deliver to any other dealer to whom it sells
such Units a notice containing substantially the same statement as is contained
in this sentence. The Initial Purchasers represent and warrant that the
aggregate of the number of potential investors that attended the marketing
meetings conducted for the offering of Units and the number of investors that
have agreed to purchase Units (without duplication) does not exceed ninety-nine
investors.
<PAGE> 18
17
(f) Each Initial Purchaser severally represents, warrants and
agrees that (i) it has not offered or sold and prior to the expiration of the
period six months after the date of issue of the Securities will not offer to
sell in the United Kingdom, by means of any document, any Units, Notes and
Warrants to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Public Offers of Securities Regulations 1995
and the Financial Services Act 1986 with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom
and (iii) it has only issued or passed on, and will only issue or pass on to any
person, in the United Kingdom, any document received by it in connection with
the issue of the Offered Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom such document may otherwise
lawfully be issued or passed on.
Section 3. Certain Covenants of the Company. The Company
covenants with the Initial Purchasers as follows:
(a) The Company will not at any time make any amendment or
supplement to the Offering Memorandum of which the Initial Purchasers
shall not have previously been advised and furnished a copy or to which
the Initial Purchasers or the Initial Purchasers' counsel shall
reasonably object.
(b) The Company will promptly deliver to the Initial
Purchasers, without charge, during the period from the date hereof to
the date of the completion of the distribution of the Securities by the
Initial Purchasers, such number of copies of the Offering Memorandum,
as it may then be amended or supplemented, or the Preliminary Offering
Memorandum, as it may then be amended or supplemented, as the Initial
Purchasers may reasonably request.
(c) If, at any time prior to completion of the distribution of
the Securities by the Initial Purchasers, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of
the Initial Purchasers' counsel or counsel for the Company, to amend or
supplement the Offering Memorandum in order that the Offering
Memorandum will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading or if, in the opinion of the
Initial Purchasers' counsel or counsel for the Company, it
<PAGE> 19
18
is necessary to amend or supplement the Offering Memorandum to comply
with applicable law, the Company, at its own expense, will promptly
prepare such amendment or supplement as may be necessary so that the
statements in the Offering Memorandum as so amended or supplemented
will not, in the light of the circumstances existing at the time it is
delivered to a purchaser, be misleading or so that such Offering
Memorandum as so amended or supplemented will comply with applicable
law, as the case may be, and furnish the Initial Purchasers such number
of copies as the Initial Purchasers may reasonably request.
(d) The Company will endeavor, in cooperation with the Initial
Purchasers, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions as
the Initial Purchasers may reasonably designate and to maintain such
qualifications in effect for a period of not less than a year from the
date of the Offering Memorandum; provided, however, that the Company
shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject. The Company will
file such statements and reports as may be required by the laws of each
jurisdiction in which the Securities have been qualified as above
provided. The Company will also supply the Initial Purchasers with such
information as is necessary for the determination of the legality of
the Securities for investment under the laws of such jurisdictions as
the Initial Purchasers may reasonably request.
(e) Except following the effectiveness of the Registration
Statement and pursuant to the terms thereof, neither the Company nor
any of its affiliates (as such term is defined in Rule 501(b) of
Regulation D) will solicit any offer to buy or offer to sell the
Securities by means of any form of general solicitation or general
advertising (within the meaning of Rule 502(c) of Regulation D) or in
any manner involving a public offering within the meaning of Section
4(2) of the 1933 Act.
(f) Except following the effectiveness of the Registration
Statement and pursuant to the terms thereof, the Company will not and
will request its affiliates (as such term is defined in Rule 501(b) of
the 1933 Act) not to offer, sell or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the 1933 Act) the
offering of which security could be integrated with the sale of the
Securities in a manner that would require the registration of any of
the Securities under the 1933 Act.
<PAGE> 20
19
(g) The Company will not be or become an open-end investment
company, unit investment trust or face-amount certificate company that
is or is required to be registered under the 1940 Act, and will not be
or become a closed-end investment company required to be registered,
but not registered, thereunder.
(h) During the period from the Closing Time to the earlier of
(i) three years after the Closing Time or (ii) the date of
effectiveness of the Registration Statement, the Company will not, and
will request its affiliates (as such term is defined in Rule 144 under
the 1933 Act) not to, resell any of the Securities that have been
reacquired thereby, except for Securities purchased by the Company or
any of its affiliates and resold in a transaction registered under the
1933 Act.
(i) The Company will file with the Trustee and provide the
holders of Notes, within 15 days after it files them with the
Commission, copies of its annual and quarterly reports and other
information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may by rules and regulations
prescribe) which the Company is required to file with the Commission
pursuant to Section 13(a) or 15(d) of the 1934 Act. Notwithstanding
that the Company may not be required to remain subject to the reporting
requirements of Section 13(a) or 15(d) of the 1934 Act or otherwise
report on an annual and quarterly basis on forms provided for such
annual and quarterly reporting pursuant to rules and regulations
promulgated by the Commission, the Company will file with or furnish to
the Commission and provide to the Trustee and to the holders of Notes
and potential purchasers of Notes upon written request to the Trustee
by any holder of Notes, potential purchaser of Notes or Initial
Purchaser: (i) within 140 days after the end of each fiscal year,
annual reports on Form 20-F (or any successor form) containing the
information required to be contained therein (or required in such
successor form); (ii) within 60 days after the end of each of the first
three fiscal quarters of each fiscal year, reports on Form 6-K (or any
successor form) containing substantially the same information required
to be contained in Form 10-Q (or required in any successor form); and
(iii) promptly from time to time after the occurrence of an event
required to be therein reported, such other reports on Form 6-K (or any
successor form) containing substantially the same information required
to be contained in Form 8-K (or required in any successor form). Prior
to the filing of the Registration Statement with the Commission and in
the event that the Company never becomes subject to the reporting
requirements of Section 13(a) or 15(d) of the 1934 Act, the Company
will provide to the Trustee and to the holders of Notes, and potential
purchasers of Notes upon written request to the Trustee by any holder
of Notes, potential purchaser of Notes or Initial Purchaser, all of the
information that would have been required to have been filed with the
Commission pursuant to clauses (i), (ii) and (iii) above at
<PAGE> 21
20
such time as the Company would have been required to provide such
information to the Commission pursuant to such clauses (i), (ii) and
(iii) above. Financial statements of the Company contained in any such
report will be prepared in accordance with Colombian GAAP and each such
report referred to in clauses (i) and (ii) above will contain a
reconciliation to U.S. GAAP consistently applied and will be prepared
in accordance with the applicable rules and regulations of the
Commission. For a period of four years after the Closing Time, the
Company will make available to the Initial Purchasers upon request
copies of all such documents, reports and information, except with
respect to such documents, reports and information, or portions
thereof, which were made as confidential submissions to the Commission
together with such other documents, reports and information as shall be
furnished by the Company to the holders of the Notes issued by it.
(j) If requested by the Initial Purchasers, the Company will
use its best efforts in cooperation with the Initial Purchasers to (i)
permit the Securities sold in transactions described in Sections
2(d)(ii)(A) and (c) hereof to be eligible for clearance and settlement
through The Depository Trust Company, and (ii) include quotation of the
Securities on PORTAL.
(k) Each Security will bear the following legend until such
legend shall no longer be necessary or advisable because such Security
is no longer subject to the restrictions on transfer described therein:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY), ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS
<PAGE> 22
21
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT
A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER
SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRUSTEE. THE ISSUANCE OF THE NOTES AND THE
WARRANTS HAS BEEN APPROVED BY THE COLOMBIAN SUPERINTENDENCY OF
CORPORATIONS (SUPERINTENDENCIA DE SOCIEDADES). SUCH APPROVAL
DOES NOT IMPLY AN APPROVAL OF THE QUALITY OF THE NOTES AND THE
WARRANTS OR THE SOLVENCY OF THE COMPANY. THE NOTES AND THE
WARRANTS MAY NOT BE OFFERED OR SOLD IN THE REPUBLIC OF
COLOMBIA.
(l) The Company will apply the net proceeds that it receives
from the offer and sale of the Securities issued by it in the manner
set forth with respect to it in the Offering Memorandum under the
caption "Use of Proceeds."
<PAGE> 23
22
(m) Except following the effectiveness of the Registration
Statement, none of the Company, any affiliates (as such term is defined
in Rule 501(b) of Regulation D) or any person acting on behalf thereof
(other than the Initial Purchasers) will engage in any directed selling
efforts (as such term is defined under Regulation S) in the United
States with respect to the Securities, and each of the Company, such
affiliate and such other person acting on behalf thereof will comply
with the offering restrictions requirement of Regulation S.
(n) Prior to the Closing Time, the Company will not issue any
press release or other communications directly or indirectly or hold
any press conference with respect to the Company, the condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Company, without the Initial Purchasers' prior written
consent (which shall not be unreasonably withheld), unless in the
judgment of the Company and its counsel, and after notification to the
Initial Purchasers, such press release or communication is required by
law or except as issued in accordance with Rule 135(c) of the
Securities Act.
(o) The Company has complied and will comply with all
applicable provisions of Florida H.B. 1771, codified as Section
517.075, and all regulations promulgated thereunder relating to issuers
doing business in Cuba.
(p) For a period of 180 days from the date of the Offering
Memorandum, the Company will not, without the Initial Purchasers' prior
written consent, directly or indirectly, offer, sell, grant any option
to purchase or otherwise dispose of any debt or equity securities of
the Company, other than (i) the Notes, the Exchange Notes referred to
in the Notes Registration Rights Agreement and the Warrants (ii) Class
C Common Stock to the sector social solidario as required by Colombian
law, (iii) debt or equity securities issued to persons who are
shareholders on the date of this Agreement and (iv) capital stock
issued to employees, directors, alternate directors or officers of the
Company or any subsidiary (or permitted transferees of such employees,
directors, alternate directors or officers), pursuant to the terms of
applicable agreements (including employment agreements) or plans (or
amendments thereto) approved by the Company's Board of Directors.
(q) The Company will obtain, and keep in full force and
effect, all governmental authorizations with any court or governmental
agency that may be required for, or in connection with, the execution,
issuance, sale, legality, validity or enforceability against the
Company of the Notes, and if issued the Exchange Notes, the Warrants,
the Warrant Shares and the Units. With respect to the Warrants, the
Company shall use its best efforts to obtain, on or prior to the
Exercise
<PAGE> 24
23
Commencement Date, all Colombian corporate and governmental approvals,
registrations and authorizations, including, without limitation, the approval of
the Colombian Ministry of Communications to permit the reduction of the equity
percentage of the shareholders which have qualified as operators in Colombia, if
required, and any other necessary authorization or approval required for the
Company to ensure that the estatutos sociales are amended to eliminate the
shareholders' right of first refusal with respect to the sale of any of the
Class B Common Stock of the Company. The Company will use its best efforts to
file and cause to be declared effective the Warrant Shares Registration
Statement on or prior to the Exercise Commencement Date (as defined in the
Offering Memorandum). In the event ADRs are issued, the Company shall use its
best efforts to obtain all Colombian corporate and governmental approvals and
authorizations, including, without limitation, the approval of the Colombian
Superintendency of Securities and the Colombian Superintendency of Corporations,
necessary to issue the ADRs and to file and cause to be declared effective the
ADR Registration Statement on or prior to the Exercise Commencement Date.
Section 4. Payment of Expenses. Whether or not any sale of the
Securities is consummated, the Company will pay and bear all costs and expenses
incident to the performance of its obligations under this Agreement, including
(a) the preparation and printing of the Preliminary Offering Memorandum, the
Offering Memorandum and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Initial Purchasers, (b) the reproduction and
distribution of the Securities, this Agreement, the Notes Registration Rights
Agreement, the Indenture, the Warrant Agreement and any "blue sky" or legal
investment memoranda, (c) the delivery of the Securities to the Initial
Purchasers, (d) the fees and disbursements of the Company's counsel and
accountants, (e) the qualification of the Securities under the applicable
securities laws in accordance with Section 3(d) and any filing for review of the
offering with the NASD, including filing fees and fees (up to a maximum of
$2,000) and disbursements of counsel for the Initial Purchasers (including any
local counsel retained to render any opinion required by any state securities or
Blue Sky authorities) in connection therewith and in connection with the
preparation of any "blue sky" or legal investment memoranda, (f) any fees
charged by rating agencies for rating the Securities, (g) the fees and expenses
of the Trustee and the Warrant Agent, including the fees and disbursements of
counsel for the Trustee and the Warrant Agent, in connection with the Indenture,
the Warrant Agreement and the Securities, (h) the cost of obtaining approval for
the trading of the Securities through PORTAL and (i) promptly upon request
therefor, the reimbursement of the reasonable out-of-pocket costs and expenses
(including, without limitation, the reasonable fees and expenses of United
States and Colombian counsel), incurred by the Initial Purchasers in connection
with the negotiation, preparation and execution of this Agreement and otherwise
in connection with their purchase
<PAGE> 25
24
of the Securities, subject in the case of this clause (i) to a maximum of
US$340,000 (which shall include the Company's portion of road show expenses).
Section 5. Conditions of Initial Purchasers' Obligations. The
obligations of each Initial Purchaser to purchase and pay for the Securities
that it has severally agreed to purchase hereunder are subject to the accuracy
of the representations and warranties of the Company contained herein and in
certificates of any officer of the Company delivered pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder, and to
the following further conditions:
(a) At the Closing Time, each of the Initial Purchasers shall
have received a signed opinion of Cravath, Swaine & Moore, United
States counsel for the Company, dated as of the Closing Time, in
substantially the form attached hereto as Exhibit C. Such opinion shall
be to such further effect with respect to other legal matters relating
to this Agreement and the sale of the Securities pursuant to this
Agreement as United States counsel for the Initial Purchasers may
reasonably request. In giving such opinion, such counsel may rely, (i)
as to all matters covered by the laws of Colombia, upon the opinions of
Holguin, Neira y Pombo, and Mauricio Campillo Orozco, General Counsel
to the Company, and (ii) as to all matters governed by laws other than
the laws of Colombia and of the State of New York and the federal law
of the United States, upon opinions of other counsel, who shall be
counsel reasonably satisfactory to United States counsel for the
Initial Purchasers, in which case the opinion shall state that they
believe the Initial Purchasers are entitled to so rely. Such counsel
may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon the
representations and warranties of the Company set forth in this
Agreement and certificates of officers of the Company and certificates
of public officials; provided that such certificates have been
delivered to the Initial Purchasers.
(b) At the Closing Time, each of the Initial Purchasers shall
have received a signed opinion of Mauricio Campillo Orozco, General
Counsel to the Company, dated as of the Closing Time, in substantially
the form attached hereto as Exhibit D. Such opinion shall be to such
further effect with respect to other legal matters relating to this
Agreement and the sale of the Securities pursuant to this Agreement as
counsel for the Initial Purchasers may reasonably request. In giving
such opinion, such counsel may rely upon the opinion of Cravath, Swaine
& Moore as to all matters governed by the laws of the State of New York
and the federal law of the United States, and the Initial Purchasers
are entitled to rely thereon.
<PAGE> 26
25
(c) At the Closing Time, each of the Initial Purchasers shall
have received a signed opinion of Holguin, Neira y Pombo, special
Colombian counsel to the Company, dated as of the Closing Time, in
substantially the form attached hereto as Exhibit E. Such opinion shall
be to such further effect with respect to other legal matters relating
to this Agreement and the sale of the Securities pursuant to this
Agreement as United States counsel for the Initial Purchasers may
reasonably request. In giving such opinion, such counsel may rely upon
the opinion of Cravath, Swaine & Moore as to all matters governed by
the laws of the State of New York and the federal law of the United
States, and the Initial Purchasers are entitled to rely thereon. Such
counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon the
representations and warranties of the Company set forth in this
Agreement and certificates of officers of the Company and certificates
of public officials; provided that such certificates have been
delivered to the Initial Purchasers.
(d) At the Closing Time, each of the Initial Purchasers shall
have received a signed opinion of Dunnington, Bartholow & Miller,
counsel to the Trustee and the Warrant Agent, dated as of the Closing
Time, in substantially the form attached hereto as Exhibit F. Such
opinion shall be to such further effect with respect to other legal
matters relating to the sale of the Securities, the Indenture and the
Warrant Agreement as United States counsel for the Initial Purchasers
may reasonably request.
(e) At the Closing Time, each of the Initial Purchasers shall
have received a signed opinion of Brigard & Urrutia Abogados, Colombian
counsel to the Initial Purchasers, dated as of the Closing Time. Such
opinion shall be to such further effect with respect to other legal
matters relating to this Agreement and the sale of the Securities
pursuant to this Agreement as United States counsel for the Initial
Purchasers may reasonably request. In giving such opinion, such counsel
may rely, upon the opinion of Shearman & Sterling as to all matters
governed by the laws of the State of New York and the federal law of
the United States, and the Initial Purchasers are entitled to rely
thereon. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem
proper, upon the representations and warranties of the Company set
forth in this Agreement and certificates of officers of the Company and
certificates of public officials; provided that such certificates have
been delivered to the Initial Purchasers.
(f) At the Closing Time, each of the Initial Purchasers shall
have received the favorable opinion of Shearman & Sterling, United
States counsel for the Initial Purchasers, dated as of the Closing
Time, to the effect that the opinions delivered pursuant to Sections
5(a), 5(b), 5(c), 5(d) and 5(e) appear on their face to be
<PAGE> 27
26
appropriately responsive to the requirements of this Agreement except,
specifying the same, to the extent waived by the Initial Purchasers,
and with respect to the Securities, the Indenture, the Notes
Registration Rights Agreement, the Warrant Agreement, the Offering
Memorandum and such other related matters as the Initial Purchasers may
require. In giving such opinion such counsel may rely, as to all
matters governed by laws other than the law of the State of New York
and the federal law of the United States, upon the opinions of counsel
satisfactory to the Initial Purchasers. Such counsel may also state
that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon the representations and
warranties of the Company set forth in this Agreement and certificates
of officers of the Company and certificates of public officials;
provided that such certificates have been delivered to the Initial
Purchasers.
(g) At the Closing Time, (i) the Offering Memorandum, as it
may then be amended or supplemented, shall not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, (ii) there shall not have been, since the respective dates
as of which information is given in the Offering Memorandum, any
Material Adverse Change, whether or not arising in the ordinary course
of business, (iii) no action, suit or proceeding at law or in equity
shall be pending or, to the knowledge of the Company, threatened
against the Company that would be required to be set forth in the
Offering Memorandum other than as set forth therein and no proceedings
shall be pending or, to the knowledge of the Company, threatened
against the Company before or by any government, governmental
instrumentality, court or arbitrator, domestic or foreign, that could
reasonably result in any material adverse change in the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company other than as set forth in the Offering
Memorandum, (iv) the Company shall have in all material respects
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied at or prior to the Closing Time, (v) no
event of default shall exist under any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which
the Company is a party or to which the Company is subject that in the
aggregate could result in a Material Adverse Change and (vi) the other
representations and warranties of the Company set forth in Section 1(a)
shall be accurate in all material respects as though expressly made at
and as of the Closing Time. At the Closing Time, each of the Initial
Purchasers shall have received a certificate of the President and the
Financial Vice President of the Company, dated as of the Closing Time,
to such effect.
<PAGE> 28
27
(h) At the time that this Agreement is executed by the
Company, each of the Initial Purchasers shall have received from KPMG
Peat Marwick, independent auditors for the Company, a letter, dated
such date, in form and substance satisfactory to the Initial
Purchasers, confirming that they are independent auditors with respect
to the Company within the meaning of the standards established for
independent public accountants in Colombia and under rule 101 of the
AICPA's Code of Professional Conduct, and its interpretations and
rulings, and stating in effect that:
(i) on the basis of procedures (but not an audit in
accordance with generally accepted auditing standards)
consisting of a reading of the latest available unaudited
interim consolidated financial statements of the Company
included in the Offering Memorandum, a reading of the minutes
of all meetings of the stockholders and directors of the
Company and the Financial Committee of the Company's Board of
Directors from January 1 to May 27, 1996 (except for those
meetings for which minutes have not yet been provided, in
which case minutes for such meetings in draft form have been
read) inquiries of certain officials of the Company
responsible for financial and accounting matters, and such
other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to
believe that:
(A) at a specified date not more than five
days prior to the date of this Agreement, there was
any change in the capital stock of the Company or
increase in long-term debt, in each case as compared
with amounts shown on the March 31, 1996 unaudited
condensed balance sheet included in the Offering
Memorandum, except in each case for such changes or
decreases that the Offering Memorandum discloses have
occurred or may occur; or
(B) for the period from April 1, 1996 to a
specified date not more than five days prior to the
date of this Agreement, there was as compared with
the comparable period in the preceding year, any
decrease in net revenues, or any increase in the
total or per share amounts of net loss, except in
each case for such decreases or increases that the
Offering Memorandum discloses have occurred or may
occur;
(ii) in addition to the procedures referred to in
clause (i) above, they have performed other specified
procedures, not constituting an audit, with respect to certain
amounts, percentages, numerical data and financial information
appearing in the Offering Memorandum, including the Selected
<PAGE> 29
28
Financial Information, which have previously been specified by
the Initial Purchasers and which shall be specified in such
letter, and have compared certain of such items with, and have
found such items to be in agreement with, the accounting and
financial records of the Company.
(i) At the Closing Time, each of the Initial Purchasers shall
have received from KPMG Peat Marwick a letter, in form and substance
satisfactory to the Initial Purchasers and dated as of the Closing
Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to Section 5(h), except that the specified
date referred to shall be a date not more than five days prior to the
Closing Time.
(j) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Time, there shall not have been any
downgrading, nor any notice given of any intended or potential
downgrading or of a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities, including the Securities, by any "nationally
recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the 1933 Act.
(k) At the Closing Time, counsel for the Initial Purchasers
shall have been furnished with all such documents, certificates and
opinions as they may reasonably request for the purpose of enabling
them to pass upon the issuance and sale of the Securities as
contemplated in this Agreement and the matters referred to in Section
5(f) and in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company, the
performance of any of the covenants of the Company, or the fulfillment
of any of the conditions herein contained; and all proceedings taken by
the Company at or prior to the Closing Time in connection with the
authorization, issuance and sale of the Securities as contemplated in
this Agreement shall be reasonably satisfactory in form and substance
to the Initial Purchasers and to counsel for the Initial Purchasers.
(l) At the Closing Time, the Notes Registration Rights
Agreement, the Indenture and the Warrant Agreement shall have been
fully executed and be in full force and effect.
(m) At the Closing Time, the Credit Agreement among the
Company, ING Bank, N.V., ING Baring (U.S.) Securities Corporation,
Merrill Lynch and the other Lenders thereto shall have been fully
executed and registered with Banco de la Republica and be in full force
and effect, the proceeds thereunder shall have been
<PAGE> 30
29
simultaneously disbursed and such proceeds shall have been
simultaneously utilized for the purposes described in the Offering
Memorandum under the caption "Use of Proceeds."
(n) At or before the Closing Time, the Initial Purchasers
shall have received a copy of the resolution of the Colombian
Superintendency of Corporations approving the issuance of the Notes and
the Warrants.
(o) At or before the Closing Time, the terms of the Notes and
the Warrants shall have been duly registered with Banco de la
Republica, and the Initial Purchasers shall have received a copy of
such registration.
(p) CT Corporation System shall have accepted its appointment
as Process Agent pursuant to Section 14, and the Initial Purchasers
shall have received a letter from the Process Agent evidencing such
acceptance.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement, this Agreement may
be terminated by the Initial Purchasers on notice to the Company at any time at
or prior to the Closing Time, and such termination shall be without liability of
any party to any other party, except as provided in Section 4. Notwithstanding
any such termination, the provisions of Sections 6, 7 and 8 shall remain in
effect.
Section 6. Indemnification. (a) The Company agrees to
indemnify and hold harmless the Initial Purchasers and each person, if any, who
controls the Initial Purchasers within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact included in any preliminary
offering memorandum or the Offering Memorandum (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission;
<PAGE> 31
30
provided that (subject to Section 6(d) below) any such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including fees and disbursements of United States and Colombian
counsel chosen by Merrill Lynch), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or any claim whatsoever, based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment or supplement thereto), or any preliminary offering
memorandum; provided further that the foregoing indemnification with respect to
any preliminary offering memorandum shall not inure to the benefit of any
Initial Purchaser (or any person controlling such Initial Purchaser) from whom
the person asserting any such losses, claims, damages or liabilities purchased
any of the Units if a copy of the Offering Memorandum (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Initial Purchaser on the
initial resale to such person, at or prior to the written confirmation of the
sale of such Units to such person and if the Offering Memorandum (as so amended
or supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability.
(b) Each Initial Purchaser severally (but not jointly) agrees
to indemnify and hold harmless the Company, its directors, each of its officers
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss,
liability, claim, damage and expense described in the indemnity agreement in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in any
preliminary offering memorandum or the Offering Memorandum (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by such Initial Purchaser through Merrill Lynch
expressly for use in such preliminary offering memorandum or the Offering
Memorandum (or any amendment or supplement thereto).
<PAGE> 32
31
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 6(a) above, counsel to the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 6(b) above, counsel to the indemnified parties
shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of such action provided, however, that counsel to the
indemnifying party shall not (except with the consent of indemnified party) also
be counsel to the indemnified party. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in addition to any
Colombian counsel) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. If it so elects within a reasonable time after receipt of such
notice, an indemnifying party, jointly with any other indemnifying parties
receiving such notice, may assume the defense of such action with counsel chosen
by it and reasonably satisfactory to the indemnified parties defendant in such
action, unless such indemnified parties reasonably object to such assumption on
the ground that representation by such counsel would be inappropriate due to
actual or potential differing interests between the indemnified and the
indemnifying parties. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel for which they are entitled to be indemnified hereunder, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after
<PAGE> 33
32
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party for such
fees and expenses of counsel in accordance with such request prior to the date
of such settlement.
Section 7. Contribution. If the indemnification provided for
in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other hand in connection with the offering of
the Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total Initial Purchasers' discount received by the Initial
Purchasers, in each case as set forth on the cover page of the Offering
Memorandum bear to the price to investors appearing thereon.
The relative fault of the Company on the one hand and the
Initial Purchasers on the other hand shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and
<PAGE> 34
33
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by it and distributed
to investors were offered to investors exceeds the amount of any damages which
such Initial Purchaser has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act shall have the same rights to contribution as such
Initial Purchaser, and each director of the Company, each officer of the
Company, and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as the Company. The Initial Purchasers' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial Securities set forth opposite their respective names in
Schedule I hereto and not joint.
Section 8. Representations, Warranties and Agreements to
Survive Delivery. The representations, warranties, indemnities, agreements and
other statements of the Company or its officers set forth in or made pursuant to
this Agreement will remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Company, the Initial Purchasers or
any person who controls the Company or the Initial Purchasers within the meaning
of Section 15 of the 1933 Act and will survive delivery of and payment for the
Securities.
Section 9. Termination of Agreement. (a) The Initial
Purchasers may terminate this Agreement, by notice to the Company, at any time
at or prior to the Closing Time (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the Offering Memorandum, any Material Adverse Change,
whether or not arising in the ordinary course of business, or (ii) if there
<PAGE> 35
34
has occurred any material adverse change in the financial markets in the United
States, Colombia or other international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, or in Colombian taxation affecting
the Company or the Securities or the transfer thereof (otherwise than as set
forth in or contemplated by the Offering Memorandum), or currency exchange rates
for the U.S. dollar into the Colombian peso or exchange controls applicable to
the U.S. dollar or the Colombian peso, in each case the effect of which is such
as to make it, in the judgment of the Initial Purchasers, impracticable to
market the Securities or to enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended or limited
by the Commission, or if trading generally on either the Colombian Stock
Exchanges, the American Stock Exchange or the New York Stock Exchange or in the
Nasdaq National Market has been suspended or limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices have been
required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
United States or Colombian governmental authority, or (iv) if a banking
moratorium has been declared by either Colombian, United States federal or New
York state authorities.
(b) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party,
except as provided in Section 4 hereof, and provided further that Sections 6 and
7 shall survive such termination and remain in full force and effect.
Section 10. Default. If one of the Initial Purchasers shall
fail at the Closing Time to purchase the Securities that it is obligated to
purchase (the "Defaulted Securities"), the non-defaulting Initial Purchaser
shall have the right, within 24 hours thereafter, to make arrangements to
purchase all, but not less than all, of the Defaulted Securities upon the terms
herein set forth; if, however, such non-defaulting Initial Purchaser has not
completed such arrangements within such 24-hour period, then:
(a) if the aggregate principal amount of Defaulted Securities
does not exceed 10% of the aggregate principal amount of the Securities
to be purchased, the non-defaulting Initial Purchaser shall be
obligated to purchase the full amount thereof, or
(b) if the aggregate principal amount of Defaulted Securities
exceeds 10% of the aggregate principal amount of the Securities to be
purchased, this Agreement shall terminate without liability on the part
of the non-defaulting Initial Purchaser.
<PAGE> 36
35
No action taken pursuant to this Section shall relieve any
defaulting Initial Purchaser from liability in respect of its default.
In the event of any such default that does not result in a
termination of this Agreement, either the Initial Purchasers or the Company
shall have the right to postpone the Closing Time for a period not exceeding
seven days in order to effect any required changes in the Offering Memorandum or
in any other documents or arrangements. As used herein, the term "Initial
Purchaser" includes any person substituted for an Initial Purchaser under this
Section 10.
Section 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Initial Purchasers shall be directed to the Initial Purchasers at
Merrill Lynch World Headquarters, North Tower, World Financial Center, New York,
New York 10281-1201, Attention: Marisa D. Drew with copies to Shearman &
Sterling at 599 Lexington Avenue, New York, New York 10022-6069, Attention: Mr.
Rohan S. Weerasinghe; and notices to the Company shall be directed to it at
Calle 50 No. 55-01, Medellin, Colombia, Attention: Mauricio Campillo, with
copies to Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York,
New York 10019-7415 Attention: Mr. Timothy G. Massad.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; at the
time received, if mailed or sent by air courier; when answered back, if telexed;
and when receipt acknowledged by recipient's telecopy operator, if telecopied.
Section 12. Parties. This Agreement is made solely for the
benefit of the Initial Purchasers, the Company and, to the extent expressed, any
person who controls the Company or any Initial Purchaser within the meaning of
Section 15 of the 1933 Act, and the directors of the Company, its officers and
their respective executors, administrators, successors and assigns and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include any purchaser, as such
purchaser, from the Initial Purchasers of the Securities.
Section 13. Governing Law and Time. This Agreement shall be
governed by the laws of the State of New York. Specified times of the day refer
to New York City time.
Section 14. Agent for Service; Submission to Jurisdiction;
Waiver of Immunities. By the execution and delivery of this Agreement, the
Company (i) acknowledges that it has, by separate written instrument, designated
and appointed CT
<PAGE> 37
36
Corporation System, 1633 Broadway, New York, New York 10019 (the "Process
Agent") (and any successor entity), as its authorized agent upon which process
may be served in any suit or proceeding arising out of or relating to this
Agreement, the Indenture, the Notes Registration Rights Agreement and the
Warrant Agreement, the Securities and, if issued, the Exchange Notes and the
Warrant Shares that may be instituted in any federal or state court in The City
of New York, Borough of Manhattan, State of New York or brought under federal or
state securities laws, and acknowledges that the Process Agent has accepted such
designation, (ii) submits to the jurisdiction of any such court in any such suit
or proceeding and (iii) agrees that service of process upon the Process Agent
and written notice of said service to the Company in accordance with Section 11
of this Agreement shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. The Company further agrees to
take any and all action, including the execution and filing of any and all such
documents and instruments, as may be necessary to continue such designation and
appointment of the Process Agent in full force and effect so long as any of the
Securities or Exchange Notes shall be outstanding; provided that the Company may
(and, to the extent the Process Agent ceases to be able to be served on the
basis contemplated herein, shall), by written notice to the Initial Purchasers
in accordance with Section 11 of this Agreement, designate such additional or
alternative agent for service of process under this Section 14 that (i)
maintains an office located in The City of New York, Borough of Manhattan, State
of New York and (ii) is a corporate service company which acts as agent for
service of process for other persons in the ordinary course of its business.
Such written notice shall identify the name of such agent for service of process
and the address of the office of such agent for service of process in The City
of New York, Borough of Manhattan, State of New York. Notwithstanding the
foregoing, any suit, action or proceeding based upon this Agreement may be
instituted by any Initial Purchaser in any competent court in Colombia.
To the extent that the Company has or hereafter may acquire
any sovereign immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such sovereign immunity, to the extent
permitted by law, in respect of its obligations under the above-referenced
documents.
Section 15. Judgment Currency. The Company agrees to indemnify
the Initial Purchasers, the officers, directors and agents or the Initial
Purchasers and each person, if any, who controls the Initial Purchasers within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any loss incurred by any of them as a result of any judgment or order being
given or made for any amount due to them under this Agreement and such judgment
or order being expressed and paid in a currency (the "Judgment
<PAGE> 38
37
Currency") other than United States dollars and as a result of any variation as
between (i) the rate of exchange at which the United States dollar amount is
converted into the Judgment Currency for the purpose of such judgment or order
and (ii) the spot rate of exchange in The City of New York at which any such
person on the date of payment of such judgment or order is able to purchase
United States dollars with the amount of the Judgment Currency actually received
by such person. The foregoing indemnity shall continue in full force and effect
notwithstanding any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, United States dollars.
Section 16. Withholding Taxes. All amounts payable by the
Company in respect of this Agreement shall be paid in U.S. dollars without
set-off or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any present or future tax, assessment or other
governmental charge or any interest or penalty thereon (collectively, "Tax")
imposed, levied, collected, assessed, or required to be deducted, withheld or
paid by or for the account of Colombia or any taxing authority or political
subdivision thereof or therein. If any such Tax is required by law to be
withheld or deducted from any such payment, the Company shall pay the full
amount of such Tax and pay such additional amounts as may be necessary to ensure
that the net amount actually received by the Initial Purchasers in respect of
such payment is equal to the amount the Initial Purchasers would have received
had no such Tax been withheld or deducted from such payment.
Section 17. Counterparts. This Agreement may be executed in
one or more counterparts and when a counterpart has been executed by each party,
all such counterparts taken together shall constitute one and the same
agreement.
<PAGE> 39
38
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company and the Initial
Purchasers in accordance with its terms.
Very truly yours,
OCCIDENTE Y CARIBE CELULAR S.A.
By /s/ Gilberto Echeverri Mejia
--------------------------------
Name: Gilberto Echeverri Mejia
Title: President
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
ING BARING (U.S.) SECURITIES, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Marisa D. Drew
---------------------------
Name: Marisa D. Drew
Title: Vice President
<PAGE> 40
SCHEDULE I
<TABLE>
<CAPTION>
Initial Purchasers Number of Units
------------------ ---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................... 162,133
ING Baring (U.S.) Securities, Inc..................................... 28,612
-------
Total........................................................ 190,745
</TABLE>
<PAGE> 41
ANNEX A
INVESTOR LETTER
Occidente y Caribe Celular S.A.
Calle 50 No. 50-01
Medellin, Colombia
and
[Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1201]
[ING Baring (U.S.) Securities, Inc.
667 Madison Avenue
New York, New York 10021]
Ladies and Gentlemen:
In connection with our proposed purchase of ___ Units, each consisting
of US$1,000 principal amount of 14% Senior Discount Notes due 2004 (the "Notes")
and four warrants (each a "Warrant") to purchase 5.709 shares of Class B Common
Stock of the Company, with a par value of 1,000 Pesos per share (the "Warrant
Shares"), at a price of US$1.00 per share (or, if greater, the U.S. dollar
equivalent of 1,000 Pesos) either as American Depositary Receipts ("ADRs"; each
ADR representing 25 Warrant Shares) or, if ADRs are not available, such Warrant
Shares of Occidente y Caribe Celular S.A. (the "Issuer"), we confirm that:
1. We understand that the Units have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
except as permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Units to offer, sell
or otherwise transfer such Units prior to the date which is three years after
the later of the date of original issue and the last date on which the Issuer or
any affiliate of the Issuer was the owner of such Units (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Issuer, (b)
pursuant to a registration statement which has been declared effective under the
Securities Act, (c) for so long as the Units are eligible for resale pursuant to
Rule 144A under the Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales to non-U.S. persons that occur outside the United States within the
meaning of Regulation S
<PAGE> 42
-2-
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act that is acquiring the Units for its own account or for the
account of such in institutional "accredited investor" for investment purposes
and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and to compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Units is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act and that it is acquiring
such Units for investment purposes and not for distribution in violation of the
Securities Act. We acknowledge that the Issuer and the Trustee reserve the right
prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Units pursuant to clauses (d), (e) and (f) above to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Issuer and the Trustee.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Units for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in violation
of the Securities Act and we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of our
investment in the Units, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment.
3. We are acquiring the Units purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
<PAGE> 43
-3-
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By: [Name of Investor]
Date:
Address: _________________________
Taxpayer ID Number: ______________
<PAGE> 44
EXHIBIT A
FORM OF
WARRANT AGREEMENT
<PAGE> 45
EXHIBIT B
FORM OF
NOTES REGISTRATION RIGHTS AGREEMENT
<PAGE> 46
EXHIBIT C, PART 1
FORM OF
OPINION OF CRAVATH, SWAINE & MOORE
[Letterhead of]
CRAVATH, SWAINE & MOORE
June 7, 1996
Occidente y Caribe Celular S.A.
US$100,000,000 Gross Proceeds
190,745 Units Consisting of
US$190,745,000 14% Senior Discount Notes due 2004 and
762,980 Warrants to Purchase
4,355,852 Shares of Class B Common Stock
Ladies and Gentlemen:
We have acted as United States counsel to Occidente y Caribe
Celular S.A., a sociedad anonima existing under the laws of Colombia (the
"Company"), in connection with the sale by the Company of 190,745 units (the
"Units") consisting of US$190,745,000 aggregate principal amount at maturity of
its 14% Senior Discount Notes due 2004 (the "Notes") and 762,980 warrants (the
"Warrants") entitling the holders thereof to purchase, under certain
circumstances, an aggregate of 4,355,852 shares of class B common stock, par
value one thousand Pesos per share, of the Company (the "Class B Common Stock"),
subject to adjustment (the "Warrant Shares"), to Merrill Lynch, Pierce, Fenner &
Smith Incorporated and ING Baring (U.S.) Securities, Inc. (collectively, the
"Initial Purchasers"), pursuant to the Purchase Agreement dated May 31, 1996
(the "Purchase Agreement") among the Initial Purchasers and the Company. The
Notes, the Warrants and the Units are collectively referred to herein as the
"Securities." The Notes are to be issued pursuant to an indenture dated as of
June 1, 1996 (the "Indenture") between the Company, as issuer, and The Bank of
New York, as trustee (the "Trustee"). The Warrants are to be issued pursuant to
a warrant agreement dated as of June 7, 1996 (the "Warrant Agreement") between
the Company and The Bank of New York, as warrant agent (the "Warrant Agent").
This opinion is furnished to you pursuant to Section 5(a) of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined herein have
the meanings ascribed thereto in the Purchase Agreement.
<PAGE> 47
C-2
In that connection, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary or
appropriate for the purposes of this opinion, including (a) the Preliminary
Offering Memorandum dated May 9, 1996, (b) the Offering Memorandum dated May 31,
1996, (c) the Purchase Agreement, (d) the Indenture, (e) the Notes Registration
Rights Agreement, (f) the Warrant Agreement and (g) specimen certificates
representing each of the Securities, and we have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Based on the foregoing and subject to the qualifications
below, we are of opinion as follows:
1. The Notes, the Indenture, the Notes Registration Rights
Agreement, the Warrants and the Warrant Agreement conform in all material
respects to the descriptions thereof contained in the Offering Memorandum.
2. Assuming that (A) the Company has all requisite corporate
power and authority to execute, deliver and perform its obligations under the
Indenture (B) the Indenture has been duly authorized, executed and delivered by
the Company and the Trustee, the Indenture constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3. Assuming that (A) the Company has all requisite corporate
power and authority to execute, deliver and perform its obligations under the
Notes, (B) the Notes have been duly authorized, executed and delivered by the
Company and (C) the Notes have been duly executed and authenticated by the
Trustee in accordance with the provisions of the Indenture and delivered to and
paid for by the Initial Purchasers pursuant to the Purchase Agreement, the Notes
constitute the valid and binding obligation of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in accordance with
their terms.
4. Assuming that (A) the Company has all requisite corporate
power and authority to execute, deliver and perform its obligations under the
Warrants, (B) the Warrants have been duly authorized, executed and delivered by
the Company and (C) the Warrants have been duly countersigned by the Warrant
Agent in accordance with the terms of the Warrant Agreement and delivered to and
paid for by the Initial Purchasers pursuant to the Purchase Agreement, the
Warrants constitute the valid and binding obligation of the Company, enforceable
against the Company in accordance with their terms.
5. Assuming that (A) the Company has all requisite corporate
power and authority to execute, deliver and perform its obligations under the
Warrant Agreement, (B) the Warrant Agreement has been duly authorized, executed
and delivered by the Company and (C) the Warrant Agreement has been duly
authorized, executed and delivered by the Warrant Agent, the Warrant Agreement
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
<PAGE> 48
C-3
6. Assuming that (A) the Company has all requisite corporate
power and authority to execute, deliver and perform its obligations under the
Notes Registration Rights Agreement (B) the Notes Registration Rights Agreement
has been duly authorized, executed and delivered by the Company and the Initial
Purchasers, the Notes Registration Rights Agreement constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
7. The statements made in the Offering Memorandum under the
caption "Taxation--United States", to the extent that they constitute matters of
law, summaries of legal matters or legal conclusions, have been reviewed by us
and are correct in all material respects.
8. None of the issue and sale of the Notes, the Warrants or
the Units, the execution and delivery by the Company of the Purchase Agreement,
the Indenture, the Notes Registration Rights Agreement or the Warrant Agreement
or the consummation of the transactions contemplated thereby in accordance with
their terms will conflict with, or result in a violation of any of the terms or
provisions of, any existing applicable United States Federal or New York State
law, rule or regulation or any judgment, order or decree of any government,
governmental instrumentality or court located in the United States having
jurisdiction over the Company or any of its properties or assets which is known
to us, except that we express no opinion in this paragraph 8 as to the
securities laws of any jurisdiction.
9. Subject to the assumptions set forth in paragraph 10, no
filing, consent, approval, authorization, order, registration or qualification
of or with any court or governmental agency or body in the United States of
America or the State of New York is required for the sale of the Securities by
the Company or the consummation by the Company of the other transactions
contemplated by the Purchase Agreement. the Indenture, the Notes Registration
Rights Agreement or the Warrant Agreement except (i) those required under the
Securities Act and the Trust Indenture Act and the rules and regulations
thereunder with respect to the Notes Registration Rights Agreement and the
Warrant Agreement and the transactions contemplated thereunder and (ii) such as
may be required under the blue sky laws of any jurisdiction.
10. Assuming (i) the accuracy of, and compliance with, the
representations, warranties and covenants of the Company in Sections 1(a)(ii),
(iii), (iv), (v) and (vi) of the Purchase Agreement, (ii) the accuracy of, and
compliance with, the representations, warranties and covenants of the Initial
Purchasers in Section 2 of the Purchase Agreement, (iii) the accuracy of the
representations and warranties of each of the purchasers to whom the Initial
Purchasers initially resell the Securities, as specified in Section 2(d) of the
Purchase Agreement, (iv) the compliance by the Initial Purchasers with the
offering and transfer procedures and restrictions described in the Offering
Memorandum and (v) receipt by the purchasers to whom the Initial Purchasers
initially resell the Securities of a copy of the Offering Memorandum prior to
such sale, it is not necessary in connection with the offer, sale and delivery
of the Securities or in connection with the initial resale of such Securities in
the manner contemplated by the Purchase Agreement and the Offering Memorandum to
register the Securities under the Act, it being understood that no opinion is
expressed as to any subsequent resale of any Securities.
<PAGE> 49
C-4
The foregoing opinions are qualified as follows:
1. With respect to the opinions expressed in paragraphs 2, 3,
4, 5 and 6 above relating to the legal, valid and binding nature of agreements
or obligations of any person and to the enforceability of such agreements or
obligations, such opinions are subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar laws affecting
creditors' rights generally from time to time in effect. In addition, the
enforceability of the Company's obligations is also subject to general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether such
enforceability is considered in a proceeding in equity or at law. Furthermore,
the enforceability of such agreements or obligations may be subject to the laws
of jurisdictions other than the United States and the State of New York, with
respect to which we express no opinion.
2. We express no opinion with respect to the enforceability of
any provision of any agreement providing for indemnification or contribution to
the extent contrary to or inconsistent with public policy.
We are admitted to practice in the State of New York and we
express no opinion as to any matters governed by any law other than the law of
the State of New York and the Federal Laws of the United States of America. In
particular, we do not purport to pass on any matter governed by the laws of
Colombia. We understand that with regard to matters governed by the laws of
Colombia you are being provided with the opinions of Holguin, Neira y Pombo,
Colombian counsel to the Company, and Mauricio Campillo Orozco, General Counsel
to the Company, delivered pursuant to Sections 5(b) and (c) of the Purchase
Agreement.
<PAGE> 50
C-5
We are furnishing this opinion to you, solely for your
benefit. This opinion may not be relied upon by any other person or for any
other purpose or used, circulated, quoted or otherwise referred to for any other
purpose.
Very truly yours,
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
ING Baring (U.S.) Securities, Inc.
667 Madison Avenue
New York, New York 10021
<PAGE> 51
EXHIBIT C, PART 2
FORM OF
STATEMENT OF CRAVATH, SWAINE & MOORE
[Letterhead of]
CRAVATH, SWAINE & MOORE
June 7, 1996
Occidente y Caribe Celular S.A.
US$100,000,000 Gross Proceeds
190,745 Units Consisting of
US$190,745,000 14% Senior Discount Notes due 2004 and
762,980 Warrants to Purchase
4,355,852 Shares of Class B Common Stock
Ladies and Gentlemen;
We have acted as United States counsel to Occidente y Caribe
Celular S.A., a sociedad anonima existing under the laws of Colombia (the
"Company"), in connection with the sale by the Company of 190,745 units (the
"Units") consisting of US$190,745,000 aggregate principal amount at maturity of
its 14% Senior Discount Notes due 2004 (the "Notes") and 762,980 warrants (the
"Warrants") entitling the holders thereof to purchase, under certain
circumstances, an aggregate of 4,355,852 shares of Class B common stock, par
value one thousand Pesos per share, of the Company (the "Class B Common Stock"),
subject to adjustment (the "Warrant Shares"), to Merrill Lynch, Pierce, Fenner &
Smith Incorporated and ING Baring (U.S.) Securities, Inc. (collectively, the
"Initial Purchasers"), pursuant to the Purchase Agreement dated May 31, 1996
(the "Purchase Agreement") among the Initial Purchasers and the Company. The
Notes, the Warrants and the Units are collectively referred to herein as the
"Securities." The Notes are to be issued pursuant to an indenture dated as of
June 1, 1996 (the "Indenture") between the Company, as issuer, and The Bank of
New York, as trustee (the "Trustee"). The Warrants are to be issued pursuant to
a warrant agreement dated as of June 7, 1996 (the "Warrant Agreement") between
the Company and The Bank of New York, as warrant agent (the "Warrant Agent").
This letter is furnished to you pursuant to Section 5(a) of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined herein have
the meanings ascribed thereto in the Purchase Agreement.
<PAGE> 52
C-2
In that capacity, we participated in conferences with certain
officers of, and with the accountants and Colombian counsel for, the Company
concerning the preparation of the Offering Memorandum.
Although we have made certain inquiries and investigations in
connection with the preparation of the Offering Memorandum, the limitations
inherent in the role of outside counsel are such that we cannot and do not
assume responsibility for the accuracy or completeness of the statements made in
the Offering Memorandum, except insofar as such statements relate to us and
except to the extent set forth in paragraphs 1 and 7 in our opinion to you dated
the date hereof. Subject to the foregoing, we hereby advise you that our work in
connection with this matter did not disclose any information that gave us reason
to believe that the Offering Memorandum (except for Annex C thereof and the
financial statements and other information of an accounting or financial nature
included therein, as to which we do not express any view), as of its date or as
of the date hereof, included or includes an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
We are furnishing this letter to you, solely for your benefit.
This letter may not be relied upon by any other person or for any other purpose
or used, circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
ING Baring (U.S.) Securities, Inc.
667 Madison Avenue
New York, New York 10021
<PAGE> 53
EXHIBIT D
FORM OF
OPINION OF MAURICIO CAMPILLO OROZCO
[Company Letterhead]
June 7, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
ING BARING (U.S.) SECURITIES, INC.
667 Madison Avenue
New York, New York 10021
Ladies and Gentlemen:
I have acted as General Counsel (Secretario General y Vicepresidente
Administrativo) to Occidente y Caribe Celular S.A., a sociedad anonima existing
under the laws of Colombia (the "Company"), in connection with the issuance and
sale by the Company of 190,745 units (the "Units") consisting of US$190,745,000
aggregate principal amount at maturity of its 14% Senior Discount Notes due 2004
(the "Notes") and 762,980 warrants (the "Warrants") entitling the holders
thereof to purchase, under certain circumstances, an aggregate of 4,355,852
shares of class B common stock, par value one thousand Pesos per share, of the
Company (the "Class B Common Stock"), subject to adjustment (the "Warrant
Shares"). The Notes, the Warrants and the Units are collectively referred to
herein as the "Securities." The Notes are to be issued pursuant to an indenture
dated as of June 1, 1996 (the "Indenture") between the Company, as issuer, and
The Bank of New York, as trustee (the "Trustee"). The Warrants are to be issued
pursuant to a warrant agreement dated as of June 7, 1996 (the "Warrant
Agreement") between the Company and The Bank of New York, as warrant agent (the
"Warrant Agent"). This opinion is furnished to you pursuant to Section 5(b) of
the Purchase Agreement dated May 31, 1996 (the "Purchase Agreement") among the
Company, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
and ING Baring (U.S.) Securities, Inc. (together with Merrill Lynch, the
"Initial Purchasers") relating to the issuance and sale of the Securities. Terms
defined in the Purchase Agreement and not otherwise defined herein are used
herein with the meanings so defined.
I have examined originals, or copies certified or otherwise identified
to my satisfaction, of such documents, corporate records and other instruments
as I have deemed necessary or appropriate for the purposes of this opinion,
including (a) the Preliminary
<PAGE> 54
D-2
Offering Memorandum dated May 9, 1996 and the Offering Memorandum dated May 31,
1996, (b) the Purchase Agreement, (c) the Indenture, (d) the Notes Registration
Rights Agreement, (e) the Warrant Agreement and (f) the form of certificates
representing each of the Securities, and I have conducted such other
investigations of fact and law as I have deemed necessary or advisable for
purposes of this opinion. I have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies and the
authenticity of the originals of such latter documents.
In giving the opinions expressed below I do not express any opinion as
to the laws of any jurisdiction other than the laws of the Republic of Colombia
("Colombia"). The opinions set forth below are based on the laws, rules or
regulations as the case may be, in effect on the date hereof.
Based upon and subject to the foregoing, I am of the opinion that:
(i) The Company is a sociedad anonima de economia mixta duly organized
and existing under the laws of Colombia, with the requisite power and
authority under such laws to own or hold its properties and to carry on the
business of providing cellular telecommunications services as described in
the Offering Memorandum, and the Company does not own or hold any material
properties or assets other than those incidental to its business.
(ii) The Company owns or possesses or has obtained all material
governmental licenses, certificates, permits, consents, orders, approvals
and other authorizations necessary to hold all concessions, leases and
permits or own its properties, including the Concession, and to carry on
its business as presently conducted, and the Company has not received any
notice relating to the revocation or modification of any such concession,
license, certificate, permit, consent, order, approval or other
authorizations.
(iii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the capitalization table in the Offering
Memorandum under the caption "Capitalization." All of the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, the
shareholders of the Company have no preemptive rights to acquire the
Warrant Shares that have not been waived and there are no restrictions on
transfer of any class of the capital stock of the Company, except for the
right of first refusal as described in the Offering Memorandum.
(iv) The Company has the requisite corporate capacity and power (A) to
execute, deliver and perform its obligations under the Purchase Agreement,
the Indenture, the Notes Registration Rights Agreement and the Warrant
Agreement, and (B) to issue, deliver and perform its obligations under the
Notes, the Warrants and the Warrant Shares; each of the Purchase Agreement,
the Indenture, the Notes Registration Rights Agreement, the Warrant
Agreement, the Notes and the Warrants has been duly authorized, executed
and delivered by the Company.
<PAGE> 55
D-3
(v) To the best of my knowledge, no default exists in the performance
or observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease
or other agreement or instrument that is not described or referred to in
the Offering Memorandum.
(vi) The execution and delivery of the Purchase Agreement, the
Indenture, the Notes Registration Rights Agreement and the Warrant
Agreement, the issuance and delivery of the Notes, and, if issued, the
Exchange Notes, the Warrants and, assuming the Company obtains the
corporate and governmental approvals as set forth in the Offering
Memorandum, the Warrant Shares, the consummation by the Company of the
transactions contemplated therein and compliance by the Company with the
terms thereof do not and will not result in any violation of the estatutos
sociales of the Company, and do not and will not conflict with, or result
in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company under (A) any
contract, indenture, mortgage, loan agreement, note, lease or any other
agreement or instrument to which the Company is a party or by which it may
be bound or to which any of its properties may be subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that in
the aggregate, would not have a material adverse change in the condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company), or (B) any judgment, order or decree of any government,
governmental instrumentality, court or arbitrator, domestic or foreign,
having jurisdiction over the Company or any of its respective properties
(except as otherwise disclosed in the Offering Memorandum and except for
such violations that in the aggregate would not have a material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company).
(vii) There is no action, suit, proceeding, inquiry or investigation,
pending, or to the best of my knowledge, threatened, other than as set
forth in the Offering Memorandum to which the Company is a party, or to
which the property of the Company is subject, before or brought by any
court or governmental agency or body, domestic or foreign, which is likely
to have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company
or which might reasonably be expected to materially and adversely affect
the consummation of the Purchase Agreement, the Indenture, the Notes
Registration Rights Agreement or the Warrant Agreement, or the performance
by the Company of its obligations thereunder.
I have participated in the preparation of the Offering Memorandum. In
the course of the preparation by the Company of the Offering Memorandum, I have
participated in discussions with your representatives and those of the Company
and its independent accountants, in which the business and affairs of the
Company and the contents of the Offering Memorandum were discussed. Nothing has
come to my attention that would lead me to believe that the Offering Memorandum
(except for Annex C thereof and the financial statements and other information
of an accounting or financial nature included therein, as to which I do not
express any view), as of its date or as of the date hereof, included or includes
an untrue statement of a material fact or omitted or omits to state a material
fact necessary in
<PAGE> 56
D-4
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
I am an attorney admitted to practice in Colombia and I do not express
any opinion as to the laws of any other jurisdiction other than the laws of
Colombia. In particular, I do not purport to pass on any matter governed by the
laws of the State of New York and the federal law of the United States. I
understand that with regard to matters governed by the laws of the State of New
York and the federal law of the United States you are being provided with the
opinions of Cravath, Swaine & Moore, United States counsel to the Company,
delivered pursuant to Section 5(a) of the Purchase Agreement.
Except as otherwise provided in the following sentence, this opinion is
being furnished only to you and is solely for your benefit in connection with
the above transaction and may not be relied upon for any other purpose or
furnished, used, circulated, quoted or otherwise referred to for any other
purpose without my prior written consent. This opinion may be delivered to
Cravath, Swaine & Moore, United States counsel to the Company, Holguin, Neira y
Pombo, special Colombian counsel to the Company and to The Bank of New York, as
Trustee under the Indenture and as Warrant Agent under the Warrant Agreement,
and each of them may rely on this opinion to the same extent as if such opinion
were addressed to them.
Very truly yours,
MAURICIO CAMPILLO OROZCO
<PAGE> 57
EXHIBIT E
FORM OF
OPINION OF HOLGUIN, NEIRA Y POMBO
[Company Letterhead]
June 7, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
ING BARING (U.S.) SECURITIES, INC.
667 Madison Avenue
New York, New York 10021
Ladies and Gentlemen:
We have acted as special Colombian counsel to Occidente y Caribe
Celular S.A., a sociedad anonima existing under the laws of Colombia (the
"Company"), in connection with the issuance and sale by the Company of 190,745
units (the "Units") consisting of US$190,745,000 aggregate principal amount at
maturity of its 14% Senior Discount Notes due 2004 (the "Notes") and 762,980
warrants (the "Warrants") entitling the holders thereof to purchase, under
certain circumstances, an aggregate of 4,355,852 shares of class B common stock,
par value one thousand Pesos per share, of the Company (the "Class B Common
Stock"), subject to adjustment (the "Warrant Shares"). The Notes, the Warrants
and the Units are collectively referred to herein as the "Securities." The Notes
are to be issued pursuant to an indenture dated as of June 1, 1996 (the
"Indenture") between the Company, as issuer, and The Bank of New York, as
trustee (the "Trustee"). The Warrants are to be issued pursuant to a warrant
agreement dated as of June 7, 1996 (the "Warrant Agreement") between the Company
and The Bank of New York, as warrant agent (the "Warrant Agent"). This opinion
is furnished to you pursuant to Section 5(c) of the Purchase Agreement dated May
31, 1996 (the "Purchase Agreement") among the Company, Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") and ING Baring (U.S.) Securities,
Inc. (together with Merrill Lynch, the "Initial Purchasers") relating to the
issuance and sale of the Securities. Terms defined in the Purchase Agreement and
not otherwise defined herein are used herein with the meanings so defined.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion, including (a) the
<PAGE> 58
E-2
Preliminary Offering Memorandum dated May 9, 1996 and the Offering Memorandum
dated May 31, 1996, (b) the Purchase Agreement, (c) the Indenture, (d) the Notes
Registration Rights Agreement, (e) the Warrant Agreement and (f) the form of
certificates representing each of the Securities, and we have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion. We have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents.
In giving the opinions expressed below we do not express any opinion as
to the laws of any jurisdiction other than the laws of the Republic of Colombia
("Colombia"). The opinions set forth below are based on the laws, rules or
regulations as the case may be, in effect on the date hereof.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Company is a sociedad anonima duly organized and existing under
the laws of Colombia, with the requisite power and authority under such
laws to own or hold its properties and to carry on the business of
providing cellular telecommunications services as described in the Offering
Memorandum.
(ii) The Company owns or possesses or has obtained all material
governmental licenses, certificates, permits, consents, orders, approvals
and other authorizations necessary to hold all concessions, leases and
permits or own its properties, including the Concession, and to carry on
its business as presently conducted, and, to the best of our knowledge
after due inquiry, the Company has not received any notice relating to the
revocation or modification of any such concession, license, certificate,
permit, consent, order, approval or other authorizations.
(iii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the capitalization table in the Offering
Memorandum under the caption "Capitalization." All of the issued and
outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, the
shareholders of the Company have no preemptive rights to acquire the
Warrant Shares that have not been waived and there are no restrictions on
transfer of any class of the capital stock of the Company, except for the
right of first refusal as described in the Offering Memorandum.
(iv) The Company has the requisite corporate capacity and power (A) to
execute, deliver and perform its obligations under the Purchase Agreement,
the Indenture, the Notes Registration Rights Agreement and the Warrant
Agreement, and (B) to issue, deliver and perform its obligations under the
Notes, the Warrants and the Warrant Shares; each of the Purchase Agreement,
the Indenture, the Notes Registration Rights Agreement, the Warrant
Agreement, the Notes and the Warrants has been duly authorized, executed
and delivered by the Company.
<PAGE> 59
E-3
(v) The form of certificates representing each of the Notes and the
Warrants complies with the provisions of the Colombian law relating
thereto.
(vi) The information in the Offering Memorandum with respect to or
involving matters of Colombian law, including the information under the
captions "Enforceability of Civil Liabilities," "Business -- Legal
Proceedings," "Regulation," "Description of the Notes," "Description of the
Warrants," "Description of the Units," "Description of Capital Stock,"
"Description of American Depositary Receipts," "Foreign Investment and
Exchange Controls in Colombia," "Enforcement of Foreign Judgments in
Colombia" and "Taxation -- Colombia," to the extent that it constitutes
matters of law, summaries of legal matters, the Company's estatutos
sociales or legal proceedings, or legal conclusions, has been reviewed by
us and is correct in all material respects.
(vii) To the best of our knowledge, no default exists in the
performance or observance of any material obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument that is not
described or referred to in the Offering Memorandum.
(viii) The execution and delivery of the Purchase Agreement, the
Indenture, the Notes Registration Rights Agreement and the Warrant
Agreement, the issuance and delivery of the Notes, and, if issued, the
Exchange Notes, the Warrants and, assuming the Company obtains the
corporate and governmental approvals as set forth in the Offering
Memorandum, the Warrant Shares, the consummation by the Company of the
transactions contemplated therein and compliance by the Company with the
terms thereof do not and will not result in any violation of the estatutos
sociales of the Company, and do not and will not conflict with, or result
in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company under (A) any
contract, indenture, mortgage, loan agreement, note, lease or any other
agreement or instrument to which the Company is a party or by which it may
be bound or to which any of its properties may be subject (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that in
the aggregate, would not have a material adverse change in the condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company), or (B) any existing, applicable law, rule or regulation,
or any judgment, order or decree of any government, governmental
instrumentality, court or arbitrator, domestic or foreign, having
jurisdiction over the Company or any of its respective properties (except
as otherwise disclosed in the Offering Memorandum and except for such
violations that would not have a material adverse change in the condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company).
(ix) No authorization, approval, consent, license, exemption, order or
decree of any Colombian government, governmental instrumentality, court or
arbitrator (A) is required for the execution, delivery and performance by
the Company of each of the Purchase Agreement, the Indenture, the Notes
Registration Rights Agreement and the Warrant Agreement including for the
valid authorization, issuance, sale and delivery of the Notes and the
Exchange Notes under the Indenture or the Warrants and the Warrant Shares
under the Warrant Agreement, or (B) is required to permit the Company to
effect
<PAGE> 60
E-4
payments of principal of, premium and interest on the Notes, and, if
issued, the Exchange Notes, and the performance of its other obligations
under the Indenture in United States dollars, except for the approvals from
(i) the Ministry of Communications with respect to the exercise of the
Warrants, (ii) the Colombian Superintendency of Securities as to the ADRs,
(iii) the corporate and governmental approvals or actions necessary for the
issuance of the ADRs and Warrant Shares as described in the Offering
Memorandum and (iv) the registration of an official translation of the
Indenture (which shall be signed before a notary public and consularized)
and the Notes with Banco de la Republica, and except for such other
authorizations, approvals, consents, licenses, exemptions, orders or
decrees (including the authorization of the Colombian Superintendency of
Corporations and the registration of the terms of the Notes and the Notes
with Banco de la Republica) which have been obtained and are in full force
and effect.
(x) There is no action, suit, proceeding, inquiry or investigation,
pending, or to the best of our knowledge, threatened, other than as set
forth in the Offering Memorandum to which the Company is a party, or to
which the property of the Company is subject, before or brought by any
court or governmental agency or body, domestic or foreign, which is likely
to have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company
or which might reasonably be expected to materially and adversely affect
the consummation of the Purchase Agreement, the Indenture, the Notes
Registration Rights Agreement or the Warrant Agreement, or the performance
by the Company of its obligations thereunder.
(xi) The governing law clauses subjecting the Purchase Agreement, the
Indenture, the Notes Registration Rights Agreement, the Warrant Agreement,
the Warrants and the Notes to New York law are valid under Colombian law.
(xii) Each of the Purchase Agreement, the Indenture, the Notes
Registration Rights Agreement, the Warrant Agreement, the Warrants and the
Notes are in proper legal form under the laws of Colombia for the
enforcement thereof against the Company in the courts of Colombia (provided
that an official Spanish translation of each such document is required to
bring an action thereon in the courts of Colombia and the registrations
listed in paragraph (xix) below shall have been made).
(xiii) In any action or proceeding arising out of or relating to any of
the Purchase Agreement, the Indenture, the Notes Registration Rights
Agreement, the Warrant Agreement, the Notes or the Warrants in any court in
Colombia, such court would recognize and give effect to the provisions of
such agreement or security wherein the parties thereto agree that the
Purchase Agreement, the Indenture, the Notes Registration Rights Agreement,
the Warrant Agreement, the Notes and the Warrants shall be governed by, and
construed in accordance with, the provisions of New York law, provided that
neither the terms of any such agreement or security nor any provisions of
New York law applicable to any such agreement or security are found to be
contrary to the public policy (orden publico) of Colombia.
<PAGE> 61
E-5
(xiv) In our opinion, none of the terms of the Purchase Agreement, the
Indenture, the Notes Registration Rights Agreement or the Warrant
Agreement, the Warrants, the Notes or if issued, the Exchange Notes, are
contrary to the public policy (orden publico) of Colombia except that
indemnification provisions might be subject to certain limitations.
(xv) Any judgment against the Company of a court in the State of New
York or of a federal court of the United States of America, in each case
sitting in the Borough of Manhattan, The City of New York, which is
obtained without fraud and rendered after due notice by any such state or
federal court, is capable of being enforced in the courts of Colombia upon
compliance with the requisites and procedures set forth in the Colombian
Civil Procedure Code (including, in the case of such judgment, articles
693, 694 and 695 of the Colombian Civil Procedure Code, which apply in
order to obtain an exequator from the Supreme Court of Justice of
Colombia).
(xvi) The submission of the Company to the jurisdiction of the courts
of the State of New York and of the federal courts of the United States of
America, in each case sitting in the Borough of Manhattan, The City of New
York, and the appointment of the agent for service of process, contained in
the Purchase Agreement, the Indenture, the Notes Registration Rights
Agreement and the Warrant Agreement is valid.
(xvii) Neither the Company nor any of its properties or assets has any
sovereign immunity from the jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) under the laws of
Colombia.
(xviii) Except as otherwise described in the Offering Memorandum, there
is no tax, duty, levy, impost, deduction, charge or withholding imposed by
Colombia or any political subdivision thereof or taxing authority therein
or any federation or organization or similar entity of which Colombia is a
member either (A) on or by virtue of the Company's execution, delivery,
performance or enforcement of the Purchase Agreement, the Indenture, the
Notes Registration Rights Agreement, the Warrant Agreement, or of any other
document to be furnished hereunder or thereunder, or (B) on any payment to
be made pursuant to the Purchase Agreement, the Indenture, the Notes
Registration Rights Agreement or the Warrant Agreement, except that
withholding taxes are payable on the "Cash Election Warrant Repurchase" (as
defined in Section 3.1 of the Warrant Agreement) and may be payable on the
fees and expenses of the Trustee and the Warrant Agent. Under current
Colombian law and regulations, payments on the Notes to nonColombian
residents are not and will not be subject to any Colombian withholding or
any other tax, except as otherwise described in the Offering Memorandum.
(xix) To ensure the legality, validity, enforcement or admissibility
into evidence in Colombia of the Purchase Agreement, the Indenture, the
Notes Registration Rights Agreement, the Warrant Agreement, the Warrants or
the Notes and any other document to be furnished thereunder, it is not
necessary that the Purchase Agreement, the Indenture, the Notes
Registration Rights Agreement, the Warrant Agreement, the Warrants or the
Notes or any such other document be filed, recorded or registered with any
court or other authority in Colombia, except (a) the registration of an
official
<PAGE> 62
E-6
translation of the Indenture (which shall be signed before a notary public
and consularized) and the Notes with Banco de la Republica and (b) the
registration of the terms of the Notes and the Notes with Banco de la
Republica, which registration has been duly obtained, or that any tax be
paid in Colombia on or in respect of any of the Purchase Agreement, the
Indenture, the Notes Registration Rights Agreement, the Warrant Agreement,
or any such other document.
(xx) Except as described in the Offering Memorandum, non-Colombian
holders of Notes or Warrants will not be deemed resident, domiciled,
carrying on business or subject to taxation in Colombia solely by reason of
the execution, delivery, performance or enforcement of the Purchase
Agreement, the Indenture, the Notes Registration Rights Agreement or the
Warrant Agreement. Non-Colombian holders of the Warrant Shares will be
subject to Colombian taxes and Colombian foreign investment registration
and regulations, as described in the Offering Memorandum.
(xxi) Except as described in the Offering Memorandum, it is not
necessary under the laws of Colombia that any of the holders of the
Securities be licensed, qualified or entitled to carry on business in
Colombia by reason solely of the execution, delivery, performance or
enforcement of this Agreement, the Indenture, the Notes Registration Rights
Agreement or the Warrant Agreement.
We have participated in the preparation of the Offering Memorandum. In
the course of the preparation by the Company of the Offering Memorandum, we have
participated in discussions with your representatives and those of the Company
and its independent accountants, in which the business and affairs of the
Company and the contents of the Offering Memorandum were discussed. Nothing has
come to our attention that would lead us to believe that the Offering Memorandum
(except for Annex C thereof and the financial statements and other information
of an accounting or financial nature included therein, as to which we do not
express any view), as of its date or as of the date hereof, included or includes
an untrue statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
We are attorneys admitted to practice in Colombia and we do not express
any opinion as to the laws of any other jurisdiction other than the laws of
Colombia. In particular, we do not purport to pass on any matter governed by the
laws of the State of New York and the federal law of the United States. We
understand that with regard to matters governed by the laws of the State of New
York and the federal law of the United States you are being provided with the
opinions of Cravath, Swaine & Moore, United States counsel to the Company,
delivered pursuant to Section 5(a) of the Purchase Agreement. Furthermore, we
rely, insofar as this opinion involves matters of fact (but not as to legal
conclusions), to the extent we deem proper, on information or certificates
received from responsible officers of the Company and public officials.
We note that, as disclosed in the Offering Memorandum, a member of
Holguin Neira y Pombo is an alternate director of the Company.
<PAGE> 63
E-7
Except as otherwise provided in the following sentence, this opinion is
being furnished only to you and is solely for your benefit in connection with
the above transaction and may not be relied upon for any other purpose or
furnished, used, circulated, quoted or otherwise referred to for any other
purpose without our prior written consent. This opinion may be delivered to
Cravath, Swaine & Moore, United States counsel to the Company, Mauricio Campillo
Orozco, General Counsel to the Company and to The Bank of New York, as Trustee
under the Indenture and as Warrant Agent under the Warrant Agreement, and each
of them may rely on this opinion to the same extent as if such opinion were
addressed to them.
Very truly yours,
Holguin, Neira y Pombo
<PAGE> 64
EXHIBIT F
FORM OF
OPINION OF DUNNINGTON, BARTHOLOW & MILLER
[Dunnington, Bartholow & Miller Letterhead]
June 7, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
ING BARING (U.S.) SECURITIES, INC.
667 Madison Avenue
New York, New York 10021
Ladies and Gentlemen:
We have acted as United States counsel to The Bank of New York, a New
York banking corporation, in connection with (i) its execution and delivery of
the Indenture dated as of June 1, 1996 (the "Indenture") by and between
Occidente y Caribe Celular S.A. (the "Company") and The Bank of New York, as
trustee (the "Trustee"), pursuant to which the Company is issuing on the date
hereof US$ 190,745,000 in aggregate principal amount at maturity of its 14%
Senior Discount Notes due 2004 (the "Notes"); (ii) its authentication and
delivery of the Notes in global and certificated form; and (iii) its execution
and delivery of a Warrant Agreement dated as of June 7, 1996 (the "Warrant
Agreement") by and between the Company and The Bank of New York, as Warrant
Agent, providing for the issuance by the Company of 762,980 warrants in global
and certificated form (the "Warrants") entitling the holders thereof to
purchase, under certain circumstances, an aggregate of 4,355,852 shares of class
B common stock, par value one thousand Pesos per share, of the Company (the
"Class B Common Stock"), subject to adjustment (the "Warrant Shares"), either as
(i) American Depositary Receipts (ADRs) or (ii) if ADRs are not available, such
Warrant Shares.
In acting as such United States counsel, we have examined executed
copies of the Indenture, the global and certificated Notes, the Warrant
Agreement and the global and certificated Warrants. As to any facts material to
our opinions expressed herein, we have relied upon the representations and
warranties contained in the documents referred to above
<PAGE> 65
F-2
and originals, or copies identified to our satisfaction, of such corporate
records of The Bank of New York and such agreements, certificates of responsible
officers of The Bank of New York and public officials, powers of attorney,
governmental orders and other documents as we have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed. In such
examination, we have assumed the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such latter documents.
We have assumed the due execution and delivery, pursuant to due
authorization, of the Indenture and the Warrant Agreement by the Company. We
have also assumed that the execution, delivery and performance by each of the
parties to each of the Indenture and the Warrant Agreement will not violate, or
be inconsistent with, any applicable law other than, but only insofar as it
relates to The Bank of New York, the law of the State of New York or the federal
law of the United States.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Indenture has been duly authorized, executed and delivered by
The Bank of New York, as Trustee, and, assuming that the Indenture
constitutes a valid and binding obligation of each of the other parties
thereto enforceable against each of them in accordance with its terms,
constitutes the valid and binding obligation of The Bank of New York, as
Trustee, enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws affecting creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law).
(ii) Assuming due authorization, execution and delivery of the Notes by
the Company, the Notes have been duly authenticated and delivered by The
Bank of New York, as Trustee.
(iii) The Warrant Agreement has been duly authorized, executed and
delivered by The Bank of New York, as Warrant Agent, and, assuming that the
Warrant Agreement constitutes a valid and binding obligation of each of the
other parties thereto enforceable against each of them in accordance with
its terms, constitutes the valid and binding obligation of The Bank of New
York, as Warrant Agent, enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws affecting creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
<PAGE> 66
F-3
(iv) Assuming due authorization, execution and delivery of the Warrants
by the Company, the Warrants have been duly countersigned and delivered by
The Bank of New York, as Warrant Agent.
We are attorneys admitted to practice in the State of New York and we
do not express any opinion as to the laws of any other jurisdiction other than
the laws of the State of New York and the federal law of the United States of
America.
This opinion is being furnished only to you and is solely for your
benefit in connection with the above transaction and may not be relied upon for
any other purpose or furnished, used, circulated, quoted or otherwise referred
to for any other purpose without our prior written consent.
Very truly yours,
Dunnington, Bartholow & Miller
<PAGE> 1
EXHIBIT 10.02
U.S.$80,000,000
CREDIT AGREEMENT
among
OCCIDENTE Y CARIBE CELULAR S.A.,
as Borrower,
and
VARIOUS FINANCIAL INSTITUTIONS,
ING BARING (U.S.) SECURITIES, INC. and MERRILL LYNCH & CO.
as Arrangers,
and
ING Bank N.V. and
ING (U.S.) CAPITAL CORPORATION,
as Administrative and Collateral Agents
----------------------------------
Dated as of June 6, 1996
----------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
Section 1. Definitions and Principles of Construction....................... 1
1.1 Defined Terms.................................................. 1
1.2 Principles of Construction..................................... 16
Section 2. Amount and Terms of Credit....................................... 16
2.1 The Loans .................................................... 16
2.2 Notice of Borrowing............................................ 16
2.3 Disbursement of Funds.......................................... 17
2.4 Notes .................................................... 18
2.5 Pro Rata Borrowing............................................. 18
2.6 Interest .................................................... 18
2.7 Increased Costs, Illegality, etc............................... 20
2.8 Compensation................................................... 22
2.9 Change of Lending Office....................................... 23
2.10 Interest Periods.............................................. 23
2.11 Interest Reserve.............................................. 23
Section 3. Fees............................................................. 24
Section 4. Prepayments; Payments............................................ 24
4.1 Voluntary Prepayments.......................................... 24
4.2 Mandatory Repayments........................................... 24
4.3 Method and Place of Payment.................................... 26
4.4 Net Payments................................................... 26
Section 5. Conditions Precedent............................................. 27
5.1 Conditions Precedent to the Borrowing.......................... 27
Section 6. Representations, Warranties and Agreements....................... 33
6.1 Legal Status................................................... 33
6.2 Power and Authority............................................ 33
6.3 No Sovereign Immunity.......................................... 34
6.4 No Violation................................................... 34
6.5 Governmental Approvals......................................... 35
6.6 Litigation .................................................... 35
6.7 Financial Statements; No Material Adverse Change............... 35
6.8 Indebtedness................................................... 36
6.9 Use of Proceeds................................................ 36
6.10 Properties.................................................... 36
6.11 License .................................................... 36
6.12 Compliance with Material Agreements........................... 37
(i)
<PAGE> 3
Page
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6.13 Patents, Licenses, Franchises and Formulas.................... 37
6.14 True and Complete Disclosure.................................. 37
6.15 Tax Returns and Payments...................................... 37
6.16 Employee Benefit Plans........................................ 38
6.17 Capitalization................................................ 38
6.18 Subsidiaries.................................................. 38
6.19 Compliance with Law........................................... 38
6.20 Labor Relations............................................... 39
6.21 Security Documents............................................ 39
6.22 Mandate .................................................... 41
6.23 Availability and Transfer of Foreign Currency................. 41
6.24 Nature of Activities.......................................... 41
6.25 Fees and Enforcement.......................................... 41
6.26 Withholding Taxes............................................. 41
6.27 Properties and Insurance...................................... 41
Section 7. Affirmative Covenants............................................ 42
7.1 Information Covenants.......................................... 42
7.2 Compliance with Law............................................ 45
7.3 Taxes .................................................... 45
7.4 License .................................................... 45
7.5 Further Assurances............................................. 45
7.6 Books, Records and Inspections; Accounting and Audit
Matters...................................................... 45
7.7 Maintenance of Property, Insurance............................. 46
7.8 Material Contracts............................................. 46
Section 8. Negative Covenants............................................... 46
8.1 Liens .................................................... 46
8.2 Dividends .................................................... 48
8.3 Indebtedness................................................... 49
8.4 Advances, Investments and Loans................................ 50
8.5 Consolidations, Mergers, Sales of Assets....................... 51
8.6 Quarterly Recurring Revenue.................................... 51
8.7 Fixed Charge Coverage Ratio.................................... 52
8.8 Interest Coverage Ratio........................................ 53
8.9 Maximum Leverage Ratio......................................... 53
8.10 Limitations on Modifications of Indebtedness; Modifications
of Certain Agreements, etc.................................. 53
8.11 No Other Business............................................. 54
8.12 Transactions with Affiliates.................................. 54
Section 9. Events of Default................................................ 54
9.1 Payments .................................................... 54
9.2 Representations, etc........................................... 54
9.3 Covenants .................................................... 54
9.4 Default Under Other Agreements................................. 55
(ii)
<PAGE> 4
Page
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9.5 Bankruptcy, etc................................................ 55
9.6 Security Documents............................................. 56
9.7 Judgments .................................................... 56
9.8 Cancellation of Payment Obligation............................. 56
9.9 License .................................................... 56
9.10 Abandonment of Business....................................... 57
9.11 Default Under Credit Documents................................ 57
9.12 Governmental Action........................................... 57
Section 10. The Administrative Agents and the Collateral Agents............. 58
10.1 Appointment of the Administrative Agents...................... 58
10.2 Appointment of the Collateral Agents.......................... 58
10.3 Administration of the Collateral.............................. 58
10.4 Application of Proceeds....................................... 59
10.5 Nature of Duties.............................................. 60
10.6 No Reliance on the Administrative Agents and the
Collateral Agents........................................... 60
10.7 Certain Rights of the Administrative Agents and the
Collateral Agents........................................... 61
10.8 Reliance by the Administrative Agents and the
Collateral Agents........................................... 61
10.9 Indemnification............................................... 61
10.10 Capacity as Lenders.......................................... 62
10.11 Holders .................................................... 62
10.12 Resignation.................................................. 62
10.13 Joint Action................................................. 63
Section 11. Miscellaneous................................................... 63
11.1 Payment of Expenses, etc...................................... 63
11.2 Right of Setoff............................................... 65
11.3 Notices .................................................... 65
11.4 Benefit of Agreement.......................................... 66
11.5 Syndication or Assignment of Loans............................ 66
11.6 No Waiver; Remedies Cumulative................................ 67
11.7 Payments Pro Rata............................................. 68
11.8 Calculations; Computations.................................... 68
11.9 Governing Law; Submission to Jurisdiction; Venue.............. 68
11.10 Obligation to Make Payments in Dollars....................... 70
11.11 Counterparts................................................. 70
11.12 Effectiveness................................................ 71
11.13 Headings Descriptive......................................... 71
11.14 Amendment or Waiver.......................................... 71
11.15 Survival .................................................... 72
11.16 Domicile of Loans............................................ 72
11.17 Confidentiality; Tombstone................................... 72
11.18 WAIVER OF TRIAL BY JURY...................................... 72
(iii)
<PAGE> 5
Page
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SCHEDULE I Schedule of Commitments
SCHEDULE II Lending Offices
SCHEDULE III Existing Indebtedness
SCHEDULE IV Shareholders
SCHEDULE V Existing Liens
SCHEDULE VI Payment of Loan Proceeds
SCHEDULE VII Litigation
SCHEDULE VIII Rights to Acquire Securities
EXHIBIT A Notice of Borrowing
EXHIBIT B Note
EXHIBIT C-1 Form of Cravath, Swaine & Moore Opinion
EXHIBIT C-2 Form of Holguin, Neira & Pombo Opinion
EXHIBIT D-1 Officer's Certificate of Borrower
EXHIBIT D-2 Officer's Certificate of Other Document Parties
EXHIBIT E Pledge Agreement
EXHIBIT F-1 Guaranty Trust Agreement
EXHIBIT F-2 Guaranty Trusts Termination Agreement
EXHIBIT G Pledge Agreement-License
EXHIBIT H Disbursement Agreement
EXHIBIT I Appointment of Process Agents
(iv)
<PAGE> 6
CREDIT AGREEMENT, dated as of June 6, 1996, among OCCIDENTE Y
CARIBE CELULAR S.A., a corporation (sociedad anonima) organized and existing
under the laws of the Republic of Colombia (the "Borrower"), the financial
institutions listed in Schedule I hereto (each, a "Lender" and collectively, the
"Lenders"), ING BARING (U.S.) SECURITIES, INC. and MERRILL LYNCH & CO., as
arrangers (in such capacity, each an "Arranger" and collectively, the
"Arrangers"), and ING BANK N.V. and ING (U.S.) CAPITAL CORPORATION, as
administrative agents (in such capacity, the "Administrative Agents") and
collateral agents (in such capacity, the "Collateral Agents").
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Lenders are willing to make available to the Borrower the credit
facility provided for herein;
NOW, THEREFORE, in consideration of the premises and mutual
agreements hereinafter contained, the parties hereto agree as follows:
Section 1. Definitions and Principles of Construction.
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined, except as otherwise
provided):
"Administrative Agents" shall have the meaning provided in the
first paragraph of this Agreement.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
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<PAGE> 7
"Applicable Margin" shall have the meaning provided in Section
2.6 of this Agreement.
"Arranger" shall have the meaning provided in the first
paragraph of this Agreement.
"Banking Superintendency" shall mean the Superintendencia
Bancaria, the banking superintendency of Colombia.
"Base Rate" shall mean the average of the rates which ING
(U.S.) Capital Corporation, Chase Manhattan Corporation and Bank of America
announce from time to time as their respective base rates, the Base Rate to
change when and as any such base rates change. The Base Rate is an average
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Any Lender may make commercial loans or other
loans at rates of interest at, above or below the Base Rate.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrower Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated, whether voting or
non-voting, ordinary or preferential) in equity of the Borrower, whether issued
and outstanding as of the date hereof or issued after the date hereof.
"Borrowing" shall mean the borrowing of the Loans from all the
Lenders on the Borrowing Date.
"Borrowing Date" shall mean the date, not earlier than one
Business Day after the Effective Date, on which the Borrowing hereunder occurs.
"Business" shall mean (i) the construction and operation of
the Network and the provision of services in accordance with the License, (ii)
the provision of other services in the telecommunications industry or otherwise
permitted by the License and applicable Law, and (iii) all activities reasonably
related or incidental thereto.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day which
shall be in New York or Santafe de Bogota, Colombia a legal holiday or a day on
which banking institutions are authorized or required by Law or
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<PAGE> 8
other government action to close in any such city and (ii) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, Loans, any day which is a Business Day described in clause (i)
above and which is also a day for trading by and between banks in the London
interbank Eurodollar market.
"Capacity" shall mean, for any date, the total number of
Subscribers that the Network has the technical capacity to serve as of such
date.
"Capacity Report" shall mean the quarterly Subscribers report
filed by the Borrower with the Ministry.
"Capital Expenditures" shall mean any expenditures for fixed
or capital assets (including, without limitation, expenditures for maintenance
and repairs which should be capitalized in accordance with Colombian GAAP and
including capitalized lease obligations).
"Cash Equivalents" shall mean, as to the Borrower, (i)
securities issued or directly and fully guaranteed or insured by the United
States, Colombia or any agency or instrumentality thereof (provided that the
full faith and credit of the United States or Colombia, as the case may be, is
pledged in support thereof) having maturities of not more than 12 months from
the date of acquisition, (ii) time deposits, certificates of deposit and
bankers' acceptances with maturities of not more than 12 months from the date of
acquisition by the Borrower of (x) any commercial bank having, or which is the
principal banking subsidiary of a bank holding company having, a long-term
unsecured debt rating of at least "A" or the equivalent thereof from Standard &
Poor's Corporation or "A2" or the equivalent thereof from Moody's Investors
Service, Inc., (y) Banco de Colombia, Banco Ganadero, Banco Industrial
Colombiano or Banco de Bogota, or (z) any other bank or financial institution
incorporated under the laws of Colombia with total assets exceeding P$350.0
billion and in the case of clause (z) as to which the aggregate principal amount
of any such time deposits, certificates of deposit and bankers' acceptances
shall not exceed U.S.$10.0 million, (iii) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (ii) above, (iv) commercial paper issued by any Person incorporated in
(x) the United States rated at least A-1 or the equivalent thereof by Standard &
Poor's Corporation or at least P-1 or the equivalent thereof by
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<PAGE> 9
Moody's Investors Service, Inc. or (y) Colombia rated at least investment grade
in Pesos by Duff & Phelps, and in each case of clause (x) and (y), maturing not
more than six months after the date of acquisition by the Borrower and (v)
investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv)
above.
"Cellular Receivables" shall mean all of the right, title and
interest of the Borrower in and to all amounts, or portions thereof, owed or to
be owed (i) by Subscribers to the Borrower for cellular telephone services
provided by the Borrower pursuant to the License and (ii) by other telephone
operators to the Borrower in connection with roaming and interconnection
services provided by the Borrower.
"Central Bank" shall mean Banco de la Republica, the central
bank of Colombia.
"Collateral" shall mean and include all of the collateral
pledged and assigned under the Security Documents (including, without
limitation, any amount on deposit (i) with the Collateral Agents pursuant to the
Disbursement Agreement, and (ii) pursuant to the Funding Agreement).
"Collateral Agents" shall have the meaning provided in the
first paragraph of this Agreement.
"Colombia" shall mean the Republic of Colombia.
"Colombian GAAP" shall mean generally accepted accounting
principles in Colombia, consistently applied during a relevant period.
"Commitment" shall mean, for each Lender, the amount set forth
opposite such Lender's name in Schedule I hereto directly below the column
entitled "Commitment."
"Commitment Termination Date" shall mean June 15, 1996.
"Confidential Information" shall mean all information
furnished by or on behalf of the Borrower or an Affiliate of the Borrower to the
Administrative Agents or any Lender, but does not include any such information
that (i) is or becomes generally available to the public or (ii) is or becomes
available to the Administrative Agents or such Lender from a source other than
the Borrower or an Affiliate of the Borrower other than as a result of a breach
by the
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<PAGE> 10
Administrative Agents or any Lender of its respective obligations hereunder or a
breach by any other Person of any obligation owed to the Borrower or any
Affiliate of the Borrower.
"Consolidated Subsidiaries" shall mean, as to any Person, all
Subsidiaries of such Person which are consolidated with such Person for
financial reporting purposes in accordance with Colombian GAAP.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness ("primary obligations")
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, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds for the purchase or payment of any such primary obligation, (iii)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor or (iv)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term Contingent
Obligation shall not include trade accounts payable or endorsements of
negotiable instruments for deposit or collection or similar transactions, in
either case in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made (subject to any limitation therein) or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.
"Credit Documents" shall mean and include (i) this Agreement,
(ii) the Notes, and (iii) the Security Documents.
"Currency Agreements" means any spot or forward foreign
exchange agreements and currency swap, currency option or other similar
financial agreements or agreements entered into by the Borrower or any of its
Subsidiaries designed to protect against or manage exposure to fluctuations in
currency exchange rates.
"Current Assets" shall mean, at any time, the current assets
of the Borrower and its Consolidated Subsidiaries at such time.
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<PAGE> 11
"Current Liabilities" shall mean, at any time, the current
liabilities of the Borrower and its Consolidated Subsidiaries at such time.
"Debt Offering" shall mean the issuance by the Borrower on or
prior to the Borrowing Date of U.S.$100,000,000 of Senior Unsecured Discount
Notes and Warrants pursuant to the terms described in that certain Offering
Memorandum dated May 30, 1996, and any subsequent registered debt issuance by
the Borrower offered in exchange for the restricted securities initially issued
by the Borrower.
"Debt Offering Indebtedness" shall mean any indebtedness
incurred by the Borrower in connection with the Debt Offering.
"Debt Ratio" shall mean, as of each Determination Date, the
ratio of Funded Indebtedness of the Borrower and its Consolidated Subsidiaries
to EBITDA, in each case as of or for December 31 of the fiscal year ended
immediately prior to such Determination Date.
"Default" shall mean any event, act or condition which, with
notice or lapse of time, or both, would constitute an Event of Default.
"Designated Shareholders" shall mean Ancel S.A., Cacel S.A.,
E.R.T. Celular S.A., Cable and Wireless plc, Eccel S.A., and Itochu Corporation.
"Determination Date" shall mean, in each calendar year, the
second Business Day following the date on which the Borrower provides to the
Administrative Agents its annual audited financial statements pursuant to
Section 7.1(c); provided, however, that the first Determination Date shall not
occur prior to January 1, 1998.
"Digitalization Percentage" shall mean, for any date, that
portion of the Network (expressed as a percentage) that has been upgraded with
digital technology as of such date in accordance with the terms of the License
(subject to any waiver or extension as may be given by the relevant authority).
"Disbursement Agreement" shall have the meaning provided in
Section 5.1(h).
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"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"EBITDA" shall mean, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries, before giving effect to any
extraordinary gains or losses and gains or losses from sales of assets not in
the ordinary course of business, (a) less any non-cash gains that were added in
arriving at Net Income (b) plus (i) Interest Expense deducted in determining Net
Income for such period, (ii) the amount of depreciation, depletion and
amortization and any other non-cash expenses, losses or other charges that were
deducted in determining Net Income for such period, (iii) provision for income
taxes (whether paid or deferred) for such period and (iv) payments on leases
related to fixed assets provided that such payments are included on the
Borrower's income statement for such period as an expense (except to the extent
already included in Interest Expense).
"Effective Date" shall have the meaning provided in Section
11.12.
"Eurodollar Rate" shall mean, with respect to each Interest
Period for the Loans, (i) the rate which appears on the Telerate Page 3750
(rounded upward to the next whole multiple of 1/16th of 1%) for deposits in
Dollars comparable to the outstanding principal amount of the Loans with three
or six-month maturities, as the case may be (provided that, if such Telerate
Page is not available, then the Eurodollar Rate shall mean the average of the
rates which appear on the Reuters Screen LIBO Page; and, if such LIBO Page is
not available, then the Eurodollar Rate shall mean the average of the rates at
which comparable deposits are offered to Citibank N.A. and Chemical Bank),
determined as of 10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period, divided by (ii) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements, if any (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable on the date two Business
Days prior to the commencement of such Interest Period to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities (as defined in
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect and any successor to all or a portion thereof
establishing reserve requirements) having a term equal to such Interest Period.
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"Event of Default" shall have the meaning provided
in Section 9.
"Excess Cash Flow" shall mean, for any period (which amount
shall be calculated based upon the annual audited financial statements delivered
by the Borrower to each Lender for the relevant Excess Cash Payment Period), the
remainder of (i) the sum of (w) Net Income for such period, (x) the provision
for income taxes to the extent such provision reduces Net Income for such period
(y) the amount of depreciation, depletion and amortization and any other
non-cash expenses (including, without limitation, any non-cash Interest
Expense), losses or other charges that were deducted in determining Net Income
for such period and (z) net proceeds to the Borrower from the disposition of
assets not in the usual course of business (to the extent not included in Net
Income for the relevant period), minus (ii) the sum of (u) any non-cash gains
that were included in Net Income and not otherwise included in item (i) above,
(v) the amount of Capital Expenditures (other than Capital Expenditures made
with the proceeds of insurance) paid for by the Borrower and its Consolidated
Subsidiaries with cash during such period, (w) the aggregate amount of voluntary
principal payments of Indebtedness by the Borrower and its Consolidated
Subsidiaries during such period, which amount shall include the aggregate amount
of any voluntary prepayments of Loans pursuant to Section 4.1 and any mandatory
repayments of Loans pursuant to Section 4.2(a), but shall exclude the aggregate
amount of any mandatory repayments pursuant to Section 4.2(b) and any Excess
Cash Flow Payments during such period, (x) payments made in respect of income
taxes during such period, (y) the amount of dividends (as permitted by Section
8.2) paid by the Borrower during such period and (z) the net change in the
Borrower's and its Consolidated Subsidiaries' working capital during such
period.
"Excess Cash Flow Payment" shall have the meaning provided in
Section 4.2(c) of this Agreement.
"Excess Cash Payment Date" shall mean the last day of the
Interest Period ending after the provision by the Borrower to the Administrative
Agents of the Borrower's annual audited financial statements pursuant to Section
7.1(c), which date shall in no event be later than 140 days after the end of the
Borrower's fiscal year.
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<PAGE> 14
"Excess Cash Payment Period" shall mean with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
fiscal year of the Borrower.
"Existing Indebtedness" shall have the meaning provided in
Section 6.8.
"Fees" shall mean all amounts payable pursuant to or referred
to in Section 3.
"Fixed Charge Coverage Ratio" for any period shall mean the
ratio of EBITDA to Fixed Charges for such period.
"Fixed Charges" for any period shall mean the sum of (i)
Interest Expense for such period, (ii) the amount of all Capital Expenditures
paid for by the Borrower and its Consolidated Subsidiaries for such period
(other than Capital Expenditures made with the proceeds of (x) insurance, (y)
Indebtedness permitted to be incurred pursuant to Section 8.3 or (z) the sale or
issuance of equity in the Borrower), (iii) the provision for income taxes for
such period (as specified on the income statement of the Borrower for such
period), (iv) the scheduled principal amount of all amortization payments on all
Indebtedness of the Borrower and its Consolidated Subsidiaries for such period
(as determined on the first day of the respective period), (v) the amount of all
dividends paid by the Borrower during the relevant period and (vi) payments on
leases related to fixed assets (except to the extent already included in
Interest Expense).
"Funded Indebtedness" shall mean, as to any Person, all
Indebtedness of such Person, excluding (i) the deferred purchase price of
property or services, (ii) the face amount of all letters of credit issued for
the account of such Person, (iii) the aggregate amount required to be
capitalized in accordance with U.S. GAAP under leases under which such Person is
the lessee and (iv) all Contingent Obligations of such Person.
"Funding Agreement" shall have the meaning provided
in Section 5.1(r).
"Guaranty Trust Agreement" shall have the meaning
provided in Section 5.1(g)(ii).
"Guaranty Trusts Termination Agreement" shall have the meaning
provided in Section 5.1(g)(iii).
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"Guaranty Trustee" shall mean Fiduanglo S.A., a corporation
organized under the laws of Colombia.
"Indebtedness" shall mean, as to any Person, without
duplication, (i) all indebtedness (including principal, interest, fees and
charges) of such Person (x) evidenced by any notes, bonds, debentures or similar
instruments made or issued by such Person, (y) for borrowed money or (z) for the
deferred purchase price of property or services, (ii) the face amount of all
letters of credit issued for the account of such Person, (iii) all Indebtedness
of the types referred to in clauses (i) and (ii) secured by any Lien on any
property owned by such Person, whether or not such Indebtedness has been assumed
by such Person, (iv) the aggregate amount required to be capitalized in
accordance with U.S. GAAP under leases under which such Person is the lessee and
(v) all Contingent Obligations of such Person; provided, however, that
Indebtedness shall not include trade accounts payable or endorsements of
negotiable instruments for deposit or collection or similar transactions, in
either case in the ordinary course of business.
"Interest Coverage Ratio" for any period shall mean the ratio
of EBITDA to Interest Expense.
"Interest Determination Date" shall mean, with respect to any
Loan, the second Business Day prior to the commencement of any Interest Period
relating to such Loan.
"Interest Expense" shall mean, for any period, total interest
expense paid in cash of the Borrower and its Consolidated Subsidiaries with
respect to all outstanding Indebtedness of the Borrower and its Consolidated
Subsidiaries.
"Interest Period" shall have the meaning provided in Section
2.10.
"Interest Rate Agreements" shall mean any interest rate
protection agreements and other types of interest rate hedging agreements
(including, without limitation, interest rate swaps, caps, floors, collars and
similar agreements) designed to protect the Borrower or any Subsidiary against
fluctuations in interest rates in respect of Indebtedness of the Borrower or any
Subsidiary.
"Law" shall mean any constitution, treaty or convention, any
statute, law, code, ordinance, decree, order,
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<PAGE> 16
rule, regulation, guideline, interpretation, direction, policy or request, or
judicial or arbitral decision.
"Lender" shall have the meaning provided in the first
paragraph of this Agreement.
"Lending Office" shall mean, with respect to each Lender, the
office of such Lender specified as its "Lending Office" opposite its name on
Schedule II hereto or such other office, Subsidiary or Affiliate of such Lender
as such Lender may from time to time specify as such to the Borrower and the
Administrative Agents.
"License" shall mean that certain Contrato de Concesion dated
March 28, 1994, and any amendment or clarification thereof (including any such
amendment or clarification required pursuant to the Laws by which it is
governed), between the Borrower and the Ministry which grants the Borrower the
authority to engage in the provision of cellular communications services in the
western region of Colombia.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
any recording or notice Law, and any lease having substantially the same effect
as any of the foregoing).
"Loan" shall have the meaning provided in Section 2.1.
"Losses" shall have the meaning provided in Section 11.1.
"Mandate" shall have the meaning provided in Section 5.1(i).
"Material Adverse Effect" shall mean, with respect to any
Person, any material adverse effect on the financial condition, business,
results of operations, properties (including, without limitation, in the case of
the Borrower, the License and the Network) or prospects of such Person and,
unless the context indicates otherwise, such Person's Consolidated Subsidiaries,
taken as a whole.
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"Maturity Date" shall mean the date which is exactly five
years and one day after the Borrowing Date.
"Maximum Leverage Ratio" for any period shall mean the ratio
of Total Liabilities of the Borrower and its Consolidated Subsidiaries as of the
end of such period to EBITDA for such period.
"Ministry" shall mean the Ministerio de Comunicaciones de
Colombia.
"Net Income" shall mean, for any period, the net income of the
Borrower and its Consolidated Subsidiaries for such period.
"Net Worth" shall mean, at any time, an amount equal to the
total shareholders' equity of the Borrower and its Consolidated Subsidiaries at
such time.
"Network" shall mean the cellular telephone network
constructed, maintained and operated by the Borrower in the Western region of
Colombia pursuant to the License and applicable Law.
"Note" shall have the meaning provided in Section 2.4.
"Notice of Borrowing" shall have the meaning provided in
Section 2.2.
"Notice Office" shall mean the notice office of the
Administrative Agents located at 135 East 57th Street, New York, New York 10022
or such other notice office as the Administrative Agents may hereafter designate
in writing as such to each of the other parties hereto.
"Obligations" shall mean all present and future obligations,
liabilities and other amounts owing to the Administrative Agents, the Collateral
Agents or any Lender pursuant to the terms of this Agreement or any other Credit
Document.
"Other Document Party" shall mean and include the Borrower and
the Designated Shareholders.
"Payment Office" shall mean the payment office of the
Administrative Agents located at 135 East 57th Street, New York, New York 10022
or such other payment office as the Administrative Agents may hereafter
designate in writing as
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<PAGE> 18
such to each of the other parties hereto. Nothing in this definition or
elsewhere in this Agreement shall oblige the Borrower to pay for the account of
the Administrative Agents or any Lender or any successor or assignee any greater
amount than it would have been obliged to pay had the Payment Office of the
Administrative Agents remained in New York.
"Permitted Equity Offering" shall mean the sale by the
Borrower of any shares of its: (x) Class C Common Stock to sector social
solidario as required by Colombian law on deferred payment terms; (y) capital
stock issued upon exercise of the Warrants issued in connection with the Debt
Offering; or (z) capital stock to current or former employees, officers,
directors or alternate directors of the Borrower or any Subsidiary (or permitted
transferees of such persons), pursuant to the terms of applicable agreements
(including employment agreements) or plans (or amendments thereto) approved by
the Borrower's Board of Directors under which such individuals purchase shares
of such capital stock), the proceeds of which, in the case of this clause (z),
either individually or in the aggregate, do not exceed U.S.$5,000,000.
"Permitted Telecommunications Business" shall mean any
wireless telecommunications business in Colombia (and any wireline business to
the extent that it constitutes part of any such wireless telecommunications
business), including cellular, satellite, data transmission and personal
communications businesses.
"Person" shall mean any individual, partnership, limited
partnership, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"Peso" or P$ shall mean the lawful currency of Colombia.
"Pledge Agreement" shall have the meaning provided in Section
5.1(g)(i).
"Pledge Agreement-License" shall have the meaning provided in
Section 5.1(g)(iv).
"Process Agents" shall mean CT Corporation System, presently
located at 1633 Broadway, New York, New York 10019.
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<PAGE> 19
"Quarterly Average Exchange Rate" shall mean, for each
calendar quarter, the average of the Representative Market Rate for all the
Business Days during such quarter as calculated by the Administrative Agents.
"Quarterly Recurring Revenue" shall mean, for each calendar
quarter, the total amount of gross revenue accrued by the Borrower and its
Consolidated Subsidiaries from the Subscribers from recurring revenue sources
(including, without limitation, monthly fees, usage fees, roaming fees and
additional service charges) and any other fees accrued by the Borrower and its
Consolidated Subsidiaries from local telephone companies for use of the Network
during such quarter, divided by the Quarterly Average Exchange Rate for such
quarter.
"Representative Market Rate" shall mean, for any date, the
exchange rate for the conversion of Pesos into Dollars as announced by the
Banking Superintendency.
"Required Lenders" shall mean, at any time, Lenders holding
more than 50% of the then aggregate unpaid principal amount of the Notes or, if
no such principal amount is then outstanding, Lenders holding more than 50% of
the Total Commitment; provided, however, that if the Arrangers and their
respective Affiliates hold, in the aggregate, more than 50% of the unpaid
principal amount of the Notes or, if no such principal amount is then
outstanding, more than 50% of the Total Commitment, the term Required Lenders
shall mean the Lenders holding more than 67% of the unpaid principal amount of
the Notes or the Total Commitment, as the case may be.
"Scheduled Repayment" shall have the meaning provided in
Section 4.2.
"Scheduled Repayment Date" shall have the meaning provided in
Section 4.2.
"Security Documents" shall mean and include the Guaranty Trust
Agreement, each of the Pledge Agreement-License, the Pledge Agreements, the
Disbursement Agreement and the Funding Agreement.
"Shareholders" shall have the meaning provided in Section
6.17.
"Subscriber" shall mean a Person which has entered into an
agreement or other arrangement with the Borrower for the provision by the
Borrower to such Person of cellular
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<PAGE> 20
communications service in the area covered by the License, provided that (i)
such Person is required to pay a tariff for such service, (ii) such service has
not at such time been permanently disconnected and (iii) no amount owed by such
Person to the Borrower is more than 120 days past due and the Borrower has not
granted such Person a deferral for any amount owed by such Person to the
Borrower for a period exceeding 120 days.
"Subsidiary" shall mean, as to any Person, (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Taxes" shall have the meaning provided in Section 4.4.
"Total Commitment" shall mean, at any time, the sum of the
Commitments of each of the Lenders.
"Total Liabilities" shall mean, as to any Person, without
duplication, (i) the total liabilities of such Person required to be shown on
such Person's balance sheet in accordance with Colombian GAAP, and (ii) the
aggregate amount required to be capitalized in accordance with Colombian GAAP
under leases under which such Person is the lessee; provided, however, that
Total Liabilities shall not include trade accounts payable or endorsements of
negotiable instruments for deposit or collection or similar transactions, in
either case in the ordinary course of business.
"United States" and "U.S." shall each mean the United States
of America.
"U.S. GAAP" shall mean generally accepted accounting
principles in the United States, consistently applied during a relevant period.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i)
any corporation 100% of whose capital stock (other than a de minimis number of
director's qualifying
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<PAGE> 21
shares or de minimis investments by non-U.S. nationals mandated by applicable
law) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest (other than a de minimis
number of director's qualifying shares or de minimis investments by non-U.S.
nationals mandated by applicable law) at such time.
1.2 Principles of Construction. (a) All references to
Sections, Schedules and Exhibits are to Sections, Schedules and Exhibits in or
to this Agreement unless otherwise specified. 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.
(b) All accounting terms not specifically defined herein shall
be construed in accordance with Colombian GAAP in conformity with those used in
the preparation of the financial statements referred to in Section 6.7(a).
Section 2. Amount and Terms of Credit.
2.1 The Loans. Subject to and upon the terms and conditions
set forth herein, each Lender severally agrees on the Borrowing Date to make a
loan to the Borrower on or prior to the Commitment Termination Date (each a
"Loan" and collectively, the "Loans"), which Loans shall be in the aggregate
amount of U.S.$80,000,000 and shall be for each Lender that amount which equals
the Commitment of such Lender. The Loans are available only on the terms and
conditions specified hereunder, and though repaid, in full or in part, at
maturity or by prepayment, may not be reborrowed in full or in part.
2.2 Notice of Borrowing. The Loans to be requested on the
Borrowing Date shall be set forth in a notice of borrowing (the "Notice of
Borrowing") delivered by the Borrower to the Administrative Agents at the Notice
Office at least one Business Day prior to the Borrowing Date, provided that such
notice shall be deemed to have been given on a certain day only if given before
12:00 Noon (New York time) on such day. Such Notice of Borrowing shall be
irrevocable and shall be given by the Borrower in the form of Exhibit A hereto,
appropriately completed to specify the Borrowing Date which shall be a Business
Day). The Administrative Agents shall promptly (but in no event later
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<PAGE> 22
than one Business Day prior to the Borrowing Date) give each Lender notice of
the proposed Borrowing, such Lender's proportionate share thereof and the other
matters required by the immediately preceding sentences to be specified in the
Notice of Borrowing.
2.3 Disbursement of Funds. Subject to the terms and conditions
hereof, no later than 12:00 Noon (New York time) on the Borrowing Date, each
Lender will make available, through such Lender's Lending Office, its pro rata
portion of the aggregate amount of the Loans to be made on the Borrowing Date,
in Dollars and in immediately available funds at the Payment Office of the
Administrative Agents, and the Administrative Agents will transfer the aggregate
of the amounts so made available by the Lenders, net of fees and costs payable
to the Lenders, in accordance with Schedule VI hereto. Immediately upon receipt
by the Administrative Agents of a Lender's notification of its intention not to
make available the portion of its Commitment, the Administrative Agents shall
notify the Arrangers which shall then make available such amount to the
Administrative Agents on the Borrowing Date in accordance with the preceding
sentence. Unless the Administrative Agents shall have been notified by any
Lender prior to such Borrowing Date that such Lender does not intend to make
available to the Administrative Agents such Lender's portion of the Borrowing to
be made on the Borrowing Date, the Administrative Agents may assume that such
Lender has made such amount available to the Administrative Agents on the
Borrowing Date, and the Administrative Agents may (but shall have no obligation
to), in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agents by such Lender, the Administrative Agents shall be
entitled to recover such corresponding amount from such Lender on demand. If
such Lender does not pay such corresponding amount forthwith upon the
Administrative Agents' demand therefor, the Administrative Agents shall promptly
notify the Arrangers, and the Arrangers shall immediately pay such corresponding
amount to the Administrative Agents. The Administrative Agents shall also be
entitled to recover on demand from such Lender or the Arrangers, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative Agents to the
Borrower until the date such corresponding amount is recovered by the
Administrative Agents, at a rate per annum equal to the cost to the
Administrative Agents of acquiring overnight federal funds at the then
applicable rate for the Loans. Nothing in this
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<PAGE> 23
Section 2.3 shall be deemed to relieve any Lender from its obligation to make a
Loan hereunder or to prejudice any rights which the Borrower and the Arrangers
may have against any Lender as a result of any failure by such Lender to make a
Loan hereunder.
2.4 Notes. The Borrower's obligation to pay the principal of,
and interest on, each Loan shall be evidenced by a promissory note duly executed
and delivered by the Borrower substantially in the form of Exhibit B hereto
(each, a "Note," and collectively, the "Notes") with blanks appropriately
completed in conformity herewith. Each of the Notes shall (i) be payable to the
order of the Lender making the Loan and be dated the Borrowing Date, (ii) be in
a stated principal amount equal to the Loan evidenced thereby, (iii) mature on
the Maturity Date, (iv) bear interest as provided in Section 2.6 and (v) be
entitled to the benefits of this Agreement and the other Credit Documents.
2.5 Pro Rata Borrowing. All Borrowings of Loans under this
Agreement shall be incurred from the Lenders pro rata on the basis of their
Commitments, but shall be undertaken by the Arrangers in any amount that the
Lenders fail to provide. It is understood that no Lender shall be responsible
for any default by any other Lender of its obligation to make a Loan hereunder
and that each Lender shall be obligated to make the Loan provided to be made by
it hereunder regardless of the failure of any other Lender to make its Loan
hereunder.
2.6 Interest. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Loan from the date the proceeds
made thereof are made available to the Borrower until the maturity thereof
(whether by acceleration or otherwise) at a rate per annum which shall, during
each Interest Period applicable thereto, be equal to the sum of the Applicable
Margin (as defined below) plus the Eurodollar Rate for such Interest Period. The
"Applicable Margin" shall be 3.75% per annum; provided, however, that the
Applicable Margin shall be adjusted on any Determination Date, which adjusted
Applicable Margin shall remain in effect until adjusted on any subsequent
Determination Date in accordance with the following:
(i) if the Debt Ratio as of any Determination Date is 5.00 or
greater, then the Applicable Margin shall be 3.75% per annum;
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<PAGE> 24
(ii) if the Debt Ratio as of any Determination Date is less than
5.00 but not less than 3.80, then the Applicable Margin shall be 3.50%
per annum;
(iii) if the Debt Ratio as of any Determination Date is less than
3.80 but not less than 3.10, then the Applicable Margin shall be 3.25%
per annum;
(iv) if the Debt Ratio as of any Determination Date is less than
3.10 but not less than 2.775, then the Applicable Margin shall be 3.00%
per annum; and
(v) if the Debt Ratio as of any Determination Date is less than
2.775, then the Applicable Margin shall be 2.75% per annum;
provided, further, that the Applicable Margin shall be 2.75% per annum with
respect to a portion of the unpaid principal amount of the Loans (pro rata among
the Lenders in proportion to the principal amount of their respective Loans)
equal to the amount, if any, of U.S. dollars deposited by the Borrower with the
Collateral Agent pursuant to, and in accordance with, Sections 4.2(b) and 4.2(c)
hereof (it being understood that no such adjustment in the Applicable Margin
shall be made under this subparagraph in respect of any deposits of Pesos
pursuant to Section 5.3 of the Disbursement Agreement).
(b) Overdue principal and, to the extent permitted by Law,
overdue interest in respect of each Loan and any other overdue amount payable by
the Borrower hereunder or under any other Credit Document shall bear interest at
a rate per annum equal to the rate which is 2.0% in excess of the rate then
borne by such Loans, or, if for any reason the Loans do not have an interest
rate otherwise applicable to them, then at a rate per annum equal to 2.0% per
annum in excess of the Base Rate plus the Applicable Margin, in each such case
accruing from the date on which such principal and interest was due, with such
overdue principal and interest payable on demand.
(c) Accrued (and theretofore unpaid) interest shall be payable
in respect of each Loan (i) quarterly in arrears on each September 7, December
7, March 7 and June 7, and (ii) on any repayment, whether mandatory or otherwise
(on the amount repaid), at maturity (whether by acceleration or otherwise) and,
after such maturity, on demand.
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<PAGE> 25
(d) On each Interest Determination Date, the Administrative
Agents shall determine the Eurodollar Rate for the Interest Period applicable to
the Loans and shall promptly notify the Borrower and the Lenders thereof. Each
such determination shall, absent manifest error, be final and conclusive and
binding on all parties hereto.
2.7 Increased Costs, Illegality, etc. (a) In the event that
any Lender shall have determined (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto but, with
respect to clause (i) below, may be made only by the Administrative Agents):
(i) on any Interest Determination Date that, by reason of any
changes arising after the Effective Date affecting the interbank
Eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect
to any Loan because of (x) any change since the Effective Date in any
applicable Law or in the interpretation or administration thereof and
including the introduction of any new Law, such as, for example, but
not limited to: (A) a change in the basis of taxation of payments to
any Lender of the principal of or interest on the Notes or any other
amounts payable hereunder (except for (i) changes in respect of taxes
imposed on overall net income pursuant to the Laws of the jurisdiction
in which the Lender is organized or in which its principal office or
applicable lending office is located or any subdivision thereof or
therein, and (ii) any Taxes described in Section 4.4) or (B) a change
in official reserve requirements and/or (y) other circumstances since
the Effective Date affecting such Lender or the interbank Eurodollar
market or the position of such Lender in such market; or
(iii) at any time, that the making or continuance of any Loan has
been made (x) unlawful by any Law or (y) impossible by compliance by
any Lender in good faith with any Law;
then, and in any such event, such Lender (or the Administrative Agents, in the
case of clause (i) above) shall
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<PAGE> 26
promptly give telephonic notice (confirmed in writing) to the Borrower and,
except in the case of clause (i) above, to the Administrative Agents of such
determination (which notice the Administrative Agents shall promptly transmit to
each of the other Lenders). Thereafter (x) in the case of clause (i) above, the
interest rate during the applicable Interest Period shall be the Base Rate in
effect on the applicable Interest Determination Date plus the Applicable Margin,
(y) in the case of clause (ii) above, if the Borrower does not elect to prepay
the Loan or is otherwise unable to prepay the Loan pursuant to applicable Law
subject to such increased costs or reductions within 30 days after receipt of
notice thereof or if later, the last day of the Interest Period during which
such notice is received, in accordance with Section 4.2 hereof, the Borrower
shall pay to such Lender, upon written demand therefor (and against a
certificate specifying in reasonable detail the nature of the increased cost or
reduction, the date from which it has been applied and the method of calculating
such increased cost), such additional amounts (in the form of an increased rate
of, or a different method of calculating, interest) as shall be required to
compensate such Lender for such increased costs or reductions in amounts
received or receivable hereunder (a written notice as to the additional amounts
owed to such Lender, showing the basis for the calculation thereof, submitted to
the Borrower by such Lender shall, absent manifest error, be final and
conclusive and binding on all the parties hereto) and (z) in the case of clause
(iii) above, the Borrower shall repay the Loan of the affected Lender(s) in
accordance with Section 2.7(b) as promptly as possible and, in any event, within
the time period required by Law.
(b) At any time that any Loan is affected by the circumstances
described in Section 2.7(a)(ii) or (iii), the Borrower may (and in the case of a
Loan affected by the circumstances described in Section 2.7(a)(iii) shall) if
the affected Loan is then outstanding, upon at least five Business Days' written
notice to the Administrative Agents, repay the Loan of the affected Lender(s)
(in which case the Borrower shall have no obligation to pay any additional
amounts pursuant to Section 2.7(a)(i), 2.7(a)(ii) or 2.7(a)(iii), as the case
may be), provided that, if more than one Lender is affected at any time, then
all affected Lenders must be treated the same pursuant to this Section 2.7(b).
(c) If any Lender determines at any time that the introduction or
implementation of, or any change in, any Law after the Effective Date concerning
capital adequacy, or any change in interpretation or administration thereof by
any
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<PAGE> 27
governmental authority, central bank or comparable agency, will have the effect
of increasing the amount of capital required or expected to be maintained by
such Lender based on the existence of such Lender's Commitment hereunder or its
obligations hereunder, then the Borrower shall pay to such Lender, within 15
Business Days of its written demand therefor, such additional amounts as shall
be required to compensate such Lender for the increased cost to such Lender as a
result of such increase of capital. In determining such additional amounts, each
Lender will act in a commercially reasonable manner and in good faith and will
use averaging and attribution methods which are reasonable, and such Lender's
determination of compensation owing under this Section 2.7 shall, absent
manifest error or a lack of commercial reasonableness or good faith, be final
and conclusive and binding on all the parties hereto. Each Lender, upon
determining that any additional amounts will be payable pursuant to this Section
2.7, will give prompt written notice thereof to the Borrower, which notice shall
show the basis for calculation of such additional amounts, and the failure to
give any such notice shall not release Borrower's obligations to pay additional
amounts pursuant to this Section 2.7 (unless the relevant Lender failed to give
such notice within 90 days of the occurrence of the events which gave the
relevant Lender the right to demand that the Borrower pay additional amounts
pursuant to this Section 2.7, in which case the Borrower shall have no
obligation to pay such additional amounts).
2.8 Compensation. The Borrower shall compensate each Lender, upon
its written request (which request shall set forth the basis for requesting such
compensation and shall, absent manifest error, be final and conclusive and
binding on all the parties hereto), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Lender to fund its Loans) which such Lender may sustain: (i) if
for any reason (other than a default by such Lender or the Administrative Agents
or the occurrence of a force majeure event) the Borrowing of Loans does not
occur on the date specified therefor in the Notice of Borrowing (whether or not
withdrawn by the Borrower); or (ii) if any repayment (including any repayment
made pursuant to Sections 4.1 and 4.2 or a result of an acceleration of the
Loans pursuant to Section 9) of its Loans occurs on a date which is not the last
day of an Interest Period with respect thereto.
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<PAGE> 28
2.9 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.7(a)(ii) or
(iii), 2.7(c) or 4.4 with respect to such Lender and prior to delivery of the
notice referred to in Section 2.7 or 4.4, it will use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different Lending Office if the making of such a designation would
avoid the need for, or reduce the amount of, such increased cost (or increase in
capital) and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender. Nothing in this Section 2.9 shall affect or
postpone any of the obligations of the Borrower or the right of any Lender
provided in Section 2.7 or 4.4.
2.10 Interest Periods. At the time it gives any Notice of
Borrowing in respect of the Loans in the case of the initial Interest Period or
on the third Business Day prior to the expiration of any subsequent Interest
Period, the Borrower shall have the right to elect, by giving the Administrative
Agent notice thereof, the interest period (each an "Interest Period") applicable
to the Loans, which Interest Period shall, at the option of the Borrower be a
three or six month period, provided that: (a) the initial Interest Period shall
commence on the Borrowing Date and each subsequent Interest Period shall
commence on the date on which the immediately preceding Interest Period
applicable thereto expires; (b) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day; (c) any
Interest Period that would otherwise extend beyond the Maturity Date shall end
on the Maturity Date; and (d) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month.
2.11 Interest Reserve. Notwithstanding anything herein to the
contrary, the Borrower acknowledges and agrees that on the Borrowing Date an
amount equal to three months' interest in respect of the principal amount of the
Loans shall be deposited with, and held by, the Collateral Agents under and
pursuant to the terms of the Disbursement Agreement.
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<PAGE> 29
Section 3. Fees. The Borrower agrees to pay to the Administrative
Agents, for its own account, and to each Arranger, for their respective
accounts, such fees as have been agreed to in writing by the Borrower, the
Administrative Agents and the Arrangers, respectively.
Section 4. Prepayments; Payments.
4.1 Voluntary Prepayments. The Borrower shall have the right to
prepay the Loans, without premium or penalty, in whole or in part at any time
and from time to time after the Borrowing Date of such Loans on the following
terms and conditions: (i) the Borrower shall give the Administrative Agents at
the Notice Office at least five Business Days' prior written notice of its
intent to prepay the Loans and the aggregate principal amount of the prepayment
(which notice the Administrative Agents shall promptly transmit to each of the
Lenders); (ii) such prepayment shall be in an aggregate principal amount of at
least U.S.$1,000,000 or whole multiples thereof; (iii) prepayments of a Loan may
only be made pursuant to this Section 4.1 on the last day of an Interest Period
applicable thereto, unless the Borrower pays, together with any such prepayment,
all amounts owing under Section 2.8, if any, as a result of prepaying such Loan
on a day other than the last day of the Interest Period applicable thereto; (iv)
each prepayment shall be applied to reduce the then remaining Scheduled
Repayments on the Loans in order of maturity (or as otherwise agreed in writing
between the Borrower and the Lenders); and (v) the Borrower shall have provided
reasonable assurances satisfactory in all respects to the Administrative Agents
that the prepayment does not violate any applicable Law.
4.2 Mandatory Repayments. (a) In addition to any other mandatory
repayments pursuant to this Section 4.2, on each date set forth below, the
Borrower shall be required to repay that principal amount of Loans, to the
extent then outstanding, as is set forth opposite such date (each such
repayment, a "Scheduled Repayment," and each such date, a "Scheduled Repayment
Date"):
<TABLE>
<CAPTION>
Scheduled Repayment Date Scheduled Repayment
<S> <C>
June 7, 1999 U.S.$ 8,000,000
December 7, 1999 U.S.$ 8,000,000
June 7, 2000 U.S.$ 8,000,000
December 7, 2000 U.S.$ 8,000,000
</TABLE>
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<PAGE> 30
; and the balance of the principal amount of each Loan shall be paid on the
Maturity Date.
(b) In addition to any other mandatory repayments pursuant to this
Section 4.2, if at any time after the Borrowing Date, the Borrower receives any
cash proceeds from the sale or issuance of equity in the Borrower (other than
from a Permitted Equity Offering), which exceed, either individually or in the
aggregate, U.S.$30,000,000 or from any issuance or incurrence of Indebtedness
(other than Indebtedness permitted pursuant to Section 8.3), then the Borrower
shall apply an amount equal to (i) 100% of the cash proceeds of the respective
issuance or incurrence of Indebtedness and (ii) that amount of the respective
issuance of equity which exceeds U.S.$30,000,000 (in each case net of
underwriting discounts and commissions and other reasonable costs associated
therewith, including legal, accounting, investment banking, consulting,
governmental and other fees incurred or reasonably expected to be incurred and
net of taxes paid or payable in respect thereof) as a mandatory repayment of
principal of any outstanding Loans by reducing the then remaining Scheduled
Repayments in order of maturity (or as otherwise agreed to in writing between
the Borrower and the Lenders). Any mandatory repayment due and owing pursuant to
the operation of this Section 4.2(b) shall be made at the end of the Interest
Period next following the date of receipt by the Borrower of the proceeds of
such offering or Indebtedness. If, and to the extent, the application of such
proceeds to the repayment of the Loans is prohibited or restricted in any manner
under applicable Law (including, without limitation, if the Central Bank
requires the payment of any taxes or mandatory deposits with respect to such
repayment), then, subject to Section 11.10, such proceeds to the extent of such
prohibition or restriction shall not be prepaid but shall be deposited into an
interest bearing escrow account by the Borrower with, and held by, the
Collateral Agents pursuant to the Disbursement Agreement.
(c) In addition to any other mandatory repayments pursuant to this
Section 4.2, on each Excess Cash Payment Date, the Borrower shall pay to the
Administrative Agents an amount equal to 50% of the Excess Cash Flow for each
relevant Excess Cash Payment Period (the "Excess Cash Flow Payment"), each such
amount to be applied as a mandatory repayment of principal of outstanding Loans
to reduce the then remaining Scheduled Repayments in order of maturity after
giving effect to all prior reductions thereto. If any such Excess Cash Flow
Payment is prohibited or restricted in any manner under applicable Law
(including, without limitation, if the Central
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<PAGE> 31
Bank requires the payment of any taxes or mandatory deposits with respect to
such repayment), then, subject to Section 11.10, such Excess Cash Flow Payments
to the extent of such prohibition or restriction shall not be prepaid but shall
be deposited into an interest bearing account by the Borrower with, and held by,
the Collateral Agents pursuant to the Disbursement Agreement.
4.3 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement or any Note shall be made to
the Administrative Agents for the account of the Lender or Lenders entitled
thereto not later than 12:00 Noon (New York time) on the date when due and shall
be made in Dollars in immediately available funds at the Payment Office.
Whenever any principal payment to be made hereunder or under any Note 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 interest shall be
payable at the applicable rate during such extension.
4.4 Net Payments. (a) All payments made by the Borrower hereunder
or under any Note will be made without setoff, counterclaim or other defense.
All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by
Colombia or any other jurisdiction from which the Borrower elects to make
payments or by any political subdivisions or taxing authorities thereof or
therein excluding in the case of each Lender, the Administrative Agents and the
Collateral Agents, taxes that would not be imposed but for a connection between
such Lender, the Administrative Agents and the Collateral Agents (as the case
may be) and the jurisdiction imposing such tax other than a connection arising
solely by virtue of the activities of such Lender, the Administrative Agents and
the Collateral Agents (as the case may be) pursuant to or in respect of this
Agreement or under any other Credit Document, including entering into, lending
money or extending credit pursuant to, receiving payments under, or enforcing,
this Agreement or any other Credit Document (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Taxes are so levied or imposed, the
Borrower agrees to pay the full amount of such Taxes and such additional amounts
as may be necessary so that every payment of all amounts due hereunder or under
any Note, after withholding or deduction for or on account of any Taxes, will
not be less than the
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amount provided for herein or in such Note. The Borrower will furnish to the
Administrative Agents within 45 days after the date the payment of any Taxes is
due pursuant to applicable Law certified copies of tax receipts evidencing such
payment by the Borrower. The Borrower will indemnify and hold harmless each
Lender, and reimburse such Lender upon its written request, for the amount of
any Taxes so levied or imposed and paid by such Lender.
(b) If the Borrower pays any additional amount pursuant to this
Section 4.4 and any Lender actually receives a refund of tax or a credit against
such Lender's tax liabilities as a result of such payment by the Borrower, such
Lender shall promptly pay to the Borrower an amount that such Lender determines,
in its sole judgment, is equal to (i) in the case of a refund of tax, the amount
of such refund actually received by such Lender as a result of such payment by
the Borrower, and (ii) in the case of a credit against its tax liabilities, the
net tax benefit obtained by such Lender as a result of such payment by the
Borrower. Whether or not any Lender claims any credit or refund shall be in the
sole discretion of each Lender. If any Lender makes a payment to the Borrower
pursuant to this Section 4.4(b) and at any time thereafter such Lender
determines in its sole judgment that it is required to repay the refund or has
been or will be denied the benefit of the credit, as the case may be, which gave
rise to the payment to the Borrower, then the Borrower shall repay to such
Lender, promptly upon the request of such Lender, the amount previously paid by
the Lender pursuant to this Section 4.4(b). Nothing in this Section 4.4 shall
require any Lender to disclose or detail the basis of its calculation of the
amount of any tax benefit or any other information to the Borrower or any other
party. Each Lender shall use its reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document reasonably
requested in writing by the Borrower, if the making of such filing would avoid
the need for or reduce the amount of any additional amounts that would be
payable or may hereafter accrue and would not be otherwise disadvantageous to
such Lender.
Section 5. Conditions Precedent.
5.1 Conditions Precedent to the Borrowing. The obligation of each
Lender to make the Loans on the Borrowing Date is subject, at the time of the
Borrowing, to the satisfaction of the following conditions:
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(a) Effective Date; Notes. On or prior to the Borrowing Date (i)
the Effective Date shall have occurred and (ii) there shall have been delivered
to the Administrative Agents for the account of each Lender the appropriate
Notes executed by the Borrower in the amount, with the maturity and as otherwise
provided herein.
(b) Notice of Borrowing. Prior to the making of the Loan, the
Administrative Agents shall have received a Notice of Borrowing with respect
thereto meeting the requirements of Section 2.2.
(c) No Default; Representations and Warranties. On the Borrowing
Date (i) there shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein and in the other Credit
Documents shall be true and correct in all material respects (it being
understood and agreed that any representation or warranty which by its terms is
made as of a specified date shall be required to be true and correct in all
material respects only as of such specified date).
(d) Officer's Certificate. On the Borrowing Date, the
Administrative Agents shall have received a certificate, dated the Borrowing
Date and signed on behalf of the Borrower by the president or chief financial
officer of the Borrower, in the form of Exhibit D-1 with appropriate insertions,
together with the organizational documents and bylaws of the Borrower and
resolutions of the Borrower referred to in such certificate, which certificate
shall state that all of the conditions in Section 5.1 have been satisfied as of
such date.
(e) Opinions of Counsel. On the Borrowing Date, the Administrative
Agents shall have received an opinion addressed to each of the Lenders, the
Administrative Agents and the Collateral Agents and dated the Borrowing Date,
from (i) Cravath, Swaine & Moore, special U.S. counsel to the Borrower, covering
the matters set forth in Exhibit C-1 hereto, (ii) Holguin, Neira y Pombo,
special Colombian counsel to the Borrower, covering the matters set forth in
Exhibit C-2 hereto, and (iii) White & Case, special U.S. counsel to the
Administrative Agents.
(f) Corporate Documents; Proceedings. On the Borrowing Date, the
Administrative Agents shall have received:
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(i) a certificate, dated the Borrowing Date, signed by
the president or chief financial officer of each of the Other
Document Parties and attested to by the secretary or assistant
secretary of such Other Document Party, in the form of Exhibit
D-2 with appropriate insertions, together with the
organizational documents and by-laws of such Other Document
Party and the resolutions of such Other Document Party
referred to in such certificate; and
(ii) all corporate, trust and legal proceedings and all
instruments and agreements in connection with the transactions
contemplated in the Credit Documents shall be reasonably
satisfactory in form and substance to the Lenders in all
respects, and the Administrative Agents shall have received
all information and copies of all documents and papers,
including, without limitation, records of corporate and trust
proceedings and governmental approvals, if any, which any
Lender reasonably may have requested in connection therewith,
such documents and papers where appropriate to be certified by
the proper corporate, trust or governmental authorities.
(g) Pledge Agreements; Guaranty Trust Agreements; Pledge
Agreement-License. On or prior to the Borrowing Date:
(i) each of the Designated Shareholders and the
Collateral Agents shall have duly authorized, executed and
delivered a Pledge Agreement in the form of Exhibit E (as then
amended, modified or supplemented from time to time, each, a
"Pledge Agreement" and collectively, the "Pledge Agreements"),
and the Borrower shall have delivered to the Collateral Agents
(x) a certificate from the Borrower's secretary or assistant
secretary certifying that in the aggregate not less than 99.8%
of the Borrower Stock as of the date hereof has been pledged
in accordance with the terms thereof, to the Collateral
Agents, free and clear of all Liens and (y) the Borrower Stock
referred to in clause (x) above, duly pledged to the
Collateral Agents, free and clear of all other Liens.
(ii) the Borrower and the Guaranty Trustee shall have
duly authorized, executed and delivered a guaranty trust
agreement (Contrato de Fiducia Mercantil) in the form of
Exhibit F-1 (as amended, modified or supplemented from time to
time, the "Guaranty Trust Agreement") pursuant to which the
Borrower shall pledge
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to the Guaranty Trustee, for the benefit of the Lenders as
security for the obligations hereunder, all of its right,
title and interest in and to the Cellular Receivables
(subject to the provisions of the Funding Agreement);
(iii) the Borrower and each of the guaranty trustees for
the Existing Indebtedness shall have duly authorized, executed
and delivered an agreement (the "Guaranty Trusts Termination
Agreement") in the Form of Exhibit F-2 by which each of the
guaranty trusts securing such Existing Indebtedness shall be
assigned, and the Cellular Receivables included in the trust
estates thereof shall be transferred, to the Guaranty Trustee
to secure the Obligations in accordance with the terms of the
Guaranty Trust Agreement and the Funding Agreement; and
(iv) the Borrower and the Collateral Agents shall have
duly authorized, executed and delivered a pledge agreement in
the form of Exhibit G (as amended, modified or supplemented
from time to time, the "Pledge Agreement-License") pursuant to
which the Borrower shall pledge to the Collateral Agents for
the benefit of the Lenders, subject to the conditions therein,
all of its right, title and interest in and to the License.
(h) Disbursement Agreement. On or prior to the Borrowing Date,
the Borrower and the Collateral Agents shall have duly authorized, executed and
delivered a Disbursement Agreement in the form of Exhibit H (as amended,
modified or supplemented from time to time, the "Disbursement Agreement"), and
the Borrower shall have paid to the Collateral Agents the Interest Reserve (as
such term is defined in the Disbursement Agreement).
(i) Mandate Letter. On or prior to the Borrowing Date, the
Borrower shall have duly authorized, executed and delivered a mandate in favor
of the Arrangers, in form and substance mutually satisfactory to the Arrangers
and the Borrower (as amended, modified or supplemented from time to time, the
"Mandate").
(j) License. On or prior to the Borrowing Date, (i) the
License shall be in full force and effect and no default shall have occurred
thereunder, and (ii) the Administrative Agents shall have received from the
Ministry a certification, in form and substance reasonably satisfactory to the
Administrative Agents in all respects, confirming that the Borrower has
satisfied, as of the date of such certification (which shall be a date no
earlier than 30
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days prior to the date of such certification), the Capacity and Digitalization
Percentage requirements of the License.
(k) Appointment Letter. On or prior to the Borrowing Date, the
Administrative Agents shall have received a letter from the Borrower, in the
form attached hereto as Exhibit I, indicating its appointment of the Process
Agents as its agents to receive service of process in connection with the
transactions contemplated by the Credit Documents, together with the
countersignature of the Process Agents indicating the consent of the Process
Agents to serve as Process Agents.
(l) Government Approvals. On or prior to the Borrowing Date,
all governmental approvals, permits, licenses, authorizations, validations and
exemptions required in connection with (i) the execution, delivery and
performance of the Credit Documents and (ii) the legality, validity, binding
effect and enforceability of any and all such Credit Documents, shall have been
received by the Borrower. The conveyance of the Receivables, and the grant of
the Liens, pursuant to the Security Documents shall not constitute a violation
of applicable Law or of the License, and the Loans, this Agreement and the other
Credit Documents shall have been registered by the Borrower with the Central
Bank to the extent required by and in accordance with applicable Law.
(m) Litigation. On the Borrowing Date, no litigation, action,
suit, investigation, claim or proceeding shall be pending or threatened with
respect to this Agreement or any other Credit Document, the transactions
contemplated hereby or which would reasonably be expected to have a Material
Adverse Effect on the Borrower.
(n) Payments. On the Borrowing Date, all Fees and other
amounts required to be paid or deposited on or prior to the Borrowing Date under
this Agreement and the other Credit Documents shall have been paid and/or
deposited.
(o) Market Conditions, etc. On the Borrowing Date, there shall
not have occurred any material change, or any development involving a
prospective change, in United States, Colombian or international financial,
political or economic conditions, or currency exchange rates or exchange
controls applicable to the Dollar or the Peso as would, in the sole judgment of
the Administrative Agents, make it impracticable for any Lender to successfully
syndicate any Loan.
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(p) Quarterly Recurring Revenue. On the Borrowing Date, the
Administrative Agents shall have received from the Vice President of Operations
of the Borrower a certification, in form and substance reasonably satisfactory
to the Administrative Agents in all respects, confirming that the Quarterly
Recurring Revenue for the calendar quarter immediately preceding the quarter in
which the Notice of Borrowing is delivered, was not less than U.S.$8.7 million
or its equivalent in Pesos measured by the Quarterly Average Exchange Rate.
(q) No Change in Condition. On the Borrowing Date, no material
adverse change shall have occurred in the business, results of operations,
properties, (including, without limitation, the License), financial condition or
prospects of the Borrower from those set forth in the most recent audited
financial statements of the Borrower delivered to and approved by the
Administrative Agents, the result of which has a material adverse effect on the
ability of the Borrower to perform its obligations under the Credit Document to
which it is a party.
(r) Funding Agreement. On the Borrowing Date, the Borrower,
the Administrative Agents and the Guaranty Trustee shall have duly authorized,
executed and delivered a Funding Agreement in form and substance satisfactory to
the Administrative Agents and the Borrower (as amended, modified or supplemented
from time to time, the "Funding Agreement"), regarding the repayment of the
Existing Indebtedness.
(s) Completion of the Debt Offering. On the Borrowing Date,
the Borrower will have completed, or simultaneously with the Borrowing
contemplated hereunder will complete, the Debt Offering, and the net proceeds
thereof shall have been applied to the repayment of the Existing Indebtedness
pursuant to the Funding Agreement.
(t) Provision of Indenture. On or prior to the Borrowing Date,
the Administrative Agents shall have received a duly executed copy of the
Indenture (or similar agreement) executed by the Borrower in connection with the
Debt Offering Indebtedness, which indenture shall require (notwithstanding that
the Notes issued in connection with the Debt Offering will rank pari passu with
the Loans) the trustee thereunder to provide to the Collateral Agents all
amounts that constitute proceeds of the License received pursuant to a
bankruptcy, insolvency or reorganization proceeding of the Borrower (including,
without limitation, a concordato) during the period from the Borrowing Date to
March 28, 1997 (the
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date on which the Collateral Agents, on behalf of the Lenders, may exercise
their remedies with respect to the License pursuant to the terms of the Pledge
Agreement-License), or if for any reason the Collateral Agents may not exercise
such remedies as of March 28, 1997, then until such later date as the Collateral
Agents may do so.
All of the Notes, certificates, legal opinions and other documents and papers
referred to in this Section 5 applicable to the Borrowing, as the case may be,
unless otherwise specified, shall be delivered to the Administrative Agents for
the account of each of the Lenders and, except for the Notes, in sufficient
counterparts or copies for each of the Lenders and shall be reasonably
satisfactory in form and substance to the Administrative Agents and the Lenders.
Section 6. Representations, Warranties and Agreements. In
order to induce the Lenders to enter into this Agreement and to make the Loans,
the Borrower makes the following representations, warranties and agreements, all
of which shall survive the execution and delivery of this Agreement and the
Notes and the making of the Loans, with the occurrence of the Borrowing being
deemed to constitute a representation and warranty that the matters specified in
this Section 6 are true and correct in all material respects on and as of the
Borrowing Date.
6.1 Legal Status. The Borrower (i) is a duly organized and
validly existing corporation (sociedad anonima) in good standing under the Laws
of Colombia, (ii) has the power and authority to own its property and assets and
to transact the Business of the Borrower and to do all things necessary or
appropriate in respect of the Business of the Borrower and to consummate the
transactions contemplated by the Credit Documents, and (iii) is duly qualified
and is authorized to do business and is in good standing in each jurisdiction
where the ownership, leasing or operation of its property or the conduct of the
Business requires such qualification, except for failures to be so qualified
which, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on the Borrower.
6.2 Power and Authority. The Borrower has the power and
authority to execute, deliver and perform the terms and provisions of each of
the Credit Documents to which it is party and has taken all necessary corporate
action to authorize the execution, delivery and performance by it of each such
Credit Document as have been executed and delivered
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as of each date this representation and warranty is made. The Borrower has, or
in the case of the Credit Documents other than this Agreement, by the Borrowing
Date will have, duly executed and delivered each of the Credit Documents to
which it is party, and each such Credit Document constitutes or, when executed
and delivered, will constitute, its legal, valid and binding obligation
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or other similar Laws relating to or limiting creditors' rights
generally or by general equity principles.
6.3 No Sovereign Immunity. Neither the Borrower nor any of its
property has any sovereign immunity from the jurisdiction of any court or from
setoff 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 any jurisdiction, including Colombia.
6.4 No Violation. Neither (A) the execution, delivery or
performance by the Borrower of the Credit Documents to which it is a party, nor
compliance by it with the terms and provisions thereof, nor the use of the
proceeds of the Loans as contemplated herein nor (B) the establishment of the
Liens created by the Security Documents (including, without limitation, the
pledge of the Borrower Stock with the Collateral Agents pursuant to the terms of
the Pledge Agreements and the pledge of the Cellular Receivables and the License
to the Guaranty Trustee and the Collateral Agents, respectively, pursuant to the
terms of the Guaranty Trust Agreement and the Pledge Agreement-License,
respectively) or the exercise of the rights and remedies contemplated by the
Security Documents at any time after the Borrowing Date, does or will (i)
contravene any material provision of any Law or any order, writ, injunction or
decree of any court or governmental instrumentality binding on the Borrower,
(ii) conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default in
respect of, or result in the creation or imposition of (or the obligation to
create or impose) any Lien (other than Liens created pursuant to the Security
Documents) upon, any of the property or assets of the Borrower or pursuant to
the terms of any indenture, mortgage, deed of trust, credit agreement, loan
agreement or any other material agreement, contract, lease or instrument to
which the Borrower is a party or by which the Borrower's properties or assets is
bound or to which the Borrower may be subject (including, without limitation,
the License), (iii) violate
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any provision of the estatutos sociales, articles of incorporation, bylaws or
other organizational documents of the Borrower or (iv) result in the termination
of the License; provided, however, that (x) the exercise of the rights and
remedies contemplated by the Security Documents at any time after the Borrowing
Date may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or by other similar Laws relating to or limiting creditors'
rights generally or by general equitable principles and (y) the remedies under
the Pledge Agreement-License can only be exercised after March 28, 1997.
6.5 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (other than the registration with the Central Bank referred to herein), or
exemption or waiver by, any governmental or public body or authority, or any
subdivision thereof (except as have been obtained or made and are in full force
and effect), is required to authorize, or is required in connection with, (i)
the execution, delivery and performance by the Borrower of any Credit Document
or (ii) the legality, validity, binding effect or enforceability against the
Borrower of any such Credit Document.
6.6 Litigation. Other than as set forth on Schedule VII
hereto, there is no litigation, action, suit, investigation, claim or proceeding
pending or threatened with respect to this Agreement or any other Credit
Document, the transactions contemplated hereby or which could reasonably be
expected to have a Material Adverse Effect on the Borrower.
6.7 Financial Statements; No Material Adverse Change. (a) The
statement of financial condition of the Borrower heretofore furnished to the
Administrative Agents presents fairly the financial condition of the Borrower at
the date of such statement of financial condition. Such financial statement
(which does not include other information or memoranda also heretofore furnished
to the Administrative Agents) has been prepared in accordance with Colombian
GAAP.
(b) Since March 31, 1996, there has been no material adverse
change in the business, results of operations, properties, (including, without
limitation, the License and the Network), financial condition or prospects of
the Borrower.
(c) Except as fully reflected in the financial statements
referred to in Section 6.7(a), there were, as of
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the Borrowing Date, no liabilities or obligations with respect to the Borrower
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, could reasonably
be expected to have a Material Adverse Effect on the Borrower.
6.8 Indebtedness. Schedule III sets forth a true and complete
list of all Indebtedness of the Borrower as of the Borrowing Date which is to
remain outstanding after giving effect thereto (excluding the Indebtedness to be
incurred under this Agreement and the Debt Offering Indebtedness) and the
Indebtedness to be repaid with the proceeds of the Borrowings and the Debt
Offering Indebtedness (collectively, the "Existing Indebtedness"), in each case
showing the aggregate principal amount thereof, accrued interest in respect
thereof and the obligee of such debt.
6.9 Use of Proceeds. The proceeds of the Borrowings shall be
used solely to (i) repay Existing Indebtedness in accordance with Schedule III
and (ii) fund working capital and planned construction and operation of the
Network.
6.10 Properties. The Borrower has good and marketable title to
all properties owned by it, free and clear of all Liens other than Liens
permitted under Section 8.1. With respect to any lease or rental agreement to
which the Borrower is a party, (i) such lease or rental agreement is in full
force and effect, (ii) the Borrower has complied in all material respects with
all of the terms of such lease or rental agreement, (iii) there exists no event
of default or an event, act or condition (other than defaults or conditions
which are not reasonably likely to have a Material Adverse Effect on the
Borrower) which with notice or lapse of time, or both, would constitute an event
of default thereunder by the Borrower or, to the knowledge of the Borrower, the
lessor thereunder, and (iv) the Borrower is in possession of the premises
demised under all such leases and rental agreements in which it is the lessee
and is conducting business on such premises.
6.11 License. The License is in full force and effect, and no
material default exists under any of the terms thereof. The Borrower has
prepared and filed all documents required to be filed by it pursuant to the
License and has paid all fees, charges and assessments payable by it which have
become due pursuant to the License other than those of which the failure to pay
would not result in a Material
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Adverse Effect on the Borrower or otherwise result in the suspension or
revocation of the License.
6.12 Compliance with Material Agreements. Each material
contract to which the Borrower is party is in full force and effect, and the
Borrower is not in default under any provision of any indenture, mortgage, deed
of trust, credit agreement, loan agreement or any other material agreement or
instrument to which it is party or by which it or any of its properties or
assets are or may be bound, where such default could result in a Material
Adverse Effect on the Borrower.
6.13 Patents, Licenses, Franchises and Formulas. The Borrower
owns all the patents, trademarks, permits, service marks, trade names,
copyrights, licenses, franchises and formulas, or rights with respect to the
foregoing, and has obtained assignments of all leases and other rights of
whatever nature, necessary for the present conduct of its business, without any
known conflict with the rights of others which, or the failure to obtain which,
as the case may be, could result in a Material Adverse Effect on the Borrower.
6.14 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower (including, without limitation, such factual information relating
to the Borrower as contained in (i) the Credit Documents, (ii) the Offering
Memorandum in connection with the Debt Offering and/or (iii) the Confidential
Information Memorandum dated May 1996 prepared and circulated in connection with
the syndication of the Loans), for purposes of or in connection with this
Agreement or any transaction contemplated herein or in any Credit Document is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of the Borrower to any Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not materially incomplete by omitting to state any fact necessary to make
such information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided.
6.15 Tax Returns and Payments. The Borrower has filed all tax
returns required to be filed by it and has paid all taxes payable by it which
have become due pursuant to such tax returns and all other taxes and assessments
payable by it which have become due, other than those not yet delin-
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quent and except for those contested in good faith and for which adequate
reserves have been established or those for which the failure to file such
returns or pay such taxes would not have a Material Adverse Effect on the
Borrower.
6.16 Employee Benefit Plans. The Borrower is in compliance in
all material respects with its respective obligations relating to all employee
benefit plans established, maintained or contributed to by the Borrower, and the
Borrower has no material outstanding liabilities with respect to any such
employee benefit plans except as disclosed in the financial statements
heretofore furnished to the Administrative Agents.
6.17 Capitalization. (a) As of the Borrowing Date, the
authorized capital stock of the Borrower consists of 91,964,254,000 Pesos,
consisting of 91,964,254 shares of common stock, 1,000 Pesos nominal value per
share, of which 82,767,828 shares are issued, outstanding, and fully paid and
are owned and registered in the name of the shareholders listed on Schedule IV
(collectively, the "Shareholders"). Other than in respect of the Debt Offering
or as set forth on Schedule VIII hereto, the Borrower does not have outstanding
(i) any securities convertible into or exchangeable for its capital stock or
(ii) any rights to subscribe for or to purchase, or any options for the purchase
of, or any agreements, arrangements or understandings providing for the issuance
(contingent or otherwise) of, or any calls, puts, commitments or claims of any
character relating to, its capital stock.
(b) On the Borrowing Date, 99.8% of the issued and outstanding
shares of the Borrower Stock will be pledged pursuant to the terms of the Pledge
Agreements.
6.18 Subsidiaries. As of the Borrowing Date, the Borrower has
no Subsidiaries and owns no equity interest in any other Person.
6.19 Compliance with Law. The Borrower is in compliance in all
material respects with all applicable Laws of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property (including applicable
Laws and restrictions relating to environmental standards and controls), except
such noncompliance as would not be reasonably likely to have a Material Adverse
Effect on the Borrower.
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6.20 Labor Relations. The Borrower is not engaged in any
unfair labor practice that would be reasonably likely to have a Material Adverse
Effect on the Borrower. There is (i) no unfair labor practice complaint pending
against the Borrower or, to the knowledge of the Borrower, threatened against
the Borrower, before any governmental body or any political subdivision thereof
with responsibility, authority or jurisdiction for such matters, and no
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Borrower or, to the
knowledge of the Borrower, threatened against the Borrower, and (ii) no strike,
labor dispute, slowdown or stoppage pending against the Borrower or, to the
knowledge of the Borrower, threatened against the Borrower, which in either
clause (i) or (ii) would be reasonably likely to have a Material Adverse Effect
on the Borrower.
6.21 Security Documents. (a) The provisions of each of the
Pledge Agreements are effective to create in favor of the Collateral Agents as
security for the Obligations hereunder for the benefit of the Lenders a legal,
valid and enforceable first priority perfected security interest in all of the
right, title and interest of the relevant Designated Shareholder in the
Collateral described in each such Pledge Agreement (including, without
limitation, 99.8% of the Borrower Stock), and each of the Pledge Agreements
creates a fully perfected first Lien on and security interest in, all right,
title and interest of the relevant Designated Shareholder in all of the
Collateral described therein (including, without limitation, the Borrower Stock
of such Designated Shareholder) subject to no other Liens, except for (i) tax
and labor liabilities as provided by Colombian Law, (ii) payments to the
Ministry in accordance with the License and (iii) Liens permitted by Section
8.1, and except as such enforcement may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or by other similar Laws
relating to or limiting creditors' rights generally or by general equitable
principles (provided, however, that unless and until an Event of Default has
occurred, the Designated Shareholders shall continue to have the right to vote
the Borrower Stock and receive dividends and other distributions with respect
thereto as set forth in each of the Pledge Agreements).
(b) (i) The provisions of the Guaranty Trust Agreement are
effective to pledge to the Guaranty Trustee as security for the Obligations
hereunder, for the benefit of the Lenders, all of the Borrower's right, title
and interest in and to the Cellular Receivables and the other
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<PAGE> 45
trust collateral described therein, and (ii) the provisions of the Pledge
Agreement-License are effective to pledge to the Collateral Agents as security
for the Obligations hereunder, for the benefit of the Lenders, all of the
Borrower's right, title and interest in and to the License and the other trust
collateral described therein, except for (w) tax and labor liabilities as
provided by Colombian Law, (x) payments to the Ministry in accordance with the
License, (y) Liens permitted by Section 8.1, and except as such enforcement may
be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or by other similar Laws relating to or limiting creditors'
rights generally or by general equitable principles and (z) Existing
Indebtedness or Contingent Obligations existing prior to the execution of the
Guaranty Trust Agreement or the Pledge Agreement-License upon which the
creditors exercise the rights granted under Article 1238 of the Colombian
Commerce Code and the rights of the Guaranty Trustee and the Collateral Agents,
as the case may be, for the benefit of the Lenders, in and to the Cellular
Receivables and the License, as the case may be, supersede, or by the Borrowing
Date will supersede, any rights, interests or Liens of any other Person therein;
provided, however, that (1) in accordance with the terms of the License and
applicable Law in effect as of the Borrowing Date, the Collateral Agents, for
the benefit of the Lenders, may not exercise any remedies with respect to the
License in accordance with the terms of the Pledge Agreement-License until March
28, 1997 and (2) the foregoing assumes that the Guaranty Trustee shall have paid
the Existing Indebtedness set forth in Schedule III to be repaid with the
proceeds of the Loans and the Debt Offering in accordance with the terms of the
Guaranty Trusts Termination Agreement.
(c) The provisions of the Disbursement Agreement create, or by
the Borrowing Date will create, in favor of the Collateral Agents for the
benefit of the Lenders, a legal, valid and enforceable security interest in the
collateral described therein, subject to no other Liens.
6.22 Mandate. The Borrower has, or by the Borrowing Date will
have, duly executed and delivered the Mandate and the Mandate constitutes or,
when executed and delivered, will constitute, its legal, valid and binding
obligation enforceable in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or other similar Laws relating to or limiting creditors' rights
generally or by general equity principles.
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<PAGE> 46
6.23 Availability and Transfer of Foreign Currency. All
requisite foreign exchange control approvals and other authorizations by
Colombia or any department or agency thereof have been duly obtained and are in
full force and effect to assure the availability of Dollars to enable the
Borrower to perform all of its obligations under each Credit Document to which
it is party in accordance with the terms thereof. Subject to the Colombian Law
which permits Colombian authorities to limit the availability or transfer of
foreign exchange whenever foreign currency reserves fall below the equivalent of
three months' imports into Colombia, there are no restrictions or requirements
which limit the availability or transfer of foreign exchange for the purpose of
the performance by the Borrower of its obligations under this Agreement or any
other Credit Document to which it is party.
6.24 Nature of Activities. The Borrower has engaged in no
business other than the Business.
6.25 Fees and Enforcement. No governmental fees or taxes,
including, without limitation, stamp, transaction, registration or similar
taxes, are required to be paid for the legality, validity, or enforceability of
this Agreement or any of the other Credit Documents. This Agreement and each
other Credit Document are each in proper legal form under the Laws of Colombia,
and under the respective governing Laws selected in such Credit Documents, for
the enforcement thereof in such jurisdiction without any further action by any
Other Document Party, the Guaranty Trustee, the Collateral Agents or the
Administrative Agents.
6.26 Withholding Taxes. No withholding or similar taxes are
required to be paid in respect of, or deducted from, any payment required to be
made by the Borrower under this Agreement or any other Credit Document.
6.27 Properties and Insurance. All tangible properties of the
Borrower utilized in the Business are in good working order and condition
(except to the extent as could not have a Material Adverse Effect on the
Borrower). The Borrower maintains insurance with financially sound and reputable
insurers against losses, damages or other risks (including, without limitation,
risks and liability to Persons and property) in such manner and to the same
extent as other companies in the business of constructing, owning and operating
a cellular telephone network in Colombia.
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<PAGE> 47
Section 7. Affirmative Covenants. The Borrower covenants and
agrees that on and after the Effective Date and until the Notes, together with
all accrued interest thereon, Fees and all other Obligations incurred hereunder
and thereunder, are paid in full and the Total Commitment shall have terminated:
7.1 Information Covenants. The Borrower will furnish or cause
to be furnished to the Administrative Agents:
(a) Monthly Reports. Within 60 days after the end of
each fiscal month of the Borrower, a monthly report in form
and substance to be agreed by the Borrower and the
Administrative Agents within 15 days after the Borrowing Date,
which shall be certified by the chief financial officer of the
Borrower, subject to normal year-end adjustments.
(b) Quarterly Financial Statements. As soon as
available, but, in any event, within 60 days after the end of
each quarterly accounting period in each fiscal year of the
Borrower, a copy of complete unaudited statements of financial
condition of the Borrower and its Consolidated Subsidiaries as
at the end of such quarterly period and the related statements
of income and retained earnings and statements of changes in
financial position for such quarterly period and for the
elapsed portion of the fiscal year ended with the last day of
such quarterly period, in each case setting forth comparative
figures for the related periods in the prior fiscal year and
the budgeted figures for such quarter as set forth in the
respective budget delivered pursuant to Section 7.1(f), all of
which shall be certified by the chief financial officer of the
Borrower, subject to normal year-end adjustments.
(c) Annual Financial Statements of the Borrower.
Promptly after the approval of the minutes from the annual
shareholders' meeting of the Borrower approving the Borrower's
and its Consolidated Subsidiaries' annual financial
statements, but in no event later than 140 days after the
close of each fiscal year of the Borrower, the statements of
financial condition of the Borrower and its Consolidated
Subsidiaries as at the end of such fiscal year and the related
statements of income and retained earnings and statements of
changes in financial position for such fiscal year, in each
case setting forth comparative figures for the preceding
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<PAGE> 48
fiscal year and certified by KPMG Peat Marwick or such other
independent public accountants of recognized international
standing who are appointed by a shareholders' meeting of the
Borrower and who shall be reasonably acceptable to the
Required Lenders, in each case pursuant to an unqualified
opinion of such independent public accountants.
(d) Capacity Reports. As soon as available, but, in any
event, within 20 days after filing each Capacity Report with
the Ministry, the Borrower shall provide the Administrative
Agents with a copy of the Capacity Report, which copy shall be
certified by the Vice President of Operations of the Borrower.
(e) Management Letters. Promptly after the Borrower's
receipt thereof, a copy of any "management letter" or other
similar communication received by the Borrower from its
auditors in relation to the Borrower's financial, accounting
and other systems, management and accounts.
(f) Budgets. As soon as available but, in any event,
within 30 days after the first day of each fiscal year of the
Borrower, (i) an annual budget (including budgeted statements
of income and sources and uses of cash and balance sheets)
prepared by the Borrower for such fiscal year accompanied by
the statement of the chief financial officer of the Borrower
to the effect that, to the best of his knowledge, the budget
is a reasonable estimate for the period covered thereby, and
(ii) to the extent prepared by or for the benefit of the
Borrower, any business plan with respect to the Business
applicable to any period beyond the fiscal year covered by the
annual budget delivered pursuant to subclause (i) above.
(g) Officer's Certificate. At the time of the delivery
of the financial statements provided for in Section 7.1(a),
(b) and (c), a certificate of the Borrower to the effect that,
to the best of his knowledge, no Default or Event of Default
has occurred and is continuing or, if any Default or Event of
Default has occurred and is continuing, specifying the nature
and extent thereof, which certificate shall set forth the
calculations required to establish whether the Borrower was in
compliance with the provisions of Sections 8.3, 8.4 and 8.6
through 8.9, at the end of such fiscal month, quarter or year,
as the case may be.
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<PAGE> 49
(h) Notice of Default or Litigation. Promptly after an
officer of the Borrower obtains actual knowledge thereof,
written notice of (i) the occurrence of any event which
constitutes a Default or Event of Default, (ii) any litigation
or governmental proceeding pending (x) against the Borrower,
which, if determined adversely, could have a Material Adverse
Effect on the Borrower or (y) with respect to any Credit
Document, or (iii) any claim by the Ministry that the License
is not valid or that any breach or default has occurred
thereunder or under relevant Law or any notice or inquiry of
the Ministry as to any breach or potential breach of the
License.
(i) Technical Compliance Certificate. Within 90 days
after the request of the Administrative Agents, a
certification from the Vice President of Operations of the
Borrower to the effect that the Borrower is, as of a date
selected by the Administrative Agents, which date shall
correspond to the end of a calendar month, in compliance
with the terms and conditions of the License (including,
without limitation, the requirements set forth therein with
respect to Capacity and Digitalization Percentage).
(j) Other Reports and Filings. Promptly, copies of all
financial information, proxy materials and other information
and reports, if any, which the Borrower shall file with the
United States Securities and Exchange Commission or any
governmental agencies substituted therefor.
(k) Other Information. From time to time, such other
financial information or documents the Administrative Agents
may reasonably request, including, without limitation, any
filings that the Borrower shall make with the Ministry.
7.2 Compliance with Law. The Borrower will comply with all
applicable Laws of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property, except where the failure to so comply would not be
reasonably likely to have a Material Adverse Effect on the Borrower.
7.3 Taxes. The Borrower will pay and discharge or cause to be
paid and discharged all applicable material taxes (including stamp taxes),
assessments and governmental charges
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<PAGE> 50
or levies imposed upon it or upon its income or profits or upon any of its
property, real, personal or mixed or upon any part thereof, when due, as well as
all lawful claims for labor, materials and supplies which, if unpaid might by
Law become a material Lien upon such property (except to the extent a Lien would
be permitted with respect thereto by Section 8.1).
7.4 License. The Borrower will perform all of its material
obligations under the License and will take all such further actions as shall be
required in order to insure that the License shall remain in full force and
effect.
7.5 Further Assurances. (a) The Borrower will, at its own
expense, make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agents from time to time such vouchers, invoices, schedules,
conveyances, financing statements, powers of attorney, certificates, reports and
other assurances or instruments and take such further steps relating to the
Collateral as the Administrative Agents may reasonably require in order to
grant, preserve and perfect the security interests created by the Security
Documents, subject to applicable law.
(b) The Borrower will make, execute, endorse, acknowledge,
file with and/or deliver to the Administrative Agents from time to time such
documents and instruments and take such further steps relating to the
syndication and/or transfer of all or any portion of the Loans as contemplated
in Section 11.5, as the Administrative Agents may reasonably require in order to
effectuate the transactions contemplated by the Credit Documents.
7.6 Books, Records and Inspections; Accounting and Audit
Matters. The Borrower shall keep proper books of record and account adequate to
reflect truly and fairly the financial condition and results of operations of
the Borrower in conformity with Colombian GAAP and all requirements of Law. The
Borrower will permit officers and designated representatives of the
Administrative Agents, the Collateral Agents or any Lender to visit and inspect,
under guidance of officers of the Borrower, any of the properties of the
Borrower, and to examine and make copies of the books of record and account of
the Borrower and discuss the affairs, finances and accounts of the Borrower
with, and be advised as to the same by, its and their officers, all at such
reasonable times and intervals during normal business hours and upon reasonable
notice and to such reasonable extent as
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<PAGE> 51
such Administrative Agents, Collateral Agents or Lender may request.
7.7 Maintenance of Property, Insurance. (a) The Borrower will (i) keep
all property useful and necessary in its business in good working order and
condition (except to the extent failure to do so would have no Material Adverse
Effect on the Borrower) and (ii) maintain insurance with financially sound and
reputable insurers against losses, damages or other risks (including, without
limitation, risks and liability to Persons and property) in such manner and to
the same extent as other companies in the business of constructing, owning and
operating a cellular telephone network in Colombia.
7.8 Material Contracts. The Borrower will fully perform its obligations
and maintain in full force and effect during its stated term each existing and
future agreement or instrument necessary to the Business by which it is party or
by which it is bound, including, without limitation, all interconnection
agreements, roaming agreements, technical service agreements and supply
agreements, except where the failure to so perform or so maintain in full force
and effect could not have a Material Adverse Effect on the Borrower.
Section 8. Negative Covenants. The Borrower covenants and agrees that
on and after the Effective Date and until the Notes, together with all accrued
interest thereon, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full and the Total Commitment shall have terminated:
8.1 Liens. The Borrower will not create, and will not agree to create,
incur, assume or suffer to exist any Lien upon or with respect to any property
or assets (real, personal or mixed, tangible or intangible) of the Borrower,
whether now owned or hereafter acquired, provided that the provisions of this
Section 8.1 shall not prevent the creation, incurrence, assumption or existence
of Liens created pursuant to the Security Documents or:
(a) Liens for taxes, assessments or governmental charges (including for
payments to the Ministry in accordance with the License which are not yet
due) or levies not yet due, or Liens for taxes, assessments or governmental
charges or levies being contested in good faith and by appropriate
proceedings for which adequate
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<PAGE> 52
reserves have been established in accordance with Colombian GAAP;
(b) Liens in respect of property or assets of the Borrower imposed by
Law, which were incurred in the ordinary course of business and do not
secure Indebtedness for borrowed money, such as carriers', warehousemen's,
materialmen's and mechanics' liens and other similar Liens arising in the
ordinary course of business, and which do not in the aggregate materially
detract from the value of the Borrower's property or assets or materially
impair the use thereof in the operation of the Business;
(c) easements, rights-of-way, restrictions, encroachments and other
similar charges or encumbrances, and minor title deficiencies, survey
exceptions, statutory and common law landlords' liens under leases to which
the Borrower is a party, in each case not securing Indebtedness and not
materially interfering with the conduct of the Business;
(d) pledges or deposits to secure obligations under workers'
compensation or unemployment insurance Laws or similar legislation or to
secure public or statutory obligations or good faith deposits in connection
with bids, tenders, contracts or leases;
(e) pledges to secure surety or appeal bonds;
(f) Liens arising from judgments, decrees or orders of any court being
contested in good faith and by appropriate proceedings and for which
adequate reserves in accordance with Colombian GAAP have been established;
(g) Liens described on Schedule V hereto in existence on the Effective
Date and not released and/or satisfied in accordance with Section 5.1(r);
(h) the replacement, extension or renewal of any Lien permitted by this
Section 8.1 upon or in the same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the principal
amount, decrease in the tenor or change in the direct or contingent
obligor) of any Indebtedness secured thereby; and
(i) any other Liens securing Indebtedness permitted by Section 8.3.
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8.2 Dividends. The Borrower will not declare or pay any dividends, or
return any capital, to the Shareholders or authorize or make any other
distribution, payment or delivery of property or cash to the Shareholders as
such in respect of capital stock, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, for any consideration, any shares of any class
of its capital stock or interest of any of the Shareholders in the Borrower, in
each case now or hereafter outstanding (or any options, rights or warrants
issued by the Borrower with respect to its capital stock) or set aside any funds
for any of the foregoing purposes; provided, however, if no Default or Event of
Default has occurred and is continuing, the Borrower may declare and pay a
dividend in an amount equal to 25% of the Excess Cash Flow for any relevant
Excess Cash Payment Period; provided, further, that the following shall be
permitted: (a) the declaration and deliverance of dividends and distributions
payable only in common stock of the Borrower (or warrants, rights or options to
purchase such common stock); (b) any purchase or redemption of capital stock of
the Borrower made by exchange for, or out of the proceeds of the substantially
concurrent sale of, capital stock of the Borrower; (c) the repurchase of shares
of, or options to purchase shares of, capital stock of the Borrower or any
Subsidiary from current or former employees, officers, directors or alternate
directors of the Borrower or any Subsidiary (or permitted transferees of such
persons), pursuant to the terms of applicable agreements (including employment
agreements) or plans (or amendments thereto) approved by the Borrower's Board of
Directors under which such individuals purchase or sell or are granted the
option to purchase or sell, shares of such common stock; (d) the issuance of
shares of capital stock issuable upon exercise of the Warrants issued in
connection with the Debt Offering; and (e) dividends paid within 60 days after
the date of declaration thereof if at such date of declaration such dividend
would have otherwise complied with this Section 8.2.
8.3 Indebtedness. The Borrower and its Consolidated Subsidiaries will
not contract, create, incur, assume or suffer to exist any Indebtedness, such
that the aggregate amount of Indebtedness of the Borrower and its Consolidated
Subsidiaries outstanding at any time (excluding the Indebtedness to be incurred
under this Agreement, the Debt Offering Indebtedness and Existing Indebtedness
which is to remain outstanding after the Borrowing Date pursuant to Schedule
III), exceeds U.S.$25,000,000 (or its equivalent in Pesos calculated using the
Representative Market Rate);
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<PAGE> 54
provided, however, that the following shall be permitted without reference to
such limitation:
(a) obligations of the Company entered into in the ordinary course of
business (i) pursuant to bona fide Interest Rate Agreements, which
obligations do not exceed the aggregate principal amount of such
Indebtedness, and (ii) pursuant to bona fide Currency Agreements entered
into by the Company or any of its Subsidiaries in respect of such Person's
assets or obligations;
(b) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of
Indebtedness otherwise permitted by this Section 8.3, including any
successive refinancings, so long as (i) the stated maturity date of any
such refinanced Indebtedness is no earlier than the stated maturity date of
the Indebtedness so refinanced; (ii) any such refinanced Indebtedness is
subordinate in right of payment to the Loans to the same extent, if any, as
the Indebtedness so refinanced; (iii) any such refinanced Indebtedness
shall be in a principal amount that does not exceed (x) the principal
amount (or, if such Indebtedness being refinanced was incurred with
original issue discount, the aggregate accreted value as of the date of
determination) so refinanced, plus (y) the lesser of the amount of any
premium required to be paid in connection with such refinancing pursuant to
the terms of the amount of any premium reasonably determined as necessary
to accomplish such refinancing, plus (z) the amount of any fees and
expenses incurred to accomplish such refinancing; (iv) any such refinanced
Indebtedness may not provide for the accrual or payment of cash Interest
Expense on a date prior to that required by the Indebtedness so refinanced;
and (v) no Event of Default shall have occurred or be anticipated to occur
as a result of such refinancing;
(c) Indebtedness up to an aggregate amount of U.S.$5,000,000
outstanding at any time incurred to pay all or a portion of the purchase
price of, or improvements or additions to, or construction of, property,
equipment or machinery used in the ordinary course of business of the
Borrower incurred within 90 days of such purchase, improvement, addition or
construction by the Borrower (or extensions, renewals or replacements of
any of the foregoing for the same or a lesser amount); and
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<PAGE> 55
(d) Indebtedness permitted under Section 8.4(e).
8.4 Advances, Investments and Loans. The Borrower and its Consolidated
Subsidiaries will not, directly or indirectly, (i) lend money or credit or make
advances to any Person, (ii) purchase or otherwise acquire (in one or a series
of related transactions) any part of the property or assets (other than
purchases or other acquisitions in the ordinary course of business) of any
Person, or (iii) purchase or acquire any stock, obligations or securities of, or
any other interest in, including, without limitation, an interest in a
partnership or joint venture, or make any capital contribution to, any other
Person, or purchase or own a futures contract or otherwise become liable for the
purchase or sale of currency or other commodities at a future date in the nature
of a futures contract; and provided, however, that the following shall be
permitted without reference to such limitation:
(a) the Borrower and its Consolidated Subsidiaries may acquire and hold
accounts receivables owing to it, including, from extension of credit to
Subscribers and to other telecommunications companies relating to
interconnecting agreements, in each case if created or acquired in the
ordinary course of business and payable or dischargeable in accordance with
customary terms;
(b) the Borrower and its Consolidated Subsidiaries may acquire and hold
cash and Cash Equivalents;
(c) the Borrower and its Consolidated Subsidiaries may make loans or
advances to employees, directors and officers in the ordinary course of
business, which loans and advances shall not exceed U.S.$1,000,000 in the
aggregate outstanding at any time;
(d) the Borrower and its Consolidated Subsidiaries may make advances to
manufacturers or suppliers for the purchase of equipment, inventory, goods
and services in the ordinary course of business;
(e) the Borrower may make loans, advances to and investments in any of
its Wholly-Owned Subsidiaries, and any Wholly-Owned Subsidiary of the
Borrower may make loans, advances to and investments in the Borrower or any
of its other Wholly-Owned Subsidiaries;
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(f) the Borrower and its Consolidated Subsidiaries may enter into
Interest Rate Agreements and Currency Agreements permitted under Section
8.3(a); and
(g) the Borrower and its Consolidated Subsidiaries may make additional
loans, advances and investments of a nature not contemplated by the
foregoing clauses (a) through (f); provided, that (i) any such investment,
advance or loan is made in or to a Permitted Telecommunications Business or
otherwise pertains thereto, (ii) the cash amount of any individual loan,
advance and/or investment made pursuant to this clause (g) shall not exceed
U.S.$5,000,000 and (iii) the aggregate cash amount of any loans, advances
and/or investments made pursuant to this clause (g) and outstanding at any
one time shall not exceed U.S.$25,000,000.
8.5 Consolidations, Mergers, Sales of Assets. The Borrower will not:
(i) wind up, liquidate or dissolve its affairs or enter into any transaction of
consolidation or merger with or into any other Person; or (ii) sell, lease,
assign, transfer or otherwise dispose of, directly or indirectly (or agree to do
any of the foregoing at any future time), all or substantially all of its
property or assets or the License.
8.6 Quarterly Recurring Revenue. The Borrower will not permit the
amount of Quarterly Recurring Revenue for each calendar quarter ending as of the
dates set forth below to be less than the amount set forth opposite each such
date:
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<PAGE> 57
<TABLE>
<CAPTION>
Date Amount
---- ------
(in millions of U.S.$)
<S> <C>
June 30, 1996 11.9
September 30, 1996 12.5
December 31, 1996 13.2
March 31, 1997 13.2
June 30, 1997 17.2
September 30, 1997 19.2
December 31, 1997 20.9
March 31, 1998 20.9
June 30, 1998 22.4
September 30, 1998 23.9
December 31, 1998 25.5
March 31, 1999 25.5
June 30, 1999 27.5
September 30, 1999 29.5
December 31, 1999 31.2
March 31, 2000 31.2
June 30, 2000 31.7
September 30, 2000 32.2
December 31, 2000 33.1
March 31, 2001 33.1
</TABLE>
8.7 Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed
Charge Coverage Ratio for each period of four consecutive calendar quarters
(taken as one accounting period) ending as of the dates set forth below to be
less than the amount set forth opposite each such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
June 30, 1997 1.00
September 30, 1997 1.00
December 31, 1997 1.10
March 31, 1998 1.10
June 30, 1998 1.25
September 30, 1998 1.25
December 31, 1998 1.25
March 31, 1999 1.25
June 30, 1999 1.25
September 30, 1999 1.25
December 31, 1999 1.25
March 31, 2000 1.25
June 30, 2000 1.25
September 30, 2000 1.25
December 31, 2000 1.25
</TABLE>
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<PAGE> 58
8.8 Interest Coverage Ratio. The Borrower will not permit the Interest
Coverage Ratio for: (a) the calendar quarter ending as of September 30, 1996 to
be less than 2.0; (b) the period of two consecutive calendar quarters (taken as
one accounting period) ending as of December 31, 1996 to be less than 2.1; (c)
the period of three consecutive calendar quarters (taken as one accounting
period) ending as of March 31, 1997 to be less than 2.1; and (d) each period of
four consecutive calendar quarters (taken as one accounting period) thereafter
ending as of the dates set forth below to be less than the amount set forth
opposite each such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
June 30, 1997 2.1
September 30, 1997 2.1
December 31, 1997 3.3
March 31, 1998 3.3
June 30, 1998 3.3
September 30, 1998 3.3
December 31, 1998 4.8
March 31, 1999 4.8
June 30, 1999 4.8
September 30, 1999 4.8
December 31, 1999 5.0
March 31, 2000 5.0
June 30, 2000 5.0
September 30, 2000 5.0
December 31, 2000 5.0
March 31, 2001 5.0
</TABLE>
8.9 Maximum Leverage Ratio. The Borrower will not permit the Maximum
Leverage Ratio for each period of four consecutive calendar quarters (taken as
one accounting period) ending as of the dates set forth below to be greater than
the amount set forth opposite each such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
December 31, 1996 13.8
December 31, 1997 7.1
December 31, 1998 5.0
December 31, 1999 3.9
December 31, 2000 3.9
</TABLE>
8.10 Limitations on Modifications of Indebtedness; Modifications of
Certain Agreements, etc. The Borrower will not: (i) amend or modify, or permit
the amendment or
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modification of, any provision of the Debt Offering Indebtedness, any Existing
Indebtedness which is to remain outstanding after the Borrowing Date pursuant to
Schedule III or of any agreement (including, without limitation, any purchase
agreement, indenture, loan agreement or security agreement) relating to any of
the foregoing except for amendments or modifications which would not contravene
the requirements for a refinancing permitted by Section 8.3(b); or (ii) amend,
modify or change its estatutos sociales or other organizational documents in a
manner which could reasonably be expected to have a Material Adverse Effect on
the Borrower; or (iii) amend the License, other than to comply with applicable
Colombian Law.
8.11 No Other Business. Neither the Borrower nor any of its
Subsidiaries will carry on any business other than the Permitted
Telecommunications Business without the prior written consent of the Required
Lenders.
8.12 Transactions with Affiliates. The Borrower will not enter into any
transaction or series of related transactions with any Affiliate of the
Borrower, other than in the ordinary course of business and on terms and
conditions substantially as favorable to the Borrower as would reasonably be
obtained by the Borrower at that time in a comparable arm's-length transaction
with a Person other than an Affiliate.
Section 9. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
9.1 Payments. The Borrower shall (i) default in the payment when due of
any principal of any Loan or any Note or (ii) default, and such default shall
continue unremedied for five or more Business Days, in the payment when due of
any interest on any Loan or any Note or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
9.2 Representations, etc. Any representation, warranty or statement
made by or on behalf of any Other Document Party herein or in any other Credit
Document or in any certificate delivered pursuant hereto or thereto shall prove
to be untrue in any material respect on the date as of which made or deemed
made; or
9.3 Covenants. The Borrower shall (i) default in the due performance or
observance by it of any term, covenant
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or agreement contained in Sections 7.1(h), 7.2, 7.3 or 8 or (ii) default in the
due performance or observance by it of any term, covenant or agreement (other
than those referred to in Sections 9.1 and 9.2 and clause (i) of this Section
9.3) contained in this Agreement or any other Credit Document and any such
default shall have continued unremedied for a period of 30 days after written
notice thereof from the Administrative Agents to the Borrower; or
9.4 Default Under Other Agreements. The Borrower shall (i) default in
any payment of all or any portion of any Indebtedness other than the Notes in a
principal amount in excess of U.S.$3,000,000 (or its equivalent in any other
currency), either individually or in the aggregate, when and as the same shall
become due and payable beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created, or (ii)
default in the observance or performance of any other agreement, covenant or
condition contained in any agreement or instrument evidencing or governing any
such Indebtedness (after giving effect to any applicable grace period), the
effect of which default or other event or condition, in each case, is to cause,
any such Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of the Borrower shall be declared to be due and payable, or
required to be prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof (after giving effect to any applicable
grace period); or
9.5 Bankruptcy, etc. The Borrower shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto or under
any bankruptcy Law of Colombia (including, without limitation, a concordato) or
any other jurisdiction; or an involuntary case under any such Law is commenced
against the Borrower and, to the extent applicable Law permits the Borrower to
controvert and/or dismiss such a case, such case is not controverted by the
Borrower within 14 days of notice to the Borrower thereof or is not dismissed
within 75 days after commencement thereof; or a custodian is appointed for, or
takes charge of, all or substantially all of the property of the Borrower, or
the Borrower commences any other proceeding 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 Borrower, or there is commenced against the Borrower any
such proceeding which remains undismissed for a period of 75 days, or the
Borrower is adjudicated insolvent
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or bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower suffers any appointment of any custodian
or the like for it or any substantial part of its property and, to the extent
applicable Law permits the Borrower to discharge or stay any such appointment,
such appointment continues undischarged and/or unstayed for a period of 75 days;
or the Borrower makes a general assignment for the benefit of creditors; or any
trust or corporate action is taken by the Borrower for the purpose of effecting
any of the foregoing; or
9.6 Security Documents. At any time after the execution and delivery
thereof, any of the Security Documents shall cease to be in full force and
effect, or, except as otherwise permitted hereby, shall cease to give the
Collateral Agents, for the benefit of the Lenders, the Liens purported to be
created thereby (including, without limitation, a perfected security interest
in, and Lien on, all of the Collateral), in favor of the Collateral Agents,
superior to and prior to the rights of all third Persons except for (i) tax and
labor liabilities as provided by Colombian Law, (ii) payments to the Ministry in
accordance with the License, (iii) Liens permitted by Section 8.1 and (iv)
creditors that by court order or otherwise are granted the benefit of Article
1328 of the Colombian Commerce Code and subject to no other Liens (except as
permitted by Section 8.1); or
9.7 Judgments. One or more judgments or decrees shall be entered
against the Borrower involving in the aggregate a liability (not paid or fully
covered by insurance) of the equivalent of U.S.$3,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged or stayed or bonded
pending appeal within 30 days after the entry thereof shall have been served to
the Borrower; or
9.8 Cancellation of Payment Obligation. Any dominant authority
asserting or exercising de jure or de facto governmental or police powers in
Colombia shall, by moratorium Laws or otherwise, cancel, suspend or defer the
obligation of the Borrower to pay any amount required to be paid hereunder,
under any other Credit Document or under the Notes; or
9.9 License. (i) The Ministry or any other governmental authority in
Colombia shall declare the License terminated; (ii) the License shall terminate
for any reason whatsoever; (iii) the Borrower shall cease to have the right to
possess and use the License; or (iv) the Ministry or any
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other governmental authority in Colombia or any Other Document Party shall
assert that the exercise of any remedies under the Guaranty Trust Agreement or
any of the Pledge Agreements would constitute a violation of the License or
applicable Law; or
9.10 Abandonment of Business. The Borrower shall abandon the Business
in which it is engaged as of the Borrowing Date; or
9.11 Default Under Credit Documents. Any Other Document Party (other
than the Borrower) shall default in the due performance or observance by such
Other Document Party of any material term, covenant or agreement contained in
the Pledge Agreement and such default (i) has a Material Adverse Effect on the
Borrower and (ii) shall have continued unremedied for a period of 30 days after
written notice thereof to such Other Document Party; or
9.12 Governmental Action. Any government or governmental authority
shall have condemned, nationalized, seized, or otherwise expropriated all or any
substantial part of the property or other assets of the Borrower or of the
Borrower Stock or shall have assumed custody or control of such property or
other assets or of the business or operations of the Borrower or of the Capital
Stock or shall have taken any action for the dissolution or disestablishment of
the Borrower or any action that would prevent the Borrower or its officers from
carrying on the Business or a substantial part thereof;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, then the Administrative Agents shall at the request of
the Required Lenders, or may with the consent of the Required Lenders, by
written notice to the Borrower, take any and all of the following actions,
without prejudice to the rights of the Administrative Agents, any Lender or the
holder of any Note to enforce its claims against the Borrower (provided, that,
if an Event of Default specified in Section 9.5 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Administrative Agents to the Borrower as specified in clause (i) and (ii) below
shall occur automatically without the giving of any such notice): (i) to declare
the Total Commitment terminated whereupon the Commitment of each Lender shall
forthwith terminate immediately; (ii) to declare the principal of and any
accrued interest in respect of all Loans and the Notes and all obligations owing
hereunder and thereunder to be,
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whereupon the same shall become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; (iii) to instruct the Collateral Agents to vote the Borrower Stock
and receive any Dividends in respect thereof pursuant to the Pledge Agreements;
and (iv) to exercise any other rights available under the Credit Documents or
other document or instrument entered into in connection therewith.
Section 10. The Administrative Agents and the Collateral Agents.
10.1 Appointment of the Administrative Agents. The Lenders hereby
appoint and designate ING Bank N.V. and ING (U.S.) Capital Corporation as
Administrative Agents to act as specified herein and in the other Credit
Documents. Each Lender hereby irrevocably authorizes, and each holder of any
Note by the acceptance of such Note shall be deemed irrevocably to authorize,
the Administrative Agents to take such action on its behalf under the provisions
of this Agreement, the other Credit Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the Administrative Agents by the terms hereof and thereof and such
other powers as are reasonably incidental hereto and thereto. The Administrative
Agents may perform any of their duties hereunder by or through their officers,
directors, agents or employees.
10.2 Appointment of the Collateral Agents. The Lenders hereby appoint
and designate ING Bank N.V. and ING (U.S.) Capital Corporation as Collateral
Agents to act as specified herein and in the other Credit Documents. Each Lender
hereby irrevocably authorizes, and each holder of any Note by the acceptance of
such Note shall be deemed irrevocably to authorize, the Collateral Agents to
take such action on its behalf under the provisions of this Agreement and the
other Credit Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Collateral Agents by the terms hereof and thereof and such other powers as are
reasonably incidental hereto and thereto. The Collateral Agents may perform any
of their duties hereunder by or through their officers, directors, agents or
employees.
10.3 Administration of the Collateral. The Collateral Agents shall
administer the Collateral and any
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Lien thereon for the benefit of the Lenders in the manner provided herein and in
the other Credit Documents. The Collateral Agents shall exercise such rights and
remedies with respect to the Collateral as are granted to them hereunder and
under the other Credit Documents and applicable Law and as shall be directed by
the Required Lenders.
10.4 Application of Proceeds. Except as otherwise specifically provided
in any Security Document, the proceeds of any collection, sale, disposition or
other realization of all or any part of the Collateral shall be applied by the
Collateral Agents as follows:
(a) to the payment of any and all expenses and fees (including
reasonable attorneys' fees) incurred by the Collateral Agents in obtaining,
taking possession of, removing, insuring, repairing, storing and disposing
of the Collateral and any and all amounts incurred by the Collateral Agents
in connection therewith;
(b) next, any surplus then remaining to the payment of the Obligations
in the following order of priority:
(i) accrued and unpaid interest;
(ii) outstanding principal due under the Loans;
(iii) unpaid Fees, if any; and
(iv) all other unpaid secured Obligations, if any, including
the Borrowings;
(c) any surplus remaining after payment of the foregoing amounts shall
be paid to the Borrower, or the Pledgors, as the case may be, subject,
however, to the rights of the holder of any then existing Lien of which the
Collateral Agents has actual notice (without investigation);
it being understood that the Borrower shall (i) remain liable to the extent of
any deficiency between the amount of the proceeds of the Collateral and the
aggregate amount of the sums referred to in clauses (a) and (b) of this Section
10.4 and (ii) have the right to use the Cellular Receivables in the Business as
long as no Event of Default shall have occurred and be continuing.
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10.5 Nature of Duties. Neither the Administrative Agents nor the
Collateral Agents shall have any duties or responsibilities except those
expressly set forth in this Agreement and in the other Credit Documents. Neither
the Administrative Agents nor the Collateral Agents nor any of their respective
officers, directors, agents or employees shall be liable for any action taken or
omitted by them hereunder or under any other Credit Document or in connection
herewith or therewith, unless caused by their gross negligence, fraud or willful
misconduct. The duties of the Administrative Agents and the Collateral Agents
shall be mechanical and administrative in nature; neither the Administrative
Agents nor the Collateral Agents shall have by reason of this Agreement or any
other Credit Document a fiduciary relationship in respect of any Lender or the
holder of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Administrative Agents or the Collateral Agents any obligations in respect of
this Agreement or any other Credit Document except as expressly set forth herein
or therein.
10.6 No Reliance on the Administrative Agents and the Collateral
Agents. Independently and without reliance upon the Administrative Agents or the
Collateral Agents, each Lender and the holder of each Note, to the extent it
deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of each of the Other
Document Parties in connection with the making and the continuance of the Loans
and the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of each of the Other Document Parties and,
except as expressly provided in this Agreement, neither the Administrative
Agents nor the Collateral Agents shall have any duty or responsibility, either
initially or on a continuing basis, to provide any Lender or the holder of any
Note with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter. Neither the Administrative Agents nor the Collateral Agents shall be
responsible to any Lender or the holder of any Note for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Document
or the financial condition of any Other Document Party or be required to make
any inquiry concerning either the perfor-
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mance or observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document, or the financial condition of any Other
Document Party or the existence or possible existence of any Default or Event of
Default.
10.7 Certain Rights of the Administrative Agents and the Collateral
Agents. If either the Administrative Agents or the Collateral Agents shall
request instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other
Document, then the Administrative Agents or Collateral Agents requesting such
instructions shall be entitled to refrain from such act or taking such action
unless and until it shall have received instructions from the Required Lenders;
and, in any such event, neither the Administrative Agents nor Collateral Agents,
as the case may be, shall incur any liability to any Person by reason of so
refraining. Without limiting the generality of the foregoing, no Lender or the
holder of any Note shall have any right of action whatsoever against the
Administrative Agents or the Collateral Agents as a result of acting or
refraining from acting hereunder or under any other Document in accordance with
the instructions of the Required Lenders.
10.8 Reliance by the Administrative Agents and the Collateral Agents.
Each of the Administrative Agents and the Collateral Agents shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or facsimile
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by any Person that the Administrative Agents or Collateral
Agents, as the case may be, believed to be the proper Person, and, with respect
to all legal matters pertaining to this Agreement and any other Credit Document
and their duties hereunder and thereunder, upon advice of counsel selected by
it.
10.9 Indemnification. To the extent the Administrative Agents or the
Collateral Agents are not reimbursed and indemnified by the Borrower, the
Lenders will reimburse and indemnify the Administrative Agents or the Collateral
Agents, as the case may be, in proportion to the Lenders' outstanding Notes, for
and against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or incurred
by the Administrative Agents or
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the Collateral Agents, as the case may be, in performing their duties hereunder
or under any other Credit Document, or in any way relating to or arising out of
this Agreement or any other Credit Document, provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of the Administrative Agents or
the Collateral Agents.
10.10 Capacity as Lenders. Each of the Administrative Agents and the
Collateral Agents may accept deposits from, lend money to, and generally engage
in any kind of banking, trust or other business with the Borrower or any
Affiliate of the Borrower as if such Administrative Agents or Collateral Agents
were not performing the duties specified herein, and may accept fees and other
consideration from the Borrower for services in connection with this Agreement
and otherwise without having to account for the same to the Lenders.
10.11 Holders. Each of the Administrative Agents and the Collateral
Agents may deem and treat the payee of any Note as the owner thereof for all
purposes hereof unless and until a written notice of the assignment, transfer or
endorsement thereof, as the case may be, shall have been filed with the
Administrative Agents. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.
10.12 Resignation. (a) Both or either ING (U.S.) Capital Corporation
and/or ING Bank N.V. may resign from the performance of its (or their, as the
case may be) duties as Administrative Agent and/or Collateral Agent (or
Administrative Agents and/or Collateral Agents) hereunder and/or under the other
Credit Documents at any time by giving 60 Business Days' prior written notice to
the Borrower and the Lenders. Such resignation shall take effect upon the
appointment of a successor Administrative Agent or Collateral Agent (or
successor Administrative Agents or Collateral Agents), as the case may be,
pursuant to clauses (b) and (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Required Lenders shall
appoint a successor Administrative
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Agent or Collateral Agent (or Administrative Agents or Collateral Agents), as
the case may be, hereunder or thereunder which shall be an
internationally-recognized commercial bank or trust company acceptable to the
Borrower.
(c) If a successor Administrative Agent or Collateral Agent (or
Administrative Agents or Collateral Agents), as the case may be, shall not
have been so appointed within such 60 Business Day period, the
Administrative Agents and/or Collateral Agents, as the case may be, with
the consent of the Borrower, may then appoint a successor Administrative
Agent and/or Collateral Agent, as the case may be, which shall serve as
such hereunder or thereunder until such time, if any, as the Required
Lenders appoint a successor as provided above.
(d) If no successor has been appointed pursuant to clause (b) or (c)
above by the 70th Business Day after the date such notice of resignation
was given by the Administrative Agent and/or the Collateral Agent (or
Administrative Agents or Collateral Agents), as the case may be, the
resignation shall become effective and the Lenders shall thereafter perform
all the duties of the Administrative Agent and/or Collateral Agent (or
Administrative Agents and/or Collateral Agents), as the case may be,
hereunder and/or under any other Credit Document until such time, if any,
as the Required Lenders appoint a successor as provided above.
10.13 Joint Action. Any action, notice or similar action that the
Administrative Agents or the Collateral Agents shall take or give to the
Borrower, the Guaranty Trustee or the Designated Shareholders shall be taken or
given jointly.
Section 11. Miscellaneous.
11.1 Payment of Expenses, etc. The Borrower shall, upon presentation by
the Administrative Agents of invoices or other appropriate evidence thereof: (i)
whether or not the transactions herein contemplated are consummated, pay, from
time to time upon request, all reasonable out-of-pocket costs and expenses of
(x) the Administrative Agents (including, without limitation, the reasonable
costs and expenses of the syndication of the Loans, the reasonable fees and
disbursements of White & Case (as special U.S. counsel to the Administrative
Agents) and of Colombian counsel to the Administrative Agents and reasonable
printing, document
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production and delivery, communication and travel costs) incurred in connection
with the preparation, review, negotiation, translation, execution and delivery
of this Agreement and the other Credit Documents and the documents and
instruments prepared in connection herewith or in anticipation hereof and any
amendment, waiver or consent relating hereto or thereto, provided that the
foregoing costs and expenses shall not exceed U.S.$210,000, exclusive of (A)
reasonable legal expenses incurred in relation to the enforcement of any
provision of the Loan Documents and (B) customary breakage costs incurred in
connection with the Loans (to be applied for the account of the Borrower), and
(y) the Administrative Agents, the Collateral Agents and each of the Lenders in
connection with the enforcement of this Agreement and the other Credit Documents
and the documents and instruments referred to herein and therein (including,
without limitation, the reasonable fees and disbursements of counsel for the
Administrative Agents and the Collateral Agents and for each of the Lenders);
(ii) pay and hold each of the Lenders harmless from and against any and all
present and future stamp and other similar taxes with respect to the foregoing
matters and save and hold each of the Lenders harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Lender) to pay such taxes; and (iii)
indemnify the Administrative Agents, the Collateral Agents and each Lender, and
their respective officers, directors, employees, representatives and agents
(each an "indemnified person") from and hold each of them harmless against any
and all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses and disbursements (collectively, "Losses")
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding (whether
or not the indemnified person is a party thereto) related to the entering into
and/or performance of this Agreement or any other Credit Document or the use of
the proceeds of any Loans hereunder or the consummation of any transactions
contemplated herein or in any other Credit Document, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding and any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender which any Lender may sustain
as a result of any default by the Borrower to repay the Loans when required
pursuant to the terms of this Agreement or the Notes (but excluding any such
Losses, to the extent incurred by reason
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of the gross negligence, fraud or willful misconduct of the indemnified person),
provided that if an indemnified person is entitled to indemnification under this
subclause (iii), the Borrower shall be entitled to assume the defense of any
action, claim or proceeding with counsel reasonably satisfactory to such
indemnified person. The Borrower will not, without the prior written consent of
each indemnified person, settle any pending or threatened action, claim or
proceeding in respect of which indemnification may be sought hereunder unless
such settlement includes an unconditional release of each indemnified person
from all liability arising out of such action, claim or proceeding. Upon
assumption by the Borrower of the defense of any such action, claim or
proceeding, the indemnified person shall have the right to participate in such
action, claim or proceeding and to retain its own lawyers but the Borrower shall
not be liable for any legal fees or expenses subsequently incurred by such
indemnified person in connection therewith.
11.2 Right of Setoff. In addition to any rights now or hereafter
granted under applicable Law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default and the continuance
thereof, the Administrative Agents and each Lender is hereby authorized at any
time or from time to time, without presentment, demand, protest or other
notice of any kind to the Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by such Lender (including, without limitation, by branches and agencies of
such Lender wherever located) to or for the credit or the account of the
Borrower against and on account of the Obligations of the Borrower to such
Lender or the Administrative Agents under this Agreement or under any of the
other Credit Documents, including, without limitation, all interests in
Obligations purchased by such Lender pursuant to Section 11.7(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether (i) such Lender
or the Administrative Agents shall have made any demand hereunder, or (ii) said
Obligations, liabilities or claims, or any of them, shall be unmatured.
11.3 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telex or facsimile communication) and telexed, faxed or delivered: if
to the Borrower, at its address specified opposite its
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signature below; if to any Lender, at its Lending Office specified opposite its
name on Schedule II; if to the Administrative Agents, at the Notice Office; and
if to the Collateral Agents, at its address specified in the Disbursement
Agreement; or, as to the Borrower, the Administrative Agents or Collateral
Agents, at such other address as shall be designated by such party in a written
notice to the other parties hereto, and, as to each other party, at such other
address as shall be designated by such party in a written notice to the
Borrower, the Collateral Agents and the Administrative Agents. All such notices
and communications shall, when faxed, telexed or delivered, be effective when
the facsimile is confirmed, confirmed by telex answerback or delivered by the
overnight courier company, respectively. All such notices and other
communications, if not in English, shall be accompanied by an English
translation.
11.4 Benefit of Agreement. This 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, provided that the Borrower may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Lenders. The Lenders may assign their rights only as
provided in Section 11.5.
11.5 Syndication or Assignment of Loans. (a) Each Lender may, subject
to Colombian Law, at any time (i) grant participations in the Loans made
hereunder or (ii) upon prior written notice to the Administrative Agents,
transfer or assign, any of its rights hereunder or under any of the Notes;
provided, however that (x) any transfer or assignment by a Lender to any lending
institution other than to (1) an Affiliate of such Lender, or (2) one of the
other Lenders or any of its Affiliates, of a portion of its rights hereunder or
under any Note shall not be for an amount less than U.S.$2,000,000 or a higher
integral multiple of $1,000,000 in each instance, (y) each such assignment shall
be of a uniform, and not a varying, percentage of all rights and obligations
under this Agreement, and (z) unless the assignment is to an existing Lender or
an Affiliate of the assigning Lender, the Borrower shall have notified the
assigning Lender within five Business Days of the Borrower's receipt of notice
of such assignment of the Borrower's approval of such assignment (such approval
not to be unreasonably withheld or delayed) and if the Borrower has not notified
the assigning Lender of its approval or disapproval of such assignment by such
date, the Borrower shall be deemed
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to have given its approval. If any Lender transfers or assigns any portion or
all of its rights hereunder or under the Notes to any other financial
institution, any reference to such Lender in this Agreement or the Note of such
Lender shall thereafter refer to such Lender and to such other financial
institution to the extent of their respective interests, as if such Lender had
been a party to this Agreement as of the Effective Date up to and including the
date of such transfer or assignment.
(b) Notwithstanding any provision in this Agreement, the Borrower shall
not be obligated to pay to the successor or assignee of any Lender (including
any Affiliate thereof) any greater amount than the Borrower would have been
obligated to pay for the account of such Lender or Affiliate as of the date of
such assignment or other transfer; provided, however, that the foregoing shall
not limit in any manner whatsoever the Borrower's obligation to pay any such
greater amount in accordance with the terms of this Agreement as a result of any
change (including, without limitation, by reason of a change in interpretation
or administration of any Law or the introduction or implementation of any new
Law), applicable to such successor or assignee of such Lender (including any
Affiliate thereof) after the date of such assignment or other transfer.
11.6 No Waiver; Remedies Cumulative. No (i) failure or delay on the
part of the Administrative Agents, the Collateral Agents or any Lender or the
holder of any Note in exercising any right, power or privilege hereunder or
under any other Credit Document or (ii) course of dealing between the Borrower
and the Administrative Agents, the Collateral Agents or any Lender or the holder
of any Note, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights, powers and
remedies herein or in any other Credit Document expressly provided are
cumulative and not exclusive of any rights, powers or remedies which the
Administrative Agents, the Collateral Agents or any Lender or the holder of any
Note would otherwise have. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the
Administrative Agents, the Collateral Agents or any Lender or the holder of any
Note to any other or further action in any circumstances without notice or
demand.
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<PAGE> 73
11.7 Payments Pro Rata. (a) The Administrative Agents agree that
promptly after their receipt of each payment from or on behalf of the Borrower
in respect of any Obligations of the Borrower hereunder, they shall distribute
such payment to the Lenders pro rata based upon their respective shares, if any,
of the Obligations with respect to which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, realization upon security, the exercise
of the right of set-off or banker's lien, counterclaim or cross action, the
enforcement of any right under the Credit Documents, or otherwise), which is
applicable to the payment of the principal of, or interest on, the Loans or any
Fee, of a sum which with respect to the related sum or sums received by other
Lenders is in a greater proportion than the total amount of such Obligation then
owed and due to such Lender bears to the total amount of such Obligation then
owed and due to all the Lenders immediately prior to such receipt, then such
Lender receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the Borrower
to such Lenders in such amount as shall result in a proportional participation
by all the Lenders in such amount; provided, however, that if all or any portion
of such excess amount is thereafter recovered from such Lender, such purchase
shall be rescinded and the purchase price restored to the extent of such
recovery, but without interest.
11.8 Calculations; Computations. (a) The financial statements to be
furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with Colombian GAAP (except as set forth in the notes thereto or as
otherwise disclosed in writing by the Borrower to the Lenders).
(b) All computations of interest and Fees hereunder shall be made on
the basis of a year of 360 days for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or Fees are payable.
11.9 Governing Law; Submission to Jurisdiction; Venue. (a) This
Agreement, the Notes, the Mandate and the Disbursement Agreement and the rights
and obligations of the parties hereunder and thereunder shall be construed in
accordance with and be governed by the Law of the State of New York without
giving effect to the principles thereof
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<PAGE> 74
relating to conflicts of law except Section 5-1401 of the New York General
Obligations Law. Any legal action or proceeding with respect to this Agreement
or any other Credit Document (except as is otherwise provided in such Credit
Document) may be brought in the courts of the State of New York sitting in the
City and the County of New York, of the United States for the Southern District
of New York, and, by execution and delivery of this Agreement, each of the
parties hereto other than Export Development Corporation hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The
Borrower hereby irrevocably designates, appoints and empowers the Process Agent,
as its designee, appointee and agents to receive, accept and acknowledge for and
on its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any such action
or proceeding. If for any reason such designee, appointee and agents shall cease
to be available to act as such, the Borrower agrees to designate a new designee,
appointee and agents in New York City on the same terms and for the purposes of
this provision reasonably satisfactory to the Administrative Agents. The
Borrower further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Borrower
at its address set forth opposite its signature below, such service to become
effective 30 days after such mailing. Nothing herein shall affect the right of
the Administrative Agents, the Collateral Agents, any Lender or the holder of
any Note to serve process in any other manner permitted by Law or to commence
legal proceedings or otherwise proceed against the Borrower in any other
jurisdiction.
(b) Each of the Pledge Agreements, the Guaranty Trust Agreements and
the Pledge Agreement-License shall be governed entirely by the Law of the
Republic of Colombia, and therefore Colombian courts will be the only courts
that will have jurisdiction over any action brought in connection with each of
the Pledge Agreements, the Guaranty Trust Agreements and the Pledge
Agreement-License, as the case may be.
(c) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clauses (a) and (b) above
and hereby further irrevocably waives and
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<PAGE> 75
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
(d) The Borrower agrees, to the extent permitted by applicable Law,
that in any legal action or proceeding arising out of or in connection with this
Agreement or any other Credit Document (the "Proceedings") anywhere (whether for
an injunction, specific performance, damages or otherwise), no sovereign
immunity (to the extent that it may at any time exist) from those Proceedings,
from attachment (whether in aid of execution, before judgment or otherwise), or
from judgment shall be claimed by it or on its behalf or with respect to its
assets.
11.10 Obligation to Make Payments in Dollars. Notwithstanding anything
herein to the contrary, the obligation of the Borrower to make payment in
Dollars of the principal of and interest on the Notes and any other amounts due
hereunder or under any other Credit Document to the Payment Office of the
Administrative Agents as provided in Section 4.3 shall not be discharged or
satisfied by any tender, or any recovery pursuant to any judgment, which is
expressed in or converted into any currency other than Dollars, including,
without limitation, any deposit in an escrow account pursuant to Section 4.2(b)
or Section 4.2(c) of proceeds of an equity offering or the incurrence of
Indebtedness or any Excess Cash Flow Payment, respectively, except to the extent
such tender or recovery shall result in the actual receipt by the Administrative
Agents at its Payment Office on behalf of the Lenders or holders of the Notes of
the full amount of Dollars expressed to be payable in respect of the principal
of and interest on the Notes and all other amounts due hereunder or under any
other Credit Document. The obligation of the Borrower to make payments in
Dollars as aforesaid shall be enforceable as an alternative or additional cause
of action for the purpose of recovery in Dollars of the amount, if any, by which
such actual receipt is less than the full amount of Dollars expressed to be
payable in respect of the principal of and interest on the Notes and any other
amounts due under any other Credit Document, and shall not be affected by
judgment being obtained for any other sums due under this Agreement or under any
other Credit Document.
11.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which
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<PAGE> 76
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agents.
11.12 Effectiveness. This Agreement shall become effective on the date
(the "Effective Date") on which the Borrower and each of the Lenders shall have
signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Administrative Agents at the Notice Office or, in the
case of the Lenders, shall have given to the Administrative Agents telephone
(confirmed in writing), written or telex notice (actually received) at such
office that the same has been signed and mailed to it. The Administrative Agents
will give the Borrower and each Lender prompt written notice of the occurrence
of the Effective Date.
11.13 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
11.14 Amendment or Waiver. Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the Required Lenders, the Administrative Agents and the Borrower (or
the Designated Shareholders or the Guaranty Trustee, if applicable); provided,
however, that no such change, waiver, discharge or termination shall, without
the consent of each Lender (which is the duty of the Administrative Agents to
confirm), (i) extend the Maturity Date of any Loan or Note, or reduce the rate
or extend the time of payment of interest or Fees thereon, or reduce the
principal amount thereof, or increase the Commitment of any Lender over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the Total Commitment shall
not constitute a change in the terms of any Commitment of any Lender), (ii)
release any of the Collateral except as shall be otherwise provided in any
Credit Document, (iii) amend, modify or waive any provision of this Section
11.14 or Sections 2.1, 11.1, 11.2, 11.4, 11.5 or 11.7(b), (iv) reduce the
percentage specified in the definition of Required Lenders or (v) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement.
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<PAGE> 77
11.15 Survival. All indemnities set forth herein, including, without
limitation, in Sections 2.7, 2.8, 4.4, 10.9 and 11.1, shall survive the
execution and delivery of this Agreement and the Notes and the making and
repayment of the Loans until such time as all Obligations shall have been paid
in full. Notwithstanding the foregoing, the confidentiality provisions set forth
in Section 11.17 shall survive and be enforceable until the date which is one
year after the Maturity Date or such earlier date upon which all of the
Obligations are paid in full.
11.16 Domicile of Loans. Each Lender may transfer and carry its Loans
at, to or for the account of any office, Subsidiary or Affiliate of such Lender.
11.17 Confidentiality; Tombstone. (a) Neither the Administrative Agents
nor any Lender shall disclose any Confidential Information to any Person without
the consent of the Borrower, other than (a) to the Administrative Agents' or
such Lender's officers, directors, employees, agents and advisors to the extent
necessary and then only so long as such Person agrees to keep confidential any
such Confidential Information in accordance with this Section 11.17, (b) as
required by any Law or administrative or judicial process and (c) as requested
or required by any state, federal or foreign authority or examiner regulating
the Administrative Agents or any Lender or (d) with the prior written permission
of the Borrower.
(b) Notwithstanding Section 11.17(a), the Borrower acknowledges and
agrees that the Arranger and/or the Administrative Agents will publish one or
more "tombstone" advertisements and issue one or more press releases describing
the transactions contemplated by this Agreement, and that all such
advertisements and press releases will name the Arrangers, the lead manager and
the Administrative Agents. Such advertisements and press releases shall be
subject to the approval of the Borrower, which approval will not be unreasonably
withheld or delayed.
11.18 WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL
BY JURY OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY OTHER CREDIT
DOCUMENT OR OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH
OR THEREWITH, OR ANY COURSE
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<PAGE> 78
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY RELATING HERETO OR THERETO.
[SIGNATURES ON NEXT PAGE]
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<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
BORROWER
OCCIDENTE Y CARIBE CELULAR S.A.
Carrera 55 No. 49 - 101
Medellin S.A.
Colombia
Attn: Alvaro H. Munoz By: /s/
Telephone: (57-4) 510-9504 ----------------------------
Facsimile: (57-4) 513-0199 Name:_______________________
Title:______________________
ADMINISTRATIVE AND COLLATERAL
AGENTS
ING (U.S.) CAPITAL CORPORATION
135 East 57th Street
New York, New York 10022
Attn: Margaret Clark By: /s/
Telephone: (212) 446-1783 ----------------------------
Facsimile: (212) 750-8935 Name:_______________________
Title:______________________
ING BANK N.V.
Kaya W.F.G. (Jombi)
Mensing, 14
P.O. Box 3895
Curacao, Netherlands Antilles
Attn: Tomas Munoz By: /s/
----------------------------
Name:_______________________
Title:______________________
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<PAGE> 80
LENDERS
ING (U.S.) CAPITAL CORPORATION
135 East 57th Street
New York, New York 10022
Attn: Margaret Clark By: /s/
Telephone: (212) 446-1783 ----------------------------
Facsimile: (212) 750-8935 Name:_______________________
Title:______________________
ING BANK N.V.
Kaya W.F.G. (Jombi)
Mensing, 14
P.O. Box 3895
Curacao, Netherlands Antilles
Attn: Tomas Munoz By: /s/
----------------------------
Name:_______________________
Title:______________________
MERRILL LYNCH CAPITAL
CORPORATION
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Attn: Stephen B. Paras By: /s/
Telephone: (212) 449-8221 ----------------------------
Facsimile: (212) 449-8230 Name:_______________________
Title:______________________
EXPORT DEVELOPMENT CORPORATION
Information Technologies Team
151 O'Connor Street
Ottawa, Canada
K1A 1K3
Attn: Michael Smallshaw By: /s/ Peter Foran
------------------------------
Telephone: (212) 598-2796 Name: Peter Foran
Facsimile: (212) 598-6858 Title: Vice President
By: /s/ Lynda Bernst
------------------------------
Name: Lynda Bernst
Title: Financial Services Manager
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<PAGE> 81
ABN AMRO BANK N.V.
200 South Biscayne Boulevard
Suite 2200
Miami, Florida 33131
Attn: Michael A. Buhler and
Christopher J. Cona By: /s/ Michel Buhler
------------------------------
Telephone: (305) 375-8213 Name: Michel Buhler
Facsimile: (305) 372-2397 Title: VP and Director
ABN AMRO North America, Inc.
as agent for ABN AMRO Bank N.V.
By: /s/ Chris Cona
-------------------------------
Name: Chris Cona
Title: AVP
ABN AMRO North America, Inc.
as agent for ABN AMRO Bank N.V.
ARRANGERS
ING BARING (U.S.) SECURITIES,
INC.
135 East 57th Street
New York, New York 10022
Attn: Steven N. Aloupis By: /s/
Telephone: (212) 446-0940 ----------------------------
Facsimile: (212) 593-0566 Name:_______________________
Title:______________________
MERRILL LYNCH & CO.
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Attn: Stephen B. Paras By: /s/
Telephone: (212) 449-8221 ----------------------------
Facsimile: (212) 449-8230 Name:_______________________
Title:______________________
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<PAGE> 1
Exhibit 10.03
REPUBLICA DE COLOMBIA
MINISTERIO DE COMUNICACIONES
OCCIDENTE Y CARIBE CELULAR S.A.
OCCEL S.A.
CELLULAR MOBILE TELEPHONE
"A" NETWORK
WESTERN AREA
CONCESSION AGREEMENT
MARCH 28 1994
SANTAFE DE BOGOTA, COLOMBIA
<PAGE> 2
AGREEMENT No. 000005
SUBJECT MATTER CONCESSION FOR RENDERING CELLULAR MOBILE PHONE SERVICE
NETWORK A
AREA WESTERN
CONCESSIONAIRE OCCIDENTE Y CARIBE CELULAR S.A. OCCEL S.A.
AMOUNT ONE HUNDRED AND TWENTY THREE THOUSAND. ONE HUNDRED
AND TWENTY MILLION PESOS ($123.120.000.000,00)
Between the heresaid, WILLIAM JARAMILLO GOMEZ, adult and resident of this city,
identified with citizens card number 530.261 of Medellin, acting on behalf and
representing MINISTRY OF COMMUNICATIONS the State Entity and empowered to
subscribe this agreement to law 80 of 1993 and specially by law 37 of 1993 and
its Regulatory Decree 741 of 1993, which hereinafter will be referred as to
MINISTRY OF COMMUNICATIONS by one part, and for the other part GILBERTO
ECHEVERRI MEJIA, adult and resident of this city, identified with citizens card
number 3.302.711 of Medellin, acting on behalf of the mixed economy company,
OCCIDENT Y CARIBE CELULAR S.A.--OCCEL S.A., constituted by Public Deed No.
378, granted on February 14th, 1992 at the unique Notary in the city of Soledad
- --Attantico, duly empowered by the Board of Directors, according to Minute No.
18 of January 24th, 1994, who hereinafter will be referred to as the
CONCESSIONAIRE and taking into account that: A) MINISTRY OF COMMUNICATIONS by
Resolution No. 3619, 1993, ordered the opening of Public Bidding No. 046 of
1993 on November 8th, 1993 by which the CONCESSIONAIRE would be selected in
order to award a concession agreement to introduce, establish and render a
cellular mobile telephone service in Columbia. B) By Resolution No. 000282 of
1994 MINISTRY OF COMMUNICATIONS awarded the Bidding No. 046 of 1993 to
OCCIDENTE Y CARIBE CELULAR S.A., previous to the fulfilment of the requirements
for such effect. In consequence, the parties agree that they will proceed to
conclude a State Concession Agreement for rendering a cellular mobile telephone
service, subjected to legal and regulatory rules and to the following terms and
conditions: FIRST CLAUSE--OBJECT. The object of this agreement is the rendering
of a cellular mobile Telephone service in Columbia under the responsibility and
risk of the CONCESSIONAIRE, by concession agreement, as a telecommunication
public service of non domiciliary, and of national scope and coverage, which
gives itself full capacity to the telephone communication between mobile
subscribers and through interconnection to the Public Switched Telephone
Network (PSTN) between them and fixed subscribers, using a cellular mobile
telephone network, on which a part of radioelectric spectrum assigned to
CONCESSIONAIRE constitutes its main item. (article 14, Decree 1900, of 1900 and
art. 1 Law 37 of 1993. FIRST PARAGRAPH: The cellular mobile telephone service
object of this concession agreement will be provided on the "A" Network and
within the Western region, on frequency bands assigned from 824.040 MHz to
825.000 MHz, 825.030 MHz to 834.990 MHz and 845.010 MHz to 848.480 MHz to
transmit from mobile stations
<PAGE> 3
to base stations, and from 869.040 MHz to 870.000 MHz, 870.030 MHz to 879.990
MHz and from 890.010 MHz to 891.480 MHz for transmission from base station to
mobile station according to the Schedule of Conditions and regulatory laws.
SECOND PARAGRAPH: Cellular mobile telephone networks to be installed under this
agreement, and at the same time, their enhancements, renewals, extensions and
modifications are part of State Telecommunication Networks, according to
articles 14, 15 and 23 of Decree 1900 of 1990 and article 5 y 6 of Decree 741 of
1993. THIRD PARAGRAPH. Expansions of originally installed network, stipulated on
the agreement documents, do not require a new authorisation from MINISTRY OF
COMMUNICATIONS (Paragraph of art. 5o. from Decree 741 of 1993). SECOND
CLAUSE--DURATION. Duration term of the concession, object of this agreement is
ten (10) years from the concluding date. FIRST PARAGRAPH--EXTENSION. The
concession will be extended over another ten (10) year period, as long as the
CONCESSIONAIRE has fulfilled all obligations according to the agreement. Such
extension should only be effective if MINISTRY OF COMMUNICATIONS and
CONCESSIONAIRE within the 8th year of the concession do not manifest their
intention in a contrary sense. In every case it will be required that the report
stipulated in letter h from number 1.27 Section 1 of the Schedule of Conditions
will be satisfactory. Within the year following the extension, the concession
will be formalized according to the economic conditions established for the
effect. SECOND PARAGRAPH MINISTRY OF COMMUNICATIONS from year five of the
agreement's execution, if it is technologically possible, could award
concessions to other operators to compete with the CONCESSIONAIRE. The
proceeding is without prejudice of concession that on performance of Law 37 of
1993 will be awarded to 'B' network. THIRD CLAUSE--STARTING OF RENDERING THE
SERVICE. For a cellular mobile telephone service starting purposes, the
CONCESSIONAIRE, shall within the three (3) months following the concluding date
of agreement, submit a written report to MINISTRY OF COMMUNICATIONS about his
capacity to commence and the estimated date for the start of operations.
MINISTRY OF COMMUNICATIONS through commissioned inspectors or functionaries,
will at the beginning a period not longer than fifteen (15) days from the date
stipulated by the CONCESSIONAIRE inspect the network and verify if the
stipulated requirements on the Schedule of Conditions have been fulfilled, the
proposal presented by the CONCESSIONAIRE and those required by MINISTRY OF
COMMUNICATIONS according to national and international rules in force. In order
to authorise the starting of service. IF MINISTRY OF COMMUNICATIONS will have
any comments, those must be resolved by the CONCESSIONAIRE within the term
fixed, according to circumstances. When the above mentioned is fulfilled,
MINISTRY OF COMMUNICATIONS will have a ten (10) calendar days to make a new
inspection, and if it is satisfactory, they will authorize it. In order to
MINISTRY OF COMMUNICATIONS can inspect and verify, the CONCESSIONAIRE must
provide adequate technical documentation, staff, equipment and all the required
facilities to test and analyse the results. If MINISTRY OF COMMUNICATIONS not
fulfil the time limits herein, the CONCESSIONAIRE may start operations. FIRST
PARAGRAPH: Within fifteen (15) days from the signing of this agreement, The
CONCESSIONAIRE must submit to MINISTRY OF COMMUNICATIONS the initial timetable
of frequency usage. SECOND PARAGRAPH. An inspector will represent MINISTRY OF
COMMUNICATION in their relationship with the CONCESSIONAIRE and will have,
besides functions assigned by regulations, the following responsibilities:
Verify the fulfilment of agreement, the efficient rendering of service and must
guarantee that all objections from subscribers are satisfied: submit in
permanent form to MINISTRY OF COMMUNICATIONS all information about evolution,
development and advance of the agreement and notify him about
<PAGE> 4
the circumstances that could affect the fulfillment, based on his observations
and on information he has received from the CONCESSIONAIRE; and to suggest the
correct measures to protect the public interest and to guarantee the provision
of uninterrupted service FORTH CLAUSE--PREVISIONS.--On the execution of the
agreement and especially on installation and usage of equipment for network
operation, the CONCESSIONAIRE must act according to the public interest,
respecting individual rights and should not interfere with the normal operation
of other public services. FIFTH CLAUSE--SUBMISSION TO RULES AND REGULATIONS. The
CONCESSIONAIRE is obliged to render the service according to all national and
international rules and regulations governing it, to fulfill all the law
provisions which protect environmental variety and integrity and the
conservation of most important ecological areas and in general to fulfill all
the rules issued by MINISTRY OF COMMUNICATIONS. SIXTH CLAUSE--AMOUNT AND FORM OF
PAYMENT. This agreement has a value of one hundred and twenty three thousand one
hundred twenty million ($123.120.000.000,00) pesos, and has a duration term of
ten (10) years, the CONCESSIONAIRE is obliged to pay in cash and only once
during the period of the concession, and this amount has to be paid to MINISTRY
OF COMMUNICATIONS within ten (10) calendar days after the concluding, through
the Communications Fund public entity attached to it. (Decree Law 1901 of 1990).
FIRST PARAGRAPH: The above mentioned amount comes from one hundred and five
thousand, eight hundred million ($105.800.000.000,00) pesos, for concession
rights, plus seventeen thousand three hundred and twenty million
($17.320.000.000,00) pesos for the expansion plan under special conditions
financing those municipalities with a higher index of unsatisfied basic needs.
SECOND PARAGRAPH: For fiscal effects the value of agreement will be the above
mentioned. SEVENTH CLAUSE--COUNTER RENDERING PERIODICAL TARIFFS. Besides the
price previously indicated and in virtue of the stipulated on number 22 article
3 Decree 1901 of 1990 and on the Schedule of Conditions, the CONCESSIONAIRE must
pay quarterly to MINISTRY OF COMMUNICATION, through the Communications Fund, for
usage and exploitation rights of radioelectric frequencies contained in subrange
specified on numeral 1.1.5 of Section II of the Schedule of Conditions, an
amount equal to 5% of the Company's monthly gross income. It has to be paid
within (15) days following the expire of the respective quarterly period,
according to the detailed income report which the CONCESSIONAIRE must submit to
MINISTRY OF COMMUNICATIONS. PARAGRAPH For this agreement gross income will be
considered to be those revenues obtained exclusively from the operation and
rendering of a cellular mobile telephone service. In order to determine it the
following concepts must be taken into account, incomes from connection or
subscription fees, periodic basic charges, for the usage of services and by
supplementary services, amounts received from another cellular operators for
"Roaming" and calls originated on their networks, amount transferred by other
telecommunications operators for calls originated on their networks. The
following items will be excluded: refunds and discounts on periodic basic
charges, by charges from service usage and supplementary services; payments to
another cellular operators by "roaming" and by calls originated on the network;
access payments to fixed network operators and payments to national and
international long distance operators. EIGHT CLAUSE: TRANSFER OF AGREEMENT. The
concession object of this agreement can not be totally, or partially transferred
before three (3) years from the date of signing (numeral 2. art. 4 Law 37 of
1993); after that date MINISTRY OF COMMUNICATIONS may authorize the transfer,
when the CONCESSIONAIRE will ask for it (art. 44 Decree 741 1993). PARAGRAPH:
Without prejudice of responsibility from this agreement, the CONCESSIONAIRE may
subcontract the rendering of service after three (3) years
<PAGE> 5
from the signing, with prior authorization from MINISTRY OF COMMUNICATION.
NINTH: CLAUSE--TECHNOLOGY AND EQUIPMENT For the rendering of the cellular mobile
telephone service the CONCESSIONAIRE must use AMPS technology, complying as a
minimum with the stipulated rules on the Schedule of Conditions. Equipment used
in building the network must be new, of the latest commercialized version by
manufacturers, offering compatibility and the possibility of technical migration
to new features and rules compatibles with the AMPS standard. TENTH
CLAUSE--QUALITY OF SERVICE. The CONCESSIONAIRE is obliged to render the cellular
mobile telephone service in a continuous and efficient way, complying with the
quality standards specified on the Schedule of Conditions and to submit
quarterly to MINISTRY OF COMMUNICATIONS, within five (5) days of the next
quarter, the information stipulated on the Schedule of Conditions and Quality
under which the service has been provided. ELEVENTH CLAUSE--RELATIONSHIP WITH
SUBSCRIBER. The CONCESSIONAIRE should not force the subscriber to purchase from
him any Mobile Station (MS) or other goods or services as a condition to render
the required service. The CONCESSIONAIRE, according to regulations, must connect
and render the service to any subscriber who requires it, if he already has his
equipment approved by MINISTRY OF COMMUNICATIONS (the Schedule of Conditions
Number 1. 26 Section I) TWELFTH CLAUSE--RECEPTION OF COMPLAINTS. The
CONCESSIONAIRE must establish an efficient system for the receipt and management
of subscriber and/or third party complaints and system for the repairs of the
network failures and must submit a quarterly report, to MINISTRY OF
COMMUNICATIONS about the timely reception, their nature and the corrective
measures that are put in place. THIRTEENTH CLAUSE--RESPONSIBILITY. Unless
accidental case or force majeure duly verified, and in those cases when
according to law, there is no responsibility, the CONCESSIONAIRE will be the
only responsible for the correct operation and quality of service of his
cellular network in front of subscribers and third parties, by the purchase of
equipment and material by working relationship acquired; therefore, MINISTRY OF
COMMUNICATIONS is not responsible for any obligation in front of them on the
performance of this agreement. In case the CONCESSIONAIRE do not render the
service according to terms and conditions herein and by regulations, MINISTRY OF
COMMUNICATIONS will take all necessary measures. FOURTEENTH CLAUSE--SERVICE
AGREEMENT. Relationship between CONCESSIONAIRE and a cellular mobile telephone
service subscriber will be governed by the agreement that the subscriber must
sign with the CONCESSIONAIRE, according to legal and regulatory provisions and
with this concession. Respective agreement models must be submitted to MINISTRY
OF COMMUNICATIONS. PARAGRAPH. The CONCESSIONAIRE must guarantee the
confidentiality of information from subscribers and should not disclosure it
without the previous consent. FIFTEENTH CLAUSE--TELEPHONE DIRECTORY. The
CONCESSIONAIRE must provide the user a telephone directory service according to
the features stipulated on the Schedule of Conditions. SIXTEENTH
CLAUSE--MEASUREMENT AND QUALITY CONTROL SYSTEMS. The CONCESSIONAIRE is obliged
to establish and maintain a service measurement and quality control system which
must be transparent, accurate, reliable and easily verifiable, both in their
functions and results by MINISTRY OF COMMUNICATIONS. The system must, as minimum
include the parameters related to the quality of service goals, set out in the
Schedule of Conditions. SEVENTEENTH CLAUSE--DIGITALIZATION. The CONCESSIONAIRE
is committed to digitalize his network according to standards stipulated by
MINISTRY OF COMMUNICATIONS, fulfilling the timetable specified on the Schedule
of Conditions. The operator may develop his digitalization plan before the term
stipulated on the timetable or may offer any type of digital service
<PAGE> 6
from the beginning of network building, provided he will guarantee the
following: Compatibility with AMPS standards--Adoption of national digital
standard, although it is different from the originally installed.--To maintain a
minimum grade of service for every subscriber, both digital and analogue.
PARAGRAPH Two years after the beginning of concession, MINISTRY OF
COMMUNICATIONS will disclosure the digital technological standard to adopt by a
cellular mobile telephone in Colombia. EIGHTEENTH CLAUSE--"ROAMING" The
CONCESSIONAIRE is committed to offer a "Roaming" service as stipulated in the
Schedule of Conditions. NINETEENTH CLAUSE--CONCESSIONAIRE OBLIGATIONS In
addition to the obligations stipulated in the sections of this agreement and by
Law, the CONCESSIONAIRE is obliged to: 1. Establish and render a cellular mobile
telephone service under his own risk and responsibility in the region and
network above mentioned according to the stipulations in the Schedule of
Conditions, for this purpose he must install, maintain and operate the network.
2. To help with MINISTRY OF COMMUNICATIONS on the supervision and inspection
that have to be performed on the development of this agreement. 3. To obey all
instructions and provisions that according to law, regulations and this
agreement the MINISTRY OF COMMUNICATIONS will require for the performance in
order for the best rendering of service. 4. Not to change, unless previous
authorised by MINISTRY OF COMMUNICATIONS, the operator or operators at the time
of the registration, and neither the other essential items that have been taken
into account for qualification in this record and evaluated in order to award
it, without prejudice of changes made during the fulfillment of law or by its
authorisation. 5. Maintain during concession term qualified staff in order to
guarantee the efficient rendering of the service awarded. 6. To comply with
signalling, numbering, tariffs and routing plans issued by the National
Government. 7. Deliver the cellular mobile telephone service minimum expansion
plan according to timetable stipulated in the proposal. PARAGRAPH During the
second semester of the fifth year of the concession, MINISTRY OF COMMUNICATIONS
will jointly review with the CONCESSIONAIRE a minimum expansion plan proposed
by him for the second five years of the concession in order to determine if it
will require any adjustment according to new environmental conditions of
country at that time. TWENTIETH CLAUSE--INDEMNITY GUARANTEE. The CONCESSIONAIRE
will be totally responsible for his acts or behaviour as the CONCESSIONAIRE
and, must repair all damage caused to third parties and to the State Network's
physical and technical infrastructure. The CONCESSIONAIRE is obliged to
maintain MINISTRY OF COMMUNICATIONS uninjured from all prejudices derived from
acts and behaviours that under his condition will execute, and could generate
prejudices affecting third parties, subscribers, other operators or the Nation
itself, and as a consequence will repair all injuries derived from these acts.
TWENTY FIRST CLAUSE--PROHIBITION OF MONOPOLISTIC PRACTICES The CONCESSIONAIRE
is forbidden for to exercise monopolistic or restrictive practices in any sense
of competence, performance of acts, covenants, agreements or combinations whose
purpose will constitute an exclusive advantage unlawful to his favour or to
another person, or tend to monopolise complementary markets on services awarded
by concession (section 2, paragraph 2, article 4 Law 37, 1993 and art 53 Decree
741, 1993) TWENTY SECOND CLAUSE--INSPECTION MINISTRY OF COMMUNICATIONS
according to legal and regulatory provisions will have be empowered to
supervise and inspect the facilities, network and service rendered by the
CONCESSIONAIRE, who will allow access to their facilities in order to inspect.
Likewise, he could have independent, random and permanent sampling of quality
and quantity measured to verify accuracy of the CONCESSIONAIRE control system.
The CONCESSIONAIRE must provide staff and equipment as required
<PAGE> 7
and should provide all facilities in order to inspect and also submit to
MINISTRY OF COMMUNICATIONS all equipment technical manuals. He must also submit
documents and information required to fulfill every contractual term and
condition. TWENTY THIRD CLAUSE - EMERGENCY SERVICES IN CASE OF DISASTERS. The
CONCESSIONAIRE must, without any charge, provide support services to security,
emergency and assistance institutions in the case of natural disaster or public
calamity, giving high priority to communication channelling under MINISTRY OF
COMMUNICATIONS' supervision. Security and assistance services must be rendered
based on international covenants and agreements applicable to it (art 10 Decree
1900 of 1990 and the Schedule of Conditions) TWENTY FOURTH CLAUSE -
INTERCONNECTION. The CONCESSIONAIRE, in order to interconnect his network with
another networks, must conclude interconnection agreements with operators, which
regulate among others, the following features: Connecting points - Methods to
establish and maintain connection - Dates for interconnecting - Interconnection
preferred system and the way signals must be received and transmitted - Report
about usage time in order to invoice - Interconnection tariffs, when they have
been established by a competent public authority, administrative costs and
invoicing of charges and their distribution - Repair of damages, caused by
interconnection to PSTN facilities or to the quality of service rendered.
Everything related to network interconnection and its usage. FIRST PARAGRAPH
Should it not be possible to conclude an interconnection agreement between
parties, the MINISTRY OF COMMUNICATIONS on a two (2) months term from the denial
of required interconnection, will give solution directly determining the terms
of conditions that had not been agreed. SECOND PARAGRAPH In any case, the
Cellular Mobile Switching Centre (MSC) CONCESSIONAIRE will guarantee to Public
Switched Telephone Network (PSTN) that he will not cause any damage to the
physical or technical infrastructure and also he must fulfill all conditions
stipulated by internal working regulations for a PSTN operator. The preceding is
without prejudice of what agreement (MSC) CONCESSIONAIRE makes with the PSTN
operator which allows the interconnection from MSC equipment room. THIRD
PARAGRAPH Agreements made on performance of this section will be submitted for
approval by MINISTRY OF COMMUNICATIONS and will be in agreement with equity, non
discrimination, principles of uninterrupted service to the rules issued by
MINISTRY OF COMMUNICATIONS. TWENTY FIFTH CLAUSE - CALCULATIONS AND BILLING The
CONCESSIONAIRE must have a billing system available which complies with
technical and functional features stipulated on the Schedule of Conditions which
allows him to invoice subscribers and verify charges for usage of the services
contracted, specifying the type of service (local calls, long distance calls,
"Roaming" supplementary services and value added services) and usage time. Long
distance service must show destination and duration of every call. TWENTY SIXTH.
CLAUSE - INFORMATION. The CONCESSIONAIRE is obliged to submit all technical,
administrative, statistical, accounting and financial information according to
service stipulated on Schedule of Conditions and regulations in order to verify
fulfillment of the quality of service requirements. In any case, MINISTRY OF
COMMUNICATIONS may, at any time, during the term of the concession require any
additional information related to system operation which can be used to
determine performance and compliance with this agreement. PARAGRAPH. MINISTRY OF
COMMUNICATIONS is obliged to maintain its confidentiality according to law.
TWENTY SEVENTH. CLAUSE - UNIQUE GUARANTEE. The CONCESSIONAIRE is obliged to
constitute, under his own charge, and to the favour of MINISTRY OF
COMMUNICATIONS a guarantee which covers compliance with every obligation of the
concession agreement, quality of service rendered, fines payment, monetary
<PAGE> 8
penal clause and extra contractual civil responsibility imputable to him, in
execution of this agreement. The CONCESSIONAIRE will award a unique guarantee,
and, he is obliged to maintain it in force, up to the termination of the
guaranteed agreement and during the extension of his effects. Guarantee term
will be three (3) years at the beginning, but it must be renewed by equal
periods six (6) months before expire until it covers the total term of this
agreement and eventually its extension. Guarantee will consist of a policy
issued by a duly authorised insurance company to operate in Colombia or in a
bank warranty which amount to ten (10%) per cent of one hundred and fourteen
thousand three hundred eighty three million pesos ($114.383.000.000,00) where
the obligation amount of CONCESSIONAIRE due at the time when policy is issued,
must be taken into account to determine covered risk extension. If the
contractor does not extend the guarantee, contractual sanctions will be
applied, the amount will be equivalent to purpose severity guarantee of the
proposal and will be effective as a protection of compliance, previous
proportional deductions to time after concession. In any case the protection
amount should not be lower than fifty (50%) per cent of this amount. For the
liquidation of this agreement it will be required from the CONCESSIONAIRE. If
it were the case, an extension or enhancement of guarantee civil responsibility
and, in general, guarantee obligations that must be fulfilled after
termination. TWENTY EIGHT CLAUSE--KNOWLEDGE. The CONCESSIONAIRE declares that
in relation with contractual provisions he has had reviewed the Schedule of
Conditions and other proceedings and has considered them in relation with area
conditions where he has to render service, he has performed the required
studies, taking into account purpose and scope of every provision herein. The
CONCESSIONAIRE should represent that he had investigated equipment
availability, restrictions, deposit and custom duties applicable to imports of
equipment and also the delays caused by imports, and also other conditions
affecting the cost or time to render into service a cellular mobile telephone,
and at the same time, that these conditions were taken into account when this
purpose was formulated and their occurrence can not be argued as a reason which
justifies the not compliance with his obligations. TWENTY
NINTH CLAUSE--REGULATORY RULES. The CONCESSIONAIRE declares to know all valid
rules about cellular mobile telephone service and indeed accepts to adjust the
execution of this agreement in compliance with all the rules and possible
modifications mandatory on legal and regulatory provisions about the matter,
and he is committed in every case to get previous authorisation from MINISTRY
OF COMMUNICATIONS to make any modification to the essential features of a
cellular mobile telephone service. THIRTIETH. The CONCESSIONAIRE has legal
facilities to get permissions and authorisations, both from public and
particular powers, for service establishment, installation, maintenance and
improvement, MINISTRY OF COMMUNICATION, if it is the case, and it is under his
faculties, will give required support, provided the CONCESSIONAIRE will request
it with enough time. THIRTY FIRST CLAUSE--UNILATERAL TERMINATION,
MODIFICATION, INTERPRETATION OF AGREEMENT. This document is governed by
unilateral termination, modification and interpretation rules of agreement
according to terms and conditions of law 80 of 1993. THIRTY SECOND--LAPSE.
Lapse of concession agreement will proceed when any constitutive facts of non
fulfilment of CONCESSIONAIRE's obligations which affect in a grave and direct
way the execution and purposes of this contact and prove that they take the
agreement to immobilisation, or the established reasons in art 43 Decree 741 of
1993, what is understood, affect the executions of this agreement. In this case
MINISTRY OF COMMUNICATION by administrative act duly motivated will terminate
the agreement, will impose on the CONCESSIONAIRE the sanctions and incapacity
stipulated by law, the amount of
<PAGE> 9
the pecuniary penal clause herein will be paid, without prejudice of collection
of fines imposed and will order its liquidation in the state they are in.
THIRTY THIRD CLAUSE--REVERSION. When the concession term finishes, items and
goods directly affecting it will belong to the Nation--MINISTRY OF
COMMUNICATIONS. It is not expected to give any compensation for this. THIRTY
FOURTH CLAUSE--FINANCIAL PENALTIES. Financial penalty clause will be directly
effective against CONCESSIONAIRE and his guarantor, by MINISTRY OF
COMMUNICATION, in case of lapse, or the non fulfillment of agreement. The
amount of the penalty is ten (10%) per cent of the value of agreement
obligations at CONCESSIONAIRE charge pending of execution which is estimated on
one hundred fourteen and thousand three hundred and eighty three million
($114.383.000.000) pesos. The penalty clause amount to be paid will be
considered as partial payment of total injuries caused to Nation--MINISTRY OF
COMMUNICATIONS. THIRTY FIFTH CLAUSE--FINES. In addition to the reasons
stipulated by law and by regulations, the non fulfillment by CONCESSIONAIRE of
his contractual obligations, will cause fines imposed on the CONCESSIONAIRE by
MINISTRY OF COMMUNICATIONS up to amount of one thousand (1.000) times monthly
legal minimum salaries, calculated on basis of the current amount at the time
of occurrence of event by every unfulfillment or infraction, according to
gravity of the faulty, produced damage and recidivism and without prejudice to
declare the lapse, by the following conditions: a) To start rendering service
without being duly authorized by MINISTRY OF COMMUNICATIONS, according to
stipulated herein. b) Unfulfillment or delay on performance of service
expansion plan timetable, presented by the CONCESSIONAIRE on his purpose and
approved by MINISTRY OF COMMUNICATION previous requirement to the
CONCESSIONAIRE, unless accidental case or force majeure c) Installation, usage
or connection to PSTN of equipment not adjusted to basic plans or
interconnection rules or produce some damage to PSTN as a consequence of usage
of unauthorized connections or installations, without prejudice of indemnities
in place. d) When the CONCESSIONAIRE, without justified cause does not fulfil
the duty to submit the information and the support required by MINISTRY OF
COMMUNICATION; e) Generally, non fulfillment of contractual and regulatory
obligations when administration do not consider to declare its lapse. THIRTY
SIX CLAUSE--FINES APPLICATION. A fine and financial penalty will be imposed
through motived resolution and, should the CONCESSIONAIRE or insurance company
had not paid within thirty (30) days, it will be collected through executive
action by coercive jurisdiction. In case of guarantee decrease by fringe
application, the CONCESSIONAIRE is obligated to pay such amount and to maintain
such guarantee. THIRTY SEVENTH CLAUSE--AGREEMENT DOCUMENTS. The following
documents are part of concession Agreement: the Schedule of Conditions
including all addendum. CONCESSIONAIRE purpose, including all Appendix,
regulations that MINISTRY OF COMMUNICATIONS will issue according to service and
networks, service and networks minimum expansion plans presented by
CONCESSIONAIRE, MINISTRY OF COMMUNICATIONS resolution awarding the biding,
written agreements concluded by parties and guarantee agreements concluded on
performance of this agreement (art. 42 decree 741 of 1993) PARAGRAPH. All
documents within this agreement are a legal, essential and integral part of it.
Documents generated during the public biding process in order to award it must
be as a set and can not be interpreted as separated parts. In the case of
disagreement between this agreement and the rest of the documents, the
agreement will prevail. The order documents are listed do not imply priority.
In discrepancy cases between parties about the agreement's interpretation it
will be governed by art 16 law 80 of 1993. THIRTY EIGHT CLAUSE--ABSENCE OF
PROHIBITIONS, INCAPACITY AND
<PAGE> 10
INCOMPATIBILITIES. The CONCESSIONAIRE declares under gravity of oath, by the
signing of this agreement, that he is out of prohibitions and of incapacity and
incompatibility reasons stipulated on laws in force. THIRTY NINTH
CLAUSE - EXECUTIVE MERIT OF THIS AGREEMENT. This agreement and also the
insurance policies or guaranties issued in favour of MINISTRY OF COMMUNICATIONS
to guarantee fulfillment and administrative acts executed which contain clear,
express and current required obligations in favour of State - Nation MINISTRY OF
COMMUNICATION, will constitute executive titles at this favour, which will be
required through coercive jurisdiction. FORTIETH CLAUSE - SUBMISSION TO
NATIONAL LAWS, this agreement is governed by Colombian laws and is submitted to
jurisdiction of Republic of Colombia Court FORTIETH FIRST CLAUSE - CONCLUSION OF
THE AGREEMENT. This agreement is concluded through signature of parties.
FORTIETH SECOND. CLAUSE - AGREEMENT EXECUTION. It will be required for the
execution of agreement previous approval of guarantee. The CONCESSIONAIRE is
obliged to give it under his risk within thirty (30) working days following its
signature. In concluding the agreement, the CONCESSIONAIRE must pay the
respective stamp duty and to publish it in Official Newspaper at
CONCESSIONAIRE's charge, this requirement will be understood to be fulfilled by
presentation of publication receipt within ten (10) days after date of its
signing. FORTY THIRD. CLAUSE - COMPROMISED CLAUSE. Controversies related to the
conclusion, execution, development termination or liquidation of this agreement
that can not be directly determined by parties, will be submitted to an
arbitration tribunal decision. The tribunal will consist of three (3) members
and their verdict will be in binding; designation and functioning way will be
submitted to legal provisions in force. FORTY FOURTH. CLAUSE - LIQUIDATION OF
AGREEMENT. There will be a of six (6) months term from termination for the
liquidation of agreement. Liquidation procedure will be as stipulated on
regulations.
As evidence it is signed in Santafe de Bogota DC: on the twenty eight (28th)
day of March, one thousand nine hundred ninety four (1994).
Between:
STATE ENTITY - MINISTRY OF COMMUNICATIONS
BY CONCESSIONAIRE.
<PAGE> 11
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 10.04
EMPRESAS PUBLICAS DE MEDELLIN
CONTRACT 4/DJ-1137/25
INTERCONNECTION AGREEMENT SIGNED BETWEEN EMPRESAS PUBLICAS DE MEDELLIN AND
COMPANIA OCCIDENTE Y CARIBE - CELULAR S.A. - OCCEL S.A.
Between the undersigned, GILBERTO IGNACIO ECHEVERRI MEJIA, of legal age,
resident of Medellin (Antioquis), with citizens card number 3.302.711, issued in
Medellin, who is acting as the President and Legal Representative of the
commercial corporation OCCIDENTE Y CARIBE CELULAR, S.A. - OCCEL S.A. - a
corporation domiciled in Pereira, established by means of Public Instrument No.
000378 of February 14, 1992, issued by the sole Notary of Soledad (Altantico),
which shall be referred to hereinafter as OCCEL, S.A. on one part, and on the
other part DIEGO URIBE URIBE, resident of Medellin, identified with citizens
card number 8.301.965 of Medellin, who is acting as the General Manager and
Legal Representative of EMPRESAS PUBLICAS DE MEDELLIN, Public Entity of
Municipal order, created by means of Resolution No. 58 of 1995 of the
Administrative Council of Medellin, which hereinafter will be referred to as
LAS EMPRESAS, this agreement for access and use of the Public Switched
Telephone Network and the Cellular Mobile Telephone Network is concluded, in
conformity with the legal provisions in force, subject to the following
considerations and definitions: FIRST. OCCEL S.A. is the awardee of the
concession which has as its object the rendering of a Cellular Mobile Telephone
Service on the "A" network in the Western region of Colombia pursuant to
agreement 000005/94 concluded with the Ministry of Communications on March 28,
1994. SECOND. The Law 37 of 1993 and the Decree 741 of the same year
authorized the provisions which regulate the relationships of interconnection,
access and usage between the PSTN and CTN networks already established in the
country. THIRD. By means of Resolution 002 of October 13 and 004 of October
28, 1993, the Telecommunications Regulatory Commission, established the
interconnection charges for the first year of operation and determined the
mechanisms for review thereof, upon the conclusion of that year, and
established the principles of pricing for the rendering of the mobile telephone
service. FOURTH. ABBREVIATIONS USED: C.T.N.: means the cellular mobile
telephone network. P.S.T.N.: means the public switched telephone network.
M.S.C.: means the mobile switching center of the cellular mobile telephone
network. The contract shall be governed by the following clauses: FIRST
CLAUSE - OBJECT: The object of this agreement is to establish the provisions
which regulate the access and use of the P.S.T.N. of LAS EMPRESAS and the
C.T.N. of OCCEL S.A. SECOND CLAUSE - OBLIGATIONS: LAS EMPRESAS engage: 1.1 to
install and make available the infrastructure for the interconnection of the
equipment of the cellular mobile telephone network of OCCEL S.A. with the
telephone network of LAS EMPRESAS. In addition, it engages to acquire,
install, maintain, operate, preserve and replace the equipment and elements
required in its network in order to guarantee the traffic to be transmitted
between the two networks, in accordance with the provisions of law 37 of
<PAGE> 2
1993 and Decree 741 of the same year, and with the quality that generates a
loss of calls with automatic access not to exceed one (1%) percent of the
traffic which is agreed upon in the development of this contract. 1.2 To
permit its subscribers to have access to the cellular mobile telephone service
of OCCEL S.A., as well as to the new services rendered to third parties through
its cellular telephone network, in accordance with the provisions of the Law.
1.3 To perform the tests destined to verify the quality of the interconnection
service, perform maintenance and provide test numbers to OCCEL S.A. The
quantity and the time period for utilization of these numbers shall be agreed
upon between the parties, by the executives designated for that purpose. 1.4
To perform measurements of traffic and grade of service on the interconnection
circuits between the networks, in order to correct deficiencies of service and
make timely plans with regard to increases of interconnection capacity. LAS
EMPRESAS shall O.S.C. verify the communications quality level between the two
networks with the necessary regularity and shall inform OCCEL S.A. thereof,
together with the damage which has occurred and which may require its
intervention. 1.5 To adopt all measures in order to prevent fraud and
generation of inconsistencies. 1.6 To repair, within the terms and
conditions established agreed upon, the failures reported by OCCEL S.A. 1.7
Not to conduct or develop practices which discriminate against OCCEL S.A., in
accordance with the law. 1.8 To bill its subscribers for the charges
incurred for calls which the consumers of its network originate to the
network of OCCEL S.A. The list of calls shall be that which is
received from OCCEL S.A. on magnetic tape or any other media agreed upon by the
parties, which must comply with the specifications of the billing procedure.
The information received may be verified by LAS EMPRESAS. The bill shall
contain the information specified in the respective procedure. 1.9 To rebill
the subscribers for the amounts not paid in due time, in accordance with the
provisions of the law and with the internal procedures of LAS EMPRESAS. 1.10
To pay and to bill its subscribers for interest on late payments, by month or
fraction of the month, pertaining to amounts corresponding to OCCEL S.A. that
have not been collected within time limits stipulated on the bill, at the
indicated interest rate, in accordance with the law and with the internal
procedures of LAS EMPRESAS. OCCEL S.A. shall supply LAS EMPRESAS with the
legal documents upon which the collection of such interest and the authorized
rate are based. 1.11 To submit to OCCEL S.A. on a monthly basis a statement
of the subscribers whose debts have been established as past due, in accordance
with the law and the regulations. The amounts not collected are debts of the
subscribers of LAS EMPRESAS to OCCEL S.A. for which the latter are not liable.
LAS EMPRESAS shall suspend access to the cellular mobile telephone network of
OCCEL S.A. for the subscribers as requested by the latter by means of a written
report, provided that this is technically possible and does not affect the
access to other networks, unless express authorization is given by the other
operators which could be affected. 1.12 To preserve the confidentiality of
the information pertaining to OCCEL S.A. in accordance with the provisions of
the National Constitution and the law; not, in no
<PAGE> 3
case shall it supply this information at its own initiative. 1.13 To effect the
collection of the amounts billed for the calls originated by the subscribers of
LAS EMPRESAS to the cellular network of OCCEL S.A. 1.14 To accept partial
payments of its bills, only at the petition of the user and in accordance with
the law and the regulations. LAS EMPRESAS shall only accept payment facilities
and discounts on the accounts of its subscribers relating to OCCEL S.A. when the
latter grants express authorization therefore, by means of a discount note and
procedure which shall be agreed upon by the parties. 1.15 To deliver to OCCEL
S.A. the sum collected within the first fifteen (15) days of each month, no
later than the 10th day of the subsequent month, and the amount collected
between the 16th and the last day of the month, no later than the 25th day of
the subsequent month. From these amounts LAS EMPRESAS shall effect the
deduction specified in subsection 2.7 of this clause. 1.16 To submit to OCCEL
S.A. a collection note for the amount corresponding to the minutes used on its
networks, in accordance with the provisions of the law, payable on the 30th day
of the month subsequent to the submission of the collection note. 1.17 To
credit and pay OCCEL S.A. interest on default at a rate equivalent to the
maximum permitted by law for similar commercial transactions, monthly or
proportionately to the days which have elapsed from the maturity date until the
date of payment, for the past due payment of that which is stipulated in
subsection 1.15 of this clause. 1.18 To inform its subscribers that the claims
relating to the billing of the calls to the cellular network of OCCEL S.A. shall
be handled by the latter at its own installations, for which LAS EMPRESAS shall
grant to OCCEL S.A. all necessary technical support. In the claims which merit
this, LAS EMPRESAS and OCCEL S.A. shall conduct the pertinent investigations,
shall provide each other with technical and operative support and shall share
all information necessary. In any case, the liability for the aforementioned
claims shall not be borne by LAS EMPRESAS. 1.19 To be liable for the costs of
repair of the damage caused to OCCEL S.A. and the damage resulting therefore,
provided that such damage is imputable to LAS EMPRESAS or to its contractors in
the execution of a contract for same. 1.20 To provide OCCEL S.A. with the
documents which it requires and which are within the documents which it requires
and which are within the scope of LAS EMPRESAS, in order that OCCEL S.A. may
take measures on its own behalf for the collection of the past due portfolio.
1.21 To provide OCCEL S.A. with the detailed information to permit the latter to
determine which of the subscribers of LAS EMPRESAS did not pay the amounts
billed for the use of the CTN of OCCEL S.A. and the amount owed by each of them.
The information shall be supplied, at minimum, two (2) times per month on the
dates determined by the executives responsible for the management of the
contract. 2. OCCEL S.A. engages: 2.1. its subscribers to access the PSTN of LAS
EMPRESAS, as well as the new services which are rendered to third parties by
means of the network of the latter. 2.2. To acquire, install, maintain,
operate, conserve and replace the required devices and elements in its PSTN in
order to comply with the management specifications set forth in subsection 1.1
of this clause.
<PAGE> 4
2.3 To perform tests in order to verify the quality of service of the
interconnection, to conduct the maintenance programs and to provide LAS EMPRESAS
with test numbers. The quantity and time for utilization of these numbers will
be agreed upon by the parties, through the executives designated for this
purpose. The tests may be conducted jointly, according to the schedule
established by mutual agreement. 2.4 To conduct measurements of traffic and
grade of service of the interconnection circuits between the networks, for the
purpose of correcting deficiencies and making timely plans for the increase of
interconnection capacity. OCCEL S.A. shall verify the communications quality
level between the two networks with the necessary regularity and shall inform
LAS EMPRESAS of the damage which has occurred and which may require its
intervention. 2.5 to attend in a timely manner to the failures reported by
LAS EMPRESAS in the incoming and outgoing links. 2.6 To deliver to LAS
EMPRESAS detailed information for the billing of the calls originated by its
subscribers. The aforementioned information shall be delivered for monthly
periods, on the 15th of each month or on the date indicated for this purpose by
LAS EMPRESAS, in accordance with its billing cycle, which shall be reported to
OCCEL S.A. no less than one month in advance. In the event of a delay on the
part of OCCEL S.A. IN THE DELIVERY OF THIS INFORMATION, LAS EMPRESAS shall only
effect the respective billing in the billing cycle subsequent to that in which
they receive the aforementioned information and the liability originating from
such delay shall be exclusively of OCCEL S.A. 2.7 To pay LAS EMPRESAS for the
administrative costs of billing and collection, the sum of FIFTY COLOMBIAN PESOS
($50.00) per monthly bill issued and empower LAS EMPRESAS to deduct this amount
from any payment order which they issue in favor of OCCEL S.A. The amount of
such administrative costs shall be adjusted in the same percentage of increase
of the minimum wage when this occurs, or in the event that the aforementioned
costs increase, subject to the study thereof by LAS EMPRESAS, who shall inform
OCCEL S.A. accordingly. 2.8 To supply LAS EMPRESAS with the information
necessary for the verification of the crediting of the information necessary for
the verification of the crediting of the charges for the use of the PSTN by the
subscribers of OCCEL S.A. The aforementioned information shall be supplied
according to the same specifications and schedule provided in subsections 1.8
and 2.6 of this clause. 2.9 To credit and pay to LAS EMPRESAS in the manner
stipulated in subsection 1.16 of the second clause of this contract, the charges
for the use of the PSTN which it owns, in accordance with the provisions of Law
37 and Decree 741 of 1993 and Resolutions Nos. 002 and 004 of the same year, of
the Telecommunications Regulatory Commission, and the provisions which
supplement, amend or supersede these. 2.10 To credit and pay to LAS EMPRESAS
an interest on default equivalent to the maximum permitted by law for similar
commercial transactions, monthly or proportionately to the days which have
elapsed from the maturity date until the date of payment, for the untimely
payment of that specified in subsection 1.16 of the present clause. 2.11 to
pay the expenses for the use of the interconnection infrastructure owned by LAS
EMPRESAS 2.12 To be liable for the costs for the repair of damage caused to
LAS EMPRESAS and the damages resulting therefrom,
<PAGE> 5
provided that such damage is imputable to OCCEL S.A. or to its subcontractors in
the performance of a contract therefor. THIRD CLAUSE - MUTUAL OBLIGATIONS OF
PARTIES: 1. In order to efficiently manage all matters relating to this
agreement, the parties engage that each shall designate a maximum of two
executives, who shall be responsible for discussion, consultation, communication
and resolution of the matters which require their intervention, making contacts
with the areas involved. Each party shall inform the other of the change of
the designated personnel, in order to avoid interruptions detrimental to the
proper execution of the contract. These executives will meet as required, and
among others, shall fulfill the following functions: 1.1 To maintain orderly and
accurate documentation related to this agreement, recording, in chronological
order, all of the information as to the events which are considered relevant,
such as consultations, decisions, and solutions. 1.2 To establish and review the
procedures relating, among other things, to interconnection, billing,
collection, information, claims, reconcilement of balances and attention to
failures or damage which occurs at the points of interconnection and in the
transmission media. 1.3 To review and approve the semi-annual reconcilements by
means of instruments, and monitoring of the amounts which appear pending
reconcilement for various reasons. 1.4 To determine the origin of the
inconsistencies, establish the mechanism to solve them and to present the
technical and factual reports which are permitted to the parties, to establish
the liability for the occurrence thereof. 1.5 To make the decision which may be
necessary in order to maintain the grade of service according to the
measurements which are made of the traffic. 1.6 To communicate to each other,
immediately, the damage detected in the elements of the interconnection which
require the intervention of either or both parties. In the events in which the
damage affects the quality of service, the intervention of the parties or of the
party requested to intervene must take place as soon as possible. 1.7 All other
duties which may be necessary in order to guarantee the adequate execution of
this contract. The decisions agreed upon by the parties must be recorded in
writing. 1.8 To study the procedures and the classifications which permit
access of the subscribers to the PSTN of LAS EMFRESAS to access the CTN of OCCEL
S.A. 2. Based upon the dimensions of the interconnection, established by the
demand and the projections therefor, the parties may sign the agreements
necessary in order that one of them may obtain the supply of the necessary
equipment and systems which the other party may have encountered difficulty in
securing, for the required expansion of capacity. 3. To have qualified
permanent staff available to attend and repair systems failures in the shortest
possible time period. 4. All of the calls transmitted to the damage service
system and between the test numbers previously established by the parties shall
not originate expenses for either of them. 5. the signalling between the
cellular mobile switching center of OCCEL S.A. and the centrals of LAS EMFRESAS
which are interconnected, shall commence using signalling through the associated
channel MFC-LME and shall change to signally through national standard common
channel, within the term established by the
<PAGE> 6
Ministry of Communications, subject to the pertinent tests. FOURTH CLAUSE -
EXEMPTION FROM LIABILITY AND CAUSE FOR TERMINATION OF THE CONTRACT Neither
party shall be liable for the non-fulfillment of any contractual obligation
caused by force majeure or inevitable accidental duly verified. If both
parties consider such circumstances as obstructing the execution of the
agreement for a term exceeding six (6) months, either party may terminate the
agreement by written notice to the other party. FIFTH CLAUSE - REGULATIONS
APPLICABLE TO THE INTERCONNECTION AND THE USE OF THE NETWORK The
interconnection between the two networks shall be subject to the plans,
regulations, definitions and standards of the Ministry of Communications, and
in the absence thereof, upon the plans, definitions and standards of the
International Telecommunications Union (ITU) and other international bodies of
jurisdiction, in which Colombia forms a part of virtue of international
agreements and covenants. SIXTH CLAUSE - SECURITY AND RELIABILITY. The
parties should maintain the interconnection minimum levels of reliability in
order to guarantee service continuity. The reliability shall be measured in
terms of the time in which the interconnection is normally operating. The
minimum reliability for the subscriber to interconnection equipment is 99.99%
measured over a monthly period, which means that the total of system dropped
times which affect the whole interconnection, should not be higher than 4.4
minutes/ month. The interconnection will have alternate routes as agreed upon
by the parties. SEVENTH CLAUSE - RECIPROCAL REVIEW. Each party may conduct,
directly or through a third party duly authorized therefore, the inspections
which may be necessary in order to establish the accuracy of the accounts and
the appropriateness of the procedures. The costs which are incurred for this
shall be borne by the executing party. In order to conduct the indicated
inspections, the party whose accounts and procedures are to be reviewed shall
provide all necessary facilities. EIGHTH CLAUSE - LIABILITY IN THE EVENT OF
INTERRUPTIONS. Neither of the parties shall be liable to the other for the
loss of profits which may be incurred due to the interruption or failure of the
interconnection or of the networks, nor shall either of them be permitted to
grant guarantees to its customers to take action against the other party under
these circumstances. NINTH CLAUSE - DURATION OF THE CONTRACT. This agreement
has a duration of five (5) years from the date of its execution, and may be
extended by one-year periods, as long as the parties do not issue notification
to the contrary in writing within sixty (60) calendar days prior to its
expiration or the expiration of the extension, for up to a maximum of ten (10)
years. TENTH CLAUSE - AMENDMENTS TO THE AGREEMENT. The amendments which the
parties agree to make to this agreement shall be made by means of bilateral
amendment agreements. In the event that an agreement as to an amendment is not
reached within the sixty (60) calendar days following the date on which one
of the parties requested agreement as to such amendment, the parties request
the intervention of the Telecommunications Regulatory Commission, and its
decision shall be binding upon both parties. Until then, the conditions
established in this contract shall remain in force. ELEVENTH CLAUSE -
TERMINATION OF THE AGREEMENT.
<PAGE> 7
Causes for the termination of this agreement are: 1. The impossibility of
fulfillment thereof due to inevitable accident or force majeure, during a
period of exceeding six (6) months. 2. The termination of the contract of
concession to OCCEL S.A. 3. The unilateral decision of LAS EMPRESAS to
terminate the agreement in the following events: 3.1 When the demand for
public service so requires or the situation of public order so demands. 3.2
Due to the dissolution of the legal entity OCCEL S.A. 3.3 Upon declaration of
bankruptcy of OCCEL S.A. 3.4 In the event of suspension of payments, meeting
of creditors or judicial embargoes of OCCEL S.A. which seriously impact the
performance of the contract. TWELFTH - ASSIGNMENT OF THE CONTRACT. OCCEL S.A.
may assign this contract only to a party who, in turn, is the assignee of its
contract of concession of the mobile cellular telephone on network "A" for the
Western region of Columbia and the conditions set forth herein shall remain in
force with the new contracting party, except for the amendments agreed upon.
THIRTEENTH CLAUSE - ANNULMENT OF THE CONTRACT. When any of the events
specified in the eleventh clause of this contract takes place, the parties
shall proceed with its annulment, by means of the reconcilement, determination
and payment of the balances in favor of each of the parties and the removal of
the equipment which each party has in the installations of the other. The
aforementioned shall be recorded in an annulment and equipment removal
agreement which must be signed by the parties, within a term not to exceed
three months from the occurrence of the event which gave rise to the
termination of the contract. FOURTEENTH CLAUSE - SOLUTION OF CONTROVERSIES:
Any dispute which may arise between the parties as to the execution,
termination or annulment of this agreement and its extensions, which can
neither be resolved directly between the parties nor falls within the
jurisdiction of the Telecommunications Regulatory Commission shall be subject
to the decision of a Court of Arbitration. The Court shall be composed of 3
members and its decision shall be according to the law. The method of
appointment and its operation shall be subject to the legal provisions in
force. The Court shall operate in the City of Medellin. FIFTEENTH CLAUSE -
FORMALIZATION. This agreement shall be formalized with the signature of the
parties. SIXTEENTH CLAUSE - PUBLICATION. This agreement must be published in
the Municipal Newspaper at the expense of OCCEL S.A. and this requirement shall
be understood to be fulfilled by the payment of the corresponding fees.
SEVENTEENTH CLAUSE - LEGAL EXPENSES. The expenses for the legalization of the
contract shall be assumed by OCCEL S.A. In view of the fact that LAS EMPRESAS
is a public establishment of municipal nature, it is exempt from the payment of
the stamp tax; in accordance with articles 532 and 533 of the Tax Law, OCCEL
S.A. is responsible for the payment of the amount indicated for contracts of
indeterminate value. EIGHTEENTH CLAUSE - DISABILITIES AND INCOMPATIBILITIES.
In this agreement, there is no application of the disabilities and
incompatibilities established in Law 80 of 1993, in view of the fact that in
accordance with article tenth thereof, these do not apply when a contract is
made according to legal obligation, as in the present case. In testimony
whereof, this agreement is signed in the city of Medellin,
<PAGE> 8
by LAS EMPRESAS on August 8, 1994 and by OCCEL S.A. on August 5, 1994.
LAS EMPRESAS, DIEGO URIBE URIBE
GENERAL MANAGER
(signature)
OCCEL S.A., GILBERTO IGNACIO ECHEVERRI MEJIA
PRESIDENT
(signature)
<PAGE> 9
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 10.05
INTERCONNECTION AGREEMENT BETWEEN SOCIEDAD OCCIDENTE Y
CARIBE - CELULAR S.A. AND EMPRESAS MUNICIPALES DE CALI -
EMCALI
Between the undersigned, GILBERTO ECHEVERRI MEJIA, resident of Medellin, with
citizens card number 3.302.711 of Medellin, who is acting as the President and
Legal Representative of OCCIDENTE Y CARIBE CELULAR, S.A. - OCCEL S.A. - a mixed
economy society with private capital in the majority, domiciled in Pereira,
that for the effects of this agreement will be referred to as OCCEL, on one
part, and on the other part ADOLFO LEON GALLON LOZANO, resident of Cali,
identified with citizens card number 16.344.987 of Tulua (Valle), who is acting
as the General Manager and Legal Representative of EMPRESAS MUNICIPALES DE
CALI, Public Entity of Municipal order, who hereinafter will be referred to as
EMCALI, this interconnection agreement is concluded and shall be governed
pursuant to the clauses within this document, subject to the following
considerations and definitions:
CONSIDERATIONS:
FIRST. OCCEL is the awardee of the concession which has as its object the
rendering of a Cellular Mobile Telephone Service on the "A" network in the
Western region of Colombia pursuant to agreement 000005 concluded with the
Ministry of Communications on March 28, 1994.
SECOND. The Law 37 of 1993 and the Decree 741 of the same year authorized the
access right of the Cellular Mobile Telephone operators (CTN) to the public
switched telephone networks (PSTN) already established in the country, for the
interconnection of the elements of their networks and to manage traffic, and
also stipulating the obligation of the public switched telephone network
operators to guarantee the access to their Mobile Switched Centers (MSC),
providing the facilities for the location of interconnection equipment within
equipment rooms of these centrals and, at the same time, the facilities of AC
power supply, preventive and corrective maintenance, and also the other
facilities that are technically and administratively required, all at the
expense of the Cellular Mobile Network Operator.
THIRD. Interconnection will be subject to the equal access principle -
pursuant to article 66 Decree 741 of 1993 by virtue whereof the MSC operators
are obliged to provide interconnection under equal technical and economic
conditions to every CTN operator.
FOURTH. By means of Resolution 002 of 1993, the Telecommunications Regulatory
Commission, exercising the powers conferred upon it by Decree 2122 of 1992,
established that for a one (1) year term from October thirteenth (13th) of
1993, the fee for the interconnection between the PSTN subscriber terminal and
the local switching center will be TWENTY-FOUR ($24) Colombian pesos per
minute, for both outgoing calls and incoming calls to the PSTN. This tariff
was established based on the variables of cost per line, percentage of line
usage, operation costs, maintenance and
<PAGE> 2
management per line per year, line traffic per year, the useful life of the
equipment and network, the replacement thereof and the rate of discount or
reasonable profit to the PSTN operator. Furthermore, by means of Resolution
004 of 1993 issued by the Telecommunications Regulatory Commission, the
principle was established whereby the party calling to or from the cellular
network must assume the costs thereof. The Interconnection Fee stipulated
herein shall be adjusted once the EMCALI Board of Directors determines the
amount of adjustment. The Board of Directors has the power to determine the
rate to be applied, which shall not exceed the maximum value pursuant to
Resolution No. 020 of February 20, 1995, Articles 2 and 3, issued by the
Telecommunications Regulatory Commission and subsequent regulations which amend
or supersede it.
FIFTH. According to regulations governing the interconnection between public
switching telephone networks and cellular networks, EMCALI and OCCEL have
decided to establish their mutual rights and obligations by means of this
instrument.
DEFINITIONS:
For the effects of this agreement, the following terms will have the same
meaning stipulated as follows for every one of them, unless in the text of this
document a different scope were expressly assigned.
AGREEMENT: Means the present interconnection agreement, in the interpretation
whereof there shall be taken into account all incorporated appendices and
legislation in force with regard to the subject. Likewise, all amendments
agreed to between the parties during the term this agreement are an integral
part thereof.
OCCEL S.A.: Means OCCIDENTE Y CARIBE CELULAR S.A., concessionaire corporation
of a Cellular Mobile Telephone Service for the Western area on the "A" Network.
EMCALI: Means Empress Municipales de Cali (Cali Municipal Entity)
CTN: Means Cellular Telephone Network.
PSTN: Means Public Switched Telephone Network.
MSC: Means Mobile Switching Center of Cellular Mobile Telephone Network.
INTERCONNECTION TRANSMISSION MEANS: These consist of insulated pairs, coaxial
and fiber optic cables and their respective regenerators or repeaters and radio
systems repeaters or satellite link repeaters, used to connect the OCCEL MSC
and the EMCALI telephone centrals directly interconnected to them.
INTERCONNECTION TRANSMISSION SYSTEMS: These consist of terminal equipment
connected to the OCCEL MSC with the EMCALI Telephone centrals directly
interconnected to them.
<PAGE> 3
This terminal equipment can be analog, digital and optic transmitters and/or
receivers of any of the above-mentioned means of transmission, including radio
systems or satellite links.
OCCEL SUBSCRIBER : An individual or legal entity with an agreement in force
with OCCEL for the rendering of a Cellular Mobile Telephone Service.
EMCALI SUBSCRIBER : An individual or legal entity with an agreement in force
with EMCALI for the rendering of a fixed basic telephone service or any of the
value added services.
EMCALI USER : Means the subscriber or person who, without being the subscriber,
benefits from the service making use of the fixed line telephone service
assigned by EMCALI to the subscriber.
OCCEL USER : Means the subscriber or person who, without being the subscriber,
uses and takes advantage of the OCCEL Cellular Mobile Telephone Service.
CONSUMER : Means any user of a public telecommunications service, using either
a private or public handset connected and attended by the PSTN operator, or the
terminal equipment activated and attended by a CTN operator.
TERMINAL EQUIPMENT : Means the portable, transportable, mobile, fixed or
another type of handset that OCCEL has permitted its subscriber or user to use
in order to access the cellular mobile telephone service, fulfilling the terms
and conditions stipulated by the rules governing this service.
FIRST CLAUSE - OBJECT OF THE AGREEMENT : The object of this agreement is to
establish the technical, operative, administrative, economic, financial and
legal rights and obligations which shall regulate the interconnection of the
EMCALI public switched telephone network to the OCCEL Cellular Mobile
Telephone Network.
SECOND CLAUSE - EMCALI OBLIGATIONS : EMCALI engages to fulfill the following
technical, administrative, economic and financial obligations:
A. TECHNICAL:
1. To guarantee the interconnection of its equipment with the OCCEL
cellular mobile telephone network equipment, both for outgoing and
incoming traffic, in accordance with the provisions of Law 37 of 1993
and Decree 741 of 1993, observing in particular the principle of equal
access and equal charge. In order to forecast the requirements of
equipment necessary to guarantee this interconnection in a timely
manner, the provisions of numbers A.5 and A.6 of the fourth clause, and
the provisions of the eighth clause herein shall be taken into account.
<PAGE> 4
2. To acquire, install, maintain, operate, preserve and replace the
equipment and elements required in its network for the interconnection
of its telephone system with the OCCEL CTN in order to guarantee that
incoming and outgoing traffic can be transmitted according to the
development plans of both companies, and in the quantity which
guarantees that in the circuits interconnecting the EMCALI PSTN centrals
with the OCCEL MSC in Cali, call drops with automatic access will not
exceed one (1%) percent in peak hours, thereby fulfilling with this the
stipulations of the Schedule of Conditions of Bidding No. 046 of 1993.
3. To permit all of the EMCALI subscribers having national automatic long
distance access service (DDN) and whose "A" subscriber number can be
automatically identified and transmitted, to have access to the OCCEL
cellular mobile telephone service, to the customer service provided by
OCCEL, and also to the new services rendered to third parties through
the OCCEL CTN, in accordance with the provisions of the Law.
4. To perform maintenance, both preventive and corrective, of the systems
and transmission media belonging to EMCALI and used by OCCEL. The
tariff agreed to by the parties for the leasing of these systems and
media includes the respective maintenance cost.
5. To perform maintenance which guarantees, in incoming and outgoing
traffic, a ratio of unsuccessful calls (with a technical failure)
attributable to EMCALI in relation to the total of calls offered in low
traffic, which does not exceed, on the average, three (3%) percent. The
executives responsible for the management of this agreement will review
this indicator for the purpose of reducing it by mutual agreement.
6. To perform pursuant to APPENDIX NO. 1, measurements of traffic, grade of
service, and in general, all tests which permit the establishment of the
communications quality level between the two networks, and at the same
time to identify the need to make adjustments in the interconnection
enhancement program or its configuration. To test quality of service
between the two networks and to perform maintenance programs, EMCALI
will provide to OCCEL two telephone lines with access to its CTN,
without long distance access and free of charge. The location, the
types of traffic accessible and usage time of these numbers will be
agreed upon by the executives designated by parties for the
administration of this agreement. When considered necessary, the tests
shall be performed jointly following a previously agreed upon program.
7. To submit to OCCEL all the required information to guarantee that
interconnection between the two networks fulfills the fundamental basic
plans established by the Ministry of Communications.
<PAGE> 5
8. To verify monthly, or upon the written request of OCCEL submitted with due
advance notice, the correct operation of its outgoing and incoming links,
immediately notifying OCCEL of any damage. EMCALI, through its network
operation and maintenance centers, will maintain permanent supervision of
the interconnection with OCCEL and will execute the required actions to
repair the failures imputable to EMCALI as soon as possible, notifying
OCCEL of their occurrence and actions taken in order to repair them.
9. To adopt all measures in order to prevent fraud and generation of
inconsistencies. By virtue of this obligation, EMCALI shall adopt the
necessary measures order to prevent the access to OCCEL's CTN telephones
without charge, not assigned, interrupted, retired and non intelligent
public phones. Access shall be permitted only to public and semi-public
telephones and which have the ability to charge for this type of calls,
which must be connected to centrals with the ability to identify to "A"
subscriber number.
10. EMCALI must submit to OCCEL the identification number of the "A" subscriber
who originates the call at the centrals of its PSTN when it is technically
possible. EMCALI subscribers connected to centrals where the
identification and automatic transmission of the "A" subscriber number is
not possible are not allowed to access the OCCEL CTN.
11. To repair, within the terms and conditions established in APPENDIX NO. 1,
the failures reported by OCCEL.
12. Not to differentiate the OCCEL traffic for its own benefit or that of any
other operator.
13. To guarantee not to cause any damage tot he physical and technical
infrastructure of OCCEL and also to respect the conditions stipulated by
the Internal Work Rules, EMCALI being obligated to assume the costs of
repair of the damage caused, provided that such damage is imputable to
EMCALI or its contractors.
14. To permit access at any time EMCALI facilities to the persons authorized by
OCCEL in order to perform preventive and corrective maintenance of the
equipment for which it is responsible. OCCEL shall provide, with
sufficient advance notice, a list of these persons, who must fulfill the
conditions established in the EMCALI Internal Work Rules. In the event
that access for the persons designated by OCCEL were not possible, due to
the absence of an EMCALI executive who authorizes it, EMCALI engages to
permit the access within the two (2) hours following the receipt of the
respective written request.
B. ADMINISTRATIVE, ECONOMIC AND FINANCIAL:
II. IN RELATION TO BILLING
<PAGE> 6
1. EMCALI shall include in the bill for services to its subscribers or
users the charges for calls which the consumers of its network originate to
the OCCEL network, including access charges to the EMCALI PSTN and charges
for usage of the OCCEL CTN. EMCALI shall bill based on the call report
and on the statement it will receive from OCCEL on magnetic tape or any
other media agreed upon by the parties.
EMCALI may verify the statement of charges for access charges to its PSTN
submitted by OCCEL against the statement for control and verification
purposes which EMCALI makes, based on calls recorded in their digital
centrals. In the event that the difference between the statements made by
OCCEL and EMCALI as to the total value of the aforementioned access charges
does not exceed the percentage which the executives designated by the
parties for the administration of this contract have agreed to establish as
the maximum tolerance, the bill shall be based on the information submitted
by OCCEL.
In the event that the aforementioned difference exceeds the maximum
tolerance established, and there is no technical justification, the access
charges shall be billed according to the higher records, whether the
information corresponds to OCCEL or EMCALI. If there is a technical
justification, the billing shall be according to the information which is
without errors, or by means of the combination of the OCCEL and EMCALI
information.
The parties shall agree monthly upon the dates and times for cutting the
billing period. EMCALI may include in the same bill the charges for other
items and even charges from the other cellular network operators. The bill
will contain the information pursuant to Appendix No. 2 of this agreement.
The incremental costs due to inclusion on bills issued by EMCALI of the
global amount and the list of calls made by its subscribers from its PSTN
to the OCCEL CTN, will be chargeable to OCCEL and will be paid pursuant to
Appendix No. 2.
2. To rebill the accounts including extra charge to the subscribers or
users who have not paid the total amount of the OCCEL Cellular Mobile
Telephone Service within the time limits stipulated to pay the bill.
3. To maintain the records that could not be billed in each period (recycle)
and are susceptible to be billed again in the next period, and submit a
report of these amounts to OCCEL. This point is applicable only in the
cases in which subscribers are in the process of incorporation into the
EMCALI subscriber files. At maximum one recycle will be permitted; after
this recycle the records will be permitted; after this recycle the records
that had not been incorporated will be considered as inconsistencies with
their respective justifications.
<PAGE> 7
4. Unless it has express and written authorization from OCCEL, EMCALI
may in no case bill any charge or amount derived from the rendering of
Cellular Mobile Telephone Service by OCCEL.
5. To bill its subscribers or users for penalties or interest on
late payment at the maximum rate legally accepted, pertaining to amounts
that have not been collected within time limits stipulated on the bill,
for calls transmitted to the OCCEL CTN. These penalties or interest will
be billed monthly for each month or fraction of delay and the money
collected for this concept shall be applied proportionately to the amount
of the balance corresponding to each party. This penalty shall not apply
in the event of an inevitable accident or force majeure.
6. To submit to OCCEL though magnetic media or another procedure
mutually agreed upon, the billing inconsistencies for calls from the PSTN
to the CTN, with their justifications, and additionally those records
which will be entered on the definitive list of accounts receivable,
within fifteen (15) days following the end of every EMCALI billing period.
7. To guarantee the integrity and quality of the billing of the calls
originated on the EMCALI PSTN to the OCCEL CTN and to be responsible for
errors generated in the billing process in relation to the customers and
authorities when such errors are imputable to EMCALI.
II. IN RELATION TO COLLECTION OF CALLS ORIGINATED ON THE EMCALI PSTN
1. EMCALI shall collect amounts due for calls originated by its
subscribers to the OCCEL CTN, in accordance with the provisions of
Resolution 004 of 1993 issued by the Telecommunication Regulatory
Commission, transferring to OCCEL the respective portion of amounts
collected for the usage of its CTN and retaining for itself the amount of
the access charges for the use of the EMCALI PSTN.
In the event that the authority of jurisdiction determines that the amount
billed for the above-mentioned access charges must be paid by OCCEL,
EMCALI shall deduct the amount billed for these charges from the amount to
be transferred to OCCEL as a payment for use of the CTN. When there is no
directive from the authority of jurisdiction, EMCALI shall collect these
charges directly from its users.
2. EMCALI shall not accept partial payments for services, that is, it
shall require payment in full from its subscribers for the services
included in the bill, and in the case of non payment, it will apply
sanctions in accordance with the Law regulations established for this
purpose.
<PAGE> 8
3. EMCALI may grant payment facilities to its subscribers
or users when they so request and provided that they
fulfill the internal rules established. These
facilities shall only be applicable to amounts owed for
calls to the OCCEL CTN subject to conditions agreed
upon by the executives responsible for the management
of this agreement. The interest shall be distributed
between OCCEL and EMCALI in proportion to their
respective balances.
Credits or discount notes issued by EMCALI in order to
grant the payment facilities specified herein, or to
resolve claims which require such credit notes, shall
not constitute a breach of the preceding provision
when such notes have been submitted to OCCEL and are
duly approved by the latter.
4. EMCALI shall transfer to OCCEL, on the final maturity
date of each payment period without extra charge
established for EMCALI subscribers, 60% of the amount
in the same period for sums which correspond to OCCEL
for usage of its CTN by EMCALI subscribers. The
aforementioned percentage may be amended by agreement
between the executives responsible for the management
of this agreement, taking into account historical
behavior of average rate of billing charges for this
concept. On the aforementioned date, EMCALI shall pay,
in addition, 100% of the amount due to OCCEL for the
use of its CTN by the EMCALI public and semi-public
telephones.
From the preceding amounts EMCALI shall deduct all
amounts owed to it by OCCEL for access charges or any
other amount that has been agreed herein, and that was
incurred in the billing period for which these
transfers are been made.
Within the five (5) business days following the
aforementioned date, that is, the final maturity date,
the executives designated by parties shall reconcile
the accounts in order to establish the difference
between the amount transferred to OCCEL by EMCALI and
that effectively collected for all concepts which
correspond to OCCEL. The payment of the amounts
resulting must be made within the five (5) business
days following the respective reconciliation date.
5. EMCALI shall pay interest to OCCEL on late payment at a
rate equivalent to the maximum allowed by Commercial
Law for similar transactions, monthly or proportional
to the days elapsed from the demandability of the debt
to the verification date, due to the delay in the
payment of the amounts collected for the use of the
OCCEL CTN. Excluded from this sanction are the delays
due to force majeure or inevitable accident.
6. To maintain and continuously update the records of the
active list of accounts receivable and also to issue
bills in order to collect them, in accordance with the
provisions of Resolution No. 113 of 1990 issued by the
<PAGE> 9
Ministry of Communications. The management of recoveries on debtors in
default shall be effected in accordance with the provisions of APPENDIX
NO. 2.
7. Within the ten (10) calendar says subsequent to the date set as the
limit for payment term without any extra charge established for its
subscribers, EMCALI shall submit to OCCEL through magnetic media or
another procedure mutually agreed upon and according to the design
agreed upon, the information as to amounts not collected, detailed in
the same form as they were submitted by OCCEL for billing.
8. EMCALI shall submit to OCCEL, monthly, a list of subscribers whose debts
have been considered as late payments. EMCALI shall suspend access to
the mobile telephone network of OCCEL to the subscribers requested by
OCCEL by written notice, provided that it is technically possible and
will not affect access to other networks, unless there is express
written authorization from the operators which could be affected.
9. To submit to OCCEL all documents that it requires and are necessary in
order that OCCEL may, under its own responsibility, proceed with legal
collection of late payments, provided that the supply of these documents
is within the scope of EMCALI.
III. IN RELATION TO SUBSCRIBER CLAIMS:
Claims from EMCALI subscribers related to calls to the OCCEL mobile
telephone network shall be handled pursuant to APPENDIX NO. 2.
IV. IN RELATION TO PUBLICATION IN THE TELEPHONE DIRECTORY:
1. To allow OCCEL to publish the list of its subscribers in the Cali
Telephone Directory, OCCEL bearing the cost set for this purpose in
accordance with the contractual regulations and tariffs agreed upon
between EMCALI and the company which publishes the Cali Telephone
Directory, without giving rise to any participation for OCCEL. Such
list will only include the OCCEL subscribers who wish to be included in
the Directory.
THIRD CLAUSE - OBLIGATIONS OF OCCEL: OCCEL engages to fulfill the following
technical, administrative, economic and financial obligations.
A. TECHNICAL:
1. To permit the EMCALI subscribers, having access category to automatic
national long distance service (DDN) and whose subscriber "A" number can
be automatically identified and transmitted, to access the OCCEL
Cellular Mobile Telephone Service.
2. To acquire, install, interconnect, operate, maintain and replace the
required devices and equipment for
<PAGE> 10
interconnection of the OCCEL CTN with the EMCALI PSTN, including those
which permit the assessing of charges for outgoing and incoming calls, with
specifications according to the development plans from both companies, and
in the amount which guarantees a loss no greater than one percent (1%)
during peak hours. This obligation will be understood as fulfilled when by
agreement between the parties, such devices and equipment are provided by
EMCALI by lease.
3. To perform both preventive and corrective maintenance of systems and
transmission media owned by OCCEL which participate in the interconnection.
4. To perform tests agreed upon by the parties in order to verify the adequate
quality of service, in accordance with the provisions of APPENDIX NO. 1.
In order to verify service quality and perform scheduled maintenance on the
interconnection between the two networks, OCCEL will provided to EMCALI two
cellular telephones without long distance access. These telephones will
not have any charge for EMCALI. Location, types of accessible traffic and
usage time of these numbers will be agreed upon by the executives
designated by parties for the management of this agreement.
In order to control the interconnection between the two networks, OCCEL and
EMCALI, within two (2) months after concluding this agreement, will make
an emergency plan and a schedule for preventive maintenance, grade and
quality of service measurements and evaluation of performance of
maintenance.
5. To adopt all required measures in order to avoid fraud on the EMCALI PSTN.
In any case, OCCEL must be responsible for access charges generated from
its CTN to the EMCALI PSTN.
6. In the event OCCEL decides to install alternative transmission media to
those installed by EMCALI, OCCEL shall be responsible for the respective
maintenance.
7. To maintain the Ministry of Communications authorizations in force for the
OCCEL radio link systems which are part of the interconnection and to pay
the usage rights for the electromagnetic spectrum frequencies which these
require.
8. To perform maintenance which guarantees, in incoming and outgoing traffic,
a ratio of unsuccessful calls (with technical failure) attributable to
OCCEL in relation to the total of calls generated in low traffic, which
shall not exceed, on the average, three (3%) percent.
9. To immediately repair failures reported by EMCALI in incoming and outgoing
links.
<PAGE> 11
10. To guarantee that it will not cause damage to the physical and
technical infrastructure of EMCALI, and also will respect the conditions
established in its Internal Work Rules. OCCEL shall be responsible for
payment for all repair of damages caused, provided that such damage is
imputable to OCCEL or its contractors.
B. ADMINISTRATIVE AND FINANCIAL
I. IN RELATION TO BILLING
1. To supply to EMCALI, in accordance with the provisions of number
II.A.1 of the second clause, all of the information necessary in order
that EMCALI may bill the calls made by the EMCALI PSTN users to the OCCEL
CTN. This information will be provided on a monthly basis within the
eight (8) calendar days following the date agreed to by the parties as the
billing close date.
If OCCEL, due to facts imputable to it, does not effect timely submission
of the information necessary in order to bill the PSTN subscribers, EMCALI
will prepare the bill, without including that which pertains to the
information that is not supplied by OCCEL in a timely manner. The
information that has not been processed will be included in the next
billing period. In this case, OCCEL shall pay to EMCALI, for the month or
fraction thereof, interest on late payment at a rate equivalent to the
maximum allowed by law for similar commercial transactions, on the amount
of access charges that have not been collected by EMCALI. Excluded from
this sanction is non-fulfillment due to force majeure or inevitable
accident.
2. OCCEL shall provide to EMCALI, if it so requires, the information
necessary in order to verify the payment of charges for access to its
PSTN.
3. To guarantee integrity and quality of records submitted to EMCALI
for billing and to be liable in relation to the customers and authorities
for the errors generated in processes where this information is used, when
such errors are imputable to OCCEL.
4. To credit and pay to EMCALI the amount corresponding to the
increase in its billing processing costs, stationery, printing and
collection arising from the billing of the calls originated by its
subscribers to the OCCEL CTN, in accordance with the provisions of
APPENDIX NO. 2.
I.1 IN RELATION TO INTERCONNECTION TARIFFS AND OTHER INCOME GENERATED IN FAVOR
OF EMCALI:
1. To credit and pay to EMCALI on a monthly basis access charges
incurred for calls originated from the OCCEL CTN to the EMCALI PSTN,
pursuant to the terms of Law 37 of 1993, Decree 741 of 1993 and
Resolutions Nos. 002 and 004 from the Telecommunications Regulatory
Commission. Such access charges shall be calculated
<PAGE> 12
based on EMCALI and OCCEL records and applying to them a procedure
similar to number B.I.1 of the second clause of this agreement. The
payment of such charges shall be effected through the deduction that
EMCALI shall make from the amount owed to OCCEL for the use of its CTN
during the same period in which access charges indicated herein were
incurred.
2. To effect payment to EMCALI of interest on late payment at a rate
equivalent to the maximum allowed by commercial law for similar
operations, monthly or proportionately to the days which have elapsed
from the due date of payment to the date on which this payment is
verified, for the delay in the payment of amounts in favor of EMCALI and
which EMCALI has not been able to deduct from the amount owed to OCCEL
for payments for the use of its CTN. Excluded from this sanction are the
delays caused by force majeure or inevitable accident.
3. To credit and pay to EMCALI the respective costs of the use of the
transmission media and systems for the interconnection provided by
EMCALI by lease. The rent shall include the respective equipment
maintenance. The amounts established by EMCALI for these rents shall be
those stipulated in Appendix No. 3, which shall be signed by the parties
within a term of no more than thirty (30) days from the date of the
concluding of this agreement.
4. To credit and pay to EMCALI the costs for usage of assigned physical
space, usage and supervision of buildings, towers and air conditioning
and power supply systems for the OCCEL equipment located within the
EMCALI facilities. The amounts established by EMCALI for these rents
will be as stipulated in Appendix No. 3.
III. IN RELATION TO HANDLING OF CLAIMS
EMCALI shall handle claims relating to the billing of calls originated from the
EMCALI PSTN to the cellular network. In the event that it is so required,
OCCEL and EMCALI shall conduct the pertinent investigations, each assisting the
other with necessary operative and technical support and sharing all required
information. OCCEL may have a customer service point, where EMCALI subscribers
can go to submit their claims.
FOURTH CLAUSE - RECIPROCAL OBLIGATIONS OF PARTIES:
A. IN RELATION TO THE ADMINISTRATION OF THE AGREEMENT:
In order to efficiently manage all matters relating to this agreement, each
party shall designate a maximum of two executives, who shall be responsible for
discussion, consultation, communication and resolution of the matters which
require their intervention and fall within their jurisdiction. Each party shall
designate one of these executives to be responsible for the coordination and
<PAGE> 13
channeling of communications related to this agreement. These executives will
meet as required, at the request of any one of them.
Their functions are as follows:
1. To maintain orderly and accurate documentation related to this
agreement, recording, in chronological order, the correspondence,
consultations, decisions, solutions and in general every event to be
considered as relevant for the history of this agreement.
2. To establish and/or review the procedures relating to billing,
collection, payment facilities, account reconciliation, analysis of
inconsistencies, information to the subscribers, claims, fraud control
and repairs of damage or failures which arise in the interconnection.
3. To review and approve monthly billing reconciliation, collections and
offsetting of accounts for access charges and lease of infrastructure
and transmission media, establishing the amount each party owes to the
other. In the development of such reconciliation all amounts pending
explanation for any of the subjects mentioned above will be followed up.
4. To agree as to solutions concerning the differences of opinion which may
arise between the parties with regard to the interpretation, development
and execution of any of the stipulations within this agreement.
5. According to measurements performed, to make all required decisions to
guarantee the fulfillment of the grade of service, in accordance with
the stipulations of the second and third clauses of this contract.
6. To review the interconnection configuration and capacity.
7. To determine the source of fraud and inconsistencies, establish their
solution mechanisms and establish responsibility for their occurrence.
8. To determine the source of damages caused to equipment and devices owned
by each party, to assess their value and determine the responsibility
for their occurrence.
9. To define the EMCALI PSTN subscribers who shall be allowed to access the
OCCEL CTN.
10. The rest derived from the execution of this agreement.
The decisions agreed upon by these executives shall be of mandatory fulfillment
by the parties and must be recorded in instruments signed by the parties.
In the event of disagreement between these persons as to a particular subject,
any of them may request that the subject
<PAGE> 14
be discussed and decided by the legal representatives of EMCALI and OCCEL.
B. IN RELATION TO DAMAGES AND THEIR REPAIR
1. To immediately issue notification as to damages detected in the
interconnection which require the intervention of any of the parties. The
respective party must repair the damage within two (2) hours following
receipt of the notice and take all required measures to repair it as soon
as possible. Unjustified delays which cause damage will result in repair
entirely in favor of the affected party.
2. To have qualified staff available at any time to repair system failures
pursuant to the terms and time limits herein.
C. IN RELATION TO INTERCONNECTION DIMENSIONS:
The parties engage to ensure that the installed capacity of the interconnection
equipment matches the dimensions calculated on the basis of demand and traffic
projections, and are in conformity with the to grade of service goals
stipulated in number A.2 of the second and third clauses. In the event that
one of the parties has any difficulty in the expansion of the required
capacity, it may sign agreements with the other party in order to obtain the
supply of the equipment of systems required.
D. IN RELATION TO LOCATION OF THE OCCEL EQUIPMENT:
According to availability, EMCALI shall provide OCCEL with all facilities for
the location of its interconnection equipment and that pertaining to its CTN,
providing physical spaces, power supply, air conditioning and guard. In the
same way EMCALI shall facilitate the installation of the OCCEL equipment. The
cost of these facilities shall be assumed by OCCEL and the amount will be
stipulated in APPENDIX No. 3.
E. IN RELATION TO INTERCONNECTION CONDITIONS:
Interconnection technical conditions such as grade of service, tariffs,
routing, numbering, signalling and operation shall be regulated in accordance
with the stipulations of the Ministry of Communications and specifically
pursuant to APPENDIX No. 1 to this contract.
FIFTH CLAUSE - LIABILITY OF THE PARTIES
1. Neither party shall be liable for the non-fulfillment of any contractual
obligation caused by force majeure or inevitable accidental duly verified.
If both parties consider such circumstances as obstructing the execution of
the agreement for a term exceeding six (6) months, either party may
terminate the agreement by written notice to the other party.
<PAGE> 15
2. Each party must guarantee the integrity and accuracy of all
information submitted to the other party, and is
obliged to be liable to the other party, customers and
authorities for errors generated in processes where
such information is used, as long as such errors are
imputable thereto.
3. Liability for frauds and inconsistencies: Each party
must pay to the other party the respective amounts of
frauds and inconsistencies which may be imputable to
it. APPENDIX NO. 2 specifies the manner in which
liability for these payments shall be determined.
Amounts due for fraud and inconsistencies shall be
included within the monthly reconciliations.
4. Liability to the subscriber: In all of their
relationships with the public, both EMCALI and OCCEL
shall act governed by the principles of honesty,
integrity, loyalty and service and shall not act in any
manner which discredits, affects or damages the
reputation of the other party in any way. Both parties
shall act in good faith, honestly and diligently, using
their best efforts in order to guarantee subscriber
satisfaction and the rendering of the services offered.
5. Social responsibility: In the interconnection and the
execution of the agreement, the parties shall take into
consideration the fact that their goal is the providing
of telecommunication public services in the charge of
the State, in a continuous and efficient manner.
SIXTH CLAUSE - INTERCONNECTION LIMIT:
In order to limit the liability of the parties, the
interconnection limit shall be general digital distributors
or optical distributors of EMCALI centrals directly
connected with the OCCEL CTN, and in consequence, every
company must assume the costs within its own network.
SEVENTH CLAUSE - SUBMISSION TO REGULATION; The
interconnection between the two networks is based upon the
plans, regulations, definitions and standards of the
Ministry of Communications, and in the absence thereof, upon
the plans, definitions and standards of the International
Telecommunications Union (ITU) and other international
bodies of jurisdiction, in which Colombia forms a part by
virtue of international agreements and covenants.
PARAGRAPH. In the cases where applicable regulations or
standards do not exist, the interconnection will be based
upon an agreement by the parties.
EIGHTH CLAUSE - INTERCONNECTION DIMENSIONS:
The quality of the circuits required for different links or
routes between two networks, both for incoming and outgoing
traffic, as well as the quantities for future expansion,
shall be calculated by OCCEL, reviewed by EMCALI and shall
be established according to instruments signed by the
parties. This dimensioning will be reviewed at least every
six months to adjust it to traffic conditions. The dates of
entry into service of links for future extensions shall be
<PAGE> 16
mutually agreed upon, taking into account that the grade of service and
development plans of each company may not be affected by the delay by one party
in the execution of such extensions.
NINTH CLAUSE - RELIABILITY AND AVAILABILITY: Both parties should maintain the
interconnection minimum levels of reliability in order to guarantee service
continuity. The reliability shall be measured in terms of the time in which
the interconnection is normally operating. The minimum reliability for the
subscriber to interconnection equipment is 99.9% measured over a monthly
period, which means that the total of system dropped times which affect the
whole interconnection should not be higher than 4.4 minutes/month. The
interconnection will have alternate routes as agreed upon the parties.
TENTH CLAUSE - AUDITING: Each party may directly or through a third duly
authorized party undertake the necessary review to establish account accuracy
and the faithful compliance with the procedures agreed upon by virtue of this
agreement. The cost incurred for this shall be paid by the party who is
reviewing. The party whose accounts and procedures shall be reviewed must
provide all required facilities.
ELEVENTH CLAUSE - EXEMPTION FROM LIABILITY IN THE EVENT OF INTERRUPTION:
Neither party shall be liable in relation to the other party for damages
causing the interruption or failure of its telephone systems or interconnection
with the OCCEL CTN, nor shall either party be permitted to provide to their
customers the facilities to take action against the other party under these
circumstances.
TWELFTH CLAUSE - CONFIDENTIALITY OF INFORMATION: All of the correspondence and
information exchanged between the parties for the fulfillment of this
agreement, concerning subscriber data, billing, collection, growth forecast,
and also that information marked as confidential or proprietary information
must be treated and received by the recipient as confidential and secret. The
verbal information that is provided as confidential, must be confirmed as such
in writing within eight (8) days following the provision thereof. Confidential
information must be restricted to the persons and employees of the recipient
party which requires it in order to fulfill the objectives herein, such persons
must be notified as to the confidential nature of the information provided, and
of the care to be taken with it. The obligations imposed upon the parties
pursuant to this clause shall not apply to the following information:
a. Information which becomes public knowledge through actions of
persons other than the recipient party.
b. When information is required by an authority of jurisdiction; in
such event the disclosure shall be restricted to the fulfillment of the
respective order.
Both parties expressly declare that the transmission of such information,
either verbally or in writing, to third parties that are not duly
authorized to request
<PAGE> 17
and receive it will result in the full indemnity of damage cause by
this disclosure.
THIRTEENTH CLAUSE - DURATION OF AGREEMENT: This agreement has a duration of
five (5) years from the date of its execution, and may be extended by equal
periods, as long as the parties do not issue notification to the contrary in
writing within sixty (60) calendar days prior to its expiration or the
expiration of the extension.
FOURTEENTH CLAUSE - AMENDMENTS TO THE AGREEMENT: During the terms of this
agreement it may be amended, except in those clauses imposed by Law; in order to
do so the interested party should notify the other party in writing. In the
event that an agreement is not reached within the sixty (60) calendar days
following the first communication date, OCCEL, EMCALI or both parties will
request intervention of the Telecommunication Regulatory Commission in the
dispute, and in the meantime, the conditions established herein shall be in
force. The decision of the Commission shall be binding upon both parties.
FIFTEENTH CLAUSE - SOLUTION OF CONTROVERSIES: In the event of differences,
discrepancies or conflicts arising between parties as to the making,
interpretations, execution, termination or dissolution of this agreement, they
shall attempt to solve it in a direct, rapid and amicable manner. If this is
not possible and the Telecommunications Regulatory Commission does not have
jurisdiction to hear the differences, discrepancies or conflicts in question,
the parties jointly or individually shall submit themselves to decision by a
Court of Arbitration.
If the controversy, discrepancy or conflict were eminently technical in nature,
the parties by mutual agreement may submit it to the decision of two experts
in the subject matter which is the object of the difference, who shall be
designated by the ACIEM. The decision of these experts shall be of mandatory
fulfillment by the parties.
The Court of Arbitration shall consist of three arbiters designated by mutual
agreement, who must be licensed, practicing attorneys, with knowledge of
Telecommunications Laws. In the event that no agreement is reached between the
parties, the designation of the arbiters shall be made by the Chamber of
Commerce of Cali. The judgment shall be by law and must take place within six
(6) following the constitution of the Court.
The costs for the petition for the constitution and the operation of the Court
shall be paid by the parties in equal proportion.
SIXTEENTH CLAUSE - DOCUMENTS OF AGREEMENT: The following documents are an
integral part of this agreement and compliance therewith is therefore mandatory.
1. APPENDIX NO. 1: Technical Aspects
2. APPENDIX NO. 2: Financial, economic and administrative aspects
<PAGE> 18
3. APPENDIX NO. 3: Lease costs of systems and transmission media, physical
spaces and infrastructure. This appendix shall be signed by the parties
within thirty (30) days from the concluding of this agreement.
SEVENTEENTH CLAUSE - APPLICABLE LAW: This agreement and all controversies that
might arise must be subject to this agreement, to the Law and to the Colombian
Courts.
EIGHTEENTH CLAUSE - DOMICILE: For pertinent legal effects it is understood
that this agreement shall be concluded in the city of Cali.
NINETEENTH CLAUSE - WAIVER: The obligations of the parties and rights granted
by this agreement to each party shall not be considered as susceptible to
waiver, by virtue of practices or customs in a contrary sense. The tolerance
of one party in accepting the non-fulfillment of any of the obligations assumed
by the other should not be considered as acceptance of the tolerated fact nor
as precedent for its repetition.
TWENTIETH CLAUSE - TITLES: Clause titles herein are only incorporated for the
purpose of facilitation of reference and cannot be used as an isolated element
for interpretation of the agreement.
TWENTY-FIRST CLAUSE - INTEGRITY OF THE AGREEMENT: Both OCCEL and EMCALI have
read this agreement and understood and accepted the terms, conditions and
stipulations herein, which have been agreed to in order to maintain the high
standards of the quality of service and the customer service and to protect the
reputation of both OCCEL and EMCALI brand names. Neither party is obligated by
declarations of their executives, employees or agents which are contrary to the
provisions of this agreement. This agreement contains the integral agreement
between the parties and previous agreements or covenants, both verbal or
written, existing between parties are null and void.
TWENTY-SECOND CLAUSE - WAIVER OF SUMMONS: To collect any amount of money which
parties owe by virtue of this agreement, it shall not be necessary to establish
default or to require its payment, rights which the parties waive.
TWENTY-THIRD CLAUSE - BUDGET IMPUTATION: EMCALI is obliged to provide in its
budget for the income and expenses incurred by the execution of this agreement
during the term of validity of the current budget and during succeeding budget
terms.
TWENTY-FOURTH CLAUSE - STAMP TAX: OCCEL as a non-exempt entity must pay,
pursuant to tax laws, one half of the stamp tax incurred by this agreement, the
tariff constituted in the amount of THREE HUNDRED THOUSAND COLOMBIAN PESOS
($300.000,oo) taking into account that it is of indeterminate amount, such
amount to be considered as an installment of the definitive tax. As soon as
monthly payments are made and it becomes possible to determine the amount, the
stamp tax must be paid. The amount of the
<PAGE> 19
respective stamp tax must be deposited to account No. 019-04276-1 of the Banco
de Occidente CAM branch office.
TWENTY-FIFTH CLAUSE - AGREEMENT REVIEW: The parties acknowledge that this
agreement must be made known to the Ministry of Communications and the
Telecommunications Regulatory Commission. In the event that these entities
require addition to this agreement of information of specifications pursuant to
the twenty-fourth clause of the concession agreement concluded between the
Ministry of Communications and OCCEL, the parties concluding this agreement are
committed to sign a supplementary agreement which incorporates such additions.
In the same manner, the parties declare that they know that EMCALI must offer
the same technical and economic conditions to all cellular mobile telephone
operators who conclude an interconnection agreement with EMCALI, and in
consequence any advantage or privilege granted to one of them and not offered
to the rest, could be subject to sanction for both EMCALI and the favored
cellular mobile telephone operator.
TWENTY-SIXTH CLAUSE - COMMUNICATIONS: Except as otherwise agreed upon, all
communications between parties shall be written and shall be considered as
valid and sufficient if they are sent by certified mail or by fax, verifying by
telephone and sending and receipt thereof, to the following address and
fax numbers:
To EMCALI
EMCALI
Gerencia de Telefonos [Telephones Management]
Avenida 3 norte No. 53 N 11
Cali
Telephone 664 40 04
Fax 664 83 73
To OCCEL
OCCEL S.A.
Direccion de Interconexion [Interconnection Dept.]
Calle 50 No. 55-01
Medellin
Telephone 512 90 90
Fax 513 01 99
In the event that any of the parties changes any of this information, it will
be responsible for reporting the new information to the other party in the
manner previously stipulated herein. Communications performed according to
stipulated herein shall be considered as received upon the first to occur of:
five (5) days following the delivery or when they have been received personally
by the addressee.
TWENTY-SEVENTH CLAUSE - CONCLUDING AND EXECUTION: In order to conclude this
agreement, it requires the signature of the legal representatives of the
contracting parties and its publication in the Municipal Newspaper of Santiago
de Cali. This requirement shall be understood to be fulfilled by the payment
of such expenses which shall be assumed by OCCEL.
<PAGE> 20
In testimony whereof, this agreement is signed in the city
of Cali on the ____ day of nineteen hundred and ninety-five
(1995).
By OCCEL S.A. By EMPRESAS MUNICIPALES DE CALI
GILBERTO ECHEVERRI MEJIA ADOLFO LEON GALLON LOZANO
President General Manager
<PAGE> 21
APPENDIX NO. 1
TECHNICAL ASPECTS
FIRST CLAUSE - OBJECT: The object of this appendix is to supplement and
specify the definitions of terms and procedures relating to the technical
aspects of the interconnection agreement.
SECOND CLAUSE - DEFINITIONS: EMCALI and OCCEL agree to the following
definitions for the terms related as follows;
SWITCHING EQUIPMENT FOR THE INTERCONNECTION: All devices which are part of the
OCCEL MSC or EMCALI switching centers, and are directly connected with
transmission systems for the intercommunication between the two networks.
GRADE OF SERVICE: Ratio by percentage between the quantity of unsuccessful
call attempts due to congestion or failure, and the total of call attempts
recorded in a measurement or a test.
CONGESTION GRADE: Ratio by percentage between the quantity of unsuccessful
call attempts due to congestion and the total of call attempts recorded in a
measurement or a test.
TECHNICAL FAILURES INDEX: Ratio by percentage between the quantity of
unsuccessful call attempts due to switching or transmission equipment failures,
and the total of call attempts recorded in a measurement or a test.
SECOND CLAUSE - CONNECTION POINTS AND ROUTING: The parties agree that at the
beginning the interconnection points between EMCALI and OCCEL networks shall be
the EMCALI combined centrals designated as Centro 5, Guavito 3 and Colon 2, and
the OCCEL MSC located in Cali. However, the executives designated by the
parties to manage this agreement may agree by means of a mutually executed
instrument as to the creation of other connecting points between their two
networks, according to traffic and quality of service requirements.
At the beginning, alternative routes to handle traffic between the EMCALI and
OCCEL networks will not be available. However, the establishment of
alternative routes, through third party networks, may be agreed upon by means
of an instrument signed by mutual agreement of the executives designated by
parties to manage this agreement.
THIRD CLAUSE - SIGNALLING: At the beginning the interconnection shall be
effected utilizing signalling by associated channel. The line signalling system
shall be the Digital R2 pursuant to CCITT recommendations Q.421, Q.422 and
Q.424. The record signalling system will by MFC type LME.
Upon mutual agreement of the parties, or when the Ministry of Communications so
stipulates as mandatory, the signalling scheme by common channel No. 7 of CCITT
on the national standard version of Colombia in force on the date of
establishment will be adopted.
<PAGE> 22
FOURTH CLAUSE - TEST AND TRAFFIC MEASUREMENT PLAN : In order to evaluate the
quality of service, and calculate the grade of service, the parties agree to
make test calls from the OCCEL MSC and EMCALI switching centrals. These calls
shall be made on a periodic basis and also in events which demand the
performance of special tests. The quantity of test calls, their centrals and
origin and destination numbers, days and hours, and the way they are recorded,
shall be agreed upon by the executives designated by the parties to manage this
agreement.
At least once a month, traffic, quality and grade of service measurements of
real traffic on interconnection routes which interconnect the two networks will
be performed. The quality of service indicators, quantity of measurement days,
hours and type of telephonic devices - trunking circuits, signalling devices,
software records, etc. - upon which the measurements are to be made shall be
agreed upon by the executives designated by the parties to manage this
agreement. These executives may also agree upon the conducting of activities
of tracking of failures detected in the interconnection. For the diagnosis of
quality of service and tariff problems there will also be joint analysis of
calls of no longer than six seconds in duration, calls longer than one hour,
calls with identification of caller number failure, channels with high index of
failure or loss produced, and series with a high index of unsuccessful calls.
EMCALI shall provide to OCCEL S.A. two telephone lines to be used as test
numbers, without any connection fee charge and basic charge.
In the same manner, OCCEL S.A. shall provide to EMCALI two cellular telephones
to be used as test numbers, with their respective terminals, without any
connection fee charge and basic charge.
These telephones may have long distance access and charges for any concept
shall be assumed by the generating party.
The calls between test numbers will be free of charge for usage of EMCALI and
OCCEL networks.
In testimony whereof, this agreement is signed in the city of Cali on the
_______ day of _______ of nineteen hundred and ninety-five (1995).
By OCCEL S.A. By EMPRESAS MUNICIPALES DE CALI
GILBERTO ECHEVERRI MEJIA ADOLFO LEON GALLON LOZANO
President General Manager
<PAGE> 23
APPENDIX NO. 2
FINANCIAL, ECONOMIC AND ADMINISTRATIVE ASPECTS
FIRST CLAUSE - OBJECT: The object of this Appendix is to supplement and
specify the procedures related to the financial, economic and administrative
aspects of the interconnection agreement.
SECOND CLAUSE - INFORMATION INCLUDED IN THE BILL: The bill from EMCALI to its
subscribers, the information about calls originated by them to the OCCEL
cellular mobile telephone network, and the amount shall be presented in the
manner agreed upon by the parties agree within the thirty (30) days following
the concluding of this agreement.
THIRD CLAUSE - BILLING COSTS: OCCEL shall effect payment to EMCALI in the
amount of thirty ($30) pesos for each bill issued with calls to the OCCEL
network, plus seven ($7) pesos for every call to the OCCEL network which may
have been billed by EMCALI to their subscribers or users. This amount includes
all concepts related to detail billing of calls to the OCCEL cellular network,
and the collection of amounts owed by OCCEL.
These billing costs will be readjusted annually in the same percentage as the
minimum wage increase, when it occurs.
FOURTH CLAUSE - LATE PAYMENT RECOVERY: According to the accounting system, the
list of late payments for calls made by EMCALI users to the OCCEL CTN shall be
borne by each company, according to the respective proportion. The recovery
of late payments may be obtained by either OCCEL or EMCALI, according to the
agreement made between the parties. In any case, each party will submit to the
other the documents required for legal collection of these late payments.
FIFTH CLAUSE - ATTENTION TO CLAIMS: Within the thirty (30) days following the
concluding of this agreement, OCCEL and EMCALI shall agree as to all procedures
for the handling, investigation and resolution of claims related to the billing
of all calls made by EMCALI subscribers to the OCCEL CTN. In the meantime,
EMCALI will handle these claims following the procedures established for the
handling of claims pertaining to long distance calls, and EMCALI must report to
OCCEL in detail every claim relating to billing of calls to its CTN.
In the case of a special claim, OCCEL and EMCALI shall investigate, providing
each other with the required operative and technical support and sharing all
required information.
In the same way EMCALI shall provide all information about the way the calls
are billed to the OCCEL cellular network, when such information is required by
EMCALI or OCCEL subscribers or users in EMCALI offices. If OCCEL so requests
and there is the physical availability, EMCALI shall provide a space at its
facilities for the handling of claims about calls originated from its PSTN to
the OCCEL
<PAGE> 24
CTN; the parties shall agree as to the economic conditions under which EMCALI
will provide this space.
SIXTH CLAUSE - ANALYSIS AND RECOVERY OF FRAUDS AND INCONSISTENCIES: An
inconsistency is considered to be all inaccurate information about data
concerning the recording, payment or billing of a call, which temporarily or
permanently makes the billing process and the charging of this call to the user
who actually made it impossible. There is temporary impossibility when the
inaccuracy is solved after an analysis which makes it possible to effect the
billing in a subsequent period. There is permanent impossibility when, after
the respective analysis, it is determined that respective charge cannot be
collected. Each party shall be liable to the other for payment for the
inconsistencies which arise due to calls which originated on its network, unless
it is proven that such inconsistencies are imputable to inaccuracies or errors
committed by the other party.
It is considered that a fraud has been committed when it has been determined
that collection cannot be effected for reasons other than the occurrence of an
inconsistency or the declaration that the debt assumed by the subscriber or user
generating is impossible to collect.
Fraudulent calls can be made from OCCEL or EMCALI networks, whether the origin
number has not been assigned to any subscriber or user, the calls have been
billed to disconnected telephones or those with a duly proven failure, or fraud
is caused by damage to the systems of billing or assessment of either the
parties, or by the improper usage of the telephone network by a non-identifiable
third party; in the latter event, exclusion shall be made of those cases in
which the subscriber's handset is used without his authorization. In such
cases, each party shall be liable to the other for payment for the fraudulent
calls originated in its network.
In all cases where there is any suspicion of fraud, the executives in charge of
the management of this agreement shall determine the liability for the payment
of the fraudulent calls within sixty (60) days at maximum. When within this
term no liability has been established, and the executives have not agreed as to
mutual exemption from liability to be borne by the parties, each party shall
have the right to proceed with legal suits in order for the liability for the
fraud to be established by the authority of jurisdiction.
SEVENTH CLAUSE - BALANCE CONFRONTATION AND RECONCILING OF ACCOUNTS: EMCALI and
OCCEL shall maintain an accounting control which shall be reconciled monthly in
order to determine the net balance which the debtor party must pay to the
creditor party. The dates for these reconcilings of accounts shall be agreed
upon by the executives responsible for the management of the agreement. For the
effects of the reconciliation, parties may agree to offset accounts for the
leasing of systems and transmission media lease, leasing of facilities for
equipment location, leasing of electric and
<PAGE> 25
air conditioning infrastructure, billing costs, payment for frauds and
inconsistencies, interest on late payment and any other concept related to the
execution of this agreement.
In testimony whereof this agreement is signed in the city of Cali on the _____
day of _______ of nineteen hundred and ninety-five (1995).
By OCCEL S.A. By EMPRESAS MUNICIPALES DE CALI
GILBERTO ECHEVERRI MEJIA ADOLFO LEON GALLON LOZANO
President General Manager
<PAGE> 26
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 10.06
INTERCONNECTION AGREEMENT BETWEEN SOCIEDAD OCCIDENTE Y CARIBE - CELULAR S.A.
AND EMPRESAS PUBLICAS DE MANIZALES EPMZL
Between the undersigned, GILBERTO ECHEVERRI MEJIA, resident of Medellin, with
citizens card number 3.302.711 of Medellin, who is acting as the President and
Legal Representative of OCCIDENTE Y CARIBE CELULAR, S.A. - OCCEL S.A. - a mixed
economy society with private capital in the majority, domiciled in Pereira, that
for the effects of this agreement will be referred to as OCCEL, on one part, and
on the other part LUIS JOSE LONDONO ARANGO, resident of Manizales, identified
with citizens card number 10.225.433 of Manizales, who is acting as the General
Manager and Legal Representative of EMPRESAS PUBLICAS DE MANIZALES, Public
Entity of Municipal order, who hereinafter will be referred to as EMPZL, this
interconnection agreement is concluded and shall be governed pursuant to the
clauses within this document, subject to the following considerations and
definitions:
CONSIDERATIONS:
FIRST. OCCEL is the awardee of the concession which has as its object the
rendering of a Cellular Mobile Telephone Service on the "A" network in the
Western region of Colombia pursuant to agreement 000005 concluded with the
Ministry of Communications on March 28, 1994.
SECOND. The Law 37 of 1993 and the Decree 741 of the same year authorized the
access right of the Cellular Mobile Telephone operators (CTN) to the public
switched telephone networks (PSTN) already established in the country, for the
interconnection of the elements of their networks and to manage traffic, and
also stipulating the obligation of the public switched telephone network
operators to guarantee the access to their Mobile Switched Centers (MSC),
providing the facilities for the location of interconnection equipment within
equipment rooms of these centrals and, at the same time, the facilities of AC
power supply, preventive and corrective maintenance, and also the other
facilities that are technically and administratively required, all at the
expense of the Cellular Mobile Network Operator.
THIRD. Interconnection will be subject to the equal access principle -
pursuant to article 66 Decree 741 of 1993 by virtue whereof the MSC operators
are obliged to provide interconnection under equal technical and economic
conditions to every CTN operator.
FOURTH. By means of Resolution 002 of 1994, the Telecommunications Regulatory
Commission, exercising the powers conferred upon it by Decree 2122 of 1992,
established powers conferred upon it by Decree 2122 of 1992, established that
for a one (1) year term from October thirteenth (13th) of 1993, the fee for the
interconnection between the PSTN subscriber terminal and the local switching
center will be TWENTY-FOUR ($24) Colombian pesos per minute, for both outgoing
calls and incoming calls to the PSN. This tariff was established based on the
variables of cost per line, percentage of line usage, operation costs,
maintenance and
<PAGE> 2
management per line per year, line traffic per year, the useful life of the
equipment and network, the replacement thereof and the rate of discount or
reasonable profit to the PSTN operator. Furthermore, by means of Resolution
004 of 1993 issued by the Telecommunications Regulatory Commission, the
principle was established whereby the party calling to or from the cellular
network must assume the costs thereof.
FIFTH. According to regulations governing the interconnection between public
switching telephone networks and cellular networks, EPMZL and OCCEL have
decided to establish their mutual rights and obligations by means of this
instrument.
DEFINITIONS:
For the effects of this agreement, the following terms will have the same
meaning stipulated as follows for every one of them, unless in the text of this
document a different scope were expressly assigned.
AGREEMENT: Means the present interconnection agreement, in the interpretation
whereof there shall be taken into account all incorporated appendices and
legislation in force with regard to the subject. Likewise, all amendments
agreed to between the parties during the term this agreement are an integral
part thereof.
OCCEL S.A.; Means Occidente y Caribe Celular S.A., concessionaire
corporation of a Cellular Mobile Telephone Service for the Western area on the
"A" network.
EPMZL: Means Empresas Publicas de Manizales.
CTN: Means Cellular Telephone Network.
PSTN: Means Public Switched Telephone Network.
TERMINAL EQUIPMENT: Means the portable, transportable, mobile, fixed or
another type of handset that OCCEL has permitted its subscriber or user to use
in order to access the cellular mobile telephone service, fulfilling the terms
and conditions stipulated by the rules governing this service.
SUBSCRIBER: Any user of the telephone service, whether using a private
telephone or public telephone connected to and handled by a CTN, or the
terminal equipment connected and handled by a PSTN.
INTERCONNECTION CIRCUIT: The device which interconnects the cellular mobile
switching center (MSC) of OCCEL with the combined center of EPMZL.
INTERCONNECTION TRANSMISSION MEANS: These consist of insulated pairs, coaxial
and fiber optic cables and their respective regenerators or repeaters and radio
systems repeaters or satellite link repeaters, used to connect the OCCEL MSC
and the EPMZL telephone centrals directly interconnected to them.
<PAGE> 3
MSC: Signifies the mobile switching center of the cellular mobile telephone
network.
INTERCONNECTION TRANSMISSION SYSTEMS: These consist of terminal equipment
connected to the OCCEL MSC with the EPMZL Telephone centrals directly
interconnected to them. This terminal equipment can be analog, digital and
optic transmitters and/or receivers of any of the above-mentioned means of
transmission, including radio systems or satellite links.
FIRST CLAUSE - OBJECT OF THE AGREEMENT: The object of this agreement is to
establish the technical, operative, administrative, economic, financial and
legal rights and obligations which shall regulate the interconnection of the
EPMZL public switched telephone network to the OCCEL Cellular Mobile Telephone
network.
SECOND CLAUSE - EPMZL OBLIGATIONS: EPMZL engages to fulfill the following
technical, administrative, economic and financial obligations:
A. TECHNICAL:
1. To guarantee the interconnection of its equipment with the OCCEL
cellular mobile telephone network equipment, both for outgoing and
incoming traffic, in accordance with the provisions of Law 37 of 1993
and Decree 741 of 1993.
2. To acquire, install, operate, maintain, and replace the equipment and
elements required in its network for the interconnection of its
telephone system with the OCCEL CTN in order to guarantee that incoming
and outgoing traffic can be transmitted according to the development
plans of both companies, and in the quantity which guarantees that in
the circuits interconnecting the EPMZL PSTN centrals with the OCCEL MSC
in Pereira, call drops with automatic access will not exceed one (1%)
percent in peak hours, excluding the losses due to the interconnection
equipment installed after the last switching center of EPMZL.
3. To permit all of the EPMZL subscribers whose "A" subscriber number can
be automatically identified and transmitted, to have access to the OCCEL
cellular mobile telephone service, and also to the new services rendered
to third parties through the OCCEL CTN, in accordance with the
provisions of the Law and the agreements between the parties. EPMZL
shall permit access to the CTN of OCCEL to all of its subscribers, but
shall have the power to withdraw such access for those who specifically
request this.
4. To perform maintenance, both preventive and corrective, of the systems
and transmission media belonging to EPMZL and used by OCCEL. The rent
agreed to by the parties for the leasing of these systems and media
includes the respective maintenance cost.
<PAGE> 4
5. To perform maintenance which guarantees, in incoming and outgoing
traffic, a ratio of unsuccessful calls (with a technical failure)
attributable to EPMZL in relation to the total of calls offered in low
traffic, which does not exceed, on the average, three (3%) percent.
6 To perform pursuant to APPENDIX NO. 1, measurements of traffic, grade
of service, and in general, all tests which permit the establishment of
the communications quality level between the two networks, and at the
same time to identify the need to make adjustments in the
interconnection enhancement program or its configuration. To test
quality of service between the two networks and to perform maintenance
programs, EPMZL will provide To OCCEL two telephone lines with access to
its CTN, without long distance access and free of charge. The location,
the types of traffic accessible and usage time of these numbers will be
agreed upon by the executives designated by parties for the
administration of this agreement. When considered necessary, the tests
shall be performed jointly following a previously agreed upon program.
7. To submit to OCCEL all the required information to guarantee that
interconnection between the two networks fulfills the fundamental basic
plans established by the Ministry of Communications.
8. To verify monthly, or upon the request of OCCEL, the correct operation
of its outgoing and incoming links, immediately notifying OCCEL of any
damage.
9. To adopt all measures in order to prevent fraud and generation of
inconsistencies. By virtue of this obligation, EPMZL shall adopt the
necessary measures order to prevent the access to OCCEL's CTN telephones
without charge, not assigned, interrupted, retired and non intelligent
public phones. Access shall be permitted only to public and semi-public
telephones and which have the ability to charge for this type of calls,
which must be connected to centrals with the ability to identify the "A"
subscriber number.
10. EPMZL must submit to OCCEL the identification number of the "A"
subscriber who originates the call at the centrals of its PSTN when it
is technically possible, in accordance with the schedule of replacement
or upgrading of its telephone centrals. EPMZL subscribers connected to
centrals where the identification and automatic transmission of the "A"
subscriber number is not possible are not allowed to access the OCCEL
CTN.
11. To repair, within the terms and conditions established by the executives
responsible for the management of the contract, the failures reported by
OCCEL.
12. Not to discriminate against the OCCEL traffic for its own benefit or
that of any other operator.
<PAGE> 5
13. To guarantee not to cause any damage to the physical and technical
infrastructure of OCCEL and also to respect the conditions stipulated by
the Internal Work Rules, EMPZL being obligated to assume the costs of
repair of the damage caused, provided that such damage is imputable to
EMPZL or to its contractors.
14. To permit access at any time to EMPZL facilities to the persons
authorized by OCCEL in order to perform preventive and corrective
maintenance of the equipment for which it is responsible. OCCEL shall
provide, with sufficient advance notice, a list of these persons, who must
fulfill the conditions established in the EMPZL Internal Work Rules. In
the event that access for the persons designated by OCCEL were not
possible, due to the absence of an EMPZL executive who authorizes it, the
latter engages to permit such access in accordance with the terms and
conditions agreed upon by the persons responsible for the management of
this contract.
B. ADMINISTRATIVE, ECONOMIC AND FINANCIAL:
BI. IN RELATION TO BILLING
1. EMPZL shall include in the bill for services to its subscribers the
charges for calls which the consumers of its network originate to the
OCCEL network, including access charges to the EMPZL PSTN and charges for
usage of the OCCEL CTN. The statement of calls and charges shall be that
received from OCCEL on magnetic tape or any other media agreed upon.
EMPZL may verify the statement of charges for access charges for its PSTN
recorded by OCCEL against the statement for control and verification
purposes which EMPZL recorded at its digital centers, in order to
establish the difference of the charge units measured according to the
agreed upon format. By mutual agreement between the parties, a percentage
of difference shall be established as the permitted margin of tolerance
In the event that the difference between the total amounts recorded by
OCCEL and EMPZL exceeds the aforementioned margin of tolerance and there
is no technical justification, the access charges shall be billed at the
higher record, whether it corresponds to the information of OCCEL or of
EMPZL. In the event that there is technical justification, the billing
shall be done based on the record which does not contain errors or by
means of the combination of the information of OCCEL and EMPZL.
The parties shall agree monthly upon the dates and times for cutting the
billing period. EMPZL may include in the same bill the charges for other
items and even charges from the other cellular network operators. The
bill will contain the information pursuant to APPENDIX NO. 2 of this
agreement.
<PAGE> 6
The incremental costs due to inclusion on bills issued by EPMZL of the calls
made by the subscribers to its PSTN to the OCCEL CTN, will be chargeable to
OCCEL and will be paid in the manner set forth in APPENDIX NO. 2.
2. To rebill the accounts including extra charge to the subscribers or
users who have not paid the total amount of the OCCEL Cellular Mobile
Telephone Service within the time limits stipulated to pay the bill.
3. To maintain the records that could not be billed in each period
(recycle) and are susceptible to be billed again in the next period, and
submit a report of these amounts to OCCEL. This point is applicable only
in the cases in which subscribers are in the process of incorporation into
the EPMZL subscriber files. At maximum one (1) recycle will be permitted;
after this recycle the records that had not been incorporated will be
considered as inconsistencies with their respective justifications.
4. Unless it has express and written authorization from OCCEL, EPMZL
may in no case bill any charge or amount derived from the rendering of
Cellular Mobile Telephone Service by OCCEL, other than that specified in
this contract.
5. To bill its subscribers or users for penalties or interest on late
payment at the maximum rate legally accepted, pertaining to amounts that
have not been collected within time limits stipulated on the bill, for
calls transmitted to the OCCEL CTN. These penalties or interest will be
billed monthly for each month or fraction of delay and the form in which it
shall be distributed shall be agreed upon by the executives responsible for
the administration of this contract. This penalty shall not apply in the
event of an inevitable accident or force majeure.
6. To submit to OCCEL though magnetic media or another procedure
mutually agreed upon, the records of frauds and billing inconsistencies for
calls from the PSTN to the CTN, with their justifications, and additionally
those records which will be entered on the definitive list of accounts
receivable, within fifteen (15) days following the end of every EPMZL
billing period.
7. To guarantee the integrity and quality of the billing of the calls
originated on the EPMZL PSTN to the OCCEL CTN and to be responsible for
errors generated in the billing process in relation to the customers and
authorities when such errors are imputable to EPMZL.
BII. IN RELATION TO COLLECTION OF CALLS ORIGINATED ON THE EPMZL PSTN
1. EPMZL shall incorporate into the invoices which it issues for
collection from its subscribers and users a tear-off or coupon which
contains the total sum which corresponds to OCCEL for the use of its
cellular.
<PAGE> 7
network and for any other item which implies a debt in favor of OCCEL.
This coupon must be designed in such a manner that the amount printed
thereon can be deposited directly to the account of OCCEL by the cashier
of the institution at which the bill is paid. The characteristics of
the aforementioned coupon shall be agreed upon by the executives
appointed by the parties for the administration of this agreement.
OCCEL shall bear the expenses for the procedures with the collection
institutions and the amount which they charge for direct deposit to the
account of OCCEL of the sums corresponding thereto.
2. During the initial months of validity of this contract, EPMZL shall
collect the amounts billed to its subscribers and users for the calls
originated by them to the OCCEL CTN, transferring to OCCEL the portion
corresponding to the fees for the use of its CTN and retaining for
itself the amount of the access charges for the use of its PSTN.
The aforementioned transfer shall take place within twenty-five (25)
calendar days from the final payment date without surcharge established
for the EPMZL subscribers. On the aforementioned date, EPMZL shall pay,
in addition to 100% of the sum it owes to OCCEL for liability for frauds
and inconsistencies, and for the use which may have been made of its
PSTN by public telephones and other subscribers which are not billed.
On the same date EPMZL shall deduct from the sum to be transferred to
OCCEL the amounts which OCCEL owes thereto for liability for frauds and
inconsistencies, access charges for calls originated by OCCEL
subscribers, or any other sum which has been agreed upon in this
contract, and which has been incurred in the billing period to which
these transfers pertain.
Within the fifteen (15) business days following the final date for
payment without surcharge established for the EPMZL subscribers, the
executives designated by parties shall reconcile the accounts in order
to establish the net amount which must be transferred to OCCEL by EPMZL,
or the amount which OCCEL owes to EPMZL, according to the result of the
reconcilement of accounts.
The provisions of this section shall be applicable until the date on
which OCCEL has completed the necessary measures to perform the separate
collections for which provision is made in the preceding section. Once
this condition is fulfilled, EPMZL and OCCEL shall execute an instrument
to institute the separation of collections.
3. Except as provided by Law, EPMZL shall not accept partial payments
differentiated by telephone operator companies, that is, it shall
require from its subscribers the payment in full of the telephone
<PAGE> 8
service billed, and in the event of non-payment, it shall apply the Law,
the regulations and this contract.
4. EPMZL shall grant payment facilities to its subscribers or users
when they so request and provided that they fulfill the internal rules
established. These facilities shall only be applicable to amounts owed for
calls to the OCCEL CTN when the latter indicates its approval thereof. The
manner in which the interest relating to the financing of these facilities
shall be distributed shall be agreed upon by the executives responsible for
the management of this agreement.
The debit advices issued by EPMZL in order to grant the payment facilities
specified herein, or to resolve claims which require such notes, shall not
constitute a breach of the preceding provision when such notes have been
submitted to OCCEL and are duly approved by the latter.
5. EPMZL shall pay interest OCCEL on late payment at a rate equivalent
to the maximum allowed by Commercial Law for similar transactions, monthly
or proportional to the days elapsed from the demandability of the debt to
the verification date, due to the delay in the payment of the amounts
collected for the use of the OCCEL CTN. Excluded from this sanction are
the delays due to force majeure or inevitable accident.
6. To maintain and continuously update the records of the active list
of accounts receivable and also to issue bills in order to collect them.
The management of recoveries on debtors in default shall be effected in
accordance with the provisions of APPENDIX NO. 2.
7. Until the separation of collections for which provision is made in
number B.II.1 of the second clause, EPMZL shall remit to OCCEL, within the
ten (10) calendar days subsequent to the final date for payment without
surcharge established for its subscribers in the respective collection
period, EPMZL shall submit to OCCEL through magnetic media or another
procedure mutually agreed upon and according to the design agreed upon, the
information as to amounts not collected, detailed in the same form as they
were submitted by OCCEL for billing, as well as the cumulative amounts of
the debt portfolio.
8. EPMZL shall suspend access to the mobile telephone network of OCCEL
to the subscribers requested by OCCEL by written notice, provided that it
is technically possible and will not affect access to other networks,
unless there is express written authorization from the operators which
could be affected.
9. To submit to OCCEL all documents that it requires and are within
the scope of EPMZL to supply, in order that OCCEL may, under its own
responsibility, proceed with legal collection of late payments.
<PAGE> 9
BIII. IN RELATION TO SUBSCRIBER CLAIMS:
Claims from EPMZL subscribers related to calls to the OCCEL mobile
telephone network shall be handled pursuant to APPENDIX NO. 2.
BIV. IN RELATION TO PUBLICATION IN THE TELEPHONE DIRECTORY:
To allow OCCEL to publish the list of its subscribers in the Manizales
Telephone Directory, OCCEL bearing the cost set for this purpose in accordance
with the contractual regulations and tariffs agreed upon between EPMZL and the
company which publishes the Manizales Telephone Directory. Such list will only
include the subscribers who wish to be included in the Directory.
THIRD CLAUSE - OBLIGATIONS OF OCCEL: OCCEL engages to fulfill the following
technical, administrative, economic and financial obligations.
A. TECHNICAL:
1. To guarantee the interconnection of its equipment with that of the
public switched telephone network of EPMZL for both incoming and
outgoing traffic.
2. To acquire, install, operate, maintain and replace the required devices
and equipment for interconnection of the OCCEL CTN with the EPMZL PSTN,
including those which permit the assessing of charges for outgoing and
incoming calls, with specifications according to the development plans
from both companies, and in the amount which guarantees a loss no
greater than one percent (1%) during peak hours. This obligation to
acquire the interconnection devices and equipment shall be considered to
be fulfilled when by agreement between the parties, such devices and
equipment are provided by EPMZL by lease.
3. To permit the subscribers of OCCEL to access the public switched
telephone network of EPMZL, as well as the new services which are
rendered to third parties through the EPMZL PSTN, in accordance with the
provisions of the Law and the agreement between the parties. OCCEL
shall permit the access to the EPMZL PSTN to all of its subscribers, but
shall have the power to withdraw such access for those who specifically
request this.
4. To perform both preventive and corrective maintenance of systems and
transmission media owned by OCCEL which participate in the
interconnection.
5. To perform maintenance which guarantees, in incoming and outgoing
traffic, a ratio of unsuccessful calls (with technical failure)
attributable to OCCEL in relation to the total of calls generated in low
traffic, which shall not exceed, on the average, three (3%) percent.
<PAGE> 10
6. To perform pursuant to APPENDIX NO. 1, measurements of traffic, grade
of service, and in general, all tests which permit the establishment of
the communications quality level between the two networks, and at the
same time to identify the need to make adjustments in the
interconnection enhancement program or its configuration. To test
quality of service between the two networks and to perform maintenance
programs, OCCEL will provide to EPMZL two telephone lines without long
distance access. These telephones shall be free of charge for EPMZL.
The location, the types of traffic accessible and usage time of these
numbers will be agreed upon by the executives designated by parties for
the administration of this agreement. When considered necessary, the
tests shall be performed jointly following a previously agreed upon
program.
In order to control the interconnection between the two networks, OCCEL
and EPMZL, within two (2) months after concluding this agreement, will
make an emergency plan and a schedule for preventive maintenance, grade
and quality of service measurements and evaluation of performance of
maintenance.
7. To supply EPMZL with the information necessary in order to guarantee
that the interconnection between the two networks complies with the
fundamental basic plans established by the Ministry of Communications.
8. To verify monthly or at the request of EPMZL the correct operation of
its incoming and outgoing links, immediately communicating any damage
which may have occurred to EPMZL.
9. To adopt the necessary measures to avoid fraud on the EPMZL PSTN.
10. OCCEL shall be liable for the access charges incurred from its CTN to
the EPMZL PSTN.
11. In the event that OCCEL wishes to install alternative transmission
media to that installed by EPMZL, it shall be responsible for the
respective maintenance.
12. To maintain the Ministry of Communications authorizations in force for
the OCCEL radio link systems which are part of the interconnection and
to pay the usage rights for the electromagnetic spectrum frequencies
which these require.
13. To repair, in accordance with the conditions and terms agreed upon by
the executives responsible for the management of the agreement, the
failures which may be reported by EPMZL.
14. Not to differentiate the EPMZL traffic in its own benefit or in that of
any other operator.
15. To guarantee that it will not cause damage to the physical and
technical infrastructure of EPMZL, and
<PAGE> 11
also will respect the conditions established in its Internal Work Rules.
OCCEL shall be responsible for payment for all repair of damages caused,
provided that such damage is imputable to OCCEL or its contractors.
B. ADMINISTRATIVE AND FINANCIAL
BI. IN RELATION TO BILLING
1. To supply to EMPZL, in accordance with the provisions of number B.I.1 of
the second clause, all of the information necessary in order that EMPZL
may bill the calls made by the EMPZL PSTN users to the OCCEL CTN. This
information will be provided on a monthly basis within the seven (7)
calendar days following the date agreed to by the parties as the billing
closing date. Once the separation of collections for which provision is
made in section B.II.1 of the second clause is in force, OCCEL must also
deliver to EMPZL the statement of the sums already billed in previous
periods and unpaid by the EMPZL users and subscribers; this information
shall be incorporated by EMPZL into the new bills which generates,
subject to verification of the corresponding amounts.
If OCCEL, due to facts imputable to it, does not effect timely and correct
submission of the information necessary in order to bill the PSTN
subscribers, EPMZL will prepare the bill, without including that which
pertains to the information that is not supplied by OCCEL in a timely and
correctly manner. The information that has not been processed will be
included in the next billing period. In this case, OCCEL shall pay to
EMPZL, for the month or fraction thereof, interest on late payment at a
rate equivalent to the maximum allowed by law for similar commercial
transactions, on the amount of access charges that have not been collected
by EMPZL. Excluded from this sanction is non-fulfillment due to force
majeure or inevitable accident.
2. OCCEL shall provide to EMPZL, if it so requires, the information necessary
in order to verify the payment of charges for access to its PSTN.
3. To guarantee integrity and quality of records submitted to EMPZL for
billing and to be liable in relation to the customers and authorities for
the errors generated in processes where this information is used, when
such errors are imputable to OCCEL.
4. To credit and pay to EMPZL the amount corresponding to the increase in its
billing processing costs, stationery, printing and collection - when
applicable - arising from the billing of the calls originated by its
subscribers to the OCCEL CTN, in accordance with the provisions of
APPENDIX NO. 2.
BII. IN RELATION TO INTERCONNECTION TARIFFS AND OTHER INCOME GENERATED IN
FAVOR OF EMPZL.
<PAGE> 12
1. To credit and pay to EPMZL on a monthly basis access charges incurred
for calls originated from the OCCEL CTN to the EPMZL PSTN, pursuant to
the terms of Law 37 of 1993, Decree 741 of 1993 and Resolutions Nos. 002
and 004 from the Telecommunications Regulatory Commission. Such access
charges shall be calculated based on EPMZL and OCCEL records and
applying to them a procedure similar to number B.I.1 of the second
clause of this agreement. The payment of such charges shall be effected
through the deduction that EPMZL shall make from the amount owed to
OCCEL for the use of its CTN during the same period in which access
charges indicated herein were incurred, or in cash in the event of a
partial deduction.
2. To effect payment to EPMZL of interest on late payment at a rate
equivalent to the maximum allowed by commercial law for similar
operations, monthly or proportionately to days which have elapsed from
the due date of payment to the date on which this payment is verified,
for the delay in the payment of amounts in favor of EPMZL and which
EPMZL has not been able to deduct from the amount owed to OCCEL for
payments for the use of its CTN. Excluded from this sanction are the
delays caused by force majeure or inevitable accident.
3. To credit and pay to EPMZL the respective costs of the use of the
transmission media and systems for the interconnection provided by EPMZL
by lease. The rent shall included the respective equipment maintenance.
The amounts established by EPMZL for these rents shall be those
stipulated in APPENDIX NO. 3, which shall be signed by the parties
within a term of no more than sixty (60) days from the date of the
concluding of this agreement.
4. To credit and pay to EPMZL the costs for usage of assigned physical
space, usage and supervision of buildings, towers and air conditioning
and power supply systems for the OCCEL equipment located within the
EPMZL facilities. The amounts established by EPMZL for these rents will
be as stipulated in APPENDIX NO. 3.
BIII. IN RELATION TO HANDLING OF CLAIMS
EPMZL shall handle claims relating to the billing of calls originated from the
EPMZL PSTN to its cellular network. In the event that it is so required, OCCEL
and EPMZL shall conduct the pertinent investigations, each assisting the other
with necessary operative and technical support and sharing all required
information.
FOURTH CLAUSE - RECIPROCAL OBLIGATIONS OF PARTIES:
A. IN RELATION TO THE ADMINISTRATION OF THE AGREEMENT:
In order to efficiently manage all matters relating to this agreement, each
party shall designate a maximum of two executives, who shall be responsible for
discussion,
<PAGE> 13
consultation, communication and resolution of the matters which require their
intervention and fall within their jurisdiction. Each party shall designate
one of these executives to be responsible for the coordination and channelling
of communications relations related to this agreement. These executives will
meet as required, at the request of any one of them.
Their functions are as follows:
1. To maintain orderly and accurate documentation related to this
agreement, recording, in chronological order, the correspondence,
consultations, decisions, solutions and in general every event to be
considered as relevant for the history of this agreement.
2. To establish and/or review the procedures relating to billing,
collection, payment facilities, account reconciliation, analysis of
frauds and inconsistencies, information to the subscribers, claims,
fraud control and repairs of damage or failures which arise in the
interconnection.
3. To review and approve monthly billing reconciliation, collections and
offsetting of accounts for access charges and lease of infrastructure
and transmission media, establishing the amount each party owes to the
other. In the development of such reconciliation all amounts pending
explanation for any of the subjects mentioned above will be followed up.
4. To agree as to solutions concerning the differences of opinion which may
arise between the parties with regard to the interpretation, development
and execution of any of the stipulations within this agreement.
5. According to measurements performed, to make all required decisions to
guarantee the fulfillment of the grade of service, in accordance with
the stipulations of the second and third clauses of this contract.
6. To review the interconnection configuration and capacity.
7. To determine the source of fraud and inconsistencies, establish their
solution mechanisms and establish responsibility for their occurrence.
8. To determine the source of damages caused to equipment and devices owned
by each party, to assess their value and determine the responsibility
for their occurrence.
9. To define the EPMZL PSTN subscribers who shall be allowed to access the
OCCEL CTN.
10. The rest derived from the execution of this agreement.
The decisions agreed upon by these executives shall be of mandatory fulfillment
by the parties and must be recorded in instruments signed by the parties.
<PAGE> 14
In the event of disagreement between these persons as to a particular subject,
any of them may request that the subject be discussed and decided by the legal
representatives of EPMZL and OCCEL.
B. IN RELATION TO DAMAGES AND THEIR REPAIR
1. To immediately issue notification as to damages detected in the
interconnection which require the intervention of any of the parties. The
respective party must repair the damage within the term established by the
executives responsible for the administration of the agreement and take the
necessary measures in order to repair it as soon as possible. Unjustified
delays which cause damage will result in repair entirely in favor of the
affected party.
2. To have qualified staff available at any time to repair system
failures pursuant to the terms and time limits herein.
C. IN RELATION TO INTERCONNECTION DIMENSIONS:
The parties engage to ensure that the installed capacity of the interconnection
equipment matches the dimensions calculated on the basis of demand and traffic
projections. In the event that one of the parties has any difficulty in the
expansion of the required capacity, it may sign agreements with the other party
in order to obtain the supply of the equipment or systems required.
D. IN RELATION TO LOCATION OF THE OCCEL EQUIPMENT:
According to availability, EPMZL shall provide OCCEL with all facilities for
the location of its interconnection equipment and that pertaining to its CTN,
providing physical spaces, power supply, air conditioning, including the
respective maintenance and guard. In the same way EPMZL shall facilitate the
installation of the OCCEL equipment. The cost of these facilities shall be
assumed by OCCEL and the amount will be as stipulated in Appendix No. 3.
E. IN RELATION TO INTERCONNECTION CONDITIONS:
Interconnection technical conditions such as grade of service, tariffs,
routing, numbering, signalling and operation shall be regulated in accordance
with the stipulations of the Ministry of Communications, the Telecommunications
Regulatory Commission and specifically pursuant to Appendix No. 1 to this
contract.
FIFTH CLAUSE - LIABILITY OF THE PARTIES
1. Neither party shall be liable for the non-fulfillment of any
contractual obligations caused by force majeure or inevitable accidental
duly verified. if such circumstances obstruct the execution of the
agreement for a term exceeding six (6) months, either party may terminate
the agreement by written notice to the other party.
<PAGE> 15
2. Each party must guarantee the integrity and accuracy of all information
submitted to the other party, and is obliged to be liable to the other
party, customers and authorities for errors generated in processes where
such information is used, provided that such errors are imputable thereto.
3. Each party must pay the sums which are owed to the other for calls which
cannot be collected from the subscribers or users due to frauds and
inconsistencies. APPENDIX NO. 2 specifies the manner in which liability
for these payments shall be determined. Amounts due for frauds and
inconsistencies shall be included within the monthly reconciliations.
4. Liability to the subscriber: In all of their relationships with the
public, both EMPZL and OCCEL shall act governed by the principles of
honesty, integrity, loyalty and service and shall not act in any manner
which discredits, affects or damages the reputation of the other party in
any way. Both parties shall act in good faith, honestly and diligently,
using their best efforts in order to guarantee subscriber satisfaction and
the rendering of the services offered.
5. Social responsibility: In the interconnection and the execution of the
agreement, the parties shall take into consideration the fact that their
goal is the providing of telecommunication public services in the charge
of the State, in a continuous and efficient manner.
SIXTH CLAUSE - INTERCONNECTION LIMIT:
In order to limit the liability of the parties, the interconnection limit shall
be the general digital distributors or optical distributors of EMPZL centrals
directly connected with the OCCEL CTN, and in consequence every company must
assume the costs within its own network.
SEVENTH CLAUSE - SUBMISSION TO REGULATION: The interconnection between the two
networks, is based upon the plans, regulations, definitions and standards of
the Ministry of Communications, and in the absence thereof, upon the plans,
definitions and standards of the International Telecommunications Union (ITU)
and other international bodies of jurisdiction, in which Colombia forms a part
by virtue of international agreements and covenants.
EIGHTH CLAUSE - INTERCONNECTION DIMENSIONS:
The quality of the circuits required for different links or routes between two
networks, both for incoming and outgoing traffic, as well as the quantities for
future expansion, shall be calculated by OCCEL and reviewed by EMPZL and shall
be established according to instruments signed by the parties. This
dimensioning will be reviewed at least every six months to adjust it to traffic
conditions. The dates of entry into service of links for future extensions
shall be mutually agreed upon, taking into account that the grade of service
and development plans of each company may not be affected by the delay by one
party in the execution of such extensions.
<PAGE> 16
NINTH CLAUSE - RELIABILITY AND AVAILABILITY: Both parties should maintain the
interconnection minimum levels of reliability in order to guarantee service
continuity. The reliability shall be measured in terms of the time in which
the interconnection is normally operating. The minimum reliability for the
subscriber to interconnection equipment is 99.99% measured over a monthly
period, which means that the total of system dropped times which affect the
whole interconnection, should not be higher than 4.4 minutes/month. The
interconnection will have alternate routes as agreed upon by the parties.
TENTH CLAUSE - AUDITING: Each party may directly or through a third duly
authorized party undertake the necessary review to establish account accuracy
and the faithful compliance with the procedures agreed upon by virtue of this
agreement. The cost incurred for this purpose shall be paid by the party who
is reviewing. The party whose accounts and procedures shall be reviewed must
provide all required facilities.
ELEVENTH CLAUSE - EXEMPTION FROM LIABILITY IN THE EVENT OF INTERRUPTION:
Neither party shall be liable in relation to the other party for damages
causing the interruption or failure of its telephone systems or interconnection
with the OCCEL CTN, nor shall either party be permitted to provide to their
customers the facilities to take action against the other party under these
circumstances.
TWELFTH CLAUSE - CONFIDENTIALITY OF INFORMATION: All of the correspondence and
information exchanged between the parties for the fulfillment of this
agreement, concerning subscriber data, billing, collection, growth forecast,
must be maintained in strict confidentiality and may only be used in order to
permit sufficient fulfillment of the obligations acquired by virtue of the
present contract. The parties expressly declare that the transmission of such
information, either verbally or in writing, to third parties that are not duly
authorized to request and receive it will result in the full indemnity of
damage caused by this disclosure.
THIRTEENTH CLAUSE - DURATION OF AGREEMENT: This agreement has a duration of
five (5) years from the date of its execution, and may be extended by equal
periods, as long as the parties do not issue notification to the contrary in
writing within sixty (60) calendar days prior to its expiration or the
expiration of the extension.
FOURTEENTH CLAUSE - AMENDMENTS TO THE AGREEMENT: During the term of this
agreement it may be amended, except in those clauses imposed by Law; in order
to do so the interested party should notify the other party in writing. In the
event that an agreement is not reached within the sixty (60) calendar days
following the first communication date, OCCEL, EPMZL or both parties will
request intervention of the Telecommunications Regulatory Commission in the
dispute, and in the meantime, the conditions established herein shall be in
force. The decision of the Commission shall be binding upon both parties.
<PAGE> 17
FIFTEENTH CLAUSE - SOLUTION OF CONTROVERSIES: In the event of differences,
discrepancies or conflicts arising between parties as to the making,
interpretation, execution, termination or dissolution of this agreement, they
shall attempt to solve it in a direct, rapid and amicable manner. If this is
not possible and the Telecommunications Regulatory Commission does not have
jurisdiction to hear the differences, discrepancies or conflicts in question,
the parties jointly or individually shall submit themselves to decision by a
Court of Arbitration.
If the controversy, discrepancy or conflict were eminently technical in nature,
the parties by mutual agreement may submit it to the decision of two experts in
the subject matter which is the object of the difference, who shall be
designated by the ACIEM. The decision of these experts shall be of mandatory
fulfillment by the parties.
The Court of Arbitration shall consist of three arbiters designated by mutual
agreement, who must be licensed, practicing attorneys, with knowledge of
Telecommunications Laws. In the event that no agreement is reached between the
parties, the designation of the arbiters shall be made by the Chamber of
Commerce of Manizales. The judgment shall be by law and must take place within
six (6) months following the constitution of the Court.
The cost for the petition for the constitution and the operation of the Court
shall be paid by the parties in equal proportion.
SIXTEENTH CLAUSE - DOCUMENTS OF AGREEMENT: The following documents are an
integral part of this agreement and compliance therewith is therefore
mandatory.
1. APPENDIX NO. 1: Technical Aspects
2. APPENDIX NO. 2: Financial, economic and administrative aspects
3. APPENDIX NO. 3: Lease costs of systems and transmission media,
physical spaces and infrastructure supplied by EPMZL.
SEVENTEENTH CLAUSE - APPLICABLE LAW: This agreement and all controversies that
might arise must be subject to this agreement, to the Law and to the Colombian
Courts.
EIGHTEENTH CLAUSE - DOMICILE: For pertinent legal effects it is understood that
this agreement shall be concluded in the city of Manizales.
NINETEENTH CLAUSE - WAIVER: The obligations of the parties and rights granted
by this agreement to each party shall not be considered as susceptible to
waiver, by virtue of practices or customs in a contrary sense. The tolerance
of one party in accepting the non-fulfillment of any of the obligations assumed
by the other should not be considered as acceptance of the tolerated fact nor
as precedent for its repetition.
<PAGE> 18
TWENTIETH CLAUSE - PARTIAL NULLITY: The nullity, invalidity or the legal
impossibility to comply with one or more of the clauses of this contract shall
not affect the other clauses and the contract shall be interpreted as if the
clause which is invalid, null or impossible to fulfill did not exist.
TWENTY-FIRST CLAUSE - TITLES: Clause titles herein are only incorporated for
the purpose of facilitation of reference and cannot be used for interpretation
of the agreement.
TWENTY-SECOND CLAUSE - INTEGRITY OF THE AGREEMENT:
Both OCCEL and EPMZL have read this agreement and understood and accepted the
terms, conditions and stipulations herein, which have been agreed to in order
to maintain the high standards of the quality of service and the customer
service and to protect the reputation of both OCCEL and EPMZL brand names.
Neither party is obligated by declarations of their executives, employees or
agents which are contrary to the provisions of this agreement. This agreement
contains the integral agreement between the parties and previous agreements or
covenants, both verbal or written, existing between parties are null and void.
TWENTY-THIRD CLAUSE - WAIVER OF SUMMONS: To collect any amount of money which
parties owe by virtue of this agreement, it shall not be necessary to establish
default or to require its payment, rights which the parties waive.
TWENTY-FOURTH CLAUSE - BUDGET IMPUTATION: EPMZL is obliged to provide in its
budget for the income and expenses incurred by the execution of this agreement
during the term of validity of the current budget and during succeeding
budget terms.
TWENTY-FIFTY CLAUSE - STAMP TAX: The stamp tax which is incurred by the
contract shall be paid by OCCEL. In view of the fact that EPMZL is a public
law institution exempt from payment of the stamp tax, according to the
provisions of article 532 of the Tax Law, OCCEL must pay one half of the
pertinent stamp tax.
TWENTY-SIXTH CLAUSE - AGREEMENT REVIEW: The parties acknowledge that this
agreement must be made known to the Ministry of Communications and the
Telecommunications Regulatory Commission. In the event that these entities
require addition to this agreement of information or specifications pursuant to
the twenty-fourth clause of the concession agreement concluded between the
Ministry of Communications and OCCEL, the parties concluding this agreement are
committed to sign a supplementary agreement which incorporates such additions.
In the same manner, the parties declare that they know that EPMZL must offer
the same technical and economic conditions to all cellular mobile telephone
operators who conclude an interconnection agreement with EPMZL, and in
consequence any advantage or privilege granted to one of them and not offered
to the rest, could be subject to sanction for both EPMZL and the favored
cellular mobile telephone operator.
<PAGE> 19
TWENTY-SEVENTH CLAUSE - COMMUNICATIONS: Except as otherwise agreed upon, all
communications between parties shall be written and shall be considered as
valid and sufficient if they are sent by certified mail or by fax, verifying by
telephone the sending and receipt thereof, to the following addresses and fax
numbers:
To Empresas Publicas de Manizales:
EMPRESAS PUBLICAS DE MANIZALES
Gerencia General [General Management]
Carrera 21 No. 29-29
Manizales
Telephone: 968 84 84 84 Fax: 968 84 33 33
To OCCEL
OCCEL S.A.
Direccion de Interconexion [Interconnection Dept.]
Calle 50 No. 55-01
Medellin
Telephone: 945129090
Fax: 94 512 90 90 94 513 01 99
In the event that any of the parties changes any of this information, it will
be responsible for reporting the new information to the other party in the
manner previously stipulated herein. Communications performed according to the
provisions of this agreement shall be considered as received upon the first to
occur of: five (5) days following the delivery or when they have been received
personally by the addressee.
TWENTY-EIGHTH CLAUSE - CONCLUDING AND EXECUTION : In order to conclude this
agreement, it requires signature, payment of the stamp tax and its publication
in the Municipal Newspaper of Manizales. This requirement shall be understood
to be fulfilled by the presentation of the receipt for the payment of the
publication fees. Both expenses shall be assumed by OCCEL.
In testimony whereof, this agreement is signed in the city of Manizales on the
_____ day of nineteen hundred and ninety-four (1994).
By OCCEL S.A. By EMPRESAS PUBLICAS DE MANIZALES
GILBERTO ECHEVERRI MEJIA LUIS JOSE LONDONO ARANGO
President General Manager
APPENDIX NO. 1
TECHNICAL ASPECTS
FIRST CLAUSE - OBJECT : The object of this appendix is to supplement and
specify the definitions of terms and procedures relating to the technical
aspects of the interconnection agreement.
<PAGE> 20
SECOND CLAUSE - DEFINITIONS: EPMZL and OCCEL agree to the following
definitions for the terms related as follows:
SWITCHING EQUIPMENT FOR THE INTERCONNECTION: All devices which are part of the
OCCEL MSC or EPMZL switching centers, and are directly connected with
transmission systems for the intercommunication between the two networks.
GRADE OF SERVICE: Ratio by percentage between the quantity of unsuccessful
call attempts due to congestion or failure, and the total of call attempts
recorded in a measurement or a test.
CONGESTION GRADE: Ratio by percentage between the quantity of unsuccessful
call attempts due to congestion and the total of call attempts recorded in a
measurement or a test.
TECHNICAL FAILURE INDEX: Ratio by percentage between the quantity of
unsuccessful call attempts due to switching or transmission equipment failures,
and the total of call attempts recorded in a measurement or a test.
THIRD CLAUSE - CONNECTION POINTS AND ROUTING: The parties agree that at the
beginning the interconnection points between EPMZL and OCCEL networks shall be
the EPMZL transmission center designated as Centro 3 and the OCCEL MSC located
in Pereira. However, the executives designated by the parties to manage this
agreement may agree by means of a mutually executed instrument as to the
creation of other connecting points between their two networks, according to
traffic and quality of service requirements.
At the beginning, alternative routes to handle traffic between the EPMZL and
OCCEL networks will not be available. However, the establishment of
alternative routes, through third party networks, may be agreed upon by means
of an instrument signed by mutual agreement of the executives designated by
parties to manage this agreement.
The parties agree that until such times as the MSC of OCCEL is operating in
Pereira, the interconnection shall be effected utilizing the MSC of OCCEL in
Cali. For that provisional interconnection the TELECOM switched network shall
be used.
FOURTH CLAUSE - SIGNALLING: At the beginning the interconnection shall be
effected utilizing signalling by associated channel. The line signalling
system shall be the Digital R2 pursuant to CCITT recommendations Q.421, Q422
and Q.424. The record signalling system will be MFC type LME.
Upon mutual agreement of the parties, or when the Ministry of Communications
so stipulates as mandatory, the signalling scheme by common channel No. 7 of
CCITT on the national standard version of Colombia in force on the date of
establishment will be adopted.
FIFTH CLAUSE - TEST AND TRAFFIC MEASUREMENT PLAN: In order to evaluate the
quality of service, and calculate the grade
<PAGE> 21
of service, the parties agree to make test calls from the OCCEL MSC and EMPZL
switching centrals. These calls shall be made on a periodic basis and also in
events which demand the performance of special tests. The quantity of test
calls, their centrals and origin and destination numbers, days and hours, and
the way they are recorded, shall be agreed upon by the executives designated by
the parties to manage this agreement.
At least once a month, traffic, quality and grade of service measurements of
real traffic on interconnection routes which interconnect the two networks will
be performed. The quality of service indicators, quantity of measurement days,
hours and type of telephonic devices - trunking circuits, signalling devices,
software records, etc. - upon which the measurements are to be made shall be
agreed upon by the executives designated by the parties to manage this
agreement. These executives may also agree upon the conducting of activities
of tracking of failures detected in the interconnection. For the diagnosis of
quality of service and tariff problems there will also be joint analysis of
calls of no longer than six seconds in duration, calls no longer than one hour,
calls with identification of caller number failure, channels with high index of
failure or loss produced, and series with a high index of unsuccessful calls.
In testimony whereof, this agreement is signed in the city of Manizales on the
_____ day of _______ of nineteen hundred and ninety-four (1994).
By OCCEL S.A. By EMPRESAS PUBLICAS DE MANIZALES
GILBERTO ECHEVERRI MEJIA LUIS JOSE LONDONO ARANGO
President General Manager
<PAGE> 22
APPENDIX NO. 2
FINANCIAL, ECONOMIC AND ADMINISTRATIVE ASPECTS
FIRST CLAUSE - OBJECT : The object of this Appendix is to supplement and
specify the procedures related to the financial, economic and administrative
aspects of the interconnecting agreement.
SECOND CLAUSE - INFORMATION INCLUDED IN THE BILL : The bill from EPMZL to its
subscribers, the information about calls originated by them to the OCCEL
cellular mobile telephone network, and the amount shall be presented in the
manner agreed upon by the parties agree within the thirty (30) days following
the concluding of this agreement.
THIRD CLAUSE - BILLING COSTS : OCCEL shall effect payment to EPMZL in the
amount of fifty ($50.00) pesos for each bill issued with calls to the OCCEL
network. This amount includes all concepts related to detail billing of calls
to the OCCEL cellular network, and the collection of amounts owed by OCCEL
where applicable.
These billing costs will be readjusted annually in the same percentage as the
minimum wage increase, when it occurs.
FOURTH CLAUSE - LATE PAYMENT RECOVERY : According to the accounting system, the
list of late payments for calls made by EPMZL users to the OCCEL CTN shall be
borne by each company, according to the respective proportion. The recovery of
late payments may be obtained by either OCCEL or EPMZL, according to the
agreement made between the parties. In any case, each party will submit to the
other the documents required for legal collection of these late payments.
FIFTH CLAUSE - ATTENTION TO CLAIMS : OCCEL shall handle the claims relating to
the billing of the calls originated by the EPMZL subscribers to its CTN. In
the claims which merit it, OCCEL and EPMZL shall conduct the pertinent
investigations, providing each other with the necessary technical and
operative support and sharing all information.
The parties shall agree as to the manner in which EPMZL shall report on the
procedures established by OCCEL for the handling of the claims, when the
subscribers or users of EPMZL or OCCEL go to the EPMZL customer service centers
to submit claims as to calls made to the OCCEL CTN. In addition, EPMZL shall
supply information concerning the billing of the calls to the OCCEL cellular
network, when the aforementioned information is requested by the subscribers or
users of EPMZL or OCCEL at the EPMZL customer service centers. In the event
that OCCEL so requests and it is physically available, EPMZL shall provide a
space at its facilities for the handling of claims concerning calls originating
from its PSTN to the OCCEL CTN; the parties shall agree as to the economic
conditions whereby EPMZL shall provide the aforementioned space.
SIXTH CLAUSE - ANALYSIS AND RECOVERY OF FRAUDS AND INCONSISTENCIES : An
inconsistency is considered to be all
<PAGE> 23
inaccurate information about data concerning the recording, payment or billing
of a call, which temporarily or permanently makes the billing process and the
charging of this call to the user who actually made it impossible. There is
temporary impossibility of billing when the inaccuracy is solved after an
analysis which makes it possible to effect the billing in a subsequent period.
There is permanent impossibility when, after the respective analysis, it is
determined that respective charge cannot be collected. Each party shall be
liable to the other for payment for the inconsistencies which arise due to
calls which originated on its network, unless it is proven that such
inconsistencies are imputable to inaccuracies or errors committed by the other
party, or to an irremediable technical problem.
It is considered that a fraud has been committed in a call when it has been
determined that collection definitively cannot be effected for reasons other
than the occurrence of an inconsistency or the declaration that the debt assumed
by the subscriber or user generating is impossible to collect. Fraudulent calls
can be made from OCCEL or EPMZL networks, whether the origin number has not been
assigned to any subscriber or user, the calls have never been billed to the
subscriber to whom the number of origin is assigned, or, having been billed,
they have been subsequently been deducted from the account of the subscriber to
whom the number of the origin is assigned. Each party shall be liable to
the other for payment for the fraudulent calls originated in its network, unless
it is proven that the cause of such fraud is due to negligence or to errors
committed by the other party.
If within the three months subsequent to the date of the reconcilement in which
it was determined that there was a suspicion of fraud or inconsistency as to a
call, it has not been possible to determine whether a fraud or inconsistency
effectively occurred in that call, and therefore it has neither been possible
to determine the liability for the occurrence of either of those events nor to
collect the charges for the call from any subscriber or user, the party
operating the network on which the call originated shall assume liability in
relation to the other for the payments which are to be made.
SEVENTH CLAUSE - BALANCE CONFRONTATION AND RECONCILING OF ACCOUNTS; EPMZL and
OCCEL shall maintain an accounting control which shall be reconciled monthly in
order to determine the net balance which the debtor party must pay to the
creditor party. The dates for these reconcilings of accounts shall be agreed
upon by the executives responsible for the management of the agreement. For the
effects of the reconciliation, parties may agree to offset accounts for the
leasing of systems and transmission media lease, leasing of facilities for
equipment location, leasing of electric and air conditioning infrastructure,
billing costs, payment for frauds and inconsistencies, interest on late payment
and any other concept related to the execution of this agreement.
<PAGE> 24
In testimony whereof this agreement is signed in the city of Manizales on the
_____ day of _______ of nineteen hundred and ninety-four (1994).
By OCCEL S.A. By EMPRESAS PUBLICAS DE MANIZALES
GILBERTO ECHEVERRI MEJIA LUIS JOSE LONDONO ARANGO
President General Manager
<PAGE> 25
APPENDIX NO. 3
COSTS OF LEASING OF TRANSMISSION SYSTEMS,
SPACE AND INFRASTRUCTURE
FIRST CLAUSE - OBJECT: This appendix has as its object the specification of
the amount of the rents which OCCEL shall pay to EMPZL for the leasing of the
transmission systems and media, physical space at the installations of EMPZL,
and infrastructure of the electrical power and air conditioning systems.
SECOND CLAUSE - LEASING OF TRANSMISSION SYSTEMS AND MEDIA:
The leasing of the units comprised by the transmission systems and media which
are the property of EMPZL, defined as specified in the contract, shall be
subject to the following monthly rates:
<TABLE>
<CAPTION>
TYPE OF UNIT UNIT MONTHLY RATE
SYSTEM-MEDIA
<S> <C> <C>
Fiber optic link $ per 2 Mbps. system
Cable link $ per 2 Mbps. system
Radio digital link $ per 2 Mbps. system
</TABLE>
The leasing of the transmission media owned by EMPZL, defined as specified
in the contract, shall be subject to the following monthly rates:
<TABLE>
<CAPTION>
TYPE OF MEDIA MONTHLY RATE
<S> <C>
Insulated pairs $ per pair
</TABLE>
All of the preceding rates include the respective maintenance and the amount
for the electrical power and air conditioning required by the respective
transmission systems and media owned by EMPZL.
THIRD CLAUSE - LEASING OF PHYSICAL SPACE, ELECTRICAL AND AIR CONDITIONING
INFRASTRUCTURE: The leasing of the physical space of the electrical and air
conditioning infrastructure required by the equipment owned by OCCEL installed
on the premises owned by EMPZL shall be subject to the following monthly rates:
FOURTH CLAUSE - INCREASES AND DISCOUNTS: All of the aforementioned rates may
be adjusted annually by EMPZL in a percentage not to exceed the percentage of
the increase of the legal minimum wage determined by the Colombian Government.
EMPZL may review and update the ranges established in the rate tables of this
appendix, and establish discounts of the stipulated rates, in accordance with
the conditions and marketing criteria adopted by EMPZL.
In testimony whereof this agreement is signed in the city of Manizales on the
____ day of ______ of nineteen hundred and ninety-four (1994).
<PAGE> 26
By OCCEL S.A. By EMPRESAS PUBLICAS DE MANIZALES
GILBERTO ECHEVERRI MEJIA LUIS JOSE LONDONO ARANGO
President General Manager
<PAGE> 27
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 10.07
INTERCONNECTION AGREEMENT BETWEEN SOCIEDAD OCCIDENTE Y CARIBE - CELULAR S.A.
AND EMPRESAS PUBLICAS DE PEREIRA
Between the undersigned, GILBERTO ECHEVERRI MEJIA, resident of Medellin, with
citizens card number 3.302.711 of Medellin, who is acting as the President and
Legal Representative of OCCIDENTE Y CARIBE CELULAR, S.A. - OCCEL S.A. - a mixed
economy society with private capital in the majority, domiciled in Pereira, that
for the effects of this agreement will be referred to as OCCEL, on one part, and
on the other part JORGE EDUARDO MURILLO MEJIA, of legal age, resident of
Pereira, identified with citizens card number 10.090.487 of Pereira, who is
acting as the General Manger and Legal Representative of EMPRESAS PUBLICAS DE
PEREIRA, Public Entity of Municipal Order, who hereinafter will be referred to
as EE.PP., this interconnection agreement is concluded and shall be governed
pursuant to the clauses within this document, subject to the following
considerations and definitions:
CONSIDERATIONS:
FIRST. OCCEL is the awardee of the concession which has as its object the
rendering of a Cellular Mobile Telephone Service on the "A" network in the
Western region of Colombia pursuant to agreement 000005/94 concluded between it
and the Ministry of Communications on March 28, 1994.
SECOND. The Law 37 of 1993 and the Decree 741 of the same year authorized the
access right of the Cellular Mobile Telephone operators (CTN) to the public
switched telephone networks (PSTN) already established in the country, for the
interconnection of the elements of their networks and to manage traffic, and
also stipulating the obligation of the public switched telephone network
operators to guarantee the access to their Mobile Switched Centers (MSC),
providing the facilities for the location of interconnection equipment within
equipment rooms of these centrals as well as the facilities of AC power supply
and access of the personnel of OCCEL S.A. for preventive and corrective
maintenance.
THIRD. Interconnection will be subject to the equal access principle -
pursuant to article 66 Decree 741 of 1993 by virtue whereof the MSC operators
are obliged to provide interconnection under equal technical and economic
conditions to every CTN operator.
FOURTH. By means of Resolution 002 of 1993, the Telecommunications Regulatory
Commission established that for a one (1) year term from October thirteenth
(13th) of 1993, the fee for the interconnection between the PSTN subscriber
terminal and the local switching center will be TWENTY-FOUR ($24) Colombian
pesos per minute, for both outgoing calls and incoming calls to the PSTN. This
tariff was established based on the variables of cost per line, percentage of
line usage, operation costs, maintenance and management per line per year, line
traffic per year, the useful life of the equipment and network, the replacement
thereof and the rate of discount or reasonable profit to the PSTN operator.
Furthermore, by means of Resolution 004 of
<PAGE> 2
1993 issued by the Telecommunications Regulatory Commission, the principle was
established whereby the party calling to or from cellular network must assume
the costs thereof.
FIFTH. According to regulations governing the interconnection between public
switching telephone networks and cellular networks, EE.PP. and OCCEL have
decided to establish their mutual rights and obligations by means of this
instrument.
DEFINITIONS:
For the effects of this agreement, the following terms will have the same
meaning stipulated as follows for every one of them, unless in the text of this
document a different scope were expressly assigned.
AGREEMENT: Means the present interconnection agreement, in the interpretation
whereof there shall be taken into account all incorporated appendices and
legislation in force with regard to the subject. Likewise, all amendments
agreed to between the parties during the term this agreement are an integral
part thereof.
OCCEL S.A.: Means OCCIDENTE Y CARIBE CELULAR S.A., concessionaire corporation
of a Cellular Mobile Telephone Service for the Western area on the "A" Network.
EE.PP.: Means Empresas Publicas de Pereira
CTN: Means Cellular Telephone Network.
PSTN: Means Public Switched Telephone Network.
CELLULAR TERMINAL EQUIPMENT : Means the portable, transportable, mobile, fixed
or another type of handset that OCCEL S.A. has permitted its subscriber to use
in order to access the cellular mobile telephone service, fulfilling the terms
and conditions stipulated by the rules governing this service.
CONSUMER: Any user of a public telecommunications service, whether using a
private or public telephone connected and attended by a PSTN, or the terminal
equipment activated and attended by a CTN.
OCCEL S.A. SUBSCRIBER : An individual or legal entity with an agreement in
force with OCCEL for the rendering of a Cellular Mobile Telephone Service.
EE.PP. SUBSCRIBER : An individual or legal entity with an agreement in force
with EE.PP. for the rendering of a fixed basic telephone service or any of the
value added services.
OCCEL S.A. USER : Means the subscriber or person who, without being the
subscriber, uses and takes advantage of the OCCEL Cellular Mobile Telephone
Service.
EE.PP. USER : Means the subscriber or person who, without being the
subscriber, benefits from the service making use
<PAGE> 3
of the fixed line telephone service assigned by EE.PP. to the subscriber.
INTERCONNECTION CIRCUIT: The device which connects the mobile switching center
(MSC) of OCCEL S.A. with the combined center of EE.PP.
INTERCONNECTION TRANSMISSION MEANS: These consist of insulated pairs, coaxial
and fiber optic cables and their respective regenerators or repeaters and radio
systems repeaters or satellite link repeaters, used to connect the OCCEL S.A.
MSC and the EE.PP. telephone centrals directly interconnected to them.
MSC: Means Mobile Switching Center of Cellular Mobile Telephone Network.
INTERCONNECTION TRANSMISSION SYSTEMS: These consist of terminal equipment
connected to the OCCEL MSC with the EE.PP. Telephone centrals directly
interconnected to them. This terminal equipment can be analog, digital and
optic transmitters and/or receivers of any of the above-mentioned means of
transmission, including radio systems or satellite links.
FIRST CLAUSE - OBJECT TO THE AGREEMENT: The object of this agreement is to
establish the technical, operative, administrative, economic, financial and
legal rights and obligations which shall regulate the interconnection of the
EE.PP. public switched telephone network to the OCCEL S.A. Cellular Mobile
Telephone Network.
SECOND CLAUSE - EE.PP. OBLIGATIONS: EE.PP. engages to fulfill the following
technical, administrative, economic and financial obligations:
A. TECHNICAL:
1. To guarantee the interconnection of its equipment with the OCCEL
S.A. cellular mobile telephone network equipment, both for outgoing and
incoming traffic, in accordance with the provisions of Law 37 of 1993 and
Decree 741 of 1993.
2. To acquire, install, operate, maintain and replace the equipment
and elements required in its network for the interconnection of its
telephone system with the OCCEL S.A. CTN in order to guarantee that
incoming and outgoing traffic can be transmitted according to the
development plans of both companies, and in the quantity which guarantees
that in the circuits interconnecting the EE.PP. PSTN centrals with the
OCCEL S.A. MSC in Pereira, call drops will not exceed one (1%) percent in
peak hours, excluding the losses due to the interconnection equipment
installed after the last switching center of EE.PP.
3. To permit all of the EE.PP. subscribers whose "A" subscriber number
can be automatically identified and transmitted, to have access to the
OCCEL S.A. cellular
<PAGE> 4
mobile telephone service, and also to the new services rendered to third
parties through the OCCEL S.A. CTN, in accordance with the provisions of
the LAW. EE.PP. shall permit access to the CTN Of OCCEL to all of its
subscribers, but shall have the power to withdraw such access for those who
specifically request this.
4. To perform maintenance, both preventive and corrective, of the systems
and transmission media belonging to EE.PP. and used by OCCEL S.A. The
tariff agreed to by the parties for the leasing of these systems and media
includes the respective maintenance cost.
5. To perform maintenance which guarantees, in incoming and outgoing
traffic, a ratio of unsuccessful calls (with a technical failure)
attributable to EE.PP. in relation to the total of calls offered in low
traffic, which does not exceed, on the average, three (3%) percent.
6. To perform pursuant to APPENDIX NO. 1, measurements of traffic, grade
of service, and in general, all tests which permit the establishment of the
communications quality level between the two networks, and at the same time
to identify the need to make adjustments in the interconnection enhancement
program or its configuration. To test quality of service between the two
networks and to perform maintenance programs EE.PP. will provide to OCCEL
S.A. two telephone lines which shall have the nature of test numbers and
which shall be exempt from payment of connection fees and basic charges.
These lines shall have access to national long distance and cellular
telephone service. In the calls which are made from these lines to the
test numbers agreed upon by the parties, OCCEL S.A. shall be exempt from
the payment of the interconnection tariff in favor of EE.PP., but shall pay
the charges which correspond to the use of other networks. OCCEL S.A.
shall pay all of the charges for calls made from these lines to customers
other than the test numbers agreed upon by the parties. When considered
necessary, the tests shall be conducted jointly according to a previously
agreed upon schedule.
7. To submit to OCCEL S.A. all the required information to guarantee that
interconnection between the two networks fulfills the fundamental basic
plans established by the Ministry of Communications.
8. To verify monthly, or upon the written request of OCCEL S.A., the
correct operation of its outgoing and incoming links, immediately notifying
OCCEL S.A. of any damage.
9. To adopt all possible measures in order to prevent fraud and
generation of inconsistencies. By virtue of this obligation, EE.PP. shall
adopt the necessary measures order to prevent the access to OCCEL S.A.'s
CTN telephones without charge, not assigned, interrupted, retired and non
intelligent public phones.
<PAGE> 5
Access shall be permitted only to public and semi-public telephones and
which have the ability to charge for this type of calls, which must be
connected to centrals with the ability to identify the "A" subscriber
number.
10. EE.PP. must submit to OCCEL S.A. the identification number of the
"A" subscriber who originates the call at the centrals of its PSTN when it
is technically possible in accordance with the schedules of replacement or
upgrading of its telephone centrals.
11. To repair, within the terms and conditions established by the executives
responsible for the administration of the agreement, the failures reported
by OCCEL S.A.
12. Not to differentiate the OCCEL S.A. traffic for its own benefit or that of
any other operator.
13. To guarantee not to cause any damage to the physical and technical
infrastructure of OCCEL S.A. and also to respect the conditions stipulated
by the Internal Work Rules, EE.PP. being obligated to assume the costs of
repair of the damage caused, provided that such damage is imputable to
EE.PP. or to its contractors.
14. To permit access at any time to EE.PP. facilities to the persons
authorized by OCCEL S.A. in order to perform preventive and corrective
maintenance of the equipment for which it is responsible. OCCEL S.A.
shall provide, with sufficient advance notice, a list of these persons,
who must fulfill the conditions established in the EE.PP. Internal Work
Rules. In the event that access for the persons designated by OCCEL S.A.
were possible, due to the absence of an EE.PP. executive who authorizes
it, EE.PP. engages to permit the access in accordance with the terms and
conditions agreed upon by the persons responsible for the administration
of this agreement.
B. ADMINISTRATIVE, ECONOMIC AND FINANCIAL:
II. IN RELATION TO BILLING
1. EE.PP. shall include in the bill for services to its subscribers or users
the charges for calls which the consumers of its network originate to the
OCCEL S.A. network, including access charges to the EE.PP. PSTN and
charges for usage of the OCCEL S.A. CTN. The statement of calls and
charges for same shall be that received from OCCEL S.A. on magnetic tape
or any other media agreed upon by the parties.
EE.PP. may verify the statement of charges for access to its PSTN
submitted by OCCEL S.A. against the statement for control and verification
purposes which EE.PP. makes, in order to establish the difference of the
assessed charge units according to the agreed upon format. By mutual
agreement between the parties, a
<PAGE> 6
percentage of difference shall be established as the permitted margin of
tolerance.
In the event that the aforementioned difference exceeds the maximum
tolerance established, and there is no technical justification, the
access charges shall be billed according to the higher records, whether
the information corresponds to OCCEL S.A. or to EE.PP. If there is a
technical justification, the billing shall be according to the
information which is without errors, or by means of the combination of
the OCCEL S.A. and EE.PP. information.
OCCEL S.A. shall deliver the charge tapes and other attachments as may
be appropriate up to the tenth calendar day of each month inclusive for
inclusion by EE.PP. in the billing. The bill will contain the
information specified in APPENDIX NO. 2 of this agreement.
The costs due to inclusion on bills issued by EE.PP. of the calls made
by its subscribers from its PSTN to the OCCEL S.A. CTN, will be
chargeable to OCCEL S.A. and will be paid pursuant to APPENDIX NO. 2.
2. To rebill the accounts including extra charge to the subscribers who
have not paid the total amount of the OCCEL S.A. Cellular Mobile
Telephone Service within the time limits stipulated to pay the bill.
3. To maintain the records that could not be billed in each period and
recycle them in the next billing periods, and submit a report of these
amounts to OCCEL S.A. on a monthly basis.
4. Unless it has express and written authorization from OCCEL S.A., EE.PP.
may in no case bill any charge or amount derived from the rendering to
Cellular Mobile Telephone Service by OCCEL S.A., other than that
indicated in this contract.
5. To bill its subscribers or users for penalties or interest on late
payment at the maximum rate legally accepted, pertaining to amounts that
have not been collected within time limits stipulated on the bill, for
calls transmitted to the OCCEL S.A. PSTN. These penalties or interest
will be billed monthly for each month or fraction of delay and the
manner in which they shall be distributed shall be agreed upon by the
executives responsible for the administration of this agreement.
6. To submit to OCCEL S.A. though magnetic media or another procedure
mutually agreed upon, the billing inconsistencies for calls from the
PSTN to the CTN, with their justifications, and additionally those
records which will be entered on the definitive list of accounts
receivable, within fifteen (15) days following the end of every EE.PP.
billing period.
<PAGE> 7
7. To guarantee the integrity and quality of the billing of the calls
originated on the EE.PP. PSTN to the OCCEL S.A. CTN and to be responsible
for errors generated in the billing process in relation to the customers
and authorities when such errors are imputable to EE.PP.
II. IN RELATION TO COLLECTION OF CALLS ORIGINATED ON THE EE.PP. PSTN.
1. EE.PP. shall incorporate into the invoices which it issues for collection
from its subscribers and users a tear-off coupon which contains the total
sum which corresponds to OCCEL S.A. for the use of its cellular network and
for any other item which implies a debt in favor of OCCEL S.A. directly
related to the service. This coupon must be designed in such a manner that
the amount printed thereon can be deposited directly to the account of
OCCEL by the cashier of the institution at which the bill is paid. The
characteristics of the aforementioned coupon shall be defined by EE.PP.
OCCEL S.A. shall bear the expenses for the procedures with the collection
institutions with which EE.PP. has signed collection agreements or may sign
them in the future and the amounts which they charge for direct deposit to
the account of OCCEL S.A. of the sums corresponding thereto, counting on
the support and intervention of EE.PP. in order to facilitate entry into
the collection agreements with all of the institutions which agree to
collect bills for EE.PP. These measures must be instituted prior to
initiation of the collection with the independent coupon for OCCEL S.A.
2. During the initial months of validity of this contract, EE.PP. shall
collect the amounts billed to its subscribers and users for the calls
originated by them to the OCCEL S.A. CTN, transferring to the OCCEL S.A.
the portion corresponding to the fees for the use of its CTN and retaining
for itself the amount of the access charges for the use of its PSTN.
Within the ten (10) calendar days following the final payment date without
surcharge established for the EE.PP. subscribers, OCCEL S.A. shall submit
the reconcilement of accounts for the payment period which has just ended
to EE.PP. In that reconcilement the amount of the sums in favor of OCCEL
S.A. corresponding to the collections by the Treasury of EE.PP. during the
reconcilement period for the charges for the use of the CTN or OCCEL S.A.
in calls made by the subscribers and users of EE.PP., including public
telephones and telephones owned by EE.PP.; for the penalties and interest
due to default which correspond to OCCEL S.A.; for frauds and
inconsistencies which are the responsibility of EE.PP.; and for any other
item related to the services rendered by OCCEL S.A. to those subscribers
and users of EE.PP. during the reconcilement period shall be established.
From the aforementioned sums in favor of OCCEL S.A., deduction shall be
made in the reconcilement of the amount of the
<PAGE> 8
sums in favor of EE.PP for the interconnection charge paid on the calls
made by the subscribers and users of OCCEL S.A. to the network of
EE.PP.; for the billing and collection services rendered by EE.PP. to
OCCEL S.A.; for the frauds and inconsistencies which are the
responsibility of OCCEL S.A.; for payments of rent for lease
infrastructure owned by EE.PP. and for any other item in favor of EE.PP.
agreed upon in this contract and which may have been incurred during the
period for which the reconcilement is made. Likewise, the reconcilement
shall establish the amount of the claims made by the EE.PP. users.
EE.PP. has four (4) business days from receipt of the reconcilement
prepared by OCCEL S.A. to review it and initiate the procedure to pay it
if it finds it to be correct.
In the event that there is any observation on the part of EE.PP., the
parties shall have an additional period of four (4) business days to
resolve the differences which may exist and initiate the payment
procedure. As a result of the reconcilement the net amount in favor of
one of the parties must be established, which must be transferred by the
debtor party to the creditor party within the ten (10) calendar days
subsequent to the date on which the reconcilement is signed.
The preparation of the reconcilements of accounts shall be the
responsibility of OCCEL S.A. For that purpose. EE.PP. shall make
available to OCCEL S.A. within the four (4) business days following the
final date for payment without surcharge established for the EE.PP.
subscribers, the list of all of the accounts which have not been billed
in view of temporary or permanent inconsistencies; the list of the
inconsistencies billed in recycle; the total amount of the accounts
billed; the total amount collected by EE.PP on sums owed to OCCEL S.A.
and the list of all accounts rebilled with their corresponding maturity
periods. Copies of the resolutions of reinstatement and withdrawal of
subscribers shall also be included. The aforementioned information
shall be provided by EE.PP. on diskette, magnetic tape or any other
media which permits automatic processing, in accordance with the
agreement between the parties.
In the event that the reconcilement is not signed within the term
provided in this clause for reasons attributable to the debtor party,
the latter must initiate the procedures for payment, within the term
provided in this clause, in the amount of 70% of the balance in favor of
the creditor party which was reflected on the preliminary reconcilement.
3. EE.PP shall implement financing of the CTN service approved by OCCEL S.A
to the subscribers and users thereof. The manner in which the interest
pertaining to the financing of these facilities shall be agreed upon by
the executives responsible for the management of the agreement.
<PAGE> 9
The credit or discount notes issued by EE.PP. in order to grant the payment
facilities specified herein, or to resolve claims which require such credit
notes, shall not constitute a breach of the preceding provision when such
notes have been submitted to OCCEL S.A.
4. EE.PP. shall pay interest to OCCEL S.A. late payment at a rate
equivalent to the maximum allowed by Commercial Law for similar
transaction, monthly or proportional to the days elapsed from the
denumerability of the debt to the verification date, due to the delay in
the payment of the amounts collected for the use of the OCCEL S.A. CTN.
5. To maintain and continuously update the records of the active list of
accounts receivable and also to issue bills in order to collect them. The
management of recoveries on debtors in default shall be effected in
accordance with the provisions of APPENDIX NO. 2.
6. Within the four (4) business days subsequent to the date set as the
limit for payment term without any extra charge established for its
subscribers, EE.PP. shall submit to OCCEL S.A. through magnetic media or
another procedure mutually agreed upon and according to the design agreed
upon, the information stipulated in section B.II.2 of this clause.
7. EE.PP. shall suspend access to the mobile telephone network of OCCEL
S.A. to the subscribers requested by OCCEL S.A. by written notice, provided
that it is technically possible and will not affect access to other
networks, unless there is express written authorization from the operators
which could be affected.
8. To submit to OCCEL S.A. all documents that it requires and are within
the scope of EE.PP. to supply, in order that OCCEL S.A. may, under its own
responsibility, proceed with legal collection of late payments.
III. IN RELATION TO SUBSCRIBER CLAIMS:
Claims from EE.PP, subscribers related to calls to the OCCEL S.A.
mobile telephone network shall be handled pursuant to APPENDIX NO. 2.
IV. IN RELATION TO PUBLICATION IN THE TELEPHONE DIRECTORY:
To allow OCCEL S.A. to publish the list of its subscribers in the
Pereira-Dosquebradas Telephone Directory, OCCEL S.A. bearing the cost set for
this purpose in accordance with the contractual regulation and tariffs agreed
upon between EE.PP. and the company which published the aforementioned Telephone
Directory. Such list will only include the subscribers who wish to be included
in the Directory.
THIRD CLAUSE - OBLIGATIONS OF OCCEL S.A.: OCCEL S.A. engages to fulfill the
following technical, administrative, economic and financial obligations.
<PAGE> 10
A. TECHNICAL:
1. To guarantee the interconnection of its equipment which that of the
public switched telephone network of EE.PP., for both outgoing and
incoming traffic.
2. To acquire, install, operate, maintain and replace the required devices
and equipment for interconnection of the OCCEL S.A. CTN with the EE.PP
PSTN, including those which permits the assessing of charges for
outgoing and incoming calls, with specifications according to the
development plans from bote companies, and in the amount guarantee a
loss no greater than one percent (1%) during peak hours. This
obligation will be understood as fulfilled when by agreement between the
parties, such devices and equipment are provided by EE.PP by lease.
3. To permit the OCCEL S.A. subscribers to access the public switched
telephone network of EE.PP., as well as the new service which are
rendered to third parties through the EE.PP PSTN, in accordance with the
provisions of the Law and the agreement between the parties. OCCEL S.A.
shall permit the access to the EE.PP PSTN to all of its subscribers, but
shall have the power to withdraw it for those who specifically so
request.
4. To perform both preventive and corrective maintenance of systems and
transmission media by OCCEL S.A. which participate in the
interconnection.
5. To perform maintenance which guarantees, in incoming and outgoing
traffic, a ratio of unsuccessful calls (with technical failure)
attributable to OCCEL S.A. in relation to the total of calls generated
in low traffic, which shall not exceed, on the average, three (3%)
percent.
6. To perform tests, in accordance with the provisions of APPENDIX NO. 1,
as to traffic, grade of service and, in general, the tests which permit
establishment of the level of quality in the communications between the
two networks, as well as to identify the need to make adjustments in the
program of expansion of the interconnection or in the configuration
thereof. In order to verify service quality and perform scheduled
maintenance on the interconnection between the two networks, OCCEL S.A.
will provide to EE.PP. two cellular telephones which shall have the
nature of test numbers and which shall be exempt from the payment
connection fees and basic charges. These telephones shall have access
to national long distance and cellular telephone service. In the calls
made from these telephone to the test numbers agrees upon by the
parties, EE.PP shall be exempt from payment of the charge for the use of
the OCCEL S.A. cellular network but shall play the charges which
correspond to the use of other networks. EE.PP. shall pay all of the
charges for calls make from these telephones to subscribers
<PAGE> 11
other than the test numbers agreed upon by the parties. Location,
types of accessible traffic and usage time of these numbers and of the
telephones which have the nature of test numbers provided by one party
to the other will be agreed upon by the executives designated by parties
for the management of this agreement. When considered necessary, the
tests shall be conducted jointly according to a previously agreed upon
schedule.
In order to control the interconnection between the two networks, OCCEL
S.A. and EE.PP., within two (2) months after concluding this agreement,
will make an emergency plan and a schedule for preventive maintenance,
grade and quality of service measurements and evaluation of performance
of maintenance.
7. To provide EE.PP. with the information necessary in order to guarantee
that the interconnection between the two networks complies with the
basic fundamental plans established by the Ministry of Communications.
8. To verify, monthly or at the request of EE.PP., the correct operation of
its outgoing and incoming links, immediately communicating any damage
which may have occurred to EE.PP.
9. To adopt all required measures in order to avoid fraud on the EE.PP.
PSTN. due to calls originating from the OCCEL S.A. CTN.
10. OCCEL S.A. shall be liable for the access charges incurred from its CTN
to the EE.PP. PSTN.
11. In the event that OCCEL S.A. decides to install alternative transmission
media to those installed by EE.PP., OCCEL S.A. shall be responsible for
the respective maintenance.
12. To maintain the Ministry of Communications authorizations in force for
the OCCEL S.A. radio link systems which are part of the interconnection
and to pay the usage rights for the electromagnetic spectrum
frequencies which these require.
13. To repair failures reported by EE.PP. in accordance with the conditions
and terms agreed upon by the executives responsible for the management
of the contract.
14. Not to differentiate the EE.PP. traffic in its own favor or in that of
any other operator.
15. To guarantee that it will not cause damage to the physical and technical
infrastructure of EE.PP., and also will respect the conditions
established in its Internal Work Rules. OCCEL S.A. shall be responsible
for payment for all repair of damages caused, provided that such damage
is imputable to OCCEL S.A.or its contractors.
<PAGE> 12
B. ADMINISTRATIVE AND FINANCIAL
I. IN RELATION TO BILLING
1. To supply to EE.PP., in accordance with the provisions of number B.I.1 of
the second clause, all of the information necessary in order that EE.PP. may
bill the calls made by the EE.PP. PSTN users to the OCCEL S.A. CTN. This
information will be provided on a monthly basis prior to the 10th day of
each month; this information shall be incorporated by EE.PP. into the new
invoices which it issues, subject to verification of the corresponding
amounts.
If OCCEL S.A., due to facts imputable to it, does not effect timely
submission of the information necessary in order to bill the PSTN
subscribers, EE.PP. will prepare the bill, without including that which
pertains to the information that is not supplied by OCCEL S.A. in a timely
manner. The information that has not been processed will be included in the
next billing period. In this case, OCCEL S.A. shall pay to EE.PP., for the
month or fraction thereof, interest on late payment at a rate equivalent to
the maximum allowed by law for similar commercial transactions, on the
amount of access charges that have not been collected by EE.PP.
2. OCCEL S.A. shall provide to EE.PP., each month, the information necessary in
order to verify the payment of charges for access to its PSTN, which must
contain the number of minutes utilized from the CTN to the PSTN of EE.PP.,
indicating, in addition, the telephone number which received the calls and
the number of minutes utilized therefor.
3. To guarantee integrity and quality of records submitted to EE.PP. for
billing and to be liable in relation to the customers and authorities for
the errors generated in process where this information is used, when such
errors are imputable to OCCEL S.A.
4. To credit and pay to EE.PP. the amount corresponding to the increase in its
billing processing costs, stationery, printing and collection - when
applicable - and preparation of information for reconcilements of accounts,
arising from the billing of the calls originated by its subscribers to the
OCCEL S.A. CTN, in accordance with the provisions of APPENDIX NO. 2.
I.1 IN RELATION TO INTERCONNECTION TARIFFS AND OTHER INCOME GENERATED IN FAVOR
OF EE.PP.:
1. To credit and pay to EE.PP. on a monthly basis access charges incurred for
calls originated from the OCCEL S.A. CTN to the EE.PP. PSTN, pursuant to the
terms of Law 37 of 1993, Decree 741 of 1993 and Resolution Nos. 002 and 004
from the Telecommunications Regulatory Commission. Such access charges shall
be calculated based on EE.PP. and OCCEL S.A. records and applying to them a
procedure similar to that described in number
<PAGE> 13
B.I.1 of the second clause of this agreement. The payment of such charges
shall be effected through the deduction that EE.PP. shall make from the
amount owed to OCCEL S.A. for the use of its CTN during the same period in
which access charges indicated herein were incurred, or in cash payment in
the event that the amounts in favor of OCCEL S.A. were insufficient.
2. To effect payment to EE.PP. of interest on late payment at a rate equivalent
to the maximum allowed by commercial law for similar operations, monthly or
proportionately to days which have elapsed from the due date of payment to
the date on which this payment is verified, for the delay in the payment of
amounts in favor of EE.PP. and which EE.PP. has not been able to deduct from
the amount owed to OCCEL S.A. for payments for the use of its CTN.
3. To credit and pay to EE.PP. the respective costs of the use of the
transmission media and systems for the interconnection provided by EE.PP. by
lease. The rent shall include the respective equipment maintenance. The
amounts established by EE.PP. for these rents shall be those stipulated in
APPENDIX NO. 3.
4. To credit and pay to EE.PP. the costs for usage of assigned physical space,
usage, and supervision of buildings, towers and air conditioning and power
supply systems for the OCCEL S.A. equipment located within the EE.PP.
facilities. The amounts established by EE.PP. for these rents will be as
stipulated in APPENDIX NO. 3.
III. IN RELATION TO HANDLING OF CLAIMS
The claims which the subscribers of EE.PP. make in relation to calls to the
cellular mobile telephone network of OCCEL S.A. shall be handled in accordance
with the provisions of APPENDIX NO. 2.
FOURTH CLAUSE - RECIPROCAL OBLIGATION OF PARTIES:
A. IN RELATION TO THE ADMINISTRATION OF THE AGREEMENT:
In order to efficiently manage all matters relating to this agreement, each
party shall designate a maximum of three executives (Technical, Financial,
Administrative), who shall be responsible for discussion, consultation,
communication and resolution of the matters which require their intervention
and fall within their jurisdiction. Each party shall designate one of these
executives to be responsible for the coordination and channelling of
communications related to this agreement. These executives will meet as
required, at the request of any one of them.
Their functions are as follows:
1. To maintain orderly and accurate documentation related to this agreement,
recording, in chronological order, the correspondence, consultations,
decisions, solutions
<PAGE> 14
and in general every event to be considered as relevant for the history of
this agreement.
2. To establish and/or review the procedures relating to billing, collection,
payment facilities, account reconciliation, analysis of frauds and
inconsistencies, information to the subscribers, claims, fraud control and
repairs of damage or failures which arise in the interconnection.
3. To review and approve monthly billing reconciliation, collections and
offsetting of accounts for access charges and lease of infrastructure and
transmission media, establishing the amount each party owes to the other.
In the development of such reconciliation all amounts pending explanation
for any of the subjects mentioned above will be followed up.
4. To agree as to solutions concerning the differences of opinion which may
arise between the parties with regard to the interpretation, development and
execution of any of the stipulations within this agreement.
5. According to measurements performed, to make all required decisions to
guarantee the fulfillment of the grade of service, in accordance with the
stipulations of the second and third clauses of this contract.
6. To review the interconnection configuration and capacity.
7. To determine the source of frauds and inconsistencies, establish their
solution mechanisms and establish responsibility for their occurrence.
8. To determine the source of damages caused to equipment and devices owned by
each party, to assess their value and determine the responsibility for their
occurrence.
9. To define the EE.PP. PSTN subscribers who shall be allowed to access the
OCCEL S.A. CTN.
10. The rest derived from the execution of this agreement.
The decisions agreed upon by these executives shall be of mandatory fulfillment
by the parties and must be recorded in instruments signed by the parties.
In the event of disagreement between these persons as to a particular subject,
any of them may request that the subject be discussed and decided by the legal
representatives of EE.PP. and OCCEL S.A.
B. IN RELATION TO DAMAGES AND THEIR REPAIR
1. To immediately issue notification as to damages detected in the
interconnection which require the intervention of any of the parties. The
respective party must repair the damage within the term established by the
executives designated to manage the
<PAGE> 15
agreement and take the required measures to repair it as soon as possible.
Unjustified delays which cause damage will result in repair entirely in
favor of the affected party.
2. To have qualified staff available at any time to repair system failures
pursuant to the terms and time limits herein.
C. IN RELATION TO INTERCONNECTION DIMENSIONS:
The parties engage to ensure that the installed capacity of the interconnection
equipment matches the dimensions calculated on the basis of demand and traffic
projections. In the event that one of the parties has any difficulty in the
expansion of the required capacity, it may sign agreements with the other party
in order to obtain the supply of the equipment or systems required.
D. IN RELATION TO LOCATION OF THE OCCEL S.A.EQUIPMENT:
According to availability, EE.PP. shall provide OCCEL S.A. with all facilities
for the location of its interconnection equipment and that pertaining to its
CTN, providing physical spaces, power supply, air conditioning and guard. In
the same way EE.PP. shall facilitate the installation of the OCCEL S.A.
equipment. The cost of these facilities shall be assumed by OCCEL S.A. and the
amount will be as stipulated in APPENDIX NO. 3.
E. IN RELATION TO INTERCONNECTION CONDITIONS:
Interconnection technical conditions such as grade of service, tariffs, routing,
numbering, signalling and operation shall be regulated in accordance with the
stipulations of the Ministry of Communications, the Telecommunications
Regulatory Commission and specifically pursuant to APPENDIX NO. 1 to this
contract.
FIFTH CLAUSE - LIABILITY OF THE PARTIES
1. Neither party shall be liable for the non-fullfillment of any contractual
obligation caused by force majeure or inevitable accidental duly verified.
If both parties consider such circumstances as obstructing the execution of
the agreement for a term exceeding six (6) months, either party may
terminate the agreement by written notice to the other party.
2. Each party must guarantee the integrity and accuracy of all information
submitted to the other party, and is obliged to be liable to the other
party, customers and authorities for errors generated in processes where
such information is used, as long as such errors are imputable thereto.
3. Each party must pay to the other party the respective amounts for calls
which cannot be billed to the subscribers or users owing to the fact that
they are due to frauds or inconsistencies. Appendix No. 2
<PAGE> 16
specifies the manner in which liability for these payments shall be
determined. Amounts due for frauds and inconsistencies shall be included
within the monthly reconciliations.
4. Liability to the subscriber: In all of their relationships with the
public, both EE.PP. and OCCEL S.A. shall act governed by the principles of
honesty, integrity, loyalty and service and shall not act in any manner
which discredits, affects or damages the reputation of the other party in
any way. Both parties shall act in good faith, honesty and diligently,
using their best efforts in order to guarantee subscriber satisfaction and
the rendering of the services offered.
5. Social responsibility: In the interconnection and the execution of the
agreement, the parties shall take into consideration the fact that their
goal is the providing of telecommunication public services in the charge of
the State, in a continuous and efficient manner.
SIXTH CLAUSE - INTERCONNECTION OF LIMIT:
In order to limit the liability of the parties, the interconnection limit shall
be general digital distributors or optical distributors of EE.PP. centrals
directly connected with the OCCEL S.A. CTN, and in consequence every company
must assume the costs within its own network.
SEVENTH CLAUSE - SUBMISSION TO REGULATION:
The interconnection between the two networks is based upon the plans,
regulations, definitions and standards of the Ministry of Communications, and in
the absence thereof, upon the plans, definitions and standards of the
International Telecommunications Union (ITU) and other international bodies of
jurisdiction, in which Colombia forms a part by virtue of international
agreements and covenants.
EIGHTH CLAUSE - INTERCONNECTION DIMENSIONS:
The quality of the circuits required for different links or routes between two
networks, both for incoming and outgoing traffic as well as the quantities for
future expansion, shall be calculated by OCCEL S.A., reviewed by EE.PP. and
shall be established according to instruments signed by the parties. This
dimensioning will be reviewed at least every six months to adjust it to traffic
conditions. The dates of entry into service of links for future extensions
shall be mutually agreed upon, taking into account that the grade of service and
development plans of each company may not be affected by the delay by one party
in the execution of such extensions.
NINTH CLAUSE - RELIABILITY AND AVAILABILITY:
Both parties should maintain the interconnection minimum levels of reliability
in order to guarantee service continuity. The reliability shall be measured in
terms of the time in which the interconnection is normally operating. The
minimum reliability for the subscriber to interconnection equipment is 99.99%
measured over a monthly period, which means that the total of system dropped
times which affect the whole
<PAGE> 17
interconnection, should not be higher than 4.4 minutes/month. The
interconnection will have alternate routes as agreed upon by the parties.
TENTH CLAUSE - AUDITING: Each party may directly or through a third duly
authorized party undertake the necessary review to establish account accuracy
and the faithful compliance with the procedures agreed upon by virtue of this
agreement. The cost incurred for this shall be paid by the party who is
reviewing. The party whose accounts and procedures shall be reviewed must
provide all required facilities. In order that the information may be available
for any auditing procedures, it is required that the tape for the billing and
reconcilement of account which OCCEL provides to EE.PP. contain the following
information, without detriment to the additional information which may be agreed
upon by the parties:
1. Number of minutes per call, both incoming and outgoing on the EE.PP. PSTN.
2. Total number of minutes, incoming and outgoing.
3. Number of minutes charged per call, both for the interconnection tariff
and for use of the OCCEL S.A. CTN.
4. Total number of minutes charged, incoming and outgoing.
Each institution shall keep the information received from the other for Audit,
for the time period which it considers appropriate.
ELEVENTH CLAUSE - EXEMPTION FROM LIABILITY IN THE EVENT OF INTERRUPTION: Neither
party shall be liable in relation to the other party for damages causing the
interruption or failure of its telephone systems or the interconnection between
their networks, when the reason for such events is not imputable to either of
the two parties or their contractors. In any event of interruption, neither
party shall grant to their customers the facilities to institute liability
action against the other party.
TWELFTH CLAUSE - CONFIDENTIALITY OF INFORMATION: All of the correspondence and
information exchanged between the parties for the fulfillment of this agreement,
concerning subscriber data, billing, collection, market growth forecast, and
also that information marked as confidential or proprietary information must be
treated and received by the recipient as confidential and secret. The verbal
information that is provided as confidential, must be confirmed as such in
writing within eight (8) days following the provision thereof. Confidential
information must be restricted to the persons and employees of the recipient
party which requires it in order to fulfill the objectives herein. Each party
must inform its employees of the type of information which is to be considered
of confidential nature, in accordance with the provisions of this clause, and of
the care to be taken with it.
<PAGE> 18
The obligations imposed upon the parties pursuant to this clause shall not
apply to the following information: a. Information which becomes public
knowledge through actions of persons other than the recipient party. b. When
information is required by an authority of jurisdiction; in such event the
disclosure shall be restricted to the fulfillment of the respective order.
Both parties expressly declare that the transmission of information which is
considered to be confidential, in accordance with the stipulations of this
clause, to third parties that are not duly authorized to request and receive it
will result in the full indemnity of damage caused by this disclosure.
THIRTEENTH CLAUSE - DURATION OF AGREEMENT: This agreement has a duration of
five (5) years from the date of its execution, and may be extended by equal
periods, as long as the parties do not issue notification to the contrary in
writing within sixty (60) calendar days prior to its expiration or the
expiration of the extension.
FOURTEENTH CLAUSE - AMENDMENTS TO THE AGREEMENT: During the terms of this
agreement it may be amended, except in those clauses imposed by Law; in order
to do so the interested party should notify the other party in writing. In the
event that an agreement is not reached within the sixty (60) calendar days
following the first communication date, OCCEL S.A., EE.PP. or both parties will
request intervention of the Telecommunications Regulatory Commission in the
dispute, and in the meantime, the conditions established herein shall be in
force. The decision of the Commission shall be binding upon both parties.
FIFTEENTH CLAUSE - SOLUTION OF CONTROVERSIES: In the event of differences
arising between the parties by virtue of the present agreement which are
eminently technical in nature, and which cannot be resolved by the parties
directly, they shall be submitted for the consideration of a Technical
Committee composed of three (3) experts in the technical Telecommunications
subject matter who shall be designated by the parties, by mutual agreement. In
the absence of agreement, the Committee shall be appointed by the ACIEM. The
Technical Committee may conduct the tests which it considers necessary and
shall have all of the information which it requests from the parties and which
is related to the matters which are the subject of the difference. The
Technical Committee shall decide as to the matter within a maximum term of
three (3) months from the date upon which it commenced its activity, and
decisions which it adopts shall be of mandatory fulfillment by the parties.
The differences which are not eminently technical in nature and which arise
between the parties by virtue of this agreement, as to the interpretation,
execution, fulfillment, termination or dissolution of this agreement, shall be
submitted for the consideration of a Court of Arbitration. The members of this
Court shall be designated by the parties by mutual agreement. In the event
that no agreement is reached between the parties, the designation of the
arbiters shall be made by the Chamber of Commerce of Pereira. The Court of
<PAGE> 19
Arbitration shall be subject to Colombian law, shall operate in the city of
Pereira and shall make judgement by law within a maximum term of six (6) months
following the constitution of the Court. The cost of the operation of the
Court of Arbitration, or the cost derived from the fees and the other
activities developed by the Technical Committee, shall be borne equally by the
parties. The party whose claims have been denied by the Court of Arbitration
or the Technical Committee shall return to the other party the sum contributed
for the operation of the Court or to cover the fees and activities carried out
by the Committee.
SIXTEENTH CLAUSE - DOCUMENTS OF AGREEMENT: The following documents are an
integral part of this agreement and compliance therewith is therefore mandatory.
1. APPENDIX NO. 1: Technical Aspects
2. APPENDIX NO. 2: Financial, economic
and administrative aspects
3. APPENDIX NO. 3: Lease costs of systems and
transmission media, physical spaces and infrastructure.
SEVENTEENTH CLAUSE - APPLICABLE LAW: This agreement and all controversies that
might arise must be subject to this agreement, to the Law and to the Colombian
Courts.
EIGHTEENTH CLAUSE - DOMICILE: For pertinent legal effects it is understood
that this agreement shall be concluded in the city of Pereira.
NINETEENTH CLAUSE - WAIVER: The obligations of the parties and rights granted
by this agreement to each party shall not be considered as susceptible to
waiver, by virtue of practices or customs in a contrary sense. The tolerance
of one party in accepting the non-fulfillment of any of the obligations assumed
by the other should not be considered as acceptance of the tolerated fact nor
as precedent for its repetition.
TWENTIETH CLAUSE - PARTIAL NULLITY: The nullity, invalidity or legal
impossibility of the fulfillment of one or more clauses of this contract shall
not affect the other clauses and the contract shall be interpreted as if the
clause which is invalid, null or impossible to fulfill did not exist.
TWENTY-FIRST CLAUSE - TITLES: Clause titles herein are only incorporated for
the purpose of facilitation of reference and cannot by used as an isolated
element for interpretation of the agreement.
TWENTY-SECOND CLAUSE - INTEGRITY OF THE AGREEMENT: Both OCCEL S.A. and EE.PP.
have read this agreement and understood and accepted the terms, conditions and
stipulations herein, which have been agreed to in order to maintain the high
standards of the quality of service and the customer service and to protect the
reputation of both OCCEL S.A. and EE.PP. brand names. Neither party is
obligated by declarations of their executives, employees or agents which are
contrary to the provisions of this agreement. This agreement contains the
integral agreement
<PAGE> 20
between the parties and previous contracts, agreements or covenants existing
between the parties, verbal or written, are null and void.
TWENTY-THIRD CLAUSE - WAIVER OF SUMMONS: To collect any amount of money which
parties owe by virtue of this agreement, it shall not be necessary to establish
default or to require its payment, rights which the parties waive.
TWENTY-FOURTH CLAUSE - BUDGET IMPUTATION. EE.PP. is obliged to provide in its
budget for the income and expenses incurred by the execution of this agreement
during the term of validity of the current budget and during succeeding budget
terms.
TWENTY-FIFTH CLAUSE - STAMP TAX: The stamp tax incurred by this agreement
shall be paid by OCCEL S.A. In view of the fact that EE.PP. is a public law
entity exempt from payment of the stamp tax, as provided by article 532 of the
Tax Law, OCCEL S.A. is to pay one half of the pertinent stamp tax.
TWENTY-SIXTH CLAUSE - AGREEMENT REVIEW: The parties acknowledge that this
agreement must be made known to the Ministry of Communications and the
Telecommunications Regulatory Commission. In the event that these entities
require addition to this agreement of information or specifications pursuant to
the twenty-fourth clause of the concession agreement concluded between the
Ministry of Communications and OCCEL S.A., the parties concluding this
agreement are committed to sign a supplementary agreement which incorporates
such additions. In the same manner, the parties declare that they know that
EE.PP. must offer the same technical and economic conditions to all cellular
mobile telephone operators who conclude an interconnection agreement with
EE.PP., and in consequence any advantage or privilege granted to one of them
and not offered to the rest, could be subject to sanction for both EE.PP. and
the favored cellular mobile telephone operator.
TWENTY-SEVENTH CLAUSE - COMMUNICATIONS: Except as otherwise agreed upon, all
communications between parties shall be written and shall be considered as valid
and sufficient if they are sent by certified mail or by fax, verifying by
telephone the sending and receipt thereof, to the following addresses and fax
numbers:
To Empresas Publicas de Pereira
Division Financiera [Finance Division]
Carrera 8a. No. 22-59
Telephone 254272
To OCCEL S.A.
Direccion de Interconexion [Interconnection Dept.]
Calle 55 No. 49-101
Telephone 5129090
In the event that any of the parties changes any of this information, it will
be responsible for reporting the new
<PAGE> 21
information to the other party in the manner previously stipulated herein.
Communications performed according to stipulated herein shall be considered as
received upon the first to occur of: five (5) days following the delivery or
when they have been receive personally by the addressee.
TWENTY-EIGHTH CLAUSE - CONCLUDING AND EXECUTION : This agreement is
concluded upon the signature thereof and for its execution requires the payment
of the stamp tax and its publication in the Municipal Newspaper of Pereira.
This requirement shall be understood to be fulfilled by the payment of the
publication fees. Both expenses shall be assumed by OCCEL S.A.
In testimony whereof, this agreement is signed in the city of Pereira on the
______ day of nineteen hundred and ninety five (1995).
By OCCEL S.A. By EMPRESAS PUBLICIAS DE
PEREIRA
GILBERTO ECHEVERRI MEJIA JORGE EDUARDO MURILLO MEJIA
Oct. 25, 1995 Nov. 3, 1995
<PAGE> 22
APPENDIX NO. 1
TECHNICAL ASPECTS
FIRST CLAUSE - OBJECT: The object of this appendix is to supplement and specify
the definitions of terms and procedures relating to the technical aspects of the
interconnection agreement.
SECOND CLAUSE - DEFINITIONS: EE.PP. and OCCEL S.A. agree to the following
definitions for the terms related as follows:
SWITCHING EQUIPMENT FOR THE INTERCONNECTION: All devices which are part of the
OCCEL S.A. MSC or EE.PP. switching centers, and are directly connected with
transmission systems for the intercommunication between the two networks.
GRADE OF SERVICE: Ratio by percentage between the quantity of unsuccessful call
attempts due to congestion or failure, and the total of call attempts recorded
in a measurement or a test.
CONGESTION GRADE: Ratio by percentage between the quantity of unsuccessful call
attempts due to congestion and the total of call attempts recorded in a
measurement or a test.
TECHNICAL FAILURES INDEX: Ratio by percentage between the quantity of
unsuccessful call attempts due to switching or transmission equipment failures,
and the total of call attempts recorded in a measurement or a test.
THIRD CLAUSE - CONNECTION POINTS AND ROUTING: The parties agree that at the
beginning the interconnection points between EE.PP. and OCCEL S.A. networks
shall be the EE.PP. combined central designated as Coliseo and the OCCEL S.A.
MSC located in Pereira. However, the executives designated by the parties to
manage this agreement may agree by means of a mutually executed instrument as to
the creation of other connecting points between their two networks, according to
traffic and quality of service requirements.
At the beginning, alternative routes to handle traffic between the EE.PP. and
OCCEL S.A. networks will not be available. However, the establishment of
alternative routes, through third party networks, may be agreed upon by means of
an instrument signed by mutual agreement of the executives designated by parties
to manage this agreement.
FOURTH CLAUSE - SIGNALLING: At the beginning the interconnection shall be
effected utilizing signalling by associated channel. The line signalling system
shall be the Digital R2 pursuant to CCITT recommendations Q.421, Q.422 and
Q.424. The record signalling system will be MFC type LME.
Upon mutual agreement of the parties, or when the Ministry of Communications so
stipulates as mandatory, the signalling scheme by common channel No. 7 of CCITT
on the national standard version of Colombia in force on the date of
establishment will be adopted.
<PAGE> 23
FIFTH CLAUSE - TEST AND TRAFFIC MEASUREMENT PLAN : In order to evaluate the
quality of service, and calculate the grade of service, the parties agree to
make test calls from the OCCEL S.A. MSC and EE.PP. switching centrals. These
calls shall be made on a periodic basis and also in events which demand the
performance of special tests. The quantity of test calls, their centrals and
origin and destination numbers, days and hours, and the way they are recorder,
shall be agreed upon by the executives designated by
the parties to manage this agreement.
At least once a month, traffic, quality and grade of service measurements of
real traffic on interconnection routes which interconnect the two networks
will be performed. The quality of service indicators, quantity of measurement
days, hours and type of telephone devices - trunking circuits, signalling
devices, software records, etc. - upon which the measurements are to be made
shall be agreed upon by the executives designated by the parties to manage this
agreement. These executives may also agree upon the conducting of activities
of tracking of failures detected in the interconnection. For the diagnosis of
quality of service and tariff problems there will also be joint analysis of
calls of no longer than six seconds in duration, calls longer than one hour,
calls with identification of caller number failure, channels with high index of
failure or loss produced, and series with a high index of unsuccessful calls.
In testimony whereof, this agreement is signed in the city of Persia on the
- ------- day of --------------- of nineteen hundred and ninety -five (1995).
By OCCEL S.A. By EMPRESS PUBLICAS DE
PEREIRA
GILBERTO ECHEVERRI MEJIA JORGE EDUARDO MURILLO MEJIA
President General Manager
Oct. 25, 1995 Nov. 3, 1995
<PAGE> 24
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 10.08
INTERCONNECTION AGREEMENT BETWEEN SOCIEDAD OCCIDENTE Y CARIBE - CELULAR S.A.
AND EMPRESA DE TELECOMMUNICACIONES DE ARMENIA - TELEARMENIA
Between the undersigned, GILBERTO ECHEVERRI MEJIA, resident of Medellin, with
citizens card number 3.302.711 of Medellin, who is acting as the president and
Legal Representative of OCCIDENTE Y CARIBE CELULAR, S.A. - OCCEL S.A. - a mixed
economy society with private capital in the majority, domiciled in Pereira,
that for the effects of this agreement will be referred to as OCCEL on one
part, and on the other part RUBEN DARIO CARCIA RODRIGUEZ, resident of Armenia,
identified with citizens card number 7'534.244 of Armenia, who is acting as the
General Manager and Legal Representative of the Empresa de Telecomunicaciones
de Armenia - TELEARMENIA -, an industrial and commercial company of national
order, who hereinafter will be referred to as TELEARMENIA, this interconnection
agreement is concluded and shall be governed pursuant to the clauses within
this document, subject to the following considerations and definitions:
CONSIDERATIONS:
FIRST. OCCEL is the awardee of the concession which has as it object the
rendering of a Cellular Mobile Telephone Service on the "A" network in the
Western region of Colombia pursuant to agreement 000005 concluded with the
Ministry of Communications on March 28, 1994.
SECOND. The Law 37 of 1993 and the Decree 741 of the same year authorized the
access right of the Cellular Mobile Telephone operators (CTN) to the public
switched telephone networks (PSTN) already established in the country, for the
interconnection of the elements of their networks and to manage traffic, and
also stipulating the obligation of the public switched telephone network
operators to guarantee the access to their Mobile Switched Centers (MSC),
providing the facilities for the location of interconnection equipment within
equipment rooms of these centrals and, at the same time, the facilities of AC
power supply, preventive and corrective maintenance, and also the other
facilities that are technically and administratively required, all at the
expense of the Cellular Mobile Network Operator.
THIRD. Interconnection will be subject to the equal access principle -
pursuant to article 66 Decree 741 of 1993 by virtue whereof the MSC operators
are obliged to provide interconnection under equal technical and economic
conditions to every CTN operator.
FOURTH. By means of Resolution 002 of 1993, the Telecommunications Regulatory
Commission, exercising the powers conferred upon it by Decree 2122 of 1992,
established that for a one (1) year term from October thirteenth (13th) of
1993, the fee for the interconnection between the PSTN subscriber terminal and
the local switching center will be TWENTY-FOUR ($24) Colombian pesos per
minute, for both outgoing calls and incoming calls to the PSTN. This tariff
was established based on the variables of cost per line,
<PAGE> 2
percentage of line usage, operation costs, maintenance and management per
line per year, line traffic per year, the useful life of the equipment and
network, the replacement thereof and the rate of discount or reasonable profit
to the PSTN operator. Furthermore, by means of Resolution 004 of 1993 issued by
the Telecommunications Regulatory Commission, the principle was established
whereby the party calling to or from the cellular network must assume the costs
thereof. The fee stipulated herein shall vary according to the regulations in
force.
FIFTH. According to regulations governing the interconnection between public
switching telephone networks and cellular networks, TELEARMENIA and OCCEL have
decided to establish their mutual rights and obligations by means of this
instrument.
DEFINITIONS:
For the effects of this agreement, the following terms will have the same
meaning stipulated as follows for every one of them, unless in the text of this
document a different scope were expressly assigned.
AGREEMENT: Means the present interconnection agreement, in the interpretation
whereof there shall be taken into account all incorporated appendices and
legislation in force with regard to the subject. Likewise, all amendments
agreed to between the parties during the term this agreement are an integral
part thereof.
OCCEL S.A.: Means OCCIDENTE Y CARIBE CELULAR S.A., concessionaire corporation
of a Cellular Mobile Telephone Service for the Western area of the "A" Network.
TELEARMENIA: Means Empresa de Telecommunications de Armenia.
CTN: Means Cellular Telephone Network.
PSTN: Means Public Switched Telephone Network.
TERMINAL EQUIPMENT: Means the portable, transportable, mobile, fixed or
another type of handset that OCCEL has permitted its subscriber or user to use
in order to access the cellular mobile telephone service, fulfilling the terms
and conditions stipulated by the rules governing this service.
CONSUMER: Means any user of a public telecommunications service, using either
a private or public handset connected and attended by the PSTN operator, or the
terminal equipment activated and attended by a CTN operator.
OCCEL SUBSCRIBER: An individual or legal entity with an agreement in force
with OCCEL for the rendering of a Cellular Mobile Telephone Service.
TELEARMENIA SUBSCRIBER: An individual or legal entity with an agreement in
force with TELEARMENIA for the rendering of
<PAGE> 3
a fixed basic telephone service or any of the value added services.
OCCEL USER : Means the subscriber or person who, without being the subscriber,
uses and takes advantage of the OCCEL Cellular Mobile Telephone Service.
TELEARMENIA USER : Means the subscriber or person who, without being the
subscriber, benefits from the service making use of the fixed line telephone
service assigned by TELEARMENIA to the subscriber.
INTERCONNECTION CIRCUIT : The device which interconnects the mobile switching
center (MSC) of OCCEL with the telephone central of TELEARMENIA.
INTERCONNECTION TRANSMISSION MEANS : These consist of insulated pairs, coaxial
and fiber optic cables and their respective regenerators or repeaters and radio
systems repeaters or satellite link repeaters, used to connect the OCCEL MSC
and the TELEARMENIA telephone centrals directly interconnected to them.
MSC : Means Mobile Switching Center of Cellular Mobile Telephone Network.
INTERCONNECTION TRANSMISSION SYSTEMS : These consist of terminal equipment
connected to the OCCEL MSC with the TELEARMENIA Telephone centrals directly
interconnected to them. This terminal equipment can be analog, digital and
optic transmitters and/or receivers of any of the above-mentioned means of
transmission, including radio systems or satellite links.
FIRST CLAUSE - OBJECT OF THE AGREEMENT : The object of this agreement is to
establish the technical, operative, administrative, economic, financial and
legal rights and obligations which shall regulate the interconnection of the
TELEARMENIA public switched telephone network to the OCCEL Cellular Mobile
Telephone Network.
SECOND CLAUSE - TELEARMENIA OBLIGATIONS : TELEARMENIA engages to fulfill the
following technical, administrative, economic and financial obligations:
A. TECHNICAL:
1. To guarantee the interconnection of its equipment with the OCCEL
cellular mobile telephone network equipment, both for outgoing and
incoming traffic, in accordance with the provisions of Law 37 of 1993
and Decree 741 of 1993.
2. To acquire, install, operate, maintain, and replace the equipment and
elements required in its network for the interconnection of its
telephone system with the OCCEL CTN in order to guarantee that incoming
and outgoing traffic can be transmitted according to the development
plans of both companies, and in the quantity which guarantees that in
the circuits interconnecting the
<PAGE> 4
TELEARMENIA PSTN centrals with the OCCEL MSC in Pereira, call drops with
automatic access will not exceed one (1%) percent in peak hours,
excluding losses due to the equipment located between the TELEARMENIA
subscriber and the TELEARMENIA switching center directly interconnected
with the MSC of OCCEL.
3. To permit all of the TELEARMENIA subscribers whose "A" subscriber number
can be automatically identified and transmitted, to have access to the
OCCEL cellular mobile telephone service, to the customer service
provided by OCCEL, and also to the new services rendered to third
parties through the OCCEL CTN, in accordance with the provisions of the
Law and the agreement between the parties. TELEARMENIA shall permit
access to the CTN of OCCEL for all of its subscribers, but shall have
the right to withdraw it for those who specifically so request and
provided that this is technically feasible.
4. To perform maintenance, both preventive and corrective, of the systems
and transmission media belonging to TELEARMENIA and used by OCCEL under
lease. The tariff agreed to by the parties for the leasing of these
systems and media includes the respective maintenance cost.
5. To perform maintenance which guarantees, in incoming and outgoing
traffic, a ratio of unsuccessful calls (with a technical failure)
attributable to TELEARMENIA in relation to the total of calls offered in
low traffic, which does not exceed, on the average, three (3%) percent.
6. To perform pursuant to APPENDIX NO. 1, measurements of traffic, grade of
service, and in general, all tests which permit the establishment of the
communications quality level between the two networks, and at the same
time to identify the need to make adjustments in the interconnection
enhancement program or its configuration. To test quality of service
between the two networks and to perform maintenance programs,
TELEARMENIA will provide to OCCEL two telephone lines with the nature of
test numbers and which shall be exempt from payment of connection fees
and basic charges. These lines will have access to national long
distance and cellular telephone service. In the calls which are made
from these lines to the test numbers agreed upon by the parties, OCCEL
shall be exempt from payment of the interconnection fee in favor of
TELEARMENIA but shall pay the charges which correspond to the use of
other networks. OCCEL shall pay all charges for calls made from these
lines to subscribers other than the test numbers agreed upon by the
parties. When considered necessary, the tests shall be performed
jointly following a previously agreed upon program.
7. To submit to OCCEL all the required information to guarantee that
interconnection between the two networks
<PAGE> 5
fulfills the fundamental basic plans established by the Ministry of
Communications.
8. To verify monthly, or upon the request of OCCEL, the correct operation
of its outgoing and incoming links, immediately notifying OCCEL of any
damage.
9. To adopt all measures in order to prevent fraud and generation of
inconsistencies. By virtue of this obligation, TELEARMENIA shall adopt
the necessary measures order to prevent the access to OCCEL's CTN
telephones without charge, not assigned, interrupted, retired and non
intelligent public phones. Access shall be permitted only to public and
semi-public telephones and which have the ability to charge for this
type of calls, which must be connected to centrals with the ability to
identify the "A" subscriber number.
10. TELEARMENIA must submit to OCCEL the identification number of the "A"
subscriber who originates the call at the centrals of its PSTN.
11. To repair, within the terms and conditions established by the executives
responsible for the management of the contract, the failures reported by
OCCEL.
12. Not to differentiate the OCCEL traffic for its own benefit or that of
any other operator.
13. To guarantee not to cause any damage to the physical and technical
infrastructure of OCCEL and also to respect the conditions stipulated by
the Internal Work Rules, TELEARMENIA being obligated to assume the costs
of repair of the damage caused, provided that such damage is imputable
to TELEARMENIA or to its contractors.
14. To permit access at any time to TELEARMENIA facilities to the persons
authorized by OCCEL in order to perform preventive and corrective
maintenance of the equipment for which it is responsible. OCCEL shall
provide, with sufficient advance notice, a list of these persons, who
must fulfill the conditions established in the TELEARMENIA Internal Work
Rules. In the event that access for the persons designated by OCCEL
were not possible, due to the absence of an TELEARMENIA executive who
authorizes it, TELEARMENIA engages to permit the access in accordance
with the terms and conditions agreed upon by the persons responsible for
the management of this contract.
B. ADMINISTRATIVE, ECONOMIC AND FINANCIAL:
II. IN RELATION TO BILLING
1. TELEARMENIA shall include in the bill for services to its subscribers or
users the charges for calls which the consumers of its network originate
to the OCCEL network, including access charges to the TELEARMENIA PSTN
and charges for usage of the OCCEL CTN. The
<PAGE> 6
statement shall be received from OCCEL on magnetic tape or any other
media agreed upon by the parties.
TELEARMENIA may verify the statement of charges for access charges to
its PSTN submitted by OCCEL against the statement for control and
verification purposes which TELEARMENIA makes, based on calls recorded
in their digital centrals, to establish the difference of the charge
units assessed according to the agreed upon format. By mutual agreement
between the parties, a percentage of difference shall be established as
the maximum tolerance permitted.
In the event that the aforementioned difference exceeds the maximum
tolerance established, and there is no technical justification, the
access charges shall be billed according to the higher records, whether
the information corresponds to OCCEL or to TELEARMENIA. If there is a
technical justification, the billing shall be according to the
information which is without errors, or by means of the combination of
the OCCEL and TELEARMENIA information.
The parties shall agree monthly upon the dates and times for cutting the
billing period. TELEARMENIA may include in the same bill the charges
for other items and even charges from the other cellular network
operators. The bill will contain the information pursuant to APPENDIX
NO. 2 of this agreement.
2. To rebill the accounts including extra charge to the subscribers or
users who have not paid the total amount of the OCCEL Cellular Mobile
Telephone Service within the time limits stipulated to pay the bill.
3. To maintain the records that could not be billed in each period
(recycle) and are susceptible to be billed again in the next period, and
submit a report of these amounts to OCCEL. The executives responsible
for the billing at TELEARMENIA and at OCCEL shall jointly define the
number of periods during which the unbilled records will be recycled,
with the objective of the billing of each call actually made by a
subscriber or user of TELEARMENIA. When the impossibility of billing a
call is established, it shall be treated as a definitive inconsistency
with its appropriate justification.
4. Unless it has express and written authorization from OCCEL, TELEARMENIA
may in no case bill any charge or amount derived from the rendering of
Cellular Mobile Telephone Service by OCCEL other than that indicated in
this agreement.
5. To bill its subscribers or users for penalties or interest on late
payment at the maximum rate legally accepted, pertaining to amounts that
have not been collected within time limits stipulated on the bill, for
calls transmitted to the OCCEL CTN. These penalties or interest will be
billed monthly for each
<PAGE> 7
month or fraction of delay and shall correspond TELEARMENIA so long as
that institution is responsible for a percentage of the sums billed in the
terms established in number B.II.1 of the second clause. If reconcilements
of accounts are effected on the sums collected, this interest shall be
distributed in the manner agreed upon by the executives responsible for the
administration of this contract. This penalty shall not apply in the event
of any inevitable accident or force majeure, or in those cases specifically
established in the legislation in force.
6. To submit to OCCEL though magnetic media or another procedure
mutually agreed upon, the records of calls not billed, the records of calls
pending payment which were billed and the records of frauds and billing
inconsistencies for calls from the PSTN to the CTN, with their
justifications, and additionally those records which will be entered on the
definitive list of accounts receivable, within eight (8) days following the
end of every TELEARMENIA billing period.
7. To guarantee the integrity and quality of the billing of the calls
originated on the TELEARMENIA PSTN to the OCCEL CTN and to be responsible
for errors generated in the billing process in relation to the customers
and authorities when such errors are imputable to TELEARMENIA.
II. IN RELATION TO THE TRANSFER OF THE SUMS CORRESPONDING TO THE USE OF THE
OCCEL CELLULAR NETWORK
1. From the total of the sums paid for the use of the OCCEL cellular
network in the record which OCCEL must deliver on a monthly basis to
TELEARMENIA for the purposes of the billing of the calls made to its
cellular network by the TELEARMENIA subscribers and users, deduction shall
be made of the sums corresponding to the use of the cellular network in the
calls which cannot be billed because they present inconsistencies which
definitively cannot be billed, and deduction shall be made of the sums
corresponding to calls between test numbers which the parties have agreed
to establish as exempt from payment. To this result shall be added the sum
for the use of the cellular network corresponding to the inconsistencies
which, having been deducted in previous periods, could be billed on recycle
in the respective billing period. The sum total thus obtained constitutes
the total sum billable to the subscribers and users of TELEARMENIA for the
use of the OCCEL cellular network, that is, the total sum which can be
collected by TELEARMENIA.
TELEARMENIA shall be liable to OCCEL for 86.5% of the aforementioned total
sum billable, and in turn everything collected for the billing for the use
of the cellular network of OCCEL, plus the financial yield which
TELEARMENIA may obtain on these sums during the period comprised between
the date of collection and the date of transfer of the aforementioned
86.5%, plus the
<PAGE> 8
collections of penalties and interest on late payment which TELEARMENIA charges
to its users on these amounts shall correspond to TELEARMENIA. The difference
which results between the income corresponding the TELEARMENIA which has just
been enumerated and the 86.5% of the total billable amount for which
TELEARMENIA shall be liable shall cover the services of billing and collection
rendered by TELEARMENIA and the amount of the accounts which finally are
considered uncollectible by TELEARMENIA.
Within the fifteen (15) calendar days following the date of each billing
process, the parties who sign this contract shall effect the reconcilement of
accounts corresponding to the billing which has just taken place. The
aforementioned reconcilement shall establish the amount which corresponds to
the 86.5% of the total amount billable for the use of the OCCEL cellular
network, to which shall be added the other sums which correspond to OCCEL for
any other item related to the services rendered by OCCEL between the first and
last day of the month preceding that in which the reconcilement is effected.
From the aforementioned sums in favor of OCCEL, deduction shall be made of the
total of the sums in favor of TELEARMENIA for the interconnection fee paid on
the calls which were made by the OCCEL subscribers and users to the TELEARMENIA
network during the same period of consumption for which the sums corresponding
to the calls made by the TELEARMENIA users to the OCCEL network are being
reconciled; the rents for the leasing of infrastructure owned by TELEARMENIA
which may have been leased to OCCEL, incurred between the first and last day of
the month preceding that in which the reconcilement is effected; and deduction
shall be made for any other item in favor of TELEARMENIA agreed upon in this
contract and which may have been incurred between the first and last day of the
month preceding that in which the reconcilement is effected. As a result of
the reconcilement determination shall be made of the net sum in favor of one of
the parties, which must be transferred by the debtor party to the creditor
party within the fifteen (15) calendar days subsequent to the date on which the
reconcilement is effected.
In the event that a reconcilement of accounts is delayed due to reasons
imputable to the debtor party, as of the fifteen (15) calendar days subsequent
to the final date for the effecting of the reconcilement which was stipulated
in the preceding paragraph, the debtor party shall pay the creditor party, for
the delay in the payment of the sums in favor of the creditor party, an
interest on late payment at a rate equivalent to the maximum permitted by
commercial law for similar transactions, monthly or proportionately to the
number of days of delay which have elapsed.
For the purposes of preparation of the reconcilement of accounts based upon a
percentage of the total billable amount, TELEARMENIA shall remit to OCCEL,
within the
<PAGE> 9
eight (8) calendar days subsequent to the date on which each billing process
has taken place, the following information relating to calls made by the
TELEARMENIA subscribers to the OCCEL cellular network and corresponding to the
period and the figures which are going to be reconciled:
The record of the calls not billed due to the presentation of definitive
inconsistencies; the total amount of the accounts pending payment which were
billed, with their corresponding maturity periods; the record of calls with
inconsistencies which, having been considered definitive, could be clarified
and were billed after the recycle; the record of accounts which ceased to be
billed upon passage to definitive accounts receivable; the record of accounts
receivable which are five months old, and the total amount collected and not
collected. These records shall have the same record format as the calls to be
billed which is delivered by OCCEL and shall be delivered by TELEARMENIA on
diskette, magnetic tape or any other media which permits automatic processing,
as agreed upon by the parties.
In each reconcilement calculation shall be made of the percentage ratio between
the sums billed for the first time five months past and which TELEARMENIA has
still not collected, and the total amount billable for the use of the cellular
network of OCCEL associated with the billing period of five months past. The
aforementioned percentage shall be considered as the percentage of the
portfolio of doubtful collection associated with the billing period of five
months past. TELEARMENIA shall be liable for the entirety of this portfolio of
doubtful collection when it, calculated as indicated herein, does not exceed
8.5% of the total billable amount associated with the billing period of five
months past; the sums which exceed this 8.5% shall be paid to TELEARMENIA by
OCCEL in the reconcilement of accounts in which the respective calculation is
made. In the event that TELEARMENIA is subsequently able to recover sums
corresponding to this portfolio of doubtful collection, TELEARMENIA shall
repay 80% of the amount recovered to OCCEL. The aforementioned repayments
shall take place until 80% of the total of the amounts which OCCEL may have
paid to TELEARMENIA in relation to the portfolio of doubtful collection is
attained.
The provisions made in this agreement both as to the liability of TELEARMENIA
for the total billable amount (86.5%) as well as that stipulated herein as the
maximum amount of the portfolio of doubtful collection for which OCCEL shall be
liable (8.5%) are figures subject to review upon the request of OCCEL or
TELEARMENIA which may be made at the end of each semiannual term of validity of
this contract. In the event that either of the parties requests the
aforementioned review, agreement shall be made as to new percentages for the
figures which have been
<PAGE> 10
indicated herein. In the event that the parties are unable to reach an
agreement as to the new percentages which must apply for the aforementioned
figures, the effecting of the transfers of the sums corresponding to the use of
the OCCEL cellular network based upon a percentage of the total billable amount
shall cease, and as of that time the reconcilements of accounts shall continue
to be effected on the basis of the sums actually collected by TELEARMENIA and in
accordance with the procedure agreed upon by the parties. In this case the
following stipulations shall be observed:
The reconcilements of accounts shall take place within the first fifteen (15)
calendar days of each month and the period of reconcilement shall be the
immediately preceding calendar month. In order to effect the reconcilement, the
amount which may have been collected by TELEARMENIA during the reconcilement
period for the fee corresponding to the use of the OCCEL cellular network shall
be established; to this sum shall be added the other sums which correspond to
OCCEL for any other item relating to the series rendered by OCCEL during the
reconcilement period. From the aforementioned sums in favor of OCCEL, deduction
shall be made of the amount of the sums in favor of TELEARMENIA for the
interconnection fee on the calls which may have been made by the OCCEL
subscribers and users to the TELEARMENIA network during the consumption period
for which the collections which are the object of the reconcilement were
effected; deduction shall be made of the rents for the leasing of infrastructure
owned by TELEARMENIA which may have been leased to OCCEL, incurred during the
reconcilement period; deduction shall be made of the amount of the claims
accepted from TELEARMENIA users during the reconcilement period; deduction shall
be made for billing and collection services, taking into account the amount
which is established in APPENDIX NO. 2 to this contract; and deduction shall be
made for any other item in favor of TELEARMENIA agreed upon in this contract and
which may have been incurred during the period for which the reconcilement is
effected (other than the 13.5% of the total billable amount, which will not
correspond to TELEARMENIA when accounts are reconciled on the basis of the sums
actually collected). As a result of the reconcilement, determination must be
made of the net balance in favor of one of the parties, which must be
transferred by the debtor party to the creditor party within the fifteen (15)
calendar days following the date on which the reconcilement was effected.
In the event that a reconcilement of accounts is delayed due to reasons
imputable to the debtor party, as of the fifteen (15) calendar days subsequent
to the final date for the effecting of the reconcilement which was stipulated in
the preceding paragraph, the debtor party shall pay the creditor party, for the
delay in the payment of the sums in favor of the creditor party, and interest on
late payment at a rate equivalent to the
<PAGE> 11
maximum permitted by commercial law for similar transactions, monthly or
proportionately to the number of days of delay which have elapsed.
For the purposes of preparation of the reconcilement of accounts based
upon a percentage of the total billable amount, TELEARMENIA shall remit
to OCCEL, within the first eight (8) calendar days of each month, the
following information relating to calls made by the TELEARMENIA
subscribers to the OCCEL cellular network and corresponding to the
period and the figures which are going to be reconciled:
The record of the calls not billed due to the presentation of temporary
or definitive inconsistencies; the record of the accounts pending
payment which were rebilled, with their corresponding maturity periods;
the record of calls with temporary or definitive inconsistencies which
could be clarified and were billed after the recycle; the record of
accounts which could not be rebilled in recycle; the record of accounts
which ceased to be billed upon passage to definitive accounts
receivable, and the total amount collected and not collected. These
records shall have the same record format as the calls to be billed
which is delivered by OCCEL and shall be delivered by TELEARMENIA on
diskette, magnetic tape or any other media which permits automatic
processing, as agreed upon by the parties.
2. Except as stipulated by law, TELEARMENIA shall ensure that its
subscribers and users pay the entirety of the sums in favor of OCCEL
included in its bills, that is, TELEARMENIA shall require its
subscribers and users to effect payment in full for the sum billed
therefor, and in the case of non payment, it will apply the Law, the
regulations and this contract.
3. TELEARMENIA shall grant payment facilities to its subscribers or users
when they so request and provided that they fulfill the internal rules
established. While TELEARMENIA is responsible for a percentage of the
amounts billed, in the provisions set forth in number B.II.1 of the
second clause, this entity shall be autonomous for the purpose of
granting to its subscribers facilities for payment for sums in favor of
OCCEL, and the entirety of the interest derived from such facilities
shall correspond thereto. In the event that reconcilements of accounts
are effected on the basis of the sums in favor of OCCEL collected by
TELEARMENIA, these facilities shall only be applicable to the sums owed
for calls to the OCCEL CTN when OCCEL indicates its approval in this
sense; the manner in which the interest relating to the financing of
these facilities shall be distributed shall be agreed upon by the
executives responsible for the administration of this agreement.
The credit notes issued by TELEARMENIA in order to grant the payment
facilities specified herein, or to
<PAGE> 12
resolve claims which require such credit notes, shall not constitute a
breach of the preceding provision when such notes have been submitted to
OCCEL and are duly approved by the latter.
4. TELEARMENIA shall pay interest to OCCEL on late payment at a rate
equivalent to the maximum allowed by Commercial Law for similar
transactions, monthly or proportional to the days elapsed from the
demandability of the debt to the verification date, due to the delay in
the payment of the amounts collected for the use of the OCCEL CTN.
Excluded from this sanction are the delays due to force majeure or
inevitable accident.
5. To maintain and continuously update the records of the active list of
accounts receivable and also to issue bills in order to collect them. The
management of recoveries on debtors in default shall be effected in
accordance with the provisions of APPENDIX NO. 2.
6. TELEARMENIA shall suspend the access to the mobile cellular telephone
network of OCCEL for those subscribers which are requested by the latter
in writing, provided that this is technically possible and does not affect
the access to other networks, unless express authorization is given by the
operators who could be affected.
7. To submit to OCCEL all documents that it requires and are necessary in
order that OCCEL may, under its own responsibility, proceed with legal
collection of late payments, provided that the supply of these documents
is within the scope of TELEARMENIA.
III. IN RELATION TO SUBSCRIBER CLAIMS:
Claims from TELEARMENIA subscribers related to calls to the OCCEL mobile
telephone network shall be handled pursuant to APPENDIX NO. 2.
IV. IN RELATION TO PUBLICATION IN THE TELEPHONE DIRECTORY:
In the event that OCCEL reaches an agreement with the company which
publishes the telephone directory of the Quindio, TELEARMENIA shall not
oppose the publication of the list of the OCCEL subscribers who wish to
appear in the aforementioned directory. The respective charges shall be
agreed upon between OCCEL and the company which published the
aforementioned directory without implication of either economic benefit
for TELEARMENIA or expenditure on the part of that entity.
THIRD CLAUSE - OBLIGATION OF OCCEL: OCCEL engages to fulfill the following
technical, administrative, economic and financial obligations.
A. TECHNICAL:
<PAGE> 13
1. To guarantee the interconnection of its equipment with that of the
public switched telephone network of the TELEARMENIA for both outgoing
and incoming traffic.
2. To acquire, install, operate, maintain and replace the required
devices and equipment for interconnection of the OCCEL CTN with the
TELEARMENIA PSTN, including those which permit the assessing of charges
for outgoing and incoming calls, with specifications according to the
development plans from both companies, and in the amount which
guarantees a loss no greater than one percent (1%) during peak hours.
This obligation to acquire the interconnection devices and equipment
shall be understood as fulfilled when by agreement between the parties,
such devices and equipment are provided by TELEARMENIA by lease.
3. To permit all of the OCCEL to have access to the TELEARMENIA public
switched telephone network, as well as to the new services rendered to
third parties through the TELEARMENIA PSTN, in accordance with the
provisions of the Law and the agreement between the parties. OCCEL
shall permit access to the PSTN of TELEARMENIA for all of its
subscribers, but shall have the right to withdraw it for those who
specifically so request.
4. To perform both preventive and corrective maintenance of systems and
transmission media owned by OCCEL which participate in the
interconnection.
5. To perform maintenance which guarantees, in incoming and outgoing
traffic, a ratio of unsuccessful calls (with technical failure)
attributable to OCCEL in relation to the total of calls generated in low
traffic, which shall not exceed, on the average, three (3%) percent.
6. To perform pursuant to APPENDIX NO. 1, measurements of traffic, grade of
service, and in general, all tests which permit the establishment of the
communications quality level between the two networks, and at the same
time to identify the need to make adjustments in the interconnection
enhancement program or its configuration. To test quality of service
between the two networks and to perform maintenance programs, OCCEL will
provide to TELEARMENIA two telephone lines which shall have the nature
of test numbers and which shall be exempt from payment of connection
fees and basic charges. These lines shall have access to national long
distance and cellular telephone service. In the calls which are made
from these telephones to the test numbers agreed upon by the parties,
TELEARMENIA shall be exempt from all payment. TELEARMENIA shall pay all
of the charges for calls made from these lines to customers other than
the test numbers agreed upon by the parties. The location, the types of
tests to be conducted and the time of usage of the lines and of the
telephones which have the nature of test numbers delivered by one party
to the other shall be agreed
<PAGE> 14
upon by the executives designated by the parties for the administration of
this agreement. When considered necessary, the tests shall be conducted
jointly according to a previously agreed upon schedule.
In order to control the interconnection between the two networks, OCCEL and
TELEARMENIA, within two (2) months after concluding this agreement, will
make an emergency plan and a schedule for preventive maintenance, grade and
quality of service measurements and evaluation of performance of
maintenance.
7. To provide TELEARMENIA with the information necessary in order to
guarantee that the interconnection between the two networks fulfills the
basic fundamental plans established by the Ministry of Communications.
8. To verify monthly, or at the request of TELEARMENIA, the correct
operation of its outgoing and incoming links, immediately notifying
TELEARMENIA of any damage.
9. To adopt all required measures in order to avoid fraud on the
TELEARMENIA PSTN. In any case, OCCEL must be responsible for access
charges generated from its CTN to the TELEARMENIA PSTN.
10. In the event that OCCEL decides to install alternative transmission
media to those installed by TELEARMENIA, OCCEL shall be responsible for the
respective maintenance.
11. To maintain the Ministry of Communications authorizations in force
for the OCCEL radio link systems which are part of the interconnection and
to pay the usage rights for the electromagnetic spectrum frequencies which
these require.
12. To repair failures reported by TELEARMENIA within the conditions
and terms agreed upon by the executives responsible for the administration
of the agreement.
13. Not to differentiate the TELEARMENIA traffic for its own benefit
or that of any other operator.
14. To guarantee that it will not cause damage to the physical and
technical infrastructure of TELEARMENIA, and also will respect the
conditions established in its Internal Work Rules. OCCEL shall be
responsible for payment for all repair of damages caused, provided that
such damage is reputable to OCCEL or it contractors.
B. ADMINISTRATIVE AND FINANCIAL
I. IN RELATION TO BILLING
1. To supply to TELEARMENIA, in accordance with the provisions of
number B.II.1 of the second clause, all of the information necessary in
order that TELEARMENIA may bill the calls made by the TELEARMENIA PSTN
users may bill the calls made by the TELEARMENIA PSTN users to the OCCEL
CTN. This information will be provided on
<PAGE> 15
a monthly basis within the seven (7) calendar days following the date
agreed to by the parties as the billing closing date.
If OCCEL, due to facts imputable to it, does not effect timely submission
of the information necessary in order to bill the PSTN subscribers,
TELEARMENIA will prepare the bill, without including that which pertains
to the information that is not supplied by OCCEL in a timely manner. The
information that has not been processed will be included in the next
billing period. In this case, OCCEL shall pay to TELEARMENIA, for the
month or fraction thereof, interest on late payment at a rate equivalent
to the maximum allowed by law for similar commercial transactions, on the
amount of access charges that have not been collected by TELEARMENIA.
Excluded from this sanction is non-fulfillment due to force majeure or
inevitable accident.
2. OCCEL shall provide to TELEARMENIA, if it so requires, the information
necessary in order to verify the payment of charges for access to its
PSTN.
3. To guarantee integrity and quality of records submitted to TELEARMENIA for
billing and to be liable in relation to the customers and authorities for
the errors generated in processes where this information is used, when
such errors are imputable to OCCEL.
4. In the event that the parties decide to effect reconcilements of account
based on the sums collected by TELEARMENIA, OCCEL shall credit and pay to
TELEARMENIA the amount which corresponds to the increase in its expenses
for processing, stationery, printing and collection - when applicable -
incurred for the billing of the calls originating from its subscribers to
the OCCEL CTN, in accordance with the provisions of APPENDIX NO. 2. While
the parties effect reconcilements of accounts based upon a percentage of
the total billable amount, it is understood that the costs for billing and
collection are included within the margin that will correspond to
TELEARMENIA, and therefore it will not be necessary for OCCEL to make
separate payment to TELEARMENIA for the costs of billing and collection.
II. IN RELATION TO INTERCONNECTION TARIFFS AND OTHER INCOME GENERATED IN FAVOR
OF TELEARMENIA:
1. To credit and pay TELEARMENIA on a monthly basis access charges incurred
for calls originated from the OCCEL CTN to the TELEARMENIA PSTN, pursuant
to the terms of Law 37 of 1993, Decree 741 of 1993 and Resolutions Nos.
002 and 004 from the Telecommunications Regulatory Commission. Such
access charges shall be calculated based on TELEARMENIA and OCCEL records
and applying to them a procedure similar to number B.I.1 of the second
clause of this agreement. The payment of such charges shall be effected
through the deduction that TELEARMENIA shall make from the
<PAGE> 16
amount owed to OCCEL for the use of its CTN during the same period in
which access charges indicated herein were incurred.
2. To effect payment to TELEARMENIA of interest on late payment at a rate
equivalent to the maximum allowed by commercial law for similar
operations, monthly or proportionately to days which have elapsed from the
due date of payment to the date on which this payment is verified, for the
delay in the payment of amounts in favor of TELEARMENIA and which
TELEARMENIA has not been able to deduct from the amount owed to OCCEL for
payments for the use of its CTN. Excluded from this sanction are the
delays caused by force majeure or inevitable accident.
3. To credit and pay TELEARMENIA the respective costs of the use of the
transmission media and systems for the interconnection provided by
TELEARMENIA by lease. The rent shall include the respective equipment
maintenance. The amounts established by TELEARMENIA for these rents
shall be those stipulated in APPENDIX NO. 3.
4. To credit and pay to TELEARMENIA the costs for usage of assigned physical
space, usage and supervision of buildings, towers and air conditioning and
power supply systems for the OCCEL equipment located within the
TELEARMENIA facilities. The amounts established by TELEARMENIA for these
rents will be stipulated in APPENDIX NO. 3.
III. IN RELATION TO HANDLING OF CLAIMS
The claims which the TELEARMENIA subscribers may make in relation to calls to
the OCCEL mobile cellular telephone network shall be handled in accordance with
the provisions of APPENDIX NO. 2
FOURTH CLAUSE - RECIPROCAL OBLIGATIONS OF PARTIES:
A. IN RELATION TO THE ADMINISTRATION OF THE AGREEMENT:
In order to efficiently manage all matters relating to this agreement, each
party shall designate a maximum of two executives, who shall be responsible for
discussion, consultation, communication and resolution of the matters which
require their intervention and fall within their jurisdiction. Each party
shall designate one of these executives to be responsible for the coordination
and channelling of communications related to this agreement. These executives
will meet as required, at the request of any one of them.
Their functions are as follows:
1. To maintain orderly and accurate documentation related to this agreement,
recording, in chronological order, the correspondence, consultations,
decisions, solutions
<PAGE> 17
and in general every event to be considered as relevant for the history
of this agreement.
2. To establish and/or review the procedures relating to billing,
collection, payment facilities, account reconciliation, analysis of
inconsistencies, information to the subscribers, claims, fraud control
and repairs of damage or failures which arise in the interconnection.
3. To review and approve monthly billing reconciliation, collections and
offsetting of accounts for access charges and lease of infrastructure
and transmission media, establishing the amount each party owes to the
other. In the development of such reconciliation all amounts pending
explanation for any of the subjects mentioned above will be followed up.
4. To agree as to solutions concerning the differences of opinion which may
arise between the parties with regard to the interpretation, development
and execution of any of the stipulations within this agreement.
5. According to measurements performed, to make all required decisions to
guarantee the fulfillment of the grade of service, in accordance with
the stipulations of the second and third clauses of this contract.
6. To review the interconnection configuration and capacity.
7. To determine the source of fraud and inconsistencies, establish their
solution mechanisms and establish responsibility for their occurrence.
8. To determine the source of damages caused to equipment and devices owned
by each party, to assess their value and determine the responsibility
for their occurrence.
9. To define the TELEARMENIA PSTN subscribers who shall be allowed to
access the OCCEL CTN.
10. The rest derived from the execution of this agreement.
The decisions agreed upon by these executives shall be of mandatory fulfillment
by the parties and must be recorded in instruments signed by the parties.
In the event of disagreement between these persons as to a particular subject,
any of them may request that the subject be discussed and decided by the legal
representatives of TELEARMENIA and OCCEL.
B. IN RELATION TO DAMAGES AND THEIR REPAIR
1. To immediately issue notification as to damages detected in the
interconnection which require the intervention of any of the parties.
The respective party must repair the damage within the term established
by the executives responsible for the
<PAGE> 18
administration of the agreement and take all required measures to
repair it as soon as possible. Unjustified delays which cause damage
will result in repair entirely in favor of the affected party.
2. To have qualified staff available at any time to repair system failures
pursuant to the terms and time limits herein.
C. IN RELATION TO INTERCONNECTION DIMENSIONS:
The parties engage to ensure that the installed capacity of the interconnection
equipment matches the dimensions calculated on the basis of demand and traffic
projections. In the event that one of the parties has any difficulty in the
expansion of the required capacity, it may sign agreements with the other party
in order to obtain the supply of the equipment or systems required.
D. IN RELATION TO LOCATION OF THE OCCEL EQUIPMENT:
According to availability, TELEARMENIA shall provide OCCEL with all facilities
for the location of its interconnection equipment and that pertaining to its
CTN, providing physical spaces, power supply, air conditioning and guard. In
the same way TELEARMENIA shall facilitate the installation of the OCCEL
equipment. The cost of these facilities shall be assumed by OCCEL and the
amount will be as stipulated in APPENDIX NO. 3.
E. IN RELATION TO INTERCONNECTION CONDITIONS:
Interconnection technical conditions such as grade of service, tariffs,
routing, numbering, signalling and operation shall be regulated in accordance
with the stipulations of the Ministry of Communications and specifically
pursuant to APPENDIX NO. 1 to this contract.
FIFTH CLAUSE - LIABILITY OF THE PARTIES
1. Neither party shall be liable for the non-fulfillment of any
contractual obligation caused by force majeure or inevitable accidental
duly verified. If such obstruct the execution of the agreement for a
term exceeding six (6) months, either party may terminate the agreement
by written notice to the other party.
2. Each party must guarantee the integrity and accuracy of all information
submitted to the other party, and is obliged to be liable to the other
party, customers and authorities for errors generated in processes
where such information is used, as long as such errors are imputable
to the party which supplied the information.
3. Each party must pay to the other party the respective amounts of calls
which cannot be billed to the subscribers or users because they are due
to frauds and inconsistencies. APPENDIX NO. 2 specifies the manner in
which liability for these payments shall be
<PAGE> 19
determined. Amounts due for frauds and inconsistencies shall be included
within the monthly reconciliations.
4. Liability to the subscriber: In all of their relationships with the
public, both TELEARMENIA and OCCEL shall act governed by the principles of
honesty, integrity, loyalty and service and shall not act in any manner
which discredits, affects or damages the reputation of the other party in
any way. Both parties shall act in good faith, honestly and diligently,
using their best efforts in order to guarantee subscriber satisfaction and
the rendering of the services offered.
5. Social responsibility: In the interconnection and the execution of the
agreement, the parties shall take into consideration the fact that their
goal is the providing of telecommunication public services in the charge of
the State, in a continuous and efficient manner.
SIXTH CLAUSE - INTERCONNECTION LIMIT:
In order to limit the liability of the parties, the interconnection limit shall
be general digital distributors or optical distributors of TELEARMENIA centrals
directly connected with the OCCEL CTN, and in consequence every company must
assume the costs within its own network.
SEVENTH CLAUSE - SUBMISSION TO REGULATION:
The interconnection between the two networks is based upon the plans,
regulations, definitions and standards of the Ministry of Communications, and in
the absence thereof, upon the plans, definitions and standards of the
International Telecommunications Union (ITU) and other international bodies of
jurisdiction, in which Colombia forms a part by virtue of international
agreements and covenants.
EIGHTH CLAUSE - INTERCONNECTION DIMENSIONS:
The quality of the circuits required for different links or routes between two
networks, both for incoming and outgoing traffic, as well as the quantities for
future expansion, shall be calculated by OCCEL, reviewed by TELEARMENIA and
shall be established according to instruments signed by the parties. This
dimensioning will be reviewed at least every six months to adjust it to traffic
conditions. The dates of entry into service of links for future extensions
shall be mutually agreed upon, taking into account that the grade of service and
development plans of each company may not be affected by the delay by one party
in the execution of such extensions.
NINTH CLAUSE - RELIABILITY AND AVAILABILITY:
Both parties should maintain the interconnection minimum levels of reliability
in order to guarantee service continuity. The reliability shall be measured in
terms of the time in which the interconnection is normally operating. The
minimum reliability for the subscriber to interconnection equipment is 99.99%
measured over a monthly period, which means that the total of system dropped
times which affect the whole interconnection, should not be higher than 4.4
minutes/
<PAGE> 20
month. The interconnection will have alternate routes as agreed upon by
the parties.
TENTH CLAUSE - AUDITING: Each party may directly or through a third duly
authorized party undertake the necessary review to establish account accuracy
and the faithful compliance with the procedures agreed upon by virtue of this
agreement. The cost incurred for this shall be paid by the party who is
reviewing. The party whose accounts and procedures shall be reviewed must
provide all required facilities.
ELEVENTH CLAUSE - EXEMPTION FROM LIABILITY IN THE EVENT OF INTERRUPTION:
Neither party shall be liable in relation to the other party for damages
causing the interruption or failure of its telephone systems or interconnection
with the OCCEL CTN, nor shall either party be permitted to provide to their
customers the facilities to take action against the other party under these
circumstances.
TWELFTH CLAUSE - CONFIDENTIALITY OF INFORMATION: All of the correspondence and
information exchanged between the parties for the fulfillment of this
agreement, concerning subscriber data, billing, collection, market growth
forecast, and also that information marked as confidential or proprietary
information must be treated and received by the recipient as confidential and
secret. The verbal information that is provided as confidential, must be
confirmed as such in writing within eight (8) days following the provision
thereof. Confidential information must be restricted to the persons and
employees of the recipient party which requires it in order to fulfill the
objectives herein, such persons must be notified as to the confidential nature
of the information provided, and of the care to be taken with it.
The obligations imposed upon the parties pursuant to this clause shall not
apply in the following cases:
a. Information which becomes public knowledge through actions of persons other
than the recipient party. b. When information is required by an authority of
jurisdiction; in such event the disclosure shall be restricted to the
fulfillment of the respective order.
Both parties expressly declare that the transmission of information considered
to be confidential, in accordance with the provisions of this clause, to third
parties that are not duly authorized to request and receive it will result in
the full indemnity of damage caused by this disclosure.
THIRTEENTH CLAUSE - DURATION OF AGREEMENT: This agreement has a duration of
five (5) years from the date of its execution, and may be extended by equal
periods, as long as the parties do not issue notification to the contrary in
writing within sixty (60) calendar days prior to its expiration or the
expiration of the extension.
FOURTEENTH CLAUSE - AMENDMENTS TO THE AGREEMENT: During the term of this
agreement it may be amended, except in those clauses imposed by Law; in
order to do so the interested party should notify the other party in writing.
In the
<PAGE> 21
event that an agreement is not reached within the sixty (60) calendar days
following the first communication date, OCCEL, TELEARMENIA or both parties will
request intervention of the Telecommunication Regulatory Commission in the
dispute, and in the meantime, the conditions established herein shall be in
force. The decision of the Commission shall be binding upon both parties.
FIFTEENTH CLAUSE - SOLUTION OF CONTROVERSIES: In the event of differences
arising between the parties by virtue of the present agreement which are
eminently technical in nature, and which cannot be resolved by the parties
directly, they shall be submitted for the consideration of a Technical Committee
composed of three (3) experts in the technical Telecommunications subject matter
who shall be designated by the parties by mutual agreement. In the absence of
agreement, the Committee shall be appointed by the ACIEM at the request of
either of the parties. The Technical Committee may conduct the tests which it
considers necessary and shall have all of the information which it requests from
the parties and which is related to the matters which are the subject of the
difference. The Technical Committee shall decide as to the matter within a
maximum term of three (3) months from the date upon which it commenced its
activity, and decisions which it adopts shall be of mandatory fulfillment by the
parties. The differences which are not eminently technical in nature and which
arise between the parties by virtue of this agreement, as to the making,
interpretation, execution, fulfillment, termination or dissolution of this
agreement, shall be submitted for the consideration of a Court of Arbitration.
The members of this Court shall be designated by the parties by mutual
agreement. In the event that no agreement is reached between the parties, the
designation of the arbiters shall be made by the Chamber of Commerce of Armenia
at the request of either of the parties. The Court of Arbitration shall be
subject to Colombian law, shall operate in the city of Armenia and shall make
judgment by law within a maximum term of six (6) months following the
constitution of the Court. The cost of the operation of the Court of
Arbitration, or the cost derived from the fees and the other activities
developed by the Technical Committee, shall be borne equally by the parties.
The party whose claims have been denied by the court of Arbitration or the
Technical Committee shall return to the other party the sum contributed for the
operation of the court or to cover the fees and activities carried out by the
Committee.
SIXTEENTH CLAUSE - DOCUMENTS OF AGREEMENT: The following documents are an
integral part of this agreement and compliance therewith is therefore
mandatory.
1. APPENDIX NO. 1: Technical Aspects
2. APPENDIX NO. 2; Financial, economic and administrative aspects
3. APPENDIX NO. 3; Lease costs of systems and transmission media,
physical spaces and infrastructure.
<PAGE> 22
SEVENTEENTH CLAUSE - APPLICABLE LAW: This agreement and all controversies that
might arise must be subject to this agreement, to the Law and to the
Colombian Courts.
EIGHTEENTH CLAUSE - DOMICILE: For pertinent legal effects it is understood
that this agreement shall be concluded in the city of Armenia.
NINETEENTH CLAUSE - WAIVER: The obligations of the parties and rights granted
by this agreement to each party shall not be considered as susceptible to
waiver, by virtue of practices or customs in a contrary sense. The tolerance
of one party in accepting the non-fulfillment of any of the obligations assumed
by the other should not be considered as acceptance of the tolerated fact nor
as precedent for its repetition.
TWENTIETH CLAUSE - PARTIAL NULLITY: The nullity, invalidity or legal
impossibility of the fulfillment of one or more clauses of this contract shall
not affect the other clauses and the contract shall be interpreted as if the
clause which is invalid, null or impossible to fulfill did not exist.
TWENTY-FIRST CLAUSE - TITLES: Clause titles herein are only incorporated for
the purpose of facilitation of reference and cannot be used as an isolated
element for interpretation of the agreement.
TWENTY-SECOND CLAUSE - INTEGRITY OF THE AGREEMENT: Both OCCEL and TELEARMENIA
have read this agreement and understood and accepted the terms, conditions and
stipulations herein, which have been agreed to in order to maintain the high
standards of the quality of service and the customer service and to protect the
reputation of both OCCEL and TELEARMENIA brand names. Neither party is
obligated by declarations of their executives, employees or agents which are
contrary to the provisions of this agreement. This agreement contains the
integral agreement between the parties and previous agreements or covenants,
both verbal or written, existing between parties are null and void.
TWENTY-THIRD CLAUSE - WAIVER OF SUMMONS: To collect any amount of money which
parties owe by virtue of this agreement, it shall not be necessary to establish
default or to require its payment, rights which the parties waive.
TWENTY-FOURTH CLAUSE - BUDGET IMPUTATION: TELEARMENIA is obliged to provide in
its budget for the income and expenses incurred by the execution of this
agreement during the term of validity of the current budget and during
succeeding budget terms.
TWENTY-FIFTY CLAUSE - STAMP TAX: In the event that by virtue of this contract
there is reason to pay the stamp tax, it shall be borne equally by OCCEL and
TELEARMENIA, because neither of the two entities is legally exempt from the
payment of the stamp tax.
<PAGE> 23
TWENTY-SIXTH CLAUSE - AGREEMENT REVIEW : The parties acknowledge that this
agreement must be made known to the Ministry of Communications and the
Telecommunications Regulatory Commission. In the event that these entities
require addition to this agreement of information or specifications pursuant to
the twenty-fourth clause of the concession agreement concluded between the
Ministry of Communications and OCCEL, the parties concluding this agreement are
committed to sign a supplementary agreement which incorporates such additions.
In the same manner, the parties declare that they know that TELEARMENIA must
offer the same technical and economic conditions to all cellular mobile
telephone operators who conclude an interconnection agreement with TELEARMENIA,
and in consequence any advantage or privilege granted to one of them and not
offered to the rest, could be subject to sanction for both TELEARMENIA and the
favored cellular mobile telephone operator.
TWENTY-SEVENTH CLAUSE - COMMUNICATIONS : Except as otherwise agreed upon, all
communications between parties shall be written and shall be considered as valid
and sufficient if they are sent by certified mail or by fax, verifying by
telephone the sending and receipt thereof, to the following addresses and fax
numbers:
To TELEARMENIA
TELEARMENIA
Gerencia
Carrera 16 No. 22-43
Armenia
Telephone 967 46 33 88 and 967 46 38 00
Fax 967 44 06 00
To OCCEL
OCCEL S.A.
Direccion de Interconexion [Interconnection Dept.]
Calle 50 No. 55-01
Medellin
Telephone 512 90 90 and 510 95 41
Fax 513 01 99
In the event that any of the parties changes any of this information, it will be
responsible for reporting the new information to the other party in the manner
previously stipulated herein. Communications performed according to stipulated
herein shall be considered as received upon the first to occur of: five (5) days
following the delivery or when they have been received personally by the
addressee.
TWENTY-EIGHTH CLAUSE - CONCLUDING AND EXECUTION : In order to conclude this
agreement, it requires the signature of the legal representatives of the
contracting parties and its publication in the Diario Unico de Contratacion
Publica [Newspaper of Public Contracting] which shall be understood to be
fulfilled by the presentation by OCCEL of the receipt for the payment of the
respective publication fees.
In testimony whereof, this agreement is signed in the city of Armenia in two
copies with equal tenor.
<PAGE> 24
By OCCEL S.A. By TELEARMENIA
GILBERTO ECHEVERRI MEJIA RUBEN DARIO GARCIA RODRIGUEZ
President Manager
Date: Oct. 25, 1995 Date: Nov. 9, 1995
<PAGE> 25
APPENDIX NO. 1
TECHNICAL ASPECTS
FIRST CLAUSE - OBJECT : The object of this appendix is to supplement and
specify the definitions of terms and procedures relating to the technical
aspects of the interconnection agreement.
SECOND CLAUSE - DEFINITIONS : TELEARMENIA and OCCEL agree to the following
definitions for the terms related as follows:
SWITCHING EQUIPMENT FOR THE INTERCONNECTION : All devices which are part of
the OCCEL MSC or TELEARMENIA switching centers, and are directly connected
with transmission systems for the intercommunication between the two networks.
GRADE OF SERVICE : Ratio by percentage between the quantity of unsuccessful call
attempts due to congestion or failure, and the total of call attempts recorded
in a measurement or a test.
CONGESTION GRADE : Ratio by percentage between the quantity of unsuccessful
call attempts due to congestion and the total of call attempts recorded in a
measurement or a test.
TECHNICAL FAILURES INDEX : Ratio by percentage between the quantity of
unsuccessful call attempts due to switching or transmission equipment failures,
and the total of call attempts recorded in a measurement or a test.
THIRD CLAUSE - CONNECTION POINTS AND ROUTING : The parties agree that at the
beginning the interconnection points between TELEARMENIA and OCCEL networks
shall be the TELEARMENIA combined centrals designated as Galan 2 and the
OCCEL MSC located in Pereira. However, the executives designated by the
parties to manage this agreement may agree by means of a mutually executed
instrument as to the creation of other connecting points between their two
networks, according to traffic and quality of service requirements.
At the beginning, alternative routes to handle traffic between the TELEARMENIA
and OCCEL networks will not be available. However, the establishment of
alternative routes, through third party networks, may be agreed upon by means
of an instrument signed by mutual agreement of the executives designated by
parties to manage this agreement.
FOURTH CLAUSE - SIGNALLING : At the beginning the interconnection shall be
effected utilizing signalling by associated channel. The line signalling
system shall be the Digital R2 pursuant to CCITT recommendations Q.421, Q.422
and Q.424. The record signalling system will be MFC type LME.
Upon mutual agreement of the parties, or when the Ministry of Communications so
stipulates as mandatory, the signalling scheme by common channel No. 7 of CCITT
on the national standard version of Colombia in force on the date of
establishment will be adopted.
<PAGE> 26
FIFTH CLAUSE - TEST AND TRAFFIC MEASUREMENT PLAN: In order to evaluate the
quality of service, and calculate the grade of service, the parties agree to
make test calls from the OCCEL MSC and TELEARMENIA switching centrals. These
calls shall be made on a periodic basis and also in events which demand the
performance of special tests. The quantity of test calls, their centrals and
origin and destination numbers, days and hours, and the way they are recorded,
shall be agreed upon the executives designated by the parties to manage this
agreement.
At least once a month, traffic, quality and grade of service measurements of
real traffic on interconnection routes which interconnect the two networks will
be performed. The quality of service indicators, quantity of measurement
days, hours and type of telephonic devices - trunking circuits, signalling
devices, software records, etc. - upon which the measurements are to be made
shall be agreed upon by the executives designated by the parties to manage this
agreement. These executives may also agree upon the conducting of activities
of tracking of failures detected in the interconnection. For the diagnosis of
quality of service and tariff problems there will also be joint analysis of
calls of no longer than six seconds in duration, calls longer than one hour,
calls with identification of caller number failure, channels with high index of
failure or loss produced, and series with a high index of unsuccessful calls.
In testimony whereof, this agreement is signed in the city of Armenia in two
copies with equal tenor.
By OCCEL S.A. By TELEARMENIA
GILBERTO ECHEVERRI MEJIA RUBEN DARIO GARCIA RODRIGUEZ
President Manager
Date: Oct. 25, 1995 Date: Nov. 9, 1995
<PAGE> 27
APPENDIX NO. 2
FINANCIAL, ECONOMIC AND ADMINISTRATIVE ASPECTS
FIRST CLAUSE - OBJECT: The object of this Appendix is to supplement and
specify the procedures relating to the financial, economic and administrative
aspects of the interconnection agreement.
SECOND CLAUSE - INFORMATION INCLUDED IN THE BILL: The bill from TELEARMENIA to
is subscribers, the information about calls originated by them to the OCCEL
cellular mobile telephone network, and the amount shall be presented as follows:
In the principal body of the bill notation shall be made separately of the
total amounts for the use of the OCCEL cellular network and the total amounts
for the interconnection fee which corresponds to TELEARMENIA. On an attached
page there shall be a breakdown of each of the calls directed to the OCCEL
cellular network, in the forma which shall be agreed upon by the parties, which
shall contain at minimum the cellular number called, the duration and the
amount for the call.
THIRD CLAUSE - BILLING COSTS: While the parties effect reconcilements of
accounts based upon a percentage of the total billable amount, as stipulated in
point B.II.1 of the second clause of this contract, it is understood that the
costs of billing and collection are included within the margin which will
correspond to TELEARMENIA, and therefore it will not be necessary for OCCEL to
effect separate payment to TELEARMENIA for billing and collection expenses.
In the event that the parties decide to effect reconcilements of accounts based
on the sums collected by TELEARMENIA, OCCEL shall credit and pay to TELEARMENIA
the amount of ninety-two ($92) pesos for each bill by TELEARMENIA with calls to
the OCCEL cellular network. This amount includes all concepts related to the
processing of data and the printing of the principal body and the call
breakdown pages of the bills, the distribution of the bills, the collection of
amounts owed by OCCEL, and the preparation of the information for reconcilement
of accounts which it is the responsibility of TELEARMENIA to prepare. These
billing costs will be readjusted annually in the percentage established by the
Telecommunications Regulatory Commission. In the event that these costs are
not subject to regulation, TELEARMENIA may increase them up to a percentage
equal to that of the minimum wage increase, when it occurs.
FOURTH CLAUSE - LATE PAYMENT RECOVERY: While the parties effect reconcilements
of accounts based upon a percentage of the total billable amount, as set forth
in point B.II.1 of the second clause of this contract, the recovery of the
amounts for calls made by TELEARMENIA subscribers and users to the OCCEL CTN
shall be the responsibility of TELEARMENIA. Up to 8.5% of the total billable
amount for the portfolio of doubtful collection, calculated as indicated in
section B.II.1 of the second clause of this contract shall be borne by
TELEARMENIA. As established in that section, the sums
<PAGE> 28
which exceed this 8.5% shall be paid to TELEARMENIA by OCCEL in the
reconcilement of accounts during which the respective calculation is made.
In the event that the parties decide to effect reconcilements of accounts
based upon the sums collected by TELEARMENIA, the list of calls made by the
subscribers made by the TELEARMENIA subscribers to the OCCEL CTN shall be borne
by each company, according to the respective proportion. The recovery of late
payments may be obtained by either OCCEL or TELEARMENIA, according to the
agreement made between the parties. In any case, each party will submit to the
other the documents required for legal collection of these late payments.
FIFTH CLAUSE - ATTENTION TO CLAIMS: The requests for explanations of the
billing of the calls made by TELEARMENIA subscribers and users to the OCCEL
cellular network shall be received and handled by OCCEL when such requests are
made at the offices of OCCEL, and shall be received and handled by TELEARMENIA
when such requests are made at the offices of TELEARMENIA. The aforementioned
explanation shall consist of indication to the user of the manner in which the
calls made to the OCCEL cellular network are charged. OCCEL shall supply
information in writing and shall instruct the TELEARMENIA employees as to the
rate schedule and the manner in which to handle these requests.
The claims pertaining to the billing of the calls made by the TELEARMENIA
subscribers and users to the OCCEL cellular network shall be received by OCCEL
or by TELEARMENIA, depending upon whether the user has contacted the offices of
OCCEL or TELEARMENIA. The person receiving the claim shall immediately issue
to the claimant a provisional release in which exclusive deduction shall be made
of the total of the sums which are the subject of the claim concerning calls
made to the OCCEL cellular network. At the points of payment of TELEARMENIA,
the user may pay his bill, accepting the amount of the discount specified in
the release. In the event that the immediate issuance of provisional releases
causes a significant increase in unjustified claims, OCCEL may request the
suspension of this measure and the parties shall agree as to the adoption of an
alternative measure. The format of the aforementioned provisional releases
shall be that agreed upon by the parties. OCCEL shall supply this stationery to
TELEARMENIA. OCCEL shall deliver to TELEARMENIA, at the office designated by
TELEARMENIA, a copy of the provisional releases which may have been issued by
OCCEL, accompanied by the copies of the page of the bill in which the breakdown
of the calls which are the subject of the claim is provided. TELEARMENIA shall
deliver to OCCEL, at the office in the city of Armenia determined by OCCEL, the
copies of the provisional releases which may have been issued by TELEARMENIA,
accompanied by the copies of the page of the bill in which the breakdown of the
calls which are the subject of the claim is provided.
TELEARMENIA shall investigate and resolve the claims which are made by the
TELEARMENIA subscribers and users for calls made to the OCCEL CTN, when in
those claims the claimant
<PAGE> 29
argues that at the time of effecting the calls his/her telephone did not have
access to the cellular network or that it was out of service for some reason
which TELEARMENIA must verify. The claims in which the claimant asserts reasons
other the two preceding reasons shall be investigated and resolved by OCCEL. In
the case claims which merit this, OCCEL and TELEARMENIA shall conduct the
investigations which correspond to each party, providing each other with the
required operative and technical support and sharing all required information.
Within a period not to exceed fifteen (15) business days from the date on which
the claim report was issued, the party responsible for its investigation and
resolution shall make a decision with regard thereto and send a written
response to the claimant, with a copy to the other party. In the
aforementioned response indication shall be given of the reasons for the
rejection if the claim has no basis, or the amount and the items which are the
object of the definitive discount if the claim has been accepted. If no
response is sent to the user within the aforementioned term, it shall be
understood that the claim has been resolved in his/her favor.
If OCCEL so requests and there is the physical availability, TELEARMENIA shall
provide a space at its principal claims handling facilities for OCCEL. The
aforementioned space shall be destined for the receipt by OCCEL of claims which
are its responsibility to investigate and resolve. The parties shall agree as
to the economic conditions under which TELEARMENIA will provide this space.
SIXTH CLAUSE - ANALYSIS AND RECOVERY OF FRAUDS AND INCONSISTENCIES : An
inconsistency is considered to be all inaccurate information about data
concerning the recording, payment or billing of a call, which temporarily or
permanently makes the billing process and the charging of this call to the user
who actually made it impossible. There is temporary impossibility of billing
when the inaccuracy is solved after an analysis which makes it possible to
effect the billing in a subsequent period. There is permanent impossibility
when, after the respective analysis, it is determined that respective charge
cannot be collected. Each party shall be liable to the other for payment for
the inconsistencies which arise due to calls which originated on its network,
unless it is proven that such inconsistencies are imputable to inaccuracies or
errors committed by the other party.
It is considered that a fraud has been committed in a call when it has been
determined that collection definitively cannot be effected due to the
impossibility of billing to a subscriber or user, or due to the existence of a
claim for fraud resolved in favor of the claimant or not resolved, to the
detriment of the claimant, within the term established by the Law or by this
contract.
Fraudulent calls, among others, are considered to be those calls in which the
number from which they are made has not been assigned to any subscriber or
user, the calls which
<PAGE> 30
were never billed to the subscriber or which, having been billed, were deducted
subsequently from the account of the subscriber, those made from telephones
which were disconnected or out of service at the time the call was made, or
those in which the fraud occurred due to damage to the systems of assessment or
billing of either of the parties. Each party shall be liable to the other for
the payment of the fraudulent calls which originate from its network.
In all cases where there is any suspicion of fraud, the executives in charge of
the management of this agreement shall determine the liability for the payment
of the fraudulent calls within sixty (60) days at maximum. These executives
shall exempt TELEARMENIA from liability in the cases in which there is
consensus among them that TELEARMENIA took adequate measures on a timely basis
in order to prevent the fraud which took place, or in other special cases
which, due to their characteristics, justify the exemption of TELEARMENIA from
liability. When within this term no liability has been established, and the
executives have not agreed as to mutual exemption from liability to be borne
by the parties, each party shall have the right to proceed with legal suits
in order for the liability for the fraud to be established by the authority
of jurisdiction.
SEVENTH CLAUSE - BALANCE CONFRONTATION AND RECONCILING OF ACCOUNTS:
TELEARMENIA and OCCEL shall maintain an accounting control which shall be
reconciled monthly in order to determine the net balance which the debtor party
must pay to the creditor party. The dates for these reconcilings of accounts
shall be agreed upon by the executives responsible for the management of the
agreement. For the effects of the reconciliation, parties may agree to offset
accounts for the leasing of systems and transmission media lease, leasing of
facilities for equipment location, leasing of electric and air conditioning
infrastructure, billing costs, payment for frauds and inconsistencies, interest
on late payment and any other concept related to the execution of this
agreement.
In testimony whereof, this agreement is signed in the city of Armenia in two
copies with equal tenor.
By OCCEL S.A. By TELEARMENIA
GILBERTO ECHEVERRI MEJIA RUBEN DARIO GARCIA RODRIGUEZ
President Manager
Date: Oct. 25, 1995 Date: Nov. 9, 1995
<PAGE> 31
APPENDIX NO. 3
COSTS OF LEASING OF TRANSMISSION SYSTEMS,
SPACE AND INFRASTRUCTURE
FIRST CLAUSE - OBJECT: This appendix has as its object the specification of
the amount of the rents which OCCEL shall pay to TELEARMENIA for the leasing of
the transmission infrastructure owned by TELEARMENIA and for the leasing of
physical space at the installations of TELEARMENIA for the installation of
equipment owned by OCCEL within the premises of TELEARMENIA.
SECOND CLAUSE - LEASING OF TRANSMISSION SYSTEMS AND MEDIA:
The leasing of the units comprised by the transmission systems and media which
are the property of TELEARMENIA to OCCEL, defined as specified in the contract,
shall be subject to the monthly rate of two hundred and thirteen thousand one
hundred and one pesos ($213.101) for each 2 Mbps. system and for each unit of 5
kilometers or a fraction thereof in length, whether cable, fiber optic or radio
links. This amount does not include the VAT [Value Added Tax]. The
aforementioned rate includes the entire remuneration of TELEARMENIA as well as
the respective maintenance and the sum for the electrical power and air
conditioning required by the systems and transmission media which are the
property of TELEARMENIA.
THIRD CLAUSE - LEASING OF PHYSICAL SPACE, ELECTRICAL AND AIR CONDITIONING
INFRASTRUCTURE; The leasing to OCCEL of the physical space for the
installation of equipment owned by OCCEL within the premises of TELEARMENIA
shall be at the monthly rate of one hundred thousand pesos ($100.000) for each
square meter or fraction thereof. This amount does not include the VAT. The
aforementioned rate includes the entire remuneration of TELEARMENIA as well as
consumption of maximum DC of 200 watts, the right to the air conditioning
infrastructure which may already be installed at the place at which the
equipment owned by OCCEL is located, and the services of cleaning and guard.
In the event that the parties agree as to the leasing of space in the
administrative and customer service areas located at the TELEARMENIA
installations, the aforementioned fees shall be agreed upon by the parties in
each case, taking as a basis the lease prices for this type of installations
which are considered to be average for the real estate market of Armenia.
FOURTH CLAUSE - INCREASES AND DISCOUNTS: All of the aforementioned rates may
be adjusted annually by TELEARMENIA in a maximum percentage to be established
by the Telecommunications Regulatory Commission or another body of
jurisdiction. In the event that any of these rates is not subject to
regulations, TELEARMENIA may increase it in a percentage not to exceed the
percentage of the increase of the legal minimum wage, when this occurs.
In the event of an interruption caused by a failure in the transmission
infrastructure which TELEARMENIA has leased to OCCEL, TELEARMENIA shall deduct
a percentage from the
<PAGE> 32
respective monthly rents equal to the percentage of time, measured in relation
to the respective monthly period, during which the aforementioned
infrastructure suffered the damage which impeded its utilization for the
transmission of calls. This discount shall not be applicable when the cause of
the interruption is imputable to OCCEL.
In testimony whereof, this agreement is signed in the city of Armenia in two
copies with equal tenor.
By OCCEL S.A. By TELEARMENIA
GILBERTO ECHEVERRI MEJIA RUBEN DARIO GARCIA RODRIGUEZ
President Manager
Date: Oct. 25, 1995 Date Nov. 9, 1995
<PAGE> 33
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 10.09
EDA EMPRESAS DEPARTAMENTALES DE ANTIOQUIA LINKING THE ANTIOQUIANS WITH THE WORLD
LETTER OF INTENT BETWEEN EMPRESAS DEPARTAMENTALES DE ANTIOQUIA "EDA" AND
OCCIDENTE Y CARIBE CELULAR S.A.
"OCCEL S.A."
Between the undersigned, IVAN CORREA CALDERON, identified with citizens card
number 70.070.586 of Medellin, who is in the name and representation of Empresas
Departamentales de Antioquia "EDA" in his capacity as Manager and GILBERTO
ECHEVERRI MEJIA, with citizens card number 3.302.711 of Medellin, who is acting
as the President and Legal Representative of OCCIDENTE Y CARIBE CELULAR, S.A.
"OCCEL S.A." with principal domicile in the city of Pereira, established by
means of Public Instrument No. 378 of February 14, 1992, granted by the sole
Notary of Soledad Atlantico, hereinafter referred to as OCCEL S.A., an agreement
is made to sign the present Letter of Intent, subject to the following:
CONSIDERATIONS:
1. Law 37 of 1993 regulated the rendering of Mobile Cellular Telephone services
and in its article 1st it defined it as a non-residential public
telecommunications service, of national scope and coverage.
2. OCCEL S.A. is the awardee of the concession which has as its object the
rendering of a Cellular Mobile Telephone Service on the "A" network in the
Western region of Colombia pursuant to concession agreement No. 000005 of
1994 concluded between it and the Ministry of Communications on March 28,
1994.
3. In accordance with the legal provisions which regulate this subject matter,
Law 37 of 1993, Decree 741 of 1993, the mobile cellular telephone operators
shall have the right of access to the fixed public switched telephone
networks (PSTN) already established in the country, for the purposes of
interconnection of the elements of their networks and to manage traffic.
4. In accordance with the provisions cited in the previous section the CTN
shall be interconnected with the PSTN at the points agreed upon by the
parties, with all of the equipment necessary for the interconnection to the
public switched telephone network (PSTN), both local and long distance.
When it is necessary for the purposes of the interconnection to locate
interconnection equipment within equipment rooms of EDA, the latter shall
provide the facilities for its location, AC power supply, preventive and
corrective maintenance and other facilities which are considered necessary
either technically or administratively, all at the expense of OCCEL,
PROVIDED THAT EDA HAS THE LEASING CAPABILITY AND OTHER CONDITIONS REQUIRED
FOR THIS PURPOSE.
<PAGE> 2
5. By means of Resolution 004 of 1993, the Telecommunications Regulatory
Commission established that the subscribers to the mobile telephone
service shall pay for the calls which they make and for those which
utilize the long distance PSTN, the charge for the long distance
service.
6. Empresas Departamentales de Antioquia -EDA - renders local and long
distance telephone service in 112 municipalities of the Department with
122 automatic centrals and rural and mobile telephone service.
7. It is necessary to proceed with the negotiation in order to establish
the technical, legal, commercial, economic and financial conditions
which shall constitute the Switched Interconnection Agreement which
shall be signed by the parties.
8. Until the action indicated in the preceding section is accomplished, it
is indispensable to temporarily define the interconnection of the
equipment of the networks of each of the parties and determine general
parameters which permit the administration of the financial resources.
II. OBJECT OF THE LETTER OF INTENT
ARTICLE FIRST. By means of the present instrument the parties agree to sign
the Switched Interconnection Agreement which shall govern the relationship
between them as operators of telecommunications services, for the purposes set
forth in Law 37 of 1993 and in the Reglamentary Decrees 741 and 2061 of 1993
and in the Resolutions of the Telecommunications Regulatory Commission within
a period of sixty (60) days from the signature of this Letter of Intent.
ARTICLE SECOND. Until the aforementioned agreement is signed, the
interconnection shall be subject to the following provisions:
1. INTERCONNECTION
EDA and OCCEL S.A. agree to proceed with the activities necessary for the
interconnection of the equipment of OCCEL S.A. with the switching centrals of
EDA. The infrastructure work, equipment and elements necessary for this
interconnection shall be at the expense of OCCEL S.A. Initially, access to the
network of OCCEL S.A. shall be provided only to subscribers pertaining to EDA
telephone centrals with the capability to identify and transmit the number of
the subscriber who originates the call.
2. PROCESSES OF RATING, BILLING AND COLLECTION
2.1 EDA Obligations
2.1.1 EDA shall effect the rating, charging, billing and collection of the
calls originating from the EDA users directed to the OCCEL S.A. CTN;
provisionally, OCCEL S.A.
<PAGE> 3
engages to effect the rating and charging of the aforementioned calls,
delivering this information to EDA in the form agreed upon by the parties.
Based upon that data, EDA shall effect the corresponding billing and
collection; once EDA has completed the required adjustments in its billing
system, it shall continue to effect the rating and charging of the calls
originated by its subscribers directly.
2.1.2 EDA shall transfer to OCCEL S.A. the sums corresponding to the use of
the CTN for traffic originating on the EDA network which uses the OCCEL S.A.
CTN.
2.1.3 EDA shall take into consideration the rates corresponding to the use of
the cellular network which OCCEL S.A. reports thereto. Any amendment of the
rated for use of the cellular network must be communicated by OCCEL S.A. with
advance notice of no less than thirty (30) calendar days prior to the
application of the rate.
2.1.4 While OCCEL S.A. adapts its mobile switching center (MSC) for the
transmission of the area "3" code within the signalling of the number of
origin, the EDA transmission center shall add that code to the calls which it
receives from OCCEL S.A. EDA shall charge OCCEL S.A. for the costs incurred
for the addition of that code.
2.2 OCCEL S.A. Obligations
2.2.1 OCCEL S.A. shall effect the rating, charging, billing and collection
from its subscribers for the charges corresponding to the calls which they make
and which utilize the EDA PSTN, in accordance with the schedules established by
OCCEL S.A.
2.2.2 OCCEL S.A. shall transfer to EDA the sums corresponding to the use of
the long distance PSTN for traffic originating on the OCCEL S.A. Mobile Network
which uses the long distance PSTN.
2.2.3 OCCEL S.A. shall take into consideration the rates corresponding to the
use of the EDA PSTN which it reports thereto. Any amendment of the regional
long distance rates must be communicated by EDA with advance notice of no less
than thirty (30) calender days prior to the application of the rate
2.3 Mutual Obligations
2.3.1 EDA and OCCEL S.A. engage to analyze the information on the traffic
transmitted, billed and collected on a monthly basis in order to establish the
sums which correspond to each of the parties for the traffic charges
collected. As a result of this process a determination shall be made of the
balance in favor of one of the parties, the corresponding Account Receivable
shall be established and its payment shall be effected within a term of five
(5) business days from the date of delivery of the account receivable. In the
determination of the aforementioned balance it shall be taken into account that
each operator
<PAGE> 4
shall be liable for both the inconsistencies and the fraudulent calls
originated from its network when one or the other is attributable thereto, but
shall not be liable for the sums which it has not been able to collect due to
the non-fulfillment of the subscribers and users of the sums billed.
2.3.2 Each of the parties shall assume the costs of rating, charging, billing
and collection from its respective subscribers and users, with the exception of
the amount which EDA shall collect as a one-time payment from OCCEL S.A. for
the addition of the area code "3" specified in point 2.1.4 of this Letter of
Intent.
2.3.3 Within the ten (10) days subsequent to the signature of the present
Letter of Intent, each of the parties engages to account one of its executives
who shall be responsible for optimization of the procedures for the correct
execution thereof, as well as the reconcilements of the accounts for the sums
incurred for the switched interconnection which is the subject of this letter.
In testimony whereof, this agreement is signed on Jan. 25, 1995.
By EDA: IVAN CORREA CALDERON
MANAGER
By OCCEL S.A. GILBERTO ECHEVERRI MEJIA
PRESIDENT
<PAGE> 5
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 10.10
LETTER OF INTENT BETWEEN EMPRESA NACIONAL DE
TELECOMUNICACIONES "TELECOM" AND
OCCIDENTE Y CARIBE CELULAR S.A. "OCCEL S.A."
Between the undersigned, JULIO MOLANO GONZALEZ, identified with citizens card
number 17.195.804 issued in Santafe de Bogota, who is acting in the name and
representation of Empresa Nacional de Telecomunicaciones "TELECOM" in his
capacity as President and GILBERTO ECHEVERRI MEJIA, with citizens card number
3.302.711 of Medellin, who is acting as the President and Legal Representative
of OCCIDENTE Y CARIBE CELULAR, S.A. "OCCEL S.A." with principal domicile in the
city of Pereira, established by means of Public Instrument No. 378 of February
14, 1992, granted by the sole Notary of Soledad Atlantico, the party
hereinafter referred to as OCCEL S.A., an agreement is made to sign the present
Letter of Intent, subject to the following:
CONSIDERATIONS:
1. Law 37 of 1993 regulated the rendering of Mobile Cellular Telephone services
and defined it as a non-residential public telecommunications service, of
national scope and coverage.
2. OCCEL S.A. is the awardee of the concession which has as its object the
rendering of a Cellular Mobile Telephone Service on the A network in the
Western region of Colombia pursuant to concession agreement No. 000005 of
1994 concluded between it and the Ministry of Communications on March 28,
1994.
3. In accordance with the legal provisions which regulate this subject matter,
Law 37 of 1993, Decree 741 of 1993, the mobile cellular telephone operators
shall have the right to access to the fixed public switched telephone
networks (PSTN) already established in the country, for the purposes of
interconnection of the elements of their networks and to manage traffic.
4. In accordance with the provisions cited in the previous section the operators
of the PSTN shall have the obligation to guarantee access of telephone
traffic to the switching centers and to provide facilities for the location
of the interconnection equipment within the equipment rooms of the
aforementioned centrals, AC power supply, preventive and corrective
maintenance and other facilities which are considered necessary either
technically or administratively to the mobile operator, all at the expense of
the cellular operator.
5. By means of Resolution 004 of 1993, it was established by the
Telecommunications Regulatory Commission that the subscribers to the mobile
telephone service shall pay for the calls which they make, and for those
which utilize the long distance PSTN, the charge for the long distance
service.
<PAGE> 2
6. It is necessary to proceed with the negotiation in order to establish
the technical, legal, commercial, economic and financial conditions
which shall constitute the Interconnection Agreement which shall be
signed by the parties.
7. Until the action indicated in the preceding section is accomplished, it
is indispensable to temporarily define the interconnection of the
equipment of the networks of each of the parties and determine general
parameters which permit the administration of the financial resources.
II. OBJECT OF THE LETTER OF INTENT
ARTICLE FIRST. By means of the present instrument the parties agree to sign the
Interconnection Agreement which shall govern the relationship between them as
operators of telecommunications services, for the purposes set forth in Law 37
of 1993 and in the Reglamentary Decrees 741 and 2061 of 1993 and in the
Resolutions of the Telecommunications Regulatory Commission within a period of
sixty (60) days from the signature of this Letter of Intent.
[beginning of Article Second appears to be missing]
shall be subject to the following provisions:
1. INTERCONNECTION
TELECOM and OCCEL S.A. agree to proceed with the activities necessary for the
interconnection and placement in operation of the equipment, links and
transmission media, as well as the facilities which are considered technically
and administratively necessary, required by OCCEL S.A., for the operation of
its network and the rendering of public mobile cellular telephone service. The
infrastructure work, equipment and elements necessary for the interconnection
with the local network of TELECOM and the National and International Long
Distance network shall be at the expense of OCCEL S.A.
2. PROCESSES OF RATING, CHARGING, BILLING AND COLLECTION
2.1 Obligations of TELECOM
2.1.1 TELECOM shall effect the rating, charging, billing and collection of
the calls originating from the fixed subscribers who use the long distance PSTN
directed to the mobile cellular network of OCCEL S.A. and shall send the
charges to the local operator, including the rates of the charges for the use
of the cellular network of OCCEL S.A., in order that the latter may proceed
with the process of billing and collection which may be applicable. OCCEL S.A.
shall bear the administrative expenses incurred by TELECOM.
2.1.2 As a tool for the reconcilement of accounts with OCCEL S.A., TELECOM
shall effect the rating and charging of the calls originating from mobile
subscribers who use the long
<PAGE> 3
distance PSTN. The aforementioned information may be used for billing purposes.
2.1.3 TELECOM shall take into consideration the rates corresponding to the use
of the cellular network which OCCEL S.A. reports thereto. Any amendment of the
rates for use of the cellular network must be communicated by OCCEL S.A. with
advance notice of no less than thirty (30) calendar days prior to the
application of the rate.
2.2 Obligations of OCCEL S.A.
2.2.1 OCCEL S.A. shall effect the rating, charging, billing and collection from
its subscribers for the charges corresponding to the calls which they make and
which utilize the long distance PSTN, in accordance with the schedules
established by OCCEL S.A., with the corresponding administrative expenses for
the account of TELECOM.
2.2.2 OCCEL S.A. shall transfer to TELECOM the sums corresponding to the use of
the long distance PSTN for traffic originating on the OCCEL S.A. mobile network
[line of text not transmitted] Resolution 004 of 1993.
2.2.3 When OCCEL S.A. makes use of a single conduit through an interurban
central of TELECOM for calls originated on its Mobile Network directed to
another mobile operator or a local operator, OCCEL S.A. shall pay a sum
equivalent to the minimum long distance rate to TELECOM.
2.2.4 OCCEL S.A. shall take into consideration the rates corresponding to the
use of the long distance network which TELECOM reports thereto. Any amendment
of the regional long distance rates must be communicated by OCCEL S.A. with
advance notice of no less than thirty (30) calendar days prior to the
application of the rate.
2.3 Mutual Obligations
TELECOM and OCCEL S.A. engage to analyze the information on the traffic
transmitted on a monthly basis in order to establish the sums which correspond
to each of the parties for the aforementioned items. As a result of this
process a determination shall be made of the balance in favor of one of the
parties, the corresponding Account Receivable shall be established and its
payment shall be effected within a term of five (5) business days.
The parties, by mutual agreement, shall establish the regulations and
principles applicable to the determination of the administrative and financial
expenses derived from the execution of the present Letter of Intent.
3. LEASING OF CHANNELS, AREAS AND POWER
3.1 OCCEL S.A. shall pay to TELECOM the sums corresponding to the leasing of
channels, leasing of areas, supply of power and other facilities which are
required in accordance with the tariffs established by TELECOM.
<PAGE> 4
3.2 TELECOM shall prepare monthly collection statements for the items
mentioned in number 3.1 of the present Letter of Intent in accordance with the
procedures in force in the Corporation; the corresponding sums must be paid
within the five (5) business days subsequent to the date of presentation.
Each of the parties shall designate a representative for the purpose of
guaranteeing fulfillment and correct execution of the agreements made in this
Letter of Intent.
The disputes which may arise between the parties by virtue of the present
Letter of Intent, with the exception of those for which the Telecommunications
Regulatory Commission holds jurisdiction [line of text missing--presumably "in
the absence of"] amicable agreement between the parties within a period of
thirty (30) days, shall be submitted to a Court of Arbitration composed of
three (3) arbiters who shall make a determination according to the law, subject
to the regulations of the Chamber of Commerce of Santafe de Bogota D.C.,
administered by the latter and subject to Colombian law.
This instrument is signed on the day of the month of of 1994.
By TELECOM: By OCCEL S.A.
JULIO MOLANO GONZALEZ GILBERTO ECHEVERRI MEJIA
PRESIDENT PRESIDENT
April 10, 1995 March 17, 1995
<PAGE> 5
I certify that the translations into English of exhibits 3.01, 10.03, 10.04,
10.05, 10.06, 10.07, 10.08, 10.09, and 10.10 to the Registration Statement on
F-4 of Occidente y Caribe Celular S.A. are fair and accurate.
/s/ Alvaro H. Munoz R.
- ------------------------------
Name
Finance Vice-president
- ------------------------------
Title
August 5, 1996
- ------------------------------
Date
<PAGE> 1
Exhibit 10.11
EXECUTION COPY
WARRANT AGREEMENT
between
OCCIDENTE Y CARIBE CELULAR S.A.
and
THE BANK OF NEW YORK,
as Warrant Agent
-------------------------
Dated as of June 7, 1996
<PAGE> 2
i
TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions........................................ 2
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates....................... 8
Section 2.2. Restrictive Legends................................ 9
Section 2.3. Execution and Delivery of Warrant Certificates..... 10
Section 2.4. Loss or Mutilation................................. 11
Section 2.5. CUSIP Number....................................... 11
ARTICLE III
EXERCISE PRICE; EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price..................................... 12
Section 3.2. Exercise; Restrictions on Exercise................. 12
Section 3.3. Method of Exercise; Payment of Exercise Price...... 13
Section 3.4. Repurchase of Warrants............................. 17
Section 3.5. Repurchase Offers.................................. 19
Section 3.6. Inability to Consummate Warrant Repurchase
or Repurchase Offer.......................... 21
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments........................................ 22
Section 4.2. Decrease in Exercise Price......................... 28
Section 4.3. Notice of Adjustment............................... 28
Section 4.4. Statement on Warrants.............................. 29
<PAGE> 3
ii
Section 4.5. Notice of Consolidation, Merger, Etc............... 29
Section 4.6. Fractional Interests............................... 29
ARTICLE V
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 5.1. Transfer and Exchange.............................. 30
Section 5.2. Registration, Registration of Transfer
and Exchange..................................... 30
Section 5.3. Book-Entry Provisions for the Rule 144A
Global Warrant and Regulation S Global Warrant... 31
Section 5.4. Special Transfer Provisions........................ 33
Section 5.5. Surrender of Warrant Certificates.................. 36
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Reservation and Authorization...................... 36
Section 6.2. Qualification Under Colombian Law.................. 37
Section 6.3. Establishment of ADR Program....................... 38
Section 6.4. Filing and Effectiveness of Warrant
Shares Registration Statement................ 38
Section 6.5. Registration Rights in Initial Public Offering..... 39
Section 6.6. Registration of ADRs............................... 40
Section 6.7. Blue Sky........................................... 40
Section 6.8. Accuracy of Disclosure............................. 41
Section 6.9. Indemnity.......................................... 41
Section 6.10. Expenses........................................... 41
ARTICLE VII
REMEDIES
Section 7.1. Liquidated Damages................................. 42
Section 7.2. Payment of Additional Amounts...................... 43
Section 7.3. Default Interest................................... 44
Section 7.4. Remedies; No Waiver................................ 44
<PAGE> 4
iii
ARTICLE VIII
THE WARRANT AGENT
Section 8.1. Duties and Liabilities.............................. 44
Section 8.2. Right to Consult Counsel............................ 46
Section 8.3. Compensation; Indemnification....................... 46
Section 8.4. No Restrictions on Actions.......................... 47
Section 8.5. Discharge or Removal; Replacement Warrant Agent..... 47
Section 8.6. Successor Warrant Agent............................. 48
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Not Deemed a Stockholder............. 48
Section 9.2. Right of Action..................................... 48
ARTICLE X
MISCELLANEOUS
Section 10.1. Money Deposited with the Warrant Agent.............. 49
Section 10.2. Payment of Taxes.................................... 49
Section 10.3. No Merger, Consolidation or Sale of Assets
of the Company.................................... 50
Section 10.4. Reports to Holders.................................. 50
Section 10.5. Notices............................................. 51
Section 10.6. Severability........................................ 51
Section 10.7. Binding Effect...................................... 51
Section 10.8. Third Party Beneficiaries........................... 51
Section 10.9. Amendments.......................................... 51
Section 10.10. Headings............................................ 52
Section 10.11. GOVERNING LAW....................................... 52
Section 10.12. Process Agent; Submission to Jurisdiction;
Waiver of Immunities.......................... 52
Section 10.13. Judgment Currency................................... 53
Section 10.14. Counterparts........................................ 53
<PAGE> 5
iv
EXHIBIT A Form of Warrant Certificate
EXHIBIT B Form of Private Placement Legend
EXHIBIT C Form of Legend for Global Warrants
EXHIBIT D Form of Legend for Warrants Issued as Part of a Unit
EXHIBIT E Form of Investor Letter to be Delivered in Connection
with Transfers to Non-QIB Accredited Investors
EXHIBIT F Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S
EXHIBIT G Form of Certificate to be Delivered upon Termination o
Restricted Period
EXHIBIT H Form of Colombian Legend
<PAGE> 6
WARRANT AGREEMENT
AGREEMENT (this "Agreement") dated as of June 7, 1996 between Occidente
y Caribe Celular S.A. (the "Company"), a sociedad anonima de economia mixta
existing under the laws of the Republic of Colombia ("Colombia"), and The Bank
of New York, as Warrant Agent (the "Warrant Agent").
Pursuant to the terms of a Purchase Agreement dated as of May 31, 1996
(the "Purchase Agreement") among the Company on the one hand and Merrill Lynch,
Pierce, Fenner & Smith Incorporated and ING Baring (U.S.) Securities, Inc. on
the other hand (the "Initial Purchasers"), the Company has agreed to issue and
sell to the Initial Purchasers warrants (each, a "Warrant") entitling the
holders thereof to purchase, under certain circumstances, either (i) American
Depositary Receipts ("ADRs") representing up to an aggregate of 4,355,852 shares
of class B common stock, par value one thousand Pesos per share, of the Company
(the "Class B Common Stock"), subject to adjustment (the "Warrant Shares"), or
(ii) if, at the time any Warrants are exercised, the Company has not entered
into an ADR Deposit Agreement (as defined below) or any Colombian corporate or
governmental approvals or authorizations necessary for the issuance of ADRs have
not been obtained or are not then in effect, the Warrant Shares, as part of
190,745 units (the "Units"), each Unit consisting of US$1,000 principal amount
at maturity of 14% Senior Discount Notes due 2004 (the "Notes") to be issued
pursuant to the provisions of an Indenture dated as of June 1, 1996 (the
"Indenture") between the Company, as issuer, and The Bank of New York, as
trustee, and four Warrants. Each Warrant will entitle the registered holder
thereof to purchase either (x) 0.22836 ADRs, each ADR representing 25 fully paid
and non-assessable Warrant Shares, or (y) if, at the time any Warrants are
exercised, the Company has not entered into an ADR Deposit Agreement or any
Colombian corporate or governmental approvals or authorizations necessary for
the issuance of ADRs have not been obtained or are not then in effect, 5.709
fully paid and non-assessable Warrant Shares at an exercise price of US$1.00 per
Warrant Share (US$25.00 per ADR), subject to adjustment as provided herein. The
Notes and the Warrants included in each Unit will become separately transferable
at the close of business upon the earliest to occur of (A) 90 days from the date
of issuance of the Units, (B) the occurrence of a Change of Control and (C) the
date on which the Exchange Offer Registration Statement (each, as defined below)
is declared effective (the "Separation Date").
In consideration of the foregoing and of the agreements contained in
the Purchase Agreement and for the purpose of defining the terms and provisions
of the Warrants and the respective rights and obligations thereunder of the
Company, the record holders thereof (the "Holders") and the Warrant Agent, the
Company and the Warrant Agent each hereby agrees as follows:
<PAGE> 7
2
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions. (a) As used in this Agreement, the following
terms shall have the following meanings:
"ADR Custodian" means the custodian under the ADR Deposit Agreement.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person that
owns, directly or indirectly, 10% or more of such specified Person's voting
Capital Stock or any executive officer or director of any such specified Person
or other Person. For the purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing; provided that the
Initial Purchasers and their Affiliates shall be deemed not to be "Affiliates"
of the Company solely as a result of transactions contemplated hereby.
"Applicable Procedures" means the applicable procedures of the Warrant
Agent, DTC, Euroclear and Cedel, in each case to the extent applicable.
"Business Day" means any day which is not a Saturday, a Sunday, or any
other day on which banking institutions in New York City or Colombia are not
required to be open.
"Bylaws" means the estatutos sociales of the Company, as the same may
be amended or restated from time to time.
"Certificated Notes" means certificated Notes in fully registered
definitive form.
"Certificated Warrants" means certificated Warrants in fully registered
definitive form.
"Change of Control" shall have the meaning provided in the Indenture.
"Class A Common Stock" means the class A common stock, par value one
thousand Pesos per share, of the Company.
<PAGE> 8
3
"Class C Common Stock" means the class C common stock, par value one
thousand pesos per share, of the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock, the Class B Common Stock
and the Class C Common Stock.
"Company Order" means a written order or request signed in the name of
the Company by its President or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Warrant Agent.
"Current Market Value" per ADR, Warrant Share or share of any other
security (herein collectively referred to as a "security"), for the purposes of
any computation under Section 3.3, 3.4 or 3.5 or Article IV, at any date herein
specified means:
(i) if the security is registered under the Exchange Act, the average
of the daily market prices (on the stock exchange that is the primary
trading market for the security) of the security for the 20 consecutive
trading days immediately preceding such date, or, if the security has been
registered under the Exchange Act for less than 20 consecutive trading days
before such date, then the average of the daily market prices for all of
the trading days before such date for which daily market prices are
available, in either case, as certified to the Warrant Agent by the
President, any Vice President or the Financial Vice President of the
Company (the "Value Certificate"). The market price for each such trading
day shall be: (A) in the case of a security listed or admitted to trading
on any national securities exchange, the closing sales price, regular way,
on such trading day, or if no sale takes place on such trading day, the
average of the closing bid and asked prices on such trading day on the
principal national securities exchange on which such security is listed or
admitted, as determined by the Board of Directors of the Company, in good
faith, (B) in the case of a security not then listed or admitted to trading
on any national securities exchange, the last reported sale price on such
trading day, or if no sale takes place on such trading day, the average of
the closing bid and asked prices on such trading day, as reported by a
reputable quotation source designated by the Company, (C) in the case of a
security not then listed or admitted to trading on any national securities
exchange and as to which no such reported sale price or bid and asked
prices are available, the average of the reported high bid and low asked
prices on such trading day, as reported by a reputable quotation service,
or a newspaper of general circulation in the Borough of Manhattan, City and
State of New York customarily published on each Business Day, designated by
the Company, or, if there shall be no bid and asked prices on such trading
day, the average of the high bid and low asked prices, as so reported, on
the most recent trading day (not more than 30 calendar days
<PAGE> 9
4
prior to the date in question) for which prices have been so reported and
(D) if there are no bid and asked prices reported during the 30 calendar
days prior to the date in question, the Current Market Value of the
security shall be determined as if the security were not registered under
the Exchange Act; or
(ii) if the security is not registered under the Exchange Act or if the
value cannot be computed under clause (i) above, the value of the security
as certified to the Warrant Agent in a Value Certificate (A) in the case of
any computation under Article IV, most recently determined as of a date
within the six months preceding such date and set forth in a Value Report
by an Independent Financial Expert selected by the Board of Directors in
accordance with the criteria for such valuation set out in Section 4.1(j)
or (B) in the case of any computation under Section 3.4 or 3.5 or in the
case of any computation under Article IV, if no such determination shall
have been made within such six-month period or if the Company so chooses,
determined as of such date and set forth in a Value Report as determined by
an Independent Financial Expert, which shall be selected by the Board of
Directors in accordance with Section 3.4(b), 3.5(b) or 4.1(j) hereof, as
the case may be.
"DTC" means The Depository Trust Company, its nominees and their
respective successors.
"Excess Cash Dividends" shall mean the portion of any cash dividend
that, when such cash dividend is added to all other cash dividends previously
paid in the calendar year of the payment of such dividend (excluding the
portion of any such other dividend that constituted Excess Cash Dividends as
of the date of its declaration), exceeds 5% of the then current market value per
share of the Class B Common Stock on the declaration date of such cash dividend.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Expiration Date" means March 15, 2004.
"Independent Financial Expert" means an internationally recognized
United States, United Kingdom or European investment banking firm that does not
(and whose directors, officers, employees and Affiliates do not) have a direct
or indirect financial interest in the Company or any of its Affiliates and is
not (and none of whose directors, officers, employees or Affiliates is) a
promoter, director or officer of the Company or any of its Affiliates.
<PAGE> 10
5
"Initial Public Offering" or "IPO" means the first time a registration
statement other than the Exchange Offer Recognition Statement filed under the
Securities Act with the Commission respecting an offering, whether primary or
secondary, of Common Stock (or securities convertible into, or exchangeable for,
Common Stock, including American depositary receipts, or rights to acquire
Common Stock or such securities), which is underwritten on a firmly committed
basis, is declared effective and the securities so registered are issued and
sold.
"Issue Date" means June 7, 1996.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Peso Equivalent" means, with respect to any amount expressed in U.S.
Dollars, the amount of Pesos necessary to acquire such amount of U.S. Dollars,
calculated at 9:00 A.M. (Colombian time) on the date of determination by
reference to the Representative Market Rate ("La Tasa Representiva de Mercada")
or market value prevailing on the relevant date as certified by the Colombian
Superintendency of Banking of Colombia or, if such rate is not available, such
other U.S. Dollars-to-Pesos foreign exchange rate as shall be determined by the
Company.
"Pesos" means the lawful currency of Colombia.
"Private Placement Legend" means the legend set forth on the Warrant
Certificates in the form set forth in Exhibit B hereof.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any of the Warrants, ADRs or Warrant Shares
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Public Equity Offering" shall have the meaning provided in the
Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means an offer to the holders of the Notes
to issue and deliver to such holders, in exchange for the Notes, a like
principal amount at
<PAGE> 11
6
maturity of debt securities of the Company identical in all material respects to
the Notes, except for the transfer restrictions relating to the Notes, as
provided in the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Initial Purchasers named therein, dated as of June
7, 1996, relating to the Notes.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means Notes offered and sold in offshore
transactions in reliance on Regulation S issued in the form of one or more
permanent Notes in global form.
"Restricted Certificated Warrant" means a Warrant in certificated,
fully registered form which carries the Private Placement Legend.
"Restricted Warrant" means a Rule 144A Global Warrant or a Restricted
Certificated Warrant, each of which carries the Private Placement Legend.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Global Note" means Notes offered and sold in the United
States in reliance on Rule 144A issued initially in the form of one or more
permanent Notes in global form.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Trading Market" means that, and a Trading Market will be deemed to
exist on any Business Day if, it is possible to determine the Current Market
Value of the ADRs or Warrant Shares (or other security) pursuant to paragraph
(i) of the definition of Current Market Value.
"Underlying Securities" shall mean the ADRs, Warrant Shares or other
securities issuable or issued upon exercise of the Warrants.
"U.S. Dollars" or "US$" means the lawful currency of the United States
of America.
"Value Report" means a report of an Independent Financial Expert
stating the Current Market Value of the ADRs, Warrant Shares and other
securities or property of the Company, if any, being valued as of any date and
containing a brief statement as to the
<PAGE> 12
7
nature and scope of the examination or investigation upon which the
determination of value was made and the method of valuation used.
"Warrant Registration Default" means, and shall be deemed to have
occurred, if (i) on the Exercise Commencement Date, the Warrant Shares
Registration Statement has not been declared effective by the Commission, or
(ii) the Commission shall have issued a stop order suspending the effectiveness
of the Warrant Shares Registration Statement, at a time when such Warrant Shares
Registration Statement is required to be kept effective by the Company pursuant
to the provisions of this Agreement.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Additional Amounts 7.2
ADR Recitals
ADR Deposit Agreement 6.3
ADR Depositary 6.3
ADR Registration Statement 6.6
Agent Members 5.3(a)
Agreement Preamble
Certificated Warrant 2.3
Class B Common Stock Recitals
Colombian Withholding Taxes 7.2
Company Preamble
Default 7.3(a)
Event Date 7.1(b)
Exercise Commencement Date 3.2
Exercise Price 3.1
expiration date 3.5(a)
Global Warrant 2.3
Holders Recitals
Indemnified Party 6.9
Indenture Recitals
Initial Purchasers Recitals
Institutional Accredited Investor 2.3
Investor Letter 2.3
IPO Registration Statement 6.5(a)
Judgment Currency 10.13
liquidated damages payment date 7.1(b)
Notes Recitals
<PAGE> 13
8
Offer Notice 3.5(c)
Offshore Certificated Warrant 2.3
Par Value Notice 3.1(a)
Private Placement Legend 5.4
Process Agent 10.12
Purchase Agreement Recitals
Registration Statement 6.5(a)
Regulation S Global Warrant 2.3
Repurchase Notice 3.4(c)
Repurchase Obligation 7.3(b)
Repurchase Offer 3.5(a)
Repurchase Price 3.5(a)
Restricted Period 5.3(g)
Rule 144A Global Warrant 2.3
Separation Date Recitals
Suspension Period 6.4(b)(ii)
Transfer Agent 5.2
Units Recitals
Value Certificate 1.1 (Fair Market Value)
Warrant Recitals
Warrant Agent Preamble
Warrant Certificates 2.1
Warrant Repurchase 3.4(a)
Warrant Repurchase Price 3.4(a)
Warrant Shares Recitals
Warrant Shares Registration Statement 6.4
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Certificates representing
the Warrants (the "Warrant Certificates") shall be in registered form only and
substantially in the form attached hereto as Exhibit A. The Warrant Certificates
shall be dated the date on which countersigned by the Warrant Agent and shall
have such insertions as are appropriate or required or permitted by this
Agreement and may have such letters, numbers or other marks of identification
and such legends and endorsements typed, stamped, printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation pursuant thereto, or to conform to usage. The
Company
<PAGE> 14
9
shall approve the form of the Warrant Certificates and any notation, legend or
endorsement on them.
The terms and provisions contained in the forms of the Warrant
Certificates annexed hereto as Exhibit A shall constitute, and are hereby
expressly made, a part of this Agreement.
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods, all as
determined by the officer of the Company executing such Warrant Certificates, as
evidenced by such officer's execution of such Warrant Certificates.
Pending the preparation of definitive Warrant Certificates, temporary
Warrant Certificates may be issued, which may be printed, lithographed,
typewritten, mimeographed or otherwise produced, and which will be substantially
of the tenor of the definitive Warrant Certificates in lieu of which they are
issued.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay. After
the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates to the Warrant Agent, without
charge to the Holder. Until so exchanged the temporary Warrant Certificates
shall in all respects be entitled to the same benefits under this Agreement as
definitive Warrant Certificates.
Section 2.2. Restrictive Legends. (a) The Rule 144A Global Warrant and
each Restricted Certificated Warrant shall bear the legend set forth in Exhibit
B on the face thereof.
(b) The Regulation S Global Warrant and each Offshore Certificated
Warrant shall bear the legend set forth in Exhibit B on the face thereof until
at least 41 days after the Issue Date and the receipt by the Warrant Agent of a
certificate substantially in the form of Exhibit G hereto.
(c) Each Global Warrant shall also bear the legend set forth in Exhibit
C on the face thereof.
(d) Each Warrant Certificate issued prior to the Separation Date shall
bear the legend set forth in Exhibit D on the face thereof.
(e) Each of the Warrants referred to in paragraphs (a) through (d)
above shall bear the legend set forth in Exhibit H on the face thereof.
<PAGE> 15
10
Section 2.3. Execution and Delivery of Warrant Certificates. Warrant
Certificates evidencing Warrants to purchase initially an aggregate of up to
4,355,852 Warrant Shares may be executed, on or after the Issue Date, by the
Company and delivered to the Warrant Agent for countersignature, and the Warrant
Agent shall thereupon countersign and deliver such Warrant Certificates upon the
order and at the direction of the Company to the purchasers thereof on the date
of issuance. The Warrant Agent is hereby authorized to countersign and deliver
Warrant Certificates as required by this Section 2.3 or by Section 2.4, 3.3, 5.3
or 5.4.
The Warrant Certificates shall be executed on behalf of the Company by
its President or any Vice President, either manually or by facsimile signature
printed thereon. The Warrant Certificates shall be countersigned manually by the
Warrant Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company whose signature shall have been placed upon any
of the Warrant Certificates shall cease to be such officer of the Company before
countersignature by the Warrant Agent and issuance and delivery thereof, such
Warrant Certificates may, nevertheless, be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such officer of the Company.
Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of a single, permanent global Warrant Certificate in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "Rule 144A Global Warrant"), deposited with the Warrant Agent, as
custodian for DTC, duly executed by the Company and countersigned by the Warrant
Agent, and shall bear the legends set forth in Exhibits B, C, D and H. The
aggregate number of Warrants represented by the Rule 144A Global Warrant may
from time to time be increased or decreased by adjustments made on the records
of the Warrant Agent, as custodian for DTC, or its nominee, as hereinafter
provided.
Warrants offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of a single, permanent global
Warrant Certificate in definitive, fully registered form, substantially in the
form set forth in Exhibit A (the "Regulation S Global Warrant"), deposited with
the Warrant Agent, as custodian for DTC, duly executed by the Company and
countersigned by the Warrant Agent, and shall bear the legends set forth in
Exhibits C, D and H. The aggregate number of Warrants represented by the
Regulation S Global Warrant may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for DTC, or
its nominee, as hereinafter provided. The Rule 144A Global Warrant and the
Regulation S Global Warrant are sometimes collectively referred to herein as the
"Global Warrants".
Warrants offered and sold in their initial distribution to a limited
number of institutions that are accredited investors (which are not QIBs) within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act (and
institutions in which all the equity
<PAGE> 16
11
owners are such accredited investors) (together referred to as "Institutional
Accredited Investors") in transactions exempt from registration under the
Securities Act shall be issued as a Restricted Certificated Warrant,
substantially in the form set forth in Exhibit A, and shall bear the legends set
forth in Exhibit B, D and H. Such Warrants shall be delivered to such
Institutional Accredited Investors only upon the execution and delivery to the
Company and the Initial Purchasers of an institutional accredited investor
transferee compliance letter (an "Investor Letter") substantially in the form of
Exhibit E hereto. Restricted Certificated Warrants may not be transferred or
exchanged for interests in a Global Warrant or another Restricted Certificated
Warrant except as provided in Sections 5.3 and 5.4 hereof.
Warrants issued pursuant to Section 5.3(b) in exchange for interests in
the Regulation S Global Warrant shall be issued in the form of permanent Warrant
Certificates in registered form in substantially the form set forth in Exhibit A
(the "Offshore Certificated Warrants") and shall bear the legend set forth in
Exhibit H. The Offshore Certificated Warrants and the Restricted Certificated
Warrants are sometimes collectively herein referred to as the "Certificated
Warrants".
Section 2.4. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership and the loss,
theft, destruction or mutilation of any Warrant Certificate and of indemnity
satisfactory to them and (in the case of mutilation) upon surrender and
cancellation thereof, then, in the absence of notice to the Company or the
Warrant Agent that the Warrants represented thereby have been acquired by a bona
fide purchaser, the Company shall execute and the Warrant Agent shall
countersign and deliver to the registered Holder of the lost, stolen, destroyed
or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new
Warrant Certificate of the same tenor and for a like aggregate number of
Warrants. Upon the issuance of any new Warrant Certificate under this Section
2.4, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and other
expenses (including the reasonable fees and expenses of the Warrant Agent and of
counsel to the Company) in connection therewith. Every new Warrant Certificate
executed and delivered pursuant to this Section 2.4 in lieu of any lost, stolen
or destroyed Warrant Certificate shall constitute a contractual obligation of
the Company, whether or not the allegedly lost, stolen or destroyed Warrant
Certificates shall be at any time enforceable by anyone, and shall be entitled
to the benefits of this Agreement equally and proportionately with any and all
other Warrant Certificates duly executed and delivered hereunder. The provisions
of this Section 2.4 are exclusive and shall preclude (to the extent lawful) all
other rights or remedies with respect to the replacement of mutilated, lost,
stolen, or destroyed Warrant Certificates.
Section 2.5. CUSIP Number. The Company in issuing the Warrants may use
a "CUSIP" number(s), and if so, the Warrant Agent shall use the CUSIP number(s)
in notices of repurchase as a convenience to Holders; provided that any such
notice may state
<PAGE> 17
12
that no representation is made as to the correctness or accuracy of the CUSIP
number(s) printed in the notice or on the Warrants, and that reliance may be
placed only on the other identification numbers printed on the Warrants.
ARTICLE III
EXERCISE PRICE; EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant Certificate shall, when
countersigned by the Warrant Agent, entitle the Holder thereof, subject to and
upon compliance with the provisions of this Agreement, to purchase either (i)
0.22836 ADRs per Warrant, each ADR representing 25 fully paid and non-assessable
Warrant Shares, or (ii) if, at the time any Warrants are exercised, (x) the
Company has not entered into an ADR Deposit Agreement or (y) any Colombian
corporate or governmental authorizations set forth in Section 6.2(b) has not
been obtained or is not then in effect, 5.709 fully paid and non-assessable
Warrant Shares, at an exercise price of US$1.00 per Warrant Share (US$25.00 per
ADR) per Warrant, subject to adjustment as provided in Sections 4.1 and 4.2
hereof (the "Exercise Price"); provided, however, that if, on the date of
exercise of any Warrant, the Peso Equivalent of the Exercise Price is less than
the aggregate of the par value of the Warrant Shares represented by the ADRs or
the Warrant Shares, as the case may be, for which such Warrant may be exercised,
the Exercise Price payable upon such exercise shall be adjusted to be equal to
the Peso Equivalent of the aggregate of such par value.
Section 3.2. Exercise; Restrictions on Exercise. Subject to the terms
and conditions set forth herein, the Warrants shall be exercisable at any time
or from time to time on any Business Day on or after the earliest to occur of
(i) June 7, 1998, (ii) the occurrence of a Change of Control, or (iii) the
consummation of a Public Equity Offering (the "Exercise Commencement Date") and
on or before the Expiration Date; provided, however, that Warrants may not be
exercised (i) prior to the date on which the Warrant Agent has received written
notice from the Company that a Registration Statement has been declared
effective with respect to the Warrant Shares, (ii) at any time after the Warrant
Agent has received written notice from the Company or the Commission that a stop
order issued by the Commission suspending the effectiveness of such Registration
Statement is in effect, (iii) prior to the date on which the Warrant Agent has
received written notice from the Company that the Company has obtained all
necessary Colombian corporate and governmental authorizations and approvals set
forth in Section 6.1 and 6.2(a), (iv) at any time after the Warrant Agent has
received written notice from the Company that the authorizations and approvals
referred to in clause (iii) are not in effect or (v) during any Suspension
Period permitted under Section 6.4(b)(ii), provided that the Warrant Agent has
received notice from the Company of such Suspension Period. If, at the time such
Warrants are exercised, (w) the Company has entered into an ADR Deposit
Agreement, (x) all
<PAGE> 18
13
Colombian corporate and governmental authorizations set forth in Section 6.2(b)
have been obtained, (y) the Warrant Agent has been notified that both (w) and
(x) of this Section 3.2 have occurred, and (z) the Warrant Agent has not
received written notice from the Company that any of the authorizations and
approvals set forth in Section 6.2(b) is not in effect, such Warrants shall be
exercisable only to purchase ADRs. Any Warrants not exercised by 5:00 p.m., New
York City time, on the Expiration Date shall expire and all rights of the
Holders of such Warrants shall terminate, except the right to receive cash in a
Warrant Repurchase as provided in Section 3.4. The Company shall give notice not
less than 90, and not more than 120, calendar days prior to the Expiration Date
to the Holders of all then outstanding Warrants to the effect that the Warrants
will terminate and become void as of the close of business on the Expiration
Date.
Additionally, pursuant to Section 4.1(h)(ii) hereof, the Warrants may
expire and all rights of the Holders of such Warrants shall terminate in the
event the Company merges or consolidates with or sells all or substantially all
of its property and assets to a Person (other than an Affiliate of the Company)
if the consideration payable to holders of shares of Class B Common Stock in
exchange for their Class B Common Stock in connection with such merger,
consolidation or sale consists solely of cash. The Company shall give the
Warrant Agent written notice of either of the events described in this paragraph
immediately upon the occurrence thereof.
Section 3.3. Method of Exercise; Payment of Exercise Price. (a) (i) In
order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof shall surrender for exercise the Warrant
Certificate to the Warrant Agent at its corporate trust office set forth in
Section 10.5 hereof, with the Subscription Form set forth in the Warrant
Certificate (or a copy thereof furnished by the Warrant Agent) duly executed,
together with payment in full of the Exercise Price then in effect for each ADR,
Warrant Share or other securities or property issuable upon exercise of the
exercised Warrants; such payment shall be made in cash or by certified or
official bank or bank cashier's check payable to the order of the Company.
(ii) Upon receipt of the Warrant Certificate, the duly executed
Subscription Form and such payment, the Warrant Agent shall promptly notify the
Company in writing of such surrender. If the Exercise Price has been adjusted
pursuant to the provision of Section 3.1 and notice of such adjustment has not
previously been given in accordance with Section 4.3, the Company will promptly
notify the exercising Holder and the Warrant Agent in writing of the adjusted
Exercise Price (a "Par Value Notice").
(iii) If the Company is obligated to deliver a Par Value Notice
pursuant to Section 3.3(a)(ii), the surrendering Holder may elect:
<PAGE> 19
14
(A) to exercise such Warrants at the adjusted Exercise Price
by notifying the Warrant Agent of such election and paying to the
Warrant Agent an amount equal to the difference between the adjusted
Exercise Price for such Warrants and the amount previously paid by such
Holder pursuant to clause (i) of this Section 3.3(a); such payment
shall be made in cash or by certified or official bank or bank
cashier's check payable to the order of the Company; or
(B) to withdraw such surrendered Warrants and receive a refund
of the Exercise Price paid pursuant to clause (i) of this Section
3.3(a); in such case the Warrant Agent shall refund such payment as
promptly as is practicable in cash or by certified or official bank or
bank cashier's check payable to such Person or Persons as it may be
directed in writing by the surrendering Holder, net of any transfer
taxes required to be paid in the event that the check is to be
delivered to a Person other than the Holder.
(iv) Except as provided in clause (iii) of this Section
3.3(a), all payments received upon exercise of Warrants shall be delivered to
the Company by the Warrant Agent as reasonably instructed in writing by the
Company. If fewer than all the Warrants represented by a Certificated Warrant
are exercised, such Certificated Warrant shall be surrendered and a new
Certificated Warrant of the same tenor and for the number of Warrants which were
not exercised shall be executed by the Company and delivered to the Warrant
Agent and the Warrant Agent shall countersign the new Certificated Warrant,
registered in such name or names as may be directed in writing by the Holder,
and shall deliver the new Certificated Warrant to the Person or Persons entitled
to receive the same. If fewer than all of the Warrants represented by a Global
Warrant are exercised, the Global Warrant shall not be surrendered to the
Warrant Agent in accordance with Section 3.3(a)(i) and the Warrant Agent shall
decrease or reflect on its records, as custodian for DTC, or its nominee, a
decrease in the aggregate number of Warrants represented by such Global Warrant
equal to the number of Warrants exercised.
(v) Upon exercise of any Warrants in accordance with the
foregoing provisions, (i) (x) the Company shall issue such number of Warrant
Shares as are issuable upon the exercise of such Warrants to the ADR Depositary
and shall issue the other securities or property (including money), if any, to
which such exercising Holder is then entitled and (y) the ADR Depositary,
pursuant to the ADR Deposit Agreement, upon instructions from the Warrant Agent,
shall issue ADRs to which such exercising Holder is then entitled, or (ii) if
the Company has not entered into an ADR Deposit Agreement or any Colombian
corporate or governmental authorizations set forth in Section 6.2(b) have not
been obtained or are not then in effect, the Company shall issue such number of
Warrant Shares and the other securities or property (including money), if any,
to which such exercising Holder is then entitled, in either case, subject to the
conditions set forth below.
<PAGE> 20
15
(b) If (w) the Company has entered into an ADR Deposit
Agreement, (x) all Colombian corporate and governmental authorizations set forth
in Section 6.2(b) have been obtained, (y) the Warrant Agent has received written
notice from the Company that both (w) and (x) of this paragraph (b) have
occurred, and (z) the Warrant Agent has not received written notice from the
Company that any of the authorizations and approvals set forth in Section 6.2(b)
is not in effect, upon exercise of any Warrants in accordance with the foregoing
provisions:
(i) the Warrant Agent shall notify the ADR Depositary in
writing that such Holder has elected to exercise such Warrants;
(ii) the Company shall promptly issue to the ADR Custodian
appropriate evidence of ownership of the Warrant Shares to be
represented by the ADRs to which such Holder is entitled, registered or
otherwise placed in such name or names as may be directed in writing by
the ADR Custodian, and to deliver such evidence of ownership to the ADR
Custodian;
(iii) the Warrant Agent shall instruct the ADR Depositary to
issue, upon receipt of appropriate evidence of ownership of the Warrant
Shares by the ADR Custodian, ADRs representing such Warrant Shares to
the Holder or upon the written order of the Holder of such Warrant
Certificate and to transfer and deliver promptly to the Holder or upon
the written order of the Holder of such Warrant Certificate appropriate
evidence of ownership of ADRs representing such Warrant Shares,
registered or otherwise placed in such name or names as may be directed
in writing by the Holder; and
(iv) the Warrant Agent shall instruct the Company to transfer
promptly to the Holder or upon the written order of the Holder of such
Warrant Certificate appropriate evidence of ownership of any other
securities or property (including money) to which it is entitled,
registered or otherwise placed in such name or names as may be directed
in writing by the Holder, and to deliver such evidence of ownership and
the other securities or property (including money), if any, to the
Person or Persons entitled to receive the same, together with an amount
in cash in lieu of any fraction of an ADR as provided in Section 4.6
hereof;
provided that the Holder of such Warrant shall be responsible for the payment of
any transfer taxes required as the result of any change in ownership of such
Warrants or the issuance of such ADRs or other securities or property (including
money) other than to the registered owner of such Warrants and the Company may
deduct such taxes from any payment of money to be made and shall not be required
to issue or deliver such Warrant Shares (if such taxes are not deducted in full)
unless and until the Holder shall have paid to the Company the
<PAGE> 21
16
amount of such tax or shall have established to the satisfaction of the Company
and the Warrant Agent that such tax has been paid.
(c) If (x) the Warrant Agent has not been notified in writing
by the Company that the Company has entered into an ADR Deposit Agreement and
that all Colombian corporate or governmental authorizations set forth in
Section 6.2(b) have been obtained or (y) the Warrant Agent has received
written notice from the Company that any of the authorizations and approvals
referred set forth in Section 6.2(b) is not in effect, upon exercise of any
Warrants, following surrender of a Warrant Certificate in conformity with the
foregoing provisions, the Warrant Agent shall instruct the Company to transfer
promptly to or upon the written order of the Holder of such Warrant
Certificate appropriate evidence of ownership of any Warrant Shares or the
other securities or property (including money), if any, to which such
exercising Holder is then entitled, registered or otherwise placed in such
name or names as may be directed in writing by the Holder, and to deliver such
evidence of ownership and the other securities or property (including money),
if any, to the Person or Persons entitled to receive the same, together with
an amount in cash in lieu of any fraction of a share as provided in Section
4.6 hereof; provided that the Holder of such Warrant shall be responsible for
the payment of any transfer taxes required as the result of any change in
ownership of such Warrants or the issuance of Warrant Shares other than to the
registered owner of such Warrants and the Company may deduct such taxes from
any payment of money to be made and shall not be required to issue or deliver
such Warrant Shares (if such taxes are not deducted in full) unless and until
the Holder shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company and the Warrant Agent that such
tax has been paid.
(d) Upon exercise of a Warrant or Warrants, the Warrant Agent
is hereby authorized and directed to instruct the ADR Depositary or any transfer
agent of the Warrant Shares, as the case may be, (and the ADR Depositary and all
such transfer agents are hereby irrevocably authorized to comply with all such
instructions) in accordance with paragraph (b) or (c), as the case may be, of
this Section 3.3, to issue, transfer and deliver certificates for the necessary
number of ADRs or Warrant Shares, as the case may be, to which the Holder of the
Warrant or Warrants may be entitled. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of exercise, as
provided in and in accordance with paragraph (a) of this Section 3.3, of such
Warrant and, for all purposes of this Agreement, the Person entitled to receive
any ADRs, Warrant Shares or other securities or property deliverable upon such
exercise shall, as between such Person and the Company, be deemed to be the
Holder of such ADRs, Warrant Shares or other securities or property of record as
of the close of business on such date and shall be entitled to receive, and the
Company shall deliver to such Person, the Warrant Shares and the other
securities or property (including money), if any, and the ADR Depositary shall
deliver to such Person any ADRs, to which he would have been entitled had he
been the record holder on such date. Without limiting the foregoing, if, at the
date referred to above, the transfer books for the
<PAGE> 22
17
ADRs, Warrant Shares or other securities purchasable upon the exercise of the
Warrants shall be closed, the certificates for the ADRs, Warrant Shares or other
securities in respect of which such Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened, and until such
date the Company shall be under no duty to deliver any certificate for such
Warrant Shares or other securities and the ADR Depositary shall be under no duty
to deliver any certificate for such ADRs; provided that the transfer books or
records, unless required by law, shall not be closed at any one time for a
period longer than 20 calendar days.
Section 3.4. Repurchase of Warrants. (a) Repurchase of
Warrants. If a Trading Market does not exist for the Warrant Shares or the ADRs
on the Expiration Date or, if for any reason such day is not a trading day or
trading in securities of such type on such day is limited or suspended, the next
preceding day which is a trading day and on which trading in securities of such
type is not limited or suspended (the "Preceding Trading Day"), the Company
shall repurchase all outstanding Warrants that have not been exercised on or
prior to the Expiration Date for cash at the Warrant Repurchase Price (the
"Warrant Repurchase"), pursuant to the provisions of this Section 3.4. The
purchase price (the "Warrant Repurchase Price") for each Warrant shall be equal
to the Current Market Value on the Expiration Date (or the Preceding Trading
Day, if applicable) of the ADRs or Warrant Shares issuable, and the other
securities or property (including money), if any, of the Company which would
have been delivered, upon exercise of Warrants had the Warrants been exercised
(regardless of whether the Warrants are then exercisable), less the Exercise
Price for such Warrant in effect on the Expiration Date. On the Expiration Date,
the Company shall give written notice to the Holders of all then outstanding
Warrants to the effect that the Warrants have terminated and become void, except
for the right of the Holders thereof to receive cash payment therefor as
provided below and, if a Trading Market does not exist for the Warrant Shares or
the ADRs as provided herein, shall give written notice thereof to the Warrant
Agent.
(b) Selection of Independent Financial Advisor. In the event
of a Warrant Repurchase, the Current Market Value shall be deemed to be equal to
the value set forth in a Value Report as determined by an Independent Financial
Expert (which may be the same Independent Financial Expert as the Independent
Financial Expert selected pursuant to Section 3.5(b)), which shall be selected
by the Board of Directors not more than ten Business Days following the
Expiration Date, and retained on customary terms and conditions, using one or
more valuation methods that the Independent Financial Expert, in its best
professional judgment, determines to be most appropriate, but without giving
effect to any discount for lack of liquidity, the fact that the Company has no
class of equity securities registered under the Exchange Act or the fact that
ADRs, Warrant Shares and other securities or property issuable upon exercise of
the Warrants represent a minority interest in the Company but giving effect to
the issuance of ADRs, Warrant Shares and other securities issuable upon exercise
of all outstanding Warrants. Within two calendar days after such selection of
the
<PAGE> 23
18
Independent Financial Expert, the Company shall deliver to the Warrant Agent a
notice setting forth the name of such Independent Financial Expert. The Company
shall cause the Independent Financial Expert to deliver a Value Report to the
Company, and the Company shall deliver to the Warrant Agent, within 45 calendar
days of the appointment of the Independent Financial Expert, a Value Certificate
attaching the Value Report. The Warrant Agent shall have no duty with respect to
the Value Report of any Independent Financial Expert, except to keep it on file
and available for inspection by the Holders. The determination as to Current
Market Value in accordance with the provisions of this Section 3.4(b) shall be
conclusive on all Persons.
(c) Notice of Warrant Repurchase. As promptly as practicable
following the delivery of the Value Report by the Independent Financial Expert
to the Company, the Company shall give notice of the terms of the Warrant
Repurchase (a "Repurchase Notice") to each Holder, as of the Expiration Date, of
then outstanding Warrants. Each Repurchase Notice: (i) shall be given by the
Company directly to all Holders of the Warrants, with a copy to the Warrant
Agent and (ii) shall be given within five Business Days after the Company
receives the Value Report and shall specify (A) the manner in which Warrants may
be surrendered to the Warrant Agent for repurchase by the Company, (B) the
Warrant Repurchase Price at which the Warrants will be repurchased by the
Company, (C) the name of the Independent Financial Expert whose valuation of the
ADRs, Class B Common Stock and other securities or property was utilized in
connection with determining such Repurchase Price and (D) that payment of the
Warrant Repurchase Price will be made by the Warrant Agent. Each such notice
shall be accompanied by a Certificate for Surrender for Repurchase in
substantially the form attached to the Warrant Certificate and a copy of the
Value Report.
(d) Payment for Warrants. (i) To receive payment for any
unexercised Warrants pursuant to this Section 3.4, each Holder thereof shall,
except as otherwise provided herein, surrender to the Warrant Agent the Warrant
Certificates evidencing such Holder's Warrants, together with a duly executed
Certificate for Surrender for Repurchase in substantially the form attached to
the Warrant Certificate.
(ii) As promptly as practicable following the Expiration Date,
the Company shall deposit with the Warrant Agent funds sufficient to make
payment for all unexercised Warrants. After receipt of such deposit from the
Company, the Warrant Agent shall make payment to each Holder, by delivering a
check in an amount equal to the Warrant Repurchase Price for each Warrant
surrendered by such Holder in accordance with this Section 3.4, to such Person
or Persons as it may be directed in writing by any Holder surrendering Warrant
Certificates representing such Warrants, net of any transfer taxes required to
be paid in the event that the check is to be delivered to a Person other than
the Holder and net of any amounts to be withheld pursuant to Section 7.2.
<PAGE> 24
19
(e) Compliance with Laws. Notwithstanding anything contained
in this Section 3.4, if the Company is required to comply with laws or
regulations in connection with making the Warrant Repurchase, such laws or
regulations shall govern the making of such Warrant Repurchase. The Company
shall immediately notify the Warrant Agent in writing if any such laws or
regulations shall require the Company to supplement or amend this Agreement or
to modify or amend the procedures or manner of such repurchase or any other
provisions set forth herein and the Warrant Agent shall not be responsible or
liable for making any such determination, complying with any such laws or
regulations or for the failure of the Company to so notify the Warrant Agent.
Section 3.5. Repurchase Offers. (a) Notice of Repurchase
Event. If a Trading Market does not exist for the Warrant Shares or the ADRs on
the Expiration Date or, in the circumstances described in Section 3.4(a), the
Preceding Trading Day, the Company shall offer to repurchase all ADRs and
Warrant Shares (other than Warrant Shares held by the ADR Depositary)
outstanding on the Expiration Date and, to the extent that there is no Trading
Market therefor, all securities issued upon exercise of the Warrants or
distributed in respect of the Warrants or Warrant Shares and then held by the
holder of such ADRs and Warrant Shares and that, in each case, are properly
tendered to the Warrant Agent on or prior to the expiration date (as hereinafter
defined in this Section 3.5(a)) for such offer for cash at the Repurchase Price
(the "Repurchase Offer"), pursuant to the provisions of this Section 3.5. The
purchase price (the "Repurchase Price") for each ADR or Warrant Share properly
tendered to the Warrant Agent pursuant to a Repurchase Offer shall be equal to
the Current Market Value of such ADR or Warrant Share and such other securities
as of the Expiration Date or the Preceding Trading Day, if applicable (after
giving effect to the issuance of ADRs, Warrant Shares and other securities
issuable upon exercise of all outstanding Warrants). The Repurchase Offer shall
commence on the date on which the Company gives an Offer Notice for such
Repurchase Offer and shall expire at 5:00 p.m., New York City time, on a date
determined by the Company (the "expiration date") that is at least 30 but not
more than 60 calendar days after the Notice Date.
(b) Selection of Independent Financial Advisor. In the event
of a Repurchase Offer, the Current Market Value of the ADRs and Warrant Shares
and such other securities or property referred to in the preceding paragraph
shall be deemed to be equal to the value set forth in a Value Report as
determined by an Independent Financial Expert (which may be the same Independent
Financial Expert as the Independent Financial Expert selected pursuant to
Section 3.4(b)), which shall be selected by the Board of Directors not more than
ten Business Days following the Expiration Date, and retained on customary terms
and conditions, using one or more valuation methods that the Independent
Financial Expert, in its best professional judgment, determines to be most
appropriate, but without giving effect to any discount for lack of liquidity,
the fact that the Company has no class of equity securities registered under the
Exchange Act or the fact that the ADRs, Warrant Shares and other securities or
property issuable upon exercise of the Warrants represent a
<PAGE> 25
20
minority interest in the Company but giving effect to the issuance of ADRs,
Warrant Shares and other securities issuable upon exercise of all outstanding
Warrants. Within two calendar days after such selection of the Independent
Financial Expert, the Company shall deliver to the Warrant Agent a notice
setting forth the name of such Independent Financial Expert. The Company shall
cause the Independent Financial Expert to deliver a Value Report to the Company,
and the Company shall deliver to the Warrant Agent, within 45 calendar days of
the appointment of the Independent Financial Expert, a Value Certificate
attaching the Value Report. The Warrant Agent shall have no duty with respect to
the Value Report of any Independent Financial Expert, except to keep it on file
and available for inspection by the holders of the ADRs or Warrant Shares. The
determination as to Current Market Value in accordance with the provisions of
this Section 3.5 shall be conclusive on all Persons.
(c) Notice of Repurchase Offer. As promptly as practicable
following the delivery of the Value Report by the Independent Financial Expert
to the Company, the Company shall give notice of the Repurchase Offer (an "Offer
Notice") to each Holder, as of the Expiration Date, of then outstanding ADRs and
Warrant Shares. Such Offer Notice: (i) shall be given by the Company directly to
all holders of ADRs and Warrant Shares, with a copy to the Warrant Agent and
(ii) shall be given within five Business Days after the Company receives the
Value Report with respect to such offer and shall specify (A) the expiration
date for such Repurchase Offer, (B) the manner in which ADRs or Warrant Shares
and such other securities or property referred to above may be surrendered to
the Warrant Agent for repurchase by the Company, (C) the Repurchase Price at
which the ADRs or Warrant Shares and such other securities or property referred
to above will be repurchased by the Company, (D) the name of the Independent
Financial Expert whose valuation of the ADRs, shares of Class B Common Stock and
other securities or property was utilized in connection with determining such
Repurchase Price and (E) that payment of the Repurchase Price will be made by
the Warrant Agent. Each such notice shall be accompanied by a Certificate for
Surrender for Repurchase of ADRs or Warrant Shares in substantially the form
attached to the Warrant Certificate and a copy of the Value Report.
(d) Payment for ADRs and Warrant Shares. (i) Each Holder of
ADRs or Warrant Shares may, but shall not be obligated to, accept such
Repurchase Offer by tendering to the Warrant Agent, on or prior to the
expiration date for such Repurchase Offer, the ADR certificate or Warrant Share
certificate evidencing the ADRs or Warrant Shares, as the case may be, together
with such other securities referred to above that are subject to such Repurchase
Offer, together with a completed Certificate for Surrender for Repurchase of
ADRs or Warrant Shares (and such other securities) in substantially the form
attached to the Warrant Certificate. A Holder of ADRs or Warrant Shares (and
such other securities) may withdraw all or a portion of the ADRs or Warrant
Shares (together with all or a proportionate amount of such other securities)
tendered to the Warrant Agent at any time prior to the expiration date for such
Repurchase Offer. If less than all the ADRs or Warrant Shares (and such other
securities) represented by an ADR certificate or Warrant Share
<PAGE> 26
21
certificate, as the case may be, shall be tendered, such ADR certificate or
Warrant Share certificate shall be surrendered and a new ADR certificate or
Warrant Share certificate of the same tenor and for the number of ADRs or
Warrant Shares (and such other securities) which were not tendered shall be
executed by the Company and, if applicable, the ADR Depositary, and delivered to
the Warrant Agent, registered in such name or names as may be directed in
writing by the Holder of such ADRs or Warrant Shares, and the Warrant Agent
shall deliver the new ADR certificate or Warrant Share certificate to the Person
or Persons entitled to receive the same; provided that the Holder of such ADRs
or Warrant Shares shall be responsible for the payment of any transfer taxes
required as the result of any change in ownership of such ADRs or Warrant
Shares.
(ii) Upon surrender for repurchase of any ADRs or Warrant
Shares and such other securities referred to above in conformity with the
provisions of this Section 3.5, the Warrant Agent shall thereupon promptly
notify the Company of such surrender. On or before the expiration date for such
Repurchase Offer, the Company shall deposit with the Warrant Agent funds
sufficient to make payment for the ADRs and Warrant Shares and such other
securities or property referred to above tendered to the Warrant Agent and not
withdrawn. Following the expiration date for such Repurchase Offer and the
receipt of such deposit from the Company, the Warrant Agent shall make payment,
by delivering a check in an amount equal to the Repurchase Price of each ADR
certificate or Warrant Share and such other securities or property referred to
above surrendered by such Holder, to such Person or Persons as it may be
directed in writing by the Holder surrendering such ADRs or Warrant Shares and
such other securities or property referred to above net of any transfer taxes
required to be paid in the event that the check is to be delivered to a Person
other than such Holder and net of any amounts to be withheld pursuant to
Section 7.2.
(e) Compliance with Laws. Notwithstanding anything contained
in this Section 3.5, if the Company is required to comply with laws or
regulations in connection with making the Repurchase Offer, such laws or
regulations shall govern the making of such Repurchase Offer. The Company shall
immediately notify the Warrant Agent in writing if any such laws or regulations
shall require the Company to supplement or amend this Agreement or to modify or
amend the procedures or manner of such repurchase or any other provisions set
forth herein and the Warrant Agent shall not be responsible or liable for making
any such determination or for the failure of the Company to so notify the
Warrant Agent.
Section 3.6. Inability to Consummate Warrant Repurchase or
Repurchase Offer. (a) In the event that the Company's consummation of a Warrant
Repurchase or a Repurchase Offer or the payment of cash in lieu of fractional
ADRs or Warrant Shares pursuant to Section 4.6 would violate the provisions of
any applicable law, rule or regulation or result in a default under any of its
indentures, mortgages, loan agreements or other agreements or instruments, the
Company need not consummate such Warrant Repurchase,
<PAGE> 27
22
pay such cash in lieu of fractional ADRs or Warrant Shares or make such
Repurchase Offer or, if such Repurchase Offer has commenced, the Company may
terminate such Repurchase Offer prior to its purchase of any ADRs or Warrant
Shares thereunder; provided, however, that, if after taking into account the
foregoing provisions, the Company would be permitted to consummate a Warrant
Repurchase or make a Repurchase Offer in part but not in full, the Company shall
only be obligated to consummate such Warrant Repurchase or make such Repurchase
Offer to the maximum extent permissible. In such event, the Company shall
promptly notify the Warrant Agent and the Holders in writing of its inability to
effect such Warrant Repurchase, Repurchase Offer or payment of cash in lieu of
fractional ADRs or Warrant Shares and whether the Company is permitted to
consummate the Warrant Repurchase or the Repurchase Offer in part.
(b) In the event that a Warrant Repurchase is not consummated,
a Repurchase Offer is not commenced or is terminated or a payment in lieu of
fractional ADRs or Warrant Shares is not made, in each case, pursuant to
Section 3.6(a), the Company shall remain obligated to consummate such Warrant
Repurchase, to make such Repurchase Offer and to make such payment in lieu of
fractional ADRs or Warrant Shares at such time as such Warrant Repurchase,
Repurchase Offer or payment in lieu of fractional ADRs or Warrant Shares would
not violate the provisions of any applicable law, rule or regulation or result
in a default under any of its indentures, mortgages, loan agreements or other
agreements or instruments and shall be obligated to pay interest on the amounts
that would otherwise be due to the Holders as provided by Section 7.3. Upon the
date on which all limitations upon the Company's ability to repurchase Warrants,
ADRs or Warrant Shares or make payments in lieu of fractional ADRs or Warrant
Shares, as the case may be, are removed, the Company's repurchase obligations
pursuant to Sections 3.4 and 3.5 and the Company's obligation to make payments
in lieu of fractional ADRs or Warrant Shares pursuant to Section 4.6 shall be
reinstated effective as of the date of the such removal, and the time periods
under Sections 3.4 and 3.5 shall be calculated as if such date were the
Expiration Date, except for purposes of calculating interest pursuant to
Section 7.3.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number of
ADRs or Warrant Shares issuable upon exercise of each Warrant shall be subject
to adjustment from time to time as follows:
(a) Stock Dividends; Stock Splits; Reverse Stock Splits;
Reclassifications. In case the Company shall (i) pay a dividend or make any
other distribution with respect to its Common Stock in shares of any class or
series of its capital stock, (ii) subdivide its
<PAGE> 28
23
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares or (iv) issue any shares of its capital stock in a
reclassification of its Common Stock (other than a reclassification in
connection with a merger, consolidation or other business combination which will
be governed by Section 4.1(h)), the number of ADRs or Warrant Shares purchasable
upon exercise of each Warrant immediately prior to the record date for such
dividend or distribution or the effective date of such subdivision, or
combination or reclassification shall be adjusted so that the Holder of each
Warrant shall thereafter be entitled to receive the kind and number of ADRs or
shares of Common Stock or other securities of the Company which such Holder
would have been entitled to receive after the happening of any of the events
described above had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this Section 4.1(a) shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for
such event.
(b) Rights; Options; Warrants. In case the Company shall issue
rights, options, warrants or convertible or exchangeable securities (other than
a convertible or exchangeable security subject to Section 4.1(a)) to all holders
of its Common Stock, entitling them to subscribe for or purchase shares of
Common Stock at a price per share which is lower (at the record date for such
issuance) than the then Current Market Value per share of Common Stock, the
number of ADRs or Warrant Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of ADRs or Warrant
Shares theretofore purchasable upon exercise of each Warrant by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
convertible or exchangeable securities plus the number of additional shares of
Common Stock offered for subscription or purchase, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
the issuance of such rights, options, warrants or convertible or exchangeable
securities plus the number of shares which the aggregate offering price of the
total number of shares of Common Stock so offered would purchase at the then
Current Market Value per share of Common Stock. Such adjustment shall be made
whenever such rights, options, warrants or convertible or exchangeable
securities are issued, and shall become effective retroactively immediately
after the record date for the determination of shareholders entitled to receive
such rights, options, warrants or convertible or exchangeable securities.
(c) Issuance of Common Stock at Lower Values. In case the
Company shall, in a transaction in which Sections 4.1(a) and 4.1(b) are
inapplicable, issue or sell shares of Common Stock, or rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, at a price per share of Common Stock
(determined in the case of such rights, options, warrants or convertible or
exchangeable securities, by dividing (A) the total amount receivable by the
Company in consideration of the issuance and sale of such rights, options,
warrants or
<PAGE> 29
24
convertible or exchangeable securities, plus the total consideration, if any,
payable to the Company upon exercise, conversion or exchange thereof, by (B) the
total number of shares of Common Stock covered by such rights, options, warrants
or convertible or exchangeable securities) that is lower than the Current Market
Value per share of Common Stock in effect immediately prior to such sale or
issuance, then the number of ADRs or Warrant Shares thereafter purchasable upon
the exercise of each Warrant shall be determined by multiplying the number of
ADRs or Warrant Shares theretofore purchasable upon exercise of such Warrant by
a fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such sale or issuance and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such sale or issuance plus the number of shares of Common Stock which the
aggregate consideration received (determined as provided below) for such sale or
issuance would purchase at such Current Market Value per share of Common Stock.
Such adjustment shall be made successively whenever any such sale or issuance is
made. For purposes of this Section 4.1(c), the shares of Common Stock which the
holder of any such rights, options, warrants or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall be deemed to be
issued and outstanding as of the date of such sale and issuance and the
consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants or
convertible or exchangeable securities, plus the consideration or premiums
stated in such rights, options, warrants or convertible or exchangeable
securities to be paid for the shares of Common Stock covered thereby.
In case the Company shall issue and sell shares of Common
Stock or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then in determining the "price per share of Common Stock" and
the "consideration" receivable by or payable to the Company for purposes of the
first sentence of this Section 4.1(c), the Board of Directors of the Company
shall determine, in good faith, the fair value of such property, which
determination shall be evidenced by a resolution of the Board of Directors of
the Company. In case the Company shall issue and sell rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, together with one or more other securities
as part of a unit at a price per unit, then in determining the "price per share
of Common Stock" and the "consideration" receivable by or payable to the Company
for purposes of the first sentence of this Section 4.1(c), the Board of
Directors of the Company shall determine, in good faith, the fair value of the
rights, options, warrants or convertible or exchangeable securities then being
sold as part of such unit, which determination shall be evidenced by a
resolution of the Board of Directors of the Company.
(d) Distributions of Debt, Assets, Subscription Rights or
Convertible Securities. In case the Company shall fix a record date for the
making of a distribution to all
<PAGE> 30
25
holders of its Common Stock of evidences of its indebtedness, assets, Excess
Cash Dividends (excluding dividends or distributions referred to in Section
4.1(a) above and excluding cash dividends other than Excess Cash Dividends) or
securities (excluding those referred to in subsections 4.1(a), 4.1(b) and 4.1(c)
above), then in each case the number of ADRs or Warrant Shares purchasable after
such record date upon the exercise of each Warrant shall be determined by
multiplying the number of ADRs or Warrant Shares purchasable upon the exercise
of such Warrant immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Value per share of Common Stock
immediately prior to the record date for such distribution and the denominator
of which shall be the Current Market Value per share of Common Stock immediately
prior to the record date for such distribution less the then fair value (as
determined in good faith by the Board of Directors of the Company, which
determination shall be evidenced by a resolution of the Board of Directors of
the Company) of the portion of the assets, evidence of indebtedness, Excess Cash
Dividends or securities so distributed applicable to one share of Common Stock.
Such adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date for
the determination of shareholders entitled to receive such distribution.
(e) Expiration of Rights, Options and Conversion Privileges.
Upon the expiration of any rights, options, warrants or conversion or exchange
privileges that have previously resulted in an adjustment hereunder, if any
thereof shall not have been exercised, the Exercise Price and the number of ADRs
or Warrant Shares issuable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter, upon any future exercise, be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
shares of Common Stock so issued were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such rights, options, warrants or
conversion or exchange rights and (ii) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received by the Company for
issuance, sale or grant of all such rights, options, warrants or conversion or
exchange rights whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the Exercise Price by an
amount, or decreasing the number of ADRs or Warrant Shares issuable upon
exercise of each Warrant by a number, in excess of the amount or number of the
adjustment initially made in respect to the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights.
(f) De Minimis Adjustments. No adjustment in the number of
ADRs or Warrant Shares purchasable hereunder shall be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the number of ADRs or Warrant Shares purchasable upon the exercise of each
Warrant; provided, however, that any adjustments which by reason of this
Section 4.1(f) are not required to be made shall be
<PAGE> 31
26
carried forward and taken into account in any subsequent adjustment. All
calculations shall be made to the nearest one-thousandth of a share.
(g) Adjustment of Exercise Price. Whenever the number of ADRs
or Warrant Shares purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Exercise Price per ADR or Warrant Share payable upon
exercise of such Warrant shall be adjusted (calculated to the nearest US$.0001)
so that it shall equal the price determined by multiplying such Exercise Price
immediately prior to such adjustment by a fraction the numerator of which shall
be the number of ADRs or Warrant Shares purchasable upon the exercise of each
Warrant immediately prior to such adjustment and the denominator of which shall
be the number of shares so purchasable immediately thereafter.
(h) Consolidation, Merger, Etc. (i) Subject to the provisions
of subsection (ii) below of this Section 4.1(h), in case of the consolidation of
the Company with, or merger of the Company with or into, or of the sale of all
or substantially all of the properties and assets of the Company to, any Person,
and in connection therewith consideration is payable to holders of shares of
Common Stock (or other securities or property purchasable upon exercise of
Warrants) in exchange therefor, the Warrants shall remain subject to the terms
and conditions set forth in this Agreement and each Warrant shall, after such
consolidation, merger or sale, entitle the Holder to receive upon exercise the
number of shares of capital stock or other securities or property (including
cash) of the Company, or of such Person resulting from such consolidation or
surviving such merger or to which such sale shall be made or of the parent of
such Person, as the case may be, that would have been distributable or payable
on account of the ADRs or Warrant Shares (or other securities or property
purchasable upon exercise of Warrants) if such Holder's Warrants had been
exercised immediately prior to such merger, consolidation or sale (or, if
applicable, the record date therefor); and in any such case the provisions of
this Agreement with respect to the rights and interests thereafter of the
Holders of Warrants shall be appropriately adjusted by the Board of Directors in
good faith so as to be applicable, as nearly as may reasonably be, to any shares
of stock or other securities or any property thereafter deliverable on the
exercise of the Warrants.
(ii) Notwithstanding the foregoing, if the Company merges or
consolidates with, or sells all or substantially all of its property and assets
to, another Person (other than an Affiliate of the Company) and consideration is
payable to holders of Common Stock in exchange for their Common Stock in
connection with such merger, consolidation or sale which consists solely of
cash, then the Holders of Warrants shall be entitled to receive distributions on
the date of such event on an equal basis with holders of Common Stock (or other
securities issuable upon exercise of the Warrants) as if the Warrants had been
exercised immediately prior to such event, less the Exercise Price. Upon receipt
of such payment, if any, the rights of a Holder shall terminate and cease and
such Holder's Warrants shall expire. In case of any such merger, consolidation
or sale of assets, the surviving or
<PAGE> 32
27
acquiring Person shall deposit promptly with the Warrant Agent the funds, if
any, necessary to pay the Holders of the Warrants. After receipt of such deposit
from such Person or the Company, and after receipt of surrendered Warrant
Certificates, the Warrant Agent shall make payment by delivering a check in such
amount as is appropriate to such Person or Persons as it may be directed in
writing by the Holder surrendering such Warrants.
(i) Adjustments at Discretion of the Board of Directors; When
No Adjustment Required. In addition to the foregoing adjustments, the Board of
Directors of the Company may make any other adjustment to increase the number of
ADRs or Warrant Shares issuable upon exercise of Warrants or to decrease the
Exercise Price as it may, in good faith, deem desirable to protect the rights
and benefits of Holders. Notwithstanding any other provision of this Section
4.1, no adjustment in the Exercise Price need be made for a transaction referred
to in subsections (a), (b), (c), (d) or (e) above (1) in respect of rights to
purchase Common Stock pursuant to a Company plan for reinvestment of dividends
or interest or pursuant to compensation plans for directors, officers and
employees in the ordinary course of business and (2) to the extent that Holders
are to receive cash compensation in U.S. dollars or compensation in securities
or property, in an amount, and in a manner, that the Board of Directors
determines to be fair and appropriate and comparable to the compensation they
would have received had they exercised the Warrants prior thereto, provided,
however, that such compensation to the Holders in securities or property will
not subject the Holder to any registration or other regulatory requirements or
subject the Holder to any adverse tax consequences other than the payment of
applicable taxes with respect to the receipt of such securities or property. To
the extent the Warrants become convertible into cash, no adjustment need be made
thereafter as to the cash. Interest will not accrue on the cash.
(j) Selection of Independent Financial Expert. If the services
of an Independent Financial Expert are required to determine the Current Market
Value, the Current Market Value shall be deemed to be equal to the value set
forth in a Value Report as determined by an Independent Financial Expert, which
shall be selected by the Board of Directors not more than ten Business Days
following the occurrence of any event referred to in subsections 4.1(b), 4.1(c)
or 4.1(d), and retained on customary terms and conditions, using one or more
valuation methods that the Independent Financial Expert, in its best
professional judgment, determines to be most appropriate, but without giving
effect to any discount for lack of liquidity, the fact that the Company may have
no class of equity securities registered under the Exchange Act or the fact that
the ADRs, Warrant Shares and other securities or property issuable upon exercise
of the Warrants represent a minority interest in the Company. Within two
calendar days after such selection of the Independent Financial Expert, the
Company shall deliver to the Warrant Agent a notice setting forth the name of
such Independent Financial Expert. The Company shall cause the Independent
Financial Expert to deliver a Value Report to the Company, and the Company shall
deliver to the Warrant Agent, within 45 calendar days of the appointment of the
Independent
<PAGE> 33
28
Financial Expert, a Value Certificate attaching the Value Report. The Warrant
Agent shall have no duty with respect to the Value Report of any Independent
Financial Expert, except to keep it on file and available for inspection by the
Holders. The determination as to Current Market Value in accordance with the
provisions of this Section 4.1(j) shall be conclusive on all Persons.
Section 4.2. Decrease in Exercise Price. The Board of
Directors of the Company, in its sole discretion, shall have the right at any
time, or from time to time, to decrease the Exercise Price of the Warrants, such
reduction of the Exercise Price to be effective for a period or periods to be
determined by it, but in no event for a period of less than 30 calendar days.
Any exercise by the Board of Directors of any rights granted in this Section 4.2
must be preceded by a written notice from the Company to each Holder of the
Warrants and to the Warrant Agent setting forth the reduction in the Exercise
Price, which notice shall be mailed at least 30 calendar days prior to the
effective date of such decrease in the Exercise Price of the Warrants. Any
reduction of the Exercise Price pursuant to provisions of this Section 4.2 shall
not alter or adjust the number of ADRs, Warrant Shares or shares of other
securities issuable upon the exercise of the Warrants.
Section 4.3. Notice of Adjustment. Whenever the number of
ADRs, Warrant Shares or other stock or property purchasable upon the exercise of
each Warrant or the Exercise Price is adjusted, as herein provided (including
pursuant to Section 3.1), the Company shall promptly notify the Warrant Agent of
such adjustment in writing and shall cause the Warrant Agent promptly to mail,
by first-class mail, postage prepaid, at the expense of the Company, to each
Holder notice of such adjustment or adjustments and shall deliver to the Warrant
Agent a certificate of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants employed
by the Company or its statutory auditors) setting forth the number of ADRs,
Warrant Shares or other stock or property purchasable upon the exercise of each
Warrant and the Exercise Price after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such certificate shall be
conclusive evidence of the correctness of such adjustment. The Warrant Agent
shall be entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holders to determine whether any facts exist which
may require any adjustment of the Exercise Price or the number of ADRs, Warrant
Shares or other stock or property purchasable on exercise of the Warrants, or
with respect to the validity, nature or extent of any such adjustment when made,
or with respect to the method employed in making such adjustment, or the
validity or value (or the kind or amount) of any ADRs, Warrant Shares or other
stock or property which may be purchasable on exercise of the Warrants. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any
<PAGE> 34
29
ADRs, Warrant Shares or stock certificates or other common stock or properties
upon the exercise of any Warrant.
Section 4.4. Statement on Warrants. Irrespective of any
adjustment in the Exercise Price or the number or kind of shares purchasable
upon the exercise of the Warrants, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated
in the Warrants initially issuable pursuant to this Agreement.
Section 4.5. Notice of Consolidation, Merger, Etc. In case at
any time after the Issue Date and prior to 5:00 p.m., New York City time, on the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company or sale, transfer or other disposition of all or substantially all of
the Company's property, assets or business (except a merger or other
reorganization in which the Company shall be the surviving corporation and
holders of Common Stock (or other securities or property purchasable upon
exercise of the Warrants) receive no consideration in respect of their shares)
or (ii) any other transaction contemplated by Section 4.1(h)(ii) above, then in
any one or more of such cases, the Company shall cause to be mailed to the
Warrant Agent and each Holder of a Warrant, at the earliest practicable time
(and, in any event, not less than 20 calendar days before any date set for
definitive action), notice of the date on which such reorganization, sale,
consolidation or merger shall take place, as the case may be. Such notice shall
also set forth such facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Exercise
Price and the kind and amount of the Common Stock and other securities, money
and other property deliverable upon exercise of the Warrants. Such notice shall
also specify the date as of which the holders of record of the Common Stock or
other securities or property issuable upon exercise of the Warrants shall be
entitled to exchange their shares for securities, money or other property
deliverable upon such reorganization, sale, consolidation or merger, as the case
may be.
Section 4.6. Fractional Interests. The Company shall not be
required to issue fractional shares of Class B Common Stock and the ADR
Depositary shall not be required to issue fractional ADRs on the exercise of
Warrants. If more than one Warrant shall be presented for exercise at the same
time by the same Holder, the number of ADRs or Warrant Shares which shall be
issuable upon such exercise thereof shall be computed on the basis of the
aggregate number of ADRs or Warrant Shares purchasable on exercise of the
Warrants so presented. If any fraction of a ADR or Warrant Share would, except
for the provisions of this Section 4.6, be issuable on the exercise of any
Warrant (or specified portion thereof), the Company shall pay an amount in cash
calculated by it to be equal to the then Current Market Value per ADR or share
of Class B Common Stock multiplied by such fraction computed to the nearest
whole cent. Notwithstanding anything contained in this Section 4.6, if the
Company is required to comply with laws or regulations in connection with
payment of cash in lieu of fractional shares, such laws or regulations shall
govern the making of such
<PAGE> 35
30
payment. The Company shall immediately notify the Warrant Agent in writing if
any such laws or regulations shall require the Company to supplement or amend
this Agreement or to modify or amend the procedures or manner of such payment or
any other provisions set forth herein and the Warrant Agent shall not be
responsible or liable for making any such determination, complying with any such
laws or regulations or for the failure of the Company to so notify the Warrant
Agent.
ARTICLE V
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 5.1. Transfer and Exchange. The Warrant Certificates
shall be issued in registered form only. The Company shall cause to be kept at
the office of the Warrant Agent a register in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Warrant Certificates and transfers or exchanges of Warrant Certificates as
herein provided. All Warrant Certificates issued upon any registration of
transfer or exchange of Warrant Certificates shall be the valid obligations of
the Company, evidencing the same obligations, and entitled to the same benefit
under this Agreement, as the Warrant Certificates surrendered for such
registration of transfer or exchange.
A Holder may transfer its Warrants only by complying with the
terms of this Agreement. No such transfer shall be effected until, and such
transferee shall succeed to the rights of a Holder only upon, final acceptance
and registration of the transfer by the Warrant Agent in the register. Prior to
the registration of any transfer of Warrants by a Holder as provided herein, the
Company, the Warrant Agent, any agent of the Company or the Warrant Agent may
treat the Person in whose name the Warrants are registered as the owner thereof
for all purposes and as the Person entitled to exercise the rights represented
thereby, any notice to the contrary notwithstanding. Furthermore, any Holder of
a Global Warrant, shall, by acceptance of such Global Warrant, agree that
transfers of beneficial interests in such Global Warrant may be effected only
through a book-entry system maintained by the Holder of such Global Warrant (or
its agent), and that ownership of a beneficial interest in the Warrants
represented thereby shall be required to be reflected in a book entry. When
Warrant Certificates are presented to the Warrant Agent with a request to
register the transfer or to exchange them for an equal amount of Warrants of
other authorized denominations, the Warrant Agent shall register the transfer or
make the exchange in accordance with the provisions hereof.
Section 5.2. Registration, Registration of Transfer and
Exchange. Each Warrant shall initially be issued as part of a Unit consisting of
US$1,000 principal amount at maturity of Notes and four Warrants. Prior to the
Separation Date, the Warrants may not be
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31
transferred or exchanged separately from, but may be transferred or exchanged
only together with, the Notes attached to such Warrants. Prior to the Separation
Date, the Trustee under the Indenture shall act as transfer agent ("Transfer
Agent") for both the Warrants and the Notes. Any request for transfer of a
Warrant prior to the Separation Date to the Transfer Agent shall be accompanied
by the Note attached thereto and the Transfer Agent will not execute any such
transfer without such Note attached thereto. Such Note will be duly endorsed and
accompanied by a written instrument of transfer in form satisfactory to the
Company, duly executed by the Holder thereof or the Holder's attorneys duly
authorized in writing. The Company shall provide notice to the Transfer Agent
and the Warrant Agent of the Separation Date five Business Days prior to such
date and the Transfer Agent will notify DTC of such date.
When Certificated Warrants are presented to the Warrant Agent
with a request from the Holder of such Warrants to register the transfer or to
exchange them for an equal number of Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested;
provided that every Warrant presented and surrendered for registration of
transfer or exchange shall be duly endorsed and be accompanied by a written
instrument of transfer in form satisfactory to the Company, duly executed by the
Holder thereof or the Holder's attorneys duly authorized in writing.
To permit registrations of transfers and exchanges, the
Company shall make available to the Warrant Agent a sufficient number of
executed Warrant Certificates to effect such registrations of transfers and
exchanges. No service charge shall be made to the Holder for any registration of
transfer or exchange of Warrants, but the Company may require from the
transferring or exchanging Holder payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable upon exchanges pursuant to
Section 2.4 and exchanges in respect of portions of Warrants not exercised or
ADRs or Warrant Shares not repurchased pursuant to Section 3.3 or 3.5 and the
Company may deduct such taxes from any payment of money to be made and such
transfer or exchange shall not be consummated (if such taxes are not deducted in
full) unless or until the Holder shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company and the
Warrant Agent that such tax has been paid.
Section 5.3. Book-Entry Provisions for the Rule 144A Global
Warrant and Regulation S Global Warrant. (a) The Rule 144A Global Warrant and
Regulation S Global Warrant initially shall (i) be registered in the name of DTC
or the nominee of DTC, (ii) be delivered to the Warrant Agent as custodian for
DTC and (iii) bear legends as set forth in Section 2.3 hereof. Members of, or
participants in, DTC ("Agent Members") shall have no rights under this Agreement
with respect to the Rule 144A Global Warrant or Regulation S Global Warrant, as
the case may be, held on their behalf by DTC or the Warrant Agent as its
custodian, and DTC may be treated by the Company, the Warrant Agent and any
agent of the Company or the Warrant Agent as the absolute owner of such Rule
144A Global Warrant
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or Regulation S Global Warrant, as the case may be, for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent from giving
effect to any written certification, proxy or other authorization furnished by
DTC or impair, as between DTC and its Agent Members, the operation of customary
practices governing the exercise of the rights of a beneficial owner of any
Warrants.
(b) Transfers of the Rule 144A Global Warrant and the
Regulation S Global Warrant shall be limited to transfers of such Rule 144A
Global Warrant or Regulation S Global Warrant in whole, but not in part, to DTC,
its successors or their respective nominees. Interests of beneficial owners in
the Rule 144A Global Warrant and the Regulation S Global Warrant may be
transferred in accordance with the rules and procedures of DTC and the
provisions of Section 5.4 hereof. Restricted Certificated Warrants and Offshore
Certificated Warrants shall be transferred to all beneficial owners in exchange
for their beneficial interests in the Rule 144A Global Warrant or the Regulation
S Global Warrant, respectively, if (i) DTC notifies the Company that it is
unwilling or unable to continue as Depositary for the Rule 144A Global Warrant
or the Regulation S Global Warrant, as the case may be, or DTC ceases to be a
"Clearing Agency" registered under the Exchange Act and a successor depositary
is not appointed by the Company within 90 days.
(c) Any beneficial interest in one of the Global Warrants that
is transferred to a Person who takes delivery in the form of an interest in the
other Global Warrant will, upon transfer, cease to be an interest in such Global
Warrant and become an interest in the other Global Warrant and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Warrant for
as long as it remains such an interest.
(d) In connection with any transfer pursuant to paragraph (b)
of this Section of a portion of the beneficial interests in the Rule 144A Global
Warrant to beneficial owners who are required to hold Restricted Certificated
Warrants, the Warrant Agent shall reflect on its books and records the date and
a decrease in the principal amount at maturity of the Rule 144A Global Warrant
in an amount equal to the principal amount at maturity of the beneficial
interest in the Rule 144A Global Warrant to be transferred, and the Company
shall execute, and the Warrant Agent shall countersign and deliver, one or more
Restricted Certificated Warrants of like tenor and amount.
(e) In connection with the transfer of the entire Rule 144A
Global Warrant or Regulation S Global Warrant to beneficial owners pursuant to
paragraph (b) of this Section , the Rule 144A Global Warrant or the Regulation S
Global Warrant, as the case may be, shall be deemed to be surrendered to the
Warrant Agent for cancellation, and the Company shall execute, and the Warrant
Agent shall countersign and deliver, to each beneficial owner identified by DTC
in exchange for its beneficial interest in the Rule 144A
<PAGE> 38
33
Global Warrant or the Regulation S Global Warrant, as the case may be,
Restricted Certificated Warrants or Offshore Certificated Warrants, as the case
may be, of authorized denominations representing, in the aggregate, the number
of Warrants theretofore represented by the Rule 144A Global Warrant or the
Regulation S Global Warrant.
(f) Any Restricted Certificated Warrant delivered in exchange
for an interest in a Global Warrant pursuant to paragraph (b) or (d) of this
Section shall, except as otherwise provided by paragraph (a) of Section 5.4
hereof, bear the legend regarding transfer restrictions set forth in Exhibits B
and H hereto.
(g) The registered holder of the Rule 144A Global Warrant and
the Regulation S Global Warrant may grant proxies and otherwise authorize any
Person, including Agent Members and persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Agreement or the Warrants.
(h) Beneficial owners of interests in a Global Warrant may
receive Certificated Warrants (which shall bear the legend set forth in Exhibits
B and H if required by Section 2.2) in accordance with the procedures of DTC. In
connection with the execution, countersigning and delivery of such Certificated
Warrants, the Warrant Agent shall reflect on its books and records a decrease in
the principal amount at maturity of the relevant Global Warrant equal to the
principal amount at maturity of such Certificated Warrants and the Company shall
execute and the Warrant Agent shall countersign and deliver one or more
Certificated Warrants representing, in the aggregate, the number of Warrants
theretofore represented by the Global Warrant.
Section 5.4. Special Transfer Provisions. Unless and until an
IPO Registration Statement is declared effective that includes all outstanding
Warrants and Underlying Securities to the extent provided in Section 6.5 the
following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of Warrants to any Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons):
(i) The Warrant Agent shall register the transfer of any
Warrant Certificate, whether or not such Warrant Certificate bears the
Private Placement Legend, if (x) (A) the requested transfer is after
the time period referred to in Rule 144(k) under the Securities Act as
in effect with respect to such transfer or (B) the proposed transferee
has delivered to the Warrant Agent a certificate substantially in the
form of Exhibit E hereto and (y) if requested by the Warrant Agent or
the Company, the proposed transferee has delivered to the Warrant Agent
or the
<PAGE> 39
34
Company, an opinion of counsel acceptable to the Warrant Agent or the
Company that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Rule 144A Global Warrant, upon receipt by
the Warrant Agent of (x) the documents, if any, required by paragraph
(i) and (y) instructions given in accordance with DTC's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and a decrease in the number of Warrants represented
by the Rule 144A Global Warrant in an amount equal to the number of
Warrants represented by the Rule 144A Global Warrant to be transferred,
and the Company shall execute, and the Warrant Agent shall countersign
and deliver, one or more Restricted Certificated Warrants of like tenor
and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of Warrants to a QIB
(excluding Non-U.S. Persons):
(i) If the Warrants to be transferred are represented by (x)
Restricted Certificated Warrants, the Warrant Agent shall register the
transfer if such transfer is being made by a proposed transferor who
has checked the box provided for on the form of Warrant Certificate
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that the sale has been made in compliance with the provisions
of Rule 144A to a transferee who has signed the certification provided
for on the form of Warrant Certificate stating, or has otherwise
advised the Company and the Warrant Agent in writing, that it is
purchasing the Warrants for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A or (y) an interest in
the Rule 144A Global Warrant, the transfer of such interest may be
effected only through the book-entry system maintained by DTC.
(ii) If the proposed transferee is an Agent Member, and the
Warrants to be transferred are represented by Restricted Certificated
Warrants, upon receipt by the Warrant Agent of the documents referred
to in clause (i) above and instructions given in accordance with DTC's
and the Warrant Agent's procedures, the Warrant Agent shall reflect on
its books and records the date and an increase in the number of
Warrants represented by the Rule 144A Global Warrant in an amount equal
to the number of Warrants represented by the Restricted Certificated
Warrants, and the Warrant Agent shall cancel the Restricted
Certificated Warrant.
<PAGE> 40
35
(c) Transfers of Interest in the Regulation S Global Warrant
or Offshore Certificated Warrants to U.S. Persons. With respect to any transfer
of interests in the Regulation S Global Warrant or Offshore Certificated
Warrants to U.S. Persons:
(i) on or prior to the date that is 40 calendar days after the
Issue Date, the Warrant Agent shall refuse to register such transfer;
and
(ii) after such date, the Warrant Agent shall register such
transfer without requiring additional certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of Warrants to a Non-U.S.
Person:
(i) the Warrant Agent shall register any proposed transfer of
Warrants to a Non-U.S. Person only upon receipt of a certificate
substantially in the form of Exhibit F from the proposed transferor.
(ii) (x) If the proposed transferor is an Agent Member holding
a beneficial interest in the Rule 144A Global Warrant, upon receipt by
the Warrant Agent of (A) the documents required by paragraph (i) and
(B) instructions in accordance with DTC's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and records
the date and a decrease in the number of Warrants represented by the
Rule 144A Global Warrant to be transferred, and (y) if the proposed
transferee is an Agent Member, upon receipt by the Warrant Agent of
instructions given in accordance with DTC's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and records
the date and an increase in the number of Warrants represented by the
Regulation S Global Warrant in an amount equal to the number of
Warrants represented by the Restricted Certificated Warrants or the
Rule 144A Global Warrant, as the case may be, to be transferred, and
the Warrant Agent shall cancel the Certificated Warrant, if any, so
transferred or decrease the number of Warrants represented by the Rule
144A Global Warrant.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Warrant Certificates not bearing the Private Placement Legend,
the Warrant Agent shall deliver Warrant Certificates that do not bear the
Private Placement Legend. Upon the transfer, exchange or replacement of Warrant
Certificates bearing the Private Placement Legend, the Warrant Agent shall
deliver only Warrant Certificates that bear the Private Placement Legend unless
there is delivered to the Warrant Agent an Opinion of Counsel reasonably
satisfactory to the Company to the effect that neither such legend nor the
related restrictions on transfer are required in order to maintain compliance
with the provisions of the Securities Act.
<PAGE> 41
36
(f) General. By its acceptance of any Warrants represented by
a Warrant Certificate bearing the Private Placement Legend, each Holder of such
Warrants acknowledges the restrictions on transfer of such Warrants set forth in
this Agreement and in the Private Placement Legend and agrees that it will
transfer such Warrants only as provided in this Agreement. The Warrant Agent
shall not register a transfer of any Warrants unless such transfer complies with
the restrictions on transfer of such Warrants set forth in this Agreement. In
connection with any transfer of Warrants, each Holder agrees by its acceptance
of Warrants to furnish the Warrant Agent or the Company such certifications,
legal opinions or other information as either of them may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities Act;
provided that the Warrant Agent shall not be required to determine (but may rely
on a determination made by the Company with respect to) the sufficiency of any
such certifications, legal opinions or other information.
(g) Records. The Warrant Agent shall retain copies of all
letters, notices and other written communications received pursuant to Section
5.3 hereof or this Section 5.4. The Company shall have the right to inspect and
make copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Warrant
Agent.
Section 5.5. Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange, exercise or
repurchase of the Warrants represented thereby shall, if surrendered to the
Company, be delivered to the Warrant Agent, and all Warrant Certificates
surrendered or so delivered to the Warrant Agent shall be promptly cancelled by
the Warrant Agent and shall not be reissued by the Company and, except as
provided in this Article V in case of an exchange or in Article III hereof in
case of the exercise or repurchase of less than all the Warrants represented
thereby or in case of a mutilated Warrant Certificate, no Warrant Certificate
shall be issued hereunder in lieu thereof. The Warrant Agent shall deliver to
the Company from time to time or otherwise dispose of such cancelled Warrant
Certificates as the Company may direct in writing.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Reservation and Authorization. During the period
within which the Warrants may be exercised in accordance with this Agreement,
the Company will have authorized and reserved and will keep available for issue
upon exercise of Warrants as herein provided, such number of its authorized but
unissued shares of Common Stock (which will be issued as shares of Class B
Common Stock) or other securities of the Company deliverable upon exercise of
Warrants as will be sufficient to permit the exercise in full of all
<PAGE> 42
37
outstanding Warrants and will cause appropriate evidence of ownership of such
shares of Class B Common Stock or other securities of the Company to be
delivered to any Holder or to such Holder's order in accordance with this
Agreement or the ADR Custodian, as the case may be, upon the Warrant Agent's
instruction for delivery upon the exercise of Warrants. The Company shall use
its best efforts to file and cause to be declared effective a Registration
Statement with respect to the Warrant Shares and to ensure that all such shares
of Class B Common Stock or any ADRs representing such shares will, at all times,
be duly approved for listing subject to official notice of issuance on each
securities exchange, if any, on which such ADRs or Class B Common Stock are then
listed. The Company will use its best efforts (i) to ensure that each of the
Company's shareholders waive, with respect to the Warrant Shares, their right of
first refusal under the Bylaws, (ii) to ensure that the Bylaws are amended to
eliminate the shareholders' preemptive right and right of first refusal with
respect to the Warrant Shares, and (iii) to obtain all other necessary corporate
and governmental approvals, in each case on or prior to the Exercise
Commencement Date. The Company covenants to promptly notify the Warrant Agent in
writing when (A) all of the Company's shareholders have waived, with respect to
the Warrant Shares, their preemptive right and right of first refusal under the
Bylaws, and (B) the Bylaws have been amended to eliminate the shareholders'
right of first refusal with respect to the Warrant Shares. The Company covenants
that all shares of Class B Common Stock or other securities of the Company that
may be issued upon the exercise of the Warrants will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free from
preemptive rights and all taxes, liens, charges and security interests with
respect to the issue thereof.
Section 6.2. Qualification Under Colombian Law. (a) The
Company shall use its best efforts to obtain, on or prior to the Exercise
Commencement Date, all Colombian corporate and governmental approvals and
authorizations, including, without limitation, (i) the approval of the Colombian
Ministry of Communications to permit the reduction of the equity percentage of
the shareholders which have qualified as "operators" in Colombia and (ii) any
necessary authorization or approval required for the Company to amend its Bylaws
to eliminate the preemptive right and right of first refusal of shareholders
with respect to the Class B Common Stock, necessary to issue the Warrant Shares
and any ADRs representing such shares and to file and cause to be declared
effective the Warrant Shares Registration Statement. The Company shall promptly
notify the Warrant Agent in writing when (A) the Company has obtained all
necessary Colombian corporate and governmental approvals and authorizations set
forth in this paragraph (a) of Section 6.2, and (B) such approvals and
authorizations thereafter cease to be in effect.
(b) Subject to the proviso of Section 6.3(a), the Company
shall use its best efforts to obtain all Colombian corporate and governmental
approvals and authorizations, including, without limitation, the approval of the
Colombian Superintendency of Securities, necessary to issue the ADRs and to file
and cause to be declared effective the ADR Registration Statement. The Company
shall promptly notify the Warrant Agent in writing
<PAGE> 43
38
when (A) the Company has obtained all necessary Colombian corporate and
governmental approvals and authorizations set forth in this paragraph (b) of
Section 6.2, and (B) such approvals and authorizations thereafter cease to be in
effect.
Section 6.3. Establishment of ADR Program. (a) The Company
shall use its best efforts to establish and maintain a facility for the deposit
of the Warrant Shares and the issuance of ADRs in compliance with the terms of
paragraph (b) of this Section 6.3; provided, however, that if, and for so long
as, direct listing or admission for trading of the Warrant Shares on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market can
be obtained without the imposition of restrictions under Colombian law on the
holders of Warrant Shares greater than those, if any, imposed on holders of
ADRs, and a certificate signed by the President and the General Counsel of the
Company certifying to such effect is delivered to the Warrant Agent, the Company
will be relieved of its obligation to establish and maintain an ADR facility.
(b) The Company shall enter into a deposit agreement
containing substantially the terms set forth herein and in the section entitled
"Description of American Depositary Receipts" contained in the Offering
Memorandum, dated May 31, 1996, relating to the sale of the Units (the "ADR
Deposit Agreement") and comply with the provisions thereof. In addition,
following the execution of the ADR Deposit Agreement and the effective date of
the ADR Registration Statement, the Company shall, upon receipt of any notice
from the Warrant Agent of the exercise of any Warrant, deposit the Warrant
Shares for which such Warrant is exercisable in the name of the deposit agent
under the ADR Deposit Agreement (the "ADR Depositary"). The Company shall not
amend, modify or in any way alter the terms of the ADR Deposit Agreement (except
for changes approved pursuant to the ADR Deposit Agreement to the extent that
any ADRs owned by the Company are not included in the calculation of any vote,
consent or approval of any such changes), or grant any consent or waiver from
any of such terms, except for amendments, waivers or consents for the purposes
of curing any ambiguities, defects or inconsistencies, and for any such
amendment, waiver or consent that does not adversely affect the interests of any
Holder of the Warrants. The Company shall promptly notify the Warrant Agent in
writing on the date that the Company has entered into an ADR Deposit Agreement.
Notwithstanding the foregoing, the Company shall be relieved of all the
obligations set forth in this Section 6.3(b) if it is not obligated to establish
and maintain an ADR Facility pursuant to Section 6.3(a).
Section 6.4. Filing and Effectiveness of Warrant Shares
Registration Statement. (a) The Company shall use its best efforts to file
pursuant to Rule 415 under the Securities Act and cause to be declared effective
on or prior to the Exercise Commencement Date, a shelf registration statement on
the appropriate form (such shelf registration statement, including the
Prospectus, any amendments and supplements to such shelf registration statement,
including post-effective amendments, and all exhibits and all material
incorporated by reference in such registration statement being the "Warrant
Shares Registration
<PAGE> 44
39
Statement") covering the issuance of the Underlying Securities upon exercise of
the Warrants.
(b) (i) The Company shall use its best efforts to keep such
Warrant Shares Registration Statement continuously effective until the earlier
of such time as all Warrants have been exercised and the Expiration Date.
(ii) Notwithstanding the foregoing, the Company may suspend
the use of the Warrant Shares Registration Statement (and the ADR Registration
Statement) for a period not to exceed 30 days in any three-month period or for a
period not to exceed an aggregate of 60 days in any 12-month period, except in
either case during the 30-day period immediately prior to the Expiration Date,
for valid business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, public filings
with the Commission, pending corporate developments and similar events (any such
period a "Suspension Period").
(iii) The Company will promptly notify the Warrant Agent in
writing (A) on the date that the Warrant Shares Registration Statement is
declared effective, (B) on any date that the Commission issues a stop order
suspending the effectiveness of such Warrant Shares Registration Statement, (C)
on any date that any such stop order ceases to be effective and (D) of the
commencement and termination of any Suspension Period. The Company will furnish
the Warrant Agent with current Prospectuses meeting the requirements of the
Securities Act and the rules and regulations of the Commission thereunder in
sufficient quantity to permit the Warrant Agent to deliver a Prospectus to each
Holder of a Warrant upon the exercise thereof.
Section 6.5. Registration Rights in Initial Public Offering.
(a) If the Company proposes to file a registration statement with the Commission
relating to a public offering that would constitute the Company's Initial Public
Offering if closed (such registration statement, including the Prospectus, any
amendments and supplements to such registration statement, including
post-effective amendments, and all exhibits and all material incorporated by
reference in such registration statement being the "IPO Registration Statement"
and, together with the Warrant Shares Registration Statement, each a
"Registration Statement"), the Company shall include all outstanding Warrants in
the IPO Registration Statement relating to the public offering, provided that
the Company shall not be obligated to include (1) any Warrants that may then be
offered and sold by a person that is not an affiliate of the Company pursuant to
Rule 144 without compliance with the provisions of Rule 144(e)(2), (2) any
Warrants that were included in any previous Registration Statement, (3) any
Warrants held by any person that is an affiliate of the Company or (4) any
Warrants held by a person that does not comply with the obligations set forth in
the Section 6.5(b). The Company shall promptly notify the Warrant Agent in
writing on the date that the IPO Registration Statement is declared effective.
The Company will furnish the Warrant
<PAGE> 45
40
Agent with current Prospectuses meeting the requirements of the Securities Act
and the rules and regulations of the Commission thereunder in sufficient
quantity to permit the Warrant Agent to deliver a Prospectus to each Holder of a
Warrant upon the sale or exercise thereof.
(b) No Holder may include any of its Underlying Securities or
Warrants in any Registration Statement pursuant to this Agreement unless and
until such Holder furnishes to the Company in writing, within 10 Business Days
after receipt of a written request therefor (which also describes the effect of
any failure to respond), such information as the Company may reasonably request
for use in connection with any Registration Statement or Prospectus included
therein and in any application to the NASD. No Holder shall be entitled to
liquidated damages pursuant to Section 7.1 hereof unless and until such Holder
shall have provided all such reasonably requested information and such Holder
shall not be entitled to liquidated damages with respect to any period during
which such information was required to have been but was not so provided.
Section 6.6. Registration of ADRs. Subject to the proviso of
Section 6.3(a), in connection with the filing of a Registration Statement, the
Company shall cause the ADR Depositary to use its best efforts to cause to be
filed a registration statement on the appropriate form (any such registration
statement, including the Prospectus, any amendments and supplements to such
registration statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such registration statement being
the "ADR Registration Statement") covering the issuance of the ADRs upon
exercise of the Warrants and shall cause the ADR Depositary to use its best
efforts to cause such ADR Registration Statement to be declared effective on or
prior to the Exercise Commencement Date. Except as set forth in Section
6.4(b)(ii), the Company shall cause the ADR Depositary to use its best efforts
to keep such ADR Registration Statement continuously effective until the earlier
of (i) such time as all Warrants have been exercised and (ii) the Expiration
Date. Prior to filing such ADR Registration Statement or any amendment or
supplement thereto, the Company shall cause the ADR Depositary to provide a copy
thereof to the Initial Purchasers and their counsel and afford them a reasonable
time to comment thereon.
Section 6.7. Blue Sky. The Company shall use its best efforts
to register or qualify the Underlying Securities under all applicable securities
or "blue sky" laws of all jurisdictions in the United States in which any Holder
of Warrants may or may be deemed to purchase Underlying Securities upon the
exercise of Warrants and shall use its best efforts to maintain such
registration or qualification through the earlier of the date upon which all
Warrants have been exercised and the Expiration Date; provided, however, that
the Company shall not be required to (i) qualify as a foreign corporation or as
a dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Section 6.7, (ii) file any general consent to
service of process or (iii) subject itself to taxation in any jurisdiction if it
is not otherwise so subject.
<PAGE> 46
41
Section 6.8. Accuracy of Disclosure. The Company and its
successors represent and warrant to each Holder and agree for the benefit of
each Holder that (i) any Registration Statement and the documents incorporated
by reference therein will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein not
misleading and (ii) the Prospectus delivered to such Holder upon its exercise of
the Warrants and the documents incorporated by reference therein will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided that such representation shall
not apply to statements in or omissions from any Registration Statement and the
documents incorporated by reference therein or the Prospectus contained therein
and the documents incorporated by reference therein or any amendment or
supplement thereto made in reliance upon and in conformity with written
information furnished to the Company through a representative by or on behalf of
such Indemnified Party specifically for use therein.
Section 6.9. Indemnity. The Company hereby indemnifies each
beneficial owner of a Warrant (whether or not it is, at the time the indemnity
provided for in this Section 6.9 is sought, such a beneficial owner) (each, an
"Indemnified Party") against all losses, damages or liabilities which such
beneficial owner suffers as a result of any breach, on the date of any exercise
of a Warrant by such beneficial owner, of the representations, warranties or
agreements contained in Section 6.8; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement in or
omission or alleged omission from any Registration Statement and the documents
incorporated by reference therein or the Prospectus contained therein and the
documents incorporated by reference therein or any amendment or supplement
thereto made in reliance upon and in conformity with written information
furnished to the Company through a representative by or on behalf of such
Indemnified Party specifically for use therein.
Section 6.10. Expenses. All expenses incident to the Company's
performance of or compliance with its obligations under this Agreement will be
borne by the Company, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all Commission, stock exchange or
National Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses incurred in connection with compliance with state
securities or "blue sky" laws, (iii) all expenses of any Persons incurred by or
on behalf of the Company in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto and other documents relating
to the performance of and compliance with this Agreement, (iv) all rating agency
fees, (v) the fees and disbursements of the Warrant Agent, (vi) the fees and
disbursements of the ADR Depositary, (vii) all fees and disbursements relating
to any required Colombian governmental authorizations and approvals, (viii) the
fees and disbursements of counsel for the Company and (ix) the fees and
<PAGE> 47
42
disbursements of the independent public accountants of the Company, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
ARTICLE VII
REMEDIES
Section 7.1. Liquidated Damages. (a) The Company and the
Initial Purchasers agree that the Holders of the Warrants will suffer damages if
a Warrant Registration Default occurs and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, if a Warrant
Registration Default occurs, then the Company agrees to pay, or cause to be
paid, to the Holder of each Warrant, as liquidated damages and not as a penalty,
cash in the amount of US$0.03 per week, or portion thereof, for the first 90-day
period during which the Warrant Registration Default continues beginning on the
Exercise Commencement Date in the case of clause (i) of the definition of
Warrant Registration Default, and on the date of the order suspending
effectiveness of the Warrant Shares Registration Statement in the case of clause
(ii) of the definition of Warrant Registration Default. Such amount shall
increase by US$0.02 per week, or portion thereof, at the beginning of each
subsequent 90-day period during which a Warrant Registration Default continues
up to a maximum aggregate additional amount of US$0.07 per week. Upon the cure
of all Warrant Registration Defaults, such liquidated damages will cease to
accrue.
(b) The Company shall notify the Warrant Agent in writing
within three Business Days after each and every date on which an event occurs in
respect of which liquidated damages are required to be paid (an "Event Date").
The Company shall pay the liquidated damages due on the Warrants by depositing
with the Warrant Agent, in trust, for the benefit of the Holders thereof, on or
before the applicable liquidated damages payment date specified below,
immediately available funds in sums sufficient to pay the liquidated damages
then due. The liquidated damages amount due shall be payable on each March 15
and September 15 commencing on the Exercise Commencement Date (the "liquidated
damages payment dates") to Holders of record of Warrants on the close of
business on the immediately preceding March 1 or September 1, as the case may
be. Each obligation to pay liquidated damages shall be deemed to accrue on the
applicable Event Date. The parties hereto agree (for themselves and for the
benefit of Holders from time to time of Warrants) that the liquidated damages
provided for in this Section 7.1 constitute a reasonable estimate of the damages
that may be incurred by Holders of Warrants by reason of the occurrence of the
failure of the Company to fulfill its obligations to register the Warrant
Shares.
<PAGE> 48
43
Section 7.2. Payment of Additional Amounts. Any and all
payments made by the Company pursuant to Section 7.1 will be made free and clear
of and without deduction for or on account of any and all present or future
taxes, levies, imposts, deductions, charges or withholdings and all liabilities
with respect thereto imposed by Colombia or any political subdivision thereof
excluding any taxes, levies, imposts, deductions, charges or withholdings and
all liability with respect thereto (i) resulting from the Holder having some
connection with Colombia or any political subdivision thereof other than the
mere holding of or enforcement of such Warrant, (ii) the payment of which may be
avoided by the Holder complying with any certification, declaration or other
reporting requirement concerning the nationality, residence, identity or
connection with any taxing authority of such Holder as the beneficial owner of
such Warrant, (iii) in the nature of estate, inheritance, gift, sale, transfer,
personal property or similar taxes or (iv) imposed on or with respect to any
payment by the Company to the Holder if such Holder is a fiduciary or
partnership or person other than the sole beneficial owner of such payment to
the extent such tax, levy, impost, deduction, charge or withholding would not
have been imposed on a beneficiary or settlor with respect to such fiduciary,
member of such partnership or the beneficial owner of such payment had such
beneficiary, settlor, member or beneficial owner been the Holder of such Warrant
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being referred to collectively or individually as "Colombian
Withholding Taxes"). If the Company is required by law to deduct any Colombian
Withholding Taxes from or in respect of any amount payable under Section 7.1,
the sum payable thereunder shall be increased by the amount necessary so that
after making all required deductions the Holder will receive an amount equal to
the sum it would have received had no such deductions been made (such additional
amounts to be paid by the Company in accordance with the foregoing being
"Additional Amounts"). At least 30 calendar days prior to each date on which any
payment under or with respect to Section 7.1 is due and payable, if the Company
will be obligated to pay Additional Amounts with respect to such payment, the
Company will deliver to the Warrant Agent an officers' certificate (x) stating
the fact that such Additional Amounts will be payable and the amounts so payable
and certifying the amount required to be withheld on such date; (y) certifying
that the Company shall withhold such amount on such date and shall pay such
amount with any required penalty or interest to the appropriate governmental
authorities; and (z) setting forth such other information necessary to enable
the Warrant Agent to pay such Additional Amounts to Holders on the payment date.
The Company agrees to indemnify the Warrant Agent for and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad faith
on its part arising out of or in connection with actions taken or omitted by it
in reliance on any certificate furnished pursuant to this Section 7.2 or the
failure of the Company to furnish any such certificate. The obligations of the
Company under this Section 7.2 shall survive the resignation or removal of the
Warrant Agent and termination of this Agreement and the payment of all amounts
under or with respect to Section 7.1.
<PAGE> 49
44
Section 7.3. Default Interest. If the Company shall fail to
pay to any Holder the Warrant Repurchase Price pursuant to Section 3.4, the
Repurchase Price pursuant to Section 3.5, or cash in lieu of fractional ADRs or
Warrant Shares pursuant to Section 4.6, in each case if and as when required by
the terms of this Agreement, the Company shall be obligated to pay interest on
such amount at a rate per annum equal to 14% from the date of the default to the
date of payment, which interest shall compound quarterly.
Section 7.4. Remedies; No Waiver. Notwithstanding any other
provision of this Agreement, if a Default occurs and is continuing, the Holders
of the Warrants may pursue any available remedy to collect the Repurchase
Obligation or to enforce the performance of any provision of this Agreement. A
delay or omission by any Holder of a Warrant in exercising, or a failure to
exercise, any right or remedy arising out of a Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in the Default. All
remedies are cumulative to the extent permitted by law.
ARTICLE VIII
THE WARRANT AGENT
Section 8.1. Duties and Liabilities. The Company hereby
appoints the Warrant Agent to act as agent of the Company as set forth in this
Agreement. The Warrant Agent hereby accepts the agency established by this
Agreement and agrees to perform the same upon the terms and conditions herein
set forth, by all of which the Company and the Holders of Warrants, by their
acceptance thereof, shall be bound. The Warrant Agent shall not have any
obligation towards or relationship of agency or trust for the Holders, except as
provided in Section 7.1(b) and Section 10.1 hereof. The Warrant Agent shall not,
by countersigning Warrant Certificates or by any other act hereunder, be deemed
to make any representations as to the validity or authorization of the Warrants
or the Warrant Certificates (except as to its countersignature thereon) or of
any securities or other property delivered upon exercise or repurchase of any
Warrant, or as to the accuracy of the computation of the Exercise Price or the
number or kind or amount of stock or other securities or other property
deliverable upon exercise or repurchase of any Warrant, or as to the
independence of any Independent Financial Expert or the correctness of the
representations of the Company made in the certificates that the Warrant Agent
receives or the validity, sufficiency or adequacy of any offering materials. The
Warrant Agent shall not be accountable for the use or application by the Company
of the proceeds of the exercise of any Warrant. The Warrant Agent shall not have
any duty to calculate or determine any adjustments with respect to either the
Exercise Price or the kind and amount of shares or other securities or any
property receivable by Holders upon the exercise or repurchase of Warrants
required from time to time and the Warrant Agent shall have no duty or
responsibility in determining the accuracy or correctness of such calculation.
The Warrant Agent shall not (a) be liable for any recital
<PAGE> 50
45
or statement of fact contained herein or in the Warrant Certificates or for any
action taken, suffered or omitted by it in good faith in the belief that any
Warrant Certificate or any other documents or any signatures are genuine or
properly authorized, (b) be responsible for any failure on the part of the
Company to comply with any of its covenants and obligations contained in this
Agreement or in the Warrant Certificates or (c) be liable for any act or
omission in connection with this Agreement except for its own negligence or
willful misconduct. The Warrant Agent is hereby authorized to accept
instructions with respect to the performance of its duties hereunder from the
President, any Vice President or the Secretary or Treasurer of the Company and
to apply to any such officer for instructions (which instructions will be
promptly given in writing when requested) and the Warrant Agent shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with the instructions of any such officer; however, in its
discretion, the Warrant Agent may in lieu thereof accept other evidence of such
or may require such further or additional evidence as it may deem reasonable.
The Warrant Agent shall not be liable for any action taken with respect to any
matter in the event it requests instructions from the Company as to that matter
and does not receive such instructions within a reasonable period of time after
the request therefor.
The Warrant Agent may execute and exercise any of the rights
and powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys, agents or employees, and the Warrant Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees, provided reasonable care has been exercised
in the selection and in the continued employment of any such attorney, agent or
employee. The Warrant Agent shall not be under any obligation or duty to
institute, appear in or defend any action, suit or legal proceeding in respect
hereof, unless first indemnified to its satisfaction, but this provision shall
not affect the power of the Warrant Agent to take such action as the Warrant
Agent may consider proper, whether with or without such indemnity. The Warrant
Agent shall promptly notify the Company in writing of any claim made or action,
suit or proceeding instituted against it arising out of or in connection with
this Agreement.
The Warrant Agent may rely and shall be fully protected in
acting or refraining from acting upon any certificate, notice, instruction,
Warrant, document or other writing believed by it to be genuine and to have been
signed or presented by the proper Person. The Warrant Agent need not investigate
any fact or matter stated in any such certificate, notice, instruction, Warrant,
document or other writing. The Warrant Agent shall not be liable for any action
that it takes or omits to take in good faith which it believes to be authorized
or within its rights or powers.
The Company will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further
acts, instruments and
<PAGE> 51
46
assurances as are consistent with this Agreement and as may reasonably be
required by the Warrant Agent in order to enable it to carry out or perform its
duties under this Agreement.
The Warrant Agent shall act solely as agent of the Company
hereunder. The Warrant Agent shall not be liable except for the failure to
perform such duties as are specifically set forth herein, and no implied
covenants or obligations shall be read into this Agreement against the Warrant
Agent, whose duties and obligations shall be determined solely by the express
provisions hereof.
With respect to the identity of beneficial owners of interests
in the Global Warrants and the number of Warrants beneficially owned by any
beneficial owner, the Warrant Agent shall be entitled to conclusively rely on
the records of DTC and shall be fully protected in so relying.
Section 8.2. Right to Consult Counsel. The Warrant Agent may
at any time consult with legal counsel acceptable to it (who may be legal
counsel for the Company), and the opinion or advice of such counsel shall be
full and complete authorization and protection to the Warrant Agent and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any Holder for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Section 8.3. Compensation; Indemnification. The Company agrees
to pay to the Warrant Agent from time to time compensation for all services
rendered by it hereunder as the Company and the Warrant Agent may agree in
writing from time to time, and to reimburse the Warrant Agent for reasonable
expenses and disbursements incurred in connection with the execution and
administration of this Agreement (including the reasonable fees and the expenses
of its counsel), and further agrees to indemnify the Warrant Agent for, and to
hold it harmless against, any claim, loss, liability or expense arising out of
or in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending itself against any such claim or
liability, except that the Company shall have no liability hereunder to the
extent that any such loss, liability or expense results from the Warrant Agent's
own negligence or willful misconduct. If the Company is required by law to
deduct Colombian Withholding Taxes from or in respect of any sum payable to the
Warrant Agent under this Section 8.3, such sum shall be increased by the amount
necessary so that after making all necessary deductions, the Warrant Agent will
receive an amount equal to the sum it would have received had no such deductions
been made. The obligations of the Company under this Section 8.3 shall survive
the exercise and the expiration of the Warrants and the resignation or removal
of the Warrant Agent. No provision of this Agreement shall require the Warrant
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
<PAGE> 52
47
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.4. No Restrictions on Actions. The Warrant Agent and
any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in transactions in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as fully and
freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
Section 8.5. Discharge or Removal; Replacement Warrant Agent.
Except as otherwise provided in this Section 8.5, no resignation or removal of
the Warrant Agent and no appointment of a successor warrant agent shall become
effective until the acceptance of appointment by the successor warrant agent
provided herein. The Warrant Agent may resign from its position as such and be
discharged from all further duties and liabilities hereunder (except liabilities
arising as a result of the Warrant Agent's own negligence or willful
misconduct), after giving one month's prior written notice to the Company. The
Company may remove the Warrant Agent upon one month's prior written notice
specifying the date when such discharge shall take effect, and the Warrant Agent
shall thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. The Warrant Agent or the Company
shall cause to be mailed (by first-class mail, postage prepaid) to each Holder
of a Warrant a copy of said notice of resignation or notice of removal, as the
case may be. Upon such resignation or removal the Company shall appoint in
writing a new warrant agent. If the Company shall fail to make such appointment
within a period of 30 calendar days after it has been notified in writing of
such resignation by the resigning Warrant Agent or after such removal, then the
resigning Warrant Agent or the Holder of any Warrant may apply to any court of
competent jurisdiction for the appointment of a new warrant agent. Any new
warrant agent, whether appointed by the Company or by such a court, shall be a
bank or trust company doing business under the laws of the United States or any
state thereof, in good standing and having a combined capital and surplus of not
less than US$50,000,000. The combined capital and surplus of any such new
warrant agent shall be deemed to be the combined capital and surplus as set
forth in the most recent annual report of its condition published by such
warrant agent prior to its appointment, provided that such reports are published
at least annually pursuant to law or to the requirements of a federal or state
supervising or examining authority. After acceptance in writing of such
appointment by the new warrant agent, it shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein as
the Warrant Agent, without any further assurance, conveyance, act or deed;
however, the original Warrant Agent, upon payment of its fees and expenses,
shall in all events deliver and transfer to the successor Warrant Agent all
property, if any, at the time held hereunder by the original Warrant Agent and
if for any reason it shall be necessary or expedient to execute and deliver any
further
<PAGE> 53
48
assurance, conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed and delivered by the resigning
or removed Warrant Agent. Not later than the effective date of any such
appointment, the Company shall file a notice thereof with the resigning or
removed Warrant Agent and shall forthwith cause a copy of such notice to be
mailed to each Holder of a Warrant. Failure to give any notice provided for in
this Section 8.5, however, or any defect therein, shall not affect the legality
or validity of the resignation of the Warrant Agent or the appointment of a new
warrant agent, as the case may be.
Section 8.6. Successor Warrant Agent. Any corporation into
which the Warrant Agent or any successor warrant agent may be merged or
converted, or any corporation resulting from any consolidation to which the
Warrant Agent or any successor warrant agent shall be a party, and any
corporation which acquires substantially all of the corporate trust business of
the Warrant Agent, shall be a successor Warrant Agent under this Agreement
without any further act, provided that such corporation would be eligible for
appointment as successor to the Warrant Agent under the provisions of Section
8.5 hereof. Any such successor Warrant Agent shall promptly cause notice of its
succession as Warrant Agent to be mailed (by first-class mail, postage prepaid)
to each Holder of a Warrant.
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Not Deemed a Stockholder. The
Company and the Warrant Agent may deem and treat the registered Holder(s) of the
Warrant Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise thereof and for all other purposes, and neither the Company nor
the Warrant Agent nor any agent of the Company or the Warrant Agent shall be
affected by any notice to the contrary. Prior to the exercise of the Warrants,
no Holder of a Warrant Certificate, as such, shall be entitled to any rights of
a stockholder of the Company, including, without limitation, the right to vote
or to consent to any action of the stockholders, to receive dividends or other
distributions, to exercise any preemptive right or to receive any notice of any
meeting of stockholders and, except as otherwise provided in this Agreement,
shall not be entitled to receive any notice of any proceedings of the Company.
Section 9.2. Right of Action. All rights of action with
respect to this Agreement are vested in the Holders of the Warrants, and any
Holder of any Warrant, without the consent of the Warrant Agent or the Holder of
any other Warrant, may, on such Holder's own behalf and for such Holder's own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company suitable to enforce, or otherwise
<PAGE> 54
49
in respect of, such Holder's right to exercise, exchange or tender for purchase
such Holder's Warrants in the manner provided in the Warrant Certificate
representing his Warrants and in this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1. Money Deposited with the Warrant Agent. The
Warrant Agent shall not be required to pay interest on any moneys deposited
pursuant to the provisions of this Agreement except such as it shall agree in
writing with the Company to pay thereon. Any moneys, securities or other
property which at any time shall be deposited by the Company or on its behalf
with the Warrant Agent pursuant to this Agreement shall be and are hereby
assigned, transferred and set over to the Warrant Agent in trust for the purpose
for which such moneys, securities or other property shall have been deposited;
but such moneys, securities or other property need not be segregated from other
funds, securities or other property except to the extent required by law. The
Warrant Agent shall distribute any money deposited with it for payment and
distribution to the Holders by mailing by first-class mail a check in such
amount as is required by this Agreement to each such Holder at the address shown
on the Warrant register of the Company, or as it may be otherwise directed in
writing by such Holder, in accordance with the terms and conditions hereof. Any
money, securities or other property deposited with the Warrant Agent for payment
or distribution to the Holders that remains unclaimed for two years after the
date the money, securities or other property was deposited with the Warrant
Agent shall be delivered to the Company upon its written request therefor.
Section 10.2. Payment of Taxes. All ADRs, Warrant Shares or
other securities issuable upon the exercise of Warrants shall be validly issued,
fully paid and nonassessable, and the Company shall pay any stamp, registration,
and other similar taxes and other governmental charges that may be imposed under
the laws of the United States of America, Colombia or any political subdivision
or taxing authority thereof or therein in respect of the issue or delivery
thereof or of other securities deliverable upon exercise of Warrants or in
respect of any Warrant Repurchase or Repurchase Offer (other than income taxes
imposed on the Holders). The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer involved in the
issue of any ADR certificate, Warrant Share certificate or other securities or
property issuable upon the exercise of the Warrants or in respect of a Warrant
Repurchase, Repurchase Offer or payment of cash to any Person other than the
Holder of a Warrant Certificate [that is not deemed a Colombian resident]
surrendered upon the exercise or repurchase of a Warrant, and in case of such
transfer or payment, the Warrant Agent and the Company shall not be required to
issue any ADR certificate, Warrant Shares certificate or stock certificate or
pay
<PAGE> 55
50
any cash until such tax or charge has been paid or it has been established to
the Warrant Agent's and the Company's satisfaction that no such tax or other
charge is due.
Section 10.3. No Merger, Consolidation or Sale of Assets of
the Company. Except as otherwise provided herein, the Company will not merge
into or consolidate with any other Person, or sell or otherwise transfer its
property, assets and business substantially as an entirety to a successor of the
Company, unless the Person resulting from such merger or consolidation, or such
successor of the Company, shall expressly assume, by supplemental agreement
satisfactory in form to the Warrant Agent and executed and delivered to the
Warrant Agent, the due and punctual performance and observance of each and every
covenant and condition of this Agreement to be performed and observed by the
Company.
Section 10.4. Reports to Holders. (a) The Company will file
with the Warrant Agent and provide the Holders, within 15 days after it files
them with the Commission, copies of its annual and quarterly reports and other
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) which
the Company is required to file with the Commission pursuant to Section 13(a) or
15(d) of the Exchange Act. Notwithstanding that the Company may not be required
to remain subject to the reporting requirements of Section 13(a) or 15(d) of the
Exchange Act or otherwise report on an annual and quarterly basis on forms
provided for such annual and quarterly reporting pursuant to rules and
regulations promulgated by the Commission, the Company will file with or furnish
to the Commission and provide to the Warrant Agent and to the Holders and
potential purchasers of Warrants upon written request to the Warrant Agent by
any Holder, potential purchaser of Warrants or Initial Purchaser: (i) within 140
days after the end of each fiscal year, annual reports on Form 20-F (or any
successor form) containing the information required to be contained therein (or
required in such successor form); (ii) within 60 days after the end of each of
the first three fiscal quarters of each fiscal year, reports on Form 6-K (or any
successor form) containing substantially the same information required to be
contained in Form 10-Q (or required in any successor form); and (iii) promptly
from time to time after the occurrence of an event required to be therein
reported, such other reports on Form 6-K (or any successor form) containing
substantially the same information required to be contained in Form 8-K (or
required in any successor form). Prior to the filing of the Registration
Statement with the Commission and in the event that the Company never becomes
subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange
Act, the Company will provide to the Warrant Agent and to the Holders and
potential purchasers of Warrants upon written request to the Warrant Agent by
any Holder, potential purchaser of Warrants or Initial Purchaser, all of the
information that would have been required to have been filed with the Commission
pursuant to clauses (i), (ii) and (iii) above. Each of the reports will be
prepared in accordance with Colombian GAAP and each of the reports referred to
in clauses (i) and (ii) above will contain a reconciliation to U.S. GAAP
consistently applied and will be prepared in accordance with the applicable
rules and regulations of the Commission.
<PAGE> 56
51
(b) If the Company is not then subject to Section 13 or 15(d)
of the Exchange Act, the Company will, upon request, provide to any Holder of
Warrants or any prospective transferee of any such Holder the information
concerning the Company required pursuant to Rule 144A(d)(4).
Section 10.5. Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or any air courier (i) if to a
Holder of the Warrants, at the address of such Holder maintained by the Warrant
Agent, (ii) if to the Company, to Occidente y Caribe Celular S.A., Calle 50, No.
55-01, Medellin, Colombia, Attention: Mauricio Campillo and (iii) if to the
Warrant Agent, to The Bank of New York, 101 Barclay Street, New York, New York
10286, Attention: Corporate Trust Administration.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; at the
time received, if mailed or sent by air courier; when answered back, if telexed;
and when receipt is acknowledged, by recipient's telecopy operator, if
telecopied.
Section 10.6. Severability. If any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
Section 10.7. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Company and the Warrant Agent and their
respective successors and assigns, and the Holders from time to time of the
Warrants. Nothing in this Agreement is intended or shall be construed to confer
upon any Person, other than the Company, the Warrant Agent and the Holders of
the Warrants, any right, remedy or claim under or by reason of this Agreement or
any part hereof.
Section 10.8. Third Party Beneficiaries. The Holders shall be
third party beneficiaries to the agreements made hereunder between the Company,
on the one hand, and the Warrant Agent, on the other hand, and each Holder shall
have the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
Section 10.9. Amendments. The Company may, without the consent
of the Holders of the Warrants, by supplemental agreement or otherwise, make any
changes or corrections in this Agreement that it shall have been advised by
counsel (a) are required to cure any ambiguity or to correct or supplement any
provision herein which may be defective or inconsistent with any other provision
herein or (b) add to the covenants and agreements of
<PAGE> 57
52
the Company for the benefit of the Holders, or surrender any rights or power
reserved to or conferred upon the Company in this Agreement; provided that, in
each case, such changes or corrections shall not adversely affect the interests
of the Holders in any material respect. The Warrant Agent shall join with the
Company in the execution and delivery of any such supplemental agreements unless
it affects the Warrant Agent's own rights, duties or immunities hereunder, in
which case the Warrant Agent may, but shall not be required to, join in such
execution and delivery.
Section 10.10. Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of any provision hereof.
Section 10.11. GOVERNING LAW. THIS AGREEMENT AND THE WARRANTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, UNITED STATES OF AMERICA.
Section 10.12. Process Agent; Submission to Jurisdiction;
Waiver of Immunities. By the execution and delivery of this Agreement, the
Company (i) acknowledges that it has, by separate written instrument, designated
and appointed CT Corporation System, 1633 Broadway, New York, New York 10019
(the "Process Agent") (and any successor entity) as its authorized agent upon
which process may be served in any suit or proceeding arising out of or relating
to this Agreement or the Warrants that may be instituted in any federal or state
court in the Borough of Manhattan, The City of New York, State of New York or
brought under federal or state securities laws, and acknowledges that the
Process Agent has accepted such designation, (ii) submits to the jurisdiction of
any such court in any such suit or proceeding and (iii) agrees that service of
process upon the Process Agent and written notice of said service to the Company
in accordance with Section 10.5 of this Agreement shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. The Company further agrees to take any and all action, including the
execution and filing of any and all such documents and instruments, as may be
necessary to continue such designation and appointment of the Process Agent in
full force and effect so long as any of the Warrants shall be outstanding;
provided that the Company may (and, to the extent the Process Agent ceases to be
able to be served on the basis contemplated herein, shall), by written notice to
the Initial Purchasers and the holders of Warrants in accordance with Section
10.5 of this Agreement, designate such additional or alternative agent for
service of process under this Section 10.12 that (A) maintains an office located
in the Borough of Manhattan, The City of New York, State of New York and (B) is
either (x) counsel for the Company or (y) a corporate service company which acts
as agent for service of process for other Persons in the ordinary course of its
business. Such written notice shall identify the name of such agent for service
of process and the address of the office of such agent for service of process in
the Borough of Manhattan, The City of New York, State of New York. Nothing
herein shall affect the right of the Warrant Agent or any
<PAGE> 58
53
Holder to serve process or to commence legal proceedings or otherwise proceed
against the Company in Colombia in any other manner permitted by law. The
Company hereby waives irrevocably, to the extent permitted by law, any objection
to the laying of venue in New York, New York, and any claim of inconvenient
forum in respect of any such action in New York, New York to which it might
otherwise be entitled in any actions arising out of or based on this Agreement
or any Warrants.
To the extent that the Company has or hereafter may acquire
any sovereign immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such immunity in respect of its
obligations under this Agreement, the Warrants or the separate written
instrument referenced in the first paragraph of this Section 10.12.
Section 10.13. Judgment Currency. The Company agrees to
indemnify the Initial Purchasers, each holder of the Warrants and each
Indemnified Party against any loss incurred by any of them as a result of any
judgment or order being given or made for any amount due under this Agreement
and such judgment or order being expressed and paid in a currency (the "Judgment
Currency") other than U.S. Dollars and as a result of any variation as between
(i) the rate of exchange at which the U. S. Dollar amount is converted into the
Judgment Currency for the purpose of such judgment or order and (ii) the spot
rate of exchange in The City of New York at which any such Person on the date of
payment of such judgment or order is able to purchase U.S. Dollars with the
amount of the Judgment Currency actually received by such Person. The foregoing
indemnity shall continue in full force and effect notwithstanding any such
judgment or order as aforesaid. The term "spot rate of exchange" shall include
any premiums and costs of exchange payable in connection with the purchase of,
or conversion into, U.S. Dollars.
Section 10.14. Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
<PAGE> 59
54
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, and their respective corporate seals to be hereto
affixed and attested, all as of the day and year first above written.
OCCIDENTE Y CARIBE CELULAR S.A.
By
-------------------------------------------
Name: Mauricio Campillo
Title: General Secretary and
Administrative Vice President
THE BANK OF NEW YORK, as Warrant Agent
By
-------------------------------------------
Name: Lloyd A. McKenzie
Title: Assistant Vice President
<PAGE> 60
Exhibit A to
Warrant Agreement
FORM OF WARRANT CERTIFICATE
OCCIDENTE Y CARIBE CELULAR S.A.
CUSIP No. __________
No. _____ rtificate for [ ] Warrants
WARRANTS TO PURCHASE
SHARES OF CLASS B COMMON STOCK
This certifies that _______________, or its registered assigns, is the
owner of the number of Warrants set forth above or such other number as shall be
represented from time to time by this Warrant Certificate in accordance with the
terms of the within-mentioned Warrant Agreement, each of which represents the
right to purchase, on any Business Day on or after the earliest to occur of (i)
June 7, 1998, (ii) the occurrence of a Change of Control (as defined in the
Warrant Agreement), or (iii) the consummation of a Public Equity Offering (as
defined in the Warrant Agreement) (the "Exercise Commencement Date") and on or
before March 15, 2004 (the "Expiration Date"), provided that certain conditions
set forth in the Warrant Agreement have been satisfied, from Occidente y Caribe
Celular S.A. (the "Company"), a sociedad anonima de economia mixta existing
under the laws of the Republic of Colombia ("Colombia"), either (i) 0.22836
American Depositary Receipts ("ADRs"), each ADR representing 25 fully paid and
nonassessable shares of class B common stock, par value one thousand Pesos per
share, of the Company (the "Class B Common Stock"), subject to adjustment (the
"Warrant Shares"), or, (ii) if certain conditions set forth in the Warrant
Agreement are not satisfied, 5.709 fully paid and nonassessable Warrant Shares,
in each case, subject to adjustment as provided in the Warrant Agreement, at a
purchase price (the "Exercise Price") of US$1.00 per Warrant Share (US$25.00 per
ADR), subject to adjustment as provided in the Warrant Agreement, upon surrender
hereof at the office of The Bank of New York or to its successor as the warrant
agent under the Warrant Agreement (any such warrant agent being herein called
the "Warrant Agent"), with the Subscription Form on the reverse hereof (or a
copy thereof furnished by the Warrant Agent) duly executed, with signature
guaranteed as therein specified, and simultaneous payment in full (in cash or by
certified or official bank or bank cashier's check payable to the order of the
Company) of the Exercise Price for the ADR(s) or Warrant Share(s) as to which
the Warrant(s) represented by this Warrant Certificate are exercised, all
subject to the terms and conditions hereof and of the Warrant Agreement.
<PAGE> 61
A-2
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of June 7, 1996 (the "Warrant Agreement"), between
the Company and The Bank of New York, as Warrant Agent, and is subject to the
terms and provisions contained therein, to all of which terms and provisions the
Holder of this Warrant Certificate consents by acceptance hereof. The Warrant
Agreement is hereby incorporated herein by reference and made a part hereof.
Reference is hereby made to the Warrant Agreement for a full description of the
rights, limitations of rights, obligations, duties and immunities thereunder of
the Company and the Holders of the Warrants. The summary of the terms of the
Warrant Agreement contained in this Warrant Certificate is qualified in its
entirety by express reference to the Warrant Agreement. All terms used in this
Warrant Certificate that are defined in the Warrant Agreement shall have the
meanings assigned to them in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the office of the
Warrant Agent and may be obtained by writing to the Warrant Agent at the
following address:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Administration
After the Exercise Commencement Date, the Warrants may only be
exercised if (i) the Warrant Agent has received written notice from the Company
that a Registration Statement has been declared effective by the Commission with
respect to the Warrant Shares, (ii) the Warrant Agent has not received written
notice from the Company or the Commission that a stop order issued by the
Commission suspending the effectiveness of such Registration Statement is in
effect, (iii) the Warrant Agent has received written notice from the Company
that the Company has obtained all necessary Colombian corporate and governmental
authorizations and approvals set forth in Sections 6.1 and 6.2(a) of the Warrant
Agreement, (iv) the Warrant Agent has not received written notice from the
Company that the authorizations and approvals referred to in clause (iii) are
not in effect and (v) the Warrant Agent has not received notice from the Company
of any Suspension Period permitted under Section 6.4(b)(ii) of the Warrant
Agreement.
A "Warrant Registration Default" shall be deemed to have occurred if
(i) on the Exercise Commencement Date, the Warrant Shares Registration Statement
has not been declared effective by the Commission, or (ii) the Commission shall
have issued a stop order suspending the effectiveness of the Warrant Shares
Registration Statement, at a time when such Warrant Shares Registration
Statement is required to be kept effective by the Company pursuant to the
provisions of the Warrant Agreement.
<PAGE> 62
A-3
If a Warrant Registration Default occurs, then the Company shall pay,
or cause to be paid, to the holder of each Warrant cash in the amount of US$0.03
per week, or portion thereof, for the first 90-day period during which the
Warrant Registration Default continues. Such amount shall increase by US$0.02
per week, or portion thereof, at the beginning of each subsequent 90-day period
during which a Warrant Registration Default continues up to a maximum aggregate
additional amount of US$0.07 per week. Such amount due shall be payable on each
March 15 and September 15 commencing on the Exercise Commencement Date (the
"liquidated damages payment dates") to holders of record of Warrants on the
close of business on the immediately preceding March 1 or September 1, as the
case may be.
Except as provided in the Warrant Agreement, the Warrants shall be
exercisable only for Warrant Shares if, at the time such Warrants are exercised,
the Warrant Agent has not received written notice that the Company has entered
into an ADR Deposit Agreement and that all Colombian corporate and governmental
authorizations set forth in Section 6.2(b) of the Warrant Agreement have been
obtained or if the Warrant Agent has received written notice from the Company
that any of the authorizations and approvals set forth in Section 6.2(b) of the
Warrant Agreement is not in effect. Except as provided in the Warrant Agreement,
the Warrants shall be exercisable only for ADRs if, at the time such Warrants
are exercised, (i) the Warrant Agent has received written notice that the
Company has entered into an ADR Deposit Agreement and all Colombian corporate
and governmental authorizations set forth in Section 6.2(b) of the Warrant
Agreement have been obtained and (ii) the Warrant Agent has not received written
notice from the Company that any of the authorizations and approvals set forth
in Section 6.2(b) of the Warrant Agreement is not in effect.
If, on the date of exercise of any Warrant, the Peso Equivalent of the
Exercise Price is less than the aggregate of the par value of the Warrant Shares
represented by the ADRs or the Warrant Shares, as the case may be, for which
such Warrant may be exercised, the Exercise Price payable upon such exercise
shall be adjusted to be equal to the Peso Equivalent of the aggregate of such
par value.
If a Trading Market does not exist for the Warrant Shares or the ADRs
on the Expiration Date (or, in certain circumstances set forth in the Warrant
Agreement, the next preceding day which is a trading day and on which trading in
securities of such type is not limited (the "Preceding Trading Day")), the
Company shall repurchase all outstanding Warrants that have not been exercised
on, or prior to the Expiration Date (a "Warrant Repurchase").
Warrants received by the Warrant Agent in proper form in a Warrant
Repurchase will, except as otherwise provided in the Warrant Agreement, be
repurchased by the Company at a price in cash equal to the value on the
Expiration Date (or the Preceding
<PAGE> 63
A-4
Trading Date, if applicable) of the ADRs, Warrant Shares and other securities or
property of the Company which would have been delivered upon exercise of
Warrants had the Warrants been exercised (regardless of whether the Warrants are
then exercisable), less the Exercise Price for such Warrant in effect on the
Expiration Date as provided in the Warrant Agreement (the "Warrant Repurchase
Price"). The value of such ADRs, Warrant Shares and other securities shall be
determined by the Independent Financial Expert (as defined in the Warrant
Agreement), in the manner set forth in the Warrant Agreement.
If a Trading Market does not exist for the Warrant Shares or the ADRs
on the Expiration Date or, in the circumstances described in the Warrant
Agreement, the Preceding Trading Day, the Company must offer to repurchase all
ADRs and Warrant Shares outstanding on the Expiration Date and, to the extent
there is no Trading Market therefor, all other securities issued upon exercise
of the Warrants or distributed in respect of the Warrant Shares that are then
held by the holder of such ADRs and Warrant Shares (a "Repurchase Offer"). If
the Company makes a Repurchase Offer, Holders may, until the expiration date of
such offer, surrender all or part of their ADRs or Warrant Shares (together with
such other securities issued or distributed in respect of such ADRs or Warrant
Shares) for repurchase by the Company.
ADRs and Warrant Shares and other such securities referred to in the
preceding paragraph received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement, be
repurchased by the Company at a price in cash equal to the value on the
Expiration Date (or the Preceding Trading Date, if applicable) of the ADRs or
Warrant Shares and other such securities subject to a Repurchase Offer, as the
case may be. The value of such ADRs or Warrant Shares and other such securities
shall be determined by the Independent Financial Expert (as defined in the
Warrant Agreement), in the manner set forth in the Warrant Agreement.
If the Company fails to pay to a Holder the Warrant Repurchase Price or
the Repurchase Price as required by the Warrant Agreement, it shall be obligated
to pay interest on such amount at a rate per annum of 14% from the date of the
default to the date of payment, which interest shall compound quarterly.
If the Company merges or consolidates with or into, or sells all or
substantially all of its property and assets to, another Person solely for cash,
the Holders of Warrants shall be entitled to receive distributions on the date
of such event on an equal basis with holders of shares of Class B Common Stock
(or other securities issuable upon exercise of the Warrants) as if the Warrants
had been exercised immediately prior to such event (less the Exercise Price) and
the Warrants shall expire upon such payment.
The number of ADRs or Warrant Shares purchasable upon the exercise of
each Warrant and the price per ADR or Warrant Share are subject to adjustment as
provided in
<PAGE> 64
A-5
the Warrant Agreement. Except as stated in the immediately preceding paragraph,
in the event the Company merges or consolidates with, or sells all or
substantially all of its assets to, another Person, each Warrant will, upon
exercise, entitle the Holder thereof to receive the number of shares of capital
stock or other securities or the amount of money and other property that would
have been distributable or payable on account of the ADRs or Warrant Shares (or
other securities or property issuable upon exercise of a Warrant) if such
Warrants had been exercised prior to completion of such merger, consolidation or
sale.
As to any final fraction of an ADR or Warrant Share which the same
Holder of one or more Warrant Certificates would otherwise be entitled to
purchase upon exercise thereof in the same transaction, the Company shall pay
the cash value thereof determined as provided in the Warrant Agreement.
All Warrant Shares or other securities issuable by the Company upon the
exercise of Warrants shall be validly issued, fully paid and nonassessable, and
the Company shall pay all stamp, registration or other similar taxes and other
governmental charges that may be imposed under the laws of the United States of
America, Colombia or any political subdivision or taxing authority thereof or
therein in respect of the issue or delivery of such shares or of other
securities deliverable upon exercise of Warrants. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any ADR certificate, Warrant Share certificate
or other securities or property issuable upon the exercise of the Warrants or in
respect of a Warrant Repurchase, Repurchase Offer or payment of cash to any
Person other than the Holder of a Warrant Certificate surrendered upon the
exercise or repurchase of a Warrant, and in case of such transfer or payment,
the Warrant Agent and the Company may deduct such taxes from any payment of
money to be made and shall not be required to issue any ADR certificate, Warrant
Shares certificate or stock certificate until such tax or charge has been paid
or it has been established to the Warrant Agent's and the Company's satisfaction
that no such tax or other charge is due.
Subject to the restrictions on transfer set forth in Article V of the
Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable by the registered Holder hereof, in whole or in part, on the
register of the Company maintained by the Warrant Agent for such purpose at its
office in New York, New York, upon surrender of this Warrant Certificate duly
endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent duly executed, with signatures
guaranteed as specified in the attached Form of Assignment, by the registered
Holder hereof or his attorney duly authorized in writing and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
Upon any partial transfer, the Company will issue and the Warrant Agent will
countersign and deliver to such Holder a new Warrant Certificate or Certificates
with respect to any portion not so transferred. Each taker and Holder of this
Warrant Certificate, by taking and holding the same, consents and
<PAGE> 65
A-6
agrees that prior to the registration of transfer as provided in the Warrant
Agreement, the Company and the Warrant Agent and any agent of the Company or the
Warrant Agent may treat the person in whose name the Warrants are registered as
the absolute owner hereof for any purpose and as the Person entitled to exercise
the rights represented hereby, any notice to the contrary notwithstanding.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in New York, New York for Warrant Certificates
representing the same aggregate number of Warrants, each new Warrant Certificate
to represent such number of Warrants as the Holder hereof shall designate at the
time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder of
this Warrant Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company, including, without limitation, the right to vote or
to consent to any action of the stockholders, to receive dividends or other
distributions, to exercise any preemptive right or to receive any notice of
meetings of stockholders, and shall not be entitled to receive any notice of any
proceedings of the Company except as provided in the Warrant Agreement.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on March 15, 2004, except the right to receive cash in a Warrant
Repurchase as provided above, unless sooner terminated by the liquidation,
dissolution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with, or sale of the
Company to, another Person.
<PAGE> 66
A-7
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
Dated:
OCCIDENTE Y CARIBE CELULAR S.A.
By
--------------------------------------------
Name:
Title:
Countersigned:
The Bank of New York,
as Warrant Agent
By
-------------------------------
Authorized Signatory
<PAGE> 67
A-8
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To:
The undersigned irrevocably exercises ________________ of the Warrants
represented by the Warrant Certificate, each for the purchase of either (i)
0.22836 American Depositary Receipts ("ADRs"), each ADR representing 25 fully
paid and non-assessable shares of class B common stock, par value one thousand
Pesos per share, of OCCIDENTE Y CARIBE CELULAR S.A. (the "Class B Common
Stock"), subject to adjustment (the "Warrant Shares"), or (ii) if the conditions
to the issuance of ADRs set forth in the Warrant Agreement have not been
satisfied, 5.709 fully paid and non-assessable Warrant Shares, in each case,
subject to adjustment as provided in the Warrant Agreement, and herewith makes
payment of US$______ (such payment being by cash or certified or official bank
or bank cashier's check payable to the order or at the direction of Occidente y
Caribe Celular S.A.), such amount being equal to the exercise price of such
Warrants, and on the terms and conditions specified in the within Warrant
Certificate and the Warrant Agreement therein referred to, surrenders this
Warrant Certificate and all right, title and interest therein to and directs
that the ADRs or Warrant Shares deliverable upon the exercise of such Warrants
be registered or placed in the name and at the address specified below and
delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY ON
CERTIFICATED WARRANTS ISSUED IN RELIANCE ON REGULATION S]
The undersigned certifies that:
Check One
[ ] (a) (i) it is not a U.S. person (as defined in Regulation S under the
Securities Act) and the Warrants are not being exercised on behalf of a
U.S. person.
or
[ ] (ii) it is furnishing to the Warrant Agent a written opinion of counsel
to the effect that the Warrants and the ADRs or Warrant Shares (or other
securities) issuable upon exercise of the Warrants have been registered
under the Securities Act or are exempt from registration thereunder.
and
<PAGE> 68
A-9
(b) if an opinion is not being furnished, the undersigned is located
outside the United States at the time of the exercise hereof.
Dated: 1
------------------------- ----------------------------------------
(Signature of Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------------------
Securities and/or check to be issued to:
---------------------------------------
Please insert social security or identifying number:
---------------------------
Name:
--------------------------------------------------------------------------
Street Address:
----------------------------------------------------------------
City, State and Zip Code:
------------------------------------------------------
- --------
1 The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a United
States national bank or trust company or by a member firm of any United
States national securities exchange.
<PAGE> 69
A-10
FORM OF CERTIFICATE FOR SURRENDER FOR REPURCHASE
(To be executed only upon repurchase
of Warrant by the Company)
To:
---------------------------
The undersigned, having received prior notice of the consideration for
which OCCIDENTE Y CARIBE CELULAR S.A. will repurchase the Warrants represented
by the within Warrant Certificate, hereby surrenders this Warrant Certificate
for repurchase by OCCIDENTE Y CARIBE CELULAR S.A. of the number of Warrants
specified below for the consideration set forth in such notice.
Dated:
------------------------------ ----------------------------------------
(Number of Warrants)
2
----------------------------------------
(Signature of Owner)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
----------------------------------------
Check to be issued to:
---------------------------------------------------------
Please insert social security or identifying number:
---------------------------
Name:
---------------------------------------------------------------------------
Street Address:
----------------------------------------------------------------
City, State and Zip Code:
------------------------------------------------------
- --------
2 The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a United
States national bank or trust company or by a member firm of any United
States national securities exchange.
<PAGE> 70
A-11
FORM OF CERTIFICATE FOR SURRENDER FOR REPURCHASE OF ADRS OR
WARRANT SHARES
(To be executed only upon repurchase
of ADRs or Warrant Shares or such other securities or property by the Company)
To: ___________________________
The undersigned, having received prior notice of the
consideration for which OCCIDENTE Y CARIBE CELULAR S.A. will repurchase the ADRs
represented by the attached ADR certificate or the Warrant Shares represented by
the attached share certificate or such other securities or property, as the case
may be, hereby surrenders the attached ADR certificate or share certificate or
such other securities or property, as the case may be, for repurchase by
OCCIDENTE Y CARIBE CELULAR S.A. of the number of ADRs or Warrant Shares or such
other securities or property specified below for the consideration set forth in
such notice.
Dated:
---------------------------- ------------------------------------------
(Number of ADRs/Warrant Shares or
such other securities or property)
3
------------------------------------------
(Signature of Owner)
------------------------------------------
(Street Address)
------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
------------------------------------------
- --------
3 The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a United
States national bank or trust company or by a member firm of any United
States national securities exchange.
<PAGE> 71
A-12
Check to be issued to:
----------------------------------------------------------
Please insert social security or identifying number:
---------------------------
Name:
--------------------------------------------------------------------------
Street Address:
----------------------------------------------------------------
City, State and Zip Code:
------------------------------------------------------
<PAGE> 72
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by the within Warrant Certificate not being
assigned hereby) all of the right of the undersigned under the within Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of Assignee(s):
--------------------------------------------------------
Address:
-----------------------------------------------------------------------
No. of Warrants:
---------------------------------------------------------------
Please insert social security or other identifying number of assignee(s):
- --------------------------------------------------------------------------------
and does hereby irrevocably constitute and appoint ________ the undersigned's
attorney to make such transfer on the books of ________________ maintained for
the purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL
CERTIFICATES EXCEPT CERTIFICATED WARRANTS
ISSUED IN RELIANCE ON REGULATION S]
In connection with any transfer of Warrants, the undersigned confirms
that without utilizing any general solicitation or general advertising that:
[Check One]
[ ] (a) these Warrants are being transferred in compliance with the
exemption from registration under the United States Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) these Warrants are being transferred other than in accordance
with (a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until
<PAGE> 73
A-14
the conditions to any such transfer of registration set forth herein and in
Article V of the Warrant Agreement shall have been satisfied.
Dated: 4
---------------------------- ------------------------------------------
(Number of ADRs/Warrant Shares or
such other securities or property)
------------------------------------------
(Signature of Owner)
------------------------------------------
(Street Address)
------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
------------------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the United States
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
---------------------------
---------------------------------------------
NOTE: To be executed by an executive officer
- --------
4 The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a United
States national bank or trust company or by a member firm of any United
States national securities exchange.
<PAGE> 74
Exhibit B to
Warrant Agreement
FORM OF PRIVATE PLACEMENT LEGEND
THIS SECURITY AND, AS OF THE DATE THIS WARRANT WAS ORIGINALLY ISSUED,
THE CLASS B COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS SECURITY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY, OR ANY AFFILIATE OF THE COMPANY, WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE.
<PAGE> 75
Exhibit C to
Warrant Agreement
FORM OF LEGEND FOR GLOBAL WARRANTS
Any Global Warrant authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Warrant) in substantially the following form:
THIS WARRANT IS A GLOBAL WARRANT WITHIN THE MEANING OF THE WARRANT
AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
WARRANT IS NOT EXCHANGEABLE FOR WARRANTS REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT, AND NO TRANSFER OF
THIS WARRANT (OTHER THAN A TRANSFER OF THIS WARRANT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE> 76
Exhibit D to
Warrant Agreement
FORM OF LEGEND FOR WARRANTS ISSUED AS PART OF A UNIT
THE WARRANT EVIDENCED BY THIS CERTIFICATE IS INITIALLY ISSUED AS PART
OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF US$1,000 PRINCIPAL AMOUNT AT
MATURITY OF 14% SENIOR DISCOUNT NOTES DUE 2004 OF OCCIDENTE Y CARIBE CELULAR
S.A. (THE "NOTES") AND FOUR WARRANTS. PRIOR TO THE CLOSE OF BUSINESS UPON THE
EARLIEST TO OCCUR OF (i) SEPTEMBER 5, 1996, (ii) A CHANGE OF CONTROL AND (iii)
THE DATE ON WHICH THE EXCHANGE OFFER REGISTRATION STATEMENT IS DECLARED
EFFECTIVE (AS SUCH TERMS ARE DEFINED IN THE WARRANT AGREEMENT REFERRED TO
HEREIN), THE WARRANT EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER
WITH, THE NOTES.
<PAGE> 77
Exhibit E to
Warrant Agreement
Form of Investor Letter to be Delivered
in connection with Transfers
to Non-QIB Institutional Accredited Investors
Occidente y Caribe Celular S.A.
Calle 50, No. 55-01
Medellin, Colombia
c/o
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed purchase of _______ Warrants to
Purchase Shares of Class B Common Stock (the "Warrants") of Occidente y Caribe
Celular S.A. (the "Company"), we confirm that:
1. We understand that the Warrants have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and may not be sold except as permitted in the following sentence. We
agree on our own behalf and on behalf of any investor account for which
we are purchasing the Warrants to offer, sell or otherwise transfer
such Warrants prior to the date which is three years after the later of
the date of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Warrants, or any
predecessor thereto (the "Resale Restriction Termination Date") only
(a) to the Company, (b) pursuant to a registration statement which has
been declared effective under the Securities Act, (c) for so long as
the Warrants are eligible for resale pursuant to Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its
own account or for the account of a QIB to whom notice is given that
the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales to non-U.S. Persons that occur outside the United
States within the meaning of Regulations S under the Securities Act,
(e) to an
<PAGE> 78
E-2
institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is
acquiring the Warrants for its own account or for the account of such
an institutional "accredited investor" for investment purposes and not
with a view to, or for offer or sale in connection with, any
distribution thereof in violation of the Securities Act or (f) pursuant
to any other available exemption from the registration requirements of
the Securities Act, subject in each of the foregoing cases to any
requirement of law that the disposition of our property and the
property of such investor account or accounts be at all times within
our or their control and to compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Warrants is proposed to be made pursuant to
clause (e) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in
the form of this letter to the Warrant Agent, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) or
Rule 501 under the Securities Act and that it is acquiring such
Warrants for investment purposes and not for distribution in violation
of the Securities Act. We acknowledge that the Company and the Warrant
Agent reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Warrants
pursuant to clauses (d), (e) and (f) above to require the delivery of
an opinion of counsel, certifications and/or other information
satisfactory to the Company and the Warrant Agent.
2. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring the Warrants
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act
and we have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Warrants, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment.
3. We are acquiring the Warrants purchased by us for our own
account or for one or more accounts as to each of which we exercise
sole investment discretion.
4. You are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
<PAGE> 79
E-3
Very truly yours,
(Name of Purchaser)
By: ________________________________
Date:
Upon transfer, the Warrants would be registered in the name of
the new beneficial owner as follows:
Name: ______________________________
Address:
Taxpayer ID Number:
<PAGE> 80
Exhibit F to
Warrant Agreement
Form of Certificate to be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------, ---
Occidente y Caribe Celular S.A.
Calle 50, No. 55-01
Medellin, Colombia
c/o
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed sale of _______ Warrants to
Purchase Shares of Class B Common Stock (the "Warrants") of Occidente y Caribe
Celular S.A. (the "Company"), we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Warrants was not made to a person in the
United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through the
facilities of a designated off shore securities market and neither we
nor any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable; and
<PAGE> 81
F-2
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933, as
amended.
In addition, if the sale is made during a restricted period
and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may
be.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: _______________________________
Authorized Signature
<PAGE> 82
Exhibit G to
Warrant Agreement
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
On or after July 18, 1996
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Administration
Ladies and Gentlemen:
This letter relates to _______ Warrants to Purchase Shares of
Class B Common Stock (the "Warrants") of Occidente y Caribe Celular S.A. (the
"Company") represented by the global warrant certificate (the "Temporary
Certificate"). Pursuant to Section 2.2 of the Warrant Agreement dated as of June
7, 1996 relating to the Warrants (the "Warrant Agreement"), we hereby certify
that (1) we are the beneficial owner of such amount of Warrants represented by
the Temporary Certificate and (2) we are a person outside the United States to
whom the Warrants could be transferred in accordance with Rule 904 of Regulation
S promulgated under the U.S. Securities Act of 1933, as amended. Accordingly,
you are hereby requested to issue a Certificated Warrant representing the
undersigned's interest in the principal amount of Warrants represented by the
Temporary Certificate, all in the manner provided by the Warrant Agreement.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By: ________________________________
Authorized Signature
<PAGE> 83
Exhibit H to
Warrant Agreement
FORM OF COLOMBIAN LEGEND
THE ISSUANCE OF THE WARRANTS HAS BEEN APPROVED BY THE COLOMBIAN SUPERINTENDENCY
OF CORPORATIONS (SUPERINDENDENCIA DE SOCIEDADES). SUCH APPROVAL DOES NOT IMPLY
AN APPROVAL OF THE QUALITY OF THE WARRANTS OR THE SOLVENCY OF THE COMPANY. THE
WARRANTS MAY NOT BE OFFERED OR SOLD IN COLOMBIA.
<PAGE> 1
Exhibit 23.03
Independent Auditors' Consent
The Board of Directors and Shareholders
Occidente y Caribe Cellular S.A.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick
Medellin Columbia
August 5, 1996
<PAGE> 1
Exhibit 25.01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) . . .
------------
THE BANK OF NEW YORK
(Exact Name of Trustee as Specified in its Charter)
NEW YORK 13-5160382
(State of Incorporation (I.R.S. Employer
if not a National Bank) Identification No.)
48 WALL STREET, NEW YORK, N.Y. 10286
(Address of Principal Executive Offices) (Zip Code)
------------
OCCIDENTE Y CARIBE CELULAR S.A.
(Exact Name of Obligor as Specified in its Charter)
REPUBLIC OF COLOMBIA NONE
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
CARRERA 55, NO. 49-101
MEDELLIN, COLOMBIA NOT APPLICABLE
(Address of principal Executive Offices) (Zip Code)
------------
14% SENIOR DISCOUNT NOTES DUE 2004
(TITLE OF THE INDENTURE SECURITIES)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
---------------------------------------------------------------------------
Name Address
---------------------------------------------------------------------------
Superintendent of Banks of the 2 Rector Street, New
State of New York York, NY 10006 and
Albany, NY 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New
York, NY 10045
Federal Deposit Insurance 550 17th Street, N.W.
Corporation Washington, D.C. 20429
New York Clearing House New York, New York
Association
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 4.)
16. LIST OF EXHIBITS.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 and Rule 24 of the Commission's
Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1,
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
2
<PAGE> 3
4. A copy of the existing By-Laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by section 321(b) of the Act.
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
3
<PAGE> 4
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Bank of New York, a corporation organized and existing under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
The City of New York, and State of New York, on the 22nd day of July, 1996.
THE BANK OF NEW YORK
By /s/ Lloyd A. McKenzie
----------------------------
Assistant Vice President
4
<PAGE> 5
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939 in connection with the proposed issue of 14% Senior Discount Notes
Due 2004 by Occidente y Caribe Celular S.A., we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
THE BANK OF NEW YORK
By /s/ Lloyd A. McKenzie
---------------------------
Assistant Vice President
Dated: July 22, 1996
5
<PAGE> 6
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries
a member of the Federal Reserve System at the close of business March 31, 1996,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
--------------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin........... $ 2,461,550
Interest-bearing balances.................................... 835,563
Securities:
Held-to-maturity securities.................................. 802,064
Available-for-sale securities................................ 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold........................................... 3,885,475
Loans and lease financing receivables:
Loans and leases, net of unearned income..................... 27,820,159
LESS: Allowance for loan and lease losses.................... 509,817
LESS: Allocated transfer risk reserve........................ 1,000
Loans and leases, net of unearned income, allowance,
and reserve................................................ 27,309,342
Assets held in trading accounts................................ 837,118
Premises and fixed assets (including capitalized leases)....... 614,567
Other real estate owned........................................ 51,631
Investments in unconsolidated subsidiaries and
associated companies......................................... 225,158
Customers' liability to this bank on acceptances outstanding... 800,375
Intangible assets.............................................. 436,668
Other assets................................................... 1,247,908
-----------
Total assets................................................... $41,558,682
LIABILITIES
Deposits:
In domestic offices.......................................... $18,851,327
Noninterest-bearing.......................................... 7,102,645
Interest-bearing............................................. 11,748,682
In foreign offices, Edge and Agreement subsidiaries
and IBFs................................................... 10,965,604
Noninterest-bearing.......................................... 37,855
Interest-bearing............................................. 10,927,749
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased...................................... 1,224,885
Securities sold under agreements to repurchase............... 29,728
Demand notes issued to the U.S. Treasury....................... 118,870
Trading liabilities............................................ 673,944
Other borrowed money:
With original maturity of one year or less................... 2,713,248
With original maturity of more than one year................. 20,780
Bank's liability on acceptances executed and outstanding....... 803,292
Subordinated notes and debentures.............................. 1,022,860
Other liabilities.............................................. 1,590,564
-----------
Total liabilities.............................................. 38,015,103
-----------
EQUITY CAPITAL
Common stock................................................... 942,284
Surplus........................................................ 525,666
Undivided profits and capital reserves......................... 2,078,197
Net unrealized holding gains (losses) on available-
for-sale securities.......................................... 3,197
Cumulative foreign currency transition adjustments............. ( 5,765)
-----------
Total equity capital........................................... 3,543,578
-----------
Total liabilities and equity capital........................... $41,558,682
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
