<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
TRANSTEL S.A.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COLOMBIA
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
4813
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
CALLE 19N, NO. 2-29
40TH FLOOR
CALI, COLOMBIA
57-2-660-4860
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
WITH A COPY TO:
CT CORPORATION
1633 BROADWAY, NEW YORK, NEW YORK BERNARD E. KURY
10019 DEWEY BALLANTINE LLP
(212) 664-1666 1301 AVENUE OF THE AMERICAS
(NAME, ADDRESS, INCLUDING ZIP CODE, NEW YORK, NEW YORK 10019-1035
AND TELEPHONE NUMBER, INCLUDING AREA
CODE, FOR AGENT OF SERVICE)
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) PRICE(2) REGISTRATION FEE(3)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exchange Certificates
(as defined herein).... U.S. $150.0 million 100% U.S. $150.0 million U.S.$44,250.00
- -------------------------------------------------------------------------------------------------------------------
Exchange Guarantee (as
defined herein)(4).....
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Total................... U.S. $150.0 million 100% U.S. $150.0 million U.S.$44,250.00
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</TABLE>
(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.
(3) Calculated in accordance with Rule 457(f)(2) under the Securities Act,
based on the face value.
(4) No separate consideration will be received by the Issuer for issuing the
Exchange Guarantee.
--------------
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
There are a total of 178 pages contained in this Registration Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated April 10, 1998
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING
12 1/2% PASS THROUGH TRUST CERTIFICATES DUE 2007,
FOR
12 1/2% PASS THROUGH EXCHANGE CERTIFICATES DUE 2007,
IN EACH CASE REPRESENTING INTERESTS IN 12 1/2% SENIOR NOTES DUE 2007
ISSUED BY
TRANSTEL S.A.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998 (AS SUCH DATE MAY BE EXTENDED, THE "EXPIRATION
DATE").
Transtel S.A. (the "Company" or "Transtel"), a Colombian corporation,
together with Transtel Pass Through Trust, a Delaware business trust (the
"Trust" or "Issuer"), created pursuant to the Trust Agreement of Transtel Pass
Through Trust, dated as of October 20, 1997 (the "Original Trust Agreement"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange all outstanding 12 1/2% Pass Through Trust Certificates due 2007 (the
"Original Certificates"), issued by the Trust, for a like aggregate principal
amount of 12 1/2% Pass Through Exchange Certificates due 2007 (the "Exchange
Certificates") issued by the Trust, each representing a pro rata interest in
the $150.0 million aggregate principal amount of 12 1/2% Senior Notes due 2007
(the "Senior Notes"), issued by the Company. Both the Original Certificates and
the Exchange Certificates (together, the "Certificates") are guaranteed by the
Company. The Original Certificates and the Original Guarantee (as defined
herein) are collectively referred to herein as the "Original Securities" and
the Exchange Certificates and the Exchange Guarantee (as defined herein) are
collectively referred to herein as the "Exchange Securities." The terms of the
Exchange Securities are substantially identical to the terms of the Original
Securities, except that the Exchange Securities will have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and will not
contain terms restricting the transfer of such securities. For a complete
description of the Exchange Securities, see "Description of the Certificates"
and "Description of the Guarantees." The Company will not receive any cash
proceeds from, and will pay all expenses incident to, the Exchange Offer.
(Continued on the following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY THE ORIGINAL CERTIFICATEHOLDERS IN DECIDING
WHETHER TO TENDER ORIGINAL CERTIFICATES IN THE EXCHANGE OFFER.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. ORIGINAL CERTIFICATEHOLDERS (AS DEFINED HEREIN) ARE URGED TO READ
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CERTIFICATES PURSUANT TO THE EXCHANGE OFFER.
-----------
The date of this Prospectus is April 10, 1998.
<PAGE>
(Continued from previous page)
The issuance of the Original Certificates and the purchase of the Senior
Notes by the Trust that occurred on October 28, 1997 are referred to herein as
the "Offering." The holders of Original Certificates (the "Original
Certificateholders") and the holders of the Exchange Certificates (the
"Exchange Certificateholders") are collectively referred to as the
"Certificateholders". The Certificates represent undivided beneficial
interests in the assets of the Trust. Wilmington Trust Company is the Pass
Through Trustee (the "Pass Through Trustee") of the Trust. The Trust exists
for the sole purpose of issuing and selling the Certificates, investing the
proceeds from the issuance of the Original Certificates in the Senior Notes,
registering the Exchange Securities under the Securities Act, exchanging the
Original Securities for Exchange Securities, and engaging in only those other
activities necessary or incidental thereto.
The Senior Notes bear interest at a rate of 12 1/2% per annum payable
semiannually in cash on each May 1 and November 1 of each year (each referred
to herein as an "Interest Payment Date"), commencing May 1, 1998. Interest
distributions made on each May 1 and November 1 will be paid to the persons
who are the registered Certificateholders on the April 15 and October 15, as
the case may be, immediately preceding such Interest Payment Date. Each
Certificateholder will be entitled to receive a pro rata share of any payments
received by, or on behalf of, the Pass Through Trustee on behalf of the Trust
in respect of the Senior Notes.
The Senior Notes are redeemable, in whole or in part, at the option of the
Company, on or after November 1, 2002, at the redemption prices set forth
herein plus accrued and unpaid interest to the date of redemption. In
addition, in the event of the sale by the Company of at least $25.0 million of
its Capital Stock (as defined herein) in one or more Public Equity Offerings
(as defined herein) or to one or more Strategic Equity Investors (as defined
herein), the Company may, at its option, use the net cash proceeds of such
sale or sales to redeem up to 35% of the Senior Notes at a redemption price
herein of the principal amount thereof plus accrued and unpaid interest to the
date of redemption. Upon a Change of Control (as defined herein), the Company
will be required to make an offer to repurchase the Senior Notes at a price
equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, to the date of repurchase.
The Trust will accept for exchange any and all Original Certificates that
are validly tendered on or prior to 5:00 p.m., New York City time, on the date
the Exchange Offer expires, which will be , 1998, unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Original Certificates
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any minimum number
of Original Certificates being tendered for exchange.
Any Original Certificates not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will
be subject to all the same limitations applicable thereto under the Trust
Agreement (except for certain rights to be registered under the Act which
terminate upon consummation of the Exchange Offer). Following consummation of
the Exchange Offer, all untendered and tendered but unaccepted Original
Certificates, if any, will continue to be subject to all of the existing
restrictions upon transfer provided thereon and neither the Company nor the
Trust will have any further obligation to such Original Certificateholders to
provide for registration under the Securities Act of the Original Certificates
held by them. To the extent that Original Certificates are not tendered and
accepted in the Exchange Offer, an Original Certificateholder's ability to
sell untendered and tendered but unaccepted Original Certificates could be
adversely affected. See "Risk Factors--Consequences of a Failure to Exchange
Original Certificates."
Prior to this Exchange Offer, there has been no public market for the
Original Certificates and there can be no assurance that an active public or
private market for the Certificates will develop. The Company does not intend
to list the Certificates on any national securities exchange or to seek
admission thereof to trading on the National Association of Securities Dealers
Automated Quotation System. Even if a market for the Certificates should
develop, the Certificates could trade at a discount from their face value.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, ORIGINAL CERTIFICATEHOLDERS IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
IN THIS PROSPECTUS, UNLESS OTHERWISE SPECIFIED OR THE CONTEXT OTHERWISE
REQUIRES, REFERENCES TO "PS" OR "PESOS" ARE TO COLOMBIAN PESOS, REFERENCES TO
"DOLLARS," "U.S. $" AND "$" ARE TO UNITED STATES DOLLARS AND THE TERMS "UNITED
STATES" AND "U.S." MEAN THE UNITED STATES OF AMERICA, ITS TERRITORIES,
POSSESSIONS AND ALL AREAS SUBJECT TO ITS JURISDICTION.
2
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a sociedad anomina organized under the laws of Colombia. The
directors and officers of the Company and certain experts named in this
Prospectus reside outside of the United States, and all or a substantial
portion of the assets of such persons and of the Company are located outside
the United States. As a result, it may not be possible for the Pass Through
Trustee, the Indenture Trustee (as defined herein), Guarantee Trustee (as
defined herein) or the Certificateholders to effect service of process within
the United States upon such persons, including with respect to matters arising
under the Securities Act, or to enforce against the Company or any of such
persons judgments of courts of the United States predicated upon the civil
liability provisions of the federal securities laws of the United States or
under the Certificate Guarantees. The Company has been advised by its
Colombian legal counsel, Cavelier Abogados 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 this Exchange Offer and the
Certificate Guarantees. The Company has been advised by its Colombian legal
counsel that a claim by the Pass Through Trustee, the Indenture Trustee or a
United States Certificateholder in connection with this Exchange Offer or the
Certificate Guarantees may be brought in Colombian courts. See "Enforcement of
Foreign Judgments in Colombia."
AVAILABLE INFORMATION
The Company has filed with the Commission under the Securities Act, a
registration statement (which term includes any amendments thereto) (the
"Registration Statement") on Form F-4, of which this Prospectus (the
"Prospectus") is a part, with respect to the Exchange Certificates offered
hereby. This Prospectus does not contain all the information set forth in or
annexed as an exhibit to the Registration Statement. Such additional
information, and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission maintained at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, at prescribed rates. The Commission also
maintains an Internet Web Site at http://www.sec.gov that contains reports and
other information. Statements contained in this Prospectus describing the
contents of any contract or other document referred to herein do not
necessarily describe such documents in their entirety, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
No separate financial statements of the Trust have been included herein.
Neither the Company nor the Trust consider such financial statements material
to the Certificateholders because (i) the Trust has no independent operations
and exists for the sole purpose of issuing and selling the Certificates,
investing the proceeds from the issuance of the Original Certificates in the
Senior Notes issued by the Company, registering the Exchange Certificates
under the Securities Act, exchanging the Original Securities for Exchange
Securities, and engaging in only those other activities necessary or
incidental thereto, and (ii) the Company's obligations described herein to
provide certain indemnities in respect of, and be responsible for, certain
costs, expenses, debts and liabilities of the Trust under the Indenture and
any supplemental indenture thereto, the Certificate Guarantees, the Trust
Agreement and the Senior Notes, taken together, constitute a full and
unconditional guarantee of payments due on the Certificates. See "Description
of Securities."
Neither the Company nor the Trust is currently subject to the information
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Upon the effectiveness of this Registration Statement, the
Company will become subject to such requirements, which will continue for so
long as the Company is required to do so pursuant to Section 15(d) of the
Exchange Act.
3
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements. These forward-looking
statements reflect the Company's views with respect to future events and
financial performance. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors as
well as other factors discussed elsewhere herein. See "Risk Factors." The
words "believe," "expect" and "anticipate" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. The
Company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise. Many factors could cause the Company's actual results to differ
materially from historical results or the results projected in the forward-
looking statements. Among these factors are those identified in "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
MARKET AND POPULATION DATA
Market data used throughout this Prospectus was obtained from internal
company surveys and industry publications. Industry publications generally
state that the information contained therein has been obtained from sources
believed to be reliable, but that the accuracy and completeness of such
information is not guaranteed. The Company has not independently verified this
market data. Similarly, internal company surveys, while believed by the
Company to be reliable, have not been verified by any independent sources.
Data regarding population in Colombia are based on preliminary projections
of 1995 population figures calculated by the Departamento Administrativo
Nacional de Estadistica (National Administrative Department of Statistics)
("DANE") on the basis of the 1993 census. There can be no assurance that these
projections accurately reflect the current population in Colombia. Information
regarding subscriber penetration and line data in Colombia is derived from
information supplied by the Departamento Nacional de Planeacion (National
Planning Department) ("DNP") as of December 31, 1995.
EXCHANGE RATES
Until 1991, the Banco de la Republica of Colombia (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 Superintendencia
Bancaria of Colombia (the "Superintendency of Banking") calculates and
publishes daily the representative market rate, which is the weighted average
of the 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 Dollars (the
"Representative Market Rate"). The Representative Market Rate serves as a
basis for many foreign exchange transactions conducted on the foreign exchange
market and the free market as defined under Law 9 of 1991. From October 1991
through January 1995, the Central Bank set the Official Rate for certain
limited purposes. Since February 1994, the Central Bank issues buy and sell
quotations that form a band within which the Representative Market Rate can
move freely.
4
<PAGE>
The following table sets forth the Official Rate at the end of each period
indicated and, for each such period, the high, low, average and end of period
Representative Market Rate. The Federal Reserve Bank of New York does not
report a noon buying rate for Pesos.
<TABLE>
<CAPTION>
OFFICIAL RATE REPRESENTATIVE MARKET RATE
-------------------- --------------------------------------------------
% CHANGE % CHANGE
PERIOD FROM PRIOR PERIOD FROM PRIOR
END PERIOD END LOW HIGH AVERAGE END PERIOD END
--------- ---------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1992.................... Ps 811.8 14.8% Ps 632.6 Ps 738.2 Ps 680.1 Ps 738.0 16.7%
1993.................... 917.3 13.0 737.6 819.6 786.6 804.3 9.0
1994.................... 1,018.8 11.0 804.3 844.4 826.5 831.3 3.4
1995.................... N/A N/A 831.3 1,003.5 912.5 987.7 18.8
1996.................... N/A N/A 987.6 1,074.7 1,036.7 1,005.3 1.8
1997.................... N/A N/A 1,005.3 1,090.6 1,063.0 1,293.6 28.7
1998 (through February
28, 1998).............. N/A N/A 1,293.6 1,350.97 1,332.16 1,344.25 3.92
</TABLE>
- --------
N/A means not applicable.
Sources: Central Bank; Superintendency of Banking
The Representative Market Rate calculated by the Superintendency of Banking
for February 28, 1998 was Ps1,344.3 for one Dollar. 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 September
30, 1997 of Ps1,246.27 for one Dollar. Unless otherwise noted, all financial
information included in this Prospectus has, for comparability purposes, been
restated in constant Pesos as of September 30, 1997, which is the latest
balance sheet date of the Company, by indexing historical amounts using the
Colombian Middle-Income Consumer Price Index ("MCPI"). 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.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety and should be read in
conjunction with the more detailed information and the financial statements,
including the notes thereto, included elsewhere in this Prospectus. As used in
this Prospectus, unless otherwise specified, the "Company" or "Transtel" means
Transtel S.A. and its subsidiaries. Unless otherwise specified, the financial
information in this Prospectus is reflected in constant Pesos as of September
30, 1997 and is presented in accordance with generally accepted accounting
principles in Colombia ("Colombian GAAP"). Certain capitalized terms used in
this Prospectus are defined herein under the caption "Glossary of Certain
Telecommunications Terms."
THE COMPANY
The Company is the largest private telephone company in Colombia, providing
telephone services to both business and residential subscribers. The Company
(excluding TeleGirardot (as defined herein)) currently owns and operates
telephone systems serving seven cities, with an aggregate population of
approximately 2.9 million people, located in the southwestern region of
Colombia. As of December 31, 1997, such system provided service to an aggregate
of approximately 101,500 subscribers and had an average penetration of
approximately 18 lines per 100 people.
On December 31, 1997, the Company acquired Empresa de Telecomunicaciones de
Girardot S.A. E.S.P. ("TeleGirardot"). The statistical, financial and other
data in this Prospectus does not include information regarding TeleGirardot,
except where specifically indicated. For information regarding TeleGirardot,
see "Prospectus Summary--Recent Developments" herein.
In 1990, through the enactment of Decree 1900, Colombia's government
initiated the deregulation and privatization of the state-owned
telecommunications sector in order to promote competition and encourage private
investment and thereby improve service for its citizens. This was followed by
the enactment of Law 142 on July 11, 1994 ("Law 142"), which established the
basic guidelines and regulations to support the sector's privatization. Prior
to the enactment of Decree 1900, telephone service in Colombia had been
provided by the same government-owned entities that also provided other basic
utility services. Since most of these municipal entities lacked sufficient
capital, spending for basic utility services such as power and water often took
precedence over the delivery of telephone service. As a result, many of these
municipal service providers have failed to install sufficient capacity to
satisfy their customers' demand for telephone service. For those customers who
do currently receive telephone service through municipal service providers, the
municipal entities provide low-quality service and offer few, if any, of the
more commonly available value-added services.
The Company was formed in August 1993 by certain members of the Caicedo
family, a prominent Colombian family, and Guillermo Lopez, the Company's
President and a Director, to take advantage of the opportunities created by
deregulation. Management's goal is to capitalize on the substantial demand for
telephone service which the Company believes exists throughout Colombia. This
belief is supported by the fact that Colombia's first and third largest cities,
Bogota and Medellin, respectively, where capital has been spent to meet
telephone demand, have recently achieved penetration in excess of 30 lines per
100 people, which is substantially higher than cities in the Company's service
area. The Company seeks to modernize and expand its telephone systems to
accommodate existing demand for telephone service and future growth.
The Company's objective is to increase the penetration in each of its markets
and to provide high quality value-added telephone services to its subscribers.
For example, in May 1995, the Company, in conjunction with the local
municipality, acquired its first telephone system, the only system serving the
city of Palmira. At the time of the acquisition, this system had approximately
15,600 subscribers, representing a penetration of approximately 4.9 lines per
100 people. Following the acquisition, the Company initiated its Expansion Plan
(as defined herein) in Palmira, which consists of investing approximately $34.2
million to replace a portion of the
6
<PAGE>
existing Palmira system's infrastructure, to upgrade the system with modern
equipment from Siemens A.G. ("Siemens") and to increase system capacity to
60,000 lines, which implies a penetration of 18.9 lines per 100 people. The
Company began offering telephone service in Palmira in September 1995 and, as a
result of the substantial demand, experienced immediate and significant
improvements in operating and financial results. Under the Company's
management, the Palmira system's subscriber base has grown by 220%, increasing
from approximately 15,600 at the time of acquisition to approximately 50,100 at
December 31, 1997. Subsequent to the acquisition of TelePalmira, the Company
acquired three additional operating companies, increasing its number of
subscribers from approximately 15,600 as of September 30, 1995 to approximately
101,500 as of December 31, 1997. In addition to the subscribers with installed
lines as of December 31, 1997, the Company had 20,966 additional customers who
have signed promissory notes for new lines to be installed.
The Company is located at Calle 19N, No. 2-29, 40th Floor, Cali, Colombia,
and its telephone number is (572) 660-4860.
COLOMBIA AND COLOMBIAN TELEPHONY MARKET OVERVIEW
Colombia is one of the oldest democracies and most stable economies in Latin
America and is one of only three countries in Latin America rated investment
grade by all three major rating agencies. Colombia has achieved positive real
economic growth every year since 1950 and averaged compounded annual growth in
Gross Domestic Product ("GDP") of approximately 4.7% from 1992 to 1996, one of
the highest growth rates in Latin America. Annual inflation has declined over
the past six years from 26.8% in 1991 to 17.7% in 1997. In recent years, the
Colombian government has encouraged foreign investment and exports through
reduced foreign exchange controls and lower import quotas and tariffs. The
Colombian government has also begun to open certain public services, such as
power and banking, to private sector investment and is considering other
sectors for privatization. In part as a result of these policies, net foreign
investment in Colombia has grown from $3.5 billion in 1990 to $10.5 billion in
1997. During the same period, Colombia has achieved increased diversification
of its export base and the value of its exports has grown from $6.7 billion to
$11.6 billion. See "Risk Factors--Colombian Political, Economic and Social
Risks."
In 1995, Colombia had approximately 4.9 million installed lines, representing
a penetration of approximately 14.0 lines per 100 people, which generated
approximately $635 million of local telephony revenues, representing
approximately 44% of the $1.5 billion telecommunications industry.
Historically, local telephony has been treated as a utility. The local
telephony network is fragmented and approximately 30 municipal operators
service approximately 780 municipalities. Prior to deregulation, each municipal
operator had a monopoly in the region which it served and typically provided
limited and often marginal service. As a result, Colombia is significantly
underserved by existing wireline operators and demand for telephone service
substantially outweighs the supply of telephone lines. This is evidenced by
multi-year waiting lists and unsatisfied demand in Colombia for approximately
1.2 million telephone lines as estimated by the DNP. The DNP also projects that
the country's existing installed line network will need to more than double by
2007 in order to keep pace with growing demand.
The Colombian government, recognizing the importance of an effective
telecommunications infrastructure and the role that the telecommunications
industry plays in national development, identified the problems in the
telecommunications industry and, from 1990 to 1994, established the regulatory
environment required to support private sector participation. The government
enacted decrees addressing many facets of operation including interconnection,
numbering and tariffs. The 1994 deregulation introduced competition and
established a tariff environment under which telephone service providers are
encouraged to compete on the basis of efficiency and service rather than price.
Tariffs for all telecommunication services are established and overseen by the
Comision de Regulacion de Telecomunicaciones (Telecommunications Regulatory
Commission) (the "CRT"), which allows operators to set prices based on either
the current or historical cost of providing service. See "Risk Factors--
Regulatory Risks."
7
<PAGE>
In 1995, the Colombian government announced its intention to open the long
distance market to competition. Until recently, domestic and international long
distance service was provided exclusively by Empresa Nacional de
Telecomunicaciones ("TELECOM"), a state-owned company, which had a monopoly on
international and long distance calls. The CRT has established a process under
which the opening of the long distance market to competition is to be reviewed.
The Company believes that the deregulation of the long distance market will, as
it has in other countries, serve to stimulate telephone usage, due to the fact
that price competition is likely to lower tariffs to the consumer. The Company
does not currently expect that it would qualify to be a new entrant into the
long distance market in the near future.
For additional information regarding Colombia and its telecommunications
industry, see "Annex--Republic of Colombia" and "Industry Overview; Legal and
Regulatory Environment."
OPERATING COMPANIES
The Company has acquired interests in existing wireline telephone systems
serving the cities of Palmira, Cartago, Popayan, Buga and their surrounding
areas, and built new systems serving the cities of Yumbo, Jamundi, Cali and
their surrounding areas. In each case the Company has joined with the local
municipality to form an operating company (each an "Operating Company") to own
and operate each telephone system. The Operating Companies are (i) Empresa de
Telefonos de Palmira S.A. E.S.P. ("TelePalmira"), which services the cities of
Palmira and Candelaria, (ii) Telefonos de Cartago S.A. E.S.P. ("TeleCartago"),
which services the city of Cartago, (iii) Caucatel S.A. E.S.P. ("Caucatel"),
which services the western section of the city of Popayan, (iv) Empresa de
Telefonos de Jamundi S.A. E.S.P. ("TeleJamundi"), which services the city of
Jamundi; (v) Bugatel S.A. E.S.P. ("Bugatel"), which services the city of Buga
and its surrounding regions; and (vi) Unitel S.A. E.S.P. ("Unitel"), which
operates a wireline system ("Unitel Wireline") in the city of Yumbo, a city
adjacent to Cali, and a fixed wireless system ("Unitel Wireless"), which
commenced operations in January, 1998, that services the city of Cali. In
addition, see "Prospectus Summary--Recent Developments" for a discussion of the
Company's acquisition of the telephone network of the municipality of Girardot
on December 31, 1997.
8
<PAGE>
The following table provides information regarding the Operating Companies:
<TABLE>
<CAPTION>
UNITEL UNITEL
TELEPALMIRA TELECARTAGO CAUCATEL TELEJAMUNDI WIRELINE BUGATEL WIRELESS(1) TOTAL
----------- ----------- -------- ----------- -------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipality served..... Palmira Cartago Popayan Jamundi Yumbo Buga Cali N/A
Population.............. 318,000 125,900 76,600 59,100 72,000 337,400 1,908,600 2,897,600
Commencement date of
Company's operations... 9/95 4/97 5/97 6/97 6/97 7/97 1/98 N/A
Number of subscribers at New New New
commencement date...... 15,600 13,800 10,800 System System 10,700 System 50,900
Number of subscribers as
of December 31, 1996... 29,528 N/A N/A N/A N/A N/A N/A 29,528
Number of subscribers as
of September 30, 1997.. 43,880 17,158 12,995 3,043 3,950 10,983 N/A 92,009
Number of subscribers as
of December 31, 1997... 50,062 17,544 13,755 5,032 3,986 11,124 N/A 101,503(2)
Total subscribers added
for the three months
ended September 30,
1997................... 4,109 3,195 1,738 2,772 3,950 10,983 N/A 26,747
Total subscribers added
for the three months
ended December 31,
1997................... 6,182 386 760 1,989 36 141 N/A 9,494
Total subscribers added
for the year ended
December 31, 1997...... 20,534 17,544 13,755 5,032 3,986 11,124 N/A 71,975
Penetration(3).......... 15.7 21.9 18.0 17.3 13.2 13.0 20.3 18.0
</TABLE>
- --------
(1) Although installation of switching infrastructure and antennas was
substantially completed at Unitel Wireless in the fourth quarter of 1997,
there was an interference from unauthorized radio spectrum users which was
subsequently removed by the Ministry of Communications. This delayed the
Company's launch of operations at Unitel Wireless until the first quarter
of 1998.
(2) In addition to the subscribers with installed lines at December 31, 1997,
the Company has 20,966 additional customers who have signed promissory
notes for new lines to be installed.
(3) Penetration at December 31, 1997 represents the number of installed lines
per 100 people. In Cartago, Jamundi, Buga, Yumbo and Cali, penetration
includes the installed lines of municipal competitors of approximately
10,000 lines, 5,200 lines, 30,700 lines, 5,500 lines, and 386,800 lines as
per the Company's estimates, respectively.
EXPANSION PLAN
At the time of each acquisition, the Company's systems generally lacked
sufficient capacity to service the demand of their customers and utilized
antiquated technology to provide limited service to their customers. Based on
extensive market demand studies, the Company created an expansion plan (the
"Expansion Plan") which is designed to satisfy the significant demand for
telephone lines in each of its operating cities (excluding the cities serviced
by TeleGirardot). The Expansion Plan does not include TeleGirardot, for which a
separate expansion plan has been developed. Management intends to increase the
number of installed lines in its seven operating cities from an aggregate of
56,800, which serviced 50,900 subscribers at the date of acquisition of each of
its systems, to approximately 222,200 lines and subscribers upon completion of
the build-out of the Expansion Plan by December 31, 1998. The Expansion Plan
also involves the upgrade of each of its telephone networks to state-of-the-art
digital and fiber-optic technology.
The Company has entered into agreements and letters of intent with Siemens
for the purchase of most of the telephone equipment required for the Expansion
Plan and for the installation of the equipment to be provided to the Company
pursuant to fixed price turn-key construction contracts. In addition, the
Company has entered into an agreement with IBM de Colombia S.A. (an affiliate
of International Business Machines Corp. ("IBM"))
9
<PAGE>
for the purchase and installation of hardware and software that will be used to
offer value-added services for its telephone systems which, together with the
equipment provided by Siemens, comprises most of the equipment necessary to
complete the Expansion Plan. As of February 28, 1998, the Company, in
conjunction with Siemens, had completed the installation of approximately
105,100 new lines, or approximately 64% of the Company's Expansion Plan.
The Expansion Plan is projected to require aggregate capital expenditures of
approximately $181.8 million, approximately 70.0% of which will be incurred
pursuant to fixed price equipment purchase agreements (or letters of intent)
and turn-key installation contracts. As of September 30, 1997, approximately
$7.8 million was financed with local bank borrowings, all of which was repaid
with a portion of the proceeds of the Offering, and approximately $1.5 million
was financed with cash flow from operations. The remainder of the Expansion
Plan, approximately $172.5 million, has been or will be financed with (i)
approximately $41.0 million of the proceeds of the Offering; (ii) approximately
$102.7 million provided by the Company's vendors under equipment financing
agreements (with Siemens and IBM) or domestic leasing arrangements
(collectively, the "Vendor Financing") (see "Risk Factors--Contingency of
Vendor Financing"); (iii) the sale of investments of $5.7 million; and (iv)
approximately $23.1 million provided by the Departamento de Impuestos y Aduanas
Nacionales (National Department of Taxes and Duties) ("DIAN") to finance the
taxes and duties payable on imported telecommunications equipment (the "DIAN
Financing", and together with the Offering, the Vendor Financing and the Equity
Contribution (as defined herein), the "Expansion Plan Financing"). See "Use of
Proceeds." As of February 28, 1998, the Company had incurred approximately
$118.2 million of capital expenditures relating to the Expansion Plan and
expects to incur the remainder, approximately $63.6 million, by the end of
1998.
For the Company's expansion plan with respect to TeleGirardot, see
"Prospectus Summary--Recent Developments."
BUSINESS AND GROWTH STRATEGY
The Company's objective is to become the leading provider of quality
telephone services in each city in which it operates. The Company's business
and growth strategy includes the following:
. Capitalize on Significant Demand for Telephony Services. The Company
believes that the low telephone penetration levels throughout Colombia,
in general, and the southwestern region in particular, provide a
substantial opportunity to quickly increase subscribers, net income and
EBITDA in its markets. In the aggregate, the Expansion Plan assumes that
the Company increases penetration of its markets from approximately 16.9
lines per 100 people at the time of acquisition to 22.8 lines per 100
people upon completion of the Expansion Plan. Management expects similar
penetration increases with respect to the TeleGirardot Expansion Plan.
Management believes that these penetration levels are achievable,
especially when compared to two of Colombia's largest cities, Bogota and
Medellin, where substantial capital has already been spent to expand and
modernize the telephone systems and where penetration levels are
currently in excess of 30 lines per 100 people. Furthermore, after
operating in Palmira for only 28 months, the Company added more than
34,400 subscribers, which represents an increase in telephone penetration
from 4.9 lines per 100 people to approximately 18 lines per 100 people at
December 31, 1997.
. Create Strategic Alliances with Municipalities. The Company seeks to
maintain a strong relationship with each of the municipalities in which
it operates. This is accomplished primarily by establishing a mixed
capital company in which both the Company and the municipality are
investors. This structure allows the municipality to enjoy the benefits
of privatization while maintaining an ongoing economic interest in these
telephone operations. At the same time, the Company realizes substantial
benefits from working together with the municipal government, including:
(i) access to extensive demographic information which allows the Company
to optimize its network build out; (ii) work permits and rights of way to
ensure that the build out plan is completed quickly and efficiently; and
(iii) access to public records regarding non-paying customers of the
local government's other utility services. In addition, in
10
<PAGE>
situations where the Company has acquired existing telephone systems,
management has the opportunity to retain the qualified employees of those
systems.
. Utilize International Expertise. Since its inception, the Company has
contracted for the support of various internationally recognized
consultants to complement its own expertise. Prior to entering a new
market, management completes a full market demand study and in certain
instances has relied on the services of independent research consultants
to gather and assess projected levels of demand as well as other
demographic and competitive information. The Company then sizes and
designs its networks around these demand parameters. Commonwealth
Communications, Inc. advised the Company with respect to the initial
selection of equipment manufacturers and the design of the Palmira,
Jamundi and Yumbo wireline telephone systems, and Bell Communications
Research ("Bellcore") advised the Company with respect to the selection
of equipment and design of the Unitel Wireless system in Cali. Pursuant
to the Expansion Plan and the TeleGirardot Expansion Plan, the Company
will rely on Siemens for the supply of equipment for both its wireline
and wireless networks as well as the design, construction and
installation of most of its systems pursuant to fixed price, turn-key
contracts. In addition, the Company has contracted with IBM to install
Internet-related services. The Company has also contracted C-NIX, a
leading international information and operating systems provider, to
upgrade its existing facilities and enhance the interface between its
management control and information systems. Management believes that the
Company has realized substantial benefits from these telecommunication
services and expects to continue to utilize the expertise of these
organizations.
. Install Modern Telephony Equipment. The Company seeks to install high-
capacity, modern telephony equipment with sufficient capacity to meet
each market's expected demand. In the case of its wireline networks, the
Company, in conjunction with its primary equipment vendor, Siemens, has
installed a fiber-optic trunk supported by fully digital local exchanges.
In the case of its wireless networks, the Company is installing a fixed
wireless system utilizing DECT equipment provided by Siemens. This modern
technology allows the Company to offer its subscribers a full range of
traditional and non-traditional value-added services, including call
waiting, voice mail, Internet access, ISDN and Centrex.
. Maximize Revenue Generation. The Company seeks to maximize the revenue
generated from each installed line by capitalizing on its efficient
operating structure and by offering subscribers a full range of telephony
services. One of the stated goals of the recent deregulation of the local
telephone markets by the Colombian government is to promote competition
among public and private operators on the basis of efficiency and
customer service, rather than price. The government accomplished this by
requiring operators to set tariffs, at their option, based on either (i)
their or their predecessor's costs or (ii) their competitors' costs, but
in no event below the cost of providing service. This law has benefited
the Company by allowing management to set tariffs at levels established
by inefficient municipal operators, rather than the Company's own lower
cost of operation. This pricing structure allows the Company to realize a
high return on its capital investment, especially when compared to its
inefficient municipal competitors. The Company's operating results are
further enhanced by the new, value-added telephony services that the
Company offers as a result of its system upgrades which are not currently
provided by its municipal competitors.
. Provide Excellent Customer Service. Telephone subscribers in Colombia
have historically received poor quality service. For example, under the
management of the municipality, in September 1995, Palmira customers were
able to complete approximately 40% of their calls and an estimated 17% of
subscribers experienced breakdowns which lasted an average of more than
12 hours. The Company utilizes sophisticated computer hardware and
software to manage, administer and correct telephone problems in its
telephone systems. This has resulted in a dramatic improvement in the
operating performance of its systems. In Palmira, in February 1998, the
Company's subscribers completed approximately 67% of their calls and only
5.7% of subscribers experienced breakdowns lasting only approximately 6
hours. In addition, the Company operates customer service centers in each
of the Company's markets, and utilizes an aggregate of approximately 40
dedicated employees for this purpose.
11
<PAGE>
. Pursue Selective Acquisitions and Other Business Opportunities. The
Company intends to selectively pursue acquisitions of additional
telephone networks from municipalities in Colombia engaged in
privatizations. The Company anticipates making bids for one or more
municipal systems in the upcoming months, including systems within and
beyond the southwestern region of Colombia. Management expects that any
future acquisitions will be structured similarly to its existing
acquisitions, including a substantial investment and ownership by the
municipality involved. The Company anticipates pursuing only those
markets which have low penetration levels and indications of significant
unmet demand for telephony service. In addition, the Company expects to
capitalize on the recently initiated deregulation of the long distance
market by aligning itself with a strategic international partner.
OWNERSHIP AND MANAGEMENT
In August 1993, in anticipation of the deregulation of Colombia's
telecommunications industry, Guillermo Lopez combined his managerial expertise
with the financial support of certain members of the Caicedo family (the
"Caicedo Investors") to form the Company. The Caicedo family is a prominent
Colombian family with a history of operating businesses in the southwestern
region of Colombia dating back more than 400 years. Currently, the Caicedo
family has interests in sugar cane, milling and processing businesses in the
region, including Colombina S.A. ("Colombina"), Ingenio Riopaila S.A. and
Ingenio Central Castilla S.A. The existing shareholders of the Company have
invested approximately Ps37.4 billion ($30.0 million) in the Company, including
the sale of common stock of the Company to the existing shareholders for a
purchase price of Ps31.2 billion ($25.0 million), which was substantially
completed in July 1997 (the "Equity Contribution").
Guillermo Lopez has been managing businesses for the Caicedo family for the
past 14 years. Prior to founding the Company, Mr. Lopez was the financial and
legal advisor to the Caicedo family with respect to their many business
interests and served as a member of the Board of Directors of several publicly
held companies in Colombia in which the Caicedo family had a substantial
interest. Since the Company's inception, Mr. Lopez has been actively involved
in all aspects of the business, including the acquisition of the Company's
telephone systems, the recruiting and hiring of the management team, and the
build-out and commencement of operations of the Company's systems.
Mr. Lopez has assembled a senior management team comprised of individuals
with extensive telecommunications industry experience both in Colombia and
throughout the world. Reporting directly to Mr. Lopez is a General Manager for
each of the Operating Companies. Collectively, this group of nine executives
has over 120 years of telephony industry experience and includes Mr. Jose
Fernando Ramirez, the General Manager of TelePalmira, with 12 years of
experience with TELECOM and TELECOM affiliated companies, Mr. Danilo Ochoa, the
General Manager of Caucatel, with 16 years of experience with Empresas
Municipales de Cali ("EMCALI"), the municipally-owned telephone company
operating in Cali, Mr. Anibal Restrepo, the General Manager of Unitel, with 21
years of experience with Empresas Publicas de Medellin, the municipally-owned
telephone company operating in Medellin and Mr. Attilio Ciampini, the Manager
for the Company's Outside Plant, with 30 years of experience with Bell Canada,
a subsidiary of Bell Canada Enterprises. In addition to the General Managers,
Mr. Lopez's management team includes Mr. Anibal E. Perez, the Technology and
Planning Vice President, who has 15 years of experience with EMCALI, Mr. Jorge
Enrique Martinez, the Financial Vice President, who has nine years of
experience with Corporacion Financiera del Valle, Mr. Javier Salgado, the
Operations Vice President, who has 14 years of combined experience with Alcatel
de Colombia, S.A. ("Alcatel Colombia") and Alcatel de Venezuela, C.A. ("Alcatel
Venezuela") and Mr. Carlos Arango, the Corporate Development Vice-President,
who has nine years of combined experience with Transejes S.A., an affiliate of
Dana Corporation, Carvajal S.A. and Lloreda Grasas S.A.
Mr. Lopez has established important relationships with several
telecommunications consultants and equipment vendors. See "Business--Expansion
Plan."
12
<PAGE>
THE TRUST
General
The Trust is a statutory business trust, created under Delaware law pursuant
to the Original Trust Agreement and the filing of a certificate of trust with
the Delaware Secretary of State on October 20, 1997. The Trust is governed by
the Trust Agreement. Wilmington Trust Company is the Pass Through Trustee for
the Trust. Marine Midland Bank will act as the paying agent, registrar,
Indenture Trustee (as defined herein) and Exchange Agent (as defined herein).
All action taken by the Trust will be conducted by the Pass Through Trustee.
The Trust exists for the exclusive purposes of (i) issuing and selling the
Certificates, (ii) using the proceeds from the sale of the Original
Certificates to acquire the Senior Notes, (iii) registering the Exchange
Securities under the Securities Act, (iv) exchanging the Original Securities
for the Exchange Securities and (v) engaging in only those other activities
necessary or incidental thereto (such as soliciting directions from the
Certificateholders and taking such actions as the Certificateholders owning a
majority of the principal amount of the Certificates direct). Accordingly, the
Senior Notes will be the sole assets of the Trust, and payments received in
respect of the Senior Notes will be the sole source of revenue of the Trust.
The Exchange Certificates will constitute a new issue of securities for which
there is no trading market. See "Risk Factors--Lack of a Market for the
Exchange Certificates; Risks Associated with Non-Investment Grade Debt."
Principal Executive Office
The principal executive office of the Trust is c/o Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration, and its telephone number is (302)
651-1000.
THE EXCHANGE OFFER
Securities Offered.......... $150.0 million aggregate principal amount of 12
1/2% Exchange Certificates due 2007. Each
Exchange Certificate along with each Original
Certificate remaining outstanding after the
Exchange Offer, if any, represent pro rata
interests in all of the assets of the Trust,
including the Senior Notes and all payments of
principal, interest, redemption premium, if any,
and Additional Amounts (as defined herein), if
any, made in respect of the Senior Notes.
Exchange Agent.............. The exchange agent with respect to the Exchange
Offer is Marine Midland Bank (in such capacity,
the "Exchange Agent"). The address, telephone and
facsimile numbers of the Exchange Agent are set
forth in "The Exchange Offer--Exchange Agent" and
in the accompanying Letter of Transmittal.
The Exchange Offer.......... Offer to exchange all outstanding Original
Certificates for Exchange Certificates. As of the
date hereof, $150.0 million aggregate principal
amount of Original Certificates are issued and
outstanding. The Company has agreed to make the
Exchange Offer in order to satisfy its
obligations under the Registration Rights
Agreement, dated as of October 28, 1997, among
the Company, the Trust, as Issuer, and BT Alex
Brown Incorporated, as initial purchaser (the
"Initial Purchaser") (the "Registration Rights
Agreement"). For a description of the procedures
for tendering, see "The Exchange Offer--
Procedures for Tendering Original Certificates."
13
<PAGE>
Expiration Date;
Withdrawal................. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998 (as such date may
be extended, the "Expiration Date"). Original
Certificates tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date. Any Original Certificates not
accepted for exchange for any reason will be
returned without expense to the tendering holders
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
See "The Exchange Offer".
Conditions to Exchange
Offer...................... The Exchange Offer is subject to certain
conditions. See "The Exchange Offer--Certain
Conditions to the Exchange Offer." The Exchange
Offer is not conditioned upon any minimum amount
of Original Certificates being tendered for
exchange.
Certain U.S. Federal Income
Tax Considerations......... The exchange of the Original Certificates for the
Exchange Certificates will not be a taxable event
to the holder for U.S. federal income tax
purposes and, thus, the holder should not
recognize any taxable gain or loss as a result of
such exchange. See "Taxation--United States."
Certain Colombian Tax
Considerations............. The exchange of the Original Certificates for the
Exchange Certificates will not be a taxable event
for Colombian tax purposes to "Non-Colombian
Holders" and therefore the holder should not
recognize any taxable gain or loss as a result of
such exchange. See "Taxation--Colombia."
Certain ERISA
Considerations............. Original Certificateholders should review the
information set forth under "Certain ERISA
Considerations" prior to acquiring an interest in
the Exchange Certificates.
Use of Proceeds............. None of the Company, the Trust or the Original
Certificateholders will receive any cash proceeds
from the issuance of the Exchange Certificates
offered hereby.
Procedures for Tendering
Original Certificates...... Tendering Original Certificateholders must
complete and sign a Letter of Transmittal in
accordance with the instructions contained
therein and forward the same by mail, facsimile
or hand delivery, or an Agent's Message (as
defined herein) in lieu thereof, together with
any other required documents, to the Exchange
Agent either with the Original Certificates to be
tendered or in compliance with the specified
procedures for guaranteed delivery of Original
Certificates. Certain brokers, dealers,
commercial banks, trust companies and other
nominees may also effect tenders by book-entry
transfer. Original Certificateholders whose
Original Certificates are registered in the name
of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact
such person promptly if they wish to tender
Original Certificates pursuant to the Exchange
Offer.
14
<PAGE>
See "The Exchange Offer--Procedures for Tendering
Original Certificates."
Letters of Transmittal and Original Certificates
should not be sent to the Company or the Trust.
Such documents should only be sent to the
Exchange Agent.
Untendered Original
Certificates............... Upon consummation of the Exchange Offer, the
Original Certificateholders, if any, will have no
further registration or other rights under the
Registration Rights Agreement. Original
Certificateholders who do not tender their
certificates in the Exchange Offer or whose
Original Certificates are not accepted for
exchange will continue to hold such Original
Certificates and will be entitled to all the same
rights and will be subject to all the same
limitations applicable thereto under the Trust
Agreement (except for certain rights to be
registered under the Act which terminate as a
result of this Exchange Offer). All untendered
and tendered but unaccepted Original
Certificates, if any, will continue to be subject
to all of the existing restrictions upon transfer
provided therein. To the extent that Original
Certificates are not tendered and accepted in the
Exchange Offer, an Original Certificateholder's
ability to sell untendered and tendered but
unaccepted Original Certificates could be
adversely affected.
CONSEQUENCES OF EXCHANGING ORIGINAL CERTIFICATES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, Original Certificateholders (other
than any holder who is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) who exchange their Original Certificates for
Exchange Certificates pursuant to the Exchange Offer generally may offer such
Exchange Certificates for resale, resell such Exchange Certificates, and
otherwise transfer such Exchange Certificates without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
such Exchange Certificates 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
Exchange Certificates. Each broker-dealer that receives Exchange Certificates
for its own account in exchange for Original Certificates, where such Original
Certificates 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 Exchange Certificates. See
"Plan of Distribution." If an Original Certificateholder does not exchange such
Original Certificates for Exchange Certificates pursuant to the Exchange Offer,
such Original Certificates will continue to be subject to the restrictions on
transfer contained in the legend thereon. In general, the Original Certificates
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 Exchange Certificates".
The Original Certificates 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
Original Certificates may continue to be traded in the PORTAL market. However,
to the extent that Original Certificates are tendered and accepted in
connection with the Exchange Offer, any trading market for remaining Original
Certificates will be adversely affected. Following consummation of the Exchange
Offer, the Exchange Certificates will not be eligible for PORTAL trading.
15
<PAGE>
THE EXCHANGE CERTIFICATES
The terms of the Exchange Certificates are identical in all material respects
to the Original Certificates, except for certain transfer restrictions and
registration rights relating to the Original Certificates.
Issuer of the Senior
Notes...................... Transtel S.A., a Colombian corporation.
Issuer of the Original
Certificates............... Transtel Pass Through Trust, a special purpose
Delaware business trust.
Issuer of the Exchange
Certificates............... Transtel Pass Through Trust, a special purpose
Delaware business trust.
Maturity Date............... November 1, 2007.
Distribution Dates.......... Each May 1 and November 1, following the Exchange
Offer.
Interest Rate and Payment
Dates...................... The Senior Notes bear interest at a rate of 12
1/2% per annum payable semiannually on each May 1
and November 1, commencing May 1, 1998.
Escrow Account.............. The Company has deposited approximately $35.3
million of the net proceeds realized from the
sale of the Senior Notes, representing funds
sufficient to pay the first four interest
payments on the Senior Notes, in the Escrow
Account created pursuant to the Escrow and
Disbursement Agreement, dated as of October 28,
1998, among Marine Midland Bank, as Escrow Agent,
the Indenture Trustee , and the Company (the
"Escrow and Disbursement Agreement") (the "Escrow
Account") to be held by the Escrow Agent. Funds
will be disbursed from the Escrow Account only to
pay interest on the Senior Notes and, upon
certain repurchases or redemptions of the Senior
Notes, to pay principal of and premium, if any,
thereon.
Refinancing Account......... The Company placed approximately $32.8 million of
the net proceeds realized from the sale of the
Senior Notes, representing funds sufficient for
the payment of indebtedness outstanding on
October 28, 1998 which the Company owed to
various financial institutions ("Other Existing
Indebtedness"), in an escrow account created
under the Escrow and Disbursement Agreement (the
"Refinancing Account") held by the Escrow Agent.
Pursuant to the Indenture, within 75 days of the
Offering, the Company repaid the Other Existing
Indebtedness.
Optional Redemption......... The Senior Notes are redeemable, in whole or in
part, at the option of the Company on or after
November 1, 2002 at the redemption prices set
forth herein plus accrued and unpaid interest to
the date of redemption.
Redemption Upon Sale of
Capital Stock.............. At any time or from time to time on or prior to
November 1, 2000, in the event of the sale by the
Company of at least $25.0 million of its Capital
Stock in one or more Public Equity Offerings or
to one or more Strategic Equity Investors (as
defined herein), the Company may, at its option,
use the net cash proceeds of such sale or sales
to redeem up to 35% of the Senior Notes at a
redemption price
16
<PAGE>
specified herein of the principal amount thereof
plus accrued and unpaid interest to the date of
redemption; provided, that at least 65% of the
initial aggregate amount of the Senior Notes
originally issued remains outstanding after any
such redemption.
Security.................... The Company has loaned approximately $98.3
million of the proceeds of the Senior Notes to
its Operating Companies. These loans are
evidenced by intercompany notes (the
"Intercompany Notes").
Ranking..................... The Senior Notes are senior obligations of the
Company ranking pari passu in right of payment
with all existing and future senior Indebtedness
(as defined herein) of the Company and ranking
senior in right of payment to all existing and
future subordinated Indebtedness of the Company.
The Intercompany Notes are senior unsecured
obligations of each of the Operating Companies.
The Senior Notes are secured by a pledge of the
Intercompany Notes and by a pledge of the Escrow
Account. The Company is a holding company that
conducts substantially all its operations through
the Operating Companies. Therefore, other than
claims under the Intercompany Notes, the Senior
Notes are effectively subordinated to all debt
and other liabilities of the Operating Companies.
As of September 30, 1997, on a pro forma basis,
after giving effect to the Offering and the
Equity Contribution and the application of the
net proceeds therefrom, the Company and its
subsidiaries on a consolidated basis would have
had approximately Ps188.3 billion ($151.1
million) of debt outstanding, excluding any
amounts arising under the Vendor Financing and
the DIAN Financing. In addition, as of September
30, 1997, on a pro forma basis, the Operating
Companies would have had Ps7.9 billion ($6.4
million) of other liabilities. For the purpose of
the Indenture, the Vendor Financing and the DIAN
Financing, without duplication, will be
considered Indebtedness as they arise and
therefore, as of September 30, 1997, on a pro
forma basis, the Company and its subsidiaries had
Indebtedness of Ps191.1 billion ($153.3 million).
Change of Control........... Upon a Change of Control, the Company will be
required to make an offer to repurchase the
Senior Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest, to the date of repurchase. See "Risk
Factors--Inability to Redeem Senior Notes within
One Year."
Certain Covenants........... The Indenture imposes certain limitations on the
ability of the Company and its subsidiaries to,
among other things, incur additional
indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate
certain asset sales, enter into certain
transactions with affiliates, issue preferred
stock, merge or consolidate with any other person
or sell, assign, transfer, lease, convey, or
otherwise dispose of all or substantially all of
the assets of the Company and its subsidiaries.
Pursuant to the Indenture, the Company may not
loan more than 20% of the proceeds from the
issuance of the Senior Notes to any one Operating
Company.
17
<PAGE>
For additional information concerning (i) the Exchange Offer, see "The
Exchange Offer," (ii) the Exchange Certificates, see "Description of the
Certificates" and (iii) the Senior Notes, see "Description of the Senior
Notes."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors which should be
considered by prospective investors in evaluating the exchange of the Original
Certificates for the Exchange Certificates.
SUMMARY FINANCIAL AND OTHER DATA
The Company was incorporated in 1993 and commenced offering telephone
services in September 1995. Accordingly, the Company has no commercial
operating history prior to such time, and results for 1995 are not directly
comparable to those of 1996. The Company was in a preoperating stage prior to
September 1, 1995 and capitalized all of its net expenses as deferred charges;
thus, no statements of income are presented for 1993 and 1994. The summary
statement of income data for each of the years ended December 31, 1995 and 1996
and the nine months ended September 30, 1997, and the summary balance sheet
data as of December 31, 1994, 1995 and 1996 and September 30, 1997 have been
derived from audited financial statements. The summary balance sheet data at
December 31, 1993 have been derived from unaudited consolidated financial
statements of the Company. 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 Consolidated
Financial Statements, including the notes thereto, included elsewhere in this
Prospectus.
The Consolidated Financial Statements included herein have been prepared in
conformity with Colombian GAAP (including restatement of the financial
information in constant pesos as of September 30, 1997), which differs in
certain significant aspects from generally accepted accounting principles in
the United States ("U.S. GAAP"). Note 28 to the Consolidated Financial
Statements provides a discussion of the principal differences between Colombian
and U.S. GAAP as they relate to the Company and a reconciliation of net income
and shareholders' equity for the Company as of and for the years ended December
31, 1995 and 1996 and as of and for the nine months ended September 30, 1997 to
amounts calculated in accordance with U.S. GAAP.
Dollar equivalent information set forth below has been included solely for
the convenience of the reader, and is translated from Pesos at the
Representative Market Rate in effect on September 30, 1997 of Ps1,246.27 to one
Dollar. Such translation should not be construed as a representation that the
Peso amounts represent, or have been or could be converted into, Dollars at
that rate or any other rate.
Unless otherwise indicated, all financial information included in this
Prospectus has, for comparability purposes, been restated in constant Pesos as
of September 30, 1997 by indexing historical amounts using the MCPI. Although
the restatement of nominal Pesos into constant Pesos lessens the distorting
effect that an inflationary environment has on comparisons of Consolidated
Financial Statements over time, such restatement does not wholly eliminate
those distortions and evaluation of period-to-period trends may be difficult.
See "Risk Factors--Corporate Disclosure and Accounting Standards" and "Risk
Factors--Inflation."
18
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ---------------------
1995 1996 1997 1997
------------- ------------- ------------ -------
(IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER 30,
1997 PURCHASING POWER AND IN THOUSANDS OF
DOLLARS, EXCEPT NETWORK AND OPERATING DATA AND
PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Colombian GAAP:
Revenues................ Ps 2,359,089 Ps 11,560,208 Ps17,639,937 $14,154
Costs and expenses...... 1,124,170 6,953,372 9,839,644 7,895
Operating income........ 1,234,919 4,606,836 7,800,293 6,259
Interest expense........ 277,073 1,891,283 4,449,384 3,570
Income tax expense...... 362 319,388 2,087,115 1,675
Minority interest
expense................ 500,603 2,228,831 2,391,209 1,919
Net income(1)........... 751,720 3,248,886 852,747 684
Earnings per share...... .33 .81 .22 --
U.S. GAAP:
Revenues................ Ps 1,765,173 Ps 7,511,755 Ps18,780,718 $15,070
Operating income
(loss)................. 2,307,448 (174,622) 4,102,908 3,292
Interest expense........ 1,578,062 8,237,631 7,463,602 5,989
Net loss................ (2,879,491) (2,913,097) (1,566,452) (1,257)
Basic earnings (loss)
per share.............. (1.25) (.73) (.37) --
OTHER FINANCIAL DATA:
Colombian GAAP:
EBITDA(1)(2)............ Ps 1,617,830 Ps 6,664,146 Ps10,753,747 $ 8,629
Capital
expenditures(3)........ 15,514,832 6,575,674 28,109,072 22,555
Depreciation and
amortization(1)........ 312,640 1,247,928 2,047,413 1,643
Total Indebtedness(4)... 18,032,952 45,790,501 64,534,380 51,782
Deficiency of earnings
to fixed charges(6).... 11,396 114,233 1,563,025 1,254
U.S. GAAP:
EBITDA(2)............... Ps (1,963,074) Ps 1,417,411 Ps 6,726,459 $ 5,397
Capital
expenditures(3)........ 15,518,810 6,832,675 29,025,685 23,290
Depreciation and
amortization........... 344,374 1,592,033 2,616,244 2,099
Deficiency of earnings
to fixed charges(5).... 3,140,066 5,121,176 1,277,692 1,025
NETWORK AND OPERATING DATA
(END OF PERIOD):
Systems in operation...... 1 1 6
Population................ 317,995 317,995 2,897,600
Subscribers............... 22,260 29,528 92,009
Penetration(6)............ 7.0 9.3 14
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1997
--------- ----------- ------------ ------------ ------------- --------
(IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER 30, 1997
PURCHASING POWER AND IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF
PERIOD):
Colombian GAAP:
Cash.................. Ps113,627 Ps 6,088 Ps 700,633 Ps13,399,275 Ps 4,790,137 $ 3,843
Properties, plant and
equipment, net....... -- -- 22,094,150 26,173,513 67,756,645 54,368
Total assets.......... 182,039 3,954,942 34,094,278 84,029,684 165,177,425 132,538
Short-term debt(7).... -- -- 1,734,160 17,404,295 552,353 443
Long-term debt(8)..... -- -- 12,607,074 25,371,859 61,148,690 49,066
Minority interest..... -- -- 9,190,819 17,047,065 33,380,596 26,784
Shareholders' equity.. 106,998 3,374,335 6,967,236 18,817,274 51,035,142 40,950
U.S. GAAP:
Cash.................. Ps -- Ps -- Ps 700,633 Ps13,399,275 Ps 4,790,137 $ 3,843
Properties, plant and
equipment, net....... -- -- 25,360,280 28,412,326 70,006,609 56,173
Total assets.......... -- -- 32,401,221 61,720,128 139,078,457 111,596
Short-term debt(7).... -- -- 2,964,247 17,934,921 687,025 551
Long-term debt(8)..... -- -- 14,617,214 27,494,365 62,156,350 49,874
Minority interest..... -- -- 8,553,136 7,191,235 23,271,406 18,673
Shareholders' equity
(deficit)............ -- -- 2,077,720 (1,160,960) 28,144,312 22,583
</TABLE>
- --------
(1) For Colombian GAAP purposes, as of January 1, 1996, TelePalmira changed
from the straight-line to the reverse sum of the years digits' method of
computing depreciation which had the effect of decreasing 1996 depreciation
(and increasing 1996 income before income taxes and minority interest) by
Ps914,548 ($734) and increasing 1996 net income by Ps548,728 ($440). For
U.S. GAAP purposes, all periods use the straight-line method.
(2) EBITDA is defined as operating income (loss) plus depreciation and
amortization and plus lease expense related to the Vendor Financing under
Colombian GAAP. Under U.S. GAAP, the Vendor Financing is treated as debt
and therefore the associated cost is treated as interest expense and
principal payment rather than lease expense. Although EBITDA is not a
measure of performance calculated in accordance with Colombian or U.S.
GAAP, the Company has included such data because it is used by certain
investors to determine the Company's ability to meet debt service
requirements. Such data should not be considered as an alternative to net
earnings as an indicator of the Company's operating performance or as an
alternative to cash flows from operating activities as a measure of
liquidity.
(3) Capital expenditures consist of purchases of properties, plant and
equipment as reflected in the Company's consolidated statements of cash
flows.
(4) Total Indebtedness is calculated in accordance with the definition of
"Indebtedness" under the Indenture, which includes short-term debt, long-
term debt, capital lease obligations, lease payments under the Vendor
Financing (which are treated as operating leases under Colombian GAAP, but
are capitalized under U.S. GAAP), and the Company's obligations under the
DIAN Financing.
(5) For purposes of computing the deficiency of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes, minority interests
and fixed charges, excluding capitalized interest. Fixed charges consist of
interest on all indebtedness (whether capitalized or expensed) and that
portion of operating lease expenses deemed to be interest expense.
(6) Penetration represents the number of installed lines per 100 people. In
Cartago, Jamundi and Yumbo, penetration includes the installed lines of
municipal competitors as of December 31, 1996 of approximately 10,000
lines, 5,200 lines and 5,500 lines as per the Company's estimates,
respectively.
(7) Short-term debt includes current portion of long-term debt, current portion
of capital lease obligations and short-term debt.
(8) Long-term debt includes long-term debt and capital lease obligations.
20
<PAGE>
RECENT DEVELOPMENTS
Empresa de Comunicaciones de Girardot S.A. E.S.P.
On December 31, 1997, TeleGirardot, a new subsidiary, was formed by the
Company. TeleGirardot was capitalized with Ps8.9 billion ($7.1 million) in cash
contributed by the Company to TeleGirardot in exchange for a 60% interest in
TeleGirardot. The municipality of Girardot contributed the net assets of its
telephone network (which had approximately 23,500 subscribers) with a fair
market value of Ps5.9 billion ($4.8 million) to TeleGirardot in exchange for a
40% interest in TeleGirardot. The municipality's telephone network commenced
operations on December 2, 1978.
TeleGirardot serves the cities of Girardot, Flandes and Ricaurte. Girardot
and Ricaurte are located 362 kilometers east of Cali and 127 kilometers
southwest of Bogota. Flandes is located 363 kilometers east of Cali and 128
kilometers southwest of Bogota. The economic base of the three cities is
tourism, agriculture and cattle raising. The aggregate population of the three
cities is approximately 161,000 people.
Upon the commencement of Transtel's operation of TeleGirardot on December 31,
1997, TeleGirardot's subscriber base was composed of approximately 80%
residential and 20% commercial subscribers. TeleGirardot's competitor in its
service area is TeleTequendama E.S.P., which currently has approximately 8,500
subscribers.
On December 31, 1997, TeleGirardot had 24,500 subscribers in Girardot.
Transtel expects, through its expansion plan (the "TeleGirardot Expansion
Plan"), to increase the number of installed lines in Girardot to 40,000 lines
by the end of 1998. Transtel expects to incur approximately $4.0 million under
the TeleGirardot Expansion Plan which will be financed with cash flow from its
operations. The Company is currently negotiating with Siemens to enter into
contracts for the supply of equipment to effect the TeleGirardot Expansion
Plan. As of February 28, 1998, TeleGirardot had approximately 1,000 new
subscribers, all of whom are serviced by digital lines, and approximately 70
employees.
21
<PAGE>
RISK FACTORS
Original Certificateholders should consider carefully the following risk
factors as well as the other information contained in this Prospectus in
evaluating an investment in the Exchange Certificates, although the risk
factors set forth below are generally applicable to the Original Certificates
as well as the Exchange Certificates.
CONSEQUENCES OF FAILURE TO EXCHANGE
Original Certificateholders who do not exchange their Original Certificates
for Exchange Certificates pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Original Certificates as a
consequence of the issuance of the Original Certificates 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 Original Certificates 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 Exchange Certificates."
SUBSTANTIAL LEVERAGE OF THE COMPANY; INSUFFICIENCY OF EARNINGS TO COVER FIXED
CHARGES
The Company is highly leveraged. Even though a portion of the proceeds of
the Offering was used to repay debt, after the Offering, the Company and its
subsidiaries had as of September 30, 1997 on a pro forma basis approximately
Ps191.1 billion ($153.3 million) of Indebtedness, which includes the Vendor
Financing and the DIAN Financing. The Indenture limits, but does not prohibit,
the incurrence of additional Indebtedness, secured or unsecured, by the
Company and its subsidiaries. Although funds sufficient to pay the first four
interest payments on the Senior Notes (and therefore on the Certificates) were
placed into the Escrow Account, future interest payments on the Senior Notes
(and therefore on the Certificates) will be payable from the Company's cash
flow. The debt service requirements of any additional debt could make it more
difficult for the Company to make principal and interest payments on the
Senior Notes and consequently, the Trust's ability to make payments on the
Certificates. For the years ended December 31, 1995 and 1996 and for the nine
months ended September 30, 1997, earnings were insufficient to cover fixed
charges by Ps11.4 million ($9,100), Ps114.2 million ($91,700) and Ps1.6
billion ($1.3 million), respectively.
There can be no assurance that the Company will be able to generate
sufficient cash flow to cover either the required interest and principal
payments or any required redemptions or repurchases of the Senior Notes and
consequently, the Trust's ability to make payments on the Certificates. If the
Company is unable to meet interest and principal payments or any required
redemptions or repurchases of the Senior Notes in the future, it may,
depending upon the circumstances which then exist, seek additional equity or
debt financing, attempt to refinance its existing indebtedness or sell all or
part of its business or assets to raise funds to repay its indebtedness. There
can be no assurance that the Company will be able to generate sufficient cash
flow to cover any required payment on the Senior Notes and consequently the
Trust would not have the ability to make the corresponding payment on the
Certificates. There can be no assurance that sufficient equity or debt
financing will be available, or, if available, that it will be on terms
acceptable to the Company, that the Company will be able to refinance its
existing indebtedness or that sufficient funds could be raised through asset
sales.
The high degree of leverage of the Company may have important consequences
to Certificateholders. In particular: (i) a substantial portion of the
Company's anticipated cash flow from operations will be required for the
payment of the Company's interest expense and principal repayment obligations
on the Senior Notes; (ii) the ability of the Company to obtain additional
financing in the future for working capital, acquisitions, capital
expenditures, repayment of debt, or other purposes is limited by restrictive
covenants in the Indenture; and (iii) the Company may be more vulnerable to
downturns in general economic conditions or in its business and may have less
flexibility to respond to changing business conditions and opportunities.
22
<PAGE>
COLOMBIAN POLITICAL, ECONOMIC AND SOCIAL RISKS
The Company is located in Colombia and is subject to political, economic and
other uncertainties, including expropriation, nationalization, renegotiation,
or nullification of existing contracts, currency exchange restrictions and
international monetary fluctuations. Furthermore, Colombia has experienced
violence related to guerrilla activity. The Indenture will not require the
Company, and the Company does not intend, to maintain insurance against such
risks.
Cali and its metropolitan area, the Company's largest market, has been the
center of operations of one of Colombia's most powerful drug organizations,
and as such has suffered the violence resulting from the Colombian
government's efforts to curb the drug trade. Cali may also have received
portions of the capital generated by the drug trade, to the extent some of
such capital was reinvested locally. The Company believes that neither the
drug trade nor the efforts to curb it have had a material adverse effect on
its business. However, no assurance can be given that drug activity in the
future will not have a material adverse effect on the Company or that the
efforts to curb such activity will not have a material adverse effect on the
economy of the region and thereby on the Company.
Since March 1, 1996, the United States government has declined to recertify
Colombia as qualifying for United States foreign aid, due to a perceived
failure by Colombia to cooperate adequately in combating the drug trade.
However, on February 26, 1998, due to the recent operations performed by the
Colombian Army and the National Police Department against the Colombian drug
cartels, the United States government certified Colombia with a "waiver".
Although the certification with a waiver does not mean that Colombia is
qualified for United States foreign aid, it does mean that Colombia is not
subject to economic or trade sanctions. The certification with a waiver
implies that the United States is able to vote in favor of Colombia at the
boards of multilateral agencies and credit institutions, such as the World
Bank, the Overseas Private Investment Corporation, OPIC, Export-Import Bank,
Eximbank and the Interamerican Development Bank, IDB.
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
on the Company. Certificateholders should recognize that these conditions and
events create significant uncertainties and risks, which could result in
material adverse effects on the Company and on its ability to meet its
obligations, including its obligations under the Senior Notes and
consequently, the Trust's ability to pay on the Certificates.
In addition to these political and social uncertainties, investment in
Colombia, as with all emerging markets, is subject to economic uncertainties.
Colombia is divided into thirty-two political subdivisions called
departamentos (departments). The Company's operations are dependent upon the
performance of the Colombian economy generally, and, in particular, upon the
performance of the economies of the Departamentos of Valle del Cauca and
Cauca. The economies of Colombia and these departamentos are 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 affected by such
fluctuations in the economies of Colombia, of Valle del Cauca, of Cauca, and
of any other departamentos in which the Company operates in the future, and
such fluctuations may affect the ability of customers to pay for the Company's
services and on the ability of the market to support the growth of 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 Senior Notes and consequently, the Certificates. There can be no
assurance that recent policies that have resulted in favorable economic growth
will be maintained by this government or any new government or that such
growth will continue.
23
<PAGE>
HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW OF OPERATING
COMPANIES; EFFECTIVE SUBORDINATION
The Senior Notes will be the exclusive obligation of the Company, which is a
holding company with no business operations of its own. The operations of the
Company are conducted through the Operating Companies, which are separate and
distinct legal entities. Other than the obligation to repay to the Company the
Intercompany Notes, the Operating Companies have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Senior Notes or the
Certificates, to make any funds available to the Company to enable it to make
payments on the Senior Notes and consequently, to make the funds available to
the Trust to make payments on the Certificates, to make funds available in
order to make investments in the Operating Companies, to meet working capital
needs or other liabilities of the Company or for any other reason. In
addition, the Operating Companies are not wholly-owned subsidiaries of the
Company and any dividends issued by the Operating Companies must be
distributed pro rata to all of their shareholders. As a result, the Company
cannot be assured that it will be able to generate significant cash through
dividends or other distributions from the Operating Companies in the
foreseeable future and there can be no assurance that the Company will be able
to generate any significant cash flow from the Operating Companies at any time
in the future. Since the Company's assets consist primarily of its ownership
interests in the Operating Companies, the Senior Notes (and therefore the
Certificates) will be effectively subordinated (other than as to claims that
the Company can make under the Intercompany Notes) to all existing and future
debt and other liabilities (including trade payables) of the Company's
Operating Companies, and the Company's right to receive the assets of the
Operating Companies upon their liquidation or reorganization will be subject
to the claims of such Operating Companies' creditors (including trade
creditors).
LIMITED OPERATING HISTORY; POTENTIAL LACK OF CUSTOMER DEMAND
The Company is a new enterprise. It was incorporated in August 1993 and
commenced offering telephone services through TelePalmira on September 1,
1995. Most of the Company's systems have only recently begun to be operated by
Transtel. Unitel Wireless commenced operations on January 2, 1998.
TeleCartargo, Caucatel, TeleJamundi, Unitel Wireline and Bugatel commenced
operations on April 1, 1997; May 1, 1997; June 1, 1997; June 1, 1997; and July
1, 1997, respectively. TeleGirardot commenced operations on December 31, 1997.
The successful development and commercialization of these systems will depend
on a number of significant financial, logistical, technical, marketing, legal
and other factors, the outcome of which cannot be predicted. These Operating
Companies will require additional funds for capital expenditures, working
capital requirements, and other cash needs, including the costs of obtaining
additional equipment. In addition, there can be no assurance that the systems
will not encounter engineering, design, or other operational problems. There
can be no assurance that the Company can successfully develop any future
systems or that any of its systems will achieve commercial success.
Additionally, the extent to which prospective telephone customers will
choose to obtain telephone service from the Company is unclear. The Company
has incurred and will continue to incur significant operating expenses, has
made, and will continue to make, significant capital investments, has entered
into operating leases, equipment supply contracts and service arrangements, in
each case based upon certain expectations as to the anticipated market
acceptance of, and customer demand for, the Company's telephony services. The
failure to meet these expectations could have a material adverse effect on the
Company. A substantial portion of the Company's revenues to date have been
derived from non-recurring connection charges. The continuation of this
revenue stream will depend on the Company continuing to obtain new
subscribers, which cannot be assured.
RISKS ASSOCIATED WITH PRIVATIZATION AND MANAGEMENT OF GROWTH
The success of the Company's operating strategy is subject to factors that
are beyond the control of the Company and are impossible to predict, in part,
because the telecommunications industry has only recently begun to be
privatized in Colombia. The Company is unable to predict how consumer demand
for telecommunications services will develop over time. The size of the
Colombian market for telecommunications services, the rates of
24
<PAGE>
penetration of the market and the sensitivity of potential subscribers to
changes in prices, among other factors, are uncertain. Moreover, the provision
of telephony service with additional calling features is without precedent in
Colombia and, therefore, the market acceptance and customer demand for such
services is uncertain. In addition, the Company's continued rapid growth will
require the training of new personnel, the expansion of its management
information systems, 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 Senior Notes and consequently, the Trust's ability to pay on the
Certificates may suffer a material adverse effect.
NETWORK ROLLOUT RISKS; RELIANCE ON SUPPLIERS; DELAYS IN CONSTRUCTION
The Company's service is dependent upon the completion and continued
viability of its network. The Company has completed portions of its network
and expects to incur significant expenditures to expand the geographic
coverage and increase the capacity of its network. The roll-out of the
Company's network is subject to risks and uncertainties that could delay the
rollout of the Company's services and increase the cost of construction.
With respect to wireless networks, one such risk is the availability, access
to, and continued use of, suitable base stations and switch sites. The
Company's ability to locate and retain suitable base stations and switch sites
is dependent on the cooperation of local planning authorities and potential
landlords. There can be no assurance that the Company will be successful in
obtaining property rights necessary to establish or maintain such base
stations and switch sites, or that delays in obtaining such rights will not
adversely affect the rate of the Company's network rollout.
The currently planned build out and upgrade of the Company's networks is
reliant on Siemens for the supply of equipment and other telecommunications
supplies and for construction of the networks. There can be no assurance that
Siemens will honor its current obligations to supply equipment and construct
the networks or that it will desire or be able to supply such equipment or
undertake construction of future projects. Equipment supplies are additionally
subject to shortages and/or delays in delivery. In addition, with respect to
letters of intent to enter into purchase agreements with respect to equipment,
there can be no assurance that the letters of intent are binding on Siemens or
that definitive purchase agreements will be entered into. Accordingly, there
can be no assurance that currently planned projects or future projects will be
completed within the time periods projected, or at all. Failure to obtain
equipment on a timely basis, or at all, could jeopardize subscriber contracts
and could have a material adverse effect on the Company.
The construction of the Company's networks in the municipalities of Palmira,
Jamundi, Yumbo, Cartago and Buga are currently governed by turn-key contracts
which obligate Siemens and the other contractors to finish construction or
installation. See "Business--Construction Arrangements." However, any future
projects will typically require substantial construction of new networks or
upgrades to existing networks, and no such construction obligation has been
undertaken by a third party. Construction activity will require qualified
subcontractors and necessary equipment to be secured on a timely basis, the
availability of which may vary significantly from location to location.
Construction projects may experience cost overruns and delays outside the
control of the Company or its subcontractors, such as those caused by acts of
governmental entities, financing delays and catastrophic occurrences. Delays
also can arise from design changes and material or equipment shortages or
delays in delivery. Accordingly, there can be no assurance that such projects
will be completed within the amount budgeted therefor or on time, or at all.
Failure to complete construction within the amount budgeted or on time could
jeopardize subscriber contracts and could have a material adverse effect on
the Company.
If the Company were to decide to pursue other investments or make other
expenditures, other than the Expansion Plan, additional capital resources
would be required. If the Company is unable to fund such
25
<PAGE>
expenditures or investments, or if the Company's cash flow from operations
does not increase from its present level, the Company might not be able to
continue to pursue its network construction and subscriber growth strategy.
POTENTIAL NEED FOR ADDITIONAL EQUIPMENT
The success of the Company's telecommunications system is partially
dependent on the completion of its Expansion Plan and its TeleGirardot
Expansion Plan. See "Business--Expansion Plan." Although the Company has
entered into equipment purchase agreements with Siemens and IBM, there can be
no assurance that future network evaluations or other similar factors will not
necessitate the Company's re-evaluation of its equipment needs. See
"Description of Existing Indebtedness--Global-Siemens Arrangements,"
"Description of Existing Indebtedness--Transtel-Siemens Arrangement",
"Description of Existing Indebtedness--IBM Arrangement" and "Prospectus
Summary--Recent Developments." If equipment requirements do increase,
additional capital or financing sources would be required. There can be no
assurance that the Company will be able to fund such capital expenditures or
obtain such financing on terms favorable to the Company.
CONTINGENCY OF VENDOR FINANCING
The build out and upgrade of the Company's networks and the completion of
the Expansion Plan is reliant on equipment vendor financing from Siemens and
IBM. While there are two purchase agreements with Siemens, a purchase
agreement with IBM, and two letters of intent with Siemens that the Company
expects will result in one or more purchase agreements for the provision of
equipment required for the Expansion Plan, the Company is negotiating (i) the
financing terms and agreements with Siemens and IBM with respect to some of
the equipment and (ii) an amendment to a Siemens purchase agreement to
increase the amount of financing under such purchase agreement. See
"Description of Existing Indebtedness--Global-Siemens Arrangements" and
"Description of Existing Indebtedness--IBM Arrangements." Additionally, the
Company is currently negotiating with Siemens to enter into contracts for the
supply of equipment to effect the TeleGirardot Expansion Plan. There can be no
assurance that the financing from Siemens or IBM will be available and if it
is not available, whether other financing will be available to the Company. In
addition, there can be no assurance that financing agreements will be entered
into and if entered into, whether the terms of such financing agreements will
be favorable to the Company.
RISKS ASSOCIATED WITH COLOMBIAN PLEDGE AND ENFORCEMENT OF FOREIGN JUDGMENTS
The Senior Notes are secured by a pledge of the Intercompany Notes. The
pledge is a security instrument governed primarily by the Codigo de Comercio
(Commercial Code) and the Codigo de Procedimiento Civil (Code of Civil
Procedure) and there can be no assurance that this arrangement will be
effective to create a senior perfected security interest in the Intercompany
Notes enforceable in the same manner and to the same extent as a security
interest granted under the laws of the United States. An action to enforce the
pledge can only be executed before a Colombian court. The process employed in
executing the pledge entails a court order to sell the pledged asset to the
public, either by public auction or through a local stock exchange, with the
proceeds of the sale going to pay the defaulted obligations. The right to
initiate the judicial proceedings to enforce a pledge expires four years after
the obligation becomes enforceable. Historically, the enforcement of pledges
before Colombian courts has been a long process. The delays of a trial to
enforce the pledge may have a material adverse effect on the Colombian court's
ability to obtain payment of the full value for the Senior Notes and
therefore, on the Trust's ability to repay the Certificates.
In addition, substantially all of the assets of the Company will be located
in Colombia. As a result, it may not be possible for the Pass Through Trustee,
the Indenture Trustee or the Exchange Certificateholders to enforce outside of
Colombia judgments against the Company, including enforcement in the United
States of judgments predicated upon the civil liability provisions of the
United States federal securities laws or a judgment to enforce the Certificate
Guarantees. The United States and Colombia do not have a treaty providing for
reciprocal recognition and enforcement of judgments in civil and commercial
matters. See "Enforcement of Foreign
26
<PAGE>
Judgments in Colombia." For a foreign judgment to be effective and enforceable
in Colombia, it must be proved in accordance with the Rules of Court in
Colombia, as contained in the Colombian Code of Civil Procedure, pursuant to
which a demand for an exequatur (proceedings in the Colombian Judicial System
for recognition of a foreign judicial decision or arbitral award) must be
presented before Colombia's Supreme Court of Justice. Therefore, a final
judgment for the payment of money rendered by a federal or state court in the
United States based on civil liability, whether or not predicated solely upon
the civil liability provisions of the United States federal securities laws,
would be enforceable in Colombia against the Company only if it has been
proven in accordance with the Colombian Rules of Court. The Company also has
been advised by its Colombian counsel 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.
COMPETITION
There is currently no restriction in Colombia on competition within the
local telephony business. It is possible that competitors, including companies
with substantially greater capital or other resources than the Company, could
commence operations in the Company's service area and offer wireline,
wireless, cellular, Personal Communication Services ("PCS") or other
competitive telecommunications services. The Company currently faces
competition in certain cities primarily from various state-run providers of
local telephony service. Competition is based on services offered, quality of
service and coverage area. See "Industry Overview; Legal and Regulatory
Environment" and "Business--Operating Companies--General."
TECHNOLOGICAL RISK; RISK OF OBSOLESCENCE
The Company's Operating Companies generally use advanced technologies.
Although many of the technologies currently in use and to be used in the
future by the Company have been developed by international telecommunications
companies, such as Siemens, some have only recently been developed and
commercially introduced. There can be no assurance that the Operating
Companies will not experience technical problems in the commercial deployment
of these technologies, particularly because they are being introduced in a
developing country. In addition, the technology used in wireless
communications is evolving rapidly and one or more of the technologies
currently utilized or planned by the Company may not be preferred by its
customers or may become obsolete, which in either case would likely have a
material adverse effect on the Company. There can be no assurance that the
Company will be able to keep pace with ongoing technological changes in the
telecommunications industry.
REGULATORY RISKS
The privatization of telecommunications services in Colombia is dependent
upon Law 142. There can be no assurance that material adverse changes to Law
142 will not occur in the future. Additionally, certain Operating Companies
could become subject to service requirements, restrictions on interconnection
to government-owned or private telephone networks and government requirements
regarding rates and tariffs, among others. These requirements may be difficult
to comply with, particularly given demographic, geographic, or other issues in
a particular market. Further, changes in the regulatory framework may limit
the Operating Companies' ability to add subscribers to developing systems. An
Operating Company's failure to comply with applicable governmental regulations
or operating requirements could have a material adverse effect on the Company.
Further, the Company's current and anticipated ownership interests in the
Operating Companies are subject to continued support by the Colombian
government of privatization of the telecommunications sector.
Additionally, the pricing of the Company's services and related matters are
subject to regulation by the CRT. Changes in the regulation of the Company's
pricing, or a change in the interpretation of the existing regulations, could
have a material adverse effect on the Company. See "Industry Overview; Legal
and Regulatory Environment."
27
<PAGE>
Furthermore, the frequency assigned to the Company with respect to Unitel's
fixed wireless system, which was assigned by the Ministerio de Comunicaciones
(Ministry of Communications), could be revoked if the Company operates out of
its assigned frequency, offers services other than those approved by the
Ministry of Communications or fails to comply with other regulations governing
such license.
RISK OF MODIFICATION OR LOSS OF PERMITS; UNCERTAINTY AS TO AVAILABILITY
Each of the Operating Companies' ability to exploit its respective existing
civil works permits is essential to the Company's construction of its network.
These permits are granted by the municipalities in the areas served. Although
the municipalities are required to grant such permits under Law 142, there can
be no assurance that these permits will not become difficult to obtain, that
the law will always require their issuance, or that some prohibited action of
any of the Operating Companies will not cause their termination, and the
occurrence of any of these events could have a material adverse effect on the
Company. The Operating Companies may have limited legal recourse if any of
these events were to occur.
DEPENDENCE ON OTHER TELECOMMUNICATIONS PROVIDERS
The success of the Company's telecommunication system will in many cases
depend upon access to the systems of other local telecommunications providers,
some of which may be competitors of the Company. Although access to such
service is required by Law 142, the revocation, loss, or modification of any
of the existing arrangements or the failure to obtain necessary agreements
and/or arrangements in the future could have a material adverse effect on the
Company. The Operating Companies are additionally required by Colombian law to
enter into interconnection arrangements with TELECOM. Although TELECOM is
currently providing such service and is required to continue to do so under
Colombian law, formal agreements are not in place with the Company's Operating
Companies, as is also the case with other telecommunications providers.
There can be no assurance that such arrangements will continue to be
regulated by the Colombian government. Additionally, a breach by any of the
Operating Companies of these interconnection agreements could lead to loss of
such agreements, which could have a material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company is currently managed by a small number of key management and
operating personnel whose efforts will largely determine the Company's
success. The success of the Company also depends upon its ability to hire and
retain qualified operating, marketing, financial, accounting and technical
personnel. Competition for qualified personnel in the telecommunications
industry is intense and, accordingly, there can be no assurance that the
Company will be able to hire or retain necessary personnel. The loss of key
management personnel would likely have a material adverse effect on the
Company. See "Management."
CORPORATE DISCLOSURE AND ACCOUNTING STANDARDS
A principal objective of the securities laws of the United States, Colombia
and other countries is to promote disclosure of all material corporate
information. However, it is likely that there would be less or different
publicly available information about the Company in Colombia than would be
available about issuers listed on stock exchanges in the United States or
certain other countries. In addition, the Company prepares its financial
statements in accordance with Colombian GAAP, which differs in significant
respects from U.S. GAAP. Thus, Colombian financial statements and reported
earnings may differ from those of companies in other countries in this and
other respects. For a description of the principal differences between
Colombian GAAP and U.S. GAAP, insofar as they are relevant to the Company, see
Note 28 to the Consolidated Financial Statements.
CURRENCY FLUCTUATIONS, FOREIGN EXCHANGE CONTROLS, AND DEVALUATION
Since the consummation of the Offering, a substantial amount of the
Company's debt obligations, including the Senior Notes, are denominated in
Dollars while the Company generates revenues in Pesos. In addition, the
28
<PAGE>
Company has incurred and expects to continue to incur a significant portion of
its equipment costs in Dollars. Therefore, the Company is exposed to currency
exchange rate risks that could significantly affect 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 Pesos to the Dollar is a freely
floating rate which has declined in recent years. Since the period from August
1, 1997 through December 31, 1997, the Peso devalued relative to the dollar
approximately 16.6%. Any significant 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 Senior Notes and
consequently, on the Trust's obligations under the Certificates. See "Exchange
Rates."
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
remittance of interest and principal 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 Senior Notes.
As of July 4, 1997, the Central Bank's currency reserves were sufficient for
approximately 10 months of imports. Nevertheless, there is no assurance that
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 Senior Notes and
consequently, the Trust's obligations under the Certificates. There are no
limitations imposed by the Colombian government on nonresident or foreign
owners' ability to hold or vote the Senior Notes or the Certificates.
INABILITY TO REDEEM SENIOR NOTES WITHIN ONE YEAR
Because of a recent modification in Colombian securities laws, it is not
clear whether the Senior Notes can be prepaid within one year of their
issuance, whether by redemption, repurchase, acceleration, or otherwise.
Moreover, there is no controlling legal precedent with respect to this issue.
The Company has been advised by its Colombian counsel that there is legal risk
in redeeming or repurchasing the Senior Notes within one year of their
issuance. Unless a positive precedent arises or a change of law occurs after
the issuance of the Senior Notes, the Company does not intend to prepay the
Senior Notes within one year of their issuance, whether by redemption,
repurchase, acceleration, or otherwise. The Company's inability to redeem the
Senior Notes when required under the Indenture would result in an Event of
Default under the Indenture.
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 19.5%, 21.6% and 17.4% in
1995, 1996 and 1997, 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 Certificates and Senior Notes will
not be adversely affected by continuing or increased levels of inflation.
LACK OF A MARKET FOR THE EXCHANGE CERTIFICATES; RISKS ASSOCIATED WITH NON-
INVESTMENT GRADE DEBT
The Exchange Certificates are new securities for which there currently
exists no trading market. The Company does not intend to list the Exchange
Certificates on any national securities exchange or to seek admission thereof
to trading on the National Association of Securities Dealers Automated
Quotation System. The liquidity of any market for the Exchange Certificates
will depend on the number of Exchange Certificateholders, the interest of
securities dealers in making a market in the Exchange Certificates and other
factors. Accordingly, there can be no assurance as to the development or
liquidity of any trading market for the Exchange Certificates.
29
<PAGE>
To comply with the applicable state securities laws, the Exchange
Certificates may not be offered or sold by a Certificateholder unless they
have been registered or qualified for sale under such applicable state
securities laws or an exemption from registration or qualification is
available therefrom and is complied with.
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 Exchange Certificates. There can be no assurance
that the market, if any, for the Exchange Certificates will not be subject to
similar disruptions. Any such disruptions may have an adverse effect on the
Exchange Certificateholders. 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 a material
adverse effect on the market value and liquidity of the Exchange Certificates.
CONTROL BY CERTAIN STOCKHOLDERS AND MANAGEMENT
Certain of the Company's directors, executive officers and principal
stockholders beneficially own 100% of the outstanding common stock of the
Company. Accordingly, if they choose to act together, these persons will be
able to control the election of the Board of Directors and other matters voted
upon by the stockholders. A sale by one or more of these principal
stockholders to third parties could trigger the right of the
Certificateholders to require the Company to repurchase the Senior Notes. In
the event that an Offer to Purchase (as defined herein) occurs at a time when
the Company does not have sufficient available funds to purchase the Senior
Notes, or at a time when the Company is prohibited from purchasing the Senior
Notes, an Event of Default (as defined herein) could occur under the
Indenture.
DEFICIENCY OF EARNINGS TO FIXED CHARGES
The deficiency of earnings to fixed charges for each of the periods set
forth below has been computed on a consolidated basis and should be read in
conjunction with the Consolidated Financial Statements included elsewhere
herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, NINE MONTHS ENDED
----------------------- SEPTEMBER 30,
1995 1996 1997
----------- ----------- -----------------
(IN THOUSANDS OF CONSTANT PESOS OF
SEPTEMBER 30, 1997 PURCHASING POWER)
<S> <C> <C> <C>
Colombian GAAP
Historical.......................... Ps 11,396 Ps 114,233 Ps1,563,025
Pro Forma(1)........................ 24,051,366 17,822,802 8,995,293
U.S. GAAP
Historical.......................... 3,140,066 5,121,176 1,277,692
Pro Forma(1)........................ 27,180,035 22,829,744 12,650,924
</TABLE>
- --------
(1) This deficiency of earnings to fixed charges is computed using the
historical deficiency adjusted only for the additional interest costs and
amortization of deferred debt issuance costs relating to the Senior Notes
and the reduced interest costs relating to the debt refinanced. No
adjustment has been made to reflect assumed interest income on any
offering proceeds from the Senior Notes not utilized to refinance debt.
For purposes of computing deficiency of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes, minority interests
and fixed charges, excluding capitalized interest. Fixed charges consist of
interest on all indebtedness (whether capitalized or expensed), amortization
of deferred financing costs and that portion of operating lease expense deemed
to be interest expense.
30
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Certificates offered hereby. The Original Certificates surrendered in
exchange for the Exchange Certificates will be cancelled and can not be
reissued. The issuance of the Exchange Certificates will not result in any
change in the aggregate indebtedness of the Company.
The net proceeds from the Offering were approximately $141.9 million
(Ps177.0 billion) after deducting discounts and offering expenses.
Approximately $35.3 million (Ps44.0 billion) was deposited into the Escrow
Account to satisfy the first four interest payments on the Senior Notes.
Approximately $32.8 million (Ps40.9 billion) was used to pay existing debt and
$9.8 million (Ps12.2 billion) was used to pay the Central Bank's withdrawal
fee. The balance of the proceeds has been or will be used to (i) fund a
portion of the costs associated with the Expansion Plan (approximately $41.0
million) and (ii) fund general corporate purposes, including the TeleGirardot
acquisition and any future acquisitions (approximately $23.0 million).
The total cost of the Company's Expansion Plan is expected to be
approximately $181.8 million, of which approximately $7.8 million had been
financed with local bank borrowings, all of which has been repaid with
proceeds of the Offering, and approximately $1.5 million had been financed
with cash flow from operations. The remainder of the Expansion Plan,
approximately $172.5 million, is being financed from several sources
including: (i) the Offering; (ii) the sale of investments of $5.7 million;
(iii) the Vendor Financing (see "Risk Factors--Contingency of Vendor
Financing"); and (iv) the DIAN Financing (see "Description of Existing
Indebtedness--DIAN Financing"). The following table sets forth the estimated
sources and uses for the Expansion Plan Financing as of October 28, 1997:
SOURCES OF FUNDS
<TABLE>
<CAPTION>
($ IN
MILLIONS)
<S> <C>
Senior Notes..................................................... $150.0
Equity Contribution.............................................. 25.0
Vendor Financing................................................. 102.7
DIAN Financing................................................... 23.1
Sale of Investments(5)........................................... 7.6
------
Total Sources of Funds......................................... $308.4
======
</TABLE>
USES OF FUNDS
<TABLE>
<CAPTION>
($ IN
MILLIONS)
<S> <C>
Expansion Plan Capital Expenditures(l)........................... $172.5
Refinancing of Existing Debt(2).................................. 54.6
Escrow Account(3)................................................ 35.3
Central Bank Deposit Withdrawal Fee(4)........................... 9.8
General Corporate Purposes....................................... 28.2
Fees and Expenses................................................ 8.0
------
Total Uses of Funds............................................ $308.4
======
</TABLE>
- --------
(1) The aggregate capital expenditures for the Expansion Plan totals
approximately $181.8 million, of which approximately $7.8 million was
financed with local bank borrowings prior to October 28, 1997, all of
which was repaid with proceeds of the Offering, and $1.5 million was
financed with cash flow from operations prior to October 28, 1997.
(2) Proceeds from the Offering and the Equity Contribution have been utilized
to repay approximately $45.5 million of debt of the Company that was
outstanding as of October 28, 1997.
(3) Represents sufficient funds to pay the first four interest payments on the
Senior Notes.
(4) The Company was required to deposit approximately $37.9 million of the net
proceeds of the Offering with the Central Bank. This non-interest bearing
deposit was withdrawn before the end of the required deposit period of 18
months by the Company to fund the Expansion Plan. Such withdrawal required
a fee determined by applying a discount declining from 28.5% to 1.8%
depending on the time of withdrawal of the deposit. The Company withdrew
the deposit to finance the Expansion Plan and paid a withdrawal fee of
$9.8 million on December 29, 1997.
(5) Investments includes short-term and long-term certificates of deposits in
marketable securities and a temporary investment in a company owned by a
shareholder of the Company. See "Consolidated Financial Statements--Notes
4 and 25" and "Certain Related Party Transactions--Certain Other
Transactions with Gonzalo Caicedo Toro."
31
<PAGE>
CAPITALIZATION
The following table shows on a Colombian GAAP basis, as of September 30,
1997, the Company's capitalization on a pro forma basis after giving effect to
the sale of the Senior Notes and the use of a portion of the Equity
Contribution to repay all existing debt. See "Use of Proceeds" and "Selected
Financial and Other Data." This table should be read in conjunction with the
Consolidated Financial Statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
------------- ------------- -------- ---------
(IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER
30, 1997
PURCHASING POWER AND IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Cash........................... Ps 4,790,137 Ps 65,234,831 $ 3,843 $ 52,344
Restricted cash--Escrow
Account(1).................... -- 43,998,569 -- 35,304
------------- ------------- -------- --------
Total cash and restricted
cash...................... Ps 4,790,137 Ps109,233,400 $ 3,843 $ 87,648
============= ============= ======== ========
Long-term debt (including
current portion):
12 1/2% Senior Notes due
2007........................ Ps -- Ps186,940,500 $ -- $150,000
Other long-term debt(2)...... 60,361,630 -- 48,434 --
Capital lease
obligations(3).............. 1,339,413 1,339,413 1,075 1,075
------------- ------------- -------- --------
Total debt(4).............. 61,701,043 188,279,913 49,509 151,075
Minority interest.............. 33,380,596 33,380,596 26,784 26,784
Shareholders' equity(5)(6)..... 51,035,142 51,035,142 40,950 40,950
------------- ------------- -------- --------
Total capitalization....... Ps146,116,781 Ps272,695,651 $117,243 $218,809
============= ============= ======== ========
</TABLE>
- --------
(1) The Company has deposited approximately Ps44.0 billion ($35.3 million) of
the net proceeds realized from the sale of the Senior Notes, representing
funds sufficient to pay the first four interest payments on the Senior
Notes, into the Escrow Account.
(2) Other long-term debt, includes approximately Ps40.9 billion ($32.8
million) of existing debt that has been repaid with proceeds of the Senior
Notes. The remaining debt of approximately Ps19.5 billion ($15.7 million)
was repaid from cash received from the Equity Contribution before
September 30, 1997.
(3) Under U.S. GAAP, all capital leases are required to be capitalized,
including the Global Leases (as defined herein). Under Colombian GAAP,
certain lease payments are not required to be capitalized, including the
lease payments on the Vendor Financing. See Notes 26 and 28 to the
Consolidated Financial Statements. The Vendor Financing and the DIAN
Financing, without duplication, will be considered Indebtedness as they
arise for purposes of the Indenture, and therefore, as of September 30,
1997, the Company and its subsidiaries had Vendor Financing and DIAN
Financing of approximately Ps4.3 billion ($3.5 million). See "Use of
Proceeds."
(4) After completion of the Expansion Plan, the Company expects to have
approximately Ps28.8 billion ($23.1 million) of DIAN Financing and
approximately Ps128.0 billion ($102.7 million) of Vendor Financing
outstanding.
(5) The total authorized share capital of the Company is 50,000,000,000 shares
comprised of one class of common stock, with a par value of one Peso, of
which 5,039,801,222 shares were outstanding at September 30, 1997.
32
<PAGE>
THE EXCHANGE OFFER
GENERAL
The Company, together with the Trust, 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 all outstanding Original Certificates properly tendered on or prior
to the Expiration Date and not withdrawn as permitted pursuant to the
procedures described below for Exchange Certificates.
As of the date of this Prospectus, U.S.$150.0 million aggregate principal
amount at maturity of the Original Certificates was outstanding. This
Prospectus, together with the Letter of Transmittal, is first being sent on or
about , 1998, to all Original Certificateholders known to the Company.
The Company's obligation to accept Original Certificates 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 Original Certificates were issued by the Trust on October 28, 1997 in
transactions exempt from the registration requirements of the Securities Act.
Accordingly, the Original Certificates may not be reoffered, resold, or
otherwise transferred in the United States unless registered pursuant to the
Securities Act or unless an applicable exemption from the registration and
prospectus delivery requirements of the Securities Act is available.
In connection with the issuance and sale of the Original Certificates, the
Company entered into the Registration Rights Agreement, which requires the
Company to use its best efforts to file with the Commission a registration
statement relating to the Exchange Offer by March 27, 1998, to use its best
efforts to cause the registration relating to the Exchange Offer to become
effective under the Securities Act by May 26, 1998, and to consummate the
Exchange Offer by June 25, 1998. The Exchange Offer is being made by the
Company to satisfy its obligations with respect to the Registration Rights
Agreement. The Company filed the registration statement on April 10, 1998. As
a result of the delay in filing, additional interest has accrued on the Senior
Notes (and therefore, on the Certificates) over and above the basic interest
amount at a rate of 0.50% per annum for the period of the delay. If for any
reason, the Exchange Offer is not consummated by June 25, 1998, additional
interest will similarly accrue for the period of delay past June 25.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998, 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 Original Certificates, 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
Original Certificates 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 Original
Certificates 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
33
<PAGE>
oral or written notice to the Original Certificateholders as promptly as
practicable in the manner set forth above with respect to an extension of the
Expiration Date.
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 ORIGINAL CERTIFICATES
The tender to the Company of Original Certificates by an Original
Certificateholder thereof as set forth below and the acceptance thereof by the
Company will constitute a binding agreement between the tendering Original
Certificateholder 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, an Original Certificateholder who wishes to
tender Original Certificates 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 or, in
the case of a book-entry transfer, an Agent's Message (as defined below) in
lieu of the 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 representing Original Certificates
must be received by the Exchange Agent along with the Letter of Transmittal or
Agent's Message in lieu thereof, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Original Certificates, 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 Original Certificateholder
must comply with the guaranteed delivery procedures described below. The term
"Agent's Message" means a message, transmitted by DTC to and received by the
Exchange Agent and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgement from the DTC participant,
which acknowledgement states that such participant has received and agrees to
be bound by the Letter of Transmittal and that the Trust and the Company may
enforce such Letter of Transmittal against such participant.
THE METHOD OF DELIVERY OF ORIGINAL CERTIFICATES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE ORIGINAL
CERTIFICATEHOLDERS. 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
ORIGINAL CERTIFICATES, LETTERS OF TRANSMITTAL OR AGENT'S MESSAGE IN LIEU
THEREOF 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 Original Certificates surrendered for
exchange pursuant thereto are tendered (i) by a registered Original
Certificateholder 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 as 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 (each an "Eligible Institution"). If Original Certificates are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Original Certificates 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.
34
<PAGE>
If the Letter of Transmittal or any Original Certificates or powers of
attorney are signed by transferors, 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.
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 or
delivery of an Agent's Message in lieu thereof accompanied by (i) the Original
Certificates (or a confirmation of book-entry transfer of such Original
Certificates 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 (the "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 Exchange
Certificates in exchange for Original Certificates 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 or delivery of an
Agent's Message in lieu thereof (and any other required documents) and the
tendered Original Certificates.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Original Certificates 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 Original Certificates not properly tendered or
to not accept any particular Original Certificates which acceptance might, in
the judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Original Certificates
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Original Certificates in the
Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Original Certificates 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 Original Certificates 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
Original Certificates for exchange, nor shall any of them incur any liability
for failure to give such notification.
By tendering, each Original Certificateholder will represent to the Company
that, among other things, the Exchange Certificates acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such Exchange Certificates, 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
Exchange Certificates 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 Exchange Certificates for its own account
in exchange for Original Certificates where such Original Certificates 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 Exchange Certificates. 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 Original
Certificates at the Book-Entry Transfer Facility. DTC, 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 Original Certificates by
causing the Book-Entry Transfer Facility to transfer such Original
Certificates into the Exchange
35
<PAGE>
Agent's account with respect to the Original Certificates in accordance with
the Book-Entry Transfer Facility's procedures for such transfer. Although
delivery of Original Certificates 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 or an
Agent's Message in lieu thereof 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 an Original Certificateholder desires to accept the Exchange Offer and
time will not permit a Letter of Transmittal or Original Certificates 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 Original Certificates are registered and, if
possible, the certificate numbers of the Original Certificates to be tendered,
and stating that the tender is being made thereby and guaranteeing that within
three business days after the Expiration Date the certificates for all
physically tendered Original Certificates, in proper form for transfer, or a
Book-Entry Confirmation of such Original Certificates 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 or an Agent's Message in lieu thereof (and any other
required documents). Unless Original Certificates 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 Original Certificates 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 Original Certificates to be withdrawn,
identify the Original Certificates to be withdrawn (including the amount of
such Original Certificates), and (where Original Certificates have been
transmitted) specify the name in which such Original Certificates are
registered, if different from that of the withdrawing holder thereof. If
Original Certificates 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 Original Certificates 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 Original Certificates 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 Original Certificates so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Original Certificates 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
Original Certificates 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 Original Certificates 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 Original
Certificates may be retendered by following one of the procedures described
under "--Procedures for Tendering Original Certificates" above at any time on
or prior to the Expiration Date.
36
<PAGE>
ACCEPTANCE OF ORIGINAL CERTIFICATES FOR EXCHANGE; DELIVERY OF EXCHANGE
CERTIFICATES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original
Certificates properly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date and will issue the Exchange Certificates promptly after such
acceptance. See "The Exchange Offer--Certain Conditions to the Exchange
Offer." For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Original Certificates 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 Original Certificate accepted for exchange, the Original
Certificateholder will receive Exchange Certificates having a principal amount
equal to that of the surrendered Original Certificates.
In all cases, issuance of Exchange Certificates for Original Certificates
that are accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of such Original Certificates
or a timely Book-Entry Confirmation of such Original Certificates into the
Exchange Agent's account at the Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal or Agent's Message in lieu
thereof and all other required documents.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
The Exchange Offer shall not be subject to any conditions, other than that
(i) the Exchange Offer does not violate applicable law, rule, regulation or
any applicable interpretation of the Staff of the Commission (the "Staff"),
(ii) no action or proceeding is instituted or threatened in any court or by
any governmental agency which might materially impair the ability of the
Company or the Trust to proceed with the Exchange Offer and no material
adverse development has occurred in any existing action or proceeding with
respect to the Company or the Trust and (iii) all governmental approvals have
been obtained, which approvals the Company deems necessary for the
consummation of the Exchange Offer.
EXCHANGE AGENT
Marine Midland Bank has been appointed as the Exchange Agent for the
Exchange Offer. All tendered Original Certificates, executed Letters of
Transmittal or Agent's Messages in lieu thereof 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.
Marine Midland Bank also acts as Indenture Trustee under the Indenture.
SOLICITATION OF TENDERS
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker, 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 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 be beneficial
owners of the Original Certificates and in handling or forwarding tenders for
their customers.
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
37
<PAGE>
there has not been a 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) Original
Certificateholders 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
Certificateholders who tender their Original Certificates for exchange will
not be obligated to pay any transfer taxes in connection therewith except that
Certificateholders who instruct the Company to register Exchange Certificates
in the name of, or request Original Certificates 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.
ACCOUNTING TREATMENT
The Exchange Certificates will be recorded at the book value of the Original
Certificates 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 Exchange Certificates for
Original Certificates. Expenses incurred in connection with the issuance of
the Exchange Certificates will be amortized over the term of the Exchange
Certificates.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALE OF EXCHANGE CERTIFICATES
Original Certificateholders who do not exchange their Original Certificates
for Exchange Certificates pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Original Certificates as set
forth in the legend thereon as a consequence of the issuance of the Original
Certificates pursuant to the exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. Original Certificates not exchanged pursuant to the Exchange
Offer will continue to remain outstanding in accordance with their terms. In
general, the Original Certificates may not be offered or sold unless
registered under the Securities Act and under the applicable state securities
laws, 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 Original Certificates under
the Securities Act. However, if, prior to consummation of the Exchange Offer,
the Initial Purchaser holds any Certificates acquired by it and having, or
which are reasonably likely to be determined to have, the status of an unsold
allotment in the initial distribution, or any other Original Certificateholder
is not entitled to participate in the Exchange Offer, under the Registration
Rights Agreement, the Company, upon the request of the Initial Purchaser or
any such Original Certificateholder, shall simultaneously with the delivery of
Exchange Certificates in the Exchange Offer, issue and deliver to the Initial
Purchaser or any such Original Certificateholder, in exchange (the "Private
Exchange") for such Certificates held by such Initial Purchaser and any such
Original Certificateholder, a like principal amount of certificates issued by
the Trust that are identical in all material respects to the Exchange
Certificates (the "Private Exchange Certificates") (and which are entitled to
the benefits of the Trust Agreement); provided, however, the Company shall not
be required to effect such exchange if, in the written opinion of counsel for
the Company (a copy of which shall be in form and substance reasonably
satisfactory to the Initial Purchaser and be delivered to the Initial
Purchaser and any Original Certificateholder affected thereby), such exchange
cannot be effected without registration under the Securities Act. The Private
Exchange Certificates shall bear the same CUSIP number as the Exchange
Certificates.
Based on certain no-action letters issued by the Staff to third parties in
unrelated transactions, the Company believes that Exchange Certificates 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 purchased Original Certificates 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
38
<PAGE>
Exchange Certificates 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 Exchange Certificates. If any
holder has any arrangement or understanding with respect to the distribution
of the Exchange Certificates to be acquired pursuant to the Exchange Offer,
such holder (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Thus, any Exchange Certificates acquired by such holder
will not be freely transferable except in compliance with the Securities Act.
A broker-dealer who holds Original Certificates 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 Exchange Certificates. Each such broker-
dealer that receives Exchange Certificates for its own account in exchange for
Original Certificates, where such Original Certificates 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 the resale of such Exchange Certificates. See
"Plan of Distribution."
In addition, to comply with applicable state securities laws, the Exchange
Certificates may not be offered or sold by a Certificateholder unless they
have been registered or qualified for sale under such applicable state
securities laws or an exemption from registration or qualification is
available therefrom.
Participation in the Exchange Offer is voluntary. Original
Certificateholders are urged to consult their financial and tax advisors in
making their own decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Certificates pursuant to the terms, of this Exchange
Offer, the Company will have fulfilled a covenant contained in the
Registration Rights Agreement. Any Original Certificates not tendered and
accepted in the Exchange Offer will remain outstanding and will be entitled to
all of the same rights and will be subject to all of the same limitations
applicable thereto under the Trust Agreement (except for certain rights to be
registered under the Act which terminate upon consummation of the Exchange
Offer). All untendered Original Certificates, and all Private Exchange
Certificates will be subject to the restrictions on transfer set forth in the
Indenture, except that the holders of Private Exchange Certificates will in
certain circumstances have rights to have their Private Exchange Certificates
registered under the Act for resale. To the extent that Original Certificates
are tendered and accepted in the Exchange Offer, an Original
Certificateholder's ability to sell untendered Original Certificates could be
adversely affected.
The Company may in the future seek to acquire untendered Original
Certificates in open market or privately negotiated transactions, through
subsequent exchange offers or otherwise. The Company has no present plan to
acquire any Original Certificates which are not tendered in the Exchange
Offer.
39
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The Company was incorporated in 1993 and commenced offering telephone
services, through its operating subsidiary TelePalmira, in September 1995.
Accordingly, the Company has no commercial operating history prior to such
time, and results for 1995 are not directly comparable to those of 1996. The
Company was in a preoperating stage prior to September 1, 1995 and capitalized
all of its net expenses as deferred charges; thus, no statements of income are
presented for 1993 and 1994. The selected statement of income data for each of
the years ended December 31, 1995 and 1996 and the nine months ended September
30, 1997, and the selected balance sheet data as of December 31, 1994, 1995
and 1996 and September 30, 1997 have been derived from financial statements
audited by Price Waterhouse, independent accountants. The consolidated balance
sheets at December 31, 1996 and September 30, 1997 and the related statements
of income and of cash flows, of changes in financial position and of changes
in shareholders' equity for the two years ended December 31, 1996 and the nine
months ended September 30, 1997, and notes thereto, appear elsewhere herein.
The report of Price Waterhouse which also appears herein contains an
explanatory paragraph relating to a change in the method of depreciation as
described in Note 7 to the Consolidated Financial Statements. The selected
balance sheet data at December 31, 1993 have been derived from unaudited
consolidated financial statements of the Company. 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 Consolidated Financial Statements of the Company,
including the notes thereto, included elsewhere in this Prospectus.
The Consolidated Financial Statements included herein have been prepared in
conformity with Colombian GAAP (including restatement of the financial
information in constant pesos as of September 30, 1997), which differs in
certain significant aspects from U.S. GAAP. Note 28 to the Consolidated
Financial Statements provides a discussion of the principal differences
between Colombian and U.S. GAAP as they relate to the Company and a
reconciliation of net income and shareholders' equity for the Company as of
and for the years ended December 31, 1995 and 1996 and as of and for the nine
months ended September 30, 1997, to amounts calculated in accordance with U.S.
GAAP.
Dollar equivalent information set forth below has been included solely for
the convenience of the reader, and is translated from Pesos at the
Representative Market Rate in effect on September 30, 1997 of Ps1,246.27 to
one Dollar. Such translation should not be construed as a representation that
the Peso amounts represent, or have been or could be converted into, Dollars
at that rate or any other rate.
Unless otherwise indicated, all financial information included in this
Prospectus has, for comparability purposes, been restated in constant Pesos as
of September 30, 1997 by indexing historical amounts using the MCPI. Although
the restatement of nominal Pesos into constant Pesos lessens the distorting
effect that an inflationary environment has on comparisons of the Consolidated
Financial Statements over time, such restatement does not wholly eliminate
those distortions and evaluation of period-to-period trends may be difficult.
See "Risk Factors--Corporate Disclosure and Accounting Standards" and "Risk
Factors--Inflation."
40
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ---------------------
1995 1996 1997 1997
------------- ------------- ------------ -------
(IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER 30,
1997 PURCHASING POWER AND IN THOUSANDS OF
DOLLARS, EXCEPT NETWORK AND OPERATING DATA AND
PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Colombian GAAP:
Revenues................ Ps 2,359,089 Ps 11,560,208 Ps17,639,937 $14,154
Costs and expenses...... 1,124,170 6,953,372 9,839,644 7,895
Operating income........ 1,234,919 4,606,836 7,800,293 6,259
Interest expense........ 277,073 1,891,283 4,449,384 3,570
Income tax expense...... 362 319,388 2,087,115 1,675
Minority interest
expense................ 500,603 2,228,831 2,391,209 1,919
Net income(1)........... 751,720 3,248,886 852,747 684
Earnings per share...... .33 .81 .22 --
U.S. GAAP:
Revenues................ Ps 1,765,173 Ps 7,511,755 Ps18,780,718 $15,070
Operating income
(loss)................. 2,307,448 (174,622) 4,102,908 3,292
Interest expense........ 1,578,062 8,237,631 7,463,602 5,989
Net loss................ (2,879,491) (2,913,097) (1,566,452) (1,257)
Basic earnings (loss)
per share.............. (1.25) (.73) (.37) --
OTHER FINANCIAL DATA:
Colombian GAAP:
EBITDA(1)(2)............ Ps 1,617,830 Ps 6,664,146 Ps10,753,747 $ 8,629
Capital
expenditures(3)........ 15,514,832 6,575,674 28,109,072 22,555
Depreciation and
amortization(1)........ 312,640 1,247,928 2,047,413 1,643
Total Indebtedness(4)... 18,032,952 45,790,501 64,534,380 51,782
Deficiency of earnings
to fixed charges(6).... 11,396 114,233 1,563,025 1,254
U.S. GAAP:
EBITDA(2)............... Ps (1,963,074) Ps 1,417,411 Ps 6,726,459 $ 5,397
Capital
expenditures(3)........ 15,518,810 6,832,675 29,025,685 23,290
Depreciation and
amortization........... 344,374 1,592,033 2,616,244 2,099
Deficiency of earnings
to fixed charges(5).... 3,140,066 5,121,176 1,277,692 1,025
NETWORK AND OPERATING DATA
(END OF PERIOD):
Systems in operation.... 1 1 6
Population.............. 317,995 317,995 2,897,600
Subscribers............. 22,260 29,528 92,009
Penetration(6).......... 7.0 9.3 14
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1997
--------- ----------- ------------ ------------ ------------- -------
(IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER 30, 1997
PURCHASING POWER AND IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF
PERIOD):
Colombian GAAP:
Cash.................. Ps113,627 Ps 6,088 Ps 700,633 Ps13,399,275 Ps 4,790,137 $ 3,843
Properties, plant and
equipment, net....... -- -- 22,094,150 26,173,513 67,756,645 54,368
Total assets.......... 182,039 3,954,942 34,094,278 84,029,684 165,177,425 132,538
Short-term debt(7).... -- -- 1,734,160 17,404,295 552,353 443
Long-term debt(8)..... -- -- 12,607,074 25,371,859 61,148,690 49,066
Minority interest..... -- -- 9,190,819 17,047,065 33,380,596 26,784
Shareholders' equity.. 106,998 3,374,335 6,967,236 18,817,274 51,035,142 40,950
U.S. GAAP:
Cash.................. Ps -- Ps -- Ps 700,633 Ps13,399,275 Ps 4,790,137 $ 3,843
Properties, plant and
equipment, net....... -- -- 25,360,280 28,412,326 70,006,609 56,173
Total assets.......... -- -- 32,401,221 61,720,128 139,078,457 111,596
Short-term debt(7).... -- -- 2,964,247 17,934,921 687,025 551
Long-term debt(8)..... -- -- 14,617,214 27,494,365 62,156,350 49,874
Minority interest..... -- -- 8,553,136 7,191,235 23,271,406 18,673
Shareholders' equity
(deficit)............ -- -- 2,077,720 (1,160,960) 28,144,312 22,583
</TABLE>
- --------
(1) For Colombian GAAP purposes, as of January 1, 1996, TelePalmira changed
from the straight-line to the reverse sum of the years digits' method of
computing depreciation which had the effect of decreasing 1996
depreciation (and increasing 1996 income before income taxes and minority
interest) by Ps914,548 ($734) and increasing 1996 net income by Ps548,728
($440). For U.S. GAAP purposes, all periods use the straight-line method.
(2) EBITDA is defined as operating income (loss) plus depreciation and
amortization and plus lease expense related to the Vendor Financing under
Colombian GAAP. Under U.S. GAAP, the Vendor Financing is treated as debt
and therefore the associated cost is treated as interest expense and
principal payment rather than lease expense. Although EBITDA is not a
measure of performance calculated in accordance with Colombian or U.S.
GAAP, the Company has included such data because it is used by certain
investors to determine the Company's ability to meet debt service
requirements. Such data should not be considered as an alternative to net
earnings as an indicator of the Company's operating performance or as an
alternative to cash flows from operating activities as a measure of
liquidity.
(3) Capital expenditures consist of purchases of properties, plant and
equipment as reflected in the Company's consolidated statements of cash
flows.
(4) Total Indebtedness is calculated in accordance with the definition of
"Indebtedness" under the Indenture, which includes short-term debt, long-
term debt, capital lease obligations, lease payments under the Vendor
Financing (which are treated as operating leases under Colombian GAAP, but
are capitalized under U.S. GAAP), and the Company's obligations under the
DIAN Financing.
(5) For purposes of computing the deficiency of earnings to fixed charges,
"earnings" consist of income (loss) before income taxes, minority
interests and fixed charges, excluding capitalized interest. Fixed charges
consist of interest on all indebtedness (whether capitalized or expensed)
and that portion of operating lease expenses deemed to be interest
expense.
(6) Penetration represents the number of installed lines per 100 people. In
Cartago, Jamundi and Yumbo, penetration includes the installed lines of
municipal competitors as of December 31, 1996 of approximately 10,000
lines, 5,200 lines and 5,500 lines as per the Company's estimates,
respectively.
(7) Short-term debt includes current portion of long-term debt, current
portion of capital lease obligations and short-term debt.
(8) Long-term debt includes long-term debt and capital lease obligations.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition and
results of operations of the Company as of and for the years ended December
31, 1995 and December 31, 1996 and as of and for the nine months ended
September 30, 1997. The discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this Prospectus. The Consolidated Financial Statements
have been prepared in accordance with Colombian GAAP, which differs in certain
significant respects from U.S. GAAP. Note 28 to the Company's Consolidated
Financial Statements provides a reconciliation to U.S. GAAP of the Company's
net income (loss) and shareholders' equity (deficit) for as of and for the
years ended December 31, 1995 and 1996 and as of and for the nine months ended
September 30, 1997. Unless otherwise indicated, the financial information has
been presented in constant Pesos as of the latest balance sheet date of the
Company (September 30, 1997). Dollar amounts are translated from Pesos amounts
at the Representative Market Rate on September 30, 1997, which was 1,246.27
Pesos to one Dollar.
GENERAL
The Company is the largest private telephone company in Colombia, providing
telephone service to both business and residential subscribers. The Company
(excluding TeleGirardot), currently owns and operates telephone systems
serving seven cities, with an aggregate population of 2.9 million people,
located in the southwestern region of Colombia. As of December 31, 1997, such
systems provided service to an aggregate of approximately 101,500 subscribers
and had an average penetration of 18 lines per 100 people.
The Company is implementing its Expansion Plan designed to satisfy the
significant demand and growth for telephone lines in each of its markets.
Management intends to substantially increase the number of lines installed
from 56,800 at the date of acquisition of each of the systems to approximately
222,200 lines by the completion of the Expansion Plan by December 31, 1998. As
of February 28, 1998 the Company, in conjunction with Siemens, had completed
the installation of approximately 105,100 new lines, or approximately 64% of
the lines to be installed pursuant to the Expansion Plan.
For the Company's expansion plan with respect to TeleGirardot, see
"Prospectus Summary--Recent Developments."
The Company generates revenues by providing telephone services to its
commercial and residential subscribers. The Company's sources of revenue
consist of: (i) basic fixed charges based either on the predecessor telephone
operator or the existing competitive tariff structure, (ii) local usage
charges based on the number of minutes used per month; (iii) access charges
for national and international long distance based on the incoming and
outgoing calls from the Company's network system; (iv) the sale of equipment
to subscribers; (v) value-added services such as video conference calling and
voice mail; and (vi) connection fees from each new subscriber connected to the
Company's network. Various local institutions are available to finance
subscribers' connection fees. Typically, Transtel installs a line and
subsequently sells the associated connection fee receivable to local financial
institutions on a non-discounted basis. In addition, the Company is expected
to generate additional revenues from its subscribers accessing the Internet.
The Company's subscribers will be expected to pay a monthly service fee and a
monthly usage fee to access the Internet. All of the Operating Companies will
be able to provide Internet access by May 1, 1998.
The Company expects that connection fees will continue to comprise a
significant portion of the Company's near-term revenues as a result of the
expected growth in the Company's subscriber base. The Company believes that as
subscribers are added to the network and existing demand is satisfied, the
composition of revenues will shift, resulting in local, national and long
distance usage comprising the majority of the Company's revenues. In addition,
the Company expects that value-added services will also comprise a more
significant portion of future revenues driven by Internet access and other
telephone services such as videoconference calling, voice mail and call
waiting.
43
<PAGE>
FACTORS THAT WILL AFFECT FUTURE RESULTS OF OPERATIONS--PRINCIPAL SOURCES OF
REVENUE AND EXPENSES
The Company has formulated a business plan based on, among other
assumptions, the following assumptions regarding penetration, call volume,
usage patterns, capital expenditures and churn, all of which could
significantly affect its future results of operations.
Penetration. In 1995, Colombia had an average penetration of approximately
14.0 lines per 100 people. At the time the Company initiated the development
and operation of telephone service in the municipality of Palmira, the
municipality had a penetration of approximately 4.9 lines per 100 people. The
Company has since increased Palmira's subscriber base by 220% from 15,600 to
50,100 as of December 31, 1997, representing a penetration of approximately 16
lines per 100 people. The Company believes that it will be able to complete
its network development in Palmira by June 30, 1998. Based on the Company's
experience in Palmira, the Company expects to achieve its complete network
build-out and subscriber addition by the end of 1998. The Company has designed
its Expansion Plan in order to accommodate the existing unmet demand and the
projected growth based on its extensive market studies that include door-to-
door surveys. Following completion of the Expansion Plan, and assuming a fully
subscribed network, the Company expects to have a penetration of approximately
22.8 lines per 100 people.
Call Volume/Usage. Charges for local and domestic long-distance service vary
with the price per minute and the number of minutes consumed on a monthly
basis. The charge per minute depends on the time of day, the day of the week
and the duration of calls. Telephone usage also depends on the number of lines
in service, the volume of minutes, the number of new lines to be installed and
the applicable tariffs. Telephone usage differs for residential, commercial
and rural subscribers.
Telephone usage in Colombia in terms of minutes has grown to 75.9 billion
minutes per annum in 1996, from 32.2 billion minutes per annum in 1994,
representing a compound annual growth rate ("CAGR") of 53.5%. Total usage for
1996 included 70.4 billion minutes of local calls, 4.9 billion minutes of
national long distance and 532 million minutes of international long distance.
According to the Ministry of Communications the average annual consumption per
subscriber in 1996 (including both residential and business subscribers) was
as follows: (i) 14,652 minutes (1,221 minutes per month) of local calls; (ii)
1,032 minutes (86 minutes per month) of domestic long distance calls; and
(iii) 110 minutes (9 minutes per month) of international long distance calls.
The Company believes future usage patterns in Colombia, including the
Company's markets, will be consistent with historical usage patterns.
Revenues. The Company's revenues are comprised of: (i) connection fees; (ii)
basic fixed charges; (iii) local usage charges; (iv) access charges of
national and international long distance calls; (v) the sale of equipment to
subscribers; and (vi) charges for value-added services. Telephone rates in
Colombia, excluding connection fees, are subject to inflationary adjustments
on a monthly basis in accordance with regulations from the CRT. For fiscal
years 1997 and 1996, the Colombian Consumer Price Index increased 17.4% and
19.5%, respectively, while basic telephone rates in constant pesos increased
approximately 3.6% and decreased 2.4%, respectively. The Company collects its
service fees from its customers every month. The local operator bills and
collects a fixed monthly fee, local usage, long distance and cellular revenues
from each customer. The Company retains its interconnection revenues for the
utilization of the Company's network in any long distance and cellular
incoming or outgoing call. In addition, the CRT sets tariffs either in
accordance with the historical costs of the telephone system or levels
established by the competition. This law has greatly benefited the Company by
allowing management to set its tariffs in accordance with its competitors'
higher historical operating costs, rather than the Company's much lower cost
of operations.
Tariffs. Tariffs and usage patterns differ significantly for the three major
categories of subscribers in Colombia: (i) residential, (ii)
commercial/industrial; and (iii) rural subscribers. In addition, Colombia
imposes a progressive tariff structure whereby higher income customers are
charged a higher tariff to subsidize lower income subscribers. Tariffs are
based on the economic status for which the subscriber qualifies. Commercial
customers are segregated into middle market and industrial classifications.
Industrial subscribers may be charged
44
<PAGE>
a higher tariff and such pricing adjustments are left to the discretion of the
service provider. Rural customers are usually charged the highest tariffs in
order to incentivize the provision of service to such customers.
The following table sets forth current tariff information for residential
and commercial customers of the Company in Palmira.
<TABLE>
<CAPTION>
SERVICE RESIDENTIAL TARIFF COMMERCIAL TARIFF
------- ------------------ -----------------
<S> <C> <C>
Connection Fees...................... Ps332,000 Ps623,000
Basic Charges........................ Ps2,500/month Ps5,800/month
Local Usage Charges.................. Ps5/minute Ps5.1/minute
Long Distance Charges................ Ps34/minute Ps34/minute
</TABLE>
Connection Fees. Tariffs with respect to installation or connection as of
December 31, 1997 ranged in each of the Operating Companies from Ps125,000-
664,000 for residential subscribers and Ps486,000-664,000 for commercial
subscribers. As of December 31, 1997, the top 25 telephone operators in
Colombia had an average residential connection fee of approximately Ps339,941
and a commercial connection fee of approximately Ps507,827. The Company set
its connection tariffs in each municipality based either on its predecessor
telephone operator or the competitive tariff structure in each market. As of
December 31, 1997, the Company, based on the total number of lines sold,
charged an average connection fee on all residential and commercial
subscribers of Ps366,000 in Palmira.
Under Colombian GAAP, the Company recognizes income from connection charges
when full payment is received from the customer or when the customer signs the
promissory note and makes the initial payment on the connection fee. These
events may occur prior to the time that the customer is connected to the
network and becomes a subscriber.
Basic Charges. The Company's basic charges vary by municipality and are
negotiated based either on the predecessor telephone operator or the existing
competitive tariff structure. In 1997, Palmira's average monthly basic fee for
residential and commercial customers was approximately Ps3,950 as compared to
the national average for the top 25 operators in Colombia which was
approximately Ps4,100. The following chart illustrates the Company's
residential and commercial basic monthly charges as of December 1997 for the
Company's Operating Companies.
<TABLE>
<CAPTION>
TELEPALMIRA TELECARTAGO CAUCATEL BUGATEL UNITEL TELEJAMUNDI
----------- ----------- -------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Ps3,950 Ps2,675 Ps3,580 Ps4,020 Ps6,445 Ps6,445
</TABLE>
Local Usage Charges. The Company collects a monthly local usage charge from
its customers. Local usage is based on the number of minutes generated by each
subscriber, valued at the price per minute existing at the time of billing. In
1997, the Company generated approximately 883 minutes per month per average
residential and commercial subscriber and had a monthly usage charge of Ps5
per minute in Palmira.
Long Distance Charges. The Company collects long distance charges based on
the number and duration of calls. Long distance access tariffs are set by the
CRT and are identical for all operators throughout Colombia. In 1997, the
Company generated approximately 344 minutes per month per average residential
and commercial subscriber and had a monthly usage charge of Ps34 per minute in
Palmira.
Other Revenues. Other revenues consist of, among other things, the sale of
telephone equipment to subscribers (provided by Siemens), telephone books and
public telephones. In addition, value-added services such as video conference
calling and Internet access are expected to generate a significant portion of
the Company's revenues in the future. The Company intends to offer competitive
tariffs for the usage of such value-added services. In addition, the Company
expects to complement its value-added services by increasing the number of
lines of its existing subscriber base that may need to have a separate line
for a fax machine or the Internet instead of sharing it with the main
telephone line.
45
<PAGE>
Operating Costs. The Company anticipates that it will incur operating costs
from the following primary activities: (i) operations, (ii) general
administrative expenses and (iii) sales and marketing. In each such category,
the Company's primary cost of operation will consist of personnel.
Substantially all of the expenses incurred by the Company during its
development period were deferred as preoperating costs and consisted primarily
of expenses associated with due diligence, research and execution of the
Company's acquisition strategy and formation of the Company's corporate
infrastructure. Such cumulative deferred costs (before accumulated
amortization) were Ps4.5 billion, Ps5.7 billion and Ps6.0 billion at December
31, 1995, December 31, 1996 and September 30, 1997, respectively.
Operating Expenses. Operating expenses consist of costs associated with
customer service, network operations and other operation costs. Although
initially the costs of operations for the Company will be limited by the turn-
key contracts that the Company has with Siemens, the Company expects that its
operating expenses will increase due to the increasing number of customers
requiring installation and general service. Subsequently, operating expenses
will consist predominantly of general maintenance and upkeep.
Administrative Expenses. Administrative expenses include engineering,
network implementation and information technology expenses, finance and
billing, management and miscellaneous costs. Administrative expenses are
expected to increase during the Expansion Plan. During fiscal 1996 and the
nine months ended September 30, 1997, the Company hired additional personnel
to oversee and supervise Siemens' construction of the networks for Palmira,
Jamundi and Yumbo. In the year ended December 31, 1996 and the nine months
ended September 30, 1997, these additional workers are reflected in
incremental administration costs of approximately Ps367.9 million ($295,200)
and Ps450.3 million ($361,300) respectively. These workers are temporary and
the costs associated with their employment are expected to decrease following
completion of the networks.
Sales and Marketing Expenses. Sales and marketing expenses, consisting of
costs relating to the Company's sales and marketing department, advertising,
direct mailing programs and door-to-door survey activities, are expected to
remain constant throughout the Expansion Plan and to decrease thereafter,
reflecting costs associated with the launch and rollout of the Company's
services in each of its Operating Companies. Sales and marketing expenses are
expected to vary based on the size of each market. In 1997, in Palmira, the
average selling and marketing expense per new subscriber was approximately
Ps39,200. The Company expects the average sales and marketing expenses per new
subscriber to be consistent with its experience in Palmira.
Capital Expenditures. The Expansion Plan is projected to require aggregate
capital expenditures of approximately Ps226.6 billion ($181.8 million), of
which approximately 70.0% is related to fixed price, equipment purchase
agreements and turn-key installation contracts. As of September 30, 1997,
approximately Ps9.7 billion ($7.8 million) has been financed with local bank
borrowings, all of which have been repaid with proceeds of the Offering, and
approximately Ps1.9 billion ($1.5 million) has been financed with cash flow
from operations. The Expansion Plan will require capital expenditures in each
of the Company's markets and management intends to fully finance the Expansion
Plan with the Expansion Plan Financing. See "Prospectus Summary--Expansion
Plan" and "Use of Proceeds." Upon completion of the Expansion Plan, the
Company will operate a fully digital internal plant and a fiber optic primary
network. This technology is long-lived and requires minimal maintenance. For
the nine months ended September 30, 1997, the Company incurred minimal
maintenance expense per line due to the fact that the networks are new. The
Company expects that its annual maintenance expense will increase to
approximately Ps10,890 per line and that new lines will cost an additional
capital expenditure of Ps317,799 per line once the network is fully built. The
Company has contracted Siemens for the execution of its Expansion Plan.
Siemens will construct newly designed networks and install modern, high
quality equipment in each of the Company's systems. Siemens is expected to
complete the Expansion Plan by December 31, 1998. See "Description of Existing
Indebtedness--Global--Siemens Arrangements."
Churn. Churn consists of both residential and business customers that change
premises, disconnect telephone service once established, switch to other
service providers, if and where available, or terminate the Company's
services. In the year ended December 31, 1996, and the nine months ended
September 30, 1997, the Company experienced an annual average churn rate of
less than 0.90% and 0.50%, respectively, in the
46
<PAGE>
municipality of Palmira. Management attributes the low churn rate to (i) the
significant unmet demand and the lack of quality telephone service providers
that has resulted in multi-year waiting lists, (ii) the significant investment
resulting from the connection fee paid by the subscriber in order to initiate
service and (iii) the Company's ability to provide high quality telephone
services with significant emphasis on customer service. Management believes
that these fundamentals exist in the markets in which it operates and expects
the churn rate to remain relatively low.
RESULTS OF OPERATIONS
The composition of the Company's revenues for each of the periods discussed
herein is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------
1995(1) % 1996 % 1997 %
----------- ----- ------------ ----- ------------ -----
(IN THOUSANDS OF CONSTANT PESOS OF SEPTEMBER 30, 1997
PURCHASING POWER, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C>
Connection fees......... Ps 690,145 29.3% Ps 5,464,634 47.2% Ps 8,073,690 45.8%
Local usage charges..... 344,471 14.6 1,262,738 10.9 2,164,675 12.3
Basic charges........... 328,207 13.9 1,093,058 9.5 1,522,297 8.6
Long-distance charges... 905,247 38.4 3,139,841 27.2 4,078,053 23.1
Other income............ 91,019 3.8 599,937 5.2 1,801,222 10.2
----------- ----- ------------ ----- ------------ -----
Total................. Ps2,359,089 100.0% Ps11,560,208 100.0% Ps17,639,937 100.0%
=========== ===== ============ ===== ============ =====
</TABLE>
- --------
(1) Includes only four months of commercial operation.
The following table expresses certain financial data from the Company's
statement of income as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED
------------- SEPTEMBER 30,
1995(1) 1996 1997
------- ----- -------------
<S> <C> <C> <C>
Revenues.................... 100.0% 100.0% 100.0%
----- ----- -----
Costs and expenses:
Operating costs........... 28.9 21.3 22.7
Administrative expenses... 15.1 32.3 27.5
Marketing expenses........ 3.7 6.5 5.6
----- ----- -----
Total................... 47.7 60.1 55.8
----- ----- -----
Operating income............ 52.3 39.9 44.2
Nonoperating income
(expenses), net............ 3.4 (8.9) (30.1)
Net monetary inflation
adjustment income (loss)... (2.6) 19.2 16.1
----- ----- -----
Income before income taxes
and minority interest...... 53.1 50.2 30.2
Income tax expense.......... -- (2.8) (6.8)
----- ----- -----
Income before minority
interest................... 53.1 47.4 23.4
Minority interest........... (21.2) (19.3) (13.5)
----- ----- -----
Net income.................. 31.9% 28.1% 9.9%
===== ===== =====
</TABLE>
- --------
(1) Includes only four months of commercial operation.
The following is a discussion of the consolidated results of operations of
the Company for the nine months ended September 30, 1997, the year ended
December 31, 1996 and the four months ended December 31, 1995 (the Company
commenced commercial operation on September 1, 1995).
47
<PAGE>
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997 COMPARED TO THE YEAR ENDED DECEMBER
31, 1996
Revenues. The total revenues for the nine months ended September 30, 1997
increased by Ps6.080 billion, or 52.6%, to Ps17.640 billion from Ps11.560
billion in the year ended December 31, 1996 ("Annual 1996"). The increase in
revenues for the first nine months of 1997 was mainly attributable to the
increase in connection fees revenues associated with the increase in the
number of new subscribers. The number of subscribers increased from 29,528 at
December 31, 1996 to 92,009 at September 30, 1997 because of the beginning of
operations in the municipalities of Cartago, Popayan, Jamundi, Buga and Yumbo
during 1997. The number of new subscribers at TelePalmira increased during the
same period because of its increase in capacity and the modernization of the
telephone infrastructure. Although installation of switching infrastructure
and antennas was substantially completed at Unitel Wireless in the fourth
quarter of 1997, there was interference from unauthorized radio spectrum
users, which was subsequently removed by the Ministry of Communications. This
delayed the Company's launch of operations at Unitel Wireless until the first
quarter of 1998.
Connection revenues in the nine months ended September 30, 1997 increased by
Ps2.609 billion from Ps5.465 billion in Annual 1996 to Ps8.074 billion. Other
operating revenues, including basic monthly charges, local usage charges,
long-distance charges and other fees for the nine months ended September 30,
1997 increased by Ps3.470 billion from Ps6.096 billion in Annual 1996 to
Ps9.566 billion in the nine months ended September 30, 1997. The increase in
other operating revenues for the nine months ended September 30, 1997 is
attributed to the increase in the number of subscribers and also in the higher
usage associated with that increase.
Costs and Expenses. The costs and expenses for the nine months ended
September 30, 1997 increased by Ps2.887 billion, or 41.5%, to Ps9.840 billion
from Ps6.953 billion in Annual 1996. The increase is primarily attributable to
the increase in the operating costs and the administrative and marketing
expenses due to the increase in the number of subscribers and the maintenance
and expansion of the telephony infrastructure in the cities of Palmira,
Cartago, Yumbo, Jamundi, Buga and Popayan.
Operating costs for the nine months ended September 30, 1997 increased by
Ps1.541 billion from Ps2.457 billion in Annual 1996 to Ps3.998 billion, mainly
as a result of an increase in salary costs, benefits and other labor expenses
related to the operations as well as an increase in lease expenses.
Administrative expenses for the nine months ended September 30, 1997
increased by Ps1.120 billion to Ps4.858 billion from Ps3.738 billion in Annual
1996. The increase was mainly attributable to the increase in consulting fees,
studies and research, and depreciation and amortization.
Marketing expenses for the nine months ended September 30, 1997 increased by
Ps0.225 billion to Ps0.983 billion from Ps0.758 billion in Annual 1996. The
increase in marketing expenses was attributable to the higher commissions paid
to the sales agents, the increase in the lines sold and the increase in other
publicity and marketing costs.
EBITDA. EBITDA for the nine months ended September 30, 1997 increased by
Ps4.090 billion from Ps6.664 billion in Annual 1996 to Ps10.754 billion as a
result of all of the above factors.
Operating Income. Operating income for the nine months ended September 30,
1997 increased by Ps3.193 billion from Ps4.607 billion in Annual 1996 to
Ps7.800 billion from Ps4.607 billion in annual 1996. The increase was mainly
attributable to the increase in revenues as a result of the larger number of
subsidiaries in operation and in subscribers, net of the increase in costs and
expenses described above.
48
<PAGE>
Nonoperating Income (Expense). Nonoperating income (expense), net for Annual
1996 and the nine months ended September 30, 1997 consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
(IN THOUSANDS OF CONSTANT PESOS OF
SEPTEMBER 30, 1997 PURCHASING POWER)
<S> <C> <C>
FINANCIAL INCOME:
Interest income.................... Ps 548,623 Ps 1,977,524
Commercial discounts and other..... 3,870 1,076,644
Exchange gains..................... 298,370 111,010
------------ ------------
850,863 3,165,178
------------ ------------
FINANCIAL EXPENSE:
Interest expense................... (1,891,283) (4,449,384)
Bank commissions................... (130,231) (420,675)
Commercial discounts and other..... (38,509) (96,579)
Exchange losses.................... (63,794) (1,870,544)
Bank expenses...................... (81,208) (220,447)
------------ ------------
(2,205,025) (7,057,629)
------------ ------------
Other.............................. 319,803 (1,422,411)
------------ ------------
Ps(1,034,359) Ps(5,314,862)
============ ============
</TABLE>
Net nonoperating expense increased from Ps1.034 billion for Annual 1996 to
Ps5.315 billion in the nine months ended September 30, 1997. The increase was
mainly due to the higher interest expense on increased average borrowings of
the Company for the nine months ended September 30, 1997, net of an increase
in interest income, and an increase in exchange losses. Interest expense
increased from Ps1.891 billion in Annual 1996 to Ps4.449 billion in the nine
months ended September 30, 1997. An additional Ps7.545 billion of interest
costs were incurred and recorded as deferred charges in the nine months ended
September 30, 1997 as compared to Ps6.118 billion during Annual 1996. The
average borrowings increased during the nine months ended September 30, 1997
because of implementing the Expansion Plan, including operations in five new
municipalities. More interest income from temporary investments in Pesos
occurred in the nine months ended September 30, 1997 due to higher average
balances. The increase in net exchange losses is due to higher U.S. dollar-
denominated borrowings during the nine months ended September 30, 1997.
Net Monetary Inflation Adjustment Income. Net monetary inflation adjustment
income for the nine months ended September 30, 1997 increased by Ps0.621
billion to Ps2.846 billion from Ps2.225 billion in Annual 1996 as a result of
the impact of inflationary adjustments on the higher balance of nonmonetary
assets as well as on the income, expense and shareholders' equity accounts.
Income Tax Expense. Income tax expense for the nine months ended September
30, 1997 increased by Ps1.768 billion to Ps2.087 billion from Ps 0.319 billion
in Annual 1996 as a result of the increase in interest income which is not
exempt from income tax and the fact that the operating subsidiaries are only
90% exempt in calendar 1997. See Note 15 of the Consolidated Financial
Statements.
Minority Interest. Minority interest for the nine months ended September 30,
1997 increased by Ps0.162 billion to Ps2.391 billion from Ps2.229 billion for
Annual 1996 because of the increased net income of the operating subsidiaries.
Net Income. Net income decreased by Ps2.396 billion from Ps3.249 billion for
Annual 1996 to Ps0.853 billion for the nine months ended September 30, 1997 as
a result of the factors discussed above.
49
<PAGE>
RESULTS OF OPERATIONS FROM INCEPTION THROUGH THE YEAR ENDED DECEMBER 31, 1996
The Annual 1996 financial statements reflect the Company's first full year
of operation, and are therefore not directly comparable to the 1995 fiscal
year statements, which only include the four months of operations of Palmira,
the Company's sole system at that time.
Revenues. Revenues for Annual 1996 increased by Ps9.201 billion or 390% to
Ps11.560 billion from Ps2.359 billion for the four months ended December 31,
1995 ("Annual 1995"). The increased revenues in Annual 1996 were primarily
attributable to the increase in connection fees associated with the increase
in the number of new subscribers. Subscribers in Palmira, the Company's only
system providing telecommunication services during this period, increased by
32.3% to 29,500 at December 31, 1996 from 22,300 at December 31, 1995 (15,600
at September 1, 1995).
Connection fees for Annual 1996 increased by Ps4.775 billion to Ps5.465
billion from Ps0.690 billion in Annual 1995. While there was an increase in
subscribers in the four months ended 1995 and for the twelve months ended
December 31, 1996, 6,382 and 3,730 of these subscribers, respectively, had
paid their connection fees to the municipality prior to the Company's
acquisition and therefore paid no additional connection fees to the Company.
Other revenues, including local usage fees, basic fees, long distance fees and
other fees for Annual 1996 increased by Ps4.427 billion to Ps6.096 billion
from Ps1.669 billion in Annual 1995. The increase in other revenues in Annual
1996 resulted primarily from the increase in the number of subscribers and
usage associated with such growth.
Costs and Expenses. Cost and expenses for Annual 1996 increased by Ps5.829
billion to Ps6.953 billion from Ps1.124 billion for Annual 1995. The increase
in costs and expenses in Annual 1996 was primarily attributable to the
increase in operating costs, administrative expenses and marketing expenses
associated with the increased number of subscribers in Palmira and the
maintenance and expansion of the Company's system in Palmira.
Operating costs for Annual 1996 increased by Ps1.774 billion to Ps2.457
billion from Ps0.683 billion for Annual 1995 primarily as a result of the
increase in salaries, benefits and other labor payments and rent due to the
twelve months of operation in Fiscal 1996 as compared to four months in Annual
1995.
Administrative expenses for Annual 1996 increased by Ps3.383 billion to
Ps3.738 billion from Ps0.355 billion for Annual 1995. This increase was
primarily as a result of the increase in consultant fees, studies and
investigations; service, maintenance and repairs; and depreciation and
amortization.
Marketing expenses for Annual 1996 increased by Ps0.672 billion to Ps0.758
billion from Ps0.086 billion for Annual 1995. Selling expenses increased as a
result of the increase in commissions paid to salespeople and marketing and
advertising expenses.
The increase in overall costs and expenses resulted primarily from the
twelve months of operations of the Company in Annual 1996 as compared to four
months in Annual 1995.
EBITDA. EBITDA for Annual 1996 increased by Ps5.047 billion to Ps6.664
billion from Ps1.617 billion for Annual 1995 as a result of factors discussed
above.
Operating Income. Operating income for Annual 1996 increased by Ps3.372
billion to Ps4.607 billion from Ps1.235 billion for Annual 1995. This increase
was primarily attributable to the increase in revenues associated with the
twelve months of operations of the Company in Annual 1996 as compared to four
months in Annual 1995, offset partially by the increase in operating costs and
expenses as discussed above.
50
<PAGE>
Nonoperating Income (Expense). Nonoperating income (expense), net for Annual
1995 and Annual 1996 consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31
1995 1996
------------ ------------
(IN THOUSANDS OF CONSTANT
PESOS OF SEPTEMBER 30, 1997
PURCHASING POWER)
<S> <C> <C>
FINANCIAL INCOME:
Interest income.............................. Ps 308,130 Ps 548,623
Commercial discounts and other............... 6,626 3,870
Exchange gains............................... 298,370
---------- ------------
314,756 850,863
---------- ------------
FINANCIAL EXPENSE:
Interest expense............................. (277,073) (1,891,283)
Bank commissions............................. (5,758) (130,231)
Commercial discounts and other............... (323) (38,509)
Exchange losses.............................. (63,794)
Bank expenses................................ (682) (81,208)
---------- ------------
(283,836) (2,205,025)
---------- ------------
Other........................................ 48,130 319,803
---------- ------------
Ps 79,050 Ps(1,034,359)
========== ============
</TABLE>
Nonoperating income (expenses), decreased from income of Ps0.079 billion for
Annual 1995 to an expense of Ps1.034 billion for Annual 1996. This decrease
was primarily a result of the increase in interest expense associated with the
higher levels of debt in Annual 1996 as compared to Annual 1995. Interest
expense increased from Ps0.277 billion in Annual 1995 to Ps1.891 billion in
Annual 1996. An additional Ps6.118 of interest costs were incurred and
recorded as deferred charges during Annual 1996 as compared to Ps1.273 billion
during Annual 1995. Nonoperating income (expenses) also consists of interest
income earned on short-term Peso-denominated investments. The Company was able
to invest its excess cash from the float created in the collection of local,
long distance and cellular revenues from subscribers. Net exchange gains of
Ps0.235 billion occurred for the first time in Annual 1996.
Net Monetary Inflation Adjustment Income (Loss). Net monetary inflation
adjustment income (loss) for Annual 1996 increased by Ps2.164 billion to
Ps2.225 billion from a loss of Ps0.061 billion for Annual 1995 primarily as a
result of the impact of inflation adjustments to larger balances in
properties, plant and equipment and deferred charges because of the expansion
of the Company.
Income Tax Expense. Income tax expense for Annual 1996 increased to Ps0.319
billion. The low level of income taxes paid reflects the special status under
Law 142 for new telephone service providers. See Note 15 of the Consolidated
Financial Statements.
Minority Interest. Minority interest for Annual 1996 increased by Ps1.728
billion to Ps2.229 billion from Ps0.501 million for Annual 1995. This increase
was attributable to the municipality of Palmira's minority ownership (40%) in
TelePalmira and minority interest increased primarily as a result of the
twelve months of operations of TelePalmira in Annual 1996 as compared to four
months in Annual 1995.
Net Income. Net income for Annual 1996 increased by Ps2.497 billion to
Ps3.249 billion from Ps0.752 billion for Annual 1995 as a result of the
factors discussed above.
51
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The fixed landline telephone business is a capital intensive business which
requires substantial investment to acquire and upgrade the telephone networks
in each of the Company's markets. From inception through September 30, 1997,
the Company expended an aggregate of approximately Ps32.0 billion to acquire
various interests in each of its existing telephone systems. In addition, the
Company has required significant capital for personnel hiring and training,
systems infrastructure development, sales and marketing programs and the
initial build-out under the Expansion Plan. To date, the primary sources of
capital have consisted of equity contributions by the Company's shareholders,
debt financing from local Colombian banks, cash flow generated by the Palmira
operating system, certain Vendor Financing in the form of non-capitalized
leases (which are treated as capitalized leases under U.S. GAAP), and the
Senior Notes.
Net cash used in operating activities during the nine months ended September
30, 1997 was Ps11.867 billion as compared to Ps7.543 billion for Annual 1996.
The increase in cash consumed by operations for the nine months ended
September 30, 1997 was primarily due to an increase in accounts receivables
and deferred charges due to the Company's expansion. Net cash used in
investing activities during the nine months ended September 30, 1997 was
Ps49.680 billion as compared to Ps8.954 billion provided in Annual 1996. Cash
used in investing activities principally relates to the construction of new
network systems, the acquisition of several operating systems and the upgrade
of existing network systems. In addition, cash used in investing activities
includes the purchase of short-term and long-term investments. Net cash
provided by financing activities during the nine months ended September 30,
1997 was Ps49.401 billion as compared to Ps27.372 billion in Annual 1996. Cash
provided by financing activities during the nine months ended September 30,
1997 primarily represents net borrowing of Ps18.627 billion of debt. As of
September 30, 1997, the Company's borrowings were Ps60.362 billion, all of
which is presented as long-term because of the refinancing by the Senior Notes
on October 28, 1997. As of September 30, 1997, the Company's borrowings
denominated in Dollars were Ps37.502 billion and the Company's borrowings
denominated in Pesos were Ps22.860 billion. The Company also has obligations
under leases which are not capitalized in accordance with Colombian GAAP, but
are required to be capitalized under U.S. GAAP. See Notes 16 and 28 to the
Consolidated Financial Statements. In July 1997, the shareholders of the
Company invested Ps30.872 billion in the Company for substantially all of the
Equity Contribution.
The Company's principal liquidity requirements will be for the Expansion
Plan, debt service (primarily on the Senior Notes), working capital and
general corporate purposes, including future acquisitions. The Expansion Plan
is projected to require aggregate capital expenditures of approximately $181.8
million, approximately 70.0% of which will be incurred pursuant to the fixed
equipment purchase and turn-key installation contracts. The Company expects to
complete the build-out of the Expansion Plan by December 31, 1998. As of
September 30, 1997, approximately $7.8 million has been financed with proceeds
of local bank borrowings, all of which was repaid with proceeds of the
Offering, and approximately $1.5 million has been financed with cash flow from
operations. The remainder of the Expansion Plan, approximately $172.5 million,
has been or will be financed with (i) approximately $41.0 million of the
proceeds of the Offering; (ii) approximately $102.7 million of Vendor
Financing (see "Risk Factors--Contingency of Vendor Financing"); (iii) the
sale of investments of $5.7 million and (iv) approximately $23.1 million of
DIAN Financing (see "Description of Existing Indebtedness--DIAN Financing").
See "Use of Proceeds." As of February 28, 1998, the Company had incurred
approximately $118.2 million of capital expenditures relating to the Expansion
Plan and expects to incur the remainder, approximately $63.6 million, by the
end of 1998.
As a result of the Offering, the Vendor Financing, the DIAN Financing and
the incurrence of certain other indebtedness, the Company will be required to
satisfy certain debt service requirements. Following the disbursements in May
and November 1998 and 1999 of all the proceeds in the Escrow Account, a
substantial portion of the Company's cash flow will be utilized to service the
Senior Notes, the Vendor Financing and the DIAN Financing. The Senior Notes
will require semi-annual interest payments of approximately $9.4 million and
the Vendor Financing will require semi-annual interest and principal payments
of approximately $7.2 million. In addition, the DIAN Financing will require
semi-annual principal payments of approximately $2.3 million. The ability of
the Company to make payments of principal and interest will be largely
dependent upon its future performance. Many factors, some of which will be
beyond the Company's control (such as prevailing
52
<PAGE>
economic conditions), may affect its performance. There can be no assurance
that the Company will be able to generate sufficient cash flow to cover
required interest and principal payments when due on its indebtedness. If the
Company is unable to make principal and interest payments in the future, it
may, depending upon the circumstances which then exist, seek additional equity
or debt financing, attempt to refinance its indebtedness or sell all or part
of its business or assets to raise funds to repay its indebtedness.
The Company formed TeleGirardot, a 60% owned subsidiary, on December 31,
1997 by contributing Ps8.898 billion in cash to the subsidiary. The
municipality of Girardot contributed the net assets of its telephone network
(which had approximately 23,500 subscribers) with a fair market value of
Ps5.932 billion to TeleGirardot in exchange for a 40% interest in
TeleGirardot. See Note 27 to the Consolidated Financial Statements.
The Company also expects to consider additional acquisitions that fit its
strategic plans. Although the Company has had discussions concerning such
potential acquisitions, to date, no agreements have been reached with regard
to any particular transaction. Any such acquisitions that the Company might
consider are likely to require additional equity and/or debt financing, which
the Company will seek to obtain as necessary. Management believes that, based
on its current operations and anticipated growth resulting from the Expansion
Plan, cash flow from the Expansion Plan Financing, cash flow from operations
and other sources of funds, including local borrowings, it will have adequate
funds to complete the Expansion Plan and to meet its future cash requirements.
ACCOUNTING FOR INFLATION
As a Colombian company, the Company maintains its financial records in
Pesos. Colombian GAAP requires that the financial statements of Colombian
companies be adjusted to account for inflation. The inflation rate for the
nine months ended September 30, 1997 was 14.10%. Financial statements are
adjusted for the effects of inflation on the basis of changes in the Colombian
MCPI. This index is applied on a one-month lagging basis to nonmonetary assets
and liabilities, shareholders' equity, revenues and expense accounts. Monetary
balances are not adjusted because they reflect the purchasing power of the
currency on 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 same date. The resulting net gain or loss from exposure to inflation is
reflected as "Net monetary inflation adjustment income (loss)" in the income
statement for each period in question. See Notes 2 and 24 to the Consolidated
Financial Statements.
INCOME TAX MATTERS
Consolidated income tax returns are not permitted in Colombia. The effective
statutory income tax rate for the Company was 35% for 1995, 1996 and 1997.
Taxable income is presumed to be not less than the greater of 5% (4% in 1994
and 1995) of shareholders' equity for tax purposes at the end of the
immediately preceding year or 1.5% of gross assets for tax purposes at the end
of the immediate preceding year. Adjustments to income to account for
inflation are taken into account for income tax purposes.
In accordance with Law 142 of 1994 and Law 223 of 1995, entities which
render basic residential telephony services and which are mixed capital
companies (i.e., companies with both public and private capital such as the
Company's subsidiaries) were exempt in 1995 and are partially exempt from the
payment of income taxes for a term of seven years from 1996 with respect to
profits which are retained for upgrade, expansion or replacement of telephone
systems. These companies are exempt from taxes on 100% of income related to
basic telephony services for 1995 and 1996; thereafter the exemption reduces
by 10 percentage points each taxable year through 2000 and then reduces by 20
percentage points in 2001 and 2002. After 2002, there is no exemption.
In July 1997, Law 383 of 1997 established that dividends declared from
companies similar to Transtel's subsidiaries and paid to government entities
are not taxable. As there is not a similar exclusion for private investors
such as Transtel S.A., the Company expects that future dividends declared to
Transtel S.A. will be taxable to it.
53
<PAGE>
RECONCILIATION TO U.S. GAAP
The Consolidated Financial Statements are prepared in accordance with
Colombian GAAP, which differ from U.S. GAAP in certain significant respects. A
comparison of the Company's net income (loss) and shareholders' equity
(deficit) at and for the years ended December 31, 1995 and 1996, and at and
for the nine months ended September 30, 1997, under Colombian GAAP and after
reflecting the material adjustments which arise when U.S. GAAP is applied
instead of Colombian GAAP, is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -----------------
(IN THOUSANDS OF CONSTANT PESOS OF
SEPTEMBER 30, 1997 PURCHASING POWER)
<S> <C> <C> <C>
Net Income (Loss)
Colombian GAAP................. Ps 751,720 Ps 3,248,886 Ps 852,747
U.S. GAAP...................... (2,879,491) (2,913,097) (1,566,452)
Shareholders' Equity (Deficit)
Colombian GAAP................. 6,967,236 Ps18,817,274 Ps 51,035,142
U.S. GAAP...................... 2,077,720 (1,160,960) 28,144,312
</TABLE>
As more fully described and quantified in Note 28 to the Consolidated
Financial Statements, the major differences between Colombian GAAP and U.S.
GAAP in each period relate to: income taxes, revaluation of assets,
depreciation expense, capitalized interest, deferred charges, capital leases,
revenue recognition, adjustments for inflation and purchase of properties from
a shareholder.
54
<PAGE>
BUSINESS
THE COMPANY
The Company is the largest private telephone company in Colombia, providing
telephone services to both business and residential subscribers. The Company
(excluding TeleGirardot) currently owns and operates telephone systems serving
seven cities, with an aggregate population of approximately 2.9 million
people, located in the southwestern region of Colombia. As of December 31,
1997, such system provided service to an aggregate of approximately 101,500
subscribers and had an average penetration of approximately 18 lines per 100
people.
On December 31, 1997, the Company acquired TeleGirardot. The statistical,
financial and other data in this Prospectus does not include information
regarding TeleGirardot except where specifically indicated. For information
regarding TeleGirardot see "Prospectus Summary--Recent Developments" herein.
In 1990 through the enactment of Decree 1900, Colombia's government
initiated the deregulation and privatization of the state-owned
telecommunications sector in order to promote competition and encourage
private investment and thereby improve service for its citizens. This was
followed by the enactment of Law 142, which established the basic guidelines
and regulations to support the sector's privatization. Prior to the enactment
of Decree 1900, telephone service in Colombia had been provided by the same
government-owned entities that also provided other basic utility services.
Since most of these municipal entities lacked sufficient capital, spending for
basic utility services such as power and water often took precedence over the
delivery of telephone service. As a result, many of these municipal service
providers have failed to install sufficient capacity to satisfy their
customers' demand for telephone service. For those customers who do currently
receive telephone service through municipal service providers, the municipal
entities provide low-quality service and offer few, if any, of the more
commonly available value-added services.
The Company was formed in August 1993 by certain members of the Caicedo
family, a prominent Colombian family, and Guillermo Lopez, the Company's
President and a Director, to take advantage of the opportunities created by
deregulation. Management's goal is to capitalize on the substantial demand for
telephone service which the Company believes exists throughout Colombia. This
belief is supported by the fact that Colombia's first and third largest
cities, Bogota and Medellin, respectively, where capital has been spent to
meet telephone demand, have recently achieved penetration in excess of 30
lines per 100 people, which is substantially higher than cities in the
Company's service area. The Company seeks to modernize and expand its
telephone systems to accommodate existing demand for telephone service and
future growth.
The Company's objective is to increase the penetration in each of its
markets and to provide high quality value-added telephone services to its
subscribers. For example, in May 1995, the Company, in conjunction with the
local municipality, acquired its first telephone system, the only system
serving the city of Palmira. At the time of the acquisition, this system had
approximately 15,600 subscribers, representing a penetration of approximately
4.9 lines per 100 people. Following the acquisition, the Company initiated its
Expansion Plan in Palmira, which consists of investing approximately $34.2
million to replace a portion of the existing Palmira system's infrastructure,
to upgrade the system with modern equipment from Siemens and to increase
system capacity to 60,000 lines, which implies a penetration of 18.9 lines per
100 people. The Company began offering telephone service in Palmira in
September 1995 and, as a result of the substantial demand, experienced
immediate and significant improvements in operating and financial results.
Under the Company's management, the Palmira system's subscriber base has grown
by 220%, increasing from approximately 15,600 at the time of acquisition to
approximately 50,100 at December 31, 1997. Subsequent to the acquisition of
TelePalmira, the Company acquired three additional operating companies,
increasing its number of subscribers from approximately 15,600 as of September
30, 1995 to approximately 101,500 as of December 31, 1997. In addition to the
subscribers with installed lines as of December 31, 1997, the Company had
20,966 additional customers who have signed promissory notes for new lines to
be installed.
55
<PAGE>
OPERATING COMPANIES--GENERAL
The Company has acquired interests in existing wireline telephone systems
serving the cities of Palmira, Cartago, Popayan, Buga and their surrounding
areas, and built new systems serving the cities of Cali, Yumbo and Jamundi and
their surrounding areas. In each case the Company has joined with the local
municipality to form an Operating Company to own and operate the telephone
system. The Operating Companies are (i) TelePalmira, which services the cities
of Palmira and Candelaria, (ii) TeleCartago, which services the city of
Cartago, (iii) Caucatel, which services the western section of city of
Popayan, (iv) TeleJamundi, which services the city of Jamundi, (v) Bugatel,
which services the city of Buga and its surrounding regions, and (vi) Unitel,
which operates Unitel Wireline in the city of Yumbo, a city adjacent to Cali,
and which, through Unitel Wireless, began servicing the city of Cali in
January 1998.
The existing shareholders of the Company have invested approximately Ps37.4
billion ($30.0 million) of equity in the Company. Approximately Ps27.2 billion
($21.8 million) of this amount has been used to repay local bank borrowings
that were used to finance start up expenses and a portion of the acquisition
costs of the Operating Companies.
The following table provides information regarding the Operating Companies:
<TABLE>
<CAPTION>
UNITEL UNITEL
TELEPALMIRA TELECARTAGO CAUCATEL TELEJAMUNDI WIRELINE BUGATEL WIRELESS(1) TOTAL
----------- ----------- -------- ----------- -------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipality served..... Palmira Cartago Popayan Jamundi Yumbo Buga Cali N/A
Population.............. 318,000 125,900 76,600 59,100 72,000 337,400 1,908,600 2,897,600
Commencement date of
Company's operations... 9/95 4/97 5/97 6/97 6/97 7/97 1/98 N/A
Number of subscribers at New New New
Commencement date...... 15,600 13,800 10,800 System System 10,700 System 50,900
Number of subscribers as
of December 31, 1996... 29,528 N/A N/A N/A N/A N/A N/A 29,528
Number of subscribers as
of September 30, 1997.. 43,880 17,158 12,995 3,043 3,950 10,983 N/A 92,009
Number of subscribers as
of December 31, 1997... 50,062 17,544 13,755 5,032 3,986 11,124 N/A 101,503(2)
Total subscribers added
for the three months
ended September 30,
1997................... 4,109 3,195 1,738 2,772 3,950 10,983 N/A 26,747
Total subscribers added
for the three months
ended December 31,
1997................... 6,182 386 760 1,989 36 141 N/A 9,494
Total subscribers added
for the year ended
December 31, 1997...... 20,534 17,544 13,755 5,032 3,986 11,124 N/A 71,975
Penetration(3).......... 15.7 21.9 18.0 17.3 13.2 13.0 20.3 18.0
</TABLE>
- --------
(1) Although installation of switching infrastructure and antennas was
substantially completed at Unitel Wireless in the fourth quarter of 1997,
there was an interference from unauthorized radio spectrum users, which
was subsequently removed by the Ministry of Communications. This delayed
the Company's launch of operations at Unitel Wireless until the first
quarter of 1998.
(2) In addition to the subscribers with installed lines at December 31, 1997,
the Company has 20,966 additional customers who have signed promissory
notes for new lines to be installed.
(3) Penetration represents the number of installed lines per 100 people. In
Cartago, Jamundi, Buga, Yumbo and Cali, penetration includes the installed
lines of municipal competitors of approximately 10,000 lines, 5,200 lines,
30,700 lines, 5,500 lines, and 386,800 lines as per the Company's
estimates, respectively.
56
<PAGE>
EXPANSION PLAN
At the time of acquisition, the Company's systems generally lacked sufficient
capacity to service the demand of their customers in the respective
municipalities and utilized antiquated technology to provide limited service to
their customers. Based on extensive market demand studies, the Company created
the Expansion Plan which is designed to satisfy the significant demand for
telephone lines in each of its operating cities. The Expansion Plan does not
include TeleGirardot, for which a separate expansion plan has been developed.
Management intends to increase the number of installed lines in its seven
operating cities from an aggregate of 56,800 which serve 50,900 subscribers at
the date of acquisition of each of its systems, to approximately 222,200 lines
and subscribers upon completion of the build-out of the Expansion Plan by
December 31, 1998. The Expansion Plan also involves the upgrade of each of its
telephone networks to state-of-the-art digital and fiber-optic technology.
The Company has entered into agreements and letters of intent with Siemens
for the purchase of most of the telephone equipment required for the Expansion
Plan and for the installation of the equipment to be provided to the Company
pursuant to fixed price turn-key construction contracts. In addition, the
Company has entered into an agreement with IBM de Colombia S.A. (an affiliate
of IBM) for the purchase and installation of hardware and software that will be
used to offer value-added services for its telephone systems which, together
with the equipment provided by Siemens, comprises most of the equipment
necessary to complete the Expansion Plan. As of February 28, 1998, the Company,
in conjunction with Siemens, had completed the installation of approximately
105,100 new lines, or approximately 64%, of the Company's Expansion Plan.
The Expansion Plan is projected to require aggregate capital expenditures of
approximately $181.8 million, approximately 70.0% of which will be incurred
pursuant to fixed price equipment purchase agreements (or letters of intent)
and turn-key installation contracts. As of September 30, 1997, approximately
$7.8 million was financed with local bank borrowings, all of which was repaid
with a portion of the proceeds of the Offering, and approximately $1.5 million
was financed with cash flow from operations. The remainder of the Expansion
Plan, approximately $172.5 million, has been or will be financed with (i)
approximately $41.0 million of the proceeds of the Offering; (ii) approximately
$102.7 million of Vendor Financing (see "Risk Factors--Contingency of Vendor
Financing"); (iii) the sale of investments of $5.7 million; and (iv)
approximately $23.1 million of DIAN Financing (see "Description of Existing
Indebtedness--DIAN Financing"). See "Use of Proceeds." As of February 28, 1998,
the Company had incurred approximately $118.2 million of capital expenditures
relating to the Expansion Plan and expects to incur the remainder,
approximately $63.6 million, by the end of 1998.
As of February 28, 1998, approximately Ps15.0 billion ($12 million) of
capital expenditures has been incurred relating to the Expansion Plan for
Bugatel, Ps14.3 billion ($11.5 million) for Caucatel, Ps33.9 billion ($27.2
million) for TelePalmira, Ps10.7 billion ($8.6 million) for TeleJamundi, Ps8.7
billion ($7.0 million) for Unitel Wireline, Ps7.7 billion ($38.3 million) for
Unitel Wireless, and Ps16.9 billion ($13.6 million) for TeleCartago. The
Company expects to incur approximately $4.0 million under the TeleGirardot
Expansion Plan which will be financed with cash flow from its operations.
For the Company's expansion plan with respect to TeleGirardot, see
"Prospectus Summary--Recent Developments."
BUSINESS AND GROWTH STRATEGY
The Company's objective is to become the leading provider of quality
telephone services in each city in which it operates. The Company's business
and growth strategy includes the following:
. Capitalize on Significant Demand for Telephony Services. The Company
believes that the low telephone penetration levels throughout Colombia,
in general, and the southwestern region in particular, provide a
substantial opportunity to quickly increase subscribers, net income and
EBITDA in its markets. In the aggregate, the Expansion Plan assumes that
the Company increases penetration of its markets from approximately 16.9
lines per 100 people at the time of acquisition to 22.8 lines per 100
people upon
57
<PAGE>
completion of the Expansion Plan. Management expects similar penetration
increases with respect to the TeleGirardot Expansion Plan. Management
believes that these penetration levels are achievable, especially when
compared to two of Colombia's largest cities, Bogota and Medellin, where
substantial capital has already been spent to expand and modernize the
telephone systems and where penetration levels are currently in excess of
30 lines per 100 people. Furthermore, after operating in Palmira for only
28 months, the Company has added more than 34,400 subscribers, which
represents an increase in telephone penetration from 4.9 lines per 100
people to approximately 18 lines per 100 people at December 31, 1997.
. Create Strategic Alliances with Municipalities. The Company seeks to
maintain a strong relationship with each of the municipalities in which
it operates. This is accomplished primarily by establishing a mixed
capital company in which both the Company and the municipality are
investors. This structure allows the municipality to enjoy the benefits
of privatization while maintaining an ongoing economic interest in these
telephone operations. At the same time, the Company realizes substantial
benefits from working together with the municipal government, including:
(i) access to extensive demographic information which allows the Company
to optimize its network build out; (ii) work permits and rights of way to
ensure that the build out plan is completed quickly and efficiently; and
(iii) access to public records regarding non-paying customers of the
local government's other utility services. In addition, in situations
where the Company has acquired existing telephone systems, management has
the opportunity to retain the qualified employees of those systems.
. Utilize International Expertise. Since its inception, the Company has
contracted for the support of various internationally recognized
consultants to complement its own expertise. Prior to entering a new
market, management completes a full market demand study and in certain
instances has relied on the services of independent research consultants,
to gather and assess projected levels of demand as well as other
demographic and competitive information. The Company then sizes and
designs its networks around these demand parameters. Commonwealth
Communications, Inc. advised the Company with respect to the selection of
equipment manufacturers and the design of the Palmira, Jamundi and Yumbo
wireline telephone systems, and Bellcore advised the Company with respect
to the selection of equipment and design of the Unitel Wireless system in
Cali. Pursuant to the Expansion Plan and the TeleGirardot Expansion Plan,
the Company will rely on Siemens for the supply of equipment for both its
wireline and wireless networks as well as the design, construction and
installation of most of its systems pursuant to fixed price, turn-key
contracts. In addition, the Company has contracted with IBM to install
Internet-related services. The Company has also contracted C-NIX, a
leading international information operating systems provider, to upgrade
its existing facilities and enhance the interface between its management
control and information systems. Management believes that the Company has
realized substantial benefits from these telecommunication services and
expects to continue to utilize the expertise of these organizations.
. Install Modern Telephony Equipment. The Company seeks to install high-
capacity, modern telephony equipment with sufficient capacity to meet
each market's expected demand. In the case of its wireline networks, the
Company, in conjunction with its primary equipment vendor, Siemens, has
installed a fiber-optic trunk supported by fully digital local exchanges.
In the case of its wireless networks, the Company is installing a fixed
wireless system utilizing DECT equipment provided by Siemens. This modern
technology allows the Company to offer its subscribers a full range of
traditional and non-traditional value-added services, including call
waiting, voice mail, Internet access, ISDN and Centrex.
. Maximize Revenue Generation. The Company seeks to maximize the revenue
generated from each installed line by capitalizing on its efficient
operating structure and by offering subscribers a full range of telephony
services. One of the stated goals of the recent deregulation of the local
telephone markets by the Colombian government is to promote competition
among public and private operators on the basis of efficiency and
customer service, rather than price. The government accomplished this by
requiring operators to set tariffs, at their option, based on either (i)
their or their predecessor's costs or (ii) their competitors' costs, but
in no event below the cost of providing service. This law has benefited
the Company by allowing management to set tariffs at levels established
by inefficient municipal operators,
58
<PAGE>
rather than the Company's own lower cost of operation. This pricing
structure allows the Company to realize a high return on its capital
investment, especially when compared to its inefficient municipal
competitors. The Company's operating results are further enhanced by the
new, value-added telephony services that the Company offers as a result of
its system upgrades which are not currently provided by its municipal
competitors.
. Provide Excellent Customer Service. Telephone subscribers in Colombia
have historically received poor quality service. For example, under the
management of the municipality, in September 1995, Palmira customers were
able to complete approximately 40% of their calls and an estimated 17% of
subscribers experienced breakdowns which lasted an average of more than
12 hours. The Company utilizes sophisticated computer hardware and
software to manage, administer and correct telephone problems in its
telephone systems. This has resulted in a dramatic improvement in the
operating performance of its systems. In Palmira, in December 1997, the
Company's subscribers completed approximately 67% of their calls and only
5.7% of subscribers experienced breakdowns lasting only approximately 6
hours. In addition, the Company operates customer service centers in each
of the Company's markets and utilizes an aggregate of approximately 40
dedicated employees for this purpose.
. Pursue Selective Acquisitions and Other Business Opportunities. The
Company intends to selectively pursue acquisitions of additional
telephone networks from municipalities in Colombia engaged in
privatizations. The Company anticipates making bids for one or more
municipal systems in the upcoming months, including systems within and
beyond the southwestern region of Colombia. Management expects that any
future acquisitions will be structured similarly to its existing
acquisitions, including a substantial investment and ownership by the
municipality involved. The Company anticipates pursuing only those
markets which have low penetration levels and indications of significant
unmet demand for telephony service. In addition, the Company expects to
capitalize on the recent deregulation of the long distance market by
aligning itself with a strategic international partner.
DESCRIPTION OF THE OPERATING COMPANIES
TELEPALMIRA
Overview
TelePalmira services the municipalities of Palmira and Candelaria. Palmira is
located 15 kilometers from Cali. Palmira's population is approximately 254,700
people and is distributed among several socioeconomic levels, with a majority
of the population belonging to the middle income bracket of Colombia. Palmira
has a stable economic base which includes agriculture, agribusiness, light
manufacturing, transportation and business commerce. The area surrounding
Palmira produces sugar cane, coffee, rice, corn and other agriculture products
used as raw material in the industries of Palmira and Yumbo. In addition,
Palmira has an international airport with significant air freight operations
and facilities. Candelaria is a municipality adjacent to Palmira with a
population of approximately 63,300 people. Candelaria is an important
residential center for the workers of the labor intensive sugarcane industry.
Customers and Competition
In 1997, TelePalmira's subscriber base was composed of approximately 83%
residential and 17% commercial subscribers. The Company believes that, through
its technology, it can offer custom-made solutions to the business needs of its
commercial subscribers, such as Centrex, ISDN, DID and high speed access
through fiber optics. As a result, the Company expects that it can increase
both usage by commercial subscribers and the number of lines per subscriber.
The Company also believes that it can increase its residential subscriber base
through its sales and marketing efforts and by encouraging Internet, facsimile
and other data applications in the home.
TelePalmira has no current competition in Palmira or Candelaria.
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History
Prior to September 1, 1995, when TelePalmira began commercial operations,
telephone service for Palmira had been provided by Empresas Publicas
Municipales de Palmira, a public entity owned by the municipality of Palmira.
The telephone services provided at that time were generally below standard,
with substantial unmet demand. On May 31, 1995, Transtel and the municipality
of Palmira incorporated TelePalmira to provide telephony services in the cities
of Palmira and Candelaria. Transtel contributed approximately Ps13.4 billion
($10.8 million) in cash and the municipality of Palmira contributed certain of
its existing telecommunications assets and infrastructure valued at
approximately Ps8.9 billion ($7.1 million) to the capital of TelePalmira. In
return for these contributions, Transtel received 60% of TelePalmira's shares
and the municipality of Palmira received 40% of TelePalmira's shares.
Expansion Plan and Growth Strategy
The portion of the Expansion Plan relating to TelePalmira is substantially
completed. The Expansion Plan involved the design, construction, installation
and operation of a local telephone network with a capacity of 60,000 lines, of
which 50,500 have been installed as of December 31, 1997, representing a 76.5%
completion of the network installation. An implied penetration of 18.9 lines
per 100 people is expected upon completion of the Expansion Plan. The newly
installed system consists of an advanced network utilizing digital switching
and fiber-optic transmission technology. The new lines are supported by a
digital host installed in TelePalmira's Central Office and three digital remote
switches installed in newly constructed buildings. The estimated cost of
TelePalmira's completed Expansion Plan is approximately $34.2 million. This has
been financed with proceeds from certain Vendor Financing, debt obtained from
local financing institutions repaid with proceeds of the Offering, proceeds
from the Offering and the DIAN Financing.
TelePalmira's growth strategy is to provide the most advanced
telecommunications service in Palmira and Candelaria while improving the
percentage of calls completed and reducing the number of service calls and
breakdowns. The Expansion Plan has resulted in an increase in penetration for
TelePalmira from 4.9 lines per 100 people at September 1, 1995 to 15.7 lines
per 100 people at December 31, 1997. TelePalmira's growth strategy involves:
(i) increasing the number of lines available; (ii) actively marketing to new
subscribers; and (iii) offering high quality service to a substantial portion
of the population for whom telephony services were previously unavailable.
Results of Operations
At the time of the acquisition, Palmira had approximately 15,600 telephone
subscribers, representing a telephone penetration of approximately 4.9 lines
per 100 people. Following the acquisition, the Company initiated its Expansion
Plan in Palmira, which consists of investing approximately $34.2 million to
replace the existing Palmira system's infrastructure, to upgrade the system
with modern equipment from Siemens and to increase system capacity to
approximately 60,000 lines, which implies a penetration of 18.9 lines per 100
people. The Company began offering telephone service in Palmira in September
1995 and, as a result of the substantial demand, experienced immediate and
significant improvements in operating and financial results. Under the
Company's management, the Palmira system's subscriber base has grown by 220%,
increasing from approximately 15,600 at the time of acquisition to
approximately 50,100 at December 31, 1997. Under the Company's management,
revenues generated by the Palmira system have increased 44% for the nine months
ended September 30, 1997 as compared to the same period in 1996, to Ps9.8
billion ($7.9 million) from Ps6.8 billion ($5.5million). EBITDA decreased 16%
for the nine months ended September 30, 1997 as compared to the same period in
1996 to Ps3.6 billion ($2.9 million) from Ps4.3 billion ($3.5 million). Net
income decreased 41.0% for the nine months ended September 30, 1997 as compared
to the same period in 1996 to Ps1.5 billion (1.2 million) from Ps2.6 billion
($2.1 million).
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The following table demonstrates TelePalmira's significant operating
improvements since the date when it began commercial operations to December
31, 1997:
<TABLE>
<CAPTION>
SEPTEMBER 1, DECEMBER 31,
1995 1997
------------ ------------
<S> <C> <C>
Number of subscribers(1)............................. 15,600 50,062
Penetration(2)....................................... 4.9 15.7
Service calls(3)..................................... 28% 11%
Breakdowns(4)........................................ 17% 5.8%
Total subscriber out of service time per month(5).... 3 0.5
Average out of service time per breakdown(6)......... 12 1/2 6
Percentage of calls completed(7)..................... 40% 63%
</TABLE>
- --------
(1) Subscribers are defined as customers currently receiving telephone
service.
(2) Penetration represents the number of installed lines per 100 people.
(3) Percentage of total subscribers who have contacted the Company, relating
to maintenance or general operating inquiries, in the preceding monthly
period.
(4) Percentage of lines experiencing any breakdown in service in the preceding
monthly period.
(5) Average hours each line was out of service during the preceding monthly
period.
(6) Average time in hours to correct service breakdown once reported by the
subscriber in the preceding monthly period.
(7) Number of calls completed divided by the number of calls made on such
date.
TELECARTAGO
Overview
TeleCartago services the municipality of Cartago which is located 237
kilometers northeast of Cali and 18 kilometers from Pereira, the capital of
Risaralda, which is a city with a population of approximately 416,100 people.
Cartago's population is approximately 125,900 people and is distributed among
several socioeconomic levels, with a majority of the population belonging to
the middle income bracket of Colombia. Cartago is located within Colombia's
Zona Cafetera (coffee-growing region) and is one of the most important
agricultural centers in the northern Valle del Cauca. Overall, the Zona
Cafetera provides nearly half of the country's coffee production, but covers
only 1.2% of the country's geographic area. Cartago has a stable and diverse
economic base which includes agriculture, agri-business, light manufacturing,
cattle raising and construction. In addition, Cartago has an international
airport with significant air freight operations and facilities.
Customers and Competition
Upon the initiation of the Company's operation of TeleCartago in April 1997,
TeleCartago's subscriber base was composed of approximately 69% residential
and 31% commercial subscribers. The Company believes that, through its
technology, it can offer custom-made solutions to the business needs of its
commercial subscribers, such as Centrex, ISDN, DID and high speed access
through fiber optics. As a result, the Company expects that it can increase
both usage by commercial subscribers and the number of lines per subscriber.
The Company also believes that it can increase its residential subscriber base
through its sales and marketing efforts and by encouraging Internet, facsimile
and other data applications.
TeleCartago's only competition in Cartago is Empresa Regional de
Telecomunicaciones ("ERT"), a telephone service provider owned by the
Departamento of Valle del Cauca. ERT commenced operations in Cartago in 1995
and the Company estimates that ERT currently has 10,000 subscribers.
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History
Prior to April 1, 1997, when TeleCartago began commercial operations,
telephone service for Cartago had been provided by both Empresas Publicas
Municipales de Cartago, a public entity owned by the municipality of Cartago,
and ERT. The telephone service provided at that time was generally below
standard, with substantial unmet demand for telephone services. On January 3,
1997, Transtel and the municipality of Cartago incorporated TeleCartago to
provide telephony services in the city of Cartago. Transtel contributed
approximately Ps4.3 billion ($3.5 million) in cash and the municipality of
Cartago contributed certain of its existing telecommunications assets and
infrastructure valued at approximately Ps2.3 billion ($1.9 million) to the
capital of TeleCartago. In return for these contributions, Transtel received
65% of TeleCartago's shares and the municipality of Cartago received 35% of
TeleCartago's shares.
Expansion Plan and Growth Strategy
TeleCartago's Expansion Plan consists of upgrading the central exchanges and
the 14,100 existing lines acquired from the municipality and expanding the
network. Once completed, the telephone network system will consist of an
advanced network utilizing digital switching and fiber-optic transmission
technology. The new lines will be supported by a digital host installed in
Cartago's Central Office and three digital remote switches installed in newly
constructed buildings. The estimated cost of TeleCartago's completed Expansion
Plan is approximately $18.3 million, to be financed with proceeds from Vendor
Financing, debt obtained from local financing institutions (and repaid with
the proceeds of the Offering), proceeds from the Offering and the DIAN
Financing. Following completion of the Expansion Plan, TeleCartago will have
approximately 25,100 lines and an implied penetration of 27.9 lines per 100
people. As of December 31, 1997, TeleCartago had installed 17,600 lines
(including new installed lines and switching upgrades) since acquisition,
resulting in an installed base of approximately 21,100 lines.
TeleCartago's growth strategy is to provide the most advanced
telecommunications service in Cartago and the surrounding regions. TeleCartago
plans to increase its penetration rate in Cartago by: (i) increasing the
number of lines available; (ii) actively marketing to new subscribers; and
(iii) offering high quality service to a substantial portion of the population
for whom telephony services were previously unavailable.
CAUCATEL
Overview
Popayan, the capital of the Departamento of Cauca, is located 189 kilometers
south of Cali. The city is the capital of the Departamento of Cauca and houses
several universities and various museums, churches and monasteries. Popayan's
population is approximately 212,800 people, of which approximately 76,600
people live in the western section of the city, where Caucatel operates.
Popayan's population is distributed among several socioeconomic levels, with a
majority of the population belonging to the middle income bracket of Colombia.
Popayan's economic base includes agriculture, agribusiness, light
manufacturing, cattle raising, mining and tourism.
Customers and Competition
Upon the initiation of Transtel's operation of Caucatel in May 1997,
Caucatel's subscriber base was composed of approximately 93% residential and
7% commercial subscribers. The Company believes that it can increase usage in
Popayan by offering Internet and other data application services to the
student population attending Popayan's universities. In addition, the
universities serve as a prime training center for potential employees of
Caucatel and the Company. Furthermore, as a result of Popayan's geographic
location within the region and its status as the capital of the Departamento
of Cauca, Popayan has significant commercial and trading activity. Therefore,
Caucatel will focus its marketing efforts on these potential commercial
subscribers.
Caucatel has no competitors in the western region of Popayan. Caucatel
services the western region of Popayan only. The eastern region is serviced by
Empresa Municipal de Telecomunicaciones de Popayan
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("EMTEL"), a municipally owned company which had approximately 8,500
subscribers as of December 31, 1997.
History
Prior to May 1, 1997, when Caucatel began commercial operations, telephone
service for Popayan had been provided by EMTEL, the municipally owned service
provider. Subsequently, EMTEL decided to split its operations into eastern and
western service areas and offered its western operations for sale. On April
30, 1997, Transtel and the municipality of Popayan incorporated Caucatel to
provide telephony services in the western section of the city of Popayan.
Transtel contributed to Caucatel approximately Ps1.0 billion ($851,000) in
cash and contributed assets valued at approximately Ps6.9 billion ($5.6
million) and the municipality of Popayan contributed its existing
telecommunications network and infrastructure valued at approximately Ps7.7
billion ($6.2 million) to the capital of Caucatel. In return for these
contributions Transtel received 51% of Caucatel's shares and the municipality
of Popayan received 49% of Caucatel's shares.
Expansion Plan and Growth Strategy
Caucatel's Expansion Plan was completed by December 31, 1997. As of December
31, 1997, Caucatel had a total of approximately 23,000 digital lines
(including approximately 3,400 newly installed digital lines and approximately
19,600 lines upgraded from analog to digital) and an implied penetration of
30.0 lines per 100 people. The telephone system consists of an advanced
network utilizing digital switching and fiber-optic transmission technology.
The new lines are supported by a digital host and various digital remote
switches. The cost of Caucatel's Expansion Plan is approximately $11.5
million, financed with proceeds from Vendor Financing, debt obtained from
local financing institutions (and repaid with the proceeds of the Offering),
proceeds from the Offering and the DIAN Financing. Following completion of the
Expansion Plan, Caucatel will have approximately 23,000 lines and an implied
penetration of 30.0 lines per 100 people.
Caucatel's growth strategy is to provide the most advanced
telecommunications service in the western section of Popayan and the
surrounding regions. Caucatel plans to increase its penetration rate in
Popayan by: (i) increasing the number of lines available; (ii) actively
marketing to new subscribers; (iii) offering high quality service to a
substantial portion of the population for whom telephony services were
previously unavailable; and (iv) providing value-added services including
voice mail, Internet services and videoconference calling.
TELEJAMUNDI
Overview
TeleJamundi services the municipality of Jamundi, which is located 23
kilometers south of Cali. Jamundi's population is approximately 59,100 people.
Jamundi is currently undergoing growth of its population that is primarily
driven by the relocation of middle and upper-middle income people from Cali to
suburban locations such as Jamundi. This has resulted in the construction of
two major malls, institutional and recreational facilities, and residential
developments in Jamundi.
Customer Base and Competition
TeleJamundi expects its subscriber base to be composed of 93% residential
and 7% commercial subscribers. As a result of EMCALI's limited telephone
service, Jamundi has very low installed lines and penetration rates. As of
December 31, 1997, the municipality of Jamundi had approximately 11,000
installed lines and a penetration of 27.4 lines per 100 people.
EMCALI continues to provide telephone service in Jamundi and is
TeleJamundi's only competitor in the municipality.
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History
Prior to June 27, 1997, when TeleJamundi began commercial operations,
telephone service for Jamundi had been provided exclusively by EMCALI. The
telephone services provided at that time were generally below standard, with
substantial unmet demand for telephone services. On September 29, 1993,
Transtel and the municipality of Jamundi incorporated TeleJamundi to provide
telephony services in the city of Jamundi. Transtel contributed approximately
Ps24.4 million ($19,600) in cash and the municipality of Jamundi contributed
demographic information, the necessary civil work permits and approximately
Ps10.5 million ($8,400) in cash to the capital of TeleJamundi. In return for
these contributions, Transtel received 70% of TeleJamundi's shares and the
municipality of Jamundi received 30% of TeleJamundi's shares.
At December 31, 1997, TeleJamundi was indebted to the Company for
approximately Ps12 billion ($9.6 million). The Company is negotiating with the
municipal shareholder of TeleJamundi with respect to the potential
recapitalization of TeleJamundi by cancellation of such indebtedness in
exchange for approximately Ps4.0 billion ($3.7 million) of shares of
TeleJamundi, the number of such shares to be determined by shareholder
approval of a valuation of the Company.
Expansion Plan and Growth Strategy
TeleJamundi's Expansion Plan is currently underway and involves the design,
construction, installation and operation of a local telephone network with a
capacity of 15,000 lines, of which 11,000 lines were installed as of December
31, 1997. The newly installed system consists of an advanced network utilizing
digital switching and fiber-optic transmission technology. The new lines are
supported by a digital host and various digital remote switches. The estimated
cost of TeleJamundi's Expansion Plan is approximately $11.2 million, to be
financed with proceeds from Vendor Financing, debt obtained from local
financing institutions (and repaid with the proceeds of the Offering),
proceeds from the Offering and the DIAN Financing. Following completion of the
Expansion Plan, TeleJamundi will have approximately 15,000 lines and an
implied penetration of 34.2 lines per 100 people.
TeleJamundi's growth strategy is to provide the most advanced
telecommunications service in Jamundi. TeleJamundi expects to increase its
penetration rate by: (i) increasing the number of lines available; (ii)
actively marketing to new subscribers; (iii) offering high quality service to
a substantial portion of the population for whom telephony services were
previously unavailable; (iv) targeting EMCALI's subscribers to switch to the
Company's service; and (v) providing value-added services.
BUGATEL
Overview
The town of Buga is located in the heart of the Valle del Cauca, 97
kilometers northeast of Cali. Buga's surrounding regions boast prime fertile
farmlands typical of the Valle del Cauca. As with other cities in the Valle
del Cauca, Buga's stable economic base is derived largely from agriculture,
agribusiness and cattle raising and farming. Due to various historical
incidents, Buga is also the focus of religious tourism which streams to the
city steadily throughout the year giving rise to small commercial and lodging
businesses. Buga, together with its surrounding regions, has a population of
approximately 337,400 people. The demographic structure of Buga consists
primarily of middle income households.
Customers and Competition
Upon the initiation of the Company's operation of Bugatel in July 1997,
Bugatel's subscriber base was composed of approximately 66% residential and
34% industrial and commercial subscribers. The Company believes that, through
its technology, it can offer custom-made solutions to the business needs of
its commercial subscribers, such as Centrex, ISDN, DID and high speed access
through fiber optics. As a result, the Company expects that it can increase
both usage by commercial subscribers and the number of lines per subscriber.
The Company also believes that it can increase its residential subscriber base
through its sales and marketing efforts
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and by encouraging Internet, facsimile and other data applications.
Furthermore, the municipality is developing a "dry port" facility. The Company
intends to focus its marketing efforts on these potential customers.
ERT, a telephone service provider owned by the Departamento of Valle del
Cauca, also operates in Buga and is Bugatel's only competitor in the
municipality. TELECOM and Teletulua compete with Bugatel in the surrounding
region of Buga. The Company estimates that, as of December 31, 1997, its
competitors had an aggregate of 30,700 lines.
History
Prior to July 1, 1997, when Bugatel began commercial operations, telephone
service for Buga had been provided by both Empresas Municipales de Buga, a
public entity owned by the municipality of Buga, and ERT. The telephone
services provided at that time were generally below standard, with substantial
unmet demand for telephone services. On June 16, 1997, Transtel and the
municipality of Buga incorporated Bugatel to provide telephony services in the
city of Buga. Transtel initially contributed Ps2.1 billion ($1.7 million) and
in July 1997, contributed an additional Ps4.1 billion ($3.3 million) for a
total of approximately Ps6.2 billion ($5.0 million) in cash. The municipality
of Buga contributed certain of its existing telecommunications network and
infrastructure valued at approximately Ps4.1 billion ($3.3 million) to the
capital of Bugatel. In return for these contributions, Transtel received 60%
of Bugatel's shares and the municipality of Buga received 40% of Bugatel's
shares.
Expansion Plan and Growth Strategy
Bugatel's Expansion Plan consists of upgrading central exchanges and
approximately 11,200 existing lines acquired from the municipality and
installing 9,900 additional lines in the city of Buga and 4,000 wireless lines
in the surrounding rural areas, for a total of approximately 25,100 installed
lines by December 31, 1998. Once completed, the telephone network system will
consist of an advanced network utilizing digital and fiber-optic transmission
technology. The new lines will be supported by a digital host and various
digital remote switches. As of December 31, 1997, Bugatel had a total of
approximately 21,600 digital lines (including approximately 17,800 newly
installed digital lines and approximately 3,800 lines upgraded from analog to
digital). The estimated cost of Bugatel's Expansion Plan is approximately
$16.7 million, to be financed with proceeds from Vendor Financing, debt
obtained from local financing institutions (and repaid with the proceeds of
the Offering), proceeds from the Offering and the DIAN Financing. Following
the completion of the Expansion Plan, Bugatel will have approximately 25,100
lines and an implied penetration of 16.5 lines per 100 people. As of December
31, 1997 Bugatel had a penetration of 12.0 lines per 100 people.
The Company's growth strategy is to provide the most advanced
telecommunications service in Buga and the surrounding regions. Bugatel
expects to increase its penetration rate by: (i) increasing the number of
lines available; (ii) actively marketing to new subscribers; (iii) offering
high quality service to a substantial portion of the population for whom
telephony services were previously unavailable; (iv) targeting ERT's
subscribers to switch to the Company's service; and (v) providing value-added
services.
UNITEL WIRELINE
Overview
Unitel Wireline services the municipality of Yumbo, a small business
community located 12 kilometers north of Cali. Yumbo's population is
approximately 72,000 people. The second largest Colombian industrial park is
located in Yumbo. It has as tenants Colombian subsidiaries of multinational
companies such as The Goodyear Tire & Rubber Company, International Paper
Company, The B.F. Goodrich Company, Johnson & Johnson, Borden, Inc., Mobil
Corporation, Exxon Corporation and Texaco Inc.
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Customers and Competition
Unitel expects that its subscriber base will be composed of 44% residential
and 56% commercial subscribers. Unitel also expects that its commercial
subscriber base will generate higher revenues per subscriber than any other
Operating Company. In addition, the Company expects to offer commercial
subscribers in Yumbo specialized equipment, such as PBX and direct fiber optic
cable. Historically, the municipality of Yumbo has been served by analog
remote switching stations established by EMCALI.
EMCALI provides telephone service in Yumbo and is Unitel's only competitor
in the municipality. The Company estimates that, as of December 31, 1997,
EMCALI had approximately 5,500 installed lines.
History
Prior to June 27, 1997, when Unitel began commercial operations, telephone
service for Yumbo had been provided by EMCALI. The telephone services provided
at that time were generally below standard, with substantial unmet demand. On
March 11, 1994, Transtel and the municipality of Yumbo incorporated Unitel to
provide telephone services in Yumbo. Transtel contributed approximately Ps75.5
million ($60,600) in cash and the municipality of Yumbo contributed
demographic information and approximately Ps18.9 million ($15,100) in cash to
the capital of Unitel. In return for these contributions, Transtel received
80% of Unitel's shares and the municipality of Yumbo received 20% of Unitel's
shares.
Expansion Plan and Growth Strategy
Unitel's Expansion Plan is currently underway and involves the design,
construction, installation and operation of a local telephone network with a
capacity of 15,000 lines, of which approximately 5,250 were installed as of
December 31, 1997. The newly installed system consists of an advanced network
utilizing digital switching and fiber-optic transmission technology. The new
lines are supported by a digital host and various digital remote switches. The
estimated cost of Unitel's completed Expansion Plan in Yumbo is approximately
$16.8 million, to be financed with proceeds from Vendor Financing, debt
obtained from local financial institutions (and repaid with the proceeds of
the Offering), proceeds from the Offering and the DIAN financing. Following
completion of the Expansion Plan, Unitel will have approximately 15,000 lines
and an implied penetration of 28.5 lines per 100 people. As of December 31,
1997, Unitel had a penetration of 13.2 lines per 100 people. Due to its heavy
commercial subscriber base, Unitel will install a network consisting of
maximum band width and capacity. This capacity will also be utilized by the
other Operating Companies for the provision of Internet services, except
Caucatel, which will provide its own Internet service to its subscribers. The
supporting Internet services will be supplied by IBM as part of its pilot
program for its Latin American market development activities.
Unitel's growth strategy in Yumbo focuses on satisfying the needs of its
predominantly commercial subscribers. Unitel plans to increase its penetration
rate by: (i) increasing the number of lines available per subscriber; (ii)
implementing its marketing strategy; (iii) targeting EMCALI's subscribers to
switch to the Company's service; and (iv) providing value-added services.
UNITEL WIRELESS
Overview
Cali is the second largest city in Colombia and is located in the
southwestern region of the country. Cali's population is 1,908,600 people.
Cali's population is distributed among all socioeconomic levels, with a
majority of the population belonging to the middle income bracket of Colombia.
Cali has a stable and diverse economic base which includes agriculture,
agribusiness, manufacturing and transportation. As of December 31, 1995,
EMCALI provided telephone service in Cali to approximately 386,800
subscribers, representing a penetration of 20.3 lines per 100 people.
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Expansion Plan and Growth Strategy
As an alternative to the fixed landline services in Cali provided by EMCALI,
Transtel is implementing a fixed wireless system in order to penetrate the
Cali market. This technology is cost effective, can be quickly deployed, and
has a transmission quality that is comparable to wireline systems. See
"Business--Technology." In addition, wireless services do not require the
civil works permits that would be required for a landline system. In September
1996, Telemercadeo was hired by Transtel to conduct a study of telephone
demand in certain sections of the city of Cali. The study estimated that there
was unmet commercial demand in the northern section of Cali for approximately
50,100 additional lines.
Unitel Wireless' Expansion Plan consists of the design, construction,
installation and operation of a fixed wireless system for 59,000 subscribers
in the city of Cali. The new subscribers will be served by Unitel's digital
host. The Company has hired Bellcore to evaluate the wireless technologies
available and to advise the Company with respect to the best application for
this market. Although installation of switching infrastructure and antennas
was substantially completed at Unitel Wireless in the fourth quarter of 1997,
there was an interference from unauthorized radio spectrum users, which was
subsequently removed by the Ministry of Communications. This delayed the
Company's launch of operations at Unitel Wireless until the first quarter of
1998. The estimated cost of Unitel Wireless' Expansion Plan in Cali is
approximately $73.1 million to be financed with proceeds from certain Vendor
Financing, debt obtained from local financing institutions (and repaid with
the proceeds of the Offering), proceeds from the Offering and the DIAN
Financing.
The Company's growth strategy is to provide the most advanced
telecommunications service in Cali. Unitel expects that its subscriber base
will be composed of approximately 50% residential and 50% commercial
subscribers. Unitel subscriber growth began to occur in the last quarter of
1997 and early 1998 after Transtel installed its telecommunications network
and implemented its marketing strategy. Transtel expects to achieve its
objectives in Cali by: (i) offering high quality service; (ii) meeting the
substantial demand that currently exists in Cali; (iii) targeting subscribers
of the municipality-owned competitor to switch to the Company's service; and
(iv) providing value-added services.
At September 30, 1997, Unitel was indebted to the Company for approximately
Ps6.7 billion ($5.4 million). On December 30, 1997, the Company agreed with
the municipal shareholder to cancel such indebtedness in exchange for
approximately Ps5.7 billion ($4.5 million) of shares of Unitel, an additional
15% of ownership.
SERVICES
The Company offers telephone services to residential and commercial
subscribers, including local calls and access to national and international
telephone carriers, Internet access and the ability to utilize standard modem
and fax equipment. The Company's basic residential service includes the
ability to activate a second telephone line without the need for a subscriber
premise visit. Residential and business services also include seven day a week
customer service.
The Company's basic telephone services include the following:
Call Divert/Forwarding diverts or forwards incoming calls to another
telephone number. The Company receives revenue for the diverted part of the
telephone call, as well as for the usual incoming call.
Call Barring prevents calls from being completed to specified groups of
numbers, such as "for fee" services and long distance telephone calls.
Caller Display enables subscribers with compatible equipment to identify the
telephone number of incoming calls.
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Caller Return identifies and automatically redials the telephone number from
which the most recent incoming call was placed. The Company receives revenue
from the returned call.
The Company also offers a variety of special telephone services for an
additional fee, including the following:
Call Waiting alerts subscribers who are using their telephone that another
party is attempting to place a call to them; subscribers then have the option
of ignoring the new telephone call or answering it while placing their
existing call on hold. In addition to a subscription charge for call waiting,
the Company receives revenues from the second caller's telephone service
provider for completing a call that, in the absence of the Company's call
waiting feature, would not have been connected.
Three Way Calling enables subscribers to place conference telephone calls
with two additional parties. In addition to the subscription charge for
conference calling, the Company receives revenues from each of the telephone
calls placed to the participating parties.
Voice Mail enables subscribers to receive and retrieve voice mail messages,
whether at home or from an outside location. In addition to the subscription
charge for voice mail, the Company receives revenues from each of the
telephone calls placed to retrieve messages.
Alarm Calls enables subscribers to have telephone calls placed to their
number at a specified time (e.g., wake-up telephone calls or appointment
reminders). The Company receives a fee for each such call.
ISDN (Integrated Services Digital Network) allows two-way, simultaneous
voice and data transmission in digital formats over the same telephone line.
ISDN permits videoconferencing over a single line, for example, and also
supports many value-added networking capabilities, reducing costs for end-
users and resulting in a more efficient use of available facilities.
Internet The Company has entered into an agreement with IBM for the purchase
and installation of Internet hardware and software in each of the Operating
Companies. The Company expects to charge its Internet subscribers a monthly
service fee and a monthly usage fee to access the Internet. All of the
Operating Companies will be able to provide Internet access by May 1, 1998 and
the Company expects to be one of the leading providers of Internet related
services in Colombia. See "Description of Existing Indebtedness--IBM
Arrangement."
The Company intends to continue to develop and introduce additional value-
added services in order to retain its competitive advantage and generate
additional revenues.
MARKETING
Overview
The Company's primary marketing objectives are to: (i) create a regional
brand perceived as a reliable, high quality telephone company; (ii) achieve
increased market penetration rates in its operating markets; and (iii) educate
consumers as to the benefits of value-added services.
The Company markets to both residential and commercial subscribers in its
respective operating regions. Each Operating Company develops an in-depth
knowledge of its markets by analyzing the demographic and customer information
provided by its municipal shareholders as well as, in certain cases, the
market studies conducted for the Company by independent consultants. In
addition, the Company conducts its own door-to-door census in each of its
markets. Based on this information, the Company creates a detailed marketing
plan to increase subscribers and their use of services.
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Sales
The Company uses a combination of door-to-door inquiries, selling booths and
networking to offer its services to consumers. Each Operating Company employs
its own trained sales force to contact potential subscribers. As of December
31, 1997, the Company and the Operating Companies (excluding TeleGirardot)
employed a sales staff of 66 people, which is expected to continue to
increase.
Advertising
The Operating Companies use radio, television, newspapers and direct mail to
solicit new subscribers, establish brand awareness, retain subscribers and
stimulate usage. Radio and direct mail are the main methods by which the
Operating Companies advertise because these methods are relatively inexpensive
and offer high-volume coverage. National television and newspaper
advertisements are generally used only to establish the Operating Company's
name in the market when it commences operations and to maintain brand
recognition once the network is operating. The Operating Companies' direct
mail campaigns involve soliciting subscribers through the mail with printed
advertisements describing the telephone service offered. While the Operating
Companies generally have their own database of potential subscribers to whom
they direct their mail campaign, they also have access to the large subscriber
base served by the municipal utilities located in each of their respective
regions.
Customer Service
The Company has focused on providing its subscribers a high level of quality
service by establishing: (i) dedicated customer service centers in each of its
markets; and (ii) a seven-day-a-week customer service telephone hotline.
The Company has customer service representatives who are trained to receive
complaints from subscribers. Subscriber complaints are directly routed to the
engineering department through the Company's internal computer system. The
Company's customer service strategy has resulted in the reduction of customer
service calls and line repair.
OPERATIONS
Installation and Maintenance
The installation process for a new subscriber commences with the entry of a
service order into the Company's computerized subscriber administration system
("SAT"). The planning department then verifies that there is sufficient
capacity in the system and assigns a line. Once partial payment of the
connection fee has been received from the subscriber, the SAT system
automatically assigns a work order to an installer. A drop wire, internal
service wire and telephone jack are then installed and tested at the
customer's premises. Any equipment ordered by the customer is also installed.
Maintenance work is begun upon receipt of repair requests from the customer
service center or from the SAT system. Maintenance crews conduct both
preventive maintenance work as well as emergency repairs.
Billing
Transtel generates a monthly bill for each subscriber which itemizes
connection fees and local, cellular and long distance charges. The SAT system
generates all customer billing based on billing information provided by the
Central Office automated message accounting systems.
Credit and Collections
The Operating Companies offer potential subscribers flexible payment plans
of up to 36 months for connection fees and hardware. The subscriber signs a
contract with a partial payment of the connection fee and
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is billed for the remaining balance on a monthly basis depending on the
payment terms agreed upon by the Company and the subscriber. Subscriber
receivables are often converted by the Operating Companies into cash by sale
to local credit institutions. The Operating Companies handle the collection of
the connection fees and any other outstanding payments.
A subscriber is charged interest for its failure to pay fees on time.
Service is suspended for failure to pay for two months and cancelled for
failure to pay for six months. Subscribers are charged substantial
reconnection expenses if their service is cancelled. To date, service
suspensions have not exceeded 1%.
Subscribers can pay their telephone bills at a large number of different
banking institutions in their community.
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TECHNOLOGY
Initial Upgrades to Fixed Wireline Systems
Prior to takeover of a newly acquired system, Transtel personnel complete a
full inspection and appraisal of the existing network's elements, operational
procedures and performance parameters. This allows the Company to gather
accurate census, network inventory and subscriber record information which is
used in the network design process. Transtel then establishes new network
priorities and redesigns the network in order to raise it to international
standards. The table below describes certain characteristics of the typical
existing system acquired by Transtel and the Transtel upgrade.
<TABLE>
<CAPTION>
TYPICAL PREDECESSOR TRANSTEL'S
PREDECESSOR SYSTEM CAPABILITIES TRANSTEL UPGRADE SERVICE CAPABILITIES
------------------ -------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Network . LECs typically . Little provision . Design . System provides
Design employ a small for alternate parameters derived redundancy and
number of Central routing in the from alternate routing
Offices configured event of network recommendations of for all critical
in a star network failure international links
to serve densely consultants . Excess capacity
populated . Use ring designs designed to meet
communities and intelligent demand forecast
. Short subscriber service nodes to and overall
loops achieve system network
flexibility flexibility
Central
Office
Environment
Switching . Primarily . No basic . Replace analog . 100% touchtone
Systems vintage touchtone service with fully digital . Provisioned with
electromechanical . Intelligent Siemens EWSD custom calling,
and crossbar Network services technology IBM DID, E1, ISDN,
technologies beginning to RS/6000 server Centrex and most
. Limited appear in larger applications Intelligent
application of markets Network
analog SPC or . Digital services applications
digital switching provided on a . Full Internet,
systems case-by-case basis voice mail and
. Newer switches . Multiple vendor interactive voice
supported by older sourcing response services
software versions complicates
network interface,
maintenance and
service
restoration
Transmission . PDH systems . No add-drop . All Central . Capacity
. Switching system capability Office links sufficient to
interconnection . Fiber-to- utilize Siemens accommodate
achieved via customer services STM (SDH type) Internet and dense
copper, coaxial or not yet present multiplexers and data transmission
microwave links fiber-optic cable . Dedicated
. Selective use of channel services
digital microwave available upon
radio links IBM request via fiber,
RS/6000 server microwave radio or
applications HDSL copper
facilities
Network
Administration
General . Virtually no TMN . Few alarm . Centralized call . Digital network
Operations operating system monitoring or center for and standard
architecture network management efficient customer interfaces allow
capabilities service operation in
. Ability to . SAT from C-NIX compliance with
analyze traffic utilizes Oracle international TMN
trends limited Data Base and IBM standards
hardware to handle
administration and
billing
. Information
systems centrally
administered
through IBM's
TIVOLI and NETVIEW
network management
systems
Management/ . Manual . Repair times up . Fully automated . Fully flexible,
Recordkeeping to three months system automated system
. Typical line offers effective,
installation up to responsive system
one month management
Outside . All copper . Cable splices . Fiber optics . Key business
Plant facilities inadequately added to all major subscribers have
. A typical urban protected against trunks direct fiber
network design moisture . System rebuilt access to network
based on an . Co-location to provide maximum . Sufficient
underground degrades capacity (up to 64 capacity to serve
network with non- transmission fibers per cable) growing customer
pressurized pulp- quality and full needs
insulated copper . Rural signal insulation . All networks
cable extended via attenuation . OSP networks grounded and surge
cement conduits compensated with provided with 30% protected
open to water and lead coil reserve ratio of . Significant
dirt penetration technology which primary cable improvement in
. Secondary routes amplifies both pairs to switching operations
are aerial often noise and the capacity (reduction in
co-located with intended signal . Secondary cable service calls,
electric power . Frequent service is provided with a improved call
lines. Rural failures due to 30% reserve to the completion)
service provided poor network primary routes
through non- protection
redundant
microwave links or
higher gauge cable
</TABLE>
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Transtel's Planned Fixed Wireless System
Transtel is employing a fixed wireless technology from Siemens for both
urban and rural applications. This technology is called DECT. It has its
origins in the wireless PBX technology developed in Europe in the early 1990's
and is based on Time Division Multiple Access ("TDMA") transmission technology
(with reception and transmission slots offset in time).
Transtel selected DECT on the basis of regulatory, market and technical
considerations. Colombia segregates wireless technology into mobile and fixed
categories. Mobile technology (which includes PCS systems) requires operator
licensing and fees whereas fixed technology requires frequency assignment by
the Ministry of Communications. The radio spectrum from 1910-1930 mHz has been
assigned for fixed wireless technology by the Ministry of Communications. DECT
utilizes this frequency and offers digital capabilities. Other systems,
including CDMA and GSM technology, cannot currently be used in Colombia, as
equipment manufacturers have not yet modified their products for use at 1910-
1930 mHz. DECT also offers Transtel the rapid deployment capability it needs
to capture unsatisfied customer demand in target service areas.
DECT provides telecommunications services via antenna sites which may cover
an area of two to ten kilometers in diameter, depending on the density and
usage patterns of subscribers, topography, and existing construction. A
standard cell can cover up to 480 subscribers. Cell size may be modified over
time to accommodate traffic trends. The DECT system utilizes Adaptive
Differential PCM ("ADPCM") technology to compress voice and data
communications and achieve better transmission efficiency.
The basic components of DECT, starting from the subscriber's premises,
consist of a Radio Network Termination Unit ("RNT"), a Radio Base Station
("RBS"), the Radio Base Controller ("RBC") and a Radio Distribution Unit
("RDV").
RNT--Radio Network Termination Unit is a small base station unit
installed at the subscriber's location next to his telephone allowing for
two lines to the jack. The RNT accepts any standard telephone, facsimile,
modem or other telecommunications adjunct. The RNT has its own power
capability (including an eight-hour battery backup) and connects to an
antenna installed on the subscriber's roof or other location in "line of
sight" of the RBS.
RBS--Radio Base Stations are the units with sectorized or omnidirectional
antennas which receive and transmit to the RNT's, collect all traffic and
utilize copper cable or coaxial facilities to further aggregate
communications in the RBC. The RBS is powered remotely and supports up to
12 channels.
RBC--The Radio Base Controller supports up to 15 RBS interfaces, further
collects traffic and is linked to the RDU located at the Central Office.
The link can be either digital microwave, fiber-optic or coaxial cable
without distance limitations.
RDU--The Radio Distribution Unit is the final link in the chain of nodes
from the subscriber to the Central Office transporting telephone calls via
two Megabit channels directly to the switching network. It supports up to
four RBC interfaces.
There are other elements to the DECT system providing network management
capabilities, extended coverage and other features essential for a flexible
network.
CONSTRUCTION ARRANGEMENTS
On April 30, 1996, each of TelePalmira, Unitel (with respect to its wireline
applications) and TeleJamundi entered into turn-key arrangements (the "Turn-
Key Arrangements") with Siemens S.A., a Colombian corporation ("Siemens
S.A."), and an affiliate of Siemens, to (i) install the lines, switches and
other equipment leased by each of these Operating Companies from Global under
the Global I Leases (as defined herein), (ii) put in operation such lines and
equipment, (iii) manage the "cut-over" to the new system lines, install air
conditioner equipment and train the personnel who will operate the switching
equipment, (iv) install SDH, (v) expand, replace and install the Outside
Plant, and (vi) complete expansion of the network. The aggregate amount due to
Siemens S.A. under these Turn-Key Arrangements is approximately $8.1 million.
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For each of the Turn-Key Arrangements described in the paragraph above,
Siemens S.A. has provided the respective Operating Company with performance
bonds equivalent to (i) 10% of the amount of each Turn-Key Arrangement, (ii)
5% of the services contracted under each Turn-Key Arrangement, (iii) 10% of
the cost of the Outside Plant civil works and (iv) up to $100,000 for personal
or property liability.
On June 18, 1997, each of Transtel (in place of Bugatel, which was not yet
formed), TeleCartago and Unitel (with respect to its wireless applications)
entered into Turn-Key Arrangements with Siemens S.A. to (i) install the lines,
switches and other equipment leased by Bugatel, TeleCartago and Unitel from
Global under the Global II Leases (as defined herein), and (ii) put in
operation such lines and equipment. The aggregate amount due to Siemens under
these Turn-Key Arrangements is approximately $6.9 million. Siemens S.A. has
provided Transtel, TeleCartago, and Unitel with performance bonds
substantially similar to those provided to TelePalmira, Unitel and
TeleJamundi. In connection with the negotiations to amend the Global II
Purchase Agreement as set forth in "Description of Existing Indebtedness--
Global-Siemens Arrangements--Global II Purchase Agreement," TeleCartago and
Siemens on February 5, 1998 agreed to reduce the amount due to Siemens under
this Turn-Key Arrangement to approximately $5.3 million.
On May 23, 1997, Transtel entered into a Turn-Key Arrangement with Siemens
S.A. to (i) install the lines, switches and other equipment that Transtel
agreed to contribute to the capital of Caucatel as part of its capital
contribution and which the Company acquired from Siemens pursuant to the
Transtel-Siemens Arrangement, and (ii) put in operation such lines and
equipment. The aggregate amount due to Siemens S.A. under this Turn-Key
Arrangement is approximately $460,000.
The Company is currently negotiating with Siemens S.A. regarding a Turn-Key
Arrangement with respect to the equipment to be provided to the Company
pursuant to the Global III Letters of Intent (as defined herein). The Company
believes that the terms and conditions of this arrangement will be
substantially similar to those contained in the other Turn-Key Arrangements.
The Company is currently negotiating with Siemens regarding contracts for
the supply of equipment to effect the TeleGirardot Expansion Plan.
INTERCONNECTION AGREEMENTS
Local Connections
Each Operating Company which has a competitor in its local calling area must
enter into an arrangement with such competitor for access to the competitor's
network so that subscribers can complete local calls between the networks. Law
142 provides that each local service provider must permit each other local
service provider in its local calling area access to its network. Law 142
additionally empowers the CRT to regulate the tariffs associated with such
arrangements. The Company intends to have interconnection agreements between
each of the Operating Companies and their competitors. Interconnection
agreements have been signed between EMCALI and Unitel and between EMCALI and
TeleJamundi. In compliance with Law 142, ERT is interconnected with
TeleCartago and Bugatel and EMTEL is interconnected with Caucatel. However,
there are no written agreements which govern these arrangements.
Long-Distance Connections
Each Operating Company must enter into an interconnection arrangement with
TELECOM for access to the national and international long distance network.
Law 142 provides that TELECOM must permit the Operating Companies to have
access to such network and empowers the CRT to establish the tariff for such
access. At the present time, Unitel and TeleJamundi are provided such access
at the CRT established tariff. The remaining Operating Companies are provided
such access at the rates previously negotiated under expired arrangements
between TELECOM and the former municipal operators of the respective networks.
The Operating Companies, as well as many other local providers in Colombia,
have not entered into formal arrangements with TELECOM as a result of the
impending privatization of national and international long distance service
which will end TELECOM's monopoly and probably lower such tariffs. The
Operating Companies which are operating under expired arrangements expect to
enter into interconnection agreements with either TELECOM at the CRT
established rate, or one of TELECOM's new competitors, if any.
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BY-LAWS OF OPERATING COMPANIES
Set forth below is a brief description of certain provisions of the
estatutos sociales (by-laws) (the "by-laws") of each of the Operating
Companies (including TeleGirardot) and Colombian law with regard to each of
the Operating Companies' capital stock. This description does not purport to
be complete and is qualified in its entirety by reference to the by-laws of
each Operating Company.
Capital Stock
The capital stock of each Operating Company is divided into two classes of
common shares, Class A shares and Class B shares, each with par value of one
Peso. Law 142 provides that shares of private public service companies owned
by the Colombian government are referred to as "Class A shares", and shares
owned by private investors are referred to as "Class B shares".
Voting Rights
In accordance with the by-laws of each Operating Company, each Class A share
and Class B share entitles the holder thereof the right to one vote per share
at meetings of the shareholders of such Operating Company.
Preemptive Rights
In accordance with the by-laws of each Operating Company, holders of common
shares of each Operating Company are entitled to preemptive rights in
proportion to their holdings in the event of an issuance of additional shares
by such Operating Company.
Transfer
Under Law Decree 130 of 1976, each shareholder of a mixed capital company
which is a public company has pre-emptive rights with respect to shares
proposed to be sold by a private sector shareholder. These pre-emptive rights
are superior to any pre-emptive rights contained in the by-laws of such
company. Each of the municipalities of Palmira, Cartago and Yumbo have waived
pre-emptive rights. Under Law 226 of 1995, employees, former employees,
unions, pension funds and cooperative entities have pre-emptive rights with
respect to shares of a mixed capital company proposed to be sold by the public
company shareholder. These pre-emptive rights are superior to any pre-emptive
rights contained in the by-laws of such company.
The by-laws of each Operating Company provide that shareholders who wish to
transfer their common shares in an Operating Company must first offer such
shares to the Operating Company. If the Operating Company does not purchase
the shares from the transferor within 30 business days, the Operating Company
is required to offer such shares to the remaining shareholders on a pro rata
basis. Any shares not purchased by the remaining shareholders within the 30
business days following such offer may be offered to third parties, which in
the case of TelePalmira's, TeleCartago's and Unitel's by-laws, must be on
terms no less favorable to the terms offered to the remaining shareholders.
Shareholders' Meetings
The by-laws of each Operating Company provide that shareholders meetings may
be ordinary or extraordinary. Matters that may be considered at an ordinary
meeting are approval of the annual financial statements, distribution of
dividends, election of the members of the Board of Directors, appointment of
administrative officers, and other matters relating to the ordinary course of
the Company's business. Extraordinary meetings may be called at any time to
consider matters beyond the competence of an ordinary meeting, such as
dissolution of an Operating Company.
The quorum required for ordinary and extraordinary meetings of the
shareholders of the Operating Companies consists of two or more shareholders
representing at least 51% of the outstanding shares.
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Board of Directors
The board of directors of each Operating Company has five members, who are
elected on a cumulative voting basis, and five alternate directors.
Dividends
The distribution of dividends by the Operating Companies is governed by Law
222 of 1995, which requires that any distribution of profits must be taken by
the favorable vote of 78% of the shares represented at a duly convened
shareholders' meeting. If a 78% majority vote cannot be obtained, the Operating
Company is obligated to distribute at least 50% of its liquid profits to the
extent such profits exceed accumulated losses from prior years.
LEGAL PROCEEDINGS
Neither the Company nor any of the Operating Companies is currently a
defendant in any legal proceeding.
PROPERTIES
On September 18, 1996, Transtel purchased a 2,000 square meter building for
Ps1.7 billion ($1.4 million). See "Certain Related Party Transactions." In
addition, Transtel leases its headquarters at Calle 19N, No 2-29, Oficina 501A,
Cali, Colombia. The monthly payment for such lease is Ps5.4 million ($4,300)
and such lease runs on a year to year basis.
Each Operating Company owns the building where its Central Office is located
and certain smaller properties where some of its remote digital switches are
located. In addition, each Operating Company leases within the municipalities
it serves certain properties which are used for office space or for the
installation of other remote digital switches.
EMPLOYEES
As of January 1, 1998, Transtel and its Operating Companies (excluding
TeleGirardot) had approximately 543 employees. As of January 1, 1998, 149 of
those employees were employed by TelePalmira, 71 by Bugatel, 59 by Caucatel, 41
by TeleJamundi, 108 by Unitel, 89 by TeleCartago and 26 by Transtel. Many of
these employees are part of the construction phase of projects that are
currently taking place, and therefore the number of employees will reduce once
these projects are concluded. The Company is not a party to any collective
bargaining agreements and has never experienced a strike or work stoppage. None
of the employees are members of a union. The Company believes its relations
with its employees to be good.
DESCRIPTION OF EXISTING INDEBTEDNESS
GLOBAL-SIEMENS ARRANGEMENTS
Global Telecommunications Operations, Inc. ("Global") is a British Virgin
Islands company owned by the same shareholders who own Transtel. See "Principal
Shareholders." Global was formed in January 1995 for the exclusive purpose of
acting as a financing vehicle for the purchase of telecommunications equipment
from Siemens to be used by the Operating Companies for the development of their
telephone networks. Global has financed, or intends to finance, its purchases
of equipment from Siemens (the "Siemens Financing"). Global then has leased, or
intends to lease, such equipment to an Operating Company pursuant to a lease
agreement (each, a "Global Lease") with terms substantially similar to the
Siemens Financing. Transtel purchased equipment, to be used by Caucatel,
directly from Siemens ($3.3 million for switches and $500,000 for installation)
and contributed such equipment to Caucatel as part of its capital. Caucatel is
the only Operating Company that does not lease its equipment from Siemens. See
Note 26 to the Consolidated Financial Statements and "--Transtel-Siemens
Arrangement." Under the Global Leases, if the Operating Companies are in
default under the Leases, Global has the right to take action against the
assets leased thereunder, including repossession or sale of the assets. See
"Certain Related Party Transactions--Undertakings by Global Regarding
Indebtedness and Line of Business."
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As a part of the Expansion Plan, Global has entered into two purchase
agreements and two letters of intent with Siemens for the provision of certain
equipment necessary for the Expansion Plan, each as described below (such
purchase agreements and the letters of intent, the "Purchase Agreements").
In consideration for Siemens agreeing to modify certain terms to the
existing Purchase Agreements in connection with the Offering, Global has
assigned to Siemens the lease payments under each of the Global Leases in case
an event of default occurs and is continuing under the Purchase Agreements.
Global I Purchase Agreement. On May 2, 1996, Global entered into a purchase
agreement with Siemens (as amended on July 28, 1997, the "Global I Purchase
Agreement") to purchase certain landline telecommunications equipment to be
used for the development of each of TelePalmira's, TeleJamundi's and Unitel's
respective wireline networks for an aggregate amount of approximately $20.0
million, of which 15% (approximately $3.0 million) was paid upon execution of
the Global I Purchase Agreement. The remaining 85% of the price of equipment
delivered and installed by Siemens under the Global I Purchase Agreement is
payable by Global in 20 semi-annual payments, commencing six months after the
completion of the Turn-Key Arrangements. Global's obligations under the Global
I Purchase Agreement are secured by a pledge of the lease payments under the
Global I Leases (as defined below).
Global I Leases. On August 1, 1996, Global entered into a lease agreement
with each of the following Operating Companies: TelePalmira (the "Global-
TelePalmira Lease"); TeleJamundi (the "Global-TeleJamundi Lease"); and Unitel
(the "Global-Unitel I Lease") (the Global-TelePalmira Lease, Global-
TeleJamundi Lease and Global-Unitel I Lease are collectively referred to as
the "Global I Leases").
Global-TelePalmira Lease. Pursuant to the Global-TelePalmira Lease,
TelePalmira agreed to pay Global an aggregate amount of approximately $14.4
million to lease, for a 12-year term, certain switching and cable equipment
that Global purchased from Siemens under the Global I Purchase Agreement.
The Global-TelePalmira Lease includes an option to purchase the equipment
for an additional $285,000 at the end of the lease term.
Global-TeleJamundi Lease. Pursuant to the Global-TeleJamundi Lease,
TeleJamundi agreed to pay Global an aggregate amount of $5.3 million to
lease, for a 12-year term, certain switching and cable equipment that
Global purchased from Siemens under the Global I Purchase Agreement. The
Global-TeleJamundi Lease includes an option to purchase the equipment for
an additional $104,000 at the end of the lease term.
Global-Unitel I Lease. Pursuant to the Global-Unitel I Lease, Unitel
agreed to pay Global an aggregate amount of $3.7 million to lease, for a
12-year term, certain switching and cable equipment that Global purchased
from Siemens under the Global I Purchase Agreement for its wireline
applications. The Global-Unitel I Lease includes an option to purchase the
equipment for an additional $73,000 at the end of the lease term.
Global II Purchase Agreement. On May 30, 1997, Global entered into a
purchase agreement with Siemens (as amended on July 28, 1997 and October 17,
1997, the "Global II Purchase Agreement") to purchase certain landline and
wireless telecommunications equipment to be used for the development of
TeleCartago's, Bugatel's and Unitel Wireless' networks for an aggregate amount
of approximately $34.0 million, of which approximately $3.7 million was paid
upon execution of the Global II Purchase Agreement. The remaining price of
equipment delivered and installed by Siemens under the Global II Purchase
Agreement is payable by Global in 20 semi-annual payments. Global's
obligations to Siemens under the Global II Purchase Agreement will be secured
by a pledge of the lease payments under the Global II Leases (as defined
below). Due to the modification of the Company's network plan with respect to
Bugatel and TeleCartago, the Company and Siemens have amended the Global II
Purchase Agreement to increase the amount of equipment and increase the amount
of the financing that will be provided by Siemens as a result thereof.
Global II Leases. On July 28, 1997, Global entered into a lease agreement
with Unitel (the "Global-Unitel II Lease") and TeleCartago (the "Global-
TeleCartago Lease" and, together with the Global-Unitel II Lease and
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the lease to be entered into with Bugatel, the "Global II Leases") for certain
of the equipment that is the subject of the Global II Purchase Agreement.
Global then leased the remainder of the equipment that is the subject of the
Global II Purchase Agreement to Bugatel under leases with terms and conditions
similar to those of the Global I Leases.
Global-Unitel II Lease. Pursuant to the Global-Unitel II Lease, Unitel
agreed to pay Global an aggregate amount of $26.9 million to lease, for a
12-year term, certain wireless telecommunications equipment that Global
purchased from Siemens under the Global II Purchase Agreement. The Global-
Unitel II Lease includes an option to purchase the equipment for an
additional $525,000 at the end of the lease term.
Global-TeleCartago Lease. Pursuant to the Global-TeleCartago Lease,
TeleCartago agreed to pay Global an aggregate amount of $9.9 million to
lease, for a 12-year term, certain switching and cable equipment that
Global purchased from Siemens under the Global II Purchase Agreement. The
Global-TeleCartago Lease includes an option to purchase the equipment for
an additional $197,000 at the end of the lease term.
Global III Letters of Intent. Siemens and Siemens A.G. have entered into
letters of intent, dated April 25, 1997 and September 25, 1997 (the "Letters
of Intent"), with the Company which outline the proposed terms of the purchase
and financing of various telecommunications equipment to be used by Transtel
to substantially complete the Expansion Plan. Global, the Company and Siemens
intend to structure these purchases with similar terms to those used under the
Global I and Global II Purchase Agreements and the Global I Leases and Global
II Leases. The purchase agreements to be entered into in connection with the
Letters of Intent are referred to herein as the "Global III Purchase
Agreements" and the leases to be entered into in connection with the Letters
of Intent are referred to herein as the "Global III Leases." See "Risk
Factors--Network Rollout Risks; Reliance on Suppliers; Delays in
Construction."
TRANSTEL-SIEMENS ARRANGEMENT
On May 23, 1997, Transtel entered into a purchase agreement with Siemens (as
amended on October 17, 1997, the "Transtel-Siemens Purchase Agreement") for
certain telecommunications equipment to be used by Caucatel in the
installation of approximately 23,000 lines, for an aggregate amount of
approximately $3.3 million payable over a ten-year period, commencing six
months after the completion of the Turn-Key Arrangements. See Note 26 to the
Consolidated Financial Statements. The obligations of Transtel under the
Transtel-Siemens Purchase Agreement are secured by a promissory note from
Transtel.
The Company is currently negotiating with Siemens to enter into contracts
for the supply of equipment to effect the TeleGirardot Expansion Plan.
DIAN FINANCING
DIAN allows for the deferral of taxes and duties related to the purchase of
certain imported telecommunications equipment used by the Company, through its
Operating Companies, in the Expansion Plan. Based on the expected imported
equipment to be purchased under the Expansion Plan, the Company estimates that
it will defer approximately $23.1 million of taxes and duties during the
Expansion Plan that will be paid over a five-year period commencing six months
from the date of incurrence. The DIAN Financing does not bear any interest.
The DIAN Financing has been obtained with respect to the equipment which is
the subject of the Global I Purchase Agreement. The Company believes it will
be able to obtain such financing with respect to the equipment to be purchased
pursuant to the Global II and Global III Purchase Agreements.
IBM ARRANGEMENT
The Company has entered into an agreement with IBM, dated June 25, 1997 (the
"IBM Agreement"), whereby IBM has agreed to provide and install all the
Internet and voice mail related hardware and software for the Company's
telephone systems. Under the IBM Agreement, the Company has agreed to pay IBM
an aggregate amount of $3.4 million for such equipment. On September 30,
October 28 and October 30, 1997, Unitel entered into 60-month leases with IBM
for $2.3 million, $427,000 and $730,000, respectively, for this equipment.
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INDUSTRY OVERVIEW; LEGAL AND REGULATORY ENVIRONMENT
Colombia is one of the oldest democracies and most stable economies in Latin
America and is one of only three countries in Latin America rated investment
grade by all three major rating agencies. Colombia has achieved positive real
economic growth every year since 1950 and averaged compounded annual growth in
Gross Domestic Product ("GDP") of approximately 4.7% from 1992 to 1996, one of
the highest growth rates in Latin America. Annual inflation has declined over
the past six years from 26.8% in 1991 to 17.7% in 1997. In recent years, the
Colombian government has encouraged foreign investment and exports through
reduced foreign exchange controls and lower import quotas and tariffs. The
Colombian government has also begun to open certain public services, such as
power and banking, to private sector investment and is considering other
sectors for privatization. In part as a result of these policies, net foreign
investment in Colombia has grown from $3.5 billion in 1990 to $10.5 billion in
1997. During the same period, Colombia has achieved increased diversification
of its export base and the value of its exports has grown from $6.7 billion to
$11.6 billion. See "Risk Factors--Colombian Political, Economic and Social
Risks."
In 1995, Colombia had approximately 4.9 million installed lines,
representing a penetration of approximately 14.0 lines per 100 people which
generated approximately $635 million of revenues representing approximately
44% of the $1.5 billion telecommunications industry. Historically, local
telephony has been treated as a utility. The local telephony network is
fragmented and approximately 30 municipal operators service approximately 780
municipalities. Prior to deregulation, each municipal operator had a monopoly
in the region which it served and typically provided limited and often
marginal service. As a result, Colombia is significantly underserved by
existing wireline operators and demand for telephone service substantially
outweighs supply for telephone lines. This is evidenced by multi-year waiting
lists and unsatisfied demand in Colombia for approximately 1.2 million
telephone lines as estimated by the DNP. The DNP also projects that the
country's existing installed line network will need to more than double by
2007 in order to keep pace with growing demand.
The Colombian government, recognizing the importance of an effective
telecommunications infrastructure and the role that the telecommunications
industry plays in national development, identified the problems in the
telecommunications industry and, from 1990 to 1994, established the regulatory
environment required to support private sector participation. The government
enacted decrees addressing many facets of operation including interconnection,
numbering and tariffs.
In 1990, the Ministry of Communications issued Decree 1900 which permitted
private sector's participation in the state-owned telecommunications industry.
The decree launched a deregulation process which resulted in the privatization
of local wireline telecommunications, the sale of cellular licenses and the
planned privatization of the national long distance carrier, TELECOM. Law 142
established the basic guidelines for the privatization of basic services,
including telecommunications, thereby introducing open competition in the
telecommunications sector and promoting a tariff environment whereby
participants would be encouraged to compete on the basis of efficiency and
service rather than price.
There is currently no restriction in Colombia on competition within the
local telephony business and therefore any person can organize and operate a
telephone company provided such person has obtained the civil works permits
for the construction of the telephone networks from the local municipalities
in the market in which such person operates. Law 142 prohibits a municipality
from denying a company the permit requirements for such works. In addition,
telephone companies are required to enter into interconnection agreements with
the long distance carrier, TELECOM, and other local municipalities for the
provision of national and international long distance services and local
service, respectively. Law 142 requires that this access be granted. See
"Business--Interconnection Agreements--Local Connections" and "Business--
Interconnection Agreements--Long-Distance Connections."
Telephone companies are subject to the supervision of the Superintendencia
de Industria y Comercio (Superintendency of Industry and Commerce), which is
empowered to enforce antitrust regulations, protect free
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competition in the marketplace and protect consumer rights on a case by case
basis, and to the supervision of the Superintendencia de Sociedades
(Superintendency of Corporations), which is entitled by Colombian Commercial
Law to exercise regulatory control over certain activities of
telecommunication service providers. The Superintendencia de Servicios
Publicos (Superintendency of Public Services) ("SPS") was created as a new
organization under Law 142 to review the management and performance of
utilities. Telecommunications service providers are required by Law 142 to
appoint an external professional reviewer to also review their management and
performance. This requirement may be waived by the SPS if it is satisfied that
a company's internal controls are sufficient.
Pursuant to such new regulations, the CRT was created as a special
administrative unit with administrative, technical and financial independence
to oversee the telecommunications sector. The CRT is funded by the companies
it regulates, which are required to pay a fee for this purpose. For 1996, this
fee was set at 0.65% of 1995 operating expenses. The CRT is chaired by the
Minister of Communications, and also includes, as members, the Director of the
DNP and three technical experts appointed by the President of Colombia for
three-year terms. Whereas the SPS is responsible for oversight and control and
has the power to impose sanctions for non-compliance with regulations, the CRT
performs the regulatory functions in the industry such as the establishment of
tariffs for all telecommunication services, which allows operators to set
prices in accordance with costs or at levels established by their competitors.
In addition, the CRT issues regulations for the purpose of promoting
competition, reviews the efficiency of monopolistic service providers, sets
technical standards for telephone services to ensure continuous, quality
service to telephone subscribers, and is also appointed to resolve disputes
among telephone service providers and between providers and consumers. The CRT
also has the authority to review the efficiency of service providers and order
the liquidation of monopolistic service providers which are found to be
inefficient. Where competition is lacking, the CRT may also set fixed fees for
services.
The CRT restricts the activities of telephone service providers in order to
ensure free competition in the marketplace. For example, users may not be
required to purchase other services together with telephone service or be
required to purchase telephone equipment. Service providers are obligated to
permit other licensed service providers access to their telephone networks on
the basis of "equal access--equal fees."
Local telephone service providers are free to set their own fees within
maximum and minimum limits set by the CRT. The minimum is the cost of
providing the service and the maximum is set for each service provider based
on its expenses and infrastructure investment. The maximum and minimum limits
are set for five-year periods and adjusted annually for inflation. The limits
can be modified within the five-year period if there is a prior agreement
between the CRT and the service provider to do so or in extraordinary
circumstances.
Domestic and international long distance service has been provided
exclusively by TELECOM, which has had a monopoly on international and long
distance calls. However, in 1995, the Colombian government announced its
intention to open the long distance market to competition. The CRT has
established a process under which the opening of the long distance market to
competition is to be reviewed. The conditions for a new entrant include: (i)
an initial payment of $150 million for a ten-year license, which is
automatically renewed at no cost for an additional ten-year period and a
monthly payment of 5% of the gross revenues to the Ministry of Communications
payable over the duration of the license; (ii) the members of the consortium
must have at least 400 million minutes of international long distance traffic;
(iii) the operation of a minimum of 150,000 local telephone lines in Colombia
but in no case serving over 35% of the Colombian telephone market; and (iv)
the provision of universal service to a wide range of municipalities
throughout Colombia. It is expected that tariffs will be under a regulated
competitive system until 1999. The Company believes that the deregulation of
the long distance market will, as it has in other countries, serve to
stimulate phone usage, due to the fact that price competition is likely to
lower tariffs to the consumer. The Company does not currently expect that it
would qualify to be a new entrant into the long distance market in the near
future.
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MANAGEMENT
DIRECTORS AND OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<S> <C>
Gonzalo Caicedo Toro............... Director
Guillermo O. Lopez................. Director and President
Victoria E. Meza................... Director and General Secretary
Jorge E. Martinez.................. Director and Financial Vice President
Anibal E. Prez..................... Director and Technology and Planning Vice
President
Javier Salgado..................... Director and Operations Vice President
Carlos A. Arango................... Corporate Development Vice President
</TABLE>
GONZALO CAICEDO TORO, 51, has been a member of the Board of Directors of the
Company since August 1993. Mr. Caicedo is an economist by training and an
investor in agribusiness, particularly in the sugar cane industry. He is an
investor, as well as a member of the Board of Directors of several Colombian
companies, including Ingenio Riopaila, S.A., Ingenio Central Castilla, S.A.
and Colombina S.A.
GUILLERMO O. LOPEZ, 42, is a lawyer by training and has been a director of
several Colombian companies, such as Colombina S.A. and Ingenio Central
Castilla, S.A. and a consultant for other companies. Before joining Transtel,
Mr. Lopez provided business, financial and managerial advice to the Caicedo
Investors and has been a member of the Board of Directors and President of the
Company since December 1994. Between 1992 and 1993, his principal occupation
was the creation of Transtel. Upon incorporation of the Company, Mr. Lopez
joined the Company as General Manager and held that position until he was
appointed President.
VICTORIA E. MEZA, 34, has been a member of the Board of Directors of the
Company since December 1994 and has been General Secretary since December
1993. Before joining Transtel, Ms. Meza worked as a prosecuting attorney in
the Ministry of Finance.
JORGE ENRIQUE MARTINEZ, 48, has been a member of the Board of Directors of
the Company since December 1994. Mr. Martinez worked for Corporacion
Financiera del Valle S.A., a financial institution specializing in project
finance and investment banking for nine years as Credit Executive and Manager.
Mr. Martinez joined Transtel in 1993 as Projects Manager and became Financial
Vice President in 1996.
ANIBAL E. PEREZ, 40, has been a member of the Board of Directors of the
Company since January 1997. Mr. Perez worked for EMCALI from September 1993 to
October 1996, as Director of External Affairs, Vice President of Network
Planning and General Manager. Mr. Perez joined Transtel in October 1996 as
Technology and Planning Vice President.
JAVIER SALGADO, 42, has been a member of the Board of Directors of the
Company since January 1997. From 1989 to 1992, he was Regional Manager in
Bogota of Alcatel de Colombia, S.A. From 1992 to 1995, he was General Manager
of Alcatel de Venezuela, C.A. He joined Transtel in 1995 as Financial Manager
and served as General Manager of TelePalmira, TeleJamundi, Unitel and Caucatel
before being appointed as Operations Vice President.
CARLOS A. ARANGO, 44, has been Corporate Development Vice President since
July 1997. From 1988 to 1992, Mr. Arango was Finance Manager of Transejes
S.A., an affiliate of Dana Corporation. From 1992 to January 1994, Mr. Arango
was Corporate Planning Director of Carvajal S.A., responsible for annual
strategic business planning, budget, forecasting and economic engineering
analysis. From 1994 to 1997, Mr. Arango was Controller for Corporate
Development of Lloreda Grasas S.A., responsible for the reengineering process
of the company.
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ANIBAL RESTREPO, 46, has been general manager of Unitel since August 1997.
From 1975 to 1997 Mr. Restrepo held several positions with Empresas Publicas
de Medellin, including Telecommunications Project Director, Head of the
Division of Commercialization, Special Projects Director and Head of Network
Design.
ATTILIO CIAMPINI, 52, has been Manager for the Company's Outside Plant since
April 1, 1997. From 1988 to 1991, Mr. Ciampini worked for Bell Canada as
Access Network Section Manager. From 1991 to 1994, Mr. Ciampini worked as
Access Network Management Consultant for Bell Sygma Telecom Solutions. Mr.
Ciampini joined Transtel on April 1, 1997 as Technical Manager for Unitel
Wireless.
STATUTORY AUDITOR
Transtel and each of its subsidiaries, as required by the Colombian
Commercial Code, has a revisor fiscal ("statutory auditor"). 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 Commercial Code, the statutory auditor has the
obligation to audit a company's annual financial statements and review tax
returns of each company in order to indicate their agreement with the
accounting records. The statutory auditor also reports on a company's
compliance with shareholders and board of directors' resolutions, certain
Colombian laws and regulations, and requests by Colombian government entities.
The statutory auditor, who has no power over a company's operations, is
authorized to investigate and require correction of noncompliance with certain
laws, including convening an extraordinary session of the Board of Directors
or the shareholders' general assembly. Commencing in 1997, the Company's
statutory auditor has been Price Waterhouse, independent accountants.
MANAGEMENT COMPENSATION
While the Company's directors are not compensated for their services, as of
June 30, 1997, the Company's officers were compensated according to the
Colombian salary standards for executive officers in the telecommunications
sector.
The aggregate compensation of all executive officers of the Company was
approximately Ps80.9 million and Ps599.0 million for the year ended December
31, 1996 and the nine months ended September 30, 1997, respectively.
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PRINCIPAL SHAREHOLDERS
The following table sets forth the aggregate number of shares of Transtel's
voting securities beneficially owned following the Equity Contribution by: (i)
each person known by Transtel to be a beneficial owner of more than 5% of any
class of Transtel's voting securities; and (ii) each director of Transtel. As
of September 30, 1997 and March 30, 1998, there were 5,039,801,222 shares of
common stock issued and outstanding.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAMED AND ADDRESS(1) OF BENEFICIAL OWNER OWNED OWNED
- ---------------------------------------- ------------- ------------
<S> <C> <C>
Guillermo Lopez................................... 2,519,900,611 50%
Gonzalo Caicedo Toro.............................. 2,519,900,611(2) 50%(2)
Gonzalo Caicedo Toro & Cia S.C.S.................. 303,367,541 6%
Maria Eugenia Llano............................... 199,999,995 4%
Valentina Caicedo Toro............................ 4 --
</TABLE>
- --------
(1) The address for each listed shareholder is c/o Transtel, S.A., Calle 19N,
No. 2-29, 40th Floor, Cali, Colombia.
(2) The "Number of Shares Beneficially Owned" and "Percentage of Shares
Beneficially Owned" for Gonzalo Caicedo Toro include the shares registered
in the name of Maria Eugenia Llano, his wife, the shares registered in the
name of Valentina Caicedo Toro, his daughter, and the shares registered in
the name of Gonzalo Caicedo Toro & Cia. S.C.S., which is owned 50% by
Maria Eugenia Llano and 50% owned by Gonzalo Caicedo Toro.
CERTAIN RELATED PARTY TRANSACTIONS
INGENIO RIOPAILA, S.A. AND INGENIO CENTRAL CASTILLA, S.A. SHARES
Transtel and Gonzalo Caicedo Toro have entered into several transactions. In
the first of these transactions, during 1996, Mr. Caicedo pledged to certain
banks part of his shares in two Colombian companies, Ingenio Riopaila, S.A.
and Ingenio Central Castilla, S.A. (the "Caicedo Shares") as collateral for
loans that such banks made to Transtel in the principal amount of Ps14.6
billion ($11.7 million) (the "Secured Loans"). In the second transaction,
during the first quarter of 1997, Transtel borrowed Ps6.9 billion ($5.5
million) (the "Other Loans") and loaned the proceeds to Mr. Caicedo (the
"Caicedo Loan"). Mr. Caicedo used the proceeds from the Caicedo Loan to remove
certain liens from certain other shares of Ingenio Riopaila, S.A. and Ingenio
Central Castilla, S.A. owned by him. Mr. Caicedo then created a trust (the
"Caicedo Trust") that borrowed from third parties Ps21.5 billion ($17.3
million) (the "Trust Loan"). In April through July 1997, Mr. Caicedo used
Ps6.9 billion ($5.5 million) of the proceeds of this loan to repay the Other
Loans on behalf of Transtel. The repayment of the Other Loans by Mr. Caicedo,
on behalf of Transtel, was credited by Transtel as a repayment by Mr. Caicedo
of the Caicedo Loan. Mr. Caicedo used the remaining proceeds of the Trust Loan
(Ps14.6 billion ($11.7 million)) to make a capital contribution, in July 1997,
to Transtel, in partial satisfaction of the Equity Contribution. Transtel used
this money for the repayment of the Secured Loan. In addition, in July 1997,
Mr. Caicedo made a partial equity contribution of Ps0.8 billion ($660,000).
CERTAIN OTHER TRANSACTIONS WITH GONZALO CAICEDO TORO
In addition to the transactions outlined above, the Company has been
involved in a number of transactions with Mr. Caicedo. In 1995, the Company
loaned Mr. Caicedo a total of approximately Ps8.4 billion ($6.7 million) of
which Mr. Caicedo repaid approximately Ps6.6 billion ($5.4 million) of that
loan in the same year. In 1996, the Company lent Mr. Caicedo an additional
approximately Ps9.2 billion ($7.4 million). These loans were repaid
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in full by Mr. Caicedo in 1996 with (i) approximately Ps6.5 billion ($5.2
million) in cash, (ii) the assignment of a 2,000 square meter building located
in the municipality of Cali that the Company valued at approximately
Ps1.7 billion ($1.4 million), and (iii) the transfer by Mr. Caicedo of the
capital stock of GCT & Cia., which owns 7.59% of Colombina, the largest candy
manufacturer in Colombia, that the Company valued at approximately Ps2.7
billion ($2.2 million). As of August 31, 1997, Mr. Caicedo had repaid the
balance of additional net loans made to him in 1997 of Ps1.4 billion ($1.1
million), including the Caicedo Loan discussed above. The loans to Mr. Caicedo
were non-interest bearing and had no maturity dates.
PURCHASE AGREEMENTS AND LEASE AGREEMENTS WITH GLOBAL
As part of the Company's tax planning, Global Telecommunications Operations,
Inc. ("Global"), a British Virgin Island company owned by the same
shareholders who own Transtel, has entered into purchase agreements and
letters of intent with Siemens for the purchase of certain telecommunications
equipment to be leased by Global to the Operating Companies to develop their
respective networks according to the Expansion Plan. In connection with these
equipment purchases, Global and the Company have entered into or intend to
enter into long-term equipment financing arrangements with Siemens under which
Siemens will provide financing for up to 85% of the total cost of such
equipment, or approximately $93.4 million. See "Description of Existing
Indebtedness--Global-Siemens Arrangements" for the terms of the existing
financing arrangements, and see "Risk Factors--Contingency of Vendor
Financing." Global in turn has entered into or intends to enter into lease
agreements with the Operating Companies for the lease of such equipment. As
security for these arrangements, Global has assigned to Siemens the lease
payments under the Global leases in case an event of default occurs and is
continuing under the Purchase Agreements. See "Description of Existing
Indebtedness--Global-Siemens Arrangement."
UNDERTAKINGS BY GLOBAL REGARDING INDEBTEDNESS AND LINE OF BUSINESS
As a condition precedent to the Offering, Global entered into a Letter of
Undertaking, among Global, Siemens, Transtel and the Indenture Trustee (the
"Global Undertaking Letter"), whereby Global agreed that it would incur
additional indebtedness only if Transtel and the Operating Companies are in
compliance with the covenant described under "Description of the Senior
Notes--Certain Covenants--Limitation on Indebtedness" after giving effect to
any lease or guaranty arrangements entered into by Transtel or any Operating
Company in connection with such indebtedness and such indebtedness is used for
the purchase of telecommunications equipment to be leased to an Operating
Company. Pursuant to the Global Undertaking Letter, Global has also agreed not
to engage, directly or indirectly, in any business other than in the business
of purchasing telecommunications equipment and the leasing of such equipment
to the Operating Companies. In addition, Global has agreed that to the extent
it sells or otherwise disposes of any equipment leased under the Global Leases
(collectively, the "Equipment"), it will apply all cash proceeds received by
it in respect of any sale of, collection from, or other realization upon any
Equipment to prepay on a pro rata basis the Senior Notes and any amounts owing
by Global to Siemens under the Global Purchase Agreements.
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DESCRIPTION OF THE CERTIFICATES
Pursuant to the terms of the Trust Agreement, the Pass Through Trustee will
issue the Exchange Certificates on behalf of the Trust and exchange the
Original Certificates for the Exchange Certificates. The Certificates will
represent undivided beneficial interests in the assets of the Trust. The terms
of the Exchange Certificates are substantially identical to the terms of the
Original Certificates, except that the Exchange Certificates will have been
registered under the Securities Act and will not contain terms restricting
transfer of such Exchange Certificates. This summary of certain provisions of
the Certificates and the Trust Agreement does not purport to be complete and
is subject to, and qualified in its entirety by reference to, all the
provisions of the Trust Agreement, including the definitions therein of
certain terms. Wherever particular defined terms of the Trust Agreement are
referred to herein, such defined terms are incorporated herein by reference. A
copy of the form of the Trust Agreement is available without charge upon
request from the Pass Through Trustee.
CERTIFICATES
General
Legal title to the Senior Notes will be held at all times by the Trust as a
separate legal entity, except where the laws of any jurisdiction where the
Senior Notes are located require title to be held by a trustee in which case
legal title will be held by the Pass Through Trustee in trust for the benefit
of the Certificateholders. Each Certificate will represent a pro rata share of
the principal amount of the Senior Notes held by the Trust as well as any
other property held by the Trust from time to time, including all payments of
principal, interest, redemption premium, if any, and Additional Amounts, if
any, paid by the Company in respect of the Senior Notes.
Payments and Distributions
All payments of principal, interest, redemption premium or other amounts in
respect of the Senior Notes received by, or on behalf of, the Trust will to
the extent reasonably practicable, be distributed to Certificateholders on the
date such payments are received. From and after October 28, 1997, the Senior
Notes will bear interest at a rate of 12 1/2% per annum payable semiannually
in cash on each May 1 and November 1 of each year, (each referred to herein as
an "Interest Payment Date") commencing May 1, 1998. Interest distributions
made on each May 1 and November 1 will be paid to the persons who are the
registered Certificateholders on the April 15 and October 15, as the case may
be, immediately preceding such Interest Payment Date. Each Certificateholder
will be entitled to receive a pro rata share of any payments received by, or
on behalf of, the Pass Through Trustee on behalf of the Trust in respect of
the Senior Notes.
Voting Rights
So long as the Senior Notes are held by the Trust or the Pass Through
Trustee, as the case may be, the Pass Through Trustee will not (i) direct the
time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustee, or execute any trust or power conferred on the Pass
Through Trustee with respect to the Senior Notes, (ii) waive any past default
that is waivable under the Senior Notes, (iii) exercise any right to rescind
or annul a declaration that the Senior Notes are due and payable, (iv) consent
to any amendment, modification or termination of the Indenture or the Senior
Notes, where such consent is required, without, in each case, obtaining the
prior approval of a Majority In Interest of Certificateholders, except that if
such consent under the Indenture would require the consent of each holder of
Senior Notes affected thereby, no such consent will be given by the Pass
Through Trustee without the prior consent of each Certificateholder (see
"Description of the Senior Notes--Modification and Waiver"), or (v) take any
other action, except as described below. If the Indenture Trustee requests the
Pass Through Trustee to take any action with respect to the Senior Notes,
including, but not limited to, a request for its consent to any amendment,
modification, waiver or supplement under the Indenture, the Pass Through
Trustee will immediately mail a notice to each Certificateholder registered as
of the date of such notice of the proposed action, and will take such action
with respect to the Senior Notes as it is instructed by the
Certificateholders; provided, however, that the Pass Through Trustee will not
be required to take any action with respect to the Senior Notes, the
Indenture, or the Certificates if it has not been assured of being indemnified
therefor.
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Any required approval of the Certificateholders may be given at a meeting of
Certificateholders convened for such purpose or pursuant to their written
consent. The Pass Through Trustee will cause a notice of any meeting at which
Certificateholders are entitled to vote, or of any matter upon which action by
written consent of such Certificateholders is to be taken, to be given to each
Certificateholder in the manner set forth the Trust Agreement.
Amendment of Trust Agreement
The Trust Agreement may be amended from time to time by the Pass Through
Trustee and the Company, without the consent of the Certificateholders, to
cure any ambiguity, to correct or supplement any provision in the Trust
Agreement which may be defective or inconsistent with any other provision, or
to make any other provisions with respect to matters or questions arising
under the Trust Agreement, provided that such amendment shall not adversely
affect the interests of the Certificateholders.
The Trust Agreement may be modified or amended by the Pass Through Trustee
and the Company with the consent of a Majority In Interest of the
Certificateholders; provided, however, that no such modification or amendment
may, without the consent of each Certificateholder affected thereby, (i)
reduce the amount or delay the timing of any distribution on the Certificates,
(ii) have the effect of any of the events described in "Description of the
Senior Notes--Modification and Waiver," or (iii) otherwise adversely affect
such Certificateholder.
Prior to the execution of any amendment, the Pass Through Trustee will be
entitled to receive an opinion of counsel that the amendment conforms to the
requirements of the Trust Agreement.
Termination of the Pass Through Trust
Pursuant to the Trust Agreement, the Trust shall terminate upon the
distribution to all Certificateholders of all amounts required to be
distributed to them pursuant to the Trust Agreement and the disposition of all
funds or property held by the trust.
Events of Default and Certain Rights Upon an Event of Default
An event of default under the Trust Agreement (a "Certificate Event of
Default") is defined as the occurrence and continuance of an Event of Default
under the Indenture (an "Indenture Default"). For a description of the
Indenture Defaults, see "Description of the Senior Notes--Events of Default."
The Trust Agreement provides that as long as an Indenture Default has
occurred and is continuing with respect to the Senior Notes, the Pass Through
Trustee will exercise such rights and take such actions with respect to the
Certificates and the Senior Notes as it is instructed to take pursuant to the
written directions of Certificateholders representing the required percentage
set forth in the Trust Agreement.
The Indenture provides that if an Indenture Default has occurred and is
continuing with respect to the Senior Notes, the Indenture Trustee may declare
the unpaid principal amount of the Senior Notes immediately due and payable,
together with any interest accrued thereon. Under certain circumstances the
Senior Notes and any accrued and unpaid interest thereon automatically will
become due and payable without action by the Indenture Trustee. See
"Description of the Senior Notes--Events of Default."
Any amount paid to the Pass Through Trustee, on behalf of the Trust as
holder of the Senior Notes, by the Indenture Trustee under the Indenture
following an Indenture Default will be applied first, to cover all fees,
indemnity costs, expenses and compensation of the Pass Through Trustee; and
second, will thereafter be applied as a distribution to the Certificateholders
in accordance with the Trust Agreement.
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DESCRIPTION OF THE GUARANTEES
GUARANTEE
General
On October 28, 1997 the Company executed the Original Certificate Guarantee,
for the benefit of the Original Certificateholders, whereby the Company fully,
irrevocably and unconditionally guaranteed all of the Trust's obligations under
the Original Certificates. Concurrently with the issuance of the Exchange
Certificates by the Trust, the Company will execute a like guarantee (the
"Exchange Certificate Guarantee"), for the benefit of the Exchange
Certificateholders, whereby the Company will fully, irrevocably and
unconditionally guarantee all of the Trust's obligations under the Exchange
Certificates. The Certificate Guarantee and the Exchange Certificate Guarantee
(together the "Certificate Guarantees") will have substantially identical
terms. Marine Midland Bank will act as guarantee trustee (together with any
successor guarantee trustee, the "Guarantee Trustee") under the Certificate
Guarantees.
The Certificate Guarantees are guarantees by the Company of (i) the punctual
payment of the full amount, when due, of the principal of and interest on, and
fees and expenses due pursuant thereto, and (ii) the full and timely payment as
if payment had been made on a full and timely basis on the Senior Notes. The
Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the Certificateholders.
The Certificate Guarantees are irrevocable guarantees on a senior basis of
the Trust's obligations under the Certificates, and are not guarantees of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against the Company (a "Direct Action") to enforce its rights under
the Certificate Guarantees without first instituting a legal proceeding against
any other person or entity). The Certificate Guarantees are held by the
Guarantee Trustee for the benefit of the Certificateholders. The Certificate
Guarantees will not be discharged except by payment of the Guarantee Payments
in full to the extent not paid by the Trust. The Trust Agreement provides that
each Certificateholder by acceptance thereof agrees to the provisions of the
Certificate Guarantees and the Indenture.
Amendments and Assignment
The Certificate Guarantees may not be amended without the prior approval of
Certificateholders of not less than a majority in aggregate principal amount of
the Certificates outstanding.
Event of Default
An event of default under the Certificate Guarantees will occur upon the
failure of the Company to perform any of its payment obligations thereunder.
The Certificateholders of not less than a majority in aggregate principal
amount of the Certificates outstanding have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the Certificate Guarantees or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Certificate Guarantees.
Any registered Certificateholder may institute a legal proceeding directly
against the Company to enforce its rights under the Certificate Guarantees
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
Information Concerning the Guarantee Trustee
The duties of the Guarantee Trustee are subject to limitations and
qualifications substantially similar to those described with respect to the
Pass Through Trustee under "--Information Concerning the Pass Through Trustee."
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Governing Law
The Certificate Guarantees will be governed by and construed in accordance
with the laws of the State of New York.
Enforcement of Civil Liabilities
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 out of the
Certificate Guarantees. See "Enforcement of Civil Liabilities" and
"Enforcement of Foreign Judgments in Colombia."
REPORTS AND NOTICES
Upon receipt of any annual and quarterly financial statements from the
Company under the Indenture, the Trust will forward a copy of such financial
statements to the Pass Through Trustee and the Registrar. See "Description of
the Senior Notes--Certain Covenants--Reports." Notices in respect of the
Certificates will be given by mail, first-class postage prepaid, to each
registered Certificateholder at the address of such Certificateholder set
forth in the securities register maintained by the Certificate Registrar with
respect to the Certificates. So long as the Certificates are represented by a
Global Certificate or Global Exchange Certificate, notices to the
Certificateholders may be given by delivery of the relevant notice to DTC,
Euroclear and Cedel for communication by them to the relevant account holders.
If, by reason of the suspension of the mails or for any other reason, it is
impracticable to give notice to the Certificateholders in the manner described
above, then such notification in lieu thereof as may be made by, or on behalf
of, the Pass Through Trustee will constitute sufficient provision of such
notice, if such notification, so far as may be practicable, approximates the
terms and conditions of the notice in lieu of which it is given. Neither the
failure to give notice nor any defect in any notice given to any particular
Certificateholder will affect the sufficiency of any notice with respect to
other Certificates. Such notices will be deemed to have been given on the date
of mailing.
ADDITIONAL AMOUNTS
All payments made by the Trust under or in respect of the Certificates will
be made free and clear of and without withholding or deduction for or on
account of any present or future tax, duty, fee, levy, impost, assessment or
other governmental charge (including penalties, interest, additions to tax and
any other liabilities related thereto) (collectively referred to as "Taxes")
imposed or levied by or on behalf of Colombia, the United States, or any other
jurisdiction in which the Trust, the Company or any of the Company's
Restricted Subsidiaries is organized or engaged in business for tax purposes
(each, a "Taxing Authority"). If the Trust is required to withhold or deduct
or if the Trust is otherwise required to pay any amount for or on account of
Taxes imposed by a Taxing Authority, from or in respect of any payment made
under or with respect to the Certificates, the Trust will pay such additional
amounts ("Additional Amounts") as may be necessary so that the net amount
received by each Certificateholder (including Additional Amounts) after such
withholding or deduction or other payment of Taxes will not be less than the
amount the Certificateholder would have received if such Taxes had not been
withheld or deducted or paid; provided that no Additional Amounts will be
payable with respect to a payment made to a Certificateholder (A) with respect
to any Tax which would not have been imposed, payable or due: (i) but for the
existence of any present or former connection between such Certificateholder
(or the beneficial owner of, or other person having a right to acquire an
interest in, such Certificate) and the relevant Taxing Authority, other than
the mere holding of a Certificate; (ii) if the Certificates are held in
definitive registered form and the presentation of the definitive Certificate
for payment had occurred within 30 days after the date such payment was due
and payable or was provided for, whichever is later; or (iii) but for the
failure of a Certificateholder that is not a "United States Person" as defined
in Section 7701(a)(30) of the United States Internal Revenue Code of 1986, as
amended, to comply with certification, information or other reporting
requirements concerning the nationality, residence, identity or business
activity within the United States of such
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Certificateholder (or, if applicable, the beneficial owner of, or other person
having a right to acquire an interest in, the Certificate) if such compliance
is a condition to such Taxes not having been imposed, payable or due with
respect to the payment or (B) if the beneficial owner of, or other person
having a right to acquire an interest in, such Certificate had been the
Certificateholder and would not be entitled to the payment of Additional
Amounts under (A). Except as provided in the second succeeding paragraph
below, in no event will Additional Amounts be payable with respect to any tax
that is payable otherwise than by withholding from payment of or with respect
to principal of, or interest on, the Certificates.
The Trust will also (i) make such withholding or deduction and (ii) remit
the full amount deducted or withheld to the relevant Taxing Authority in
accordance with applicable law. The Trust will make reasonable efforts to
obtain certified copies of tax receipts evidencing the payment of any Taxes so
deducted or withheld from each Taxing Authority imposing such Taxes. The Trust
will furnish to the Certificateholders, within 60 days after the date that the
payment of any Taxes so deducted or withheld is due pursuant to applicable
law, either certified copies of tax receipts evidencing such payment by the
Trust or, if such receipts are not obtainable, other evidence of such payments
by the Trust.
In addition, the Trust will, upon written request of a Certificateholder
(subject to the exclusions set forth in (A) and (B) of the first paragraph
above), and provided that reasonable supporting documentation is provided,
reimburse each such Certificateholder for the amount of any Taxes levied or
imposed by any Taxing Authority and paid by such Certificateholder as a result
of payments made by the Trust to such Certificateholder with respect to the
Certificates. Any payment pursuant to this paragraph shall be an Additional
Amount.
Whenever in the Trust Agreement, Indenture or in this Prospectus there is
mentioned in the context of the payment of amounts based upon the principal
of, premium, if any, interest or of any other amount payable under or with
respect to any Certificate, 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.
In addition, the Trust will pay any stamp, issue, transfer, sales, use,
value-added, property, registration, documentary, enforcement or other similar
taxes and other duties (including interest and penalties) payable to any
Taxing Authority in respect of the creation, issue or offering of the
Certificates or any other documents directly related to such creation, issue
or offering.
REMOVAL AND RESIGNATION OF THE PASS THROUGH TRUSTEE; APPOINTMENT OF SUCCESSORS
A Majority In Interest of the Certificateholders may remove the Pass Through
Trustee for cause or, if a Certificate Event of Default has occurred and is
continuing, with or without cause. If the Pass Through Trustee is removed by
the Certificateholders, a successor shall be appointed by the
Certificateholders holding at least 25% in principal amount of Certificates.
If the Pass Through Trustee resigns, the Company shall immediately appoint its
successor. If the Company fails to appoint a successor, the Certificateholders
holding at least 25% in principal amount of the outstanding Certificates may
appoint a successor. If a successor shall not have been appointed by the
Company or by the Certificateholder holding at least 25% in aggregate amount
of Certificates, within 30 days of notice of such resignation or removal, the
Pass Through Trustee or any Certificateholder may petition a court in the
State of Delaware to appoint a successor. Any Pass Through Trustee must meet
the applicable requirements of Section 3807 of the Delaware Business Trust
Act, 12 Del. c. (S)3801 et seq. Any Pass Through Trustee must at the time of
appointment have capital and surplus of at least $50,000,000. No resignation
or removal of the Pass Through Trustee and no appointment of a successor
trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
PAYMENT AND PAYING AGENCY
Payments in respect of the Certificates will be made to DTC, which payments
will be credited to the relevant accounts at DTC on the applicable payment
dates or, if the Certificates are not held by DTC, such payments will
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be made by check mailed to the address of the Certificateholder entitled
thereto as such address appears on the securities register for the
Certificates. Marine Midland Bank (Marine Midland Bank and any co-paying agent
chosen by the Pass Through Trustee and acceptable to the Company, the "Paying
Agent") will initially be the paying agent. The Paying Agent will be permitted
to resign as Paying Agent upon 30 days' written notice to the Pass Through
Trustee and the Company, in which event the Company will appoint a successor
to act as Paying Agent.
If any day for payment and other amounts payable in respect of the
Certificates is not a Business Day (as defined herein) in the applicable place
of payment, the Certificateholders will not be entitled to payment until the
next Business Day following such day in the place of payment or to any
interest or other sums in respect of such postponed payment. For purposes of
the Trust Agreement, "Business Day" means a day (other than Saturday and
Sunday) on which DTC, Euroclear and banks in New York, Delaware and Colombia
are open for business.
CERTIFICATE REGISTRAR AND TRANSFER AGENT
Marine Midland Bank will act as registrar and transfer agent for the
Certificates (the "Certificate Registrar").
Registration of transfers of Certificates will be effected without charge by
or on behalf of the Trust, other than amounts with respect to any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Certificate Registrar will not be required to register or cause
to be registered the transfer of the Certificates after the Exchange
Certificates have been called for redemption.
GOVERNING LAW
The Trust Agreement and the Certificates will be governed by and construed
in accordance with the laws of the State of Delaware.
INFORMATION CONCERNING THE PASS THROUGH TRUSTEE
The Pass Through Trustee, other than during the occurrence and continuance
of a Certificate Event of Default, will perform only such duties as are
specifically set forth in the Trust Agreement. The Pass Through Trustee is
under no obligation to exercise any of the powers vested in it by the Trust
Agreement at the request of any Certificateholder unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. The Pass Through Trustee is not required to expend or risk
its own funds or otherwise incur personal financial liability in the
performance of its duties if the Pass Through Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
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DESCRIPTION OF THE SENIOR NOTES
GENERAL
The Senior Notes were issued under an Indenture (the "Indenture"), dated as
of October 28, 1997, between the Company and Marine Midland Bank, as indenture
trustee (in such capacity, the "Indenture Trustee"). The Indenture permits the
issuance of up to $180.0 million of Senior Notes thereunder, $150.0 million of
which were offered pursuant to the Offering consummated on October 28, 1997
(the "Initial Senior Notes") and $30.0 million of which may be offered in the
future (the "Additional Senior Notes") subject to compliance with the first
paragraph of clause (a) of the "--Limitation on Indebtedness" covenant below.
For purposes of this section of the Prospectus, the term Senior Notes shall
mean the Initial Senior Notes and the Additional Senior Notes. In the event of
such a future offering, the Additional Senior Notes would have the same terms
as the Initial Senior Notes (including payment dates and maturity) and rank
pari passu with the Initial Senior Notes in all respects. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all the
provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act.
Certain capitalized terms used in this section of the Prospectus are defined
below. Whenever particular Sections or defined terms of the Indenture not
otherwise defined herein are referred to, such Sections or defined terms are
incorporated herein by reference. A copy of the Indenture is available upon
request from the Company or the Indenture Trustee. Concurrently with the
issuance of the Original Certificates, the Trust invested the proceeds
therefrom in the Senior Notes issued by the Company. For purposes of this
section of the Prospectus, "Holders" shall mean the holders of the Senior
Notes. The Trust is the sole Holder of the Senior Notes.
The Senior Notes were issued in fully registered form only, without coupons,
in denominations of $1,000 and integral multiples thereof. Initially, Marine
Midland Bank will act as Paying Agent and Registrar for the Senior Notes. The
Senior Notes may be presented for registration or transfer and exchange at the
offices of the Registrar, which will be the Registrar's corporate trust office
at 140 Broadway, 12th Floor, New York, New York 10005. The Company may change
any Paying Agent and Registrar without notice to the Holders. The Company will
pay principal (and premium, if any) on the Senior Notes at the Paying Agent's
corporate trust office in New York, New York. At the Company's option,
interest may be paid by check mailed to the registered address of the Holders.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are limited in aggregate principal amount to $180 million.
The Senior Notes will mature on November 1, 2007, and bear interest from
October 28, 1997 at a rate of 12 1/2% per annum payable semiannually in cash
on each May 1 and November 1 (each an "Interest Payment Date"), commencing May
1, 1998. Interest on the Senior Notes will be computed on the basis of a 360-
day year of twelve 30-day months.
REDEMPTION
Optional Redemption
The Senior Notes are not redeemable at the Company's option prior to
November 1, 2002. Thereafter, the Senior Notes will be subject to redemption
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 days' prior notice, at the following redemption prices (expressed
in percentages of the principal amount), plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of the Holders to receive
interest due on an Interest Payment Date), if redeemed during the 12-month
period commencing November 1 of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002..................................................... 106.250%
2003..................................................... 104.688%
2004..................................................... 103.125%
2005..................................................... 101.563%
2006 and thereafter...................................... 100.000%
</TABLE>
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Notwithstanding the foregoing, in the event of the sale by the Company prior
to November 1, 2000 of at least $25 million of its Capital Stock (other than
Disqualified Stock) in one or more Public Equity Offerings, or to one or more
Strategic Equity Investors, the Company may, at its option, use the Net Cash
Proceeds of such sale or sales of Capital Stock to redeem up to 35% of the
Senior Notes at a redemption price equal to 112.50% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided that at least 65% of the initial principal amount of the
Senior Notes (including in such initial principal amount, the initial
principal amount of any Additional Senior Notes issued as contemplated by the
first paragraph under the heading "--General" above, if issued prior to the
date of the redemption pursuant to this paragraph) remains outstanding
immediately after such redemption. In order to effect the foregoing redemption
with the proceeds of any such sale of Capital Stock, the Company shall make
such redemption not more than 120 days after the consummation of any such sale
or sales of Capital Stock.
Mandatory Redemption; Change of Control; Certain Asset Sales
The Company is not required to make any mandatory redemption or sinking fund
payments in respect of the Senior Notes. However, (i) upon the occurrence of a
Change of Control, the Company is obligated to make an Offer to Purchase (as
defined in "--Offer to Purchase Upon Change of Control") all outstanding
Senior Notes at a price of 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of purchase and (ii) upon the
occurrence of an Asset Sale, the Company may be obligated to make a Net
Proceeds Offer (as defined in "--Certain Covenants--Limitation on Asset
Sales") for all or a portion of the outstanding Senior Notes at a price of
100% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of repurchase. See "--Offer to Purchase Upon Change of Control"
and "--Certain Covenants--Limitation on Asset Sales," respectively.
Selection; Effect of Redemption Notice
In the case of any partial redemption, selection of the Senior Notes for
redemption will be made by the Indenture Trustee or Registrar on a pro rata
basis by lot or in accordance with any other method the Indenture Trustee
considers fair and appropriate. The notice of redemption relating to such
Senior Note shall state the portion of the principal amount thereof to be
redeemed. A new Senior Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder upon cancellation of
the original Senior Note. Upon redemption, unless the Company defaults in
providing the funds for such redemption, interest on Senior Notes called for
redemption will cease to accrue from and after the date fixed for redemption
and, upon redemption, such Senior Notes will then cease to be outstanding.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
Holder will have the right to require that the Company purchase all or a
portion of such Holder's Senior Notes pursuant to the offer described below
(the "Offer to Purchase"), at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest thereon, if any, to the date
of purchase.
Within 30 days following the date upon which a Change of Control occurs, the
Company must send, by first class mail, a notice to each Holder, with a copy
to the Indenture Trustee and Paying Agent, which notice shall govern the terms
of the Offer to Purchase. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 45 days
from the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders will be required to surrender the
Senior Notes it wishes to have redeemed, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Senior Note or Notes
completed, to the Paying Agent at the address specified in the Senior Notes
prior to the close of business on the third Business Day prior to the Change
of Control Payment Date.
If an Offer to Purchase 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 the Senior Notes that might be delivered by the Holders seeking
to accept the Offer to Purchase. In the event the Company is required to
purchase outstanding
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Senior Notes pursuant to an Offer to Purchase, the Company expects that it
would seek third-party financing to the extent it does not have available
funds to meet its purchase obligations. However, the Indenture limits the
Company's ability to incur Indebtedness (see "--Certain Covenants--Limitation
on Indebtedness") and there can be no assurance that the Company would be able
to obtain such financing.
DISBURSEMENT OF FUNDS--ESCROW ACCOUNT
As provided in the Indenture, the Company has placed approximately $35.0
million of the net proceeds realized from the sale of the Senior Notes,
representing funds sufficient to pay the first four interest payments on the
Initial Senior Notes, in an escrow account (the "Escrow Account") held by the
Escrow Agent for the benefit of Holders of the Senior Notes and the Indenture
Trustee in accordance with the Escrow and Disbursement Agreement. The Company
entered into the Escrow and Disbursement Agreement, which provides, among
other things, that funds may be disbursed from the Escrow Account only to pay
interest on the Senior Notes (or, if any Senior Notes have been retired by the
Company, funds representing the interest payment on the retired Senior Notes
may be paid to the Company on the date of retirement) and, upon certain
repurchases or redemptions of Senior Notes, to pay principal of and premium,
if any, on the Senior Notes being repurchased or redeemed. Pending such
disbursement, the Company will cause such funds contained in the Escrow
Account to be invested in Marketable Securities. Interest earned on these
Marketable Securities will be added to the Escrow Account. The Escrow Account
will be held in the corporate trust office of the Escrow Agent in New York.
The Company granted to the Indenture Trustee for the benefit of the Holders
a security interest in the Escrow Account under the Escrow and Disbursement
Agreement. Such security interest secures the payment and performance when due
of all of the Obligations of the Company under the Indenture with respect to
the Senior Notes, as provided in the Escrow and Disbursement Agreement. The
ability of the Holders to realize upon any such funds or securities may be
subject to certain bankruptcy law limitations in the event of the bankruptcy
of the Company.
Upon the acceleration of the maturity of the Senior Notes or upon certain
redemptions and repurchases of the Senior Notes, the Escrow and Disbursement
Agreement provides for the foreclosure by the Indenture Trustee upon the net
proceeds of the Escrow Account. Under the terms of the Indenture, the proceeds
of the Escrow Account shall be applied to the Obligations under the Senior
Notes.
RANKING
The Senior Notes are senior obligations of the Company ranking pari passu in
right of payment with all existing and future senior Indebtedness of the
Company and rank senior in right of payment to all existing and future
subordinated Indebtedness of the Company, if any. The Company is a holding
company that conducts substantially all of its operations through its
subsidiaries. Other than claims under the Intercompany Notes, the Senior Notes
are effectively subordinated to all existing and future liabilities and
Indebtedness of the Company's subsidiaries. Subject to certain limitations set
forth in the Indenture and as described under "--Limitations on Liens" below,
the Company and its Restricted Subsidiaries may incur Indebtedness which is
secured by assets of the Company and its Restricted Subsidiaries. Any right of
the Company to receive assets of the Company's Restricted Subsidiaries or any
future Restricted Subsidiaries of the Company, upon a Restricted Subsidiary's
liquidation or reorganization (and the consequent right of the Holders to
participate in those assets), are effectively subordinated to the claims of
that Restricted Subsidiary's creditors, except to the extent that the Company
is itself recognized as a creditor of such Restricted Subsidiary as in the
case of Indebtedness evidenced by Intercompany Notes, although other creditors
of such Restricted Subsidiary may be secured by certain assets of such
Restricted Subsidiary.
SECURITY
The Senior Notes are secured by a first priority security interest in: (i)
the Intercompany Notes, which Intercompany Notes represent senior unsecured
obligations of each Restricted Subsidiary and rank senior in right of payment
to all existing and future subordinated Indebtedness of the respective
Restricted Subsidiary and pari
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passu with all existing and future Senior Indebtedness of such Restricted
Subsidiary; and (ii) pending disbursement pursuant to the Escrow and
Disbursement Agreement, the Escrow Account and the Refinancing Account.
CERTAIN COVENANTS
Limitation on Indebtedness
(a) Under the terms of the Indenture, the Company will not, and will not
permit any Restricted Subsidiary to, incur any Indebtedness; provided that the
Company and its Restricted Subsidiaries may incur Indebtedness if, after
giving effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds therefrom, (i) no Default or Event of Default
shall have occurred and be continuing and (ii) the Indebtedness to Annualized
EBITDA Ratio as of the date of such incurrence shall not exceed (x) 6.0 to 1.0
if such incurrence occurs on or prior to the second anniversary of the Issue
Date, (y) 5.5 to 1.0 if such incurrence occurs after the second anniversary of
the Issue Date and on or prior to the third anniversary of the Issue Date and
(z) 5.0 to 1.0 if such incurrence occurs thereafter.
The foregoing limitation will not apply to: (i) Indebtedness evidenced by
the Initial Senior Notes; (ii) the existing Indebtedness, consisting of (A)
Indebtedness of the Company under the Transtel-Siemens Purchase Agreement in
an amount not to exceed $3.4 million; (B) the Obligations of the Restricted
Subsidiaries under the Global I Leases, Global II Leases and Global III Leases
in an amount not to exceed $95.0 million; (C) Obligations of the Company under
the DIAN Financing in an amount not to exceed $25.0 million, (D) Obligations
of the Company under the IBM Financing in an amount not to exceed $3.4
million; (E) Obligations of the Company under the purchase money financing
existing on the Issue Date in an amount not to exceed $6.5 million; and (F)
Obligations of the Company under the Certificate Guarantees; (iii) the Other
Existing Indebtedness; (iv) the incurrence by the Company or its Restricted
Subsidiaries of Bank Indebtedness in an aggregate principal amount at any one
time outstanding, together with Indebtedness incurred under clause (xi) below,
not to exceed $25.0 million, as such amount may be permanently reduced as
specified in the "--Limitation on Asset Sales" covenant described below;
provided that the use of the proceeds of such Bank Indebtedness will not be used
to make Investments; (v) (A) the Guarantee by Restricted Subsidiaries of Bank
Indebtedness permitted to be incurred by the Company and (B) the Guarantee by
the Company of Bank Indebtedness permitted to be incurred by Restricted
Subsidiaries, in each case pursuant to clause (iv) above; (vi) Indebtedness of
the Company to any Restricted Subsidiary; provided that (a) any such
Indebtedness is unsecured and subordinated, pursuant to a Subordination
Agreement, in right of payment to the Senior Notes and (b) any subsequent
issuance or transfer of any Capital Stock which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of
such Indebtedness to a Person not a Restricted Subsidiary shall be deemed, in
each case, to constitute an incurrence of such Indebtedness not permitted by
this clause (vi); (vii) Indebtedness of a Restricted Subsidiary issued to and
held by the Company; provided that (a) any subsequent issuance or transfer of
any Capital Stock which results in any such Restricted Subsidiary ceasing to be
a Restricted Subsidiary or any subsequent transfer of such Indebtedness to a
Person not a Restricted Subsidiary shall be deemed, in each case, to constitute
an incurrence of such Indebtedness not permitted by this clause (vii) and (b) if
such Indebtedness arises from loans or advances made to a Restricted Subsidiary
by the Company with the proceeds of the Senior Notes, such Indebtedness shall be
evidenced by an Intercompany Note; (viii) the incurrence by the Company or its
Restricted Subsidiaries of additional Indebtedness in an aggregate principal
amount not to exceed $10.0 million at any one time outstanding; (ix) the
incurrence (a "Permitted Refinancing") by the Company or its Restricted
Subsidiaries of Indebtedness issued in exchange for, or the proceeds of which
are used to extend, refinance, renew, replace or refund Indebtedness incurred
pursuant to the first paragraph of this clause (a) or pursuant to clauses (i)
(but, only as to clause (i), only to the extent the proceeds thereof are used to
purchase Senior Notes tendered in an Offer to Purchase made as a result of a
Change of Control), (ii), (iv), (v), (vii) and (viii) above or theretofore
incurred pursuant to this clause (ix) ("Refinancing Indebtedness"); provided
that: (a) the net proceeds of such Refinancing Indebtedness shall not exceed the
principal amount of and required premium, if any, and accrued interest on the
Indebtedness so extended, refinanced, renewed, replaced, substituted or refunded
(or if such Indebtedness was issued at an original issue
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discount, the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at the time of the
repayment of such Indebtedness) and reasonable expenses incurred in connection
therewith; (b) the Refinancing Indebtedness shall have a final maturity not
sooner than, and an Average Life equal to or greater than, the final maturity
and remaining Average Life of the Indebtedness being extended, refinanced,
renewed, replaced or refunded; (c) if the Indebtedness being extended,
refinanced, renewed, replaced or refunded is subordinated in right of payment
to the Senior Notes, the Refinancing Indebtedness shall be subordinated in
right of payment to the Senior Notes pursuant to a Subordination Agreement;
(d) the obligor with respect to the Refinancing Indebtedness shall be the same
as the obligor with respect to the Indebtedness being extended, refinanced,
renewed or replaced or refunded, and there shall be no additional guarantors
(direct or indirect) with respect to any such Refinancing Indebtedness; and
(e) the Refinancing Indebtedness shall be unsecured, secured in compliance
with the "--Limitation on Liens" covenant, or, if the Indebtedness being
extended, refinanced, renewed, replaced or refunded is secured, the respective
Refinancing Indebtedness may be secured, but only to the same extent as the
Indebtedness being refinanced, renewed, replaced or refunded; (x) Indebtedness
of the Company or any Restricted Subsidiary (A) in respect of performance,
surety or appeal bonds provided in the ordinary course of business, (B) in
respect of Currency Agreements or Interest Rate Agreements incurred for the
purpose of hedging against currency or interest rate risks with respect to
Indebtedness incurred in accordance with the first paragraph of clause (a) of
"--Limitation on Indebtedness" and which the Company in good faith determines
is non-speculative in nature and is a bona fide hedge against fluctuations in
currency values or interest rates, respectively; provided, that in the case of
Currency Agreements that relate to other Indebtedness, such Currency Agreement
does not increase the Indebtedness of the obligor outstanding at any time
other than as a result of fluctuations in foreign currency exchange rates or
by reasons of fees, indemnities and compensation payable thereunder and in the
case of Interest Rate Agreements, the notional amount of such Interest Rate
Agreement does not exceed the underlying obligation or amount to which such
Interest Rate Agreement relates; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing
any obligations of the Company or any of its Restricted Subsidiaries pursuant
to such agreements, in any case incurred in connection with the disposition of
any business, assets or Restricted Subsidiary of the Company (other than
Guarantees of Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition), in a principal amount not to exceed
the gross proceeds actually received by the Company or any Restricted
Subsidiary in connection with such disposition; and (xi) Guarantees by the
Company of operating leases expensed under GAAP of its Restricted
Subsidiaries; provided that the Company's Obligations under such Guarantees
and Indebtedness incurred under clause (iv) shall not exceed $25.0 million.
The Company and its Subsidiaries may incur Acquired Debt only in compliance
with this covenant.
(b) For purposes of determining any particular amount of Indebtedness under
this "--Limitation on Indebtedness" covenant, Liens on such Persons' assets or
obligations of such Persons with respect to letters of credit supporting
Indebtedness otherwise included in the determination of such particular amount
shall not be included. For purposes of determining compliance with this "--
Limitation on Indebtedness" covenant, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above paragraph, the Company shall classify such item of
Indebtedness and only be required to include the amount of such Indebtedness
in one of such types of Indebtedness and (B) the amount of Indebtedness issued
at a price that is less than the principal amount thereof shall be equal to
the amount of the liability in respect thereof determined in conformity with
GAAP. The Indenture further provides that, notwithstanding any other provision
of the "--Limitation on Indebtedness" covenant, the maximum amount of
Indebtedness that the Company or a Restricted Subsidiary may incur pursuant to
this "--Limitation on Indebtedness" covenant shall not be deemed to be
exceeded due solely to the result of fluctuations in the exchange rates of
currencies after the date of the respective incurrence of Indebtedness
otherwise in conformity with the provisions of this "--Limitation on
Indebtedness" covenant.
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Limitation on Restricted Payments
So long as any of the Senior Notes are outstanding, the Company and its
Restricted Subsidiaries will not, directly or indirectly, (i) declare or pay
any dividend or make any distribution on Capital Stock of the Company or any
of its Restricted Subsidiaries (other than dividends or distributions payable
solely in shares of such Capital Stock held by holders of such Capital Stock
or in options, warrants, or other rights to acquire such shares of Capital
Stock), (ii) repurchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock of the Company or any of its Restricted Subsidiaries
(including options, warrants or other rights to acquire such shares of Capital
Stock) held by any Person (other than any such Capital Stock owned by the
Company), (iii) make any voluntary or optional principal payment, or voluntary
or optional redemption, repurchase, defeasance, or other acquisition or
retirement for value, of Indebtedness of the Company that is subordinated in
right of payment to the Senior Notes or Indebtedness of Restricted
Subsidiaries that is subordinated to the Intercompany Notes, or (iv) make any
Investment in any Person (such payments or any other actions described in
clauses (i) through (iv) being collectively "Restricted Payments") if, at the
time of, and after giving effect to, the proposed Restricted Payment: (A) a
Default or Event of Default shall have occurred and be continuing, (B) the
Company could not incur at least $1.00 of Indebtedness under the first
paragraph of the "--Limitation on Indebtedness" covenant (without reliance
upon any of the exceptions in clauses (a)(i) through (xi) under "--Limitation
on Indebtedness") or (C) the aggregate amount expended for all Restricted
Payments (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) after the Issue Date shall exceed the sum
of (1) 50% of the aggregate amount of the Consolidated Net Income (or, if the
Consolidated Net Income is a loss, minus 100% of such loss) accrued on a
cumulative basis during the period (taken as one accounting period) beginning
on the first day of the fiscal quarter immediately following the Issue Date
and ending on the last day of the last fiscal quarter preceding the
Transaction Date for which annual or interim financial statements of the
Company have been delivered to the Indenture Trustee in compliance with the
covenant described in "--Reports", plus (2) 100% of the aggregate Net Cash
Proceeds received by the Company after the Issue Date from the issuance and
sale permitted by the Indenture of (A) its Capital Stock (other than
Disqualified Stock) to a Person who is not a Subsidiary of the Company, or (B)
the issuance to a Person who is not a Subsidiary of the Company of
Indebtedness of the Company that has been exchanged for or converted into
Capital Stock of the Company, plus without duplication of amounts included
pursuant to clause (1) above, (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments) in any Person
resulting from payments of dividends, repayments of loans or advances, or
other transfers of assets, in each case to the Company or any Restricted
Subsidiary, or designations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), in the aggregate under this subclause (3) not to exceed the
amount of Investments previously made by the Company and its Restricted
Subsidiaries in such Person.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at
said date of declaration, such payment would comply with the foregoing
paragraph; (ii) the payment of dividends or distributions by a Restricted
Subsidiary on its Capital Stock to the Company or any other Restricted
Subsidiary that owns equity interests in the Restricted Subsidiary making the
respective payment; (iii) in connection with a payment of dividends or
distributions by a Restricted Subsidiary to its shareholders generally, the
payment to the minority shareholders, if any, of such Restricted Subsidiary of
dividends or distributions (not to exceed their proportionate share of the
dividends or distributions so paid); provided that in no case shall any
Affiliate Minority Shareholder shall be entitled to receive dividends or
distributions pursuant to this clause (iii); (iv) so long as no Default or
Event of Default shall have occurred and be continuing, the making of any
principal payment or repurchase, redemption, retirement, defeasance or other
acquisition for value of Indebtedness of the Company which is subordinated in
right of payment to the Senior Notes, in exchange for, or out of the proceeds
of a substantially concurrent issuance of, shares of the Capital Stock of the
Company; (v) so long as no Default or Event of Default shall have occurred and
be continuing, a Permitted Refinancing; or (vi) Permitted Investments;
provided, that, with respect to Investments by the Company in a Restricted
Subsidiary, no more than an aggregate principal amount of $35.0 million of the
gross proceeds of the Initial Senior Notes shall be applied to make
Investments in the Capital Stock of Restricted
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Subsidiaries and provided further that the aggregate investment in any
Restricted Subsidiary in the form of Intercompany Notes shall not exceed 20%
of the gross proceeds of the Notes. The amounts referred to in clauses (i),
(iii) and (iv) shall be included as Restricted Payments in any computation
made pursuant to the first paragraph above.
Not later than the making of any Restricted Payment, the Company shall
deliver to the Indenture Trustee an Officers' Certificate (as defined in the
Indenture) stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "--Limitation
on Restricted Payments" were computed.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
So long as any of the Senior Notes are outstanding, the Company will not,
and will not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction of any kind on the ability of any Restricted Subsidiary to (i) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or
any other Restricted Subsidiary or (iv) transfer any of its property or assets
to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Issue Date, including those in the Indenture
or in the Existing Indebtedness, and any Permitted Refinancings thereof;
provided that the encumbrances and restrictions in any such Permitted
Refinancings are in the aggregate not materially more restrictive than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law and not due to any contractual arrangement; (iii) in the case
of clause (iv) of the first paragraph of this covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or
asset that is a lease, license, conveyance or contract or similar property or
asset, (B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by the
Indenture, (C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness for borrowed money, and that do not, individually
or in the aggregate, detract from the value of property or assets of the
Company or any Restricted Subsidiary in any manner material to the Company or
any Restricted Subsidiary, (D) existing pursuant to any purchase money
obligations for property solely with respect to the property acquired or (E)
existing pursuant to any mortgage or construction financing that imposes
restrictions solely on the real property acquired or improved; (iv) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that
has been entered into for the sale or disposition of all or substantially all
of the Capital Stock of, or property or assets of, such Restricted Subsidiary;
or (v) included in Bank Indebtedness or Guarantees incurred pursuant to
clauses (iv) and (v) of the second paragraph of the "--Limitation on
Indebtedness" covenant, respectively, so long as, in the case of this clause
(v), the relevant restrictions in no event restrict payments to the Company to
be used by it to make payments of principal, interest or other amounts as
required pursuant to the terms of the Senior Notes or the Indenture other than
to require that no such payment be made if there is a default or event of
default with respect to the Bank Indebtedness or Guarantees. Nothing contained
in this "--Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" covenant shall prevent the Company or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to exist any
Liens otherwise permitted in the "--Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company
or any of its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
Under the terms of the Indenture, the Company will not sell, and will not
permit any Restricted Subsidiary, directly or indirectly, to issue or sell any
shares of Capital Stock of a Restricted Subsidiary (including options,
warrants or other rights to purchase shares of such Capital Stock) except (i)
to the Company, a Wholly-Owned Subsidiary or, in the case of Restricted
Subsidiaries, the Municipal Shareholders of such Restricted Subsidiary so long
as such Restricted Subsidiary remains a Subsidiary of the Company; (ii) if,
immediately after giving
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effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary; (iii) issuances or sales to foreign
nationals of shares of Capital Stock of Restricted Subsidiaries, to the extent
required by applicable law; and (iv) issuances or sales of Capital Stock of
Restricted Subsidiaries to persons who after such issuance or sale will hold a
minority interest in such Restricted Subsidiary; provided that in the case of
clauses (ii) and (iv), the Company or such Restricted Subsidiary applies the
Net Cash Proceeds, if any, of any such sale in accordance with the "--
Limitation on Asset Sales" covenant described below.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a Subsidiary Guarantee and (ii) such Restricted Subsidiary waives
and will not in any manner whatsoever claim or take the benefit or advantage
of, any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided
that this paragraph shall not be applicable to any Guarantee of any Restricted
Subsidiary that (A) (x) existed at the time such Person became a Restricted
Subsidiary and (y) was not incurred in connection with, or in contemplation
of, such Person becoming a Restricted Subsidiary or (B) Guarantees of Bank
Indebtedness incurred by the Company pursuant to clause (iv) of the second
paragraph of the "--Limitation on Indebtedness" covenant. If the Guaranteed
Indebtedness is (A) pari passu with the Senior Notes, then the Guarantee of
such Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Senior Notes, then the
Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness
is subordinated to the Senior Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's and each Wholly-Owned Subsidiary's Capital Stock in such Restricted
Subsidiary (which sale, exchange or transfer is not prohibited by the
Indenture) or (ii) the release or discharge of the Guarantee or other
Indebtedness which resulted in the creation of such Subsidiary Guarantee,
except a release or discharge by or as a result of payment under such
Guarantee.
Under certain circumstances, the Company may cause the execution and
delivery of Subsidiary Guarantees. Each Subsidiary Guarantee delivered by a
Restricted Subsidiary is limited to such amount as will not, after giving
effect thereto, and to all other liabilities of such Restricted Subsidiary,
result in such amount constituting a fraudulent transfer or conveyance.
Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, enter into, renew or
extend any transaction (including, without limitation, the purchase, sale,
lease or exchange of property or assets, or the rendering of any service) with
any legal or beneficial owner (or any Affiliate of such holder) of 5% or more
of any class of Capital Stock of the Company or with any Affiliate of the
Company or any Restricted Subsidiary (each of the foregoing, an "Affiliate
Transaction"), unless: (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or such Restricted Subsidiary than those that
would have been obtained at the time of such transaction or at the time of the
execution of the agreement providing therefor in a comparable arm's-length
transaction with a Person that is not such a Related Person and (ii) the
Company delivers to the Indenture Trustee: (x) with respect to any Affiliate
Transaction involving aggregate payments in excess of $250,000 but less than
$2.5 million, a resolution of the Board of Directors of the Company set forth
in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above, (y) with respect to any Affiliate Transaction
involving aggregate payments equal to or greater than $2.5 million but less
than $15.0 million, a resolution of the Board of Directors of the Company set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and (A) that such Affiliate Transaction has
been approved by at least three disinterested directors of the Board of
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Directors of the Company and, in any case, by a majority of the disinterested
directors of the Board of Directors of the Company or (B) a written opinion as
to the fairness to the Company or such Restricted Subsidiary from a financial
point of view issued by an independent internationally recognized investment
banking firm or independent Colombian investment banking firm with respect to
any such Affiliate Transaction, and (z) with respect to any Affiliate
Transaction involving aggregate payments equal to or greater than $15.0
million, a resolution of the Board of Directors of the Company set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and a written opinion as to the fairness to the Company or
such Restricted Subsidiary from a financial point of view issued by an
independent internationally recognized investment banking firm with respect to
any such Affiliate Transaction.
Notwithstanding the foregoing, the following shall not be deemed Affiliate
Transactions: (i) any transaction between the Company and any of its
Restricted Subsidiaries or between Restricted Subsidiaries, provided such
transaction complies with clause (i) in the first paragraph above (other than
for amounts paid by a Restricted Subsidiary to the Company in respect of
corporate overhead); (ii) the payment of reasonable and customary regular fees
to directors of the Company who are not employees of the Company; (iii) any
payments or other transactions pursuant to any tax-sharing agreement between
the Company and any other Person with which the Company files a consolidated
tax return or with which the Company is part of a consolidated group for tax
purposes; (iv) Global I Leases, Global II Leases and Global III Leases, and
any extension, amendment, replacement or renewal thereof on substantially
similar terms; (v) any Restricted Payments not prohibited by the "--Limitation
on Restricted Payments" covenant; or (vi) equipment leases with Affiliates
entered into after the Issue Date; provided such leases comply with clause (i)
in the first paragraph above and the Company delivers to the Indenture Trustee
a resolution of the Board of Directors of the Company set forth in an
Officer's Certificate certifying that such Affiliate Transaction complies with
clause (i) in the first paragraph above, and contains terms substantially
similar to the terms of Global I Leases, Global II Leases and Global III
Leases, and any extension, amendment, replacement or renewal thereof.
Limitation on Liens
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, create, incur, assume or suffer to exist any
Lien on any of its assets or properties of any character, or any shares of
Capital Stock or Indebtedness of any Restricted Subsidiary, except for
Permitted Liens.
The Indenture will also provide that if the Company or any of its Restricted
Subsidiaries shall create, incur, assume or suffer to exist any Lien, other
than a Permitted Lien, on any assets or other property to secure Indebtedness
in violation of this covenant, the Company or such Restricted Subsidiary, as
the case may be, shall make effective provision for securing the Senior Notes
equally and ratably with such Indebtedness as to such assets or other property
for so long as such Indebtedness shall be so secured.
Limitation on Modifications to Certain Documents
The Company will not, and will not permit any of its Restricted Subsidiaries
to: (a) after the issuance thereof, amend or modify (or permit the amendment
or modification of) any of the terms or provisions of the Intercompany Notes
in any manner adverse to the interests of the Holders and the Indenture
Trustee under the Pledge Agreement, or forgive or reduce (except to extent
resulting from actual repayment to the Company in cash) the principal amount
of the Indebtedness evidenced thereunder, or (b) amend or modify any of the
terms or provisions of its estatutos sociales or other charter documents and,
in the case of the Restricted Subsidiaries, any lease agreement to which an
Affiliate of such Restricted Subsidiary or an Affiliate of the Company is a
party, in any manner adverse to the interests of the Holders.
Limitation on Asset Sales
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the
consideration received by the Company or such Restricted Subsidiary is at
least equal to the Fair Market Value of the assets sold or disposed of (as
determined in good faith by the Company's Board of Directors or if the Fair
Market Value of such assets (A) exceeds $10.0 million but is less
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than $25.0 million, the Company shall receive from an independent
internationally recognized investment banking firm or independent Colombian
investment banking firm or (B) exceeds $25.0 million, the Company shall
receive from an independent internationally recognized investment banking
firm, a written opinion in customary form as to the fairness, to the Company,
of such Asset Sale) and (ii) at least 75% of the consideration received
consists of cash or Cash Equivalents.
Upon the consummation of an Asset Sale, the Company may apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 270 days of receipt thereof either to (A) permanently prepay any
Bank Indebtedness and, in the case of any Bank Indebtedness outstanding under
a revolving credit facility, to effect a permanent reduction in the
availability under such revolving credit facility, (B) invest in property or
assets that are used in a Telecommunications Business, or the acquisition of
Capital Stock of any Person primarily engaged in a Telecommunications Business
if, as a result of such acquisition, such Person would become a Restricted
Subsidiary and such acquisition is in compliance with the "--Limitation on
Restricted Payments" covenant or (C) a combination of prepayment and
investment permitted by the foregoing clauses (A) and (B). On the 271st day
after an Asset Sale or such earlier date, if any, as the Board of Directors of
the Company or of such Restricted Subsidiary determines not to apply any
portion of the Net Cash Proceeds relating to such Asset Sale as set forth in
Clauses (A), (B) or (C) of the preceding sentence (each, a "Net Proceeds Offer
Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Offer Trigger Date as permitted in
clauses (A), (B) or (C) of the preceding sentence (each a "Net Proceeds Offer
Amount") shall be applied by the Company to make an offer to purchase (the
"Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not
less than 30 nor more than 45 days following the applicable Net Proceeds Offer
Trigger Date, from the Holders on a pro rata basis that amount of Senior Notes
equal to the Net Proceeds Offer Amount at a price equal to 100% of the
principal amount of the Senior Notes to be purchased, plus accrued and unpaid
interest thereon, if any, to the date of purchase; provided, however, that if
at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with
any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale under the Indenture and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than
$5.0 million, the application of the Net Cash Proceeds constituting such Net
Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time
as such Net Proceeds Offer Amount plus the aggregate amount of all Net
Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger
Date relating to such initial Net Proceeds Offer Amount from all Asset Sales
by the Company and its Restricted Subsidiaries aggregates at least $5.0
million, at which time the Company shall apply all Net Cash Proceeds
constituting all Net Proceeds Offer Amounts that have been so deferred to make
a Net Proceeds Offer (the first date the aggregate of all such deferred Net
Proceeds Offer Amounts is equal to $5.0 million or more shall be deemed to be
a Net Proceeds Offer Trigger Date).
Each Net Proceeds Offer will be mailed within not less than 30 nor more than
45 days following the applicable Net Proceeds Offer Trigger Date to the record
Holders as shown on the register of Holders, with a copy to the Pass Through
Trustee and the Indenture Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender its Senior Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders properly
tender Senior Notes in an amount exceeding the Net Proceeds Offer Amount,
Senior Notes of tendering Holders will be purchased on a pro rata basis (based
on amounts tendered). A Net Proceeds Offer shall remain open for a period of
20 Business Days or such longer period as may be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder in
connection with the repurchase of Senior Notes pursuant to a Net Proceeds
Offer (whether or not such rule by its terms would be applied to such offer as
a matter of law). To the extent that the provisions of any securities laws or
regulations conflict with the "Asset Sale" provisions of the Indenture, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the "Asset Sale"
provisions of the Indenture by virtue thereof.
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Conduct of Business
The Indenture provides that the Company and its Restricted Subsidiaries may
not, directly or indirectly, engage in any business other than the
Telecommunications Business in Latin America; provided that in the event a
Change of Control occurs in which one or more Strategic Equity Investors gain
control of the Company this covenant shall no longer be of force or effect.
Reports
For so long as any of the Senior Notes remain outstanding, the Company will
file with the Indenture Trustee: (i) within 120 days after the end of each
fiscal year, (a) audited year-end consolidated financial statements prepared
in accordance with GAAP and reconciled to U.S. GAAP and (b) the information
described in Item 303 of Regulation S-K under the Securities Act, (ii) by
January 30, 1998, (a) unaudited quarterly consolidated financial statements
prepared in accordance with GAAP and reconciled to U.S. GAAP and (b) the
information described in Item 303 of Regulation S-K under the Securities Act,
with respect to the quarter ending September 30, 1997 and (iii) thereafter,
through and including the quarter ending September 30, 1999, within 75 days
after the end of each of the first three fiscal quarters of each fiscal year,
(a) unaudited quarterly consolidated financial statements prepared in
accordance with GAAP and reconciled to U.S. GAAP (year to date only)
(provided, that, such quarterly financial statements and reconciliation to
U.S. GAAP shall continue to be provided for a period to be agreed to between
the Company and the Holders if 66 2/3% in principal amount of the outstanding
Senior Notes request) and (b) the information described in Item 303 of
Regulation S-K under the Securities Act, with respect to such period. Upon
qualification of the Indenture under the Trust Indenture Act, the Company
shall also comply with the provisions of Trust Indenture Act Section 314(a).
In the event that the Company is not required or shall cease to be required to
file reports with the Commission pursuant to the Exchange Act, the Company
shall nevertheless continue to file such reports with the Commission and the
Indenture Trustee. If the Indenture Trustee (at the Company's request and
expense) is to mail the foregoing information to the Holders, the Company
shall supply such information to the Indenture Trustee at least five days
prior thereto.
ADDITIONAL AMOUNTS
The Company has covenanted in the Indenture that (A) for so long as the
Trust is required to pay any amounts in respect of the Senior Notes to the
Certificateholders, the Company will pay as additional sums on the Senior
Notes such amounts as may be (a) required so that such payments by the Trust
will not be reduced as a result of any Taxes imposed by any Taxing Authority
on payments to the Trust under the Indenture to the extent that the Trust
would have been obligated to pay Additional Amounts with respect to such
amounts if such payment had been made by the Trust to the Certificateholder
and (b) such amounts as may be necessary in order to satisfy the obligation of
the Trust to pay any (i) Additional Amounts in respect of the Certificates,
and (ii) any stamp, issue, transfer, sales, use, value-added property,
registration, documentary, enforcement or other similar taxes and other duties
(including interest and penalties) payable to any Taxing Authority in respect
of the creation, issue or offering of the Certificates or any other documents
directly related to such creation, issue or offering; and (c) such amounts as
may be required so that the payments payable by the Trust will not be reduced
as a result of any Taxes or other liabilities imposed on the Trust, except to
the extent that the Company is required to pay such Taxes pursuant to (a) or
(b) of this paragraph. See also "Description of the Guarantees--Additional
Amounts."
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture:
(a) default in the payment of principal of, or premium, if any, on, the
Senior Notes when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on the Senior Notes when the same
becomes due and payable and such default continues for a period of 30 days;
(c) failure to perform or comply with the provisions described under "--
Offer to Purchase Upon Change of Control" or "--Limitation on Asset Sales,"
or the failure by the Company to comply with the first sentence of the
provisions described under "--Disbursement of Funds--Escrow Account;"
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(d) failure to comply with the covenant described under "--Consolidation,
Merger and Sale of Assets;"
(e) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture, the Senior Notes or
the Escrow and Disbursement Agreement and such default or breach continues
for a period of 30 consecutive days after written notice by the Indenture
Trustee or the Holders of 25% or more in aggregate principal amount of the
Senior Notes outstanding (other than those referred to in (a), (b), (c) or
(d));
(f) there occurs with respect to (A) any issue or issues of Indebtedness
(other than Intercompany Notes) of the Company or any Subsidiary having an
outstanding principal amount of $5 million or more in the aggregate for all
such issues of all such Persons or (B) any Intercompany Note of any
Restricted Subsidiary, in each case, whether such Indebtedness now exists
or shall hereafter be created, (I) an event of default that has caused the
holder thereof to declare such Indebtedness to be due and payable prior to
its final Stated Maturity and such Indebtedness has not been discharged in
full or such acceleration has not been rescinded or annulled within 30 days
following such acceleration and/or (II) the failure to make a principal
payment at the final Stated Maturity and such defaulted payment shall not
have been made, waived or extended within 30 days of such payment default
or any longer grace period provided for in such Indebtedness;
(g) one or more final judgments rendered against the Company or any of
its Subsidiaries (other than any judgment as to which a reputable insurance
or bonding company has accepted full liability in writing) aggregating in
excess of $5.0 million which judgments are not stayed within 60 days after
their entry;
(h) certain events of bankruptcy, liquidation, insolvency, "concordato",
reorganization or administration affecting the Company or any Subsidiary;
(i) there occurs with respect to the Global I Purchase Agreement, the
Global II Purchase Agreement, the purchase agreements to be entered into in
connection with the Global III Leases, or any future Global arrangements
permitted under the Indenture an event of default that has caused Siemens
to declare Global's Obligations under such purchase agreements to be due
and payable prior to such Obligations' Stated Maturity and (A) such
Obligations have not been discharged in full, or (B) such acceleration has
not been rescinded or annulled within 10 days following such acceleration;
(j) failure by Global to perform or comply with the Global Undertaking
Letter, or Global rejects being bound by the terms of the Global
Undertaking Letter; and
(k) repudiation by the Company of its obligations under the Escrow and
Disbursement Agreement for any reason.
If an Event of Default (other than an Event of Default specified in clauses
(h) above that occurs with respect to the Company and (i) above) occurs and is
continuing under the Indenture, the Indenture Trustee or the Holders of at
least 25% in aggregate principal amount of the Senior Notes outstanding by
written notice to the Company (and to the Indenture Trustee if such notice is
given by the Holders), may declare the Senior Notes outstanding to be
immediately due and payable at 100% of the unpaid principal thereof plus
accrued and unpaid interest thereon, if any. Upon a declaration of
acceleration, such principal of, premium, if any, and accrued interest shall
be immediately due and payable. If an Event of Default specified in clauses
(h) or (i) above occurs with respect to the Company or an Event of Default
specified in clause (j) above occurs with respect to Global, the Senior Notes
then outstanding shall ipso facto become and be immediately due and payable at
100% of the principal amount thereof plus accrued and unpaid interest thereon,
if any, to the date of such Event of Default, without any declaration or other
act on the part of the Indenture Trustee or any Holder. At any time after a
declaration of acceleration, but before a judgment or decree for the payment
of money due has been obtained by the Indenture Trustee, the Holders of at
least a majority in principal amount of the outstanding Senior Notes by
written notice to the Company and to the Indenture Trustee, may waive all past
defaults and rescind and annul a declaration of acceleration and its
consequences (i) if the rescission would not conflict with any judgment or
decree; (ii) if all existing Events of Default have been cured or waived
except non-payment of principal or interest that has become due solely because
of the acceleration; (iii) to the extent the payment of such interest is
lawful, interest
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on overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid; (iv) if
the Company has paid the Indenture Trustee its reasonable compensation and
reimbursed the Indenture Trustee for its expenses, disbursements and advances;
and (v) in the event of the cure or waiver of an Event of Default specified in
clause (h) above, the Indenture Trustee shall received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been
cured or waived. For information as to the waiver of defaults, see "--
Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Senior Notes may direct the time, method and place of conducting
any proceeding for any remedy available to the Indenture Trustee or exercising
any trust or power conferred on the Indenture Trustee. However, the Indenture
Trustee may refuse to follow any direction that conflicts with law or the
Indenture, that may involve the Indenture Trustee in personal liability, or
that the Indenture Trustee determines may be unduly prejudicial to the rights
of Holders of Senior Notes not joining in the giving of such direction and may
take any other action it deems proper that is not inconsistent with any such
direction received from Holders of Senior Notes. A Holder may not pursue any
remedy with respect to the Indenture or the Senior Notes unless: (i) the
Holder gives the Indenture Trustee written notice of a continuing Event of
Default; (ii) the Holders of at least 25% in aggregate principal amount of
outstanding Senior Notes make a written request to the Indenture Trustee to
pursue the remedy; (iii) such Holder or Holders offer the Indenture Trustee
indemnity satisfactory to the Indenture Trustee against any loss, liability or
expense; (iv) the Indenture Trustee does not comply with the request within 15
days after receipt of the request and the offer of indemnity; and (v) during
such 15-day period, the Holders of a majority in aggregate principal amount of
the outstanding Senior Notes do not give the Indenture Trustee a direction
that is inconsistent with the request. However, such limitations do not apply
to the right of any Holder of a Senior Note to receive payment of the
principal of, premium, if any, or interest on, such Senior Note or to bring
suit for the enforcement of any such payment, on or after the due date
expressed in the Senior Notes, which right shall not be impaired or affected
without the consent of the Holder.
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 120 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries, and of the Company's and its Subsidiaries' performance under the
Indenture or the Escrow and Disbursement Agreement, and that the Company has
fulfilled all obligations under the Indenture or the Escrow and Disbursement
Agreement, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof.
The Company will also be obligated to notify the Indenture Trustee of any
default or defaults in the performance of any covenants or agreements under
the Indenture or the Escrow and Disbursement Agreement.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its
property or assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company (other than a consolidation or merger
with or into a Restricted Subsidiary with a positive net worth where minority
shareholders of Restricted Subsidiaries receive only stock of the surviving
entity; provided that, in connection with any such merger or consolidation,
clauses (i) and (iv) below are complied with and no consideration (other than
Common Stock in the surviving Person or the Company) shall be issued or
distributed to the shareholders of the Company) unless: (i) the Company shall
be the surviving Person, or the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or that acquired or
leased such property and assets of the Company shall be a corporation
organized and validly existing under the laws of Colombia or the United States
of America, any State thereof or the District of Columbia, and shall expressly
assume, by a supplemental indenture, executed and delivered to the Indenture
Trustee, all of the obligations of the Company under the Senior Notes and the
Indenture; (ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction on a pro forma basis, the
Company, or any Person becoming the successor obligor of the Senior Notes,
could incur at least $1.00 of Indebtedness under the first paragraph of clause
(a) of the "--Limitation on Indebtedness" covenant (without reliance upon any
of the exceptions in (a)(i) through (xi)
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under "--Limitation on Indebtedness"); and (iv) the Company delivers to the
Indenture Trustee an Officers' Certificate (attaching, if applicable, the
arithmetic computations to demonstrate compliance with clause (iii)) and
opinion of counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision and that
all conditions precedent provided for herein relating to such transaction have
been complied with.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, the surviving entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture and the Senior Notes with the same effect as if such surviving
entity had been named as such; provided that solely for purposes of computing
amounts described in clause (C) of the first paragraph of the covenant "--
Limitation on Restricted Payments" above, any such surviving entity to the
Company shall only be deemed to have succeeded to and be substituted for the
Company with respect to periods subsequent to the effective time of such
merger, consolidation, combination or transfer of assets.
BANKRUPTCY ("CONCORDATO")
Under Colombian law, the procedure for reorganization differs from that in
the United States. Under Law 222/1995, upon admittance of the Company to the
concordato proceeding, the Company cannot make any payment or settle any of
its obligations (including the Senior Notes) 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, in
which case the Company enters immediately into mandate liquidation 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 creditors are 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.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect, and the Indenture Trustee,
on demand of and at the expense of the Company, will execute proper
instruments acknowledging satisfaction and discharge of the Indenture, when
(1) either (a) the Company shall have irrevocably paid in full all Guaranteed
Obligations (as such term is defined in the Certificate Guarantee) to the
Guarantee Trustee (as such term is defined in the Certificate Guarantee)
pursuant to the terms of the Certificate Guarantee; or (b) all Senior Notes
theretofore authenticated and issued (other than (i) Senior Notes which have
been destroyed, lost or stolen and which have been replaced or paid and (ii)
Senior Notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to the
Indenture Trustee or discharged from such trust) have been delivered to the
Indenture Trustee for cancellation; or (c) all such Senior Notes not
theretofore delivered to the Indenture Trustee for cancellation (i) have
become due and payable; or (ii) will become due and payable within one year,
and the Company, in the case of (c)(i) or (ii) above, has deposited or caused
to be deposited with the Indenture Trustee as trust funds in trust an amount
sufficient to pay and discharge the entire indebtedness on such Senior Notes
not theretofore delivered to the Indenture Trustee for cancellation, for
principal of, premium, if any, and interest on the Senior Notes to the date of
such deposit (in the case of Senior Notes which have become due and payable)
together with irrevocable instructions from the Company directing the
Indenture Trustee to apply such funds to the payment thereof at maturity or
redemption, 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 Indenture 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 the Indenture have been complied
with.
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Notwithstanding the satisfaction and discharge of the Indenture, the
obligations of the Company to the Indenture Trustee with respect to
compensation, indemnification and reimbursement, the obligations of the
Indenture Trustee to any authenticating agent, registrar, co-registrar, paying
agent or transfer agent under the Indenture and, if money shall have been
deposited with the Indenture Trustee pursuant to subclause (b) of clause (1)
above, the obligations of the Indenture Trustee with respect to notices of
default under the Indenture shall survive.
AMENDMENT SUPPLEMENT AND WAIVER
Without Consent of Holders of Notes
From time to time, the Company and the Indenture Trustee, without the
consent of the Holders of the Senior Notes, may amend the Indenture for the
following purposes, so long as such change does not adversely affect the
rights of any of the Holders. The Indenture Trustee will be entitled to rely
on such evidence as it deems appropriate, including, without limitation,
solely on an Opinion of Counsel that such change does not adversely affect the
rights of any Holder, in executing any supplemental indenture.
Notwithstanding, the provisions in the Indenture with respect to amending or
supplementing with consent of Holders of Notes, the Company and the Indenture
Trustee may amend or supplement the Indenture, the Notes or the Escrow and
Disbursement Agreement without the consent of any Holder of a Senior Note: (a)
to cure any ambiguity, defect or inconsistency; (b) to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes; (c) to provide for the assumption of the Company's obligations to the
Holders of the Senior Notes in the case of a merger or consolidation; (d) to
execute and deliver any documents necessary or appropriate to release Liens on
the Escrow Account and the Refinancing Account; (e) to make any change that
would provide any additional rights or benefits to the Holders of the Senior
Notes or that does not adversely affect the legal rights hereunder of any
Holder of the Senior Notes; or (f) to comply with requirements of the
Commission in order to effect or maintain the qualification of this Indenture
under the Trust Indenture Act of 1939, as it may be amended from time to time.
Upon the written request of the Company accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such
amended or supplemental Indenture, and upon receipt by the Indenture Trustee
of the documents described in the Indenture, the Indenture Trustee shall join
with the Company in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of the Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but
the Indenture Trustee shall not be obligated to enter into such amended or
supplemental Indenture which affects its own rights, duties or immunities
under the Indenture or otherwise.
With Consent of Holders of Notes
The Company and the Indenture Trustee may amend or supplement the Indenture,
the Senior Notes or the Escrow and Disbursement Agreement or any amended or
supplemental Indenture with the written consent of the Holders of Senior Notes
of not less than a majority in aggregate principal amount of the Senior Notes
then outstanding, and any existing Default and its consequences or compliance
with any provision of the Indenture, the Senior Notes or the Escrow and
Disbursement Agreement may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Senior Notes.
Upon the request of the Company accompanied by a resolution of the Board of
Directors of the Company authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Indenture Trustee of
evidence satisfactory to the Indenture Trustee of the consent of the Holders
of Senior Notes as aforesaid, and upon receipt by the Indenture Trustee of the
documents described in the Indenture Trustee shall join with the Company in
the execution of such amended or supplemental Indenture unless such amended or
supplemental Indenture affects the Indenture Trustee's own rights, duties or
immunities under the Indenture or otherwise, in which case the Indenture
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture.
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It shall not be necessary for the consent of the Holders of Senior Notes to
approve the particular form of any proposed amendment or waiver, but it shall
be sufficient if such consent approves the substance thereof.
After such amendment, supplement or waiver becomes effective, the Company
shall mail to the Holders of Senior Notes affected thereby a notice briefly
describing the amendment, supplement or waiver. Any failure of the Company to
mail such amended notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to provisions in the Indenture, the Holders of a
majority in aggregate principal amount of the Senior Notes then outstanding
may waive compliance in a particular instance by the Company with any
provision of the Indenture or the Senior Notes. However, without the consent
of each Holder affected thereby, an amendment or waiver may not (with respect
to any Senior Notes held by a non-consenting Holder of Senior Notes); (a)
reduce the principal amount of Senior Notes whose Holders must consent to an
amendment, supplement or waiver; (b) reduce the principal of or change or have
the effect of changing the fixed maturity of any Senior Note or change the
date on which any Senior Note may be subject to redemption or repurchase, or
reduce the redemption or repurchase price thereof; (c) reduce the rate of or
change or have the effect of changing the time for payment of interest,
including defaulted interest, on any Senior Notes; (d) waive a Default or
Event of Default in the payment of principal of or premium, if any, or
interest on the Senior Notes (except a rescission of acceleration of the
Senior Notes by the Holders of at least a majority in aggregate principal
amount of the Senior Notes and a waiver of the payment default relating solely
to the principal or interest that has become due solely because of the
acceleration); (e) make any Senior Note payable in money other than that
stated in the Senior Notes; (f) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Senior Notes to receive payments of principal of or interest on the Senior
Notes on or after the due date thereof or to bring suit to enforce such
payment; (g) waive a redemption payment with respect to any Senior Note (other
than specific payments referenced in the Indenture as not waivable); (h)
amend, change or modify in any material respect the obligation of the Company
to make and consummate a Change of Control Offer in the event of a Change of
Control or make and consummate a Net Proceeds Offer with respect to any Asset
Sale that has been consummated or modify any of the provisions or definitions
with respect thereto; (i) make any change in the foregoing amendment and
waiver provisions; or (j) directly or indirectly release Liens on all or
substantially all of the collateral except as permitted by the Escrow and
Disbursement Agreement.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Notes, the Indenture or the Escrow and Disbursement Agreement or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of the Senior Notes, by accepting a Senior Note, waives
and releases all such liability. The waiver and release are part of the
consideration of issuance of the Senior Notes.
CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee's address is Marine Midland Bank, 140 Broadway, 12th
Floor, New York, New York 10005. The Indenture provides that, except during
the continuance of a Default, the Indenture Trustee will not be liable, except
for the performance of such duties as are specifically set forth in such
Indenture. If an Event of Default has occurred and is continuing, the
Indenture Trustee will use the same degree of care and skill in its exercise
of the rights and powers vested in it by the Indenture as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.
The Indenture, and provisions of the Trust Indenture Act incorporated by
reference therein, contain limitations on the rights of the Indenture 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 Indenture Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict within 90 day, apply to
the Commission for permission to continue as trustee or resign.
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GOVERNING LAW
The Indenture provides that the Indenture and the Senior Notes issued
thereunder will be governed by and construed in accordance with the laws of
the State of New York without giving effect to principles of conflict of laws.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other
capitalized term used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, Indebtedness of
any other Person existing at the time such other Person merged with or into or
became a Restricted Subsidiary of such specified Person or Indebtedness
incurred by such Person in connection with the acquisition of assets,
including, without limitation, Indebtedness incurred or assumed in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Restricted Subsidiary of such specified Person or the acquisition
of such assets, as the case may be.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as applied to any Person, is defined to
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
"Affiliate Minority Shareholder" at any time shall mean any minority
shareholder of a Restricted Subsidiary which is an Affiliate (other than a
Restricted Subsidiary) or Related Person (other than a Restricted Subsidiary)
of the Company.
"Annualized Pro Forma EBITDA" means with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter preceding the date of
calculation for which financial statements are then available multiplied by
four.
"Asset Acquisition" means (i) an Investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries or (ii) an
acquisition by the Company or any of its Restricted Subsidiaries of the
property or assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or
line of business of such Person.
"Asset Sale" means any sale, transfer or other disposition (or series of
related sales, leases, transfers or dispositions) in one transaction or a
series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) any of the Capital Stock of any Restricted Subsidiary,
(ii) all or substantially all of the property or assets of an operating unit
or business of the Company (other than Capital Stock of the Company) or any of
its Restricted Subsidiaries or (iii) any other property or assets of the
Company or any of its Restricted Subsidiaries outside the ordinary course of
business of the Company or such Restricted Subsidiary and, in each case, that
is not governed by the provisions of the Indenture applicable to mergers,
consolidations and sales of assets of the Company; provided that (A) sales or
other dispositions of inventory, receivables and other current assets, (B)
sales or other dispositions of equipment that has become worn out, obsolete or
damaged or otherwise unsuitable for use in connection with the business of the
Company or its Restricted Subsidiaries, (C) sales and other dispositions
constituting Restricted Payments and Permitted Investments made in compliance
with the terms of the Indenture, (D) sales or other dispositions of assets
with a Fair Market Value (as certified in an Officers' Certificate) not in
excess of $500,000 and (E) issuances, sales or other dispositions of shares of
Capital Stock of Unrestricted Subsidiaries and issuances, sales or other
dispositions of shares of Capital Stock of Restricted Subsidiaries effected in
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accordance with the "--Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries"; provided, in each case set forth in clause (E), that
the consideration received therefor by the Company, the Unrestricted
Subsidiary or the Restricted Subsidiary, as the case may be, has at least
substantially equal market value to the Company, the Unrestricted Subsidiary
or such Restricted Subsidiary as the shares of Capital Stock so issued, sold
or disposed of (as determined by the Board of Directors whose good faith
determination shall be conclusive and evidenced by a Board Resolution) shall
not be included within the meaning of "Asset Sale."
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the
amount of such principal payment by (ii) the sum of all such principal
payments.
"Bank Indebtedness" means loans made by banks, trust companies and other
institutions principally engaged in the business of lending money to
businesses to the Company or a Restricted Subsidiary under a credit facility,
loan agreement or similar agreement.
"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act with respect to
the Indenture from time to time.
"Board Resolution" means a copy of a resolution, certified by the secretary
of the duly convened meeting or the legal representative or statutory auditor
of the Company to have been duly adopted by the Board of Directors and to be
in full force and effect on the date of such certification, and delivered to
the Indenture Trustee.
"Business Day" means a day (other than a Saturday or Sunday) on which DTC,
Euroclear, Cedel and banks in New York, Delaware and Colombia are open for
business.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether outstanding at
the Issue Date or issued after the Issue Date, including, without limitation,
all Common Stock and Preferred Stock, and any and all rights, warrants or
options exchangeable for or convertible into any thereof.
"Capitalized Lease" means, as applied to any Person, any lease or license
of, or other agreement conveying the right to use, any property (whether real,
personal or mixed, movable or immovable) of which the present value of the
obligations of such Person to pay rent or other amounts is required, in
conformity with U.S. GAAP, to be classified and accounted for as a finance
lease obligation; and "Capitalized Lease Obligation" is defined to mean the
capitalized present value of the obligations to pay rent or other amounts
under such lease or other agreement, determined in accordance with U.S. GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of
365 days or less issued or directly and fully guaranteed or insured by the
United States of America or Colombia or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America or
Colombia, as the case may be, is pledged in support thereof); (ii)
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
$500 million; (iii) 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; (iv)
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; (v)
Colombian Peso deposits, with maturities of not more than 12 months from the
date of acquisition, in (A) Banco de Colombia, Banco Ganadero, Banco
Industrial Colombiano or Banco de Bogota or (B) any other bank or financial
institution incorporated
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under the laws of Colombia with total assets exceeding the equivalent of $350
million; provided that the aggregate principal amount of any such deposits in
banks described in this subclause (B) shall not exceed the equivalent of $10
million at any time outstanding; (vi) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by Colombia and backed by the full faith and credit
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 (v); provided that such agreement with banks described in subclause (v)
(B) shall be deemed a deposit for purposes of the $10 million limit in such
subclause; and (vii) investments in money market funds all of the assets of
which consist of securities of the types described in the foregoing clauses
(i) through (vi).
"Cedel" means Cedel Bank, societe anonyme.
"Change of Control" means the occurrence of any of the following events:
(i) the sale, lease, transfer, conveyance or other disposition, whether
direct or indirect (by way of a merger, consolidation or otherwise), by the
Company or a Restricted Subsidiary of the Company, in one or a series of
related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole, to any Person
other than a Restricted Subsidiary of the Company;
(ii) the adoption of a plan relating to the liquidation or dissolution of
the Company;
(iii) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Permitted Holders, becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of (a) more than 35% of the total voting rights of the Common
Stock of the Company and (b) a greater percentage of the voting power of
the total Common Stock of the Company than that represented by the voting
power of the Common Stock of the Company then beneficially owned, in the
aggregate, by the Permitted Holders; or
(iv) individuals who on the Issue Date constitute the Board of Directors
of the Company (together with any new directors whose election by the Board
of Directors or whose nomination for election by the Company's shareholders
was approved by a vote of at least a majority of the members of the Board
of Directors then in office who either were members of the Board of
Directors on the Issue Date or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the members of the Board of Directors then in office.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if such shares are not listed or admitted to
trading on any national securities exchange or quoted on such automated
quotation system, the average of the closing bid and asked prices in the over-
the-counter market as furnished by any New York Stock Exchange member firm
that is selected from time to time by the Company for that purpose and is
reasonably acceptable to the Indenture Trustee.
"Collateral Agent" means Marine Midland Bank, as Collateral Agent under the
Pledge Agreement, or any other successor thereto appointed pursuant to such
agreement.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of such Person's common stock or
ordinary shares, whether or not outstanding at the Issue Date, and includes,
without limitation, all series and classes of such common stock or ordinary
shares.
"Consolidated EBITDA" for any period means the Consolidated Net Income for
such period plus to the extent deducted in calculating Consolidated Net Income
(i) Consolidated Income Tax Expense, (ii) net monetary inflation adjustment,
(iii) depreciation and amortization expenses, (iv) Net Financial Expense, (v)
minority
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interest, (vi) interest expense attributable to Capitalized Leases in
accordance with U.S. GAAP (whether or not in accordance with GAAP) and (vii)
all other non-cash charges (other than non-cash charges which require an
accrual of or reserve for cash charges in future periods), less any non-cash
items which have the effect of increasing Consolidated Net Income for such
period, plus (less) to the extent deducted (included) in Consolidated Net
Income, extraordinary losses (gains) and non-recurring items (including gains
and losses on Asset Sales) deducted (included) in calculating Consolidated Net
Income, each (except with respect to (vi) above) determined in accordance with
GAAP.
"Consolidated Income Tax Expense" for any Person for any period means,
without duplication, the aggregate amount of net taxes based on income or
profits for such period of the operations for such Person and its consolidated
Subsidiaries with respect to such period in accordance with GAAP.
"Consolidated Indebtedness" means the aggregate amount of Indebtedness of
the Company and its Restricted Subsidiaries on a consolidated basis.
"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Consolidated Net Income (without duplication): (i) the
net income of any Person (other than net income attributable to a Restricted
Subsidiary) in which any Person (other than the Company or any of its
Restricted Subsidiaries) has a joint interest and the net income of any
Unrestricted Subsidiary, except to the extent of the amount of dividends or
other distributions actually paid to the Company or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during such
period; (ii) the net income of any Restricted Subsidiary in which any Person
other than the Company or another Restricted Subsidiary has a minority
interest shall be excluded to the extent such net income is attributable to
such minority interests; (iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary, except that (A) the Company's equity
in the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitation contained in this clause) and (B) the Company's
equity in a net loss of any such Subsidiary for such period shall be included
in determining such Consolidated Net Income; (iv) without duplication, any
gains or losses (on an after-tax basis) attributable to Asset Sales; (v)
except for purposes of calculating the amount of Restricted Payments that may
be made pursuant to clause (C) of the first paragraph of the "--Limitation on
Restricted Payments" covenant, any amount paid or accrued as dividends on
Preferred Stock of the Company owned by Persons other than the Company and any
of its Restricted Subsidiaries; and (vi) all extraordinary gains and
extraordinary losses.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures (other than any
maturity that results from an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Stated Maturity of the Senior Notes; provided, however, that any
Capital Stock that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require the Company to repurchase
or redeem such Capital Stock upon the occurrence of a Change of Control
occurring prior to the Stated Maturity of the Senior Notes shall not
constitute Disqualified Stock if (i) the change of control provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions applicable to the Senior Notes contained in
the covenant described under "Offer to Purchase Upon
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Change of Control" and (ii) such Capital Stock specifically provides that the
Company will not repurchase or redeem any such stock pursuant to such
provisions prior to the Company's repurchase of Senior Notes as are required
to be repurchased pursuant to the covenant described under "Offer to Purchase
Upon Change of Control."
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rated "A" (or higher) by S&P or Moody's at
the time as of which any investment or rollover therein is made.
"Equity Market Capitalization" of any Person means, as of any day of
determination, the product of (a) the aggregate number of outstanding shares
of Common Stock of such Person on such day (which shall not include any
options or warrants on, or securities convertible or exchangeable into, shares
of Common Stock of such Person) and (b) the average Closing Price of such
Common Stock over the 20 consecutive Trading Days immediately preceding such
day. If no such Closing Price exists with respect to shares of any such class,
the value of such shares for purposes of clause (b) of the preceding sentence
shall be determined by an independent internationally recognized investment
banking firm.
"Escrow Account" means an escrow account for the deposit of approximately
$35.3 million of the net proceeds from the sale of the Senior Notes under the
Escrow and Disbursement Agreement, representing funds sufficient to pay the
first four interest payments on the Senior Notes.
"Escrow Agent" means Marine Midland Bank, as Escrow Agent under the Escrow
and Disbursement Agreement, or any successor thereto appointed pursuant to
such agreement.
"Escrow and Disbursement Agreement" means the Escrow and Disbursement
Agreement, dated as of the date of the Indenture, by and among the Escrow
Agent, the Indenture Trustee and the Company, governing the disbursement of
funds from the Escrow Account and the Refinancing Account.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Existing Indebtedness" means (i) the Indebtedness of the Company under the
Transtel-Siemens Purchase Agreement, (ii) the Obligations of the Restricted
Subsidiaries under the Global I Leases, Global II Leases and the Global III
Leases, (iii) the Obligations of the Company under the Transtel Guaranty
(without duplication of the Obligations of the Restricted Subsidiaries under
clause (ii) of this definition), (iv) the Obligations of the Company under the
DIAN Financing, (v) the obligations of the Company under the IBM Financing,
and (vi) the Other Existing Indebtedness.
"Fair Market Value" means, with respect to any asset or property, the price
that could be negotiated in an arm's-length free-market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under
pressure or compulsion to complete the transaction. Unless otherwise specified
in the Indenture, Fair Market Value shall be determined by the Board of
Directors acting in good faith and shall be evidenced by a Board Resolution
delivered to the Indenture Trustee.
"GAAP" means, at any date of determination, generally accepted accounting
principles in Colombia as then in effect.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such other Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has a corresponding
meaning.
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"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise, contingently or otherwise, become liable,
directly or indirectly, for or with respect to, or become responsible for, the
payment of such Indebtedness, including an incurrence of Indebtedness by
reason of the acquisition of a Restricted Subsidiary. The term "incurrence"
has a corresponding meaning.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) any liability, contingent or
otherwise, of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect thereto
and purchase money obligations), (iv) all obligations of such Person to pay
the deferred and unpaid purchase price of property or services, which purchase
price is due more than 180 days after the date of placing such property in
service or taking delivery and title thereto or the completion of such
services, except Trade Payables, (v) all obligations of such Person as lessee
under Capitalized Leases in accordance with U.S. GAAP (whether or not in
accordance with GAAP); (vi) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person, (vii) all Indebtedness of other Persons Guaranteed by such
Person to the extent such Indebtedness is Guaranteed by such Person, (viii) to
the extent not otherwise included in this definition, the Net Obligation under
Currency Agreements and Interest Rate Agreements, (ix) all obligations of such
Person to pay deferred Colombian taxes and duties to DIAN (or any other
Colombian taxing authority) with respect to imported equipment purchases and
leases and (x) any and all deferrals, renewals, extensions and refundings of,
or amendments of or supplements to, any liability or obligation of the kind
described in this definition. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent obligations,
the maximum liability upon the occurrence of the contingency giving rise to
the obligation, that (A) the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP and (B) the amount of Indebtedness for purposes of clause (vi) above
shall be the lesser of (x) the principal amount of the Indebtedness secured by
the assets of the relevant Person and (y) the Fair Market Value (as determined
by the board of directors of the relevant Person) of the assets securing such
Indebtedness.
"Indebtedness to Annualized EBITDA Ratio" means, as at any date of
determination, the ratio of (i) the aggregate amount of Consolidated
Indebtedness to (ii) the Annualized Pro Forma EBITDA of the Company, each
calculated on the date of the incurrence of Indebtedness.
"Intercompany Note" means the promissory notes issued by a Restricted
Subsidiary to the Company upon making an advance or loan to such Restricted
Subsidiary with the proceeds of the Senior Notes, which Intercompany Notes (i)
are pledged to the Collateral Agent pursuant to the Pledge Agreement, (ii)
have the same Stated Maturity as the Senior Notes, (iii) contain a provision
that accelerates payment of the Intercompany Notes upon acceleration of the
Senior Notes and (iv) state that they are senior unsecured obligations of the
respective Restricted Subsidiary and rank senior in right of payment to all
existing and future subordinated Indebtedness of such Restricted Subsidiary
and rank pari passu with all Senior Indebtedness of such Restricted Subsidiary
(including the Indebtedness evidenced by the Global I Leases, Global II Leases
and Global III Leases).
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement
designed to protect the Company or any of its Restricted Subsidiaries against
fluctuations in interest rates in respect of Indebtedness to or under which
the Company or any of its Restricted Subsidiaries is a party or a beneficiary
on the date of this Indenture or becomes a party or a beneficiary hereafter;
provided that the Net Obligation thereof does not exceed the principal amount
of the Indebtedness of the Company and its Restricted Subsidiaries that bears
interest at floating rates.
"Investment" means, with respect to any Person, any advance, loan, account
receivable (other than an account receivable arising in the ordinary course of
business), or other extension of credit (including, without
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limitation, by means of any Guarantee) or any capital contribution to (by
means of transfers of property to others, payments for property or services
for the account or use of others, or otherwise), or any purchase or ownership
of any stocks, bonds, notes, debentures or other securities of, any other
Person, and shall include the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary. For purposes of the definition of "Unrestricted
Subsidiary" described below and the "--Limitation on Restricted Payments"
covenant described above, (i) "Investment" shall include the Fair Market Value
of the assets (net of liabilities) of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the Fair Market Value of the assets (net of liabilities) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company, and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"Issue Date" means the original date of issuance of the Senior Notes.
"Lien" means any mortgage, charge, pledge, security interest, encumbrance,
lien (statutory or other), hypothecation, assignment for security, claim, or
preference or priority or other encumbrance of any kind upon or with respect
to any property, it being understood that Lien includes any lien granted in
any future receivables (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller or any agreement to
give any security interest).
"Marketable Securities" means (i) U.S. Government Securities maturing not
more than two years after the date of acquisition; (ii) any certificate of
deposit maturing not more than 270 days after the date of acquisition issued
by, or time deposit of, an Eligible Institution; (iii) commercial paper
maturing not more than 270 days after the date of acquisition issued by a
corporation (other than an Affiliate of the Company) with a rating, at the
time as of which any investment therein is made, of "A-1" (or higher)
according to S&P or "P-1" (or higher) according to Moody's; (iv) any banker's
acceptances or money market deposit accounts issued or offered by an Eligible
Institution; and (v) any fund investing exclusively in investments of the
types described in clauses (i) through (iv) above.
"Moody's" means Moody's Investors Service Inc. and its successors.
"Municipal Shareholder" of a Restricted Subsidiary means the shareholder of
such Subsidiary that is a municipality in which such Restricted Subsidiary
conducts its business and such municipality's related entities.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or Cash Equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary of the
Company) and proceeds from the conversion of other property received when
converted to cash or Cash Equivalents if converted within 12 months after
receipt, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to
such Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or
any other obligation outstanding at the time of such Asset Sale (excluding the
Senior Notes and the Bank Indebtedness incurred by the Company or a Restricted
Subsidiary pursuant to clause (iv) of the second paragraph of the "--
Limitation on Indebtedness" covenant) that either (A) is secured by a Lien on
the property or assets sold or (B) is required to be paid as a result of such
sale and (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary of the Company as a reserve against any liabilities
associated with 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, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of
such issuance or sale in the form of cash or Cash Equivalents, including
payments in respect of
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deferred payment obligations (to the extent corresponding to the principal,
but not interest, component thereof) when received in the form of cash or Cash
Equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary of the Company) and
proceeds from the conversion of other property received when converted to cash
or Cash Equivalents, net of attorneys' fees, accountants' fees, underwriters'
or placement agents' fees, discounts or commissions and brokerage, consultant
and other fees incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Net Financial Expense" for any period means financial expenses, which
include interest expense, commissions, discounts and other fees and charges
paid or accrued with respect to letters of credit and bankers' acceptance
financing, and exchange losses less financial income, which includes interest
income, commercial discounts and exchange gains, all determined on a
consolidated basis in accordance with GAAP.
"Net Obligation" means, at any date of determination, the net amount,
exclusive of any commission or administrative fees that a Person would be
obligated to pay upon the termination of an Interest Rate Agreement or
Currency Agreement.
"Obligations" means any principal, interest, penalties, fees, payments,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Other Existing Indebtedness" means Indebtedness outstanding on the Issue
Date owed to various financial institutions which was to be repaid with
proceeds in the Refinancing Account.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person who
has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"Paying Agent" means Marine Midland Bank, as Paying Agent under the
Indenture, or any successor thereto appointed pursuant to the Indenture.
"Permitted Holders" means Guillermo Lopez, Gonzalo Caicedo Toro, Gonzalo
Caicedo & Co., Maria Eugenia Caicedo Llano, Valentina Caicedo Toro or any
Person controlled by such Persons.
"Permitted Investment" means so long as no Default or Event of Default shall
have occurred and be continuing (i) an Investment by the Company in a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with
or into, or transfer or convey all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided that (A) such Restricted
Subsidiary is a Wholly-Owned Subsidiary or an empresa mixta (mixed capital
company) under Law 142 with no Affiliate Minority Shareholders and (B) if such
Restricted Subsidiary ceases to be a Restricted Subsidiary (except by reason
of the sale by the Company or its Restricted Subsidiary of the Capital Stock
therein), then any Investment in such Restricted Subsidiary will be deemed to
be a Restricted Payment at the time of such event determined in accordance
with the "--Limitation on Restricted Payments" covenant; (ii) Cash
Equivalents; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) stock, obligations or securities received in
satisfaction of judgments; and (v) an Investment in any Person (other than a
Restricted Subsidiary) engaged in a Telecommunications Business not to exceed
$10.0 million in the aggregate for all Investments under this clause (v) at
any time outstanding (determined without regard to any write-downs or write-
offs thereof).
"Permitted Liens" means:
(i) Liens on (x) the Escrow Account and the Refinancing Account and all
funds and securities therein securing only the Senior Notes and (y) the
Intercompany Notes securing only the Senior Notes;
(ii) Liens to secure Bank Indebtedness incurred by the Company or the
Restricted Subsidiaries in compliance with clause (iv) or the second
paragraph of the "--Certain Covenants--Limitation on Indebtedness" covenant
and Guarantees incurred by the Company or the Restricted Subsidiaries in
compliance with clause (iv) of the second paragraph of "--Certain
Covenants--Limitation on Indebtedness" executed in connection therewith;
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(iii) Liens on the property of the Company or its Restricted Subsidiaries
created solely for the purpose of securing purchase money obligations
incurred in compliance with the "--Certain Covenants--Limitation on
Indebtedness" covenant; provided that (a) such property so acquired is for
use in lines of business related to the Company's or its Restricted
Subsidiaries' business as it exists immediately prior to the issuance of
the related Indebtedness, (b) no such Lien shall extend to or cover other
property or assets of the Company and its Restricted Subsidiaries other
than the respective property so acquired and (c) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such property or assets;
(iv) Liens on the property or assets of a Restricted Subsidiary acquired
after the Issue Date or on property or assets acquired in an asset purchase
transaction with a Person that is not an Affiliate created solely to secure
the Obligations that financed the acquisition of such Restricted Subsidiary
or such property or assets and which were incurred in compliance with the
"--Certain Covenants--Limitation on Indebtedness" covenant; provided that
(a) no such Lien shall extend to or cover property or assets of the Company
and its Restricted Subsidiaries other than the property or assets of the
Restricted Subsidiary so acquired or the property or assets so acquired and
(b) no such Lien shall extend to the Capital Stock of any Restricted
Subsidiary so acquired and (c) the principal amount of Indebtedness secured
by any such Lien shall not exceed the original purchase price of such
Restricted Subsidiary or such property or assets;
(v) Liens on assets of any entity existing at the time such entity or
assets are acquired by the Company or any of its Restricted Subsidiaries,
whether by merger, consolidation, purchase of assets or otherwise; provided
that such Liens (a) are not created, incurred or assumed in connection
with, or in contemplation of, such assets being acquired by the Company or
any of its Restricted Subsidiaries and (b) do not extend to any other
property of the Company or any of its Restricted Subsidiaries;
(vi) Liens for taxes, assessments, governmental charges or claims that
are being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;
(vii) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other similar Liens arising in the
ordinary course of business and with respect to amounts not yet delinquent
or being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;
(viii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(ix) Liens on the Existing Indebtedness existing on the date of the
Indenture; provided such Liens on the Other Existing Indebtedness are
removed within 75 days after the Issue Date;
(x) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory or regulatory obligations, bankers' acceptances,
surety and appeal bonds, government contracts, performance and return-of-
money bonds and other obligations of a similar nature incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money);
(xi) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Company or any of its Restricted Subsidiaries;
(xii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries, taken as a whole;
(xiii) Liens encumbering property or assets under construction arising
from progress or partial payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or assets;
(xiv) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease;
(xv) Liens in favor of the Company or any Restricted Subsidiary;
(xvi) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Subsidiary of the Company that does
not give rise to an Event of Default;
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(xvii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xviii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business of the Company and its Restricted Subsidiaries; and
(xix) Liens to secure Obligations under Capitalized Leases (except in
respect of sale-leaseback transactions) on real or personal property of the
Company to the extent consummated in compliance with the Indenture;
provided that (A) at the time such Lien attaches to the real or personal
property of the Company, the Company shall be permitted to incur at least
$1.00 of Indebtedness under the first paragraph of the "--Certain
Covenants--Limitation on Indebtedness" covenant (without reliance upon any
of the exceptions in clauses (a)(i) through (xi) under "--Certain
Covenants--Limitation on Indebtedness").
Notwithstanding the foregoing, Permitted Liens may not extend to the Escrow
Account, the Refinancing Account, the Escrow and Disbursement Agreement or the
Intercompany Notes.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge Agreement" means the Pledge Agreement, dated as of the date of the
Indenture, between the Company and the Collateral Agent, whereby the Company
pledges the Intercompany Notes to the Indenture Trustee.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding, or issued
after the Issue Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Pro Forma EBITDA" means for any Person for any period the Consolidated
EBITDA of such Person after giving effect to the following: (i) if, during the
period commencing on the first day of the relevant period through the
Transaction Date (the "Reference Period"), the Company or any Restricted
Subsidiaries have engaged in any Asset Sale, Pro Forma EBITDA of the Company
for such period shall be reduced by an amount equal to the Consolidated EBITDA
(if positive), or increased by an amount equal to the Consolidated EBITDA (if
negative), directly attributable to the assets which are the subject of such
Asset Sale, (ii) if during such Reference Period the Company or any Restricted
Subsidiaries have effected any Asset Acquisition, Pro Forma EBITDA of the
Company for such period shall be calculated using the historical results of
such acquired entity on a pro forma basis as if such acquisition had occurred
on the first day of such Reference Period and (iii) if during such Reference
Period, (A) the Company designates a Restricted Subsidiary as an Unrestricted
Subsidiary, Pro Forma EBITDA for the Company shall be reduced by an amount
equal to the Consolidated EBITDA (if positive), or increased by an amount
equal to the Consolidated EBITDA (if negative), directly attributable to the
designated Unrestricted Subsidiary and (B) the Company designates an
Unrestricted Subsidiary as a Restricted Subsidiary, Pro Forma EBITDA for the
Company shall be increased by an amount equal to the Consolidated EBITDA (if
positive), or decreased by an amount equal to the Consolidated EBITDA (if
negative), directly attributable to the designated Restricted Subsidiary.
"Public Equity Offering" means underwritten public offerings or quotations
or placements of Common Stock of the Company (i) that have been registered
with the Commission under the Securities Act, (ii) that have been registered
with the Superintendency of Corporations so long as a Level 3 American
Depositary Receipt Program is established in the United States in conjunction
therewith or (iii) that have been listed on the London Stock Exchange or the
Luxembourg Stock Exchange.
"Refinancing" means the refinancing of the Other Existing Indebtedness with
the proceeds of the Initial Senior Notes expected to occur within 75 days of
the Issue Date.
"Refinancing Account" means an escrow account for the deposit of
approximately $33.2 million of the net proceeds from the sale of the Senior
Notes under the Escrow and Disbursement Agreement.
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"Registrar" means Marine Midland Bank, as registrar under the Indenture, or
any successor thereto appointed pursuant to the Indenture.
"Related Person" means any holder (or any Affiliate of such holder) of 5% or
more of any class of Capital Stock of the Company and any Affiliate of the
Company or any Restricted Subsidiary.
"Restricted Subsidiary" means any Subsidiary of the Company (including any
Subsidiary which has an outstanding Intercompany Note to the Company and each
newly acquired or newly formed Subsidiary of the Company) other than an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Corporation and its successors.
"Stated Maturity" is defined to mean, (i) with respect to any debt security,
the date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii)
with respect to any scheduled installment of principal of or interest on any
debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"Strategic Equity Investor" means any Person (and any Subsidiary of such
Person) that, both as of the Trading Day immediately before the day of such
sale and the Trading Day immediately after the day of such sale, has an Equity
Market Capitalization of at least $1.0 billion (or the Peso equivalent on the
day of such sale) and is engaged in the Telecommunications Business.
"Subordination Agreement" shall mean an agreement, which may be incorporated
into the terms of the respective Indebtedness, for the benefit of the Holders
of the Senior Notes to the effect that (i) the Indebtedness subject to such
Subordination Agreement is subordinated in right of payment to the Senior
Notes, (ii) in any bankruptcy, insolvency or similar proceeding with respect
to the respective obligor (or any guarantor) of such Indebtedness, no payment
shall be made thereon until the payment in full in cash of all principal,
interest and other amounts owing with respect to the Senior Notes, (iii) if
there is any default in any payment when due of principal of, premium on,
interest on or any other amount owing with respect to any Senior Notes, then
until all such payment defaults have been cured by the payment in full in cash
of the amounts then due, no payment shall be permitted to be made on the
Indebtedness subject to the Subordination Agreement and (iv) if any payments
are received by a holder of Indebtedness subject to a Subordination Agreement
in contravention of the provisions of the Subordination Agreement, such amount
shall be held for the benefit of, and shall be turned over to the Trustee for
the benefit of, the Holders of the Senior Notes.
"Subsidiary" is defined to mean, with respect to any Person, any
corporation, association or other business entity (i) of which outstanding
Capital Stock having at least a majority of the votes entitled to be cast in
the election of directors is owned, directly or indirectly, by such Person
and/or one or more other Subsidiaries of such Person, or (ii) of which at
least a majority of voting interest is owned, directly or indirectly, by such
Person and one or more other Subsidiaries of such Person.
"Subsidiary Guarantee" is defined as the Guarantee of a Subsidiary in favor
of the Trustee for the benefit of the Noteholders substantially in the form of
the Exhibit relating thereto to the Indenture.
"Tax" is defined to mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest, additions to tax and any
other liabilities related thereto).
"Taxing Authority" is defined to mean any government or political
subdivision or territory or possession of any government or any authority or
agency therein or thereof having power to tax.
"Telecommunications Business" means the development, ownership and/or
operation of one or more telephone, telecommunications or information systems
and/or the provision of telephony, telecommunications and/or information
services and any related, ancillary or complementary business, including,
without limitation,
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local and long distance telephony, telecommunications and other information
and transmission services such as the Internet.
"Trade Payables" means any accounts payable or other indebtedness or
monetary obligation to trade creditors created, assumed or Guaranteed by the
Company or any of its Restricted Subsidiaries arising in the ordinary course
of business in connection with the acquisition of goods or services.
"Trading Day," with respect to a securities exchange or automated quotation
system, means a day on which such exchange or system is open for a full day of
trading.
"Transaction Date" means, with respect to the incurrence of any Indebtedness
by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is incurred and, with respect to any Restricted Payment, the date
such Restricted Payment is made.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any
Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company), other than a Subsidiary that has given a
Subsidiary Guarantee or has Intercompany Notes outstanding, to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any Restricted
Subsidiary; provided that either (A) the Subsidiary to be so designated has
total assets of $10,000 or less or (B) if such Subsidiary has assets greater
than $10,000, that such designation shall be deemed to be at the time of such
designation the making of a Restricted Payment at the time of such designation
in an amount equal to the Investment in such Subsidiary subject to the
restrictions contained in the "--Limitation on Restricted Payments" covenant
described above. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary of the Company; provided that
immediately after giving effect to such designation (x) all Indebtedness of
such Subsidiary could be incurred under the "--Limitation on Indebtedness"
covenant described above and (y) no Default or Event of Default shall have
occurred and be continuing or result from such designation (treating all
outstanding Indebtedness of the Unrestricted Subsidiary as incurred at the
time of such designation). Any such designation by the Board of Directors
shall be evidenced to the Indenture Trustee by promptly filing with the
Indenture Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. GAAP" means, at any date of determination, generally accepted
accounting principles in the United States as then in effect.
"U.S. Government Securities" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the 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) 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.
"Wholly-Owned Subsidiary" means any Subsidiary of the Company, all of the
outstanding Capital Stock (other than directors' qualifying shares), or in the
case of a non-corporate Subsidiary, other equity interests having ordinary
voting power for the election of directors or other governing body of such
Subsidiary, of which is owned by the Company or another Wholly-Owned
Subsidiary of the Company or a combination thereof.
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TAXATION
The following is a discussion of certain Colombian and United States federal
income tax considerations associated with the exchange of Original
Certificates for Exchange Certificates and the ownership and disposition of
the Exchange Certificates by Exchange Certificateholders who acquire the
Exchange Certificates pursuant to the Exchange Offer. This discussion is based
upon existing Colombian and United States federal income tax law, which is
subject to change, possibly retroactively. This discussion does not describe
all aspects of Colombian or United States federal income taxation, but only
summarizes the material Colombian income tax consequences to Non-Colombian
Holders (as defined herein) and the material United States federal income tax
consequences to United States Holders (as defined herein) of exchange for,
ownership of and disposition of Exchange Certificates.
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. These laws and practices are subject to changes
subsequent to the date of this Prospectus and any such changes may be
retroactive.
As used herein in referring to Certificateholders, a "Non-Colombian Holder"
means: (i) a natural person who is neither a citizen nor a resident of
Colombia; (ii) a company or other legal entity that is not organized under the
laws of Colombia or any political subdivision thereof; and (iii) any other
person that is not subject to Colombian income tax on a net income basis in
respect of the Certificates.
As used herein in referring to Certificateholders, a "United States Holder"
means: (i) a natural person who is either a citizen or a resident of the
United States; (ii) a corporation, partnership or other legal entity organized
under the laws of the United States, any State thereof or the District of
Columbia; (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source; (iv) a trust (a) the
administration over which a United States court can exercise primary
supervision and (b) over which one or more United States persons have the
authority to control all substantial decisions; and (v) a person that for any
other reason is subject to United States federal income tax on a net income
basis in respect of the Exchange Certificates.
COLOMBIA
The consummation of the Exchange Offer will not be a taxable event for
Colombian tax purposes to the "Non-Colombian Holders."
UNITED STATES
In General
Under current law, the Trust will be classified as a grantor trust (and not
as an association taxable as a corporation) for United States federal income
tax purposes and each Exchange Certificateholder will be treated as the owner
of a pro rata undivided interest in the Senior Notes and any other property
owned by the Trust. Each Exchange Certificateholder will be required to report
on its United States federal income tax return its pro rata share of the
income from the Senior Notes and any other property owned by the Trust, in
accordance with the Exchange Certificateholder's method of accounting.
The following deals only with Exchange Certificates that are held as capital
assets by certain United States Holders, and does not address special aspects
of United States federal income taxation that may be applicable to Exchange
Certificateholders that are subject to special tax rules with respect to the
Exchange Certificates, such as dealers or traders in securities or currencies,
financial institutions, insurance companies, tax-exempt entities, persons
holding Exchange Certificates as a part of a "hedging," "conversion" or
"integrated" transaction or as a position in a straddle, or persons whose
"functional currency" is not the U.S. dollar. Moreover, this summary does not
address the federal United States income tax treatment of Exchange
Certificateholders that do not acquire Exchange Certificates in exchange for
Original Certificates that were acquired as part of the initial
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distribution at the initial issue price. 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 United States
federal income tax consequences different from those discussed below. This
summary does not discuss the potential impact of state and local taxes on an
Exchange Certificateholder by reason of its exchange of an Original
Certificate for an Exchange Certificate or its ownership of an Exchange
Certificate.
The Exchange
The exchange of Original Certificates for Exchange Certificates pursuant to
the Exchange Offer will not be a taxable event for United States federal
income tax purposes. Accordingly, an Exchange Certificateholder receiving
Exchange Certificates pursuant to the terms of the Exchange Offer will have
the same adjusted tax basis and holding period in Exchange Certificates, for
United States federal income tax purposes, as such Original Certificateholder
had in the Original Certificates tendered in exchange therefor.
Reporting of Interest Income
Each United States Holder of an Exchange Certificate will be required to
report interest (including any Additional Amounts) with respect to such
Exchange Certificate on its United States federal income tax return when such
interest is received or accrued by the Exchange Certificateholder, depending
upon its method of accounting. Such interest will be considered "foreign
source income" and, in general, "passive income" and, in the case of certain
United States Holders, "financial services income," for purposes of
calculating the Exchange Certificateholder's limitation on foreign tax
credits. In the case of an Exchange Certificateholder other than a
corporation, such interest income will, in general, also constitute
"investment income" for purposes of determining the deduction allowable for
investment interest.
In the event that Colombian income or remittance taxes are withheld with
respect to a payment by the Trust to a United States Holder, such Exchange
Certificateholder may deduct the amount of such taxes from its income, or,
alternatively, may, subject to generally applicable limitations, elect to
credit the amount of such taxes against its United States tax liability under
the foreign tax credit provisions of the Internal Revenue Code.
Payments of interest on an Exchange Certificate to a non-United States
Holder generally will not be subject to United States federal income tax,
provided that the Exchange Certificateholder provides the Pass Through Trustee
with the appropriate certificate to establish exemption from United States
withholding tax.
Sale, Exchange or Retirement
Upon the sale, exchange or retirement of an Exchange Certificate, a United
States Holder will recognize taxable gain or loss equal to the difference, if
any, between the amount realized on the sale, exchange or retirement and the
United States Holder's adjusted tax basis in such Certificate. A United States
Holder's adjusted tax basis in an Exchange Certificate generally will equal
the cost of the Original Certificate to the United States Holder of the
Original Certificate for which such Exchange Certificate was exchanged. Such
gain or loss generally will be capital gain or loss (except to the extent
attributable to accrued but unpaid interest that has not been included in
income, which will be taxable as ordinary income), and will be long-term
capital gain or loss if the Exchange Certificate has been held for more than
one year at the time of such sale, exchange or retirement, which holding
period will include the holding period of the Original Certificate. Under
legislation enacted in 1997, the top net capital gain tax rate for individual
taxpayers has been lowered from 28% maximum rate to 20% for property held for
more than 18 months (but remains at a maximum rate of 28% for property held
for more than one year, but not more than 18 months). The maximum net capital
gain tax rate for corporate taxpayers remains at 35%. Any gain realized on a
sale, exchange or retirement of an Exchange Certificate by a United States
Holder generally will be treated as United States source income.
Any gain realized by a non-United States Holder upon the sale, exchange or
retirement of an Exchange Certificate generally will not be subject to United
States federal income tax.
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United States Backup Withholding Tax and Information Reporting
A 31% backup withholding tax and information reporting requirements apply to
certain payments of principal of, and interest on, an obligation and to
proceeds of the sale or redemption of an obligation, to certain noncorporate
United States Holders. The payor will be required to withhold 31% of any such
payment within the United States on an Exchange Certificate to a United States
Holder (other than an "exempt recipient," such as a corporation) if such
United States Holder fails to furnish its correct taxpayer identification
number or otherwise fails to comply with, or establish an exemption from, such
backup withholding requirements. Payments of principal and interest to a non-
United States Holder will not be subject to backup withholding tax and
information reporting requirements if an appropriate certification is provided
by the Certificateholder to the payor and the payor does not have actual
knowledge that such certification is false.
Any such withheld amounts are allowed as a credit against the Exchange
Certificateholder's United States federal income tax liability and may entitle
the Exchange Certificateholder to a refund provided the required information
is furnished to the IRS. In addition, certain penalties may be imposed by the
IRS on an Exchange Certificateholder who is required to supply information but
fails to do so or does so in an improper manner.
PROSPECTIVE EXCHANGE CERTIFICATEHOLDERS OF THE EXCHANGE CERTIFICATES ARE
URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE PARTICULAR TAX CONSEQUENCES
OF EXCHANGING ORIGINAL CERTIFICATES FOR THE EXCHANGE CERTIFICATES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER
TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a plan
subject to Section 4975 of the Internal Revenue Code, including an entity
whose underlying assets are deemed to include assets of such an employee
benefit plan or plan (collectively, an "employee benefit plan"), considering
the purchase of Exchange Certificates must determine that the purchase of the
Exchange Certificates is consistent with its fiduciary duties under Title I of
ERISA and does not result in a non-exempt prohibited transaction under Section
406 of ERISA or Section 4975 of the Internal Revenue Code. "Prohibited
transactions" within the meaning of ERISA and Section 4975 of the Internal
Revenue Code may result if the Exchange Certificates are acquired by an entity
using the assets of an employee benefit plan with respect to which the Company
or certain of its affiliates is a "party in interest" or "disqualified
person", as defined in ERISA and Section 4975 of the Internal Revenue Code,
respectively, unless the Exchange Certificates are acquired pursuant to an
applicable exemption. In addition, under certain circumstances, investments in
the Exchange Certificates by employee benefit plans might result in assets of
the Trust being deemed to constitute "plan assets" subject to the regulatory
restrictions of ERISA. The level of investment by employee benefit plans in
the Exchange Certificates will not be monitored or restricted for purposes of
determining whether the assets of the Trust may be deemed to constitute such
"plan assets" or avoiding such status. In light of the foregoing
considerations, any employee benefit plan or other entity subject to Title I
of ERISA or Section 4975 of the Internal Revenue Code proposing to acquire the
Exchange Certificates should consult with legal counsel.
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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, as amended by
subsequent regulations, particularly Decree 1295 of 1996 (the "Foreign
Investment Statute") of the CONPES, and Resolution 21 of 1993 ("Resolution
21"), as amended by several resolutions issued by the Central Bank. The
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 with the exception of
defense, national security, the processing, disposal, and discharge of toxic,
hazardous, or radioactive waste not produced in Colombia, and real estate
companies; and (iii) automatic procedures: except in a limited number of
cases, foreign investors need not follow any special authorization procedure
to invest in Colombia.
Under Colombian law there are three types of foreign capital investment.
First, there is direct investment, which is defined as any contribution (i.e.,
cash and debt capitalization) made by a foreigner into the capital of an
existing or newly formed company in Colombia. Second, there are investments
involving any acts or contracts whereby a foreign investor makes a
contribution to a company without taking an equity position; provided that the
income derived by the foreign investor depends on the profits generated by the
Company, and third, portfolio investment, which is made through a foreign
capital investment fund for the acquisition of shares and other securities
traded on Colombian stock exchanges.
Resolution 21 established two distinct foreign exchange markets: (i) the
formal foreign exchange market, which is conducted through authorized
financial intermediaries (each an "Authorized Intermediary") and is subject to
the procedures established by Resolution 21, as amended, which requires
certain specified transactions to be carried out through such Authorized
Intermediaries; and (ii) the free market, which is available for all
transactions not required to be conducted through Authorized Intermediaries,
including the exchange of foreign currency relating to professional services,
donations and sales of goods and services to tourists.
Since October 1991, exchange rates have been freely set by the market.
External Resolution No. 5 of 1997 of the Central Bank (the "Resolution"),
dated May 20, 1997, introduced fundamental changes to the regulation of
foreign indebtedness in Colombia.
From May 20, 1997 until the law is modified or repealed, Colombian residents
who obtain credits denominated in foreign currencies must make a deposit with
the Central Bank, prior to each disbursement of funds. The requirement applies
to both private and public entities. The deposit must be for 30% of the value
of the funds to be disbursed, converted into Colombian pesos at the
Representative Market Rate on the date of the conversion. The term of the
deposit required is 18 months. The deposit requirement applies without regard
to the term of the credit, with limited exceptions. After 18 months, the
deposit will be returned at its nominal value in Colombian pesos, in other
words, without interest or adjustment for devaluation.
It is no longer necessary to register foreign credit agreements with the
Central Bank prior to disbursement. Instead, one must provide proof of having
made the required deposit to the Central Bank. The following credit operations
are exempted from the deposit requirement: (i) credits in foreign currency
intended to finance investment by Colombians outside of Colombia, or for
personal expenses using credit cards; (ii) credits in foreign currency granted
to finance exports, with a term of one year or less, by Authorized
Intermediaries using funds from BANCOLDEX (the Colombian Government Foreign
Trade Bank), up to a maximum limit of $550,000 or the equivalent in other
currencies; (iii) credit operations entered into by Authorized Intermediaries
with financial institutions outside of Colombia, for the purpose of
implementing the operations such Authorized Intermediaries are authorized to
perform; (iv) the granting of credit in foreign currency by Colombian
residents or Authorized Intermediaries to Colombian residents who are outside
of Colombia; such credit may be granted directly or using the funds of public
agencies which provide discounts; although it is not necessary to make the
deposit in such cases, one must inform the Central Bank; (v) the import
financing of certain specified capital goods (see below); and (vi) the
financing of imports for a value of less than $5,000 or the equivalent in
other currencies.
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The import financing of certain capital goods is exempt from the deposit
requirement. The list of capital goods to which this exemption applies has
been expanded by the Resolution, and exempted goods now include all goods
categorized as "machinery" or "equipment" in lists used by the Colombian
taxation authority and by INCOMEX (a Foreign Trade Governmental Agency).
Foreign credits obtained by the government of Colombia, the departments or
other territorial entities and other decentralized public agencies (except
those which are designated as foreign exchange intermediaries) are also
subject to the deposit requirement. The Resolution provides that the interest
rate on such credits may not exceed the maximum preferred interest rate in the
New York market plus 5%, or the London interbank rate for one month plus 3%.
Nevertheless, when the credit is granted by Authorized Intermediaries, the
interest rate may exceed this maximum by an amount not exceeding the
Authorized Intermediaries discount margin.
The Resolution provides that credits in foreign currency may be obtained by
the placement of securities in the international capital markets, prior to
making the required deposit, so long as the credits are among those authorized
by the Resolution.
Users of free trade zones who obtain financing for the purchase of
merchandise must also make the deposit whenever the value of the financing is
greater than $5,000 and the term of the financing is greater than six months
from the date of the shipment or waybill. If the financing is for the purchase
of capital goods which are exempted, the deposit is not required.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Certificates for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver this
Prospectus in connection with any resale of such Exchange Certificates. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer who holds Original Certificates 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 Exchange
Certificates received in exchange for Original Certificates. 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 , 1998, (90 days after the date of this Prospectus), all
dealers affecting transactions in the Exchange Certificates may be required to
deliver a prospectus.
The Company will not receive any proceeds from the exchange of Original
Certificates for Exchange Certificates by broker-dealers. Exchange
Certificates 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 Exchange Certificates 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 Exchange Certificates. Any
broker-dealer that resells Exchange Certificates that were received by it for
its own account pursuant to the Exchange Offer and any person that
participates in the distribution of such Exchange Certificates may be deemed
an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Certificates 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.
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ENFORCEMENT OF FOREIGN JUDGMENTS IN COLOMBIA
The courts of Colombia give effect to and enforce judgments of non-Colombian
courts through a process known as exequatur provided under Colombian law,
subject to the provisions of Articles 693 through 695 of the Colombian Code of
Civil Procedure. Such articles provide for enforcement by Colombian courts of
foreign judgments that are obtained without fraud and rendered after due
notice, provided that either (i) Colombia and the country where the foreign
judgment has been issued are parties to a treaty which recognizes the
enforceability of foreign judgments; or (ii) 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 (A) does not
relate to "in rem" rights vested in assets that were located in Colombia at
the time the suit was filed; (B) does not contravene any public policy laws or
regulations of Colombia, other than those governing judicial procedures; (C)
is a final judgment not subject to appeal in accordance with the applicable
foreign laws and an original certified copy of such judgment together with a
Spanish translation provided by an official translator, is filed with the
court; (D) does not refer to any matter upon which Colombian courts have
exclusive jurisdiction; (E) does not refer to any matter subject to a lawsuit
presently ongoing in Colombia or already decided by any court of Colombia; (F)
was obtained upon compliance with the applicable foreign laws relating to
service of process to the defendant, which compliance is presumed if the
judgment is final; and (G) is 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. The Company has been advised by Cavelier Abogados 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: (A)
evidence that a court in the State of Florida had accepted the validity of a
Colombian judgment in a certain case; and (B) 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 Exchange
Certificates or the Certificate Guarantee, 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 Cavelier Abogados 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.
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BOOK-ENTRY; DELIVERY AND FORM
GENERAL
The Original Certificates offered and sold in reliance on Regulation S under
the Securities Act were initially represented by a single, permanent Global
Certificate in definitive, fully registered book-entry form (the "Regulation S
Global Certificate") which was registered in the name of a nominee of DTC and
deposited on behalf of the purchasers of the Original Certificates 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 Original
Certificates 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 Certificate in definitive, fully registered book-
entry form (the "Rule 144A Global Certificate," and, together with the
Regulation S Global Certificate, the "Original Global Certificates") which was
registered in the name of a nominee of DTC and deposited on behalf of
purchasers of the Original Certificates 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. Except as set forth
below, the Exchange Certificates issued pursuant to the Exchange Offer will be
issued in global form (the "Exchange Global Certificates," and together with
the Original Global Certificates, the "Global Certificates").
GLOBAL CERTIFICATES
Upon the issuance of the Exchange Global Certificates, DTC or its custodian
will credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Exchange Global
Certificate 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 an Exchange Global Certificate 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 Exchange Global Certificates 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
Certificate, DTC or such nominee, as the case may be, will be considered the
absolute owner or holder of the Certificates represented by such Global
Certificate for all purposes under the Indenture and the Certificates, and the
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
Certificate. Owners of beneficial interests in a Global Certificate will not
be considered to be the owners or holders of any Certificates under the
Indenture or the Certificates.
In addition, no beneficial owner of an interest in a Global Certificate 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 Certificate 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 Certificate. Neither the Company nor the Pass Through
Trustee 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 Certificates 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 Certificate, 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 Certificate
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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
Certificate held through such Agent Members will 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 Certificateholder only at the direction of one or more Agent
Members to whose account the DTC interests in the Global Certificates is
credited and only in respect of such portion of the aggregate principal amount
of Certificates 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 Certificates 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 nor the Pass Through Trustee 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 CERTIFICATES
Interests in a Global Certificate will be exchangeable or transferable, as
the case may be, for Exchange Certificates issued in the form of registered
definitive certificates ("Certificated Certificates") if (i) DTC notifies the
Company that it is unwilling or unable to continue as depositary for such
Global Certificates, 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 Exchange Certificates and Exchange Certificateholders who
hold more than 25% in aggregate principal amount of the Exchange Certificates
at the time outstanding represented by the Global Certificates 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 Certificates
is no longer required. Upon the occurrence of any of the events described in
the preceding sentence, the Company will cause the appropriate Certificated
Certificates to be delivered.
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LEGAL MATTERS
Certain legal matters with respect to the Senior Notes and the Exchange
Certificate Guarantee offered hereby will be passed upon for the Company by
Cavelier Abogados, Colombia, with respect to matters of Colombian law.
Certain legal matters with respect to the Exchange Certificate Guarantee
offered hereby will be passed upon for the Company by Dewey Ballantine LLP,
New York, New York with respect to matters of United States law.
Certain matters of Delaware law relating to the validity of the Exchange
Certificates, the enforceability of the Trust Agreement and the creation of
the Transtel Pass Through Trust will be passed upon by Richards, Layton &
Finger, special Delaware counsel to the Company and the Issuer. Richards,
Layton & Finger is also serving as counsel to Wilmington Trust Company in
connection with the issuance of the Exchange Certificates.
EXPERTS
The Consolidated Financial Statements as of December 31, 1996 and September
30, 1997 and for each of the two years in the period ended December 31, 1996
and the nine months ended September 30, 1997 included in this Prospectus, have
been so included in reliance on the report of Price Waterhouse, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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GLOSSARY OF CERTAIN TELECOMMUNICATIONS TERMS
The following is a glossary of certain telecommunications terms appearing
elsewhere in this Prospectus.
Access Charges: The fees paid by IXCs to LECs for originating and
terminating long distance telephone calls on their local networks.
AIX Operating System: Refers to IBM's version of the UNIX operating system
to be used in conjunction with Transtel's Internet and voice mail platform.
ATM (Asynchronous Transfer Mode): A recently commercialized switching and
transmission technology that is one of a general class of packet technologies
that relay traffic by way of an address contained within the first five bits
of a standard fifty-three bit-long packet or cell. ATM switching was
specifically developed to allow switching and transmission of mixed voice,
data and video (sometimes referred to as "multimedia" information) at varying
rates. The ATM format can be used by many different information systems,
including LANs.
Broadband: Broadband communications systems can transmit large quantities of
voice, data and video by way of digital or analog signals. Examples of
broadband communications systems include DS-3 fiber-optic systems, which can
transmit 672 simultaneous voice conversations, or a broadcast television
station that transmits high-resolution audio and video signals into the home.
Broadband connectivity is also an essential element for interactive multimedia
applications.
CDMA (Code Division Multiple Access): A digital multiplexing scheme for
grouping/ungrouping numerous channels into a higher speed channel through code
division.
Central Offices: The switching centers or central switching facilities of
the LECs.
Centrex: Centrex is a service that offers features similar to those of a
Private Branch Exchange (PBX), except the equipment is located at the
carrier's premises and not at the premises of the customer. These features
include direct dialing within a given phone system, direct dialing of incoming
telephone calls, and automatic identification of outbound telephone calls.
This is a value-added service that carriers can provide to a wide range of
customers who do not have the size or the funds to support their own on-site
PBX.
DID (Direct Inward Dialing): Central Office service allowing for calls to be
made directly to the extension of a customer's PBX, without having to go
through an operator.
Digital: A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary code digits 0 and 1. Digital transmission and switching technologies
employ a sequence of these pulses to represent information as opposed to the
continuously variable analog signal. Digital transmission and switching
technologies offer a threefold improvement in speed and capacity over analog
techniques, allowing much more efficient and cost-effective transmission of
voice, video and data.
DS-O, E-1, E-3: Standard telecommunications industry digital signal formats,
which are distinguishable by bit rate (the number of binary digits (0 and 1)
transmitted per second). DS-O service has a bit rate of 64 kilobits per
second. E-1 service has a bit rate of 2 megabits per second and E-3 service
has a bit rate of 34 megabits per second.
EWSD: Brand name for Siemens digital switching system used in both private
and public telecommunications networks.
Fiber Optics: Fiber-optic cable is the medium of choice for the
telecommunications and cable industries. Fiber is immune to electrical
interference and environmental factors that affect copper wiring and satellite
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transmission. Fiber-optic technology involves sending laser light pulses
across glass strands in order to transmit digital information. A strand of
fiber-optic cable is as thick as a human hair yet has significantly greater
bandwidth capacity than copper cable, which is many times greater in size.
Fiber-Optic Ring Network: The Company has designed its networks in ring
configuration in order to ensure that, if one segment of a network is damaged
or cut, the traffic is simply re-routed and sent to its destination in the
opposite direction. The Company uses a "self-healing" optical fiber-ring
architecture in its networks.
Frame Relay: Frame relay is a high-speed data packet switching service used
to transmit data between computers. Frame Relay supports data units of
variable lengths at access speeds ranging from 56 kilobits to 1.5 megabits.
This service is ideal for connecting LANs, but is not appropriate for voice
and video applications due to the variable delays that can occur. Frame Relay
was designed to operate at higher speeds on modern fiber-optic networks.
HDSL (High Bit Rate Digital Subscriber Line): A modern technology typically
used for establishing T1/E1 trunk facilities between the Central Office and
the subscriber over copper cable facilities. HDSL modems utilize only a few
copper pairs to digitally transmit a large number of circuits.
IBM's Netview: A network management system for information systems which
monitors and controls the physical network elements including, among other
things, routers, access servers, bridges, hubs and servers.
IBM RS/6000: A scaleable hardware platform group based on open systems
architecture used in corporate information networks worldwide. The hardware
supports IBM's Unix.
IBM's Tivoli: A family of products (registered trademark of IBM) for network
computing management of the software and hardware elements of corporate
information networks. Examples of network management include centralized
backup, software distribution, hardware inventory management and other
functions.
ISDN (Integrated Services Digital Network): A switched digital service
allowing for the transmission of voice, data and/or video signals over the
public switched telecommunications network. Colombia utilizes the
international ISDN standard which allows for Basic Rate (two by kilobit
channels and one 16 kilobit data channel) over the same copper pairs used for
traditional telephone service, or Primary Rate (30 64 kilobit channels and one
16 kilobit data channel).
ISP (Internet Service Provider): An Internet service provider provides
customers with access to the Internet by linking its network directly or
through other ISPs to the Internet backbone network.
IXC (Interexchange Carriers): See Long Distance Carrier.
LANs (Local Area Network): Corporate node for client server applications
used for corporate communications.
LEC (Local Exchange Carrier): A company providing local telephone services.
Long Distance Carriers or IXCs (Interexchange Carriers): Long distance
carriers provide services between local exchanges. TELECOM is the sole
provider of these services and may offer service over its own facilities.
mHz: Megahertz.
Mode: An individual point of origination and termination of data on the
network transported using frame relay or similar technology.
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OSP (Outside Plant): Refers to the external network of a telecommunications
company which links subscribers to Central Office switching systems, and
Central Offices to each other. This includes the cable, splices, distribution
cabinets and terminals of both copper and fiber networks. The Outside Plant
technically ends at the cable vault of the Central Office. The rest of the
technologies in the Central Office are referred to as inside plant.
PBX (Private Branch Exchange): A switching system within an office building
which allows telephone calls from outside to be routed directly to the
individual instead of through a central number. The PBX also allows for
calling within an office by way of four-digit extensions. Centrex is a service
which can simulate this service from an outside switching source, thereby
eliminating the need for a large capital expenditure on a PBX.
PCS (Personal Communications Service): A type of wireless telephone system
that uses light, inexpensive handheld sets and communicates via low-power
antennas.
PDH (Plesiochronous Digital Hierarchy): Refers to a transmission signaling
standard. This is a more inflexible transmission scheme which is acceptable
for point to point.
POPs (Points of Presence): Locations where a long distance carrier has
installed transmission equipment in a service area that serves as, or relays
telephone calls to, a network switching center of that long distance carrier.
Private Line: A private, dedicated telecommunications connection between
end-use locations (excluding long distance carrier POPs).
Route Miles: The number of miles of the telecommunications path in which
fiber-optic cables are installed as it would appear on a network map.
SAT (Telecommunications Administration System): Brand name of C-NIX's
software. A software subscriber data base and administration system used for
inputting new service orders, assigning new, billing, installation and a range
of other functions critical to telephone operations.
SDH (Synchronous Digital Hierarchy): Refers to a transmission signaling
standard which allows for the multiplexing and demultiplexing of
telecommunications traffic at multiple points along a transmission path.
SPC (Stored Program Control): Stored program control switching systems
including both earlier analog and more recent digital systems.
STM (Synchronous Transfer Mode): Refers to the European signaling rates of
the SDH standard starting at STM 1 or 155 Megabits.
Switch: A sophisticated computer that accepts instructions from a caller in
the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits
or selects the path or circuits to be used for transmission of information.
Switching is a process of interconnecting circuits to form transmission path
between users. Switches allow local telecommunications service providers to
connect telephone calls directly to their destination, while providing
advanced features and recording connection information for future billing.
Switched Traffic: Telecommunications traffic along a switched network.
TDMA (Time Division Multiple Access): Refers to a multiplexing scheme for
grouping/ungrouping various circuits into higher speed facilities through the
division of these signals into digital time slots.
TMN (Telecommunications Management Network): Refers to an international
standard for integrated network management of all of the physical network
elements of a public telecommunications network. TMN software systems perform
such critical functions as: fault management; traffic management; customer
administration; billing; and work force management.
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ANNEX A
REPUBLIC OF COLOMBIA
The following information has been made public by the Republic of Colombia
and has not been prepared or independently verified by the Company or any of
its affiliates. 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
location of the Company's business and should not be viewed as reflective of
such region. The following information should be read in conjunction with the
information set forth under "Risk Factors--Colombian Political, Economic, and
Social Risks." Investors who wish to know more about Colombia are urged to
consult the wide variety of information available from public sources.
OVERVIEW
Since 1950, Colombia has enjoyed positive real economic growth in every year
(ranging from a low of 1.0% in 1982 to a high of 8.5% 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 22.3% between 1992 and 1996. Unlike other major Latin American
countries, Colombia did not 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.
In June 1994, Ernesto Samper Pizano, former Minister of Economic Development
in the previous administration of Cesar Gaviria and a former Senator, was
elected President of Colombia. President Samper proposed a four-year national
development plan, El Salto Social (The Social Leap), which was approved by the
Congress in June 1995. El Salto Social looked to continue the economic and
political reforms of the Gaviria administration's Apertura policy, under which
the Government removed restrictions on foreign investment, eliminated import
quotas and reduced tariffs, entered into free trade agreements with regional
trading partners, reduced foreign exchange controls, granted greater
independence to the Central Bank, encouraged private sector participation in
the management of pension system assets and began a privatization program with
respect to certain state-owned companies and financial institutions. At the
same time, El Salto Social aimed to secure the benefits of these reforms for a
larger segment of the population.
Under El Salto Social, the Government, among other measures, has set out to:
. Increase government expenditures directed toward the social sector,
including higher spending on health, education and job training programs
and the implementation of the Red de Solidaridad Social (Social
Solidarity Network), while maintaining current levels of expenditures on
defense and justice;
. Increase tax revenues by improving tax collections and reducing
exemptions;
. Improve and develop infrastructure by attracting private investment
through privatizations and concessions;
. Implement measures, together with the Central Bank, to reduce inflation,
including reaching agreement with labor and business to restrict wage and
price increases;
. Maintain competitiveness of the exchange rate by implementing measures,
in conjunction with the Central Bank (which is primarily responsible for
setting the foreign exchange rate policy), to limit short-term capital
inflows and an appreciation of the peso; and
. Strengthen domestic savings by developing the domestic capital market,
and carefully investing the proceeds from increased exports of oil in the
international markets.
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The Colombian government believes that a continuation of nearly balanced
public sector budgets and the policies outlined above, together with projected
growth in oil exports and other factors, should contribute toward continued
moderate real GDP growth over the medium term.
However, for the past two years, the fiscal deficit created by an increase
in public expenditures has resulted in an increase in interest rates from
19.46% in 1995 to 21.63% in 1996 and a slow down in the economy's growth.
Geography and Population
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.
In 1993, according to the census conducted in that year, Colombia's
population was 35.9 million, approximately 73% of whom lived in urban areas.
Over 6.3 million people live in the metropolitan area of Bogota, the capital
of Colombia. Cali and Medellin, the second and third largest cities, have
populations of approximately 1.95 million and 1.93 million, respectively. The
most important urban centers, with the exception of Barranquilla (the largest
port city), are located in the Andes range. The population grew at a rate of
2.2% per year from 1985 through 1993, down from approximately 3.1% per year in
the 1960s.
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 Partido Liberal (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 became a recognized political party at the end of the 1980s.
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 narcotics-related violence, and to enhance
control and supervision over public officials.
Foreign Affairs and International Organizations
Colombia has diplomatic ties with 154 countries. Colombia is a member of the
United Nations, the International Monetary Fund (the "IMF") and the
International Bank for Reconstruction and Development (the "World Bank"). In
October 1995, Colombia assumed the presidency of the Group of 77 (Non-Aligned
Nations). On the regional level, Colombia is a member of the Organization of
American States, the Inter-American Development Bank (the "IDB"), the
Caribbean Development Bank, the Latin American Economic System and the Andean
Development Bank. Colombia is also party to several trade and commodity
agreements, including the Andean Pact, the Latin American Integration
Association, the Union of Banana Exporting Countries, the International Sugar
Association, the General Agreement on Tariffs and Trade ("GATT") and the World
Trade Organization.
In 1992, a free-trade zone was formed with Venezuela which has increased
commercial trade and financial activity between these two neighboring
countries. Colombia also has free trade agreements with Ecuador and Bolivia,
and a free trade agreement with Chile which became effective on January 1,
1994. The Andean Pact, which is designed to create a five-nation free-trade
zone, was revived in December of 1991. Pursuant to this agreement, Colombia,
Venezuela, Peru, Ecuador and Bolivia have implemented common external tariffs
as of February 1, 1995.
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ECONOMY
Gross Domestic Product
Traditionally, agriculture has played a large role in the Colombian economy,
accounting for an estimated 18.6% of GDP in 1996 as compared to 17.9% of GDP
for industry. In 1996, agricultural activity increased by 0.2% in real terms
(despite a decrease in coffee production of 18.5%), industrial activity
increased by 2.9%, construction increased by 0.3%, and services increased by
4.7%. Between 1992 and 1996, GDP grew at an average annual rate of 4.7%. Real
GDP growth for 1996 was 2.1%, as compared with 5.4% in 1995, mainly as a
result of the strict monetary policy implemented in late 1994 to stabilize the
growth of aggregate demand and credit.
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>
1992 1993 1994(1) 1995(1) 1996(2)
---- ----- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Agriculture, Livestock, Fishing,
Forestry and Hunting
Coffee............................ (1.1)% (15.1)% (12.6)% 14.1 % (18.5)%
Other Agriculture and Livestock... (2.1) 6.6 3.2 4.4 3.0
Fishing, Forestry and Hunting..... 1.3 (2.4) (9.4) (0.2) (10.1)
Total Agriculture................. (1.8) 3.2 0.9 5.2 0.6
Industry
Coffee Processing................. 22.9 (16.9) (10.7) (18.3) 8.7
Manufacturing..................... 1.9 4.8 3.2 3.2 (3.9)
Total Industry.................... 4.5 1.6 1.6 1.0 (2.9)
Mining(3)........................... (3.9) (1.7) 1.6 17.8 7.6
Construction........................ 7.3 18.2 19.2 5.2 0.3
Services
Transportation and Storage........ 5.6 4.4 7.7 4.3 1.5
Communications.................... 4.5 4.0 (1.1) 12.6 16.1
Retail, Restaurants and Hotels.... 2.6 9.1 6.1 5.2 (0.4)
Financial Services................ 4.1 6.4 18.8 6.4 4.7
Housing........................... 2.9 4.0 6.1 2.0 3.2
Personal Services................. 1.1 2.9 6.5 7.0 7.1
Government........................ 12.5 0.2 2.7 7.8 10.9
Domestic Services................. 0.3 2.4 2.4 3.0 1.8
Utilities......................... (5.8) 14.0 6.2 6.1 2.8
Total Services.................... 4.7 5.0 7.5 5.7 4.7
Subtotal............................ 2.9 4.0 5.1 5.1 2.3
Minus: Imputed Banking Services..... (3.6) 13.8 16.2 10.0 9.2
Plus: Duties and Tariffs on
Imports............................ 36.7 48.2 26.0 11.8 2.8
Real GDP............................ 4.0 5.4 5.8 5.4 2.1
</TABLE>
- --------
(1) Preliminary.
(2) Estimated.
(3) Includes petroleum.
Source: DANE and DNP.
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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 trends in the composition of Colombia's
exports over the years indicated.
TRENDS IN THE COMPOSITION OF EXPORTS
1980-1996
<TABLE>
<CAPTION>
1980 1985 1990 1995(1) 1996(2)
-------------- -------------- -------------- --------------- ---------------
(MILLIONS OF DOLLARS AND PERCENTAGE OF TOTAL EXPORTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Exports (FOB):
Oil and its
Derivatives........... $ 101.0 2.4% $ 451.3 11.6% $1,951.0 28.0% $ 2,189.9 21.3% $ 2,900.0 27.4%
Coffee................. 2,360.5 55.8 1,745.5 45.2 1,399.2 20.1 1,841.0 17.9 1,579.4 14.9
Coal................... 10.7 0.3 126.3 3.3 544.8 7.8 593.2 5.7 880.9 8.3
Nickel and Gold(3)..... 310.0 7.3 420.0 10.9 521.0 7.5 357.9 3.5 376.5 3.6
Nontraditional
Exports(4)............ 1,444.3 34.2 1,118.7 29.0 2,550.8 36.6 5,305.6 51.6 4,845.3 45.8
-------- ----- -------- ----- -------- ----- --------- ----- --------- -----
Total Exports.......... $4,226.5 100.0% $3,861.8 100.0% $6,966.8 100.0% $10,287.6 100.0% $10,582.1 100.0%
======== ===== ======== ===== ======== ===== ========= ===== ========= =====
</TABLE>
- --------
(1) Preliminary.
(2) Estimated.
(3) Includes domestic purchases of gold by the Central Bank.
(4) Includes emeralds.
Source: The Central Bank--Economic Studies.
In 1996, exports are estimated to have increased by 2.9%, primarily due to
increased exports of oil and its derivatives attributable to increased
production from the Cusiana oil field and higher international oil prices, as
well as to increased exports of coal. Exports in 1996 are estimated to have
totaled approximately $10.6 billion, including oil and its derivatives (27.4%
of total exports), coffee (14.9% of total exports), coal (8.3% of total
exports), nickel and gold (3.6% of total exports) and nontraditional exports
(45.8% of total exports). In 1996, the volume of exports of crude oil
increased by 3.1% and the international price of Colombian crude oil increased
by 26.8%.
133
<PAGE>
The following table shows the composition of Colombia's exports for the
periods indicated.
EXPORTS (FOB) BY GROUPS OF PRODUCTS
<TABLE>
<CAPTION>
% OF TOTAL
1992 1993 1994 1995(1) 1996(1) 1996
-------- -------- -------- --------- --------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Mining
Oil and its
Derivatives.......... $1,395.6 $1,323.0 $1,318.2 $ 2,189.9 $ 2,900.0 27.4%
Coal.................. 555.4 567.0 552.8 593.2 880.9 8.3
Emeralds.............. 179.7 399.6 422.3 452.4 174.7 1.7
Nickel................ 125.1 101.9 118.8 184.8 172.2 1.6
Gold(2)............... 363.5 312.5 304.6 173.1 204.3 1.9
Platinum.............. 0.1 15.4 37.2 NA NA NA
Others(3)............. 17.4 14.4 18.6 NA NA NA
-------- -------- -------- --------- --------- -----
Total Mining............ $2,636.8 $2,733.8 $2,772.5 $ 3,593.4 $ 4,332.1 40.9%
Agriculture, Livestock,
Forestry and Fishing,
except Coffee.......... 1,095.6 1,062.7 1,239.0 955.2 1,003.1 9.5
Coffee.................. 1,258.9 1,139.7 1,990.5 1,841.0 1,579.4 14.9
Industry
Foods, Beverages and
Tobacco.............. 345.1 334.1 425.3 932.9 774.2 7.3
Textiles and
Apparel(4)........... 905.8 1,042.8 1,033.9 1,096.0 951.0 9.0
Wood and its
Derivatives.......... 18.7 18.9 13.8 10.7 20.2 0.2
Paper and its
Byproducts........... 184.0 198.5 214.1 254.7 222.9 2.1
Chemicals............. 389.8 441.0 544.8 898.6 964.7 9.1
Non-metallic
Minerals............. 105.0 109.5 119.5 55.0 65.3 0.6
Iron and Steel
Industries........... 101.7 90.8 126.1 122.9 130.2 1.3
Machinery and
Equipment............ 152.5 155.9 164.0 292.8 324.0 3.1
Other Industries(5)... 69.8 101.3 110.3 234.4 215.0 2.0
-------- -------- -------- --------- --------- -----
Total Industry.......... $2,272.4 $2,492.8 $2,751.8 $ 3,898.0 $ 3,667.5 34.7%
-------- -------- -------- --------- --------- -----
Total Exports......... $7,263.7 $7,429.0 $8,753.8 $10,287.6 $10,582.1 100.0%
======== ======== ======== ========= ========= =====
</TABLE>
- --------
(1) Estimated.
(2) Includes domestic purchases of gold by the Central Bank.
(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.
Imports (FOB) increased by 17.0% in 1995 and 1.3% in 1996, due to a lowering
of tariffs and an appreciation of the peso in real terms. In 1996, imports
(FOB) are estimated to have totaled $13.7 billion, basically unchanged from
their level in 1995. Imports (FOB) of consumer goods are estimated to have
fallen by 4.1%, while imports of raw materials and intermediate goods are
estimated to have increased by 6.2% and imports of capital goods are estimated
to have fallen by 9.0%, from 1995 to 1996. Consumer goods are estimated to
have comprised 18.7%, raw materials and intermediate goods 47.8%, and capital
goods 33.5% of total imports (FOB) in 1996.
134
<PAGE>
The level of imports will continue to be affected by the opening of the
Colombian economy. The following table shows the composition of Colombia's
major imports for the periods indicated.
IMPORTS (CIF)
<TABLE>
<CAPTION>
% OF TOTAL
1992 1993 1994 1995(1) 1996(1) 1996
-------- -------- --------- --------- --------- ----------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Consumer Goods
Non-Durable........... $ 439.4 $ 676.7 $ 1,010.0 $ 1,252.9 $ 1,440.4 10.5%
Durable............... 473.0 1,138.7 1,325.0 1,418.6 1,120.6 8.2
-------- -------- --------- --------- --------- -----
Total Consumer Goods.. $ 912.4 $1,815.4 $ 2,335.0 $ 2,671.5 $ 2,561.0 18.7%
Raw Materials and
Intermediate Goods
Fuels(2).............. $ 344.3 $ 351.9 $ 322.0 $ 396.1 $ 412.7 3.0%
Agricultural.......... 297.2 228.4 296.0 338.1 481.3 3.5
Industrial............ 2,941.7 3,589.6 4,180.0 5,420.3 5,644.1 41.3
-------- -------- --------- --------- --------- -----
Total Raw Materials
and Intermediate
Goods................ $3,583.2 $4,169.9 $ 4,798.0 $ 6,154.5 $ 6,538.1 47.8%
Capital Goods
Construction
Materials............ $ 67.4 $ 119.4 $ 194.0 $ 259.3 $ 320.8 2.4%
Agricultural.......... 35.7 51.4 73.0 70.5 63.7 0.5
Industrial............ 1,490.5 2,237.5 2,723.0 3,394.6 3,200.1 23.4
Transportation........ 574.3 1,426.4 1,751.0 1,302.8 989.8 7.2
-------- -------- --------- --------- --------- -----
Total Capital Goods... $2,167.9 $3,834.7 $ 4,741.0 $ 5,027.2 $ 4,574.4 33.5%
-------- -------- --------- --------- --------- -----
Unclassified............ $ 5.3 $ 2.2 $ 9.0 -- -- NA
-------- -------- --------- --------- --------- -----
Total................... $6,668.8 $9,822.2 $11,883.0 $13,853.2 $13,673.5 100.0%
======== ======== ========= ========= ========= =====
</TABLE>
- --------
NA means not available
(1) Preliminary.
(2) Includes oil derivatives and coal.
Source: DANE
The United States is Colombia's most important trading partner. During the
first ten months of 1996, trade between the two countries accounted for
approximately 40% of Colombia's total trade (exports and imports). During the
first ten months of 1996, Venezuela was Colombia's second largest trading
partner, accounting for a further 8.3% of total trade. A key component of the
Apertura program of reforms involved reducing trade barriers by fostering
economic integration with other countries. The Samper administration has
continued former President Gaviria's policies of promoting bilateral and
multilateral trade agreements with regional trading partners.
From 1991 to 1996, growth in exports occurred mainly with countries that are
members of the Andean Pact--primarily Venezuela, Peru and Ecuador. Exports to
Venezuela have grown from $443 million in 1991 to $772 million in 1996.
Similarly, exports to Peru have grown to $610 million in 1996 from $213
million in 1991 and exports to Ecuador have grown to $420 million in 1996 from
$127 million in 1991. Imports from the Andean Pact countries have also
increased 271% from $482 million in 1991 to $1,791 million in 1996.
DIRECT FOREIGN INVESTMENT
Foreign investment in Colombia was traditionally directed towards the oil
and mining sectors. Previously, investment in sectors such as public services
was prohibited, and investments in the financial sector were limited to no
more than 49% foreign ownership of financial institutions. As part of the
Apertura process, the Gaviria administration enacted reforms designed to make
foreign investment in Colombia more attractive, such as the
135
<PAGE>
adoption of a legislative framework that ensures equal treatment of foreign
and local investors and foreign access to traditionally restricted economic
sectors.
The following table sets forth information on net foreign investment by
sector (excluding petroleum) for the periods indicated below.
NET DIRECT FOREIGN INVESTMENT BY SECTOR(1)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996(2)
---- ---- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Petroleum....................................... $440 $557 $ 825 $ 721 $1,101
Agriculture and Fishing......................... 5 13 12 30 26
Mining.......................................... 76 6 26 110 46
Manufacturing................................... 70 198 365 577 653
Public Services................................. 0 0 6 8 145
Construction.................................... 19 19 33 32 22
Commerce........................................ 19 31 81 132 151
Transportation and Communications............... 7 6 157 217 156
Finance(3)...................................... 154 159 701 441 959
Social Services................................. 0 1 2 9 11
Others.......................................... 0 3 6 8 1
---- ---- ------ ------ ------
Total........................................... $790 $993 $2,214 $2,285 $3,271
==== ==== ====== ====== ======
</TABLE>
- --------
Totals may differ due to rounding.
(1) Net foreign investment registered with the Central Bank, less remittances
of capital. The figures provided in this table represent the amount
officially registered for foreign investment with the Central Bank. In
contrast, the figures provided in the "Balance of Payments" table reflect
the amount actually invested in Colombia.
(2) Preliminary.
(3) Includes portfolio investment of $61 million in 1992, $44 million in 1993,
$588 million in 1994, $243 million in 1995 and $245 million in 1996.
Source: The Central Bank.
MONETARY SYSTEM AND MONETARY AGGREGATES
The Central Bank was chartered in 1923. Following ratification of the new
Constitution in 1991, the Central Bank was granted greater independence from
the government in the formulation of monetary policy.
Monetary and exchange rate policy is set by the Central Bank'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 expirations 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 the Central Bank, is
elected by the other six members. Unless all seven members of the Board of
Directors vote to do so, the Central Bank may not finance the government's
budget deficits, and the Central Bank is prohibited from making loans to the
private sector (except to provide liquidity to the financial system or for
intermediation of foreign indebtedness).
136
<PAGE>
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>
1992......................................... 25.1% 17.9% 26.7%
1993......................................... 22.6 13.2 25.8
1994......................................... 22.6 20.7 29.4
1995......................................... 19.5 15.4 32.3
1996......................................... 21.6 14.5 31.1
January..................................... 20.2 17.7 32.5
February.................................... 20.8 17.4 33.1
March....................................... 20.2 16.3 33.6
April....................................... 19.9 14.6 33.6
May......................................... 19.8 14.6 32.1
June........................................ 19.7 13.0 32.1
July........................................ 20.6 13.8 32.4
August...................................... 21.1 14.0 30.4
September................................... 21.6 14.4 28.4
October..................................... 21.9 15.5 28.7
November.................................... 21.9 15.0 28.5
December.................................... 21.6 14.5 28.0
1997
January..................................... 20.6 12.7 26.5
February.................................... 19.6 12.2 25.4
March....................................... 18.9 14.0 25.5
April....................................... 18.5 14.9 24.7
May......................................... 18.6 14.9 23.6
June........................................ 18.7 17.1 23.2
July........................................ 17.9 15.5 23.2
August...................................... 18.0 15.3 23.0
</TABLE>
- --------
(1) For the annual periods, percentage change over the twelve months ending
December 31 of each year; for monthly periods in 1996, percentage change
over the previous twelve months at end of each month indicated.
(2) Average for each of the years 1992-1996, and for each month in 1996, of
the short-term composite reference rate (Depositos a Termino Fijo
("DTF")), as calculated by the Superintendency of Banks.
Source: Superintendencia Bancaria y Banco de la Republica.
FOREIGN EXCHANGE RATES
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
the Central Bank.
In February 1994, the Central Bank instituted a mechanism, which consists of
a 15% band within which the exchange rate is allowed to fluctuate. The Central
Bank intervenes by selling or purchasing its debt securities in order to
maintain the exchange rate within the 15% band. Such a band is allowed to
depreciate by small amounts to meet an annual target devaluation rate. In
December 1994, the Central Bank narrowed the band to 14%, shifted
137
<PAGE>
the band downward by 7% and increased the rate at which it devalues the band
to meet an annual target devaluation rate of 13.6% for 1995. The band was set
to reflect a projected devaluation rate, in nominal terms, of 13.6% for 1996,
and 15.0% for 1997.
During the second half of 1996, the peso appreciated in relation to the
dollar, recovered its value and ended the year at the bottom of the exchange
rate band. During the first six months of 1997, the devaluation rate kept a
stable pace and the rate kept within the lower half of the band. For 1997, the
Government estimates a depreciation of the peso against the dollar of 15% in
nominal terms (a 1.3% appreciation in real terms), very similar to the
targeted depreciation of 13.6% in nominal terms for 1996.
INTERNATIONAL RESERVES
As of December 31, 1996, net international reserves were $9.9 billion,
representing coverage of approximately nine months of imports of goods and
approximately six months of imports of goods and services. Net international
reserves increased by $1.6 billion, or 18.9%, from December 31, 1995 to
December 31, 1996.
The following table shows the composition of international reserves of the
Central Bank at each of the dates indicated.
<TABLE>
<CAPTION>
1992 1993(1) 1994(2) 1995(2) 1996(2)
-------- -------- -------- -------- --------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Gross International Reserves:
Monetary Gold.................. $ 172.2 $ 118.5 $ 111.9 $ 103.2 $ 95.7
Special Drawing Rights......... 47.9 158.1 169.9 176.6 176.3
Andean Pesos................... 20.0 20.0 20.0 20.0 20.0
Foreign Exchange............... 7,231.4 7,346.0 7,453.4 7,733.7 9,185.6
Others(3)...................... 256.5 289.8 348.2 423.8 462.6
-------- -------- -------- -------- --------
Total........................ $7,728.0 $7,932.4 $8,103.4 $8,457.3 $9,940.2
Less: Short and Medium-term
Liabilities of Banco de la
Republica....................... 14.8 63.3 101.1 132.9 43.6
-------- -------- -------- -------- --------
Net International Reserves....... $7,713.2 $7,869.1 $8,002.3 $8,324.4 $9,896.6
======== ======== ======== ======== ========
Reserves (Months of Imports
(FOB))
Goods.......................... 15.4 10.4 8.7 7.9 9.3
Goods and Services............. 8.8 6.8 5.7 5.1 5.8
</TABLE>
- --------
NA means not available
(1) 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 $254 million at December 31, 1993.
(2) Preliminary.
(3) Includes deposits in Latin American Reserve Fund and Andean Reserve Fund
and compensation agreements.
Source: The Central Bank.
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, 1996 was
138
<PAGE>
$16.4 billion. As of June 30, 1997 the total market capitalization was $19.6
billion (an increase of 34.3% from the same period in 1996, when it reached
$14.6 million).
The total value of securities traded on the three Colombian stock exchanges
during 1996 was Ps36,615 billion (approximately $36.6 billion), representing
nominal growth of 42% over the value of securities traded in 1995. 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.
139
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets at December 31, 1996 and September 30, 1997... F-3
Consolidated Statements of Income for the Years Ended December 31, 1995
and 1996 and the Nine Months Ended September 30, 1997.................... F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 1995 and 1996 and the Nine Months Ended September 30,
1997..................................................................... F-5
Consolidated Statements of Changes in Financial Position for the Years
Ended December 31, 1995 and 1996 and the Nine Months Ended September 30,
1997..................................................................... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995 and 1996 and the Nine Months Ended September 30, 1997............... F-7
Notes to the Consolidated Financial Statements............................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Transtel S.A.
We have audited the accompanying consolidated balance sheets of Transtel
S.A. and its subsidiaries as of December 31, 1996 and September 30, 1997, and
the related consolidated statements of income, of changes in shareholders'
equity, of changes in financial position and of cash flows for each of the two
years in the period ended December 31, 1996 and for the nine months ended
September 30, 1997, all expressed in constant Colombian pesos of September 30,
1997 purchasing power. 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, which are substantially consistent with those in the
United States of America. 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 consolidated financial statements audited by us present
fairly, in all material respects, the financial position of Transtel S.A. and
its subsidiaries at December 31, 1996 and September 30, 1997, and the results
of their operations, the changes in their financial position and their cash
flows for each of the two years in the period ended December 31, 1996 and for
the nine months ended September 30, 1997, in conformity with generally
accepted accounting principles in Colombia, applied on a consistent basis
except for the change in depreciation method discussed in Note 7.
Accounting principles generally accepted in Colombia, as described in Notes
2 and 3 to the financial statements, vary in certain significant respects from
accounting principles generally accepted in the United States of America. The
application of the latter would have affected the determination of
consolidated net income expressed in constant Colombian pesos of September 30,
1997 purchasing power for each of the two years in the period ended December
31, 1996 and for the nine months ended September 30, 1997, and the
determination of consolidated shareholders' equity also expressed in constant
Colombian pesos of September 30, 1997 purchasing power at December 31, 1995
and 1996 and September 30, 1997 to the extent summarized in Note 28 to the
consolidated financial statements.
/s/ Price Waterhouse
Cali, Colombia
January 30, 1998
F-2
<PAGE>
TRANSTEL S.A.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, ---------------------------
1996 1997 1997
------------ ------------- -------------
(THOUSANDS OF PESOS (THOUSANDS OF
OF SEPTEMBER 30, 1997 DOLLARS
PURCHASING POWER UNAUDITED
--NOTE 2) --NOTE 3)
<S> <C> <C> <C>
ASSETS
Current
Cash................................ Ps13,399,275 Ps 4,790,137 $ 3,843
Short-term and temporary investments
(Note 4)........................... 5,136,620 16,265,179 13,051
Accounts receivable, net (Note 5)... 9,646,540 23,085,800 18,524
Inventories (Note 6)................ 288,764 640,819 514
Prepaid expenses.................... 161,391 263,669 212
------------ ------------- --------
Total current assets.............. 28,632,590 45,045,604 36,144
Noncurrent
Accounts receivable (Note 5)........ 1,525,510 2,530,945 2,031
Properties, plant and equipment, net
(Note 7)........................... 26,173,513 67,756,645 54,368
Deferred monetary correction........ 475,609 1,430,937 1,148
Deferred charges (Note 8)........... 12,957,590 22,610,679 18,143
Long-term investments (Note 4)...... 38,040 10,485,398 8,413
Other assets ....................... 114,984 145,329 117
Reappraisal of assets (Note 9)...... 14,111,848 15,171,888 12,174
------------ ------------- --------
Total assets...................... Ps84,029,684 Ps165,177,425 $132,538
============ ============= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt (Note 11)........... Ps10,721,725 Ps -- $ --
Current portion of long-term debt
(Note 11).......................... 6,619,094
Current portion of capital lease ob-
ligations (Note 16)................ 63,476 552,353 443
Accounts payable (Note 12).......... 3,405,904 6,248,296 5,014
Tax liabilities (Note 13)........... 815,025 1,553,102 1,246
Labor liabilities (Note 14)......... 130,040 323,573 260
Other liabilities................... 209,393 6,977,530 5,599
------------ ------------- --------
Total current liabilities......... 21,964,657 15,654,854 12,562
Long-term liabilities
Long-term debt (Note 11)............ 24,393,607 60,361,630 48,434
Capital lease obligations (Note
16)................................ 978,252 787,060 632
Deferred monetary correction........ 757,571 2,860,917 2,296
Deferred income taxes and other lia-
bilities (Note 15)................. 71,258 1,097,226 880
------------ ------------- --------
Total liabilities................. 48,165,345 80,761,687 64,804
------------ ------------- --------
Minority interest (Note 17)........... 17,047,065 33,380,596 26,784
------------ ------------- --------
Commitments (Note 26)
Shareholders' equity (Note 18):
Common stock, Ps1 par value, 50
billion shares
authorized; 5,039,801,222 shares
issued and
outstanding (4,000,000,000 in
1996).............................. 6,215,516 37,087,240 29,759
Retained earnings................... 4,000,606 4,853,353 3,894
Surplus from reappraisal of assets.. 8,601,152 9,094,549 7,297
------------ ------------- --------
Total shareholders' equity........ 18,817,274 51,035,142 40,950
------------ ------------- --------
Total liabilities and sharehold-
er's equity...................... Ps84,029,684 Ps165,177,425 $132,538
============ ============= ========
Memorandum accounts (Note 10)......... Ps30,433,656 Ps 63,440,336 $ 47,962
============ ============= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
TRANSTEL S.A.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ---------------------------
1995 1996 1997 1997
---------------- ---------------- ------------ -------------
(THOUSANDS OF
DOLLARS,
(THOUSANDS OF PESOS OF SEPTEMBER 30, 1997 UNAUDITED
PURCHASING POWER -- NOTE 2) --NOTE 3)
<S> <C> <C> <C> <C>
Revenues (Note 19)...... Ps 2,359,089 Ps 11,560,208 Ps17,639,937 $14,154
--------------- ---------------- ------------ -------
Costs and expenses:
Operating costs (Note
20).................. 682,938 2,456,985 3,997,957 3,208
Administrative ex-
penses (Note 21)..... 355,025 3,738,216 4,858,282 3,898
Marketing expenses
(Note 22)............ 86,207 758,171 983,405 789
--------------- ---------------- ------------ -------
1,124,170 6,953,372 9,839,644 7,895
--------------- ---------------- ------------ -------
Operating income.... 1,234,919 4,606,836 7,800,293 6,259
--------------- ---------------- ------------ -------
Nonoperating income (ex-
penses)
Financial income (Note
23).................. 314,756 850,863 3,165,178 2,540
Financial expenses
(Note 23)............ (283,836) (2,205,025) (7,057,629) (5,663)
Other................. 48,130 319,803 (1,422,411) (1,141)
--------------- ---------------- ------------ -------
79,050 (1,034,359) (5,314,862) (4,264)
--------------- ---------------- ------------ -------
Net monetary inflation
adjustment income
(loss) (Note 24)....... (61,284) 2,224,628 2,845,640 2,283
--------------- ---------------- ------------ -------
Income before income
taxes and minority
interest............... 1,252,685 5,797,105 5,331,071 4,278
Income tax expense (Note
15).................... (362) (319,388) (2,087,115) (1,675)
--------------- ---------------- ------------ -------
Income before minority
interest............. 1,252,323 5,477,717 3,243,956 2,603
Minority interest....... (500,603) (2,228,831) (2,391,209) (1,919)
--------------- ---------------- ------------ -------
Net income (loss)... Ps 751,720 Ps 3,248,886 Ps 852,747 $ 684
=============== ================ ============ =======
Earnings (loss) per
share (in single Pesos
and single Dollars per
share)................. Ps 0.33 Ps 0.81 Ps 0.22 $ --
=============== ================ ============ =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
TRANSTEL S.A.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
TWO YEARS ENDED DECEMBER 31, 1996 AND NINE MONTHS ENDED SEPTEMBER 30, 1997
(THOUSANDS OF PESOS OF SEPTEMBER 30, 1997 PURCHASING POWER--NOTE 2, EXCEPT
SHARES)
<TABLE>
<CAPTION>
SURPLUS FROM TOTAL
COMMON SHARES RETAINED REAPPRAISAL SHAREHOLDERS'
OUTSTANDING EARNINGS OF ASSETS EQUITY
------------------------ ----------- ------------ -------------
NUMBER
(NOTE 18) AMOUNT
----------- ------------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994................... 2,000,000 Ps 3,374,333 Ps -- Ps -- Ps 3,374,333
Shares issued for cash.. 2,000,000 2,841,183 2,841,183
Net income.............. 751,720 751,720
--------- ------------ ----------- ----------- ------------
Balance at December 31,
1995................... 4,000,000 6,215,516 751,720 6,967,236
Net income.............. 3,248,886 3,248,886
Increase during the
year................... 8,601,152 8,601,152
--------- ------------ ----------- ----------- ------------
Balance at December 31,
1996................... 4,000,000 6,215,516 4,000,606 8,601,152 18,817,274
Shares issued for cash.. 1,039,801 30,871,724 30,871,724
Net income.............. 852,747 852,747
Increase during the pe-
riod................... 493,397 493,397
--------- ------------ ----------- ----------- ------------
Balance at September 30,
1997................... 5,039,801 Ps37,087,240 Ps4,853,353 Ps9,094,549 Ps51,035,142
========= ============ =========== =========== ============
</TABLE>
Retained earnings balances consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
--------- ----------- -------------
<S> <C> <C> <C>
Legal reserve........................... Ps -- Ps 75,172 Ps 399,922
Reserve for future construction......... 676,548 676,698
Reserve for future acquisitions......... 3,248,886 2,923,986
Unappropriated retained earning......... 751,720 852,747
--------- ----------- -----------
Ps751,720 Ps4,000,606 Ps4,853,353
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
TRANSTEL S.A.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------- FOR THE NINE MONTHS
1995 1996 ENDED SEPTEMBER 30, 1997
---------------- ---------------- -------------------------
(THOUSANDS OF PESOS OF SEPTEMBER 30, 1997 (THOUSANDS
PURCHASING POWER--NOTE 2) OF
DOLLARS,
UNAUDITED
--NOTE 3)
<S> <C> <C> <C> <C>
Sources of working
capital:
Net income............ Ps 751,720 Ps 3,248,886 Ps 852,747 $ 684
Items that do not
utilize (provide)
working capital:
Depreciation......... 308,809 222,452 431,275 346
Amortization......... 3,831 1,025,476 1,616,138 1,297
Deferred income
taxes............... 960,985 771
Allowance for
properties, plant
and equipment....... 47,351 38
Gain on sale of
properties, plant
and equipment....... (8,496) (197,868)
Minority interest.... 500,602 2,231,121 2,391,209 1,919
Net inflation
adjustment from
non-current balance
sheet account....... 41,775 (2,023,900) (2,763,549) (2,217)
Deferred monetary
correction, net..... 290,947 (45,558) (178,637) (143)
---------------- ---------------- ------------- --------
Working capital
provided by
operations........... 1,889,188 4,460,609 3,357,519 2,695
---------------- ---------------- ------------- --------
Financial resources
generated otherwise:
Sales proceeds from
properties, plant
and equipment....... 14,725 2,748,662
Increase in debt..... 11,760,795 12,632,802 35,968,023 28,861
Capital lease
obligations......... 978,252 (191,192) (153)
Increase in other
liabilities......... 64,983 52
Investment by
minority interest... 8,952,146 15,200,397 12,197
Shares issued for
cash................ 2,841,183 30,871,724 24,771
---------------- ---------------- ------------- --------
23,568,849 16,359,716 81,913,935 65,728
---------------- ---------------- ------------- --------
Total financial
resources
generated......... 25,458,037 20,820,325 85,271,454 68,423
---------------- ---------------- ------------- --------
Financial resources
utilized:
Acquisitions of
properties, plant
and equipment....... (24,466,977) (7,638,979) (43,704,947) (35,069)
Increase in deferred
charges............. (4,445,181) (6,771,102) (10,897,187) (8,744)
Increase in long-
term investments.... (25,497) (12,543) (10,447,358) (8,383)
Increase in other
assets.............. (1,197) (108,321) (30,345) (24)
Non-current accounts
receivable.......... (1,525,510) (1,005,435) (809)
Decrease in accounts
payable............. (93,490)
Decrease in other
liabilities......... (24,960) (61,529)
---------------- ---------------- ------------- --------
(29,057,302) (16,117,984) (66,085,272) (53,029)
---------------- ---------------- ------------- --------
Effect of revaluing
to constant pesos.... 1,798,947 1,823,503 3,536,635 2,839
---------------- ---------------- ------------- --------
Increase (decrease)
in working
capital........... Ps (1,800,318) Ps 6,525,844 Ps 22,722,817 $ 18,233
================ ================ ============= ========
Changes in working
capital components:
Cash.................. Ps 694,545 Ps 12,698,639 Ps (8,609,138) $ (6,908)
Short-term and
temporary
investments.......... (2,071,470) 5,126,820 11,128,559 8,929
Accounts receivable... 3,928,066 5,639,299 13,439,260 10,784
Inventories........... 350,134 (61,369) 352,055 282
Prepaid expenses...... 116,097 45,294 102,278 83
Short-term debt....... (1,734,159) (8,987,561) 10,721,725 8,603
Short-term and current
portion of long-term
debts................ (846,276) (5,772,817) 6,619,094 5,311
Current portion of
capital lease
obligations.......... (63,476) (488,877) (392)
Accounts payable...... (1,881,103) (1,337,803) (2,842,392) (2,281)
Tax liabilities....... (193,877) (596,103) (738,077) (592)
Labor liabilities..... (51,816) (76,919) (193,533) (155)
Other liabilities..... (110,459) (88,160) (6,768,137) (5,431)
---------------- ---------------- ------------- --------
Increase (decrease)
in working
capital........... Ps (1,800,318) Ps 6,525,844 Ps 22,722,817 $ 18,233
================ ================ ============= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
TRANSTEL S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------- FOR THE NINE MONTHS
1995 1996 ENDED SEPTEMBER 30, 1997
--------------- ---------------- --------------------------
(THOUSANDS OF PESOS OF SEPTEMBER 30, 1997 (THOUSANDS
PURCHASING POWER--NOTE 2) OF DOLLARS,
UNAUDITED
--NOTE 3)
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............. Ps 751,720 Ps 3,248,886 Ps 852,747 $ 684
Adjustments to
reconcile net income
with net cash
Provided by
operations:
Depreciation.......... 308,809 222,452 431,275 346
Amortization.......... 3,831 1,025,476 1,616,138 1,297
Deferred income
taxes................ 960,985 771
Allowance for
property, plant and
equipment............ 47,351 38
Gain on sales of
properties, plant
and equipment........ (8,496) (197,868)
Minority interest..... 500,602 2,231,121 2,391,209 1,919
Net inflation
adjustment from
balance sheet
Accounts............. 26,599 (2,099,388) (2,809,295) (2,254)
Deferred monetary
correction, net...... 290,947 (45,558) (178,637) (143)
Changes in operating
assets and
liabilities:
Accounts receivable... (3,928,066) (7,164,810) (14,444,695) (11,590)
Inventories........... (334,958) 136,859 (311,427) (250)
Prepaid expenses...... (116,097) (45,294) (102,278) (82)
Deferred charges...... (4,445,181) (6,771,104) (10,897,187) (8,744)
Other assets.......... (26,694) (120,864) (30,345) (24)
Accounts payable...... 1,787,614 1,337,803 2,842,392 2,281
Labor liabilities..... 51,816 76,919 193,533 155
Tax liabilities....... 193,877 596,103 738,077 592
Other liabilities..... 85,500 26,629 6,833,120 5,483
--------------- ---------------- ------------- --------
Net cash (used for)
provided by
operating
activities......... (4,858,177) (7,542,638) (11,867,037) (9,521)
--------------- ---------------- ------------- --------
Cash flows from
investing activities:
Acquisition of
properties, plant and
equipment............. (15,514,832) (6,575,674) (28,109,072) (22,555)
Sales of properties,
plant and equipment... 14,723 2,748,662
Purchases of
investments........... (7,697,555) (16,443,288) (56,969,252) (45,711)
Proceeds from
sale/maturity of
short-term
investments........... 9,769,025 11,316,467 35,398,453 28,403
--------------- ---------------- ------------- --------
Net cash used by
investing
activities......... (13,428,639) (8,953,833) (49,679,871) (39,863)
--------------- ---------------- ------------- --------
Cash flows from
financing activities:
Issuance of debt....... 18,989,426 47,583,344 105,393,150 84,567
Repayments of debt..... (4,648,195) (20,190,156) (86,765,946) (69,621)
Shares issued for
cash.................. 2,841,183 30,871,724 24,771
Repayments of capital
lease obligations..... (21,578) (97,793) (80)
--------------- ---------------- ------------- --------
Net cash provided by
financing
activities......... 17,182,414 27,371,610 49,401,135 39,637
--------------- ---------------- ------------- --------
Effect of revaluing to
constant pesos......... 1,798,947 1,823,503 3,536,635 2,839
--------------- ---------------- ------------- --------
Net (decrease) increase
in cash............... 694,545 12,698,642 (8,609,138) (6,908)
Cash at beginning of
period................ 6,088 700,633 13,399,275 10,752
--------------- ---------------- ------------- --------
Cash at end of year.... Ps 700,633 Ps 13,399,275 Ps 4,790,137 $ 3,844
=============== ================ ============= ========
Supplemental disclosure
of cash flows
information:
Cash paid during the
year for:
Interest............... Ps 1,306,204 Ps 7,309,259 Ps 8,094,082 $ 6,495
=============== ================ ============= ========
Income taxes........... Ps 1,092 Ps 1,993 Ps 2,309,044 $ 1,853
=============== ================ ============= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THOUSANDS OF PESOS OF SEPTEMBER 30, 1997 PURCHASING POWER--NOTE 2, UNLESS
OTHERWISE SPECIFIED)
NOTE 1--REPORTING ENTITY
Transtel S.A. (hereafter, Transtel S.A. and its subsidiaries are referred to
as the "Company" or "Transtel") was created under Colombian law on August 23,
1993 for a term expiring on August 23, 2023; this term may be extended by an
amendment of the Company's bylaws.
The Company's business consists of the design, installation, operation and
ownership of fixed telephony networks in various areas of Colombia.
To date, Transtel has grown through the formation of subsidiaries with
municipalities as their minority shareholders. Transtel contributed cash
(except in the case of Caucatel where Transtel's contribution consisted of
cash and equipment) to each subsidiary in exchange for a majority ownership.
In exchange for a minority ownership position in the subsidiary, the relevant
municipality either (i) transferred its currently owned telecommunications
infrastructure along with its cooperation in various forms, including the
provision of its demographic information and the required civil works permits
on an expedited basis, or (ii) where such current infrastructure does not
exist, contributed nominal cash and demographic information and permits
cooperation only. Once the subsidiary structure is in place, Transtel then
focuses on expanding the subscriber base and either upgrading the current
infrastructure or building a new infrastructure, as the case may be.
As of September 30, 1997, Transtel has formed six operating subsidiaries as
shown in the following chart:
<TABLE>
<CAPTION>
PERCENT
DATE DATE COMMERCIAL OWNED BY
SUBSIDIARY AREA SERVED INCORPORATED OPERATIONS BEGAN TRANSTEL
---------- ----------- ------------ ---------------- --------
<S> <C> <C> <C> <C>
Empresa de Telefonos de
Jamundi S.A.,E.S.P.
("TeleJamundi")........ Jamundi 9/29/93 6/1/97 70%
Unitel S.A. E.S.P.
("Unitel")............. Yumbo 3/11/94 6/1/97 90
Empresa de Telefonos de
Palmira S.A., E.S.P. Palmira and
("TelePalmira")........ Candelaria 5/31/95 9/1/95 60
Telefonos de Cartago
S.A., E.S.P.
("TeleCartago")........ Cartago 1/3/97 4/1/97 65
Caucatel S.A., E.S.P.
("Caucatel")........... Popayan 4/30/97 5/1/97 51
Bugatel S.A., E.S.P.
("Bugatel")............ Buga 6/16/97 7/1/97 60
</TABLE>
In addition to the above subsidiaries, Transtel formed TeleCauca S.A. E.S.P.
as a 98% owned subsidiary on December 27, 1996; however, it has had no
operations to date.
As of September 30, 1997, Transtel S.A. had no significant operations or
assets except for its investments in its subsidiaries. Transtel S.A. was in
the preoperating stage until September 1, 1995.
TeleJamundi and Unitel were formed by Transtel S.A. contributing cash of
Ps24,412 and Ps75,515 respectively. The municipalities of Jamundi and Yumbo
contributed Ps10,462 and Ps18,879 in cash for their minority interests in
TeleJamundi and Unitel, respectively, as these municipalities did not own
existing telephony systems.
TelePalmira was formed by Transtel S.A. contributing cash of Ps13,428,217
for a 60% interest and the municipality of Palmira contributing a portion of
its telephony system with a fair value of Ps8,952,144 for a 40% minority
interest. Concurrently, TelePalmira purchased the remaining assets of
Palmira's telephony system for Ps12,085,411 in cash.
F-8
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During the nine months ended September 30, 1997, Transtel S.A. acquired the
telephony operations of the municipalities of Cartago, Popayan and Buga. The
acquisitions were effected by Transtel S.A. forming subsidiaries with the
municipalities having a minority interest as follows:
<TABLE>
<CAPTION>
TRANSTEL S.A. MUNICIPALITY
--------------------------- ---------------------------
OWNERSHIP OWNERSHIP
INVESTMENT PERCENTAGE INVESTMENT PERCENTAGE
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
TeleCartago......... Ps4,301,569(/1/) 65% Ps2,316,229(/3/) 35%
Caucatel............ 7,990,270(/2/) 51 7,676,927(/4/) 49
Bugatel............. 6,171,633(/1/) 60 4,114,422(/3/) 40
---------------- ----------------
Ps18,463,472 Ps14,107,578
================ ================
</TABLE>
- --------
(/1/) Cash invested by Transtel S.A.
(/2/) Cash of Ps1,061,104 and equipment with a cost of Ps6,929,166 were
contributed by Transtel S.A.
(/3/) Portions of the telephony systems of Cartago and Buga were contributed to
the subsidiaries and recorded at estimated fair value.
(/4/) The entire telephony system of Popayan was contributed to the subsidiary
and recorded at estimated fair value.
Upon formation, TeleCartago and Bugatel paid the municipalities of Cartago
and Buga Ps8,940,873 and Ps5,194,459 respectively, in cash for the portion of
their telephony systems not contributed in exchange for stock in the related
subsidiary. Transtel financed these acquisitions by borrowing Ps14,135,332
from banks.
Separate financial information of the municipalities' telephony operations
prior to the acquisitions by the Company does not exist and thus no pro forma
statement of income is included herein for any of the above acquisitions.
See Note 27 for the acquisition of the telephony operations of the
municipality of Girardot on December 31, 1997.
NOTE 2--BASIS OF FINANCIAL STATEMENT PRESENTATION
Consolidation
Companies in Colombia must keep their accounting records and prepare their
financial statements in conformity with rules prescribed by the Government of
Colombia. These are considered by law to be accounting principles generally
accepted in Colombia ("Colombian GAAP"). Consolidated financial statements in
Colombia include the subsidiaries in which the Company owns, directly or
indirectly, more than 50% of the common stock. All of the Company's
subsidiaries are consolidated, eliminating intercompany accounts and
transactions.
Inflation accounting
The consolidated financial statements, as required by law, have been
adjusted for the effects of inflation on the basis of changes in the official
Colombian middle-income consumer price index ("MCPI"). This index is applied,
on a one-month lagging basis, to nonmonetary assets and liabilities,
shareholders' equity (excluding the surplus from reappraisal of assets) and
revenue and expense accounts. Monetary balances have not been adjusted because
they reflect the purchasing power of the currency at the date of the balance
sheet. The Company's management considers that the application of the one-
month lagging basis in the inflation adjustments does not deviate materially
from the calculation performed on a current-month basis.
F-9
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The adjusted costs of the non-monetary assets may not exceed the net
realizable value of the assets.
The exposure to inflation is reflected in each non-monetary item of the
consolidated financial statements. The net gain or loss from exposure to
inflation is reflected as "Net monetary inflation adjustment income (loss)" in
the consolidated statements of income. The individual components of the
consolidated statements of income have been adjusted to reflect the effect of
inflation during the year. The net effect of inflation during the year on
these revenue and expense components is recorded as a portion of the "Net
monetary inflation adjustment income (loss)" account.
Accordingly, the "Net monetary inflation adjustment income (loss)" shown in
the income statement of the Company is the result of netting or offsetting the
following items:
A. A credit (or income entry) for inflation affecting non-monetary
assets;
B. A charge (or expense entry) for inflation affecting non-monetary
liabilities and shareholders' equity; and
C. Charges and credits (for expense and income entries) representing
inflation adjustments made to expenses and revenues, respectively. Since
monetary inflation adjustments are offset in the net monetary inflation
adjustment account in the statement of income, the net effect on net income
from the expense and income inflation adjustments is zero. The inflation
adjustments to revenue and expenses are included in the individual revenue
and expense captions in the income statement.
Because expense and revenue inflation adjustments net to zero, the only
impact on the consolidated statement of income of the effects of inflation is
attributable to the restatement of non-monetary assets and liabilities and
shareholders' equity accounts.
The financial statements for 1995 and 1996 have been restated to constant
pesos of purchasing power of September 30, 1997. The constant pesos amounts
have been determined by applying an index derived from the MCPI to the nominal
amounts reflected in the statutory financial statements prepared under
Colombian GAAP. The indexes applied to the nominal financial statements data
for 1995 and 1996 were 1.393 and 1.141, respectively. Some components of the
statements of cash flows, of changes in financial position and of changes in
shareholders' equity were restated using average indexes of 1.8476 and 1.25765
for 1995 and 1996, respectively.
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies and procedures are described
below:
Inventories
Inventories of materials, cables, spare parts and other supplies are stated
at the lower of average cost adjusted for inflation or market.
Properties, plant and equipment
The amounts recorded for telecommunications equipment and networks that were
contributed to subsidiaries by municipalities and minority interest are valued
at estimated fair value of the equipment and networks and are in proportion to
the cash or fair value of assets contributed to the subsidiaries by Transtel
since the historical book value records of these municipalities are non-
existent or unreliable. If reliable historical book value amounts are
available for future acquisitions, the Company will record the acquisitions at
the municipalities' historical book value plus Transtel's portion of the
excess of fair value over that book value. Other purchases from municipalities
are recorded at amounts payable in cash. Subsequently, these assets are
adjusted for inflation.
F-10
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Other properties, plant and equipment are recorded at historical cost
adjusted for the effects of inflation. Sales and retirements of these assets
are removed at their net inflation-adjusted cost, and differences between sale
proceeds and net inflation-adjusted cost were recorded as gains or losses,
according to each case.
Disbursements for additions to and substantial improvements of assets are
capitalized and adjusted for inflation. Interest costs incurred during the
construction period are capitalized. Maintenance and repair expenditures are
expensed as incurred.
Depreciation is calculated on the basis of the cost of assets, adjusted for
inflation, over their estimated useful lives as follows:
<TABLE>
<CAPTION>
LIFE IN YEARS
-------------
<S> <C>
Buildings...................................................... 20
Office equipment............................................... 10
Computer and communications equipment.......................... 5
Telecommunication equipment.................................... 20
External telephony networks.................................... 20
</TABLE>
Prior to January 1, 1996, the Company used the straight-line method of
depreciation. As of January 1, 1996, TelePalmira changed to the reverse sum of
the years method of depreciation, a method acceptable in Colombia. All other
operating subsidiaries also use this method.
Allowance for doubtful accounts
The allowance for doubtful accounts is reviewed and updated at the end of
each year on the basis of evaluations of collectibility based on agings of
customer receivables and management's judgment. Uncollectible balances are
periodically charged against the allowance account.
Deferred charges
Items recorded as deferred charges include disbursements for software,
leasehold improvements, organization costs, preoperating expenses until
Transtel S.A. and each subsidiary commences commercial operations, costs of
market and demand studies and investigations, costs related to several
acquisitions and bond issuance costs. In addition, the Company has recorded as
deferred charges interest on the financing of its investments in its
subsidiaries until their commercial operations commence.
These deferred costs are adjusted for inflation with a credit to "Deferred
monetary correction," a liability, and, concurrently, the inflation adjustment
of the part of shareholders' equity used to finance such costs is deferred by
a debit to an asset account "Deferred monetary correction". All deferred
costs, except bond issuance costs, and expenses arising from monetary
correction are amortized over five years from the time when the studies and
investigations are completed or when commercial operations begin. Bond
issuance costs will be amortized over the life of the bonds.
Reappraisal of assets
Reappraisals of properties, plant and equipment, which increase
shareholders' equity are calculated as the excess of appraised values of
properties, plant and equipment (as periodically established by independent
appraisers) over their net adjusted book values. The initial reappraisal was
recorded in 1996. Such reappraisal
F-11
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
amounts are not depreciated. A provision charged to results should be recorded
when appraisals are lower than the net adjusted book value of properties,
plant and equipment.
Translation of foreign currency transactions and balances
Foreign currency transactions and balances are translated into Colombian
pesos at the representative market exchange rate. This representative rate for
the United States dollar in Colombian nominal pesos was Ps987.65, Ps1,005.33
and Ps1,246.27 per $1 at December 31, 1995, December 31, 1996 and September
30, 1997, respectively. Foreign exchange differences are recognized as
financial income or expense. The only foreign currency balances were
borrowings from financial entities of $15,171,541 (Ps17,402,995) at December
31, 1996 and $30,091,000 (Ps37,501,510) at September 30, 1997, certificates of
deposits of Ps2,010,660 ($2,000,000) and Ps2,492,540 ($2,000,000) at December
31, 1996 and September 30, 1997, respectively, and prepayments and advances of
Ps537,540 ($431,300) at September 30, 1997.
Labor liabilities
Labor liabilities are adjusted at the end of each accounting period by
reference to legal provisions and labor agreements in force.
The Social Security Institute of Colombia has the responsibility for the
pension liability for employees of the Company. The Company and its employees
are required to contribute monthly to a pension fund based on a percentage of
salaries.
Under Colombian labor regulations, employees are entitled to receive one
month's salary for each year of service. The Company contributes these amounts
within 30 days of its year end to a fund established by each employee.
Recognition of revenues, costs and expenses
Revenues for telephone services are recognized in the period during which
the services are provided. Revenues from settlement of traffic for national
and international long distance calls are recognized on a net basis and are
based on estimates of traffic volume and rates. Certain revenues subject to
final settlement are not recorded until realization is probable. Revenues for
connection fees for telephone lines are recognized upon payment in cash or the
execution of a promissory note (with a 10% down payment) by the customer and
the Company's assignment of a telephone number which is transferable to others
by the customer. Actual connection with a dial tone takes place within a day
to approximately three months depending on the customer's location in relation
to the buildout of the system. Costs and expenses are recorded on the accrual
basis.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Subsequent resolution of some matters
could differ from those estimates.
Income tax
The tax provision includes tax resulting from timing differences and other
expenses deductible for tax purposes which differ from recorded expenses for
financial statement purposes. The tax benefit or expense relating to such
timing differences is recorded in deferred income tax asset or liability
accounts.
F-12
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Memorandum accounts
Items recorded as memorandum accounts include guarantees, remaining payments
on lease agreements and assets given as collateral. Contingent
responsibilities mainly represent the amounts of promissory notes payable from
connection fees sold to financial institutions with recourse to the Company,
which are not collected yet. Memorandum accounts called fiscal accounts are
also recorded for differences between financial statement data and data for
income tax purposes. Nonmonetary memorandum accounts are adjusted for
inflation, with a charge or credit to reciprocal memorandum accounts.
Statement of cash flows
For purposes of reporting cash flows, cash and cash equivalents are defined
as cash and highly liquid debt instruments with an original maturity of three
months or less. The statements of cash flows are prepared substantially in
conformity with generally accepted accounting principles in the United States
("U.S. GAAP").
During 1995 and the nine months ended September 30, 1997, the Company
recorded non-cash transactions for properties, plant and equipment and
minority interest of Ps8,952,144 and Ps14,107,578, respectively, related to
the acquisitions of the telephony assets of municipalities. Additionally the
Company recorded non-cash transactions for land and capital lease obligations
of Ps1,063,307 in 1996.
Earnings per share
Earnings per share are computed by dividing net income applicable to common
shares by the weighted average number of subscribed and paid shares
outstanding for each year presented. Transtel's weighted average number of
shares used in the computation of earnings per share was 2,294,444,444 and
4,000,000,000 in 1995 and 1996, respectively, and 4,231,066,938 for nine
months ended September 30,1997
Convenience translation to U.S. dollars (unaudited)
Transtel maintains its accounting records and prepares its financial
statements in Colombian pesos ("Pesos"). The U.S. dollar ("Dollar") amounts
presented in the financial statements and accompanying notes have been
translated from the Peso figures solely for the convenience of the reader, at
the exchange rate of 1,246.27 Pesos per Dollar, which approximates the
exchange rate which existed at September 30, 1997. Such translation should not
be construed as representations that the Peso amounts represent, or have been
or could be, converted into Dollars at that or any other rate.
NOTE 4--INVESTMENTS
Short-term and temporary investments consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Temporary investment--100% of the shares of
Gonzalo Caicedo Toro & Cia. S.C.S. (a
shareholder), at cost (see Note 25)............ Ps2,657,890 Ps --
Certificates of deposits........................ 2,478,730 7,602,011
Trust fund investment........................... 8,663,168
----------- ------------
Ps5,136,620 Ps16,265,179
=========== ============
Long-term investments consisted of the following:
Certificate of deposits......................... Ps -- Ps10,426,008
Other investments............................... 38,040 59,390
----------- ------------
Ps 38,040 Ps10,485,398
=========== ============
</TABLE>
F-13
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On August 31, 1996, the Company received 100% of the shares of Gonzalo
Caicedo Toro & Cia. S.C.S. ("GCT & Cia.") from Mr. Gonzalo Caicedo Toro, a
shareholder of the Company, for Ps2,657,890 in payment of the Company's net
advances to him (see Notes 5 and 25). GCT & Cia. owns 6% of the Company and an
interest in Colombina S.A., a candy manufacturer in Colombia. The Company
pledged the shares of GCT & Cia. as collateral for certain of its borrowings.
On July 21, 1997, the Company sold the shares in GCT & Cia. to Mr. Caicedo for
cash equal to the price paid by the Company. Since the Company's ownership of
GCT & Cia. was temporary, the investment has been recorded at cost as a
temporary investment at December 31, 1996.
Certificates of deposits earned interest at rates between 18% and 20% in
1995, 25% and 30% in 1996, and 20% and 22% in 1997.
The investment in the trust fund earned interest rate of 21% in 1997.
NOTE 5--ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Customers....................................... Ps5,794,032 Ps10,523,209
Prepayments and advances........................ 5,286,694 13,418,123
Employees....................................... 37,669 23,726
Other receivables............................... 65,999 1,673,617
----------- ------------
11,184,394 25,638,675
Less--Allowance for doubtful accounts........... (12,344) (21,930)
----------- ------------
11,172,050 25,616,745
Less--Noncurrent portion-customers.............. (1,525,513) (2,530,945)
----------- ------------
Ps9,646,537 Ps23,085,800
=========== ============
Receivables from subscribers at December 31, 1996 and September 30, 1997
include Ps4,207,844 and Ps6,284,435, respectively, for connection fees
represented by promissory notes payable over up to 36 months, of which
Ps1,727,345 and Ps4,308,556, respectively, were subsequently sold to financial
institutions with recourse to the Company.
NOTE 6--INVENTORIES
Inventories consisted of the following:
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Materials....................................... Ps -- Ps 274,080
Cables.......................................... 114,368 166,016
Spare parts..................................... 167,882 138,266
Other........................................... 6,514 62,457
----------- ------------
Ps 288,764 Ps 640,819
=========== ============
</TABLE>
F-14
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--PROPERTIES, PLANT AND EQUIPMENT, NET
Properties, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Land............................................ Ps 1,579,412 Ps 3,502,257
Construction in progress........................ 1,447,080 12,555,849
Buildings....................................... 2,364,315 4,230,590
Office equipment and other...................... 514,008 889,918
Communications equipment........................ 256,284 747,898
Telecommunications equipment.................... 12,021,498 25,792,107
Vehicles........................................ 251,830
External telephony networks..................... 8,545,932 20,690,358
------------ ------------
26,728,529 68,660,807
Less--Accumulated depreciation.................. (555,016) (904,162)
------------ ------------
Ps26,173,513 Ps67,756,645
============ ============
</TABLE>
Land at December 31, 1996 and September 30, 1997 includes Ps1,154,084
capitalized under capital leases (see Note 16).
Depreciation expense for the years ended December 31, 1995 and 1996 amounted
to Ps308,809 and Ps222,452, respectively, and Ps431,275 for the nine months
ended September 30, 1997. As of January 1, 1996, TelePalmira changed to the
reverse sum of the years method of computing depreciation which had the effect
of decreasing 1996 depreciation and increasing 1996 income before income taxes
and minority interest by Ps914,548 and increasing 1996 net income by Ps548,728
(0.14 single Pesos per share). There is no income tax benefit since TelePamira
was exempt from income taxes in 1996.
Land and buildings at December 31, 1996 and September 30, 1997 include real
estate purchased by the Company in 1996 from Mr. Gonzalo Caicedo Toro, a
shareholder, for Ps84,341 and Ps1,627,160, respectively (see Note 25). The
Company plans to use this property in the near future for its expansion
program.
NOTE 8--DEFERRED CHARGES
Deferred charges consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Software....................................... Ps 354,668 Ps 452,920
Leasehold improvements and other............... 493,922 344,531
Organization costs............................. 16,889 84,644
Preoperating expenses.......................... 2,848,004 3,273,803
Market and demand studies and investigations... 2,883,165 2,772,543
Interest costs of investments in subsidiaries.. 7,390,246 14,935,496
Senior Notes issuance costs.................... 563,623
Acquisitions costs............................. 1,036,073
Other.......................................... 383,488
------------ ------------
13,986,894 23,847,121
Less--Accumulated amortization................. (1,029,304) (1,236,442)
------------ ------------
Ps12,957,590 Ps22,610,679
============ ============
</TABLE>
F-15
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9--REAPPRAISAL OF ASSETS
Reappraisal of certain assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Reappraisal of properties, plant and equipment.. Ps14,111,844 Ps15,171,888
Less--Reappraisal related to minority
interest..................................... (5,510,692) (6,077,339)
------------ ------------
Total reappraisal of assets recorded in share-
holders' equity................................ Ps 8,601,152 Ps 9,094,549
============ ============
</TABLE>
NOTE 10--MEMORANDUM ACCOUNTS
Memorandum accounts consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Debit fiscal (tax) accounts..................... Ps 645,728 Ps 552,439
Credit fiscal (tax) accounts.................... 619,086 515,616
Contingent responsibilities..................... 3,521,470
Remaining payments on lease agreements.......... 5,808,288 1,248,827
Guarantees of Global's purchase agreements (see
Note 26)....................................... 22,907,039 24,511,702
Assets given as collateral...................... 33,090,282
Other........................................... 453,515
------------ ------------
Ps30,433,656 Ps63,440,336
============ ============
</TABLE>
NOTE 11--DEBT
On October 28, 1997, the Company received the net proceeds from the sale of
$150 million of its 12 1/2% Senior Notes due 2007. These Senior Notes were
sold to a trust which issued certificates representing pro rata interests in
the Senior Notes to qualified institutional buyers in the United States of
America or non-U.S. persons outside the United States. Interest on the Senior
Notes will be due on May 1 and November 1, commencing May 1, 1998.
A portion of the net proceeds of the 12 1/2% Senior Notes due 2007 was used
to pay all existing short and long-term debt existing at October 28, 1998. The
following debt tables reflect the reclassifications of short-term debt and the
current portion of long-term debt as long-term at September 30, 1997 (see Note
27).
The indenture of the Senior Notes imposes certain limitations on the ability
of the Company and its subsidiaries to, among other things, incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, issue preferred stock, merge or consolidate with any other person
or sell, assign, transfer, lease, convey, or otherwise dispose of all or
substantially all of the assets of the Company and its subsidiaries.
F-16
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Short-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Bank overdrafts................................ Ps 3,797,299 Ps 5,521,245
Borrowings from financial entities
Denominated in Dollars....................... 9,770,757
Denominated in Pesos......................... 6,386,318 9,334,247
Letters of credit.............................. 95,848
Other.......................................... 442,260
------------ -------------
Total short-term debt before refinancing..... 10,721,725 24,626,249
Less--Amounts refinanced with 12 1/2% Senior
Notes due 2007................................ (24,626,249)
------------ -------------
Total short-term debt.......................... Ps10,721,725 Ps --
============ =============
</TABLE>
Approximately Ps1,797,074 and Ps4,645,524 of short-term debt at December 31,
1996 and September 30, 1997, were respectively, secured by assets of Mr.
Gonzalo Caicedo Toro, a shareholder of the Company.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Borrowings from financial entities
Denominated in Dollars................... Ps17,402,998 Ps27,730,753
Denominated in Pesos..................... 13,609,703 8,004,628
------------ ------------
31,012,701 35,735,381
Less--Current portion of long-term debt.... (6,619,094) (/1/)
------------ ------------
Total long-term debt................... 24,393,607 35,735,381
Add--Short-term debt refinanced with 12
1/2% Senior Notes due 2007................ 24,626,249
------------ ------------
Ps24,393,607 Ps60,361,630
============ ============
</TABLE>
- --------
(/1/) Absent the refinancing, Ps3,319,722 of the long-term debt would have been
current.
Included in long-term borrowings from financial entities are Ps19,712
million and Ps906,041 million at December 31, 1996 and September 30, 1997,
respectively, which were secured by assets of Mr. Caicedo (see Note 25).
Additionally, approximately Ps20,833,079 and Ps7,228,365 of long-term debt at
December 31, 1996 and September 30, 1997, respectively, is guaranteed by Mr.
Caicedo.
Borrowings of $6,518,262 and $6,151,000 at December 31, 1996 and September
30, 1997, respectively, were secured by plant, equipment and telephony lines
with a cost of Ps9,716,568 and Ps9,995,132, respectively.
F-17
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--ACCOUNTS PAYABLE
Accounts payable consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Accrued interest expense........................ Ps 777,266 Ps 999,916
Accrued costs and expenses...................... 100,220 814,402
Trade current accounts.......................... 806,647
Empresa Nacional de Telecomunicaciones--long
distance....................................... 483,867 2,807,419
Suppliers and trade............................. 2,023,325 819,912
Shareholder (see Note 25)....................... 21,226
----------- -----------
Ps3,405,904 Ps6,248,296
=========== ===========
</TABLE>
NOTE 13--TAX LIABILITIES
Tax liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Income tax withholdings........................... Ps 281,593 Ps 181,282
Value-added tax payable........................... 223,463 307,065
Income taxes payable.............................. 213,955 1,064,543
Other............................................. 96,014 212
---------- ------------
Ps 815,025 Ps 1,553,102
========== ============
</TABLE>
NOTE 14--LABOR LIABILITIES
Labor liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Salaries payable.................................. Ps -- Ps 816
Accrued severance compensation.................... 75,214 218,380
Interest on severance compensation................ 7,903 22,931
Accrued vacation.................................. 46,923 81,446
---------- ----------
Ps 130,040 Ps 323,573
========== ==========
</TABLE>
NOTE 15--INCOME TAX
Consolidated income tax returns are not permitted in Colombia. The effective
statutory income tax rate for Transtel S.A. was 35% for 1995, 1996 and 1997.
Transtel's taxable income is presumed to be not less than the greater of 5%
(4% in 1995) of shareholders' equity for tax purposes at the end of the
immediately preceding year or 1.5% of gross assets for tax purposes at the end
of the immediately preceding year; however, operating companies (Transtel's
subsidiaries) are not subject to presumpted income tax.
In accordance with Law 142 of 1994 and Law 223 of 1995, entities which
render basic residential telephony services and which are mixed capital
companies (i.e., companies with both public and private capital such as the
F-18
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's subsidiaries) are exempt in 1995 and partially exempt from the
payment of income taxes for a term of seven years from 1996 with respect to
profits which are retained for upgrade, expansion or replacement of telephone
systems. These companies are exempt from taxes on 100% of income related to
basic telephony services for 1995 and 1996; thereafter the exemption reduces
by 10 percentage points each taxable year through 2000 and then reduces by 20
percentage points in 2001 and 2002. After 2002, there is no exemption.
In July 1997, Law 383 of 1997 established that dividends declared from
companies similar to Transtel's subsidiaries and paid to government entities
are not taxable. As there is not a similar exclusion for private investors
such as Transtel S.A, the Company expects that future dividends declared to
Transtel S.A. will be taxable to it. At September 30, 1997, deferred income
taxes calculated on Transtel S.A.'s distributable portion of net income earned
by its subsidiaries through that date amounted to Ps960,985, which is included
in deferred income taxes and other long-term liabilities.
The following is a reconciliation of taxable income before taxes and
minority interest for the years ended December 31, 1995 and 1996 and the nine
months ended September 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
Income before taxes and minority
interest....................... Ps1,252,685 Ps5,797,105 Ps5,331,071
Non-deductible expenses......... 343 306,284 1,096,797
Non-taxable income.............. (51,048) (12,433)
Fiscal deduction................ (62,717)
Difference between adjustment
for inflation for tax purposes
and for financial reporting
purposes....................... 117,722 66,187 (182,832)
Financial reporting purposes....
Other........................... 13,223 43,987 103,774
----------- ----------- -----------
1,321,256 6,162,515 6,336,377
Less--Exempt income............. (1,320,222) (5,249,978) (3,118,865)
----------- ----------- -----------
Taxable income.................. 1,034 912,537 3,217,512
----------- ----------- -----------
Statutory tax rate.............. 35% 35% 35%
----------- ----------- -----------
Current income tax expense...... 362 319,388 1,126,130
Deferred tax.................... 960,985
----------- ----------- -----------
Income tax expense.............. Ps 362 Ps 319,388 Ps2,087,115
=========== =========== ===========
</TABLE>
The Company's income tax returns for the years 1995 and 1996 are subject to
review and acceptance by the tax authorities. The tax returns for the year
ending December 31, 1997 of each company will be filed between April and June
1998. The Company's management and its legal advisors believe that no material
tax liabilities in excess of those recorded will arise as a result of any such
eventual reviews. The Company and its subsidiaries do not have any pending
claims from the tax authorities.
F-19
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16--LEASES
Operating leases
Operating leases in effect at September 30, 1997 consisted of the following:
<TABLE>
<CAPTION>
NUMBER OF MONTHS REMAINING AMOUNTS
------------------------------ ---------------------------------------
CLASS OF ASSET ORIGINAL TERM REMAINING PERIOD AMOUNT PURCHASE OPTION TOTAL
-------------- ------------- ---------------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Computer equipment...... 36 1-27 Ps 151,379 Ps 15,486 Ps 166,865
Computer equipment...... 24 4-24 81,698 1,307 83,005
Equipment for 11,000
lines.................. 60 8 2,301,938 20,147 2,322,085
Office equipment........ 24 5-21 28,888 488 29,376
Vehicles................ 23 17 7,713 275 7,988
Vehicles................ 36 1-29 901,424 262,915 1,164,339
Power station........... 36 36 185,434 18,159 203,593
----------- --------- -----------
Total............... Ps3,658,474 Ps318,777 Ps3,977,251
=========== ========= ===========
</TABLE>
Such operating lease amounts, including purchase options, are due as follows:
<TABLE>
<CAPTION>
PAYABLE IN TWELVE MONTHS
ENDING SEPTEMBER 30,
------------------------
<S> <C>
1998........................................................... Ps1,173,616
1999........................................................... 1,078,507
2000........................................................... 882,832
2001........................................................... 493,272
2002........................................................... 349,024
-----------
Ps3,977,251
===========
</TABLE>
Total rent expense was Ps40,536 and Ps999,024 in 1995 and 1996, respectively,
and Ps1,004,246 in the nine months ended September 30, 1997.
See Note 26 for additional commitments for operating leases with Global
Telecommunications Operations, Inc., a related party, as part of the Company's
expansion plan.
Capital leases
The Company, in the ordinary course of business, has entered into two capital
lease arrangements with variable interest rates for the purchase of land.
Interest rates applicable to these capital leases were FTD (fixed time deposit
rate) + 6% and FTD + 8% at December 31, 1996 and September 30, 1997. Future
payments under the capital lease commitments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Total minimum lease payments..................... Ps2,553,005 Ps2,498,976
Less: Imputed interest........................... (1,511,277) (1,159,563)
----------- -----------
Present values of minimum lease payments......... 1,041,728 1,339,413
Less: Current portion............................ (63,476) (552,353)
----------- -----------
Ps 978,252 Ps 787,060
=========== ===========
</TABLE>
F-20
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Payable in the twelve months ending September 30,
<TABLE>
<S> <C>
1998............................................................ Ps 524,057
1999............................................................ 620,203
2000............................................................ 602,579
2001............................................................ 546,606
2002............................................................ 205,531
-----------
Total minimum lease payments.................................... Ps2,498,976
===========
</TABLE>
NOTE 17--MINORITY INTEREST
Minority interest in the net assets of subsidiaries consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Capital........................................... Ps 8,330,618 Ps18,985,471
Retained earnings................................. 3,203,818 4,705,976
Surplus from reappraisal of assets................ 5,512,629 9,689,149
------------ ------------
Ps17,047,065 Ps33,380,596
============ ============
</TABLE>
NOTE 18--SHAREHOLDERS' EQUITY
Effective July 7, 1997, the capital of Transtel S.A. consisted of 50 billion
authorized shares of common stock with a par value of one nominal peso each.
At December 31, 1996 and September 30, 1997, 4 billion shares and 5 billion
shares, respectively, were issued and outstanding.
In July 1997, two of the existing shareholders subscribed to a total of
1,039,801,222 shares of the Company's common stock for a total of Ps31,153,570
(30 single Pesos per share). These shareholders paid Ps30,871,724 in July 1997
and the remaining unpaid balance of Ps281,846 at September 30, 1997 was paid
in October 1997. The Company reduced a portion of its borrowings with the cash
received.
Legal reserve
Pursuant to Colombian law, 10% of the net profit of the parent company and
its Colombian subsidiaries in each year must be appropriated with a credit to
a "reserve fund" until it is equivalent to at least 50% of the subscribed
capital. This legal reserve may not be reduced to less than the indicated
percentage, except to cover losses in excess of undistributed profits.
Reserve for future construction
Reserves other than the legal reserve, appropriated directly out of retained
earnings, are freely distributable by the shareholders in general meeting.
F-21
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19--REVENUES
Revenues consisted of the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------ SEPTEMBER 30,
1995 1996 1997
----------- ------------ --------------
<S> <C> <C> <C>
Connection fees......... Ps 690,145 Ps 5,464,634 Ps 8,073,690
Local usage charges..... 344,471 1,262,738 2,164,675
Basic charges........... 328,207 1,093,058 1,522,297
Long distance charges... 905,247 3,139,841 4,078,053
Telephone directory com-
missions............... 212,024 263,169
Sale of telephones...... 269,505 523,467
Other operating income.. 91,019 118,408 1,014,586
----------- ------------ ------------
Ps2,359,089 Ps11,560,208 Ps17,639,937
=========== ============ ============
</TABLE>
NOTE 20--OPERATING COSTS
Operating costs consisted of the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------- SEPTEMBER 30,
1995 1996 1997
----------------------- -------------
<S> <C> <C> <C>
Salaries, benefits and other la-
bor payments.................... Ps296,179 Ps1,259,480 Ps1,541,575
Insurance........................ 54,873 83,037
Fees, studies and investiga-
tions........................... 27,331
Rentals of space................. 21,246 48,196 6,812
Other rent....................... 437 543,655 617,124
Taxes other than income.......... 278 23,518 15,716
Services, maintenance and re-
pairs........................... 63,854 90,126 171,487
Depreciation..................... 293,907 125,936 285,322
Amortization..................... 121,914 433,613
Other............................ 7,037 189,287 815,940
---------- ------------ -----------
Ps682,938 Ps2,456,985 Ps3,997,957
========== ============ ===========
</TABLE>
NOTE 21--ADMINISTRATIVE EXPENSES
Administrative expenses consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, NINE MONTHS
-------------------- ENDED
1995 1996 SEPTEMBER 30, 1997
--------- ----------- ------------------
<S> <C> <C> <C>
Salaries, benefits and other
labor payments.................. Ps158,132 Ps 888,665 Ps1,171,723
Insurance........................ 23,364 62,970 71,824
Fees, studies and
investigations.................. 8,392 558,518 621,253
Travel expenses.................. 1,399 73,682 159,940
Rentals of space................. 10,011 195,065 228,709
Other rent....................... 8,234 186,472 134,073
Taxes other than income.......... 3,408 137,075 405,863
Services, maintenance and
repairs......................... 90,727 504,694 445,660
Depreciation..................... 14,902 72,624 145,624
Amortization..................... 3,831 823,775 885,563
Other............................ 32,625 234,676 588,050
--------- ----------- -----------
Ps355,025 Ps3,738,216 Ps4,858,282
========= =========== ===========
</TABLE>
F-22
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 22--MARKETING EXPENSES
Marketing expenses consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
------------------ ENDED
1995 1996 SEPTEMBER 30, 1997
-------- --------- ------------------
<S> <C> <C> <C>
Salaries, benefits and other labor
payments........................... Ps74,553 Ps412,546 Ps471,735
Publicity........................... 3,178 136,059 31,899
Insurance........................... 5,157 3,020
Travel expenses..................... 84 2,145 1,242
Rentals of space.................... 608 23,644 11,236
Other rent.......................... 1,992 6,292
Services, maintenance and repairs... 4,444 51,481 75,771
Depreciation........................ 23,892 229
Amortization........................ 79,787 296,962
Other............................... 3,340 21,468 85,019
-------- --------- ---------
Ps86,207 Ps758,171 Ps983,405
======== ========= =========
</TABLE>
NOTE 23--FINANCIAL INCOME AND EXPENSES
Financial income consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
------------------------ ENDED
1995 1996 SEPTEMBER 30, 1997
----------- ------------ ------------------
<S> <C> <C> <C>
Interest................ Ps 308,130 Ps548,623 Ps1,977,524
Commercial discounts and
other.................. 6,626 3,870
Exchange gains.......... 298,370 1,076,644
Other................... 111,010
----------- ------------ -----------
Ps 314,756 Ps 850,863 Ps3,165,178
=========== ============ ===========
</TABLE>
Financial expenses consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
----------------------- ENDED
1995 1996 SEPTEMBER 30, 1997
----------------------- ------------------
<S> <C> <C> <C>
Interest.......................... Ps 277,073 Ps 1,891,283 Ps4,449,384
Bank commissions.................. 5,758 130,231 420,675
Commercial discounts.............. 323 38,509 16,936
Exchange losses................... 63,793 1,870,544
Bank expenses..................... 682 81,209 220,447
Other............................. 79,643
---------- ------------ -----------
Ps 283,836 Ps 2,205,025 Ps7,057,629
========== ============ ===========
</TABLE>
F-23
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 24--NET MONETARY INFLATION ADJUSTMENT INCOME (LOSS)
The net monetary inflation adjustment income (loss) consisted of the
following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------ NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
---------- ------------ ------------------
<S> <C> <C> <C>
Inflation adjustment of:
Investments................. Ps -- Ps 5,432 Ps 4,113,671
Inventories................. 15,176 75,489 40,628
Properties, plant and
equipment.................. 679,267 3,867,672 4,497,211
Accumulated amortization.... (67,339)
Accumulated depreciation.... (72,182) (83,728)
Deferred charges............ 1,876 1,103,586 664,549
Deferred monetary
correction--debit.......... (163,609) (138,691)
Other assets................ 34 296,354
Deferred monetary
correction--credit......... 151,537 265,355
Shareholders' equity........ (722,919) (2,868,573) (7,011,627)
---------- ------------ ------------
Subtotal.................. (26,600) 2,099,386 2,576,383
Revenues.................... (48,798) (707,621) (788,915)
Expenses.................... 420 691,990 1,046,292
Costs....................... 13,694 140,873 11,880
---------- ------------ ------------
Total..................... Ps (61,284) Ps 2,224,628 Ps 2,845,640
========== ============ ============
</TABLE>
NOTE 25--RELATED PARTY TRANSACTIONS
The Company has had significant transactions with Mr. Gonzalo Caicedo Toro
(see Notes 4 and 5). The following table summarizes the significant
transactions with Mr. Caicedo:
<TABLE>
<CAPTION>
BALANCE DUE FROM (TO) MR. CAICEDO
---------------------------------------------
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
-------------------------- -----------------
SEPTEMBER 30,
1995 1996 1997
------------ ------------ -----------------
<S> <C> <C> <C>
Beginning of period........... Ps (93,489) Ps 1,670,420 Ps (21,226)
Loans made.................... 8,355,200 9,219,446 11,294,130
Payments received:
Cash........................ (6,591,291) (6,541,701) (3,900,053)
Land and building (see Note
7)......................... (1,711,501)
Shares of GCT & Cia. (see
Note 4).................... (2,657,890)
Cash received from fiduciary
rights to a trust set up to
manage the sale of certain
investments owned by Mr.
Caicedo.................... (6,270,287)
Loans assumed............... (1,102,564)
------------ ------------ ------------
End of period (see Note 12)... Ps 1,670,420 Ps (21,226) Ps --
============ ============ ============
</TABLE>
The loans were not interest bearing and had no maturity dates.
See Note 26 for transactions with Global Telecommunications, Inc., a related
party.
F-24
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 26--COMMITMENTS
GLOBAL-SIEMENS ARRANGEMENTS
Global Telecommunications Operations, Inc. ("Global") is a British Virgin
Islands company owned by the same shareholders who own Transtel. Global was
formed in January 1995 as a financing vehicle for the purchase of certain
equipment from Siemens AG ("Siemens"). As part of the Company's expansion
plan, Global has entered into two purchase agreements and two letters of
intent with Siemens for the provision of certain equipment necessary for the
Company's expansion plan. Global has entered or intends to enter into a lease
agreement with each subsidiary for the lease of such telecommunications
equipment to each subsidiary on terms substantially similar to the financing
to Global from Siemens. Transtel purchased equipment to be used by Caucatel
directly from Siemens ($3.3 million switches and $500,000 for installation)
and contributed it to Caucatel as part of its capital. Caucatel is the only
subsidiary that does not lease its equipment from Global. Under these leases,
if the subsidiaries default under the leases, Global has the right to take
action against the assets leased thereunder including repossession or sale of
the equipment. Global has assigned to Siemens the lease payments under each of
the leases in the event of an event of default under the purchase agreements
occurs and is continuing. The following transactions with Global are accounted
for as operating leases under Colombian GAAP and as capital leases under U.S.
GAAP (see Note 28 (d)(vi)):
Global I Purchase Agreement. On May 2, 1996, Global entered into a purchase
agreement with Siemens (as amended on July 28, 1997, the "Global I Purchase
Agreement") to purchase certain landline telecommunications equipment to be
used for the development of each of TelePalmira's, TeleJamundi's and Unitel's
respective wireline networks for an aggregate amount of approximately $20.0
million, of which 15% (approximately $3.0 million) was paid upon execution of
the Global I Purchase Agreement. The remaining 85% of the price of equipment
delivered and installed by Siemens under the Global I Purchase Agreement is
payable by Global in 20 semi-annual payments. Global's obligations under the
Global I Purchase Agreement are secured by a pledge of the Global I Leases (as
defined below).
Global I Leases. On August 1, 1996, Global entered into a lease agreement
with each of the following subsidiaries: TelePalmira (the "Global--TelePalmira
Lease"); TeleJamundi (the "Global--TeleJamundi Lease"); and Unitel (the
"Global--Unitel I Lease") (the Global--TelePalmira Lease, Global--TeleJamundi
Lease and Global-Unitel I Lease are collectively referred to as the "Global I
Leases").
Global-TelePalmira Lease. Pursuant to the Global-TelePalmira Lease,
TelePalmira agreed to pay Global an aggregate amount of approximately $14.4
million to lease, for a 12-year term, certain switching and cable equipment
that Global purchased from Siemens under the Global I Purchase Agreement.
The Global-TelePalmira Lease includes an option to purchase the equipment
for an additional $285,000 at the end of the lease term.
Global-TeleJamundi Lease. Pursuant to the Global-TeleJamundi Lease,
TeleJamundi agreed to pay Global an aggregate amount of $5.3 million to
lease, for a 12-year term, certain switching and cable equipment that
Global purchased from Siemens under the Global I Purchase Agreement. The
Global-TeleJamundi Lease includes an option to purchase the equipment for
an additional $104,000 at the end of the lease term.
Global-Unitel I Lease. Pursuant to the Global-Unitel I Lease, Unitel
agreed to pay Global an aggregate amount of $3.7 million to lease, for a
12-year term, certain switching and cable equipment that Global purchased
from Siemens under the Global I Purchase Agreement for its wireline
applications. The Global-Unitel I Lease includes an option to purchase the
equipment for an additional $73,000 at the end of the lease term.
F-25
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Global II Purchase Agreement. On May 30, 1997, Global entered into a
purchase agreement, as later amended, with Siemens (the "Global II Purchase
Agreement") to purchase certain landline and wireless telecommunications
equipment to be used for the development of each of TeleCartago's, Bugatel's
and Unitel Wireless' respective networks for an aggregate amount of
approximately $34.0 million, of which approximately $3.7 million was paid upon
execution of the Global II Purchase Agreement. The remaining price of
equipment delivered and installed by Siemens under the Global II Purchase
Agreement is payable by Global in 20 semi-annual payments. Global's
obligations to Siemens under the Global II Purchase Agreement will be secured
by a pledge of the lease payments under the Global II Leases (as defined
below). Due to the modification of the Company's network plan with respect to
Bugatel and TeleCartago, the Company and Siemens have entered into
negotiations to amend the Global II Purchase Agreement to increase the amount
of equipment and increase the amount of the financing that will be provided by
Siemens as a result thereof.
Global II Leases. On July 28, 1997, Global entered into a lease agreement
with Unitel (the "Global-Unitel II Lease") and TeleCartago (the "Global-
TeleCartago Lease") for certain of the equipment that is the subject of the
Global II Purchase Agreement. Global intends to lease the remainder of the
equipment that is the subject of the Global II Purchase Agreement to Bugatel
under leases with terms and conditions similar to those of the Global I Leases
(the Global-Unitel II Lease and the Global-TeleCartago Lease, together with
the lease to be entered into with Bugatel are collectively referred to herein
as, the "Global II Leases").
Global-Unitel II Lease. Pursuant to the Global-Unitel II Lease, Unitel
agreed to pay Global an aggregate amount of $26.9 million to lease, for a
12-year term, certain wireless telecommunications equipment that Global
purchased from Siemens under the Global II Purchase Agreement. The Global-
Unitel II Lease includes an option to purchase the equipment for an
additional $525,000 at the end of the lease term.
Global-TeleCartago Lease. Pursuant to the Global-TeleCartago Lease,
TeleCartago agreed to pay Global an aggregate amount of $9.9 million to
lease, for a 12-year term, certain switching and cable equipment that
Global purchased from Siemens under the Global II Purchase Agreement. The
Global-TeleCartago Lease includes an option to purchase the equipment for
an additional $197,000 at the end of the lease term.
Global III Letters of Intent. Siemens and Siemens A.G. have entered or plan
to enter into letters of intent with the Company which outline the proposed
terms of the purchase and financing of various telecommunications equipment to
be used by Transtel to substantially complete its expansion plan. Global, the
Company and Siemens intend to structure these purchases with similar terms to
those used under the Global I and Global II Purchase Agreements and the Global
I Leases and Global II Leases.
TRANSTEL-SIEMENS ARRANGEMENT
On May 23, 1997, Transtel entered into a purchase agreement with Siemens for
certain telecommunications equipment to be used by Caucatel in the
installation of approximately 23,000 lines for approximately $3.3 million
payable over a ten-year period, commencing six months after the completion of
the Turn-Key Arrangements. The obligations of Transtel under the Transtel-
Siemens Purchase Agreement are secured by a promissory note from Transtel.
The Company is currently negotiating with Siemens to enter into contracts
for the supply of equipment to effect the TeleGirardot expansion plan.
F-26
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
IBM ARRANGEMENT
The Company has entered into an agreement with International Business
Machines Corp. ("IBM"), dated June 25, 1997, whereby IBM has agreed to finance
and to provide and install all the Internet and voice mail related hardware
and software for the Company's telephone systems. Under the IBM agreement, the
Company has agreed to pay IBM an aggregate amount of $3.4 million for such
equipment. On September 30, October 28 and October 30, 1997, Unitel entered
into 60 month leases with IBM for $2.3 million, $427,000 and $730,000,
respectively, for this equipment.
CONSTRUCTION ARRANGEMENTS
On April 30, 1996, each of TelePalmira, Unitel (with respect to its wireline
applications) and TeleJamundi entered into turn-key arrangements (the "Turn-
Key Arrangements") with Siemens S.A., a Colombian Corporation, to (i) install
the lines, switches and other equipment leased by each of these subsidiaries
from Global under the Global I Leases, (ii) put in operation such lines and
equipment, (iii) manage the "cut-over" to the new system lines, install air
conditioner equipment and train the personnel who will operate the switching
equipment, (iv) install a transmission signaling standard (v) expand, replace
and install the outside plant, and (vi) complete expansion of the network. The
aggregate amount due to Siemens S.A. under these Turn-Key Arrangements is
approximately $8.1 million.
For each of the Turn-Key Arrangements described in the paragraph above,
Siemens S.A. has provided the respective subsidiary with performance bonds
equivalent to (i) 10% of the amount of each Turn-Key Arrangement, (ii) 5% of
the services contracted under each Turn-Key Arrangement, (iii) 10% of the cost
of the outside plant civil works and (iv) up to $100,000 for personal or
property liability.
On June 18, 1997, each of Transtel (in place of Bugatel, which was not yet
formed), TeleCartago and Unitel (with respect to its wireless applications)
entered into Turn-Key Arrangements with Siemens to (i) install the lines,
switches and other equipment leased by Bugatel, TeleCartago and Unitel from
Global under the Global II Leases, and (ii) put in operation such lines and
equipment. The aggregate amount due to Siemens under these Turn-Key
Arrangements is approximately $6.9 million. Siemens S.A. has provided
Transtel, TeleCartago, and Unitel with performance bonds substantially similar
to those provided to TelePalmira, Unitel and TeleJamundi. In connection with
the negotiations to amend the Global II Purchase Agreement, the Company
expects to reduce the amount due to Siemens under this Turn-Key Arrangement to
approximately $5.3 million.
On May 23, 1997, Transtel entered into a Turn-Key Arrangement with Siemens
to (i) install the lines, switches and other equipment that Transtel agreed to
contribute to the capital of Caucatel as part of its capital contribution and
which the Company acquired from Siemens pursuant to the Transtel-Siemens
arrangements, and (ii) put in operation such lines and equipment. The
aggregate amount due to Siemens S.A. under this Turn-Key Arrangement is
approximately $460,000.
F-27
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 27--SUBSEQUENT EVENTS
As discussed in Note 11, the Company received the proceeds of $150 million
of 12 1/2% Senior Notes due 2007 on October 28, 1997. The use of proceeds and
the net proceeds received by Transtel were as follows:
<TABLE>
<S> <C>
Sale of Senior Notes.......................................... Ps186,940,500
Payment of existing debt...................................... (40,836,574)
Escrow account for first four interest payments............... (43,998,569)
Central Bank's withdrawal fee................................. (12,160,493)
Cost of issuance.............................................. (9,975,114)
-------------
Cash available for the Company's expansion plan............... Ps 79,969,750
=============
</TABLE>
On December 31, 1997, Empresa de Telecomunicaciones de Girardot S.A. E.S.P
("TeleGirardot"), a new subsidiary of Transtel, was formed by Transtel
contributing Ps8,898,299 in cash for its 60% interest and the municipality of
Girardot contributing the net assets of its wholly-owned telephone subsidiary,
Empresa de Telecomunicaciones de Girardot E.S.P. ("Girardot Telephone")
totaling Ps5,932,199 for its 40% minority interest. Transtel used a portion of
the proceeds from the Senior Notes to finance its investment in TeleGirardot.
The transaction will be accounted for at the municipality's historical book
value plus Transtel's portion of the excess of fair value over that book value
since prior accounting records for Girardot Telephone are available.
NOTE 28--DIFFERENCES BETWEEN COLOMBIAN GAAP AND U.S. GAAP
The Company's financial statements are prepared in accordance with Colombian
GAAP. Because these principles differ in certain significant respects from
U.S. GAAP, this note presents a reconciliation to U.S. GAAP of net income and
shareholders' equity as of and for the years ended December 31, 1995 and 1996.
(a) RECONCILIATION OF NET INCOME:
The following summarizes the principal differences between accounting
practices under Colombian and U.S. GAAP and their effects on net income for
the years ended December 31, 1995 and 1996 and the nine months ended September
30, 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -----------------
<S> <C> <C> <C> <C>
Consolidated net income under Colombian GAAP........ Ps 751,720 Ps 3,248,886 Ps 852,747
(i) Deferred income taxes...................... 418,927 956,715 2,941,045
(ii) Surplus from reappraisal of assets......... -- -- --
(iii) Depreciation............................... -- (914,547) (1,443,979)
(iv) Capitalized interest....................... 3,962 248,298 881,001
(v) Deferred charges........................... (4,268,693) (6,402,485) (7,536,041)
(vi) Capital leases............................. 15,293 (235,409) 266,304
(vii) Revenue recognition........................ (593,915) (4,048,451) 1,140,781
(viii) Adjustment for inflation................... 266,044 524,519 1,646,899
(ix) Effect of the above differences on minority
interest................................... 527,171 3,709,377 (315,209)
(x) Distribution to shareholder................ -- -- --
------------ ------------ ------------
Consolidated net loss under U.S. GAAP............... Ps(2,879,491) Ps(2,913,097) Ps(1,566,452)
============ ============ ============
</TABLE>
F-28
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(b) RECONCILIATION OF SHAREHOLDERS' EQUITY:
The following summarizes the principal differences between accounting
practices under Colombian GAAP and U.S. GAAP and their effects on
shareholders' equity at December 31, 1995 and 1996 and September 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------- -------------
<S> <C> <C> <C>
Consolidated shareholders' equity under Colombian GAAP......... Ps 6,967,236 Ps 18,817,274 Ps 51,035,142
(i) Deferred income taxes................................. 561,995 1,518,710 4,459,755
(ii) Surplus from reappraisal of assets.................... (8,601,152) (9,094,549)
(iii) Depreciation.......................................... (914,547) (2,358,526)
(iv) Capitalized interest.................................. 3,962 252,260 1,133,261
(v) Deferred charges...................................... (5,840,853) (12,243,337) (19,779,378)
(vi) Capital leases........................................ 15,293 (220,114) 46,190
(vii) Revenue recognition................................... (593,915) (4,642,366) (3,501,587)
(viii) Adjustment for inflation.............................. 326,319 850,835 2,497,736
(ix) Effect of the above differences on minority interest.. 637,683 4,347,060 4,031,851
(x) Distribution to shareholder........................... -- (325,583) (325,583)
------------ ------------- -------------
Consolidated shareholders' equity (deficit) under U.S. GAAP.... Ps 2,077,720 Ps (1,160,960) Ps 28,144,312
============ ============= =============
</TABLE>
(c) ANALYSIS OF CHANGES IN SHAREHOLDERS' EQUITY:
The following summarizes the changes in shareholders' equity (deficit) under
U.S. GAAP for the two years ended December 31, 1995 and 1996 and the nine
months ended September 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -----------------
<S> <C> <C> <C>
Balance at beginning of
period..................... Ps 2,116,028 Ps 2,077,720 Ps (1,160,960)
Shares issued............... 2,841,183 30,871,724
Distribution to
shareholder................ (325,583)
Net loss.................... (2,879,491) (2,913,097) (1,566,452)
------------ ------------ -------------
Balance at end of period.... Ps 2,077,720 Ps(1,160,960) Ps28,144,312
============ ============ =============
</TABLE>
(d) SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN COLOMBIAN AND U.S. GAAP:
(i) Deferred income taxes
Under Colombian GAAP, deferred income taxes are generally recognized for
timing differences in a manner similar to Accounting Principles Board Opinion
No. 11.
Under U.S. GAAP, Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes" requires that deferred tax assets or
liabilities be recorded for the tax effects of temporary differences between
the financial and tax bases for assets and liabilities. A valuation allowance
is provided for deferred tax assets when it is considered more likely than not
that they will not be realized.
F-29
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total applicable income taxes under U.S. GAAP are comprised of the following
components for 1995 and 1996 and the nine months ended September 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
------------------------ SEPTEMBER 30,
1995 1996 1997
----------- ----------- -----------------
<S> <C> <C> <C>
Current income tax expense...... Ps 362 Ps 319,388 Ps 1,126,130
Deferred income tax benefit..... (418,927) (956,715) (1,980,060)
----------- ----------- ------------
Total....................... Ps(418,565) Ps(637,327) Ps (853,930)
=========== =========== ============
</TABLE>
Temporary differences between the amounts reported in the financial
statements and the tax bases for assets and liabilities result in deferred
taxes. Deferred tax assets and liabilities at December 31, 1995 and 1996 and
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
--------- ----------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Depreciation......................... Ps -- Ps 228,965 Ps 624,469
Preoperating expenses................ 531,521 1,029,229 4,056,300
Revenue recognition.................. 141,694 101,767
Capital leases....................... 8,769 108,781 93,410
Inflation adjustment................. 22,588 66,542
--------- ----------- -----------
Total.............................. 562,878 1,575,211 4,875,946
--------- ----------- -----------
Deferred tax liabilities:
Capitalized interest................. 883 56,501 251,533
Undistributed earnings of
subsidiaries........................ 960,985
Inflation adjustment................. 164,658
--------- ----------- -----------
Total.............................. 883 56,501 1,377,176
--------- ----------- -----------
Net deferred tax assets recorded under
U.S. GAAP............................. 561,995 1,518,710 3,498,770
Deferred tax liability recorded under
Colombian GAAP........................ 960,985
--------- ----------- -----------
Additional net deferred tax assets
recorded under
U.S. GAAP............................. Ps561,995 Ps1,518,710 Ps4,459,755
========= =========== ===========
</TABLE>
The factors involved in the differences between the amount of income taxes
computed at the statutory regular tax rate of 35.0% and the applicable income
taxes for the years ended December 31, 1995 and 1996 and the nine months ended
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
----------------------------------------- SEPTEMBER 30,
1995 1996 1997
------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense (benefit) at
statutory rate......... Ps(1,163,618) (35.0)% Ps(1,760,839) (35.0)% Ps 100,113 35.0 %
Increase (decrease)
resulting from:
Monetary correction... (27,562) (.8) (114,072) (2.3) 319,668 111.7
Lower tax rates of
telephony
subsidiaries......... 794,797 23.9 1,217,033 24.1 (1,414,333) (494.5)
Other, net............ (22,182) (.7) 20,551 .5 140,622 49.2
------------ ----- ------------ ----- ------------ ------
Tax benefit............. Ps (418,565) (12.6)% Ps (637,327) (12.7)% Ps (853,930) (298.6)%
============ ===== ============ ===== ============ ======
</TABLE>
F-30
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ii) Surplus from reappraisal of assets
In accordance with Colombian GAAP, reappraisals of properties, plant and
equipment and long-term investments are made periodically and recorded in
offsetting accounts which are shown under the asset caption "Reappraisal of
assets" and the shareholders' equity caption "Surplus from reappraisals of
assets". Under U.S. GAAP, reappraisals of assets are not permitted.
(iii) Depreciation
Since January 1, 1996, the Company uses the reverse sum of the years method
of depreciation for Colombian GAAP purposes. The Company used the straight-
line method in 1995. The straight-line method of depreciation is used for U.S.
GAAP in 1996. Additional depreciation expense of Ps914,547 and Ps1,443,979 is
recorded under U.S. GAAP in 1996 and for the nine months ended September 30,
1997, respectively.
(iv) Capitalized interest
Under Colombian GAAP, the Company does not capitalize interest costs on
projects during construction which is required under U.S. GAAP. Under U.S.
GAAP the following adjustments to expenses are required:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------- NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
----------------------- ------------------
<S> <C> <C> <C>
Reduction in interest expense
for amounts capitalized as
properties, plant and equip-
ment and equipment.......... Ps 3,962 Ps 256,994 Ps916,613
Less--Additional depreciation
expense on interest amounts
capitalized................. (8,696) (35,612)
---------- ------------ ---------
Ps 3,962 Ps 248,298 Ps881,001
========== ============ =========
</TABLE>
(v) Deferred charges
Subsidiaries of the Company have deferred certain costs which are expensed
as incurred under U.S. GAAP. Under U.S. GAAP, the following deferred charges
are expensed:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------ NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
----------- ----------- ------------------
<S> <C> <C> <C>
Preoperating expenses......... Ps2,160,832 Ps -- Ps4,693,866
Organization costs............ 16,889 409,372
Market and demand studies and
investigations............... 825,525 1,181,395 251,605
Interest costs of investments
in subsidiaries.............. 1,264,081 6,117,586 3,604,286
----------- ----------- -----------
Increase in expenses.......... 4,250,438 7,315,870 8,959,129
Less--Amortization recorded
under Colombian GAAP......... (3,832) (1,025,480) (1,623,446)
Plus--Amortization required on
items not expensed under U.S.
GAAP......................... 22,087 112,095 200,358
----------- ----------- -----------
Net increase in expenses...... Ps4,268,693 Ps6,402,485 Ps7,536,041
=========== =========== ===========
</TABLE>
The remaining deferred charges under Colombian GAAP consist of software,
leasehold improvements and costs incurred in the issuance of the Senior Notes
which total Ps289,774, Ps848,589 and Ps2,117,048 at December 31, 1995,
December 31, 1996 and September 30, 1997, respectively. Such amounts are also
deferred under U.S. GAAP but are classified as property, plant and equipment
or other assets.
F-31
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(vi) Capital leases
Certain of the Company's operating leases for Colombian GAAP purposes
qualify as capital leases under U.S. GAAP. In addition to the amounts shown
under capital leases in Note 16, the following assets and liabilities are
recorded under U.S. GAAP:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
Telephony networks............. Ps2,812,939 Ps2,859,519 Ps2,804,779
Computer equipment............. 99,682 169,513 325,650
Transport fleet and equipment.. 363,449 617,948 1,292,163
Generator...................... 160,025
----------- ----------- -----------
Total........................ 3,276,070 3,646,980 4,582,617
Less--Accumulated deprecia-
tion.......................... (13,902) (420,299) (781,805)
----------- ----------- -----------
Ps3,262,168 Ps3,226,681 Ps3,800,812
=========== =========== ===========
The above amounts include cumulative adjustments of Ps568,873 and
Ps1,067,756 at December 31, 1996 and September 30, 1997, respectively, which
are also included in the cumulative shareholders' equity adjustment in (viii).
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
<S> <C> <C> <C>
Total minimum lease payments... Ps4,391,254 Ps3,963,806 Ps3,977,252
Less-Imputed interest.......... (1,151,026) (1,310,673) (1,495,507)
----------- ----------- -----------
Present value of minimum lease
payments...................... 3,240,228 2,653,133 2,481,745
Less--Current portion.......... (383,812) (530,627) (687,025)
----------- ----------- -----------
Long-term portion.............. Ps2,856,416 Ps2,122,506 Ps1,794,720
=========== =========== ===========
Deferred income from sale
leaseback..................... Ps 224,791 Ps 205,122
=========== ===========
</TABLE>
The additional total minimum lease payments at September 30, 1997 are as
follows under U.S. GAAP:
<TABLE>
<CAPTION>
PAYABLE IN TWELVE MONTHS ENDING
SEPTEMBER 30,
-------------------------------
<S> <C>
1998............................................................. Ps1,173,616
1999............................................................. 1,078,507
2000............................................................. 882,832
2001............................................................. 842,297
-----------
Total minimum lease payments....................................... Ps3,977,252
===========
</TABLE>
F-32
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following additional expenses are recorded under U.S. GAAP for the above
capital leases:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------- NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
--------- ---------- ------------------
<S> <C> <C> <C>
Increase in interest expense.. Ps 40,870 Ps 485,756 Ps 326,545
Increase in depreciation ex-
pense........................ 13,108 334,244 332,861
Decrease in (amortization of)
gain from sale of properties,
plant and equipment on
leaseback.................... 224,791 (19,669)
--------- ---------- ----------
Total....................... 53,978 1,044,791 639,737
Decrease in rent expense...... (69,271) (809,382) (906,041)
--------- ---------- ----------
Net increase (decrease) in ex-
penses....................... Ps(15,293) Ps 235,409 Ps(266,304)
========= ========== ==========
</TABLE>
Under U.S. GAAP, there are no operating lease commitments at September 30,
1997. See Note 26 for the Global Leases that will be recorded as capital
leases upon commencement of the lease periods.
(vii) Revenue recognition
Under Colombian GAAP, revenues for connection fees for telephone lines are
recognized upon payment in cash or the execution of a promissory note (with a
10% down payment) by the customer and the Company's assignment of a telephone
number which is transferable to others by the customer. Under U.S. GAAP,
revenues from these connection fees are recorded at the date of actual
installation with a dial tone.
(viii) Adjustment for inflation
The difference in accounting for capital leases between Colombian and U.S.
GAAP creates an additional U.S. GAAP difference in the related inflation
adjustment. Additionally, the deferred monetary correction asset and liability
are reversed for U.S. GAAP.
The components of the inflation adjustment to income are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
------------------- NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
--------- --------- ------------------
<S> <C> <C> <C>
Reverse net deferred monetary
correction liability
(asset)...................... Ps266,044 Ps(44,354) Ps1,148,018
Inflation adjustment relating
to capital lease
obligations.................. 568,873 498,881
--------- --------- -----------
Ps266,044 Ps524,519 Ps1,646,899
========= ========= ===========
The components of the inflation adjustment to shareholders' equity are as
follows:
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------- NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
--------- --------- ------------------
<S> <C> <C> <C>
Reverse net deferred monetary
correction liability......... Ps326,319 Ps281,962 Ps1,429,980
Inflation adjustment relating
to capital lease
obligations.................. 568,873 1,067,756
--------- --------- -----------
Ps326,319 Ps850,835 Ps2,497,736
========= ========= ===========
</TABLE>
F-33
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ix) Minority interest
The minority interests' share of the differences between Colombian GAAP and
U.S. GAAP are presented separately.
(x) Distribution to shareholder
Transtel purchased land and building from a major shareholder at appraised
value in August 1996. For U.S. GAAP, the difference between the amount paid
(Ps1,711,501) and the shareholder's historical basis Ps1,385,918 is treated as
a distribution to the shareholder in 1996.
(xi) Acquisitions
For U.S. GAAP purposes, the Company's accounting policy for acquisitions in
the form of subsidiaries formed with municipalities as minority interests is
to use estimated fair value to record the initial contribution of telephone
systems and the minority interest when the municipalities' historical book
value records are nonexistent or unreliable. If reliable historical book value
amounts are available, the Company will record telephone systems acquired and
minority interests at the municipalities' historical book values plus
Transtel's portion of the excess of fair value over that book value. There are
no differences between U.S. and Colombian GAAP for the years ended December
31, 1995 and 1996 and the nine months ended September 30, 1997.
(xii) Earnings per share
Under Colombian GAAP, earnings per share are computed by dividing net income
(loss) applicable to common shares by the weighted average number of common
shares outstanding for each period presented.
Under U.S. GAAP, earnings per share are calculated on the basis of the
weighted average number of common shares outstanding, adjusted for stock
dividends issued by the Company which are considered outstanding since the
beginning of the earliest period presented. For U.S. GAAP, the weighted
average number were 2,294,444,444 and 4,000,000,000 during 1995 and 1996,
respectively, and 4,231,066,938 for the nine months ended September 30, 1997,
the same as under Colombian GAAP since no stock dividends have yet been
declared.
Basic and fully diluted loss per share under U.S. GAAP were (1.25) Pesos and
(0.73) Pesos in 1995 and 1996, respectively, and (0.37) Pesos in the nine
months ended September 30, 1997.
(E) 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 sold to financial institutions. 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 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
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 SFAS 121 did not have any
material impact on Transtel's financial position or results of operations.
F-34
<PAGE>
TRANSTEL S.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fair value of financial instruments
Cash, short-term and temporary investments, accounts receivable and accounts
payable: The carrying amounts approximate fair value because of the short
maturity of these instruments or, in the case of temporary investments, the
subsequent sales price.
Long and short-term debt: Substantially all of the Company's long- and
short-term debt is variable rate borrowings; thus, the carrying amounts of the
Company's borrowings under its credit agreements approximate their fair value.
Capital lease obligations: The Company's capital lease obligations contain
variable interest rates and approximate fair value.
F-35
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS IN CONNECTION WITH THIS EXCHANGE OFFER OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRE-
SENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RE-
LATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Enforceability of Civil Liabilities...................................... 3
Available Information.................................................... 3
Forward-Looking Statements............................................... 4
Market and Population Data............................................... 4
Exchange Rates........................................................... 4
Prospectus Summary....................................................... 6
Risk Factors............................................................. 22
Deficiency of Earnings to Fixed Charges.................................. 30
Use of Proceeds.......................................................... 31
Capitalization........................................................... 32
The Exchange Offer....................................................... 33
Selected Financial and Other Data........................................ 40
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 43
Business................................................................. 55
Description of Existing Indebtedness..................................... 75
Industry Overview; Legal and Regulatory Environment...................... 78
Management............................................................... 80
Principal Shareholders................................................... 82
Certain Related Party Transactions....................................... 82
Description of the Certificates.......................................... 84
Description of the Guarantees............................................ 86
Description of the Senior Notes.......................................... 90
Taxation................................................................. 118
Certain ERISA Considerations............................................. 120
Foreign Investment and Exchange Controls in Colombia..................... 121
Plan of Distribution..................................................... 122
Enforcement of Foreign Judgments in Colombia............................. 123
Book-Entry; Delivery and Form............................................ 124
Legal Matters............................................................ 126
Experts.................................................................. 126
Glossary of Certain Telecommunications Terms............................. 127
Annex A--Republic of Colombia............................................ 130
Index to Financial Statements............................................ F-1
</TABLE>
UNTIL , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OFFER TO EXCHANGE ALL OUTSTANDING
12 1/2% PASS THROUGH TRUST CERTIFICATES DUE 2007,
FOR
12 1/2% PASS THROUGH EXCHANGE CERTIFICATES
DUE 2007,
IN EACH CASE REPRESENTING INTERESTS IN 12 1/2% SENIOR NOTES DUE 2007
ISSUED BY
TRANSTEL S.A.
---------------
PROSPECTUS
---------------
APRIL 10, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under both United States and Colombian law, the Company can indemnify its
directors and officers and purchase director and officer insurance. However
the Company's articles of incorporation and bylaws currently do not provide
for indemnification of any directors or officers, and the Company presently
does not have director and officer insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
3.1 Articles of Incorporation and Bylaws of Transtel S.A.
4.1 Indenture, dated as of October 28, 1997, between the Company
and Marine Midland Bank, as Indenture Trustee.
4.2 Form of Exchange Certificates.
4.3 Pledge Agreement relating to Intercompany Notes pledged to
Noteholders by the Company.
4.4 Trust Agreement of Transtel Pass Through Trust dated as of
October 20, 1997, by and between Transtel, as depositor, and
Wilmington Trust Company.
4.5 Amended and Restated Pass Through Trust Agreement, dated as
of October 28, 1997, among the Company, as Depositor,
Wilmington Trust Company, as Pass Through Trustee, and
Marine Midland Bank, as Registrar and Paying Agent.
4.6 Escrow and Disbursement Agreement, dated as of October 28,
1997, among the Company, Marine Midland Bank, as Escrow
Agent and Marine Midland Bank, as Indenture Trustee under
the Indenture.
4.7 Form of Exchange Certificate Guarantee, by the Company in
favor of Marine Midland Bank and the Exchange
Certificateholders.
5.1 Opinion of Dewey Ballantine LLP to Transtel S.A. as to
legality of the Exchange Certificate Guarantee.*
5.2 Opinion of Cavelier Abogados as to legality of the Senior
Notes and the Exchange Certificate Guarantee.*
5.3 Opinion of Richards, Layton & Finger as to legality of the
Exchange Certificates.*
8.1 Opinion of Dewey Ballantine LLP regarding United States tax
matters.*
8.2 Opinion of Lewin & Wells regarding Colombian tax matters.*
10.1 Public Deed of Incorporation of TeleGirardot and Adoption of
Bylaws.
10.2 Registration Rights Agreement, dated as of October 28, 1997,
among the Company, Transtel Pass Through Trust, as the
Issuer and BT Alex. Brown Incorporated, as Initial
Purchaser.
12.1 Computation of deficiency earnings to fixed charges.*
21.1 List of subsidiaries of Transtel S.A.
23.1 Consent of Price Waterhouse.
23.2 Consent of Dewey Ballantine LLP (included in 5.1).*
23.3 Consent of Cavelier Abogados (included in 5.2).*
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
23.4 Consent of Richards, Layton & Finger (included in 5.3).*
23.5 Consent of Lewin & Wells (included in 8.2).*
24.1 Power of Attorney of certain officers and directors of
Transtel S.A. (included on signature page).
25.1 Form T-1 Statement of Eligibility of Marine Midland Bank to
act as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility of Wilmington Trust
Company to act as trustee under the Amended and Restated
Pass Through Trust Agreement.
25.3 Form T-1 Statement of Eligibility of Marine Midland Bank to
act as Guarantee Trustee under the Exchange Certificate
Guarantee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agent Agreement.
</TABLE>
- --------
* To be filed by amendment.
(b) Schedules
All supplementary schedules are omitted because they are not required or
the required information, where material, is contained in the consolidated
financial statements of Transtel S.A. or the Notes thereto.
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act 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 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.
(2) The undersigned Registrant hereby undertakes: (i) to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Items 4, l0(b), 11 or 13 of Form F-4) within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means; and (ii) to arrange or provide for a facility in
the U.S. for the purposes of responding to such requests. The undertaking in
(i) above includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CALI, COLOMBIA, ON APRIL 10, 1998.
Transtel S.A.
Registrant
/s/ Guillermo O. Lopez
By: _________________________________
GUILLERMO O. LOPEZ,DIRECTOR AND
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATE INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS BELOW HEREBY
APPOINTS AND CONSTITUTES GUILLERMO O. LOPEZ, AS HIS OR HER ATTORNEY-IN-FACT,
WITH FULL POWER OF SUBSTITUTION FOR HIM OR HER IN ANY AND ALL CAPACITIES, TO
EXECUTE IN THE NAME AND ON BEHALF OF SUCH PERSON ANY AMENDMENT TO THIS
REGISTRATION STATEMENT (INCLUDING POST-EFFECTIVE AMENDMENT) AND TO FILE THE
SAME, WITH EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH
MAKING SUCH CHANGES IN THIS REGISTRATION STATEMENT AS THE PERSON SO ACTING
DEEMS APPROPRIATE, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-
FACT, OR HIS SUBSTITUTE, MAY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Gonzalo Caicedo Toro Director April 10, 1998
- -------------------------------------
GONZALO CAICEDO TORO
/s/ Guillermo O. Lopez Director and April 10, 1998
- ------------------------------------- President
GUILLERMO O. LOPEZ
/s/ Victoria E. Meza Director and General April 10, 1998
- ------------------------------------- Secretary
VICTORIA E. MEZA
/s/ Jorge E. Martinez Director and April 10, 1998
- ------------------------------------- Financial Vice
JORGE E. MARTINEZ President
/s/ Anibal E. Perez Director and April 10, 1998
- ------------------------------------- Technology and
ANIBAL E. PEREZ Planning Vice
President
/s/ Javier Salgado Director and April 10, 1998
- ------------------------------------- Operations Vice
JAVIER SALGADO President
/s/ Carlos A. Arango Corporate April 10, 1998
- ------------------------------------- Development Vice
CARLOS A. ARANGO President
/s/ Alexander P. Baber Marketing and Sales April 10, 1998
- ------------------------------------- Vice President
ALEXANDER P. BABER
II-3
<PAGE>
EXHIBIT 3.1
ZK 005129
485 Feb. 13/97
OFFICIALLY RECORDED PROCEEDING NUMBER: (485)
FOUR HUNDRED EIGHTY-FIVE
In the city of Cali, capital of the administrative district of Valle del Cauca,
Republic of Colombia, on the THIRTEENTH (13TH) day of the month of FEBRUARY of
1997, before me MARIA SOL SINISTERRA ALVAREZ, Notary FOURTEEN of the Cali
association, there appeared Mr. GUILLERMO O. LOPEZ ESQUIVEL, of legal age and
resident of Cali, identified with citizenship document number 16,614,481 issued
in Cali and military record number E178078 of military zone number 16, marital
status married, with marital partnership in effect, legally competent to enter
into contract and bind himself, and stated:
FIRST: That in this instrument he is acting in his capacity of President and
legal representative of the company TRANSTEL S.A., constituted by means of
officially recorded proceeding number 3,097, executed on August 23, 1993, at
notarial office Fourteen of the Cali Association, circumstances which he proves
with the certificate of existence and representation, issued by the Chamber of
Commerce of Cali, a document which he attaches to this text in order that it may
form a part thereof and of the copies of same which may be issued.
SECOND: That at the extraordinary session of the meeting of shareholders of
TRANSTEL S.A. which took place on the eighth day of July of one thousand nine
hundred ninety-six, that statutory body approved, with the required quorum, the
general revision of the current bylaws of the company.
THIRD: That duly empowered by the Extraordinary Meeting of Shareholders of the
company which he represents and considering what was stipulated in the preceding
affirmation, he is appearing in order to place on official record minutes number
09, corresponding to the aforementioned date, containing the cited bylaw
material, the text of which is as follows:
TRANSTEL S.A.
MINUTES NO. 09
MINUTES OF THE EXTRAORDINARY SESSION OF THE MEETING OF SHAREHOLDERS OF TRANSTEL,
S.A., HELD ON THE EIGHTH (8TH) DAY OF JULY OF ONE THOUSAND NINE HUNDRED NINETY-
SIX (1996).
<PAGE>
In the municipality of Jamundi, on the eighth (8th) day of the month of July of
one thousand nine hundred ninety-six (1996), at ten o'clock in the morning
(10:00 a.m.), the extraordinary session of the general meeting of shareholders
of TRANSTEL S.A. was held at the offices of the company, located at Avenue 10
No. 9-68, pursuant to a notice of meeting issued by Doctor GUILLERMO O. LOPEZ
ESQUIVEL, in his position of President of the company and representative of
same, through the following communication addressed to the shareholders:
"Jamundi, June 18, 1996
Dear Shareholder:
Acting in my capacity of President and legal representative of the company
TRANSTEL S.A., I respectfully call you to the extraordinary session of the
general meeting of shareholders of the company, which shall take place on
Monday, the eighth (8th) day of July of 1996 at 10:00 a.m. at the office of the
President of the company, located at Avenue 10 No. 9-68.
At the meeting, the following shall be submitted for consideration by the
shareholders or representatives thereof:
A G E N D A:
1. Verification of the quorum.
2. Election of Chairman and Secretary of the meeting.
3. Consideration and approval of the agenda.
4. General revision of the bylaws of the company.
5. Reading and approval of the minutes of the meeting.
In the event that your attendance is not possible, we very respectfully request
that you inform us in writing, sufficiently in advance, of the name of the
individual appointed to represent you at the extraordinary session of the
meeting.
Cordially,
(SIGNED) GUILLERMO O. LOPEZ ESQUIVEL
President"
As is stated, the following shareholders of the company met at the
aforementioned city, offices, date and time:
2
<PAGE>
ZK 005130
<TABLE>
<CAPTION>
SHAREHOLDER: SHARES: VALUE: %
<S> <C> <C> <C>
GONZALO CAICEDO
TORO, acting in
his own name and
behalf. 1,200,000,000 1,200,000,000.00 30
GONZALO CAICEDO
TORO & CIA. S.C.S.,
represented by Mr.
Gonzalo Caicedo
Toro, in his
capacity of
managing partner
and legal
representative. 1,600,000,000 1,600,000,000.00 40
MARIA EUGENIA
LLANO DE CAICEDO,
acting in her own
name and behalf. 1,199,999,995 1,199,999,995 [number
partially
obscured
by stamp]
VALENTINA CAICEDO,
represented by his
parents Gonzalo
Caicedo and
</TABLE>
3
<PAGE>
ZK 005129
<TABLE>
<CAPTION>
[First five lines of document heading from first page photocopied onto this page]
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Maria Eugenia
Llano in exercise
of paternal
authority. 4 4.00 0.000000001
FRANCIA ELENA
VELASCO, acting
in her own name
and behalf. 1 1.00 0.000000025
TOTAL SHARES 4,000,000,000 4,000,000,000.00 100%
============= ================ ===========
</TABLE>
After the representation documents described above were accredited before the
company and the quorum for deliberating and resolving thus having been made up,
the session was declared open.
1. VERIFICATION OF THE QUORUM.
As was noted previously, the Secretary reported that one hundred per cent (100%)
of the shares which make up the subscribed and paid capital of the company were
represented, there accordingly being a valid quorum for deliberation and
resolution.
2. ELECTION OF CHAIRMAN AND SECRETARY.
As there was a quorum to deliberate and resolve inasmuch as the previously
determined shares were represented, the extraordinary meeting of shareholders
was set up and proceeded unanimously to appoint the Chairman of same, a duty
which devolved upon Mr. GUILLERMO O. LOPEZ E.
Then Doctor VICTORIA EUGENIA MEZA Q. was named unanimously as Secretary of the
meeting.
3. CONSIDERATION AND APPROVAL OF THE AGENDA.
Those in attendance unanimously approved the indicated agenda.
4. GENERAL REVISION OF BYLAWS OF THE COMPANY.
The Chairman, taking the floor, expressed the need and importance which making a
general revision of the bylaws of the company represents for the firm, with the
goal of continuing to fulfill its corporate purpose effectively.
4
<PAGE>
ZK 005131
Following an extensive analysis, the extraordinary general meeting of
shareholders declared itself sufficiently enlightened on the subject and by
fully unanimous vote passed the following
RESOLUTION:
The extraordinary general meeting of shareholders of TRANSTEL S.A., at its
session of today,
WHEREAS:
FIRST: For the effective development of its corporate purpose, the company
has moved its domicile to the city of Cali,
SECOND: The company also needs to strengthen its financial structure by means
of increase in capital,
THIRD: For the efficient fulfillment of the corporate purpose of the firm, it
becomes necessary to restructure the statutory bodies responsible for
its management, to define their competence and functions,
FOURTH: The general revision of the corporate bylaws is the appropriate method
for achieving this objective,
RESOLVES:
FIRST: To effect a general revision of the current corporate bylaws, which as of
this date are as follows:
BYLAWS.- CHAPTER I.- NATURE - NAME - DOMICILE - DURATION:
ARTICLE ONE: NATURE.- The company is of a commercial nature, of Colombian
nationality, of the limited-liability type; its organization and operation are
governed by the following bylaws and lacking explicit stipulation, by the
provisions of the Commercial Code of Colombia.
ARTICLE TWO: COMPANY NAME.- The company is named TRANSTEL S.A. and has as
principal domicile the city of Cali, administrative district of Valle del Cauca,
Republic of Colombia, but following a resolution by the Board of Directors, it
may establish offices, agencies and branches in other cities or locations in the
country or abroad.
5
<PAGE>
ARTICLE THREE: DURATION.- The company shall have a duration of thirty (30)
years, calculated from the execution of this instrument; nonetheless, this term
may be extended prior to its expiration, by means of a resolution of the general
meeting of shareholders.
CHAPTER II. ARTICLE FOUR: PURPOSE.- The company has as a corporate purpose the
performance of any commercial function relating to investment in companies which
in turn develop the activity of operation of permanent telephone service in
territorial entities and also the provision of services or activities in
subscription television; open television; voice, data and image
telecommunications or a combination; basic, value-added or telematic services;
telemarketing services; dome services; video newsreels; video games; office
automation; security; monitoring; metering; remote controls;
radiocommunications; private and public networks; cellular telephony; motion
pictures; radio broadcasting and advertising media; including the provision,
installation, production, manufacture, distribution or rental of any type of
services, stations, channels, networks, equipment and systems for television,
telecommunication, information processing and public or private communications,
in particular but not exclusively the operation and production of services and
sale of programs for any of the media, whether they are recorded, filmed or
live, have been produced directly or purchased or merely performed, as well as
telepoint equipment and services; paging; beepers; trunking; security;
electronic alarms; electric monitoring; sound broadcasting; electronic voice,
data, fax and image mail and international voice, data, text and image networks.
The company likewise may undertake all related activities connected with and
complementary to said principal purpose. In the development of its corporate
purpose, the firm may conduct the following activities: A) Investment in
personal or real property, urban and/or rural, and the purchase of one and the
other for the purpose of operating them in accordance with the nature and
intended use of same, as well as the management, leasing, encumbrance and/or
transfer of that personal or real property; concluding contracts for usufruct or
antichresis; using the financial mechanisms of trusteeship and leasing when they
are applicable; B) Purchase,
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ZK 005132
sale, distribution, import and/or export, acquisition, obtaining and utilization
in any context of any type of goods and services relating to the corporate
purpose; C) Investment of capital funds in bonds; time deposits; accounts at
financial institutions; listed securities; shares or interests, stock in public
or private, domestic or foreign companies, whether through the formation of
other firms or the purchase of said stock or shares or interests and the
negotiation of any type of rights, provided that in such occurrences the company
does not become involved in middleman financial activity; D) Representation and
negotiation for domestic and/or foreign firms, provided such occurrences are
related to the corporate purpose; E) Entering into all types of actions or
contracts conducive to the fulfillment or appropriate culmination of the
corporate purpose of the company, for which it may carry out, among other
things, projects under the system most efficient, practical and appropriate for
the current financial and economic situation of the country, being able to opt
for the implementation of programs under the following forms: construction,
operation and conveyance (BOT); construction, operation, temporary ownership and
conveyance (BOOT); construction, operation, maintenance and conveyance (BOOM);
assignment, target cost, turnkey or others which totally or partially involve
third parties; F) Reciprocally giving or accepting cash or kind without becoming
involved in middleman financial activity; G) Applying for patents, registrations
of trademarks or names, and entering into contracts relating to industrial
property; H) Entering into a checking-account contract; I) Drawing, endorsing,
collecting, protesting, paying all types of instruments; J) Appearing at public
or private biddings and tendering the corresponding bids; K) Carrying out
actions and entering into contracts of a civil, labor, fiscal and administrative
nature, conducive to the development of the corporate purpose; L) Providing to
third parties with personnel, with its own or others' equipment, specialized
technology and services relating to any of the corporate businesses.
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<PAGE>
FIRST PARAGRAPH: The exercise of the corporate purpose of the company and the
conduct of all the related, connected or complementary or accessory actions
essential for developing it, shall be governed by the rules of private law,
barring the exceptions which the law may provide.
SECOND PARAGRAPH: The company may grant personal or real securities to secure
obligations contracted by individuals or legal entities, following explicit
approval passed by the Board of Directors to this effect.
CHAPTER III. ARTICLE FIVE: CAPITAL, SHARES, SHAREHOLDERS.-
The authorized capital of the company is FOURTEEN BILLION PESOS
($14,000,000,000.00) LEGAL TENDER, represented in FOURTEEN BILLION
(14,000,000,000) registered shares, with a value of ONE PESO ($1.00) LEGAL
TENDER each. The subscribed capital is FOUR BILLION PESOS ($4,000,000,000.00)
LEGAL TENDER, divided into FOUR BILLION (4,000,000,000) registered SHARES with a
value of ONE PESO ($1.00) each. The paid-in capital of the company is FOUR
BILLION PESOS ($4,000,000,000.00), represented in FOUR BILLION (4,000,000,000)
registered SHARES with a face value of ONE PESO ($1.00) each, which has been
paid for by the shareholders constituting the company.
ARTICLE SIX: VARIATION IN CAPITAL.- The general meeting of shareholders may
increase or decrease the capital of the company, but if it is a question of
decreasing, it is to be subject to the requirements set forth by Article 145 of
the Commercial Code.
ARTICLE SEVEN: ISSUE OF SHARES.- The shares shall be placed in accordance with
the subscription regulations drawn up by the Board of Directors and authorized
by the Corporate Superintendent's Office, in the case of control by that entity.
In any event, shares may be issued with a preferred dividend and without a
voting right, under the terms of the law.
ARTICLE EIGHT: SECURITIES.- All the shares shall be registered and the security
or provisional certificate which proves his capacity of shareholder shall be
issued to each of the subscribers. In each subscription of shares, the
securities shall be issued within thirty
8
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ZK 005143
(30) days following the subscription of the respective contract.
ARTICLE NINE: CONTENT OF THE SECURITIES.- The securities shall be issued with
the characteristics which are set forth below: 1) They shall be issued on
safety paper numbered consecutively and shall bear the facsimile signature of
the President and the Secretary of the company. 2) The authorized capital, the
name and principal domicile of the company, the number, the date and the
notarial office for the articles of association and the number of the resolution
of the Corporate Superintendent's Office which authorized operation, if such is
the case. 3) The number of shares represented in each security and the face
value, the class and series letter of same. 4) The full name of the holder.
ARTICLE TEN: PROVISIONAL CERTIFICATES.- As long as the value of the subscribed
shares has not been paid in full, a provisional certificate shall be delivered
to the subscribers. The assignment of these certificates shall be subject to
the same conditions required for that of the definitive securities, and assignor
as well as assignee shall be jointly liable for the unpaid contribution. Once
said amount has been covered, the provisional certificate shall be replaced by
the corresponding definitive security.
ARTICLE ELEVEN: TRANSFER AND SUBSCRIPTION.- Neither the company nor the
shareholders shall have priority in the transfer of shares or in the issue and
subscription of same which might be approved by the Board of Directors of the
company. Transfers shall be subject only to the provisions in Article ten of
these bylaws.
ARTICLE TWELVE: EFFECT OF THE OWNERSHIP OF SHARES.- The ownership of any number
of shares entails for their owner the acceptance of the bylaws of the company,
regardless of the source of his security.
ARTICLE THIRTEEN: RULES FOR THE TRADING OF SHARES.- So that the trading of
shares may become effective with respect to the company and to outsiders, their
entry in the Shareholders' Registry Book shall be required through a written
order from the assignor or through an endorsement made on the security; the new
entry and the forwarding of the security to the assignee shall be effected after
that of the assignor has been canceled. In
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order to trade shares encumbered with a pledge, the authorization of the
creditor shall be required.
ARTICLE FOURTEEN: RIGHTS OF THE SHAREHOLDERS.- Without prejudice to the others
which the law, the regulations and the bylaws grant thereto, the shareholders
shall have the following rights:
1) That of participating in the deliberations of the meeting and voting
therein; 2) That of receiving a portion of the corporate profits which the
balance sheets show at the end of the fiscal year, in proportion to the value of
their shares; 3) That of trading their shares under the terms of these bylaws;
4) That of freely examining, within the fifteen (15) working days prior to the
ordinary sessions of the meeting, the books and other documents to which
Articles 446 and 447 of the Commercial Code refer; 5) That of receiving, in
proportion to the value of their shares, a portion of the corporate assets at
the time of liquidation, after the outside liabilities of the company have been
paid.
CHAPTER IV. MANAGERIAL BODIES OF THE COMPANY.
ARTICLE FIFTEEN: ADMINISTRATION OF THE COMPANY.- The company shall be managed by
the general meeting of shareholders, the Board of Directors, the President and
the alternates for the President, in accordance with the responsibilities and
functions which are indicated in these bylaws. In addition, the company shall
have an auditor who shall serve as a permanent control body.
ARTICLE SIXTEEN: GENERAL MEETING OF SHAREHOLDERS. COMPOSITION AND FUNCTIONS.-
The shareholders convened within the conditions indicated in these bylaws
constitute the meeting. In addition to those which are not allocated in the
bylaws to other bodies of the company, the functions of the meeting shall be the
following: 1) To set up the measures conducive to ensuring the fulfillment of
the corporate purpose of the company. 2) To consider the reports and projects
submitted to it by the Board of Directors, the President, the alternates for the
President, the auditor and the committees which the same meeting may appoint.
3) To consider and to approve or disapprove the balance sheets and accounts for
the end of the fiscal year and to close or annotate the accounts which are to
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ZK 005146
be submitted therewith. 4) To order the setting up of the reserves which, in
addition to the legal ones, it may deem advisable, and possibly to discontinue
them. 5) To determine and to decide, in accordance with the law, the
distribution of the profits which are set forth on the balance sheet, once the
sums which are to be posted to the legal reserve or those which the same meeting
sets up are deducted; to determine the amount of the profit to be distributed,
the period and the manner of payment of the dividends. 6) To agree on the
manner of write-off of losses, if there are any. 7) To examine the condition of
the company and to consider the memorandum or annual report presented thereto,
separately or jointly, by the Board of Directors, the President and his
alternates, concerning the progress of same. 8) To consider the auditor's
report. 9) To approve the appraisal of the assets which are to be received in
payment of subscription of shares. 10) To authorize any issue of shares. 11)
To decide on the increase or decrease of company capital in accordance with
these bylaws and the law. 12) To order the relevant legal actions to be brought
against the administrators and other executive officers or the auditor, without
prejudice to the duties which the laws impose on the other bodies of the company
concerning the matter. 13) To appoint committees assigned to carry out some of
the special functions of the meeting which, because of their nature, might be
able to be delegated. 14) To decide on the structure of the fiscal auditor's
office and to approve the annual budget therefor. 15) To freely elect and
remove the members of the Board of Directors, principals and alternates, the
auditor or his alternates or, in place of this auditor, to designate an
accounting group or firm to perform the audit in accordance with the legal
provisions. In the election of the Board of Directors, the meeting is to see to
it that representation directly proportional to the shareholding exists thereon.
16) To set the remunerations for the Board of Directors and the auditor and to
agree on that for the agents on whom it confers assignments which by their
characteristics entail fees. 17) To Revise the bylaws of the company. 18) To
decide on the dissolution or extension of the
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company and to authorize its transformation or merger with another company or
companies. 19) The others which may correspond thereto in accordance with the
laws.
ARTICLE SEVENTEEN: ORDINARY SESSIONS.- The ordinary sessions of the meeting
shall be held each year within the first three (3) months of the year. If the
meeting is not convened, it shall be held in its own right on the first business
day of the month of April at ten (10:00) o'clock in the morning, on the premises
where the administration operates, in the location of the principal domicile of
the company.
ARTICLE EIGHTEEN: EXTRAORDINARY SESSIONS.- Extraordinary sessions shall be held
when the Board of Directors, the President, the alternates for the President,
the auditor may deem it advisable, or when a plurality of shareholders who
represent no less than twenty-five percent (25%) of the subscribed shares so
requests. Also, the Superintendent's Office may issue the notice of meeting
when the request is presented by a plurality of shareholders who represent one
fifth of the subscribed capital (paragraph 3, Article 423 of the Commercial
Code).
ARTICLE NINETEEN: NOTICE OF MEETING.- Any notice of meeting of shareholders
shall be effected by written communication which shall be sent to the most
recent address of the shareholder which appears on record with the
administration. The agenda shall be inserted in the text of the notice of
meeting. The notice of meeting for the ordinary session of the meeting of
shareholders shall be effected at least fifteen (15) working days in advance of
the date on which the session is to be held, excluding the days of the notice of
meeting and the session. For extraordinary sessions, an advance notice of eight
(8) calendar days shall be sufficient.
ARTICLE TWENTY: LOCATION OF THE MEETING.- The Meeting shall be held at the
location of the principal domicile of the company, on the day, at the time and
in the place indicated in the text of the notice of meeting, It likewise may be
held, without prior invitation and at any location, when all of the subscribed
shares are represented. The extraordinary meeting may not pass resolutions on
topics not included on the agenda inserted in the notice of meeting, but once
the latter is exhausted and by decision of no
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ZK 005147
less than seventy percent (70%) of the shares represented, other topics may be
considered. In any event and at any time, administrators and other executives
whose appointment devolves thereon may be removed.
ARTICLE TWENTY-ONE: VOTES.- For resolutions of the meeting, one vote shall
correspond to each share, without any restriction. Accordingly, the provision
contained in the first (1st) paragraph of Article 428 of the Commercial Code
shall not be applicable.
ARTICLE TWENTY-TWO: QUORUM FOR DELIBERATING.- The meeting shall deliberate at
its ordinary or extraordinary sessions with the attendance of a plurality of the
individuals who hold or represent at least fifty-one percent (51%) of the
subscribed shares.
ARTICLE TWENTY-THREE: QUORUM FOR RESOLVING.- For validity of the resolutions of
the meeting, the favorable vote of at least fifty-one percent (51%) of the
subscribed shares shall be required, except in cases in which a different
majority may be required in the law or in these bylaws. When the meeting is
convened in an ordinary or extraordinary session, if the quorum to which this
Article refers is not attained, a new notice of meeting shall be effected. At
the meeting deriving from this last notice of meeting, deliberations and
resolutions shall be effected with a plurality of individuals who hold any
number of shares, except in the cases in which a special deciding quorum may be
required. The new meeting may not be held before the following ten (10)
business days, or after the subsequent thirty (30) business days, calculated
starting from the date set for the meeting in the first notice of meeting.
ARTICLE TWENTY-FOUR: SUSPENSION AND CONCLUSION OF DELIBERATIONS.- The
deliberations of the meeting may be suspended as many times as necessary, to be
resumed later, within a period which is not to exceed three (3) days by a
resolution adopted by a plurality of those in attendance which corresponds to at
least fifty-one percent (51%) of the shares represented at the meeting. This
rule notwithstanding, the individual who is presiding over the session may order
the recesses customary at this type of meeting.
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ARTICLE TWENTY-FIVE: EXTENSION OF DELIBERATIONS.- The deliberations may not be
extended for more than three (3) days, if the entirety of the subscribed shares
is not represented.
ARTICLE TWENTY-SIX: ELECTIONS.- Whenever it is a question of electing two or
more individuals to make up the same Board, committee or managerial body, the
electoral quotient system shall be applied. This shall be determined by
dividing the total number of valid votes cast by that of the individuals who
are to be elected. The counting of votes shall begin with the slate which has
obtained the greatest number of votes and so on in descending order. From each
slate there shall be declared as elected as many names as times the quotient
goes into the number of votes cast for same. If posts remain to be filled,
these shall correspond to the highest remainders, counting them also in
descending order. In the case of a tie in the remainders, a drawing shall
decide. Blank ballots are counted in order to determine the electoral quotient.
The individuals who are elected may not be replaced in partial elections without
undertaking a new election, in which the electoral quotient system is to be
employed, unless the vacancies are filled unanimously.
ARTICLE TWENTY-SEVEN: MINUTES.- An official transcript of what occurred at the
session shall be set down in the book of minutes of the meeting, placed on
record and paginated at the Chamber of Commerce of the corporate domicile. The
minutes of any session shall begin with the serial number which corresponds
thereto and shall state at least the place, the date and the time of the
meeting, the form and advance time of the notice of meeting, the list of those
in attendance with the indication of the number of shares owned or represented
and the total shares, the subjects taken up, the resolutions adopted and the
number of votes in favor, against and blank, the records made by those in
attendance, and the date and time of closing. The meeting may approve or protest
the minutes at the same meeting to which the latter correspond or delegate such
power to a plural committee which shall submit a written report. The minutes are
to be signed by the Chairman of the meeting and by the Secretary. Copies of the
minutes approved by the Secretary and by a representative of the company, shall
be sufficient proof of the events which are set forth therein, as long as the
falsity of the respective copy or minutes
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ZK 005148
is not demonstrated.
ARTICLE TWENTY-EIGHT: BOARD OF DIRECTORS.- The company shall have a Board of
Directors composed of three (3) principal directors, each one of whom shall have
an alternate individual who shall replace him in his temporary or extended
absences.
ARTICLE TWENTY-NINE: ELECTION.- The principal and alternate members of the Board
of Directors shall be elected and removed freely by the general meeting of
shareholders.
ARTICLE THIRTY: TERM.- The term of service of the Board of Directors shall be
one (1) year, which shall begin as of the 1st of April of each year and shall
end on March 31st of the following year.
PARAGRAPH: The members of the Board of Directors shall remain in their posts as
long as they are not removed.
ARTICLE THIRTY-ONE: FUNCTIONS OF THE BOARD OF DIRECTORS.- In addition to the
special functions which the meeting entrusts thereto, the Board of Directors
shall have the following: 1) To set the course and general guidelines for the
management of the company in accordance with the directives established by the
general meeting of shareholders. 2) To comply with the bylaws and to ensure
compliance with them, and in general to make decisions in order that the company
may fulfill its purposes. 3) To request information concerning his work from
any executive of the company and to advise the President and his alternates, on
the matters on which it is asked for an opinion or when it may consider it
advisable to do so. 4) To hear the President, the alternates for the Vice-
President and the auditor as many times as it may deem necessary. 5) To
authorize the establishment of offices, agencies and branches outside the
principal domicile of the company. 6) To propose the revisions to the bylaws
which it may consider advisable. 7) To hear and to decide on resignations
tendered by the executives whose appointment is the responsibility thereof. 8)
To authorize the participation of the company in other companies. 9) To
regulate the placement of company shares. 10) To freely appoint and remove the
President and his alternates; to inform them of their
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remuneration and to decide on their resignations, vacations and leaves of
absence. 11) To authorize extraordinary investments in cases of emergency in
order to ensure the normal development of the company. 12) To examine at any
time the accounting books, the correspondence and in general the documents of
the company as well as the statement of holdings and to examine and to approve
or disapprove the general budget and the accounts of the company submitted by
the President and his alternates. 13) To convene the general meeting for
extraordinary sessions without prejudice to the statutory powers of other bodies
or executives. 14) To appoint special working committees. 15) To submit
annually for the consideration of the meeting at its ordinary session and in
association with the President and his alternates and following their study and
approval, the balance sheet, accounts and supporting documents for the company
and the plan for distribution of profits or for write-off or posting of losses.
16) To present annually to the meeting at its ordinary sessions and in
association with the President and his alternates, or separately, a report
concerning the economic and financial position of the company and concerning the
management conducted during its term of office, accompanied by the relevant
recommendations. 17) To study the reports concerning the economic and financial
position of the company. 18) To present to the meeting, at its ordinary and
extraordinary sessions, the other reports and recommendations which it may deem
advisable. 19) To delegate to the President and his alternates one or some of
its functions which, in accordance with the law, may be delegated. 20) To
authorize the alternates for the President of the company to execute actions or
contracts the amount of which exceeds the sum which corresponds in pesos to the
amount of SEVEN HUNDRED (700) MINIMUM MONTHLY LEGAL WAGES IN FORCE.
ARTICLE THIRTY-TWO: ORDINARY SESSIONS.- The Board of Directors shall meet in
ordinary sessions at least once a month, on the dates which the Board itself
shall indicate in accordance with the requirements of the firm.
ARTICLE THIRTY-THREE: EXTRAORDINARY SESSIONS.- Extraordinary sessions of the
Board may be convened by the President, the alternates for the President, the
auditor or by at least two (2) members of the Board who are acting as
principals, to take up urgent
16
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ZK 005149
matters.
ARTICLE THIRTY-FOUR: NOTICE OF MEETING.- The notice of meeting for the Board
shall be effected by letter no less than three (3) calendar days in advance,
including that of the notice of meeting. The agenda shall be included in the
aforesaid notice of meeting. Nonetheless, the Board may convene without a
notice of meeting when all those who comprise it are in attendance. The agenda
shall be included in the notice of meeting.
ARTICLE THIRTY-FIVE: PLACE OF THE MEETING.- The Board of Directors shall meet on
the date, at the time and in the place stated in the notice of meeting or as
determined by all those who comprise it.
ARTICLE THIRTY-SIX: VOTES.- Each one of the members shall have one vote.
ARTICLE THIRTY-SEVEN: QUORUM.- The Board of Directors shall deliberate and shall
pass resolutions with the presence and the favorable vote of the majority of its
members.
ARTICLE THIRTY-EIGHT: MINUTES.- An official transcript of what occurred at the
meetings shall be set down in the book of minutes of the Board of Directors,
placed on record and paginated at the Chamber of Commerce. The minutes of any
session shall begin with the serial number which corresponds thereto and shall
state at least the place, the date and the time of the meeting, the form and
advance time of the notice of meeting, the list of those in attendance, the
matters taken up, the resolutions adopted and the number of votes cast in favor,
against and blank, the records made by the participants and the date and time of
closing. The Board may approve or protest the minutes at the same meeting to
which the latter correspond or at the following meeting, or delegate this power
to a plural committee which shall provide a written report. All the minutes are
to be signed by the Chairman and the Secretary and in their absence by whomever
is taking their place.
ARTICLE THIRTY-NINE: CONCERNING THE PRESIDENT.- The company shall have a
President and two alternates, who shall replace him in his temporary or extended
absences.
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ARTICLE FORTY: FUNCTIONS OF THE PRESIDENT.- The President of the Company shall
be elected by the general meeting of shareholders for periods of one year and
such designation may fall to an individual who is or is not a shareholder of the
company. The President shall remain in his post as long as he is not removed.
Functions of the President are:
1. To preside over the sessions of the meeting of shareholders, whether ordinary
or extraordinary.
2. To convene sessions of the meeting of shareholders and of the Board of
Directors for the purpose of discussing matters relating to the progress of the
company.
3. To be answerable to the meeting of shareholders or to the Board of Directors
for the instructions which he conveys and for the resolutions which it adopts
during its term of office.
4. To handle the legal representation of the company.
5. To execute any type of action or contract for the development of the
corporate purpose of the company, without limit of amount.
6. To determine the administrative organization chart of the company and its
revisions and also to effect the corresponding appointments or dismissals.
7. To authorize his alternates, without regard to amount, to invest the
available funds which are not required for the immediate operations of the
company and to execute actions or contracts without limit of amount.
ARTICLE FORTY-ONE: SECRETARY GENERAL.- The company shall have a Secretary
General, who likewise shall be that of the meeting and the Board of Directors.
ARTICLE FORTY-TWO: ELECTION.- The Secretary General shall be elected and removed
freely by the Board of Directors and shall act under the direction of the
President.
ARTICLE FORTY-THREE: FUNCTIONS.- In addition to those which the meeting, the
President, the alternates for the President and the Board of Directors
occasionally may assign thereto, the Secretary General shall have the following
functions: 1) To prepare for the sessions of the general meeting and the Board
of Directors. 2) To draw up, in
18
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ZK 005150
agreement with the alternates for the President, the terms and agendas for the
sessions and in general to take the measures necessary for the proper
functioning thereof. 3) To draw up and read the minutes of the meeting and the
Board of Directors; to sign them after they are approved by the respective
statutory body and have been signed by the Chairman and to maintain the book
where these are entered. 4) To receive, handle and retain the proposals and
records which are presented to the meeting, the President, the alternates or the
Board of Directors, setting down an official transcript of what has been decided
with respect thereto. 5) To provide the reports which the general meeting, the
President, the alternates for the President or the Board of Directors might
request thereof with respect to the matters specific to the Office of the
Secretary. 6) To communicate to the interested party the decisions of the
general meeting, the President, the alternates for the President or the Board of
Directors. 7) To sign the share certificates jointly with the President or his
alternates. 8) To see to it that the shareholders' registry book is maintained
in due form and to keep it under its care. 9) To see to it that the receipt,
recording, opening, distribution, answering, sending and filing of the
correspondence of the general meeting, the President, his alternates and the
Board of Directors is handled in proper manner. 10) To provide for the
organization and safekeeping of the document files under its care. 11) To issue
certified copies of the documents the originals of which remain in the company
and concerning which confidentiality need not be maintained. 12) To certify
concerning all the acts and circumstances which relate to the life and
development of the company. 13) To make the necessary arrangements for the
organization and maintenance of the general file. 14) To record new
shareholders in the case of transfer of shares, following written order from the
assignor and after the procedure provided for in these bylaws has been carried
out. 15) To assist the President and his alternates in the performance of their
functions. 16) The others which the general meeting, the Board of Directors,
the President and his alternates may assign thereto.
CHAPTER V. ARTICLE FORTY-FOUR. CONCERNING THE AUDITOR: AUDITOR.- The company
shall have an auditor and an alternate for same, who shall replace him in his
temporary or extended absences.
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ARTICLE FORTY-FIVE: ELECTION OF THE AUDITOR.- The auditor and his alternate
shall be elected and removed freely by the general meeting of shareholders.
ARTICLE FORTY-SIX: TERM.- The term of the auditor and his alternate shall be one
(1) year, which shall begin as of the 1st of April of each year and end on March
31st of the following year, and both may be reelected indefinitely.
PARAGRAPH: The auditor and his alternate shall remain in their posts as long as
they are not removed.
ARTICLE FORTY-SEVEN: FUNCTIONS.- Aside from the powers and duties which
occasionally may be assigned thereto by the meeting, functions of the auditor
shall be: 1) To organize and effect the control of the accounting and financial
operations of the company and the status of its assets, subject to the law and
within the guidelines and instructions determined by the meeting. 2) To submit
for consideration by the meeting the plans relating to the auditor's office with
respect to its administrative structure with specification of its facilities,
services of the latter and number of employees with their functions and
remunerations. 3) To freely appoint and remove the employees of the auditor's
office whose positions have been created by the general meeting. 4) To submit
annually to the meeting the expense budget for the auditor's office, accompanied
by the data necessary for its proper consideration. 5) To monitor and check
that the accounting is maintained in accordance with the law and to examine in
an ongoing manner the accounting operations and the corresponding internal and
external supporting documents, in order to determine the accuracy of same with
power to prescribe technical standards for their improved control and to request
of the Board of Directors and all the executives, data, documents and, in
general, collaboration in order that said control may be effected
satisfactorily. 6) To see to it that the books, supporting documents, machines
and other elements used in the accounting are maintained and safeguarded in due
manner. 7) To see to it that the book of minutes of the meeting of shareholders
and the Board of Directors and the shareholders' registers are maintained and
kept in order and to examine them at any time it may deem advisable. 8) To make
sure that the company operations
20
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ZK 005151
are in conformity with the bylaws and the resolutions of the meeting and the
Board of Directors, with power to review the methods of receipt, recording,
opening, distribution, answering, sending and filing of the correspondence and
to revise them at any time. 9) To exercise ongoing control over the assets of
the firm and those of others which the latter has in its possession, with power
to convey instructions and to perform inspections, reviews, cash audits,
inventories and in general to use the means conducive to protecting said assets
and verifying their status. 10) To convene the general meeting or the Board of
Directors in extraordinary sessions when the interests of the company or the
need to comply with the bylaws so requires. 11) To attend the general meeting
with a right to speak but without a vote. 12) To attend the Board of Directors
meeting with a right to speak but without a vote, provided he is called
therefor. 13) To approve the general balances at the end of the fiscal year
with his signature, when he has found them to be correct. 14) To draw up an
opinion on each of said balances in which there is stated at least: A) Whether
he has had available the information necessary for its examination. B) Whether
the recommended accounting-practice procedures have been followed in the course
of the review. C) Whether in his opinion the accounting is maintained in
accordance with legal standards and accounting practice and whether the
operations recorded are in conformity with the bylaws and the decisions of the
general meeting, the President, his alternates and the Board of Directors,
respectively. D) Whether the balance sheet and the profit and loss statement
accurately correspond to the books and whether, in his judgment, the first
presents in a reliable manner, in accordance with generally accepted accounting
standards, the financial position of the company at the close of the period
reviewed, and whether the second correctly expresses the result of the
operations of said period. E) The reservations, qualifications, suggestions
which he may have concerning the financial statements. 15) To draw up an annual
report for the ordinary session of the meeting in which there is stated at
least: A) Whether the actions of the members of the Board of Directors, the
President, his alternates, and the highest executives of the company were in
accordance with the bylaws and the decisions and
21
<PAGE>
instructions of the general meeting, the President, his alternates and the Board
of Directors respectively. B) Whether the books, supporting documents, machines
and other accounting elements, as well as the books of minutes and shareholders'
register are adequately maintained. C) Whether the correspondence is attended
to and maintained adequately. D) Whether there are measures for internal
control, maintenance and safekeeping of the corporate assets and those of others
which may be in the possession of the firm and, if so, whether such measures are
adequate. E) The manner in which the budget for the auditor's office was
implemented during the fiscal year. 16) To inform officially, in a timely
manner and in writing, the meeting, the Board of Directors, the President and
his alternates, as the case may be, concerning irregularities which may occur in
the internal functioning of the company or in its transactions with outsiders.
17) To provide to the meeting the reports which it may request, on everything
relating to the progress of the company and the performance of his assignment.
18) To provide to the Board of Directors, the President and his alternates, all
the reports which they may request of him and which are not incompatible with
the control functions which the auditor is to exercise over one and the other.
19) To maintain strict confidentiality concerning the functions, actions,
documents and in general concerning matters relating to the company of which he
may have knowledge by reason of his assignment and which should be kept
confidential, without prejudice to communicating them, subject to the
corresponding legal or statutory procedure, to those who, pursuant to the law or
the bylaws, might have a right to know them. 20) To comply with and to ensure
compliance with the laws, the bylaws and the resolutions of the meeting. 21) To
perform the audit in such manner that it does not interfere with the functions
of the other corporate bodies or hinder or paralyze the progress of the company.
ARTICLE FORTY-EIGHT: AUDIT BY A LEGAL ENTITY.- The audit may be performed by an
accounting firm under the terms of the second (2nd) section of Article two
hundred fifteen (215) of the Commercial Code. The accounting firm with which
services are contracted first is to prove its capacity as a legal entity and its
legal representation. The
22
<PAGE>
ZK 005152
corresponding contract shall require the prior approval of the general meeting
and its provisions are to allow for compliance with the rights and obligations
which the law and these bylaws assign to the auditor.
CHAPTER VI. BALANCE SHEET, PROFIT AND LOSS STATEMENT. ARTICLE FORTY-NINE:
BALANCE SHEET.- A balance sheet shall be drawn up at the close of the company's
fiscal year, which shall run from the first (1st) of January to the thirty-first
(31st) of December of each year. The accounting shall be maintained in
accordance with standards accepted by the law by means of procedures which allow
for the recording of operations in a complete and reliable manner and knowledge
and proof of the general conditions of the firm's business.
ARTICLE FIFTY: ATTACHMENTS TO THE BALANCE SHEET.- The year-end balance sheet
which the Board of Directors and the President and his alternates are to present
to the general meeting shall be accompanied by the following documents: 1) The
complete detail of the profit and loss account, with stipulation of the
appropriations made by way of depreciation of fixed assets and amortization of
intangibles. 2) A plan for distribution of divisible profits, after deduction
of the sum calculated for the payment of income and additional taxes for the
corresponding fiscal year. 3) The report which the Board of Directors, the
President and his alternates are to present to the general meeting of
shareholders concerning the economic and financial position of the company
furthermore shall contain: A) The detail of expenditures by way of salaries,
fees, travel allowances, representation costs, transportation expenses, and any
other type of remunerations which each of the managing executives of the company
might have collected. B) The listing of expenses for the same items indicated
in the preceding clause, incurred in favor of consultants or agents, relating to
procedures conducted outside the company. C) The detail of transfers of assets
free of charge or in comparable manner. D) The detail of expenses for
advertising, public relations, one distinguished from the other. E) The list
23
<PAGE>
of assets of the company abroad and its obligations in foreign currency. F) The
detail of the company's investments in other companies, with stipulation of
domestic and foreign companies and their respective domiciles. 4) A written
report from the President concerning his management, which is to include the
measures the adoption of which he recommends to the meeting. 5) The auditor's
report.
ARTICLE FIFTY-ONE: PROFIT AND LOSS STATEMENT.- The corresponding profit and loss
statement shall be drawn up at the close of each fiscal year. In order to
determine the results of the operations, it shall be necessary first to
appropriate, in accordance with the law and accounting practices, the items
required to provide for depreciation, devaluation and guarantee of net worth or
the funds intended for legal, statutory or voluntary reserves. Inventories
shall be evaluated in accordance with the methods permitted by the tax rules.
CHAPTER VII. RESERVES. ARTICLE FIFTY-TWO: RESERVES.- The Company shall set up
a legal reserve which shall amount to at least fifty percent (50%) of the
subscribed capital, constituted with ten percent (10%) of the net earnings for
each fiscal year. Whenever this reserve falls below the legal limit, ten
percent (10%) of the aforesaid earnings shall be reappropriated until again
attaining this limit. In addition to the reserves ordered by the law, the
meeting may set up incidental ones which it may deem advisable, provided that
they have a specific intended use and are approved and substantiated according
to the law.
CHAPTER VIII. MISCELLANEOUS. ARTICLE FIFTY-THREE: EARNINGS.-Subject to the
rules set forth in the law relating to earnings, those approved by the meeting
which are substantiated by reliable balance sheets shall be distributed among
the shareholders, after the legal and incidental reserves and the appropriations
for payment of taxes have been set up. If the sum of the legal and incidental
reserves exceeds one hundred percent (100%) of the subscribed capital, the
mandatory percentage of net earnings which the company is to distribute
according to the law shall amount to seventy percent (70%). Barring
determination to the contrary, approved with votes which represent at least
seventy percent (70%) of the shares represented at the meeting, the
24
<PAGE>
ZK 005153
company is to distribute by way of dividend among its shareholders, in
proportion to the paid part of the face value of the shares for each year, no
less than fifty percent (50%) of the net earnings for each fiscal year or of the
remainder of same if it had to wipe out losses for prior fiscal years.
ARTICLE FIFTY-FIVE: PAYMENT OF DIVIDENDS.- The payment of dividends shall be
made in cash at such times as the meeting may approve and to those who have the
capacity of shareholders at the time each payment becomes due. Nonetheless,
dividends may be paid in the form of shares of the same company which were
issued, if the meeting so decides by means of the vote of at least eighty
percent (80%) of the shares represented at the meeting. Lacking this majority,
such shares may be delivered to the shareholders by way of dividend only if the
meeting so orders.
ARTICLE FIFTY-SIX: LOSSES.- The losses, if any, shall be wiped out with the
reserves intended for that purpose and in their absence, with the legal reserve.
Reserves the purpose of which might be to absorb specific losses may not be used
to cover other different ones, except if the meeting so decides. Should the
legal reserve be insufficient to wipe out the decrease in the capital, there
shall be applied for this purpose the corporate profits for the following fiscal
years, until said decrease is wiped out, before these may have any other use.
The meeting may take and order measures conducive to the restoration of fifty
percent (50%) of the subscribed capital which may have been lost, such as the
sale of appraised corporate assets, reduction of the subscribed capital effected
in accordance with the law or the issue of new shares. Any of these measures is
to be taken within six (6) months following the determination of the loss.
Otherwise the dissolution of the company shall be undertaken.
ARTICLE FIFTY-SEVEN: CORPORATION DISSOLUTION.- The company shall be dissolved:
1) Because of the impossibility of developing the corporate purpose. 2) Because
of reduction in the number of shareholders to fewer than five (5). 3) Because
of declaration
25
<PAGE>
of bankruptcy. 4) Because of resolution of the general meeting, adopted with
the vote of shareholders who represent at least seventy percent (70%) of the
subscribed capital. 6) [sic] Because of decision of a competent authority. 7)
When losses occur which reduce the net worth below fifty percent (50%) of the
subscribed capital. 8) When ninety-five percent (95%) or more of the subscribed
shares come to belong to a sole shareholder. 9) Because of the other grounds
stipulated in the law. 10) Because of expiration of the term provided for its
duration.
ARTICLE FIFTY-EIGHT: CORPORATE LIQUIDATION.- When the company is dissolved, its
liquidation shall be started immediately. No new operations may be undertaken
which involve the exercise of its purpose, and its legal capacity shall be
limited to the actions necessary to conclude the liquidation condition. Barring
explicit legal exception, any action unrelated to this purpose which may be
undertaken shall make the liquidator or liquidators and the auditor who have not
raised any objection liable in joint and unlimited manner. The words "in
liquidation" shall be added to the corporate name, and if this requirement is
not fulfilled, the liquidator or liquidators and the auditor who have not raised
any objection shall be answerable in joint and unlimited manner for the damages
which may occur. Aside from the provisions in these bylaws concerning
liquidation, the latter shall be governed by Chapter X of Title I of the second
volume of the Commercial Code.
ARTICLE FIFTY-NINE: ARBITRATION.- If with respect to the company, whether during
its existence, at the time of liquidation or subsequent thereto, some dispute
should arise among the partners or between the latter and the company or the
liquidator, which cannot be resolved directly by the interested parties, the
dispute shall be submitted to the ruling of a court of arbitration made up of
three arbitrators, who lawfully shall decide. The arbitrators shall be
appointed by the Chamber of Commerce of the corporate domicile, upon written
request of either of the interested parties, in which the matter or matters
which are to be the subject of decision are to be indicated. The court shall be
constituted, shall function and shall decide according to the laws in force.
ARTICLE SIXTY: PROHIBITIONS.- Without prejudice to those set forth in the laws
or in
26
<PAGE>
ZK 005137
other Articles of these bylaws, the prohibitions shall be of two types, namely:
1) For the company: That it shall not: A) Stand surety for obligations of third
parties without the authorization of the Board of Directors. B) Refuse to enter
in the shareholders' registry book the shares traded in accordance with the
appropriate practices. 2) For the auditor: That he may not: A) Be a shareholder
of the company. B) Be a partner in any affiliate or subsidiary thereof. C) Be
connected by marriage or family relationship, within the fourth degree of
consanguinity or first civil or second by marriage with members of the Board of
Directors or with the President or his alternates, the Secretary, the Treasurer,
the accountant or any other executive of the company. D) Hold or conclude
company contracts with the executives indicated in the immediately preceding
provision. E) Be a joint holder with any of said executives.
ARTICLE SIXTY-ONE: SANCTIONS.- Without prejudice to the actions established in
the law, the violation of any of the prohibitions set forth in the preceding
clauses shall result in loss of position for the executives involved, which
violation is to be decreed by the body which has made the appointment.
ARTICLE SIXTY-TWO: REVISIONS OF THE BYLAWS.- Resolutions for revisions of these
bylaws are to be approved by the meeting in a single discussion, in ordinary or
extraordinary sessions, by means of the vote corresponding to a plural number
which represents at least seventy percent (70%) of the subscribed shares. The
resolutions for revision are to be submitted for study by the Corporate
Superintendent's Office, in the case of control by this entity and once they
have been approved thereby, they shall be placed on official record by the
President of the Company or his alternates.
TRANSITORY ARTICLE: APPOINTMENTS.- The following appointments are made:
27
<PAGE>
BOARD OF DIRECTORS
A.
PRINCIPALS: ALTERNATES:
GONZALO CAICEDO TORO. VICTORIA E. MEZA Q.
C.C. 14,945,396 OF CALI. C.C. 38,863,026 OF BUGA.
GUILLERMO O. LOPEZ E. ANIBAL E. PEREZ
C.C. 16,614,481 OF CALI. C.C. 16,611,702 OF CALI.
JORGE ENRIQUE MARTINEZ. JAVIER SALGADO P.
C.C. 7,506,436 OF ARMENIA. C.C. 19,369,552 OF BOGOTA.
B. PRESIDENT: GUILLERMO O. LOPEZ E.
C.C. 16,614,481 OF CALI.
C. FIRST ALTERNATE: JORGE ENRIQUE MARTINEZ OCAMPO
C.C. 7,506,436 OF ARMENIA.
D. SECOND ALTERNATE: ANIBAL EDUARDO PEREZ
C.C. 16,611,702 OF CALI.
[C.C. = citizenship document]
E. Appointing to perform the task of audit for the company and by virtue of
the provisions in Article 203 and following of the Commercial Code, the
company PRICE WATERHOUSE, with domicile in Santafe de Bogota, which entity
shall assign to public accountants the task conferred thereby through a
private document which is to be recorded in due time with the Chamber of
Commerce of the corporate domicile.
5. READING AND APPROVAL OF THE MINUTES.
A recess then was declared for the drawing up of the minutes which, once
the session was resumed, were read and approved unanimously, and the
President and the Secretary of the meeting sign them for the record.
There being no further business, the session was closed at twelve noon (12 noon)
of the same 8th day of July of 1996.
/s/ /s/
GUILLERMO O. LOPEZ E. VICTORIA E. MEZA Q.
PRESIDENT SECRETARY
28
<PAGE>
ZK 005133
THE FOREGOING MINUTES ARE A TRUE COPY TAKEN FROM THEIR ORIGINAL, WHICH IS
ENTERED IN THE BOOK OF MINUTES OF THE MEETING OF SHAREHOLDERS OF THE COMPANY,
DULY RECORDED AT THE CHAMBER OF COMMERCE OF CALI ON THE 27TH DAY OF OCTOBER OF
ONE THOUSAND NINE HUNDRED NINETY-THREE (1993) UNDER NUMBER 74634.
(SIGNED) VICTORIA EUGENIA MEZA Q.
SECRETARY
THE MINUTES AND THE MEMORANDUM UP TO THIS POINT. This officially recorded
proceeding was drawn up on sheets of notarial paper numbers:
ZK005129/30/31/32/005143/005146/47/48/49/50/51/52/53/005137/005133
Once the officially recorded instrument is read to the appearing party, he
approves and signs it before me, the notary, to all of which I attest.
NOTARIAL FEES: $6,000,000/ASSESSMENTS: $3,000 DECREE 1681 of SEPTEMBER 16, 1996.
THE NOTARY INFORMS THE EXECUTING PARTIES OF THE REQUIREMENT OF PAYING THE
DEPARTMENTAL REGISTRATION TAX WITHIN TWO MONTHS FOLLOWING ITS EXECUTION (ART.
231 LAW [obliterated by initials] of 1995).
[Initials]
TRANSTEL S.A.
/s/
GUILLERMO O. LOPEZ ESQUIVEL
PRESIDENT AND LEGAL REPRESENTATIVE
[Initials and inked notarial stamps]
MARIA SOL SINISTERRA ALVAREZ
NOTARIAL OFFICE FOURTEEN OF CALI
[Each page of the original bears initials, inked notarial stamps, and the
printed notation "THIS PAPER IS WITHOUT ANY COST FOR THE USER."]
29
<PAGE>
EXHIBIT 4.1
================================================================================
TRANSTEL S.A.
12 1/2% Senior Notes due 2007
______________________________________
_____________________________
INDENTURE
Dated as of October 28, 1997
_____________________________
_____________________________
MARINE MIDLAND BANK
Indenture Trustee
_________________
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310(a)(1)................................................. 7.10
(a)(2).................................................. 7.10
(a)(3).................................................. N.A.
(a)(4).................................................. 7.10
(a)(5).................................................. N.A.
(b)..................................................... 7.10
(c)..................................................... N.A.
311(a).................................................... 7.11
(b)..................................................... 7.11
(c)..................................................... N.A.
312(a).................................................... 2.05
(b)..................................................... 11.03
(c)..................................................... 11.03
313(a).................................................... 7.06
(b)(1).................................................. 11.03
(b)(2).................................................. 7.06
(c)............................................... 7.06; 11.02
(d)..................................................... 11.06
314(a).............................................. 4.03; 11.02
(b)..................................................... N.A.
(c)(1).................................................. 12.04
(c)(2).................................................. 12.04
(c)(3).................................................. N.A.
(d).............................................. 10.03; 10.04
(e)..................................................... 11.05
(f)..................................................... N.A.
315(a).................................................... 7.01
(b)............................................... 7.05; 11.02
(c)..................................................... 7.01
(d)..................................................... 7.01
(e)..................................................... 6.11
316(a)(last sentence)..................................... 2.09
(a)(1)(A)............................................... 6.05
(a)(1)(B)............................................... 6.04
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
(a)(2).................................................. N.A.
(b)..................................................... 6.07
(c)..................................................... 2.13
317(a)(1)................................................. 6.08
(a)(2).................................................. 6.09
(b)..................................................... 2.04
318(a).................................................... 11.01
(b)..................................................... N.A.
(c)..................................................... 11.01
N.A. means not applicable.
</TABLE>
*This Cross-Reference Table is not part of the Indenture.
-ii-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE....................... 1
Section 1.01. Definitions............................................... 1
Section 1.02. Other Definitions......................................... 25
Section 1.03. Incorporation by Reference of Trust Indenture Act......... 26
Section 1.04. Rules of Construction..................................... 27
ARTICLE 2 THE NOTES........................................................ 27
Section 2.01. Form and Dating........................................... 27
Section 2.02. Execution and Authentication; Aggregate Principal Amount.. 28
Section 2.03. Registrar and Paying Agent................................ 29
Section 2.04. Paying Agent To Hold Assets in Trust...................... 30
Section 2.05. Holder Lists.............................................. 30
Section 2.06. Transfer and Exchange..................................... 31
Section 2.07. Replacement Notes......................................... 32
Section 2.08. Outstanding Notes......................................... 32
Section 2.09. Treasury Notes............................................ 32
Section 2.10. Temporary Notes........................................... 33
Section 2.11. Cancellation.............................................. 33
Section 2.12. Defaulted Interest........................................ 34
Section 2.13. CUSIP Number.............................................. 34
Section 2.14. Deposit of Monies......................................... 35
Section 2.15. Restrictive Legends....................................... 35
Section 2.16. Book-Entry Provisions for Global Security................. 37
Section 2.17. Special Transfer Provisions............................... 39
ARTICLE 3 REDEMPTION....................................................... 42
Section 3.01. Notices to Indenture Trustee.............................. 42
Section 3.02. Selection of Notes to Be Redeemed......................... 42
Section 3.03. Notice of Redemption...................................... 42
Section 3.04. Effect of Notice of Redemption............................ 43
Section 3.05. Deposit of Redemption Price............................... 44
Section 3.06. Notes Redeemed in Part.................................... 44
Section 3.07. Optional Redemption....................................... 44
Section 3.08. Mandatory Redemption...................................... 45
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 4 COVENANTS........................................................ 45
Section 4.01. Payment of Notes.......................................... 45
Section 4.02. Maintenance of Office or Agency........................... 46
Section 4.03. Reports................................................... 47
Section 4.04. Compliance Certificate.................................... 47
Section 4.05. Taxes..................................................... 49
Section 4.06. Stay, Extension and Usury Laws........................... 49
Section 4.07. Limitation on Restricted Payments......................... 49
Section 4.08. Limitation on Indebtedness................................ 51
Section 4.09. Limitation on Liens....................................... 54
Section 4.10. Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries.................................. 54
Section 4.11. Limitation on Preferred Stock of Subsidiaries............. 55
Section 4.12. Limitation on Asset Sales................................. 56
Section 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries........................ 58
Section 4.14. Limitation on Transactions with Shareholders and
Affiliates............................................... 59
Section 4.15. Limitation on Issuances of Guarantees by Restricted
Subsidiaries............................................. 60
Section 4.16. Limitation on Modifications to Certain Documents.......... 61
Section 4.17. Conduct of Business....................................... 61
Section 4.18. Change of Control......................................... 62
Section 4.19. Disbursement of Funds; Escrow Account..................... 64
Section 4.20. Payment of Additional Amounts............................. 64
ARTICLE 5 SUCCESSORS....................................................... 65
Section 5.01. Merger, Consolidation or Sale of Assets................... 65
Section 5.02. Successor Corporation Substituted......................... 65
ARTICLE 6 DEFAULTS AND REMEDIES............................................ 66
Section 6.01. Events of Default......................................... 66
Section 6.02. Acceleration.............................................. 68
Section 6.03. Other Remedies............................................ 69
Section 6.04. Waiver of Past Defaults................................... 69
Section 6.05. Control by Majority....................................... 70
Section 6.06. Limitation on Suits....................................... 70
Section 6.07. Rights of Holders of Notes to Receive Payment............. 71
Section 6.08. Collection Suit by Indenture Trustee...................... 71
Section 6.09. Indenture Trustee May File Proofs of Claim................ 71
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
Section 6.10. Priorities................................................ 72
Section 6.11. Undertaking for Costs.................................... 73
ARTICLE 7 INDENTURE TRUSTEE................................................ 73
Section 7.01. Duties of Indenture Trustee.............................. 73
Section 7.02. Rights of Indenture Trustee.............................. 75
Section 7.03. Individual Rights of Indenture Trustee................... 75
Section 7.04. Indenture Trustee's Disclaimer........................... 76
Section 7.05. Notice of Defaults....................................... 76
Section 7.06. Reports by Indenture Trustee to Holders of the Notes..... 76
Section 7.07. Compensation and Indemnity............................... 77
Section 7.08. Replacement of Indenture Trustee......................... 78
Section 7.09. Successor Indenture Trustee by Merger, etc............... 79
Section 7.10. Eligibility; Disqualification............................ 79
Section 7.11. Preferential Collection of Claims Against Company........ 80
Section 7.12. Appointment of Co-Trustee or Separate Trustee
ARTICLE 8 SATISFACTION AND DISCHARGE....................................... 81
Section 8.01. Satisfaction and Discharge of Indenture.................. 81
Section 8.02. Application of Monies for Satisfaction and Discharge..... 83
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER................................. 83
Section 9.01. Without Consent of Holders of Notes...................... 83
Section 9.02. With Consent of Holders of Notes......................... 84
Section 9.03. Compliance with Trust Indenture Act...................... 86
Section 9.04. Revocation and Effect of Consents........................ 86
Section 9.05. Notation on or Exchange of Notes......................... 87
Section 9.06. Indenture Trustee to Sign Amendments, etc................ 87
ARTICLE 10 COLLATERAL AND SECURITY......................................... 87
Section 10.01. Escrow and Disbursement Agreement........................ 87
Section 10.02. Recording and Opinions................................... 88
Section 10.03. Release of Amounts Deposited in the Escrow Account or
the Refinancing Account................................. 89
Section 10.04. Certificates of the Company.............................. 90
Section 10.05. Authorization of Actions to be Taken by the Indenture
Trustee Under the Escrow and Disbursement Agreement..... 91
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Section 10.06. Authorization of Receipt of Funds by the Indenture
Trustee Under the Escrow and Disbursement Agreement..... 91
Section 10.07. Termination of Security Interest......................... 91
ARTICLE 11 MISCELLANEOUS................................................... 92
Section 11.01. Trust Indenture Act Controls............................. 92
Section 11.02. Notices.................................................. 92
Section 11.03. Communication by Holders of Notes with Other Holders of
Notes................................................... 93
Section 11.04. Certificate and Opinion as to Conditions Precedent....... 93
Section 11.05. Statements Required in Certificate or Opinion............ 94
Section 11.06. Rules by Indenture Trustee and Agents.................... 94
Section 11.07. No Personal Liability of Partners, Directors, Officers,
Employees and Stockholders.............................. 94
Section 11.08. Governing Law............................................ 95
Section 11.09. No Adverse Interpretation of Other Agreements............ 96
Section 11.10. Successors............................................... 96
Section 11.11. Severability............................................. 96
Section 11.12. Counterpart Originals.................................... 96
Section 11.13. Table of Contents, Headings, etc......................... 96
</TABLE>
Exhibits
- --------
A - Form of Note
B - Form of Intercompany Note
C - Form of Pledge Agreement
D - Form of Subsidiary Guarantee
E - Form of Undertaking Letter
F - Form of Certificate to be delivered in connection with transfers to
Institutional Accredited Investors
G - Form of Certificate to be delivered in connection with transfers pursuant
to Regulation S
H - Form of Certificate to be delivered in connection with transfers pursuant
to Rule 144A
-vi-
<PAGE>
INDENTURE, dated as of October 28, 1997, between Transtel S.A., a
sociedad anonima organized under the laws of the Republic of Colombia (the
"Company"), and Marine Midland Bank, as trustee (the "Indenture Trustee").
The Company has duly authorized the creation of an issue of 12 1/2%
Senior Notes due 2007 (the "Notes") and, to provide therefor, the Company has
duly authorized the execution and delivery of this Indenture. All things
necessary to make the Notes, when duly issued and executed by the Company, and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding agreement of the Company, have been
done.
The Company and the Indenture Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the Notes
(initially the Transtel Pass Through Trust, a special purpose Delaware business
trust, will be the sole Holder of the Notes):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Restricted Subsidiary of such specified Person or
indebtedness incurred by such Person in connection with the acquisition of
assets, including, without limitation, Indebtedness incurred or assumed in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Restricted Subsidiary of such specified Person or the acquisition
of such assets, as the case may be.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
<PAGE>
"Affiliate Minority Shareholder" at any time shall mean any minority
shareholder of a Restricted Subsidiary which is an Affiliate (other than a
Restricted Subsidiary) or Related Person (other than a Restricted Subsidiary) of
the Company.
"Agent" means any Registrar, Paying Agent or Authenticating Agent.
"Annualized Pro Forma EBITDA" means with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter preceding the date of
calculation for which financial statements are then available multiplied by
four.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Note or beneficial interest therein, the rules
and procedures of the Depository for such Global Note, Euroclear and Cedel, in
each case to the extent applicable to such transaction and as in effect from
time to time.
"Asset Acquisition" means (i) an Investment by the Company or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries or (ii) an
acquisition by the Company or any of its Restricted Subsidiaries of the property
or assets of any Person other than the Company or any of its Restricted
Subsidiaries that constitute substantially all of a division or line of business
of such Person.
"Asset Sale" means any sale, transfer or other disposition (or series
of related sales, leases, transfers or dispositions) in one transaction or a
series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) any of the Capital Stock of any Restricted Subsidiary, (ii)
all or substantially all of the property or assets of an operating unit or
business of the Company (other than Capital Stock of the Company) or any of its
Restricted Subsidiaries or (iii) any other property or assets of the Company or
any of its Restricted Subsidiaries outside the ordinary course of business of
the Company or such Restricted Subsidiary and, in each case, that is not
governed by the provisions of this Indenture applicable to mergers,
consolidations and sales of assets of the Company; provided that (A) sales or
other dispositions of inventory, receivables and other current assets, (B) sales
or other dispositions of equipment that has become worn out, obsolete or damaged
or otherwise unsuitable for use in connection with the business of the Company
or its Restricted Subsidiaries, (C) sales and other dispositions constituting
Restricted Payments and Permitted Investments made in compliance with the terms
of this Indenture, (D) sales or other dispositions of assets with a Fair Market
Value (as certified in an Officers' Certificate) not in excess of $500,000 and
(E) issuances, sales or other dispositions of shares of Capital Stock of
Unrestricted
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Subsidiaries and issuances, sales or other dispositions of shares of Capital
Stock of Restricted Subsidiaries effected in accordance with Section 4.10;
provided, in each case set forth in clause (E), that the consideration received
therefor by the Company, the Unrestricted Subsidiary or the Restricted
Subsidiary, as the case may be, has at least substantially equal market value to
the Company, the Unrestricted Subsidiary or such Restricted Subsidiary as the
shares of Capital Stock so issued, sold or disposed of (as determined by the
Board of Directors whose good faith determination shall be conclusive and
evidenced by a Board Resolution) shall not be included within the meaning of
"Asset Sale."
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Bank Indebtedness" means loans made by banks, trust companies and
other institutions principally engaged in the business of lending money to
businesses to the Company or a Restricted Subsidiary under a credit facility,
loan agreement or similar agreement.
"Board of Directors" means the Board of Directors of the Company or
any committee of such Board of Directors duly authorized to act with respect to
this Indenture from time to time.
"Board Resolution" means a copy of a resolution, certified by the
secretary of the duly convened meeting or the legal representative or statutory
auditor of the Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification, and delivered
to the Indenture Trustee.
"Business Day" means a day (other than a Saturday or Sunday) on which
the Depository, Euroclear, Cedel and banks in New York, Delaware and Colombia
are open for business.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether outstanding at
the Issue Date or issued after the Issue Date, including, without limitation,
all Common Stock and Preferred Stock, and any and all rights, warrants or
options exchangeable for or convertible into any thereof.
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"Capitalized Lease" means, as applied to any Person, any lease or
license of, or other agreement conveying the right to use, any property (whether
real, personal or mixed, movable or immovable) of which the present value of the
obligations of such Person to pay rent or other amounts is required, in
conformity with U.S. GAAP, to be classified and accounted for as a finance lease
obligation; and "Capitalized Lease Obligation" is defined to mean the
capitalized present value of the obligations to pay rent or other amounts under
such lease or other agreement, determined in accordance with U.S. GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 365 days or less issued or directly and fully guaranteed or insured
by the United States of America or Colombia or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of America
or Colombia, as the case may be, is pledged in support thereof); (ii)
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 $500
million; (iii) 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; (iv) 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; (v) Colombian Peso deposits, with
maturities of not more than 12 months from the date of acquisition, in (A) Banco
de Colombia, Banco Ganadero, Banco Industrial Colombiano or Banco de Bogota or
(B) any other bank or financial institution incorporated under the laws of
Colombia with total assets exceeding the equivalent of $350 million; provided
that the aggregate principal amount of any such deposits in banks described in
this subclause (B) shall not exceed the equivalent of $10 million at any time
outstanding; (vi) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by Colombia and backed by the full faith and credit 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 (v); provided that such
agreement with banks described in subclause (v) (B) shall be deemed a deposit
for purposes of the $10 million limit in such subclause; and (vii) investments
in money market funds all of the assets of which consist of securities of the
types described in the foregoing clauses (i) through (vi).
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"Cedel" means Cedel Bank, societe anonyme.
"Certificate Guarantee" means the Guarantee, dated as of the date of
this Indenture, for the benefit of the holders of the Certificates, whereby the
Company has fully, irrevocably and unconditionally guaranteed all of the Trust's
obligations under the Certificates.
"Certificates" means the 12 1/2% Pass Through Trust Certificates due
2007 issued by the Trust, the gross proceeds of which are used by the Trust to
purchase the Notes from the Company.
"Change of Control" means the occurrence of any of the following
events:
(i) the sale, lease, transfer, conveyance or other disposition,
whether direct or indirect (by way of a merger, consolidation or
otherwise), by the Company or a Restricted Subsidiary of the Company, in
one or a series of related transactions, of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole, to
any Person other than a Restricted Subsidiary of the Company;
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(iii) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Permitted Holders, becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of (a) more than 35% of the total voting rights of the Common
Stock of the Company and (b) a greater percentage of the voting power of
the total Common Stock of the Company than that represented by the voting
power of the Common Stock of the Company then beneficially owned, in the
aggregate, by the Permitted Holders; or
(iv) individuals who on the Issue Date constitute the Board of
Directors of the Company (together with any new directors whose election by
the Board of Directors or whose nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the members
of the Board of Directors then in office who either were members of the
Board of Directors on the Issue Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office.
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"Closing Price" on any Trading Day with respect to the per share price
of any shares of Capital Stock means the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on such automated quotation system, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm that is selected from time
to time by the Company for that purpose and is reasonably acceptable to the
Indenture Trustee.
"Collateral Agent" means Marine Midland Bank, as Collateral Agent
under the Pledge Agreement, or any other successor thereto appointed pursuant to
such agreement.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock or ordinary
shares, whether or not outstanding at the Issue Date. and includes, without
limitation, all series and classes of such common stock or ordinary shares.
"Consolidated EBITDA" for any period means the Consolidated Net Income
for such period plus to the extent deducted in calculating Consolidated Net
Income (i) Consolidated Income Tax Expense, (ii) net monetary inflation
adjustment, (iii) depreciation and amortization expenses, (iv) Net Financial
Expense, (v) minority interest, (vi) interest expense attributable to
Capitalized Leases in accordance with U.S. GAAP (whether or not in accordance
with GAAP) and (vii) all other non-cash charges (other than non-cash charges
which require an accrual of or reserve for cash charges in future periods), less
any non-cash items which have the effect of increasing Consolidated Net Income
for such period, plus (less) to the extent deducted (included) in Consolidated
Net Income, extraordinary losses (gains) and nonrecurring items (including gains
and losses on Asset Sales) deducted (included) in calculating Consolidated Net
Income, each (except with respect to (vi) above) determined in accordance with
GAAP.
"Consolidated Income Tax Expense" for any Person for any period means,
without duplication, the aggregate amount of net taxes based on income or
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profits for such period of the operations for such Person and its consolidated
Subsidiaries with respect to such period in accordance with GAAP.
"Consolidated Indebtedness" means the aggregate amount of Indebtedness
of the Company and its Restricted Subsidiaries on a consolidated basis.
"Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Consolidated Net Income (without duplication): (i) the net
income of any Person (other than net income attributable to a Restricted
Subsidiary) in which any Person (other than the Company or any of its Restricted
Subsidiaries) has a joint interest and the net income of any Unrestricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any of its Restricted Subsidiaries
by such other Person or such Unrestricted Subsidiary during such period; (ii)
the net income of any Restricted Subsidiary in which any Person other than the
Company or another Restricted Subsidiary has a minority interest shall be
excluded to the extent such net income is attributable to such minority
interests; (iii) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary, except that (A) the Company's equity in the net income of
any such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitation contained in this clause) and (B) the Company's equity in a net loss
of any such Subsidiary for such period shall be included in determining such
Consolidated Net Income; (iv) without duplication, any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of Section 4.07, any amount paid or accrued as
dividends on Preferred Stock of the Company owned by Persons other than the
Company and any of its Restricted Subsidiaries; and (vi) all extraordinary gains
and extraordinary losses.
"Corporate Trust Office of the Indenture Trustee" shall be at the
address of the Indenture Trustee specified in Section 11.02 or such other
address as to which the Indenture Trustee may give notice to the Company.
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"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means The Depository Trust Company, or its nominee or
successors and assigns.
"DIAN Financing" means the financing provided by the Direccion de
Impuestos y Aduanas Nacionales (National Department of Taxes and Duties) in
Colombia to finance the taxes and duties payable by the Company on imported
telecommunications equipment.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures (other than any
maturity that results from an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Stated Maturity of the Notes; provided, however, that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require the Company to repurchase or redeem
such Capital Stock upon the occurrence of a Change of Control occurring prior to
the Stated Maturity of the Notes shall not constitute Disqualified Stock if (i)
the change of control provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the provisions applicable to
the Notes contained in Section 4.18 and (ii) such Capital Stock specifically
provides that the Company will not repurchase or redeem any such stock pursuant
to such provisions prior to the Company's repurchase of Notes as are required to
be repurchased pursuant to Section 4.18.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) by S&P or Moody's at the
time as of which any investment or rollover therein is made.
"Equity Market Capitalization" of any Person means, as of any day of
determination, the product of (a) the aggregate number of outstanding shares of
Common Stock of such Person on such day (which shall not include any options or
warrants on, or securities convertible or exchangeable into, shares of Common
Stock
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of such Person) and (b) the average Closing Price of such Common Stock over the
20 consecutive Trading Days immediately preceding such day. If no such Closing
Price exists with respect to shares of any such class, the value of such shares
for purposes of clause (b) of the preceding sentence shall be determined by an
independent internationally recognized investment banking firm.
"Escrow Account" means an escrow account for the deposit of
approximately $35 million of the net proceeds from the sale of the Notes under
the Escrow and Disbursement Agreement, representing funds sufficient to pay the
first four interest payments on the Notes.
"Escrow Agent" means Marine Midland Bank, as escrow agent under the
Escrow and Disbursement Agreement, or any successor thereto appointed pursuant
to such agreement.
"Escrow Account Available Funds" has the meaning provided in the
Escrow and Disbursement Agreement.
"Escrow and Disbursement Agreement" means the Escrow and Disbursement
Agreement, dated as of the date of this Indenture, by and among the Escrow
Agent, the Indenture Trustee and the Company, governing the disbursement of
funds from the Escrow Account and the Refinancing Account.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
(or any successor act), and the rules and regulations promulgated thereunder.
"Existing Indebtedness" means (i) the Indebtedness of the Company
under the Transtel-Siemens Purchase Agreement, (ii) the Obligations of the
Restricted Subsidiaries under the Global I Leases, Global II Leases and the
Global III Leases, (iii) the Obligations of the Company under the DIAN
Financing, (iv) the obligations of the Company under the IBM Financing, and (v)
the Other Existing Indebtedness.
"Fair Market Value" means, with respect to any asset or property, the
price that could be negotiated in an arm's-length free-market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
pressure or compulsion to complete the transaction. Unless otherwise specified
in this Indenture, Fair Market Value shall be determined by the Board of
Directors acting in good faith and shall be evidenced by a Board Resolution
delivered to the Indenture Trustee.
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"GAAP" means, at any date of determination, generally accepted
accounting principles in Colombia as then in effect.
"Global" means Global Telecommunications Operations, Inc., a British
Virgin Islands Company owned by the same shareholders who own the Company.
"Global I Leases" means the lease agreements between Global and each
of the following operating companies of the Company: Empresa de Telefonos de
Palmira S.A. E.S.P, Empresa de Telefonos de Jamundi S.A. E.S.P. and Unitel S.A.
E.S.P., for telecommunication equipment to be used for the development of the
wireline networks of such operating companies, each dated August 1, 1996, and
each of which relate to the Global I Purchase Agreement.
"Global I Purchase Agreement" means the Purchase Agreement, dated May
2, 1996 and amended July 28, 1997, between Siemens and Global relating to the
purchase and financing of telecommunications equipment as described in the
Offering Memorandum.
"Global II Leases" means the lease agreements (i) between Global and
Telefonos de Cartago S.A. E.S.P., for telecommunications equipment, dated July
28, 1997; (ii) between Global and Bugatel S.A. E.S.P., for telecommunications
equipment, to be entered into upon terms and conditions similar to those of the
Global I Leases; and (iii) between Global and Unitel S.A. E.S.P., whereby
Global leases certain wireless telecommunications equipment to Unitel, dated
July 28, 1997, and each of which relate to the Global II Purchase Agreement.
"Global II Purchase Agreement" means the Purchase Agreement, dated May
30, 1997 and amended July 28, 1997 and October 17, 1997, between Siemens and
Global, relating to the purchase and financing of telecommunications equipment
as described in the Offering Memorandum.
"Global III Leases" means the lease agreements to be entered into
between Global and an operating company of the Company, relating to the letters
of intent, dated April 25, 1997 and September 25, 1997, which lease agreements
are for the purchase and financing of various telecommunications equipment to be
used by the Company to substantially complete its expansion plan as described in
the Offering Memorandum.
"Global Note" has the meaning provided in Section 2.01.
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"Global Undertaking Letter" means the Undertaking Letter, dated as of
the date of this Indenture, in the form Exhibit E.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Holder" means a Person in whose name a Note is registered.
"IBM Financing" means the financing provided to the Company by IBM de
Colombia S.A. for the financing of telecommunications equipment under equipment
financing agreements as described in the Offering Memorandum.
"incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise, contingently or otherwise, become liable,
directly or indirectly, for or with respect to, or become responsible for, the
payment of such Indebtedness, including an incurrence of Indebtedness by reason
of the acquisition of a Restricted Subsidiary. The term "incurrence" has a
corresponding meaning.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) any liability, contingent or otherwise,
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (iii) all obligations
of such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto and purchase money
obligations), (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more than
180 days after the date of placing such property in service or taking delivery
and title thereto or the completion of such services, except Trade Payables, (v)
all obligations of such Person as lessee under Capitalized Leases in accordance
with U.S. GAAP (whether or not in accordance with GAAP); (vi) all Indebtedness
of other Persons secured by a Lien on any asset of such Person, whether
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or not such Indebtedness is assumed by such Person, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person, (viii) to the extent not otherwise included in this
definition, the Net Obligation under Currency Agreements and Interest Rate
Agreements, (ix) all obligations of such Person to pay deferred Colombian taxes
and duties to DIAN (or any other Colombian taxing authority) with respect to
imported equipment purchases and leases and (x) any and all deferrals, renewals,
extensions and refundings of, or amendments of or supplements to, any liability
or obligation of the kind described in this definition. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided that (A) the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP and (B) the amount of Indebtedness for purposes of
clause (vi) above shall be the lesser of (x) the principal amount of the
Indebtedness secured by the assets of the relevant Person and (y) the Fair
Market Value (as determined by the board of directors of the relevant Person) of
the assets securing such Indebtedness.
"Indebtedness to Annualized EBITDA Ratio" means, as at any date of
determination, the ratio of (i) the aggregate amount of Consolidated
Indebtedness to (ii) the Annualized Pro Forma EBITDA of the Company, each
calculated on the date of the incurrence of Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indenture Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Initial Purchaser" means BT Alex. Brown Incorporated.
"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.
"Intercompany Note" means the promissory notes issued by a Restricted
Subsidiary to the Company in the form of Exhibit B hereto upon making an advance
or loan to such Restricted Subsidiary with the proceeds of the Notes, which
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Intercompany Notes shall (i) be pledged to the Collateral Agent pursuant to the
Pledge Agreement, (ii) have the same Stated Maturity as the Notes, (iii) contain
a provision that accelerates payment of the Intercompany Notes upon acceleration
of the Notes and (iv) state that they are senior unsecured obligations of the
respective Restricted Subsidiary and rank senior in right of payment to all
existing and future subordinated Indebtedness of such Restricted Subsidiary and
will rank pari passu with all Senior Indebtedness of such Restricted Subsidiary
(including the Indebtedness evidenced by the Global I Leases, Global II Leases
and Global III Leases).
"Interest Payment Date" means May 1 and November 1 of each year,
commencing May 1, 1998.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect the Company or any of its Restricted
Subsidiaries against fluctuations in interest rates in respect of Indebtedness
to or under which the Company or any of its Restricted Subsidiaries is a party
or a beneficiary on the date of this Indenture or becomes a party or a
beneficiary hereafter; provided that the Net Obligation thereof does not exceed
the principal amount of the Indebtedness of the Company and its Restricted
Subsidiaries that bears interest at floating rates.
"Investment" means, with respect to any Person, any advance, loan,
account receivable (other than an account receivable arising in the ordinary
course of business), or other extension of credit (including, without
limitation, by means of any Guarantee) or any capital contribution to (by means
of transfers of property to others, payments for property or services for the
account or use of others, or otherwise), or any purchase or ownership of any
stocks, bonds, notes, debentures or other securities of, any other Person, and
shall include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. For purposes of the definition of "Unrestricted Subsidiary"
described below and Section 4.07, (i) "Investment" shall include the Fair Market
Value of the assets (net of liabilities) of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
and shall exclude the Fair Market Value of the assets (net of liabilities) of
any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company, and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its Fair
Market Value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"Issue Date" means the original date of issuance of the Notes.
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"Lien" means any mortgage, charge, pledge, security interest,
encumbrance, lien (statutory or other), hypothecation, assignment for security,
claim, or preference or priority or other encumbrance of any kind upon or with
respect to any property, it being understood that Lien includes any lien granted
in any future receivables (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller or any agreement to
give any security interest).
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Municipal Shareholder" of a Restricted Subsidiary means the
shareholder of such Subsidiary that is a municipality in which such Restricted
Subsidiary conducts its business and such municipality's related entities.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or Cash Equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or Cash Equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary of the
Company) and proceeds from the conversion of other property received when
converted to cash or Cash Equivalents if converted within 12 months after
receipt, net of (i) brokerage commissions and other fees and expenses (including
fees and expenses of counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes (whether or not such taxes will actually be paid
or are payable) as a result of such Asset Sale without regard to the
consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale (excluding the Notes
and the Bank Indebtedness incurred by the Company or a Restricted Subsidiary
pursuant to clause (iv) of the second paragraph Section 4.08) that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary of the Company as a reserve against any
liabilities associated with 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, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or Cash Equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations are financed or
sold with recourse to the
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Company or any Restricted Subsidiary of the Company) and proceeds from the
conversion of other property received when converted to cash or Cash
Equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Net Financial Expense" for any period means financial expenses, which
include interest expense, commissions, discounts and other fees and charges paid
or accrued with respect to letters of credit and bankers' acceptance financing,
and exchange losses less financial income, which includes interest income,
commercial discounts and exchange gains, all determined on a consolidated basis
in accordance with GAAP.
"Net Obligation" means, at any date of determination, the net amount,
exclusive of any commission or administrative fees that a Person would be
obligated to pay upon the termination of an Interest Rate Agreement or Currency
Agreement.
"Notes" mean Notes treated as a single class of securities, as amended
or supplemented from time to time in accordance with the terms hereof, that are
issued pursuant to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
payments, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering Memorandum" means the final Offering Memorandum dated
October 21, 1997 of the Company relating to the offering of the Certificates.
"Officer" means, with respect to any Person, other than the Indenture
Trustee, Authenticating Agent, Paying Agent, or Registrar, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice President of such Person.
"Officers' Certificate" means a certificate signed by two Officers of
the Company, one of whom must be the principal executive officer, principal
financial officer, treasurer or principal accounting officer of the Company.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel reasonably satisfactory to the Indenture Trustee.
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<PAGE>
"Other Existing Indebtedness" means Indebtedness outstanding on the
Issue Date owed to various financial institutions which will be repaid with
proceeds in the Refinancing Account.
"Pass Through Trustee" means Wilmington Trust Company, acting not in
its individual capacity but solely as trustee under the Trust Agreement.
"Paying Agent" means Marine Midland Bank, as Paying Agent under this
Indenture, or any successor thereto appointed pursuant to this Indenture.
"Permitted Holders" means Guillermo Lopez, Gonzalo Caicedo Toro,
Gonzalo Caicedo & Co., Maria Eugenia Caicedo Llano, Valentina Caicedo Toro or
any Person controlled by such Persons.
"Permitted Investment" means so long as no Default or Event of Default
shall have occurred and be continuing (i) an Investment by the Company in a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into, or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that (A) such Restricted Subsidiary is a
Wholly-Owned Subsidiary or an empress mixta (mixed capital company) under Law
142 with no Affiliate Minority Shareholders and (B) if such Restricted
Subsidiary ceases to be a Restricted Subsidiary (except by reason of the sale by
the Company or its Restricted Subsidiary of the Capital Stock therein), then any
Investment in such Restricted Subsidiary will be deemed to be a Restricted
Payment at the time of such event determined in accordance with Section 4.07;
(ii) Cash Equivalents; (iii) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses in accordance with GAAP; (iv) stock, obligations or securities
received in satisfaction of judgments; and (v) an Investment in any Person
(other than a Restricted Subsidiary) engaged in a Telecommunications Business
not to exceed $10.0 million in the aggregate for all Investments under this
clause (v) at any time outstanding (determined without regard to any write-downs
or write-offs thereof).
"Permitted Liens" means:
(i) Liens on (x) the Escrow Account and the Refinancing Account
and all funds and securities therein securing only the Notes and (y) the
Intercompany Notes securing only the Notes;
(ii) Liens to secure Bank Indebtedness incurred by the Company or
the Restricted Subsidiaries in compliance with clause (iv) or the second
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paragraph of Section 4.08 and Guarantees incurred by the Company or the
Restricted Subsidiaries in compliance with clause (iv) of the second
paragraph of Section 4.08 executed in connection therewith;
(iii) Liens on the property of the Company or its Restricted
Subsidiaries created solely for the purpose of securing purchase money
obligations incurred in compliance with Section 4.08; provided that (a)
such property so acquired is for use in lines of business related to the
Company's or its Restricted Subsidiaries' business as it exists immediately
prior to the issuance of the related Indebtedness, (b) no such Lien shall
extend to or cover other property or assets of the Company and its
Restricted Subsidiaries other than the respective property so acquired and
(c) the principal amount of Indebtedness secured by any such Lien shall at
no time exceed the original purchase price of such property or assets;
(iv) Liens on the property or assets of a Restricted Subsidiary
acquired after the Issue Date or on property or assets acquired in an asset
purchase transaction with a Person that is not an Affiliate created solely
to secure the Obligations that financed the acquisition of such Restricted
Subsidiary or such property or assets and which were incurred in compliance
with Section 4.08; provided that (a) no such Lien shall extend to or cover
property or assets of the Company and its Restricted Subsidiaries other
than the property or assets of the Restricted Subsidiary so acquired or the
property or assets so acquired and (b) no such Lien shall extend to the
Capital Stock of any Restricted Subsidiary so acquired and (c) the
principal amount of Indebtedness secured by any such Lien shall not exceed
the original purchase price of such Restricted Subsidiary or such property
or assets;
(v) Liens on assets of any entity existing at the time such entity
or assets are acquired by the Company or any of its Restricted
Subsidiaries, whether by merger, consolidation, purchase of assets or
otherwise; provided that such Liens (a) are not created, incurred or
assumed in connection with, or in contemplation of, such assets being
acquired by the Company or any of its Restricted Subsidiaries and (b) do
not extend to any other property of the Company or any of its Restricted
Subsidiaries;
(vi) Liens for taxes, assessments, governmental charges or claims
that are being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which a reserve or
other appropriate provision, if any, as shall be required in conformity
with GAAP shall have been made;
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(vii) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other similar Liens arising
in the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made;
(viii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(ix) Liens on the Existing Indebtedness existing on the date of
this Indenture; provided such Liens on the Other Existing Indebtedness are
removed within 75 days after the Issue Date;
(x) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment
of borrowed money);
(xi) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Company or any of its Restricted Subsidiaries;
(xii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries, taken as a whole;
(xiii) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of the Company or
its Restricted Subsidiaries relating to such property or assets;
(xiv) any interest or title of a lessor in the property subject to
any Capitalized Lease or operating lease;
(xv) Liens in favor of the Company or any Restricted Subsidiary;
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(xvi) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Subsidiary of the Company that does
not give rise to an Event of Default;
(xvii) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xviii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business of the Company and its Restricted Subsidiaries; and
(xix) Liens to secure Obligations under Capitalized Leases (except
in respect of sale lease back transactions) on real or personal property of
the Company to the extent consummated in compliance with this Indenture;
provided that (A) at the time such Lien attaches to the real or personal
property of the Company, the Company shall be permitted to incur at least
$1.00 of Indebtedness under the first paragraph of Section 4.08 (without
reliance upon any of the exceptions in clauses (a)(i) through (xi) under
Section 4.08).
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Pledge Agreement" means the Pledge Agreement, dated as of the date of
this Indenture, between the Company and the Collateral Agent in the form of
Exhibit C hereto, whereby the Company pledges the Intercompany Notes to the
Indenture Trustee.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock, whether now outstanding, or issued
after the Issue Date, and including, without limitation, all classes and series
of preferred or preference stock of such Person.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.15.
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"Pro Forma EBITDA" means for any Person for any period the
Consolidated EBITDA of such Person after giving effect to the following: (i) if,
during the period commencing on the first day of the relevant period through the
Transaction Date (the "Reference Period"), the Company or any Restricted
Subsidiaries have engaged in any Asset Sale, Pro Forma EBITDA of the Company for
such period shall be reduced by an amount equal to the Consolidated EBITDA (if
positive), or increased by an amount equal to the Consolidated EBITDA (if
negative), directly attributable to the assets which are the subject of such
Asset Sale, (ii) if during such Reference Period the Company or any Restricted
Subsidiaries have effected any Asset Acquisition, Pro Forma EBITDA of the
Company for such period shall be calculated using the historical results of such
acquired entity on a pro forma basis as if such acquisition had occurred on the
first day of such Reference Period and (iii) if during such Reference Period,
(A) the Company designates a Restricted Subsidiary as an Unrestricted
Subsidiary, Pro Forma EBITDA for the Company shall be reduced by an amount equal
to the Consolidated EBITDA (if positive), or increased by an amount equal to the
Consolidated EBITDA (if negative), directly attributable to the designated
Unrestricted Subsidiary and (B) the Company designates an Unrestricted
Subsidiary as a Restricted Subsidiary, Pro Forma EBITDA for the Company shall be
increased by an amount equal to the Consolidated EBITDA (if positive), or
decreased by an amount equal to the Consolidated EBITDA (if negative), directly
attributable to the designated Restricted Subsidiary.
"Public Equity Offering" means underwritten public offerings or
quotations or placements of Common Stock of the Company (i) that have been
registered with the Commission under the Securities Act, (ii) that have been
registered with the Superintendency of Corporations so long as a Level 3
American Depositary Receipt Program is established in the United States in
conjunction therewith or (iii) that have been listed on the London Stock
Exchange or the Luxembourg Stock Exchange.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Record Date" means each April 15 and October 15 of each year
immediately preceding each Interest Payment Date.
"Redemption Date" means any date on which the Notes are called for
redemption by the Company.
"Refinancing Account" means an escrow account for the deposit of
approximately $ 32,762,036 of the net proceeds from the sale of the Notes under
the Escrow and Disbursement Agreement.
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"Refinancing Account Available Funds" has the meaning provided in the
Escrow and Disbursement Agreement.
"Registrar" means Marine Midland Bank, as registrar under this
Indenture, or any successor thereto appointed pursuant to this Indenture.
"Regulation S" means Regulation S under the Securities Act.
"Related Person" means any holder (or any Affiliate of such holder) of
5% or more of any class of Capital Stock of the Company and any Affiliate of the
Company or any Restricted Subsidiary.
"Responsible Officer," when used with respect to this Indenture
Trustee, means any officer within the Corporate Trust Department of the
Indenture Trustee (or any successor group of the Indenture Trustee) or any other
officer of the Indenture 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 Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Indenture
-------- -------
Trustee shall be entitled to request and conclusively rely on an Opinion of
Counsel with respect to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company (including
any Subsidiary which has an outstanding Intercompany Note to the Company and
each newly acquired or newly formed Subsidiary of the Company) other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Corporation and its successors.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor act), and the rules and regulations thereunder.
"Siemens" means Siemens A.G., a corporation incorporated in Germany.
"Siemens Financing" the financing provided by Siemens to Global under
the Global I Purchase Agreement, the Global II Purchase Agreement and the
purchase
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agreements to be entered into in connection with the Global III Leases for the
purchase of telecommunications equipment as described in the Offering
Memorandum.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Strategic Equity Investor" means any Person (and any Subsidiary of
such Person) that, both as of the Trading Day immediately before the day of such
sale and the Trading Day immediately after the day of such sale, has an Equity
Market Capitalization of at least $1.0 billion (or the Peso equivalent on the
day of such sale) and is engaged in the Telecommunication Business.
"Subordination Agreement" means an agreement, which may be
incorporated into the terms of the respective Indebtedness, for the benefit of
the Holders of the Notes to the effect that (i) the Indebtedness subject to such
Subordination Agreement is subordinated in right of payment to the Notes, (ii)
in any bankruptcy, insolvency or similar proceeding with respect to the
respective obligor (or any guarantor) of such Indebtedness, no payment shall be
made thereon until the payment in full in cash of all principal, interest and
other amounts owing with respect to the Notes, (iii) if there is any default in
any payment when due of principal of, premium on, interest on or any other
amount owing with respect to any Notes, then until all such payment defaults
have been cured by the payment in full in cash of the amounts then due, no
payment shall be permitted to be made on the Indebtedness subject to the
Subordination Agreement and (iv) if any payments are received by a holder of
Indebtedness subject to a Subordination Agreement in contravention of the
provisions of the Subordination Agreement, such amount shall be held for the
benefit of, and shall be turned over to the Indenture Trustee for the benefit
of, the Holders of the Notes.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity (i) of which outstanding Capital Stock
having at least a majority of the votes entitled to be cast in the election of
directors is owned, directly or indirectly, by such Person and/or one or more
other Subsidiaries of such Person, or (ii) of which at least a majority of
voting interest is owned, directly or indirectly, by such Person and one or more
other Subsidiaries of such Person.
"Subsidiary Guarantee" means the Guarantee of a Subsidiary in favor of
the Indenture Trustee for the benefit of the Holders substantially in the form
of Exhibit D.
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"Tax" means any tax, duty, fee, levy, impost, assessment or other
governmental charge (including penalties, interest, additions to tax and any
other liabilities related thereto).
"Taxing Authority" means any government or political subdivision or
territory or possession of Colombia, the United States, or any jurisdiction in
which the Trust, the Company or any of the Company's Restricted Subsidiaries is
organized or engaged in business for tax purposes or any authority or agency
therein or thereof having power to tax.
"Telecommunications Business" means the development, ownership and/or
operation of one or more telephone, telecommunications or information systems
and/or the provision of telephony, telecommunications and/or information
services and any related, ancillary or complementary business, including,
without limitation, local and long distance telephony, telecommunications and
other information and transmission services such as the Internet.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-bbbb), as it may be amended from time to time.
"Trade Payables" means any accounts payable or other indebtedness or
monetary obligation to trade creditors created, assumed or Guaranteed by the
Company or any of its Restricted Subsidiaries arising in the ordinary course of
business in connection with the acquisition of goods or services.
"Trading Day" with respect to a securities exchange or automated
quotation system, means a day on which such exchange or system is open for a
full day of trading.
"Transaction Date" means, with respect to the incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is incurred and, with respect to any Restricted Payment, the date
such Restricted Payment is made.
"Transtel-Siemens Purchase Agreement" means the Purchase Agreement
dated May 23, 1997 and amended October 17, 1997, between the Company and
Siemens, for the purchase of certain telecommunications equipment as described
in the Offering Memorandum.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published
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in the most recent Federal Reserve Statistical Release H. 15 (519) which has
become publicly available at least two business days prior to the redemption
date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the redemption date to November 1, 2002, provided, however, that if the period
from the redemption date to November 1, 2002 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the redemption date to November 1, 2002 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trust" means the Transtel Pass Through Trust, a special purpose
Delaware business trust created pursuant to a Trust Agreement, dated as of the
date of this Indenture.
"Trust Agreement" means the Amended and Restated Pass Through Trust
Agreement, dated as of the date hereof, among the Company, the Pass Through
Trustee and Marine Midland Bank, as registrar and paying agent thereunder.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company), other than a Subsidiary that has given a Subsidiary
Guarantee or has Intercompany Notes outstanding, to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any Restricted Subsidiary; provided
that either (A) the Subsidiary to be so designated has total assets of $10,000
or less or (B) if such Subsidiary has assets greater than $10,000, (x) that such
designation shall be deemed to be at the time of such designation the making of
a Restricted Payment at the time of such designation in an amount equal to the
Investment in such Subsidiary subject to the restrictions contained in Section
4.07, (y) that no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such designation and (z) the
Company would be permitted to incur $1.00 of additional Indebtedness under
Section 4.08, assuming the effectiveness of such designation. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (x) all Indebtedness of such Subsidiary could be incurred under
Section 4.08 and (y) no Default or Event of Default
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shall have occurred and be continuing or result from such designation (treating
all outstanding Indebtedness of the Unrestricted Subsidiary as incurred at the
time of such designation). Any such designation by the Board of Directors shall
be evidenced to the Indenture Trustee by promptly filing with the Indenture
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. GAAP" means, at any date of determination, generally accepted
accounting principles in the United States as then in effect.
"U.S. Government Securities" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the 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) 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.
"U.S. Legal Tender" means money of the United States that is legal
tender for payment of public and private debts.
"Wholly-Owned Subsidiary" means any Subsidiary of the Company, all of
the outstanding Capital Stock (other than directors' qualifying shares), or in
the case of a non-corporate Subsidiary, other equity interests having ordinary
voting power for the election of directors or other governing body of such
Subsidiary, of which is owned by the Company or another Wholly-Owned Subsidiary
of the Company or a combination thereof.
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Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"144A Global Note"................. 2.01
"Additional Notes"................. 2.02
"Affiliate Transaction"............ 4.14
"Agent Members".................... 2.16
"Authenticating Agent"............. 2.02
"Authorized Agent"................. 11.08
"Bankruptcy Law"................... 4.01
"Change of Control Date"........... 4.18
"Change of Control Payment Date"... 4.18
"Custodian"........................ 6.01
"Default Interest Payment Date..... 2.12
"Event of Default"................. 6.01
"Guaranteed Indebtedness........... 4.15
"Initial Notes".................... 2.02
"Net Proceeds Offer"............... 4.12
"Net Proceeds Offer Amount"........ 4.12
"Net Proceeds Offer Payment Date".. 4.12
"Net Proceeds Offer Trigger Date".. 4.12
"Offer to Purchase................. 4.18
"Permitted Refinancing"............ 4.08
"Refinancing Indebtedness"......... 4.08
"Regulation S Global Note"......... 2.01
"Restricted Payments".............. 4.07
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture shall be governed by the provisions of the TIA.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
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"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Indenture
Trustee;
"obligor" on the Notes means the Company and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule under
the TIA have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Indenture Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or depository rule or usage. The Company shall approve the form
of the Notes and any notation, legend or endorsement on them and shall furnish
the same to the Indenture Trustee, which shall be in form and substance
satisfactory to the Indenture Trustee. Each Note shall be dated the date of its
authentication.
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The terms and provisions contained in the Notes, annexed hereto as
Exhibit A, shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company and the Indenture Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (a "144A Global Note"),
deposited with Marine Midland Bank, as custodian for the Depository, duly
executed by the Company and authenticated by the Indenture Trustee as
hereinafter provided and shall bear the legend set forth in Section 2.15. The
aggregate principal amount of a Rule 144A Global Note may from time to time be
increased or decreased by adjustments made on the records of the Indenture
Trustee, as custodian for the Depository, as hereinafter provided. Notes
offered and sold in offshore transactions in reliance on Regulation S shall be
issued in the form of one or more permanent global Notes in registered form in
substantially the form set forth in Exhibit A (a "Regulation S Global Note"),
deposited with Marine Midland Bank, as custodian for the Depository for the
operator of Euroclear and Cedel for credit to the respective accounts of the
beneficial owners of the Regulation S Global Note, duly executed by the Company
and authenticated by the Indenture Trustee as hereinafter provided. The
aggregate principal amount of a Regulation S Global Note may from time to time
be increased or decreased by adjustments made on the record of the Indenture
Trustee, as custodian for the Depositary, as hereinafter provided. The 144A
Global Notes and Regulation S Global Notes are sometimes collectively herein
referred to as the "Global Notes."
Notes offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued in the form of permanent certificated Notes in
registered form, in substantially the form set forth in Exhibit A (the "Physical
Notes") and shall bear the legend set forth in Section 2.15.
Section 2.02. Execution and Authentication; Aggregate Principal
Amount.
One Officer shall sign (who shall have been duly authorized by all
requisite corporate actions) the Notes for the Company by manual or facsimile
signature.
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If an Officer whose signature is on a Note was an Officer at the time
of such execution but no longer holds that office at the time the Indenture
Trustee authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Indenture Trustee manually signs the certificate of authentication on the Note.
The signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
An Opinion of Counsel need not be provided for the authentication of
any Notes issued hereunder.
The Indenture Trustee shall authenticate Notes for original issue in
the aggregate principal amount not to exceed $150,000,000 (the "Initial Notes")
and from time to time additional Notes in an amount not to exceed $30,000,000
(the "Additional Notes"), upon a written order of the Company in the form of an
Officers' Certificate. The Officers' Certificate shall specify the amount of
Notes to be authenticated and the date on which the Notes are to be
authenticated, whether the Notes are to be issued as Physical Notes or a Global
Note and whether or not the Notes shall bear the Private Placement Legend, or
such other information as the Indenture Trustee may reasonably request. The
aggregate principal amount of Notes outstanding at any time may not exceed
$180,000,000, except as provided in this paragraph and in Section 2.07.
The Indenture Trustee may appoint an authenticating agent (the
"Authenticating Agent") reasonably acceptable to the Company to authenticate
Notes. Unless otherwise provided in the appointment, an Authenticating Agent
may authenticate Notes whenever the Indenture Trustee may do so. Each reference
in this Indenture to authentication by the Indenture Trustee includes
authentication by such Authenticating Agent. An Authenticating Agent has the
same rights as an Agent to deal with the Company or with any Affiliate of the
Company. The Indenture Trustee initially appoints, and the Company approves the
appointment of, Marine Midland Bank, as Authenticating Agent.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a)
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Notes may be presented or surrendered for registration of transfer or for
exchange, (b) Notes may be presented or surrendered for payment and (c) notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company, upon prior written notice to the Indenture
Trustee, may have one or more additional paying agents reasonably acceptable to
the Indenture Trustee. The term "Paying Agent" includes any additional Paying
Agent. The Company may act as its own Paying Agent, except that for the purposes
of payments on the Notes pursuant to Sections 3.07(b), 4.12 and 4.18 neither the
Company nor any Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Company shall notify the Indenture Trustee, in advance, of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Indenture
Trustee shall act as such.
The Company initially appoints Marine Midland Bank as Registrar and,
Paying Agent until such time as Marine Midland Bank has resigned or a successor
has been appointed. Any of the Registrar, the Paying Agent or any other agent
may resign upon 30 days' written notice to the Company.
The Indenture Trustee is authorized to enter into a letter of
representation with the Depository in the form provided to the Indenture Trustee
by the Company and to act in accordance with such letter.
Section 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the Indenture
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of the Holders or the Indenture Trustee all assets held by the Paying
Agent for the payment of principal of, or interest on, the Notes (whether such
assets have been distributed to it by the Company or any other obligor on the
Notes), and the Company and the Paying Agent shall notify the Indenture Trustee
of any Default by the Company (or any other obligor on the Notes) in making any
such payment. The Company at any time may require a Paying Agent to distribute
all assets held by it to the
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Indenture Trustee and account for any assets disbursed and the Indenture Trustee
may at any time during the continuance of any payment default under Article 6,
upon written request to a Paying Agent, require such Paying Agent to distribute
all assets held by it to the Indenture Trustee and to account for any assets
distributed. Upon distribution to the Indenture Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
Section 2.05. Holder Lists.
The Indenture Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of the Holders. The Company shall furnish or cause the Registrar to
furnish to the Indenture Trustee promptly after each Record Date and as of such
Record Date and at such other times as the Indenture Trustee may reasonably
request in writing a list as of such date and in such form as the Indenture
Trustee may reasonably require of the names and addresses of the Holders, which
list may be conclusively relied upon by the Indenture Trustee.
Section 2.06. Transfer and Exchange.
Subject to Section 2.17 hereof, when Notes are presented to the
Registrar with a request to register the transfer of such Notes or to exchange
such Notes for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met; provided, however,
that the Notes presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall execute and the Indenture Trustee
shall authenticate Notes at the Registrar's request. No service charge shall be
made for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers pursuant to
Sections 2.10, 3.06, 3.07(b), 4.12, 4.18 or 9.05, in which event the Company
shall be responsible for the payment of such taxes).
The Registrar shall not be required to register the transfer of or
exchange of any Note (i) during a period beginning at the opening of business 15
days before the mailing of a notice of redemption of Notes and ending at the
close of business on the day of such mailing and (ii) selected for redemption in
whole or in part pursuant to Article Three, except the unredeemed portion of any
Note being redeemed in part.
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Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Notes may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry system.
Section 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Indenture Trustee or an
Agent or if the Holder of a Note claims that the Note has been lost, destroyed
or wrongfully taken, the Company shall issue and the Indenture Trustee shall
authenticate a replacement Note if the Indenture Trustee's requirements are met.
Such Holder must provide an indemnity bond or other indemnity of reasonable
tenor, sufficient in the reasonable judgment of the Company, such Agent and the
Indenture Trustee, to protect the Company, the Indenture Trustee or any Agent
from any loss which any of them may suffer if a Note is replaced. Every
replacement Note shall constitute an additional obligation of the Company.
Section 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Indenture Trustee except those cancelled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. Subject to the provisions of Section 2.09, a Note does not cease to
be outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Indenture Trustee receives proof satisfactory to it that the replaced Note is
held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon
surrender of such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Stated Maturity of the Notes the Paying
Agent holds U.S. Legal Tender or U.S. Government Securities sufficient to pay
all of the principal and interest due on the Notes payable on that date and is
not prohibited from paying such money to the Holders thereof pursuant to the
terms of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
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Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Company or an Affiliate shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Indenture
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes as to which a Responsible Officer of the Indenture Trustee has
received written notice of such ownership shall be so considered. The Company
shall notify the Indenture Trustee, in writing, when it or any of its Affiliates
repurchases or otherwise acquires Notes, of the aggregate principal amount of
such Notes so repurchased or otherwise acquired.
Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare
and the Indenture Trustee shall authenticate temporary Notes upon receipt of a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated, the date on which the temporary Notes are to be authenticated,
whether such Notes shall bear the Private Placement Legend. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company considers appropriate for temporary Notes and so indicates in
the Officers' Certificate. Without unreasonable delay, the Company shall prepare
and the Indenture Trustee shall authenticate upon receipt of a written order of
the Company pursuant to Section 2.02 definitive Notes in exchange for temporary
Notes.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Indenture Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Indenture
Trustee any Notes surrendered to them for transfer, exchange or payment. The
Indenture Trustee, or at the direction of the Indenture Trustee, the Registrar
or the Paying Agent, and no one else, shall cancel and, at the written direction
of the Company, shall dispose of all Notes surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.07, the Company may not issue new
Notes to replace Notes that it has paid or delivered to the Indenture Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and
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until the same are surrendered to the Indenture Trustee for cancellation
pursuant to this Section 2.11.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which special record date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest or
the next succeeding Business Day if such date is not a Business Day. The Company
shall notify the Indenture Trustee and Paying Agent in writing of the amount of
defaulted interest proposed to be paid on each Note and the date of the proposed
payment (a "Default Interest Payment Date"), and at the same time the Company
shall deposit with the Indenture Trustee or Paying Agent 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 Indenture Trustee or
Paying Agent 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 Section provided; provided that in no
event shall the Company deposit monies proposed to be paid in respect of
defaulted interest later than 10:00 a.m. New York time on the proposed Default
Interest Payment Date. At least 15 days before the subsequent special record
date, the Company shall mail (or cause to be mailed) to each Holder, as of a
recent date selected by the Company, with a copy to the Indenture Trustee and
Paying Agent, a notice that states the subsequent special record date, the
payment date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid. Notwithstanding the foregoing, any
interest which is paid prior to the expiration of the 30-day period set forth in
Section 6.01(b) shall be paid to Holders as of the regular record date for the
Interest Payment Date for which interest has not been paid. Notwithstanding the
foregoing, 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 Notes may be listed, and upon such notice as may be required by
such exchange.
Section 2.13. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and, if so,
the Indenture Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided, however, that no representation
is hereby deemed to be made by the Indenture Trustee as to the correctness or
accuracy
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of the CUSIP number printed in the notice or on the Notes, and that reliance may
be placed only on the other identification numbers printed on the Notes. The
Company shall promptly notify the Indenture Trustee of any change in the CUSIP
number.
Section 2.14. Deposit of Monies.
Prior to 10:00 a.m. New York City time on each Interest Payment Date,
Stated Maturity of the Notes, Redemption Date, Change of Control Payment Date
and Net Proceeds Offer Payment Date, the Company shall have deposited with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date, Stated Maturity of the
Notes, Redemption Date, Change of Control Payment Date and Net Proceeds Offer
Payment Date, as the case may be, in a timely manner which permits the Paying
Agent to remit payment to the Holders on such Interest Payment Date, Stated
Maturity of the Notes, Redemption Date, Change of Control Payment Date and Net
Proceeds Offer Payment Date, as the case may be.
Section 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") on the
face thereof until October 28, 1999, unless otherwise agreed by the Company and
the Holder thereof and unless specified in an Officers' Certificate delivered to
the Indenture Trustee and Registrar:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION
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IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT
IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO
THE ISSUER, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE INDENTURE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE INDENTURE TRUSTEE
OR REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE INDENTURE TRUSTEE AND THE
ISSUER SUCH CERTIFICATIONS, WRITTEN 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 IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
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UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF 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 SECTION 2.17 OF THE INDENTURE.
Section 2.16. Book-Entry Provisions for Global Security.
(a) Each Global Note initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Indenture Trustee as custodian for such Depository and (iii) bear legends as set
forth in Section 2.15. Each Global Note shall constitute a single Note for all
purposes of this Indenture.
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Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Indenture Trustee as its custodian, or
under a Global Note, and the Depository may be treated by the Company, the
Indenture Trustee and any Agent of the Company or the Indenture Trustee as the
absolute owner of a Global Note for all purposes whatsoever. Agent Members shall
hold their interest in a Global Note in accordance with the Applicable
Procedures. Accordingly, any Agent Member's beneficial interest in a Global Note
will be shown only on, and the transfer of such interest shall be effected only
through, records maintained by the Depositary or its nominee. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Indenture Trustee
or any Agent of the Company from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in a Global Note may be transferred or
exchanged for Physical Notes in accordance with the Applicable Procedures of the
Depository and, in the case of a transfer of a beneficial interest in a Global
Note to an Institutional Accredited Investor that is not a QIB, upon delivery of
a certificate in the form of Exhibit F by the transferee to the Registrar,
provided, however, that no Physical Note shall be issued in any denomination
less than the minimum authorized denomination therefor. In addition, Physical
Notes shall be transferred to all beneficial owners in exchange for their
beneficial interests in a Global Note if (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for a Global Note and a
successor depositary is not appointed by the Company within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository to issue Physical
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal amount of the beneficial
interest in such Global Note to be transferred, and the Company shall execute,
and the Indenture Trustee shall authenticate and deliver, one or more Physical
Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be deemed to
be surrendered to the Indenture Trustee for cancellation, and the Company shall
execute,
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and the Indenture Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depository in exchange for its beneficial interest in
such Global Note, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraph (c) of Section 2.17, bear the
legend regarding transfer restrictions applicable to the Physical Notes set
forth in Section 2.15.
(f) The Holder of the Global Note 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 Notes.
Section 2.17. Special Transfer Provisions.
(a) Notwithstanding any other provision of this Indenture, transfers
and exchanges of Notes and beneficial interests in a Global Note shall be made
only in accordance with this Section 2.17.
(i) Rule 144A Global Note to Regulation S Global Note. If the
-------------------------------------------------
beneficial owner of a Rule 144A Global Note wishes at any time to transfer
all or any portion of such interest to a Person who wishes to take delivery
thereof in the form of a beneficial interest in a Regulation S Global Note,
such transfer may be effected only in accordance with the provisions of
this clause (a)(i) and the Applicable Procedures. Upon receipt by the
Registrar of (A) a written order given in accordance with the Applicable
Procedures from the Depository or its authorized representative directing
the Registrar to credit or cause to be credited to a specified Depository
Agent Member's account a beneficial interest in the Regulation S Global
Note in a principal amount equal to the beneficial interest in the Rule 144
Global Note to be so transferred, and (B) the proposed transferor of the
beneficial interest of the Rule 144A Global Note delivers a certificate in
the form of Exhibit G to the Registrar, then the Registrar shall (1) reduce
the aggregate principal amount of the Rule 144A Global Note, (2) increase
the aggregate principal amount of the Regulation S Global Note by the
principal amount of such Notes so transferred, (3) endorse the appropriate
schedules of each such Global Note in the amount of such reduction and
increase, respectively, and (4) credit or cause to be credited to the
account of the Person specified in such instructions a beneficial interest
in the Regulation S Global Note having a principal amount equal to the
amount so transferred.
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(ii) Regulation S Global Note to Rule 144A Global Note. If the
-------------------------------------------------
beneficial owner of a Regulation S Global Note wishes at any time to
transfer all or any portion of such interest to a Person who wishes to take
delivery thereof in the form of a beneficial interest in a Rule 144A Global
Note, such transfer may be effected only in accordance with the provisions
of this clause (a)(ii) and subject to the Applicable Procedures. Upon
receipt by the Registrar of (A) a written order given in accordance with
the Applicable Procedures from a Depository Agent Member directing the
Registrar to credit or cause to be credited to a specified Depository Agent
Member's account a beneficial interest in the Rule 144A Global Note in the
principal amount equal to the beneficial interest in the Regulation S
Global Note to be so transferred, and (B) the proposed transferor of the
beneficial interest of the Regulation S Global Note delivers a certificate
in the form of Exhibit H to the Registrar, then the Registrar shall (1)
reduce the aggregate principal amount of the Regulation S Global Note, (2)
increase the aggregate principal amount of the Rule 144A Global Note by the
principal amount of such Notes so transferred, (3) endorse the appropriate
schedules of each such Global Note in the amount of such reduction and
increase, respectively, and (4) credit or cause to be credited to the
account of the Person specified in such instructions a beneficial interest
in the Rule 144A Global Note having a principal amount equal to the amount
so transferred.
(iii) Physical Note to a Global Note. If the Holder of a Physical
------------------------------
Note wishes at any time to transfer all or any portion of such Note to a
Person who wishes to take delivery thereof in the form of a beneficial
interest in a Global Note, such transfer may be effected only in accordance
with the provisions of this clause (a)(iii) and subject to the Applicable
Procedures. Upon receipt by the Registrar of (A) such Note as provided in
Section 2.06 and instructions satisfactory to the Registrar directing that
a specified principal amount not greater than the principal amount of such
Note be credited to a specified Depository Agent Member's account or
Euroclear or Cedel participant's account, as the case may be, and (B) the
proposed transferor of the Physical Note delivers a certificate in the form
of, in the case of sales under Rule 144A, Exhibit H, and in the case of
sales under Regulation S, Exhibit G, to the Registrar, then the Registrar
shall cancel such Physical Note (and issue a new Physical Note in respect
of any untransferred portion thereof) and increase the aggregate principal
amount of the Global Note by the principal amount of such Physical Note so
transferred.
(iv) Physical Note to Physical Note. A Physical Note may be
------------------------------
transferred, in whole or in part, to a Person who takes delivery in the
form of
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another Physical Note, provided that if the Physical Note to be transferred
--------
evidences Restricted Securities, then the Registrar shall have received a
certificate from the transferee in the form of Exhibit F from the
transferor.
(v) Global Note to Physical Note. A beneficial interest in a Global
----------------------------
Note may be exchanged for a Security that is not a Global Note only as
provided in Section 2.16.
(b) Notwithstanding any other provision of this Indenture, Notes or
portions thereof may be transferred or exchanged only in principal amounts of
not less than the minimum authorized denomination therefor, and only if,
following such transfer or exchange, each Holder would hold Notes with a
principal amount of not less than such minimum authorized denomination. Any
transfer, exchange or other disposition of Notes in contravention of this
Section 2.17(b) shall be deemed to be void and of no legal effect whatsoever,
any such transferee shall be deemed not to be the Holder or owner of any
beneficial interest in such Notes for any purpose, including but not limited to
the receipt of interest (including any Additional Interest) payable on such
Notes, and such transferee shall be deemed to have no interest whatsoever in
such Notes.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after October 28, 1999, or (ii) there is
delivered to the Registrar and the Indenture Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Indenture 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.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during the
Registrar's normal business hours upon the giving of reasonable written notice
to the Registrar.
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The Indenture Trustee shall be under no duty to monitor compliance
with any federal, state or other securities laws.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Indenture Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07, it shall furnish to the Indenture
Trustee, Registrar and Paying Agent, at least 45 days (unless a shorter period
is acceptable to the Indenture Trustee) but not more than 60 days before a
redemption date, an Officers' Certificate setting forth (i) the redemption date,
(ii) the principal amount at maturity of Notes to be redeemed and (iii) the
redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed, the Registrar or
Indenture Trustee shall select the Notes to be redeemed among the Holders of the
Notes on a pro rata basis, by lot or in accordance with any other method the
Indenture Trustee considers fair and appropriate, provided that no Notes of
$1,000 or less shall be redeemed in part. In the event of partial redemption by
lot, the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Registrar or Indenture Trustee from the outstanding Notes not
previously called for redemption.
The Registrar shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount at maturity thereof to be redeemed. Notes and
portions of them selected shall be in amounts of $1,000 or whole multiples of
$1,000. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 4.12, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed,
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by first class mail, a notice of redemption to each Holder whose Notes are to be
redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount at maturity of such Note to be redeemed and that, after
the redemption date upon surrender of such Note, a new Note or Notes in
principal amount at maturity equal to the principal amount at maturity of
the unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) the CUSIP number, and that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in such notice
or printed on the Notes.
At the Company's request, the Registrar shall give the notice of
redemption in the Company's name and at the Company's expense; provided,
however, that the Company shall have delivered to the Indenture Trustee and
Registrar, at least 45 days prior to the redemption date, an Officers'
Certificate requesting that the Indenture Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
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Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become due and payable on the redemption date at the
redemption price.
Section 3.05. Deposit of Redemption Price.
Prior to 10:00 a.m. New York time on any redemption date, the Company
shall deposit with the Indenture Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued interest on all Notes to
be redeemed on that date. The Indenture Trustee or the Paying Agent shall
promptly return to the Company upon its written request any money deposited with
the Indenture Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
On and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Indenture Trustee shall authenticate for the Holder of the Notes
at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Optional Redemption. The Notes will not be redeemable at the
Company's option prior to November 1, 2002. Thereafter, the Notes will be
subject
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to redemption at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on November 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002................. 106.250%
2003................. 104.688%
2004................. 103.125%
2005................. 101.563%
2006 and thereafter.. 100.000%.
</TABLE>
(b) Optional Redemption Upon Sale of Equity to Strategic Equity
Investor. Notwithstanding the foregoing, in the event of the sale by the
Company prior to November 1, 2000 of at least $25.0 million of its Capital Stock
(other than Disqualified Stock) in one or more Public Equity Offerings, or to
one or more Strategic Equity Investors, the Company may, at its option, use the
Net Cash Proceeds of such sale or sales of Capital Stock to redeem up to 35% of
the Notes at a redemption price equal to 112.50% of the principal amount thereof
plus accrued and unpaid interest thereon, if any, to the date of redemption;
provided that at least 65% of the initial principal amount of the Notes
(including in such initial principal amount, the initial principal amount of any
Additional Notes issued as contemplated by 2.02, if issued prior to the date of
redemption pursuant to this paragraph) remains outstanding immediately after
such redemption. In order to effect the foregoing redemption with the proceeds
of any such sale of Capital Stock (other than Disqualified Stock), the Company
shall make such redemption not more than 120 days after the consummation of any
such sale or sales of Capital Stock.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.12 and 4.18 of this Indenture,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes. There are no sinking fund payments with respect to the
Notes.
ARTICLE 4
COVENANTS
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Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal and on overdue
installments of interest (without regard to any applicable grace period) from
time to time on demand at the rate borne by the Notes plus 2% per annum, to the
extent lawful.
The term "Bankruptcy Law" means the Law 222 of 1995 of Colombia, the
relevant provisions of the Codigo de Comercio (Colombian Commercial Code), and
any other similar Colombian law, administrative decree or order intended for the
relief of debtors as may be in force from time to time.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an office
of the Indenture Trustee or Registrar or an affiliate of the Indenture Trustee
or Registrar) where Notes may be surrendered for registration of transfer,
exchange or conversion and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company shall give
prompt written notice to the Indenture Trustee of the location, and any change
in the location, of 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
Indenture Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Indenture Trustee.
The Company shall give prompt written notice to the Indenture Trustee
of any such designation or rescission and of any change in the location of any
such other office or agency.
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The Company hereby designates the Corporate Trust Office of the
Indenture Trustee as one such office or agency of the Company in accordance with
Section 2.03.
Section 4.03. Reports.
For so long as any of the Notes remain outstanding, the Company (at
its own expense) shall file with the Indenture Trustee: (i) within 120 days
after the end of each fiscal year, (a) audited year-end consolidated financial
statements prepared in accordance with GAAP and reconciled to U.S. GAAP and (b)
the information described in Item 303 of Regulation S-K under the Securities
Act, (ii) by January 30, 1998, (a) unaudited quarterly consolidated financial
statements prepared in accordance with GAAP and reconciled to U.S. GAAP and (b)
the information described in Item 303 of Regulation S-K under the Securities Act
with respect to the quarter ending September 30, 1997 and (iii) thereafter,
through and including the quarter ending September 30, 1999, within 75 days
after the end of each of the first three fiscal quarters of each fiscal year
(year to date only), (a) unaudited quarterly consolidated financial statements
prepared in accordance with GAAP and reconciled to U.S. GAAP (provided, that,
such quarterly financial statements and reconciliation to U.S. GAAP shall
continue to be provided for a period to be agreed to between the Company and the
Holders if 66 2/3% in principal amount of the outstanding Senior Notes request)
and (b) the information described in Item 303 of Regulation S-K under the
Securities Act, with respect to such period. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA Section 314(a). In the event that the Company is not required or shall
cease to be required to file reports with the Commission pursuant to the
Exchange Act, the Company shall nevertheless continue to file such reports with
the Commission and the Indenture Trustee. If the Indenture Trustee (at the
Company's request and expense) is to mail the foregoing information to the
Holders, the Company shall supply such information to the Indenture Trustee at
least five days prior thereto. The Company shall provide to the Holders or
prospective purchasers any information concerning the Company reasonably
requested by the Holders or such prospective purchasers (including financial
statements) necessary in order to permit such Holder or such prospective
purchasers to sell or transfer Notes in compliance with Rule 144A promulgated
under the Securities Act (including, without limitation. the information
specified in Rule 144A(d)(4)).
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Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Indenture Trustee, within 120
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled, and has caused each of its Subsidiaries to keep,
observe, perform and fulfill, its obligations under this Indenture and the
Escrow and Disbursement Agreement, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled, and has caused each of its
Subsidiaries to keep, observe, perform and fulfill, each and every covenant
contained in this Indenture and the Escrow and Disbursement Agreement and no
such Person is in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture or the Escrow and Disbursement
Agreement to be performed or observed by it, without regard to any period of
grace or requirement of notice provided under this Indenture, including, without
limitation, a default in the performance or breach of Sections 4.07 through 4.19
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action each is taking or proposes to take with respect thereto) and that to the
best of his or her knowledge no event has occurred and remains in existence by
reason of which payments on account of the principal of or interest, if any, on
the Notes is prohibited or if such event has occurred, a description of the
event and what action each is taking or proposes to take with respect thereto.
The Company's fiscal year ends on December 31st of each year.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention which would lead them to believe that the Company has violated
any provisions of Article Four or Article Five of this Indenture or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Indenture Trustee, forthwith upon any Officer becoming aware of
(i) any Default or Event of Default, (ii) any default under the Escrow and
Disbursement
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Agreement or (iii) any default under any Indebtedness referred to in Section
6.01(f), an Officers' Certificate specifying such Default, Event of Default or
default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Restricted
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies imposed on it or any of its Restricted Subsidiaries, as the
case may be, except as contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that 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 shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Indenture Trustee,
but shall suffer and permit the execution of every such power as though no such
law has been enacted.
Section 4.07. Limitation on Restricted Payments.
So long as any of the Notes are outstanding, the Company and its
Restricted Subsidiaries shall not, directly or indirectly, (i) declare or pay
any dividend or make any distribution on Capital Stock of the Company or any of
its Restricted Subsidiaries (other than dividends or distributions payable
solely in shares of such Capital Stock held by holders of such Capital Stock or
in options, warrants, or other rights to acquire such shares of Capital Stock),
(ii) repurchase, redeem, retire or otherwise acquire for value any shares of
Capital Stock of the Company or any of its Restricted Subsidiaries (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by any Person (other than any such Capital Stock owned by the Company), (iii)
make any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
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value, of Indebtedness of the Company that is subordinated in right of payment
to the Notes or Indebtedness of Restricted Subsidiaries that is subordinated to
the Intercompany Notes, or (iv) make any Investment in any Person (such payments
or any other actions described in clauses (i) through (iv) being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment: (A) a Default or Event of Default shall have
occurred and be continuing, (B) the Company could not incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.08 (without reliance upon
any of the exceptions in clauses (a)(i) through (xi) under Section 4.08) or (C)
the aggregate amount expended for all Restricted Payments (the amount so
expended, if other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) after the Issue Date shall exceed the sum of (1) 50% of the
aggregate amount of the Consolidated Net Income (or, if the Consolidated Net
Income is a loss, minus 100% of such loss) accrued on a cumulative basis during
the period (taken as one accounting period) beginning on the first day of the
fiscal quarter immediately following the Issue Date and ending on the last day
of the last fiscal quarter preceding the Transaction Date for which annual or
interim financial statements of the Company have been delivered to the Indenture
Trustee in compliance with Section 4.03, plus (2) 100% of the aggregate Net Cash
Proceeds received by the Company after the Issue Date from the issuance and sale
permitted by this Indenture of (A) its Capital Stock (other than Disqualified
Stock) to a Person who is not a Subsidiary of the Company, or (B) the issuance
to a Person who is not a Subsidiary of the Company of Indebtedness of the
Company that has been exchanged for or converted into Capital Stock of the
Company, plus without duplication of amounts included pursuant to clause (1)
above, (3) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments) in any Person resulting from payments of
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary, or designations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), in the aggregate under this
subclause (3) not to exceed the amount of Investments previously made by the
Company and its Restricted Subsidiaries in such Person.
The foregoing provision shall not be violated by reason of. (i) the
payment of any dividend within 60 days after the date of declaration thereof if,
at said date of declaration, such payment would comply with the foregoing
paragraph; (ii) the payment of dividends or distributions by a Restricted
Subsidiary on its Capital Stock to the Company or any other Restricted
Subsidiary that owns equity interests in the Restricted Subsidiary making the
respective payment; (iii) in connection with a payment of dividends or
distributions by a Restricted Subsidiary to its shareholders generally, the
payment to the minority shareholders, if any, of such Restricted Subsidiary of
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dividends or distributions (not to exceed their proportionate share of the
dividends or distributions so paid); provided that in no case shall any
Affiliate Minority Shareholder be entitled to receive dividends or distributions
pursuant to this clause (iii); (iv) so long as no Default or Event of Default
shall have occurred and be continuing, the making of any principal payment or
repurchase, redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to the
Notes, in exchange for, or out of the proceeds of a substantially concurrent
issuance of, shares of the Capital Stock of the Company; (v) so long as no
Default or Event of Default shall have occurred and be continuing, a Permitted
Refinancing; or (vi) Permitted Investments; provided, that, with respect to
Investments by the Company in a Restricted Subsidiary, no more than an aggregate
principal amount of $35.0 million of the gross proceeds of the Initial Notes
shall be applied to make Investments in the Capital Stock of Restricted
Subsidiaries; and provided, further that the aggregate Investment in any
Restricted Subsidiary in the form of Intercompany Notes shall not exceed 20% of
the gross proceeds of the Notes. The amounts referred to in clauses (i), (iii)
and (iv) shall be included as Restricted Payments in any computation made
pursuant to the first paragraph above.
Not later than the making of any Restricted Payment, the Company shall
deliver to the Indenture Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section were computed.
Section 4.08. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, incur any Indebtedness; provided that the Company and its
Restricted Subsidiaries may incur Indebtedness if, after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the Indebtedness to Annualized EBITDA Ratio as of the date
of such incurrence shall not exceed (x) 6.0 to 1.0 if such incurrence occurs on
or prior to the second anniversary of the Issue Date, (y) 5.5 to 1.0 if such
incurrence occurs after the second anniversary of the Issue Date and on or prior
to the third anniversary of the Issue Date and (z) 5.0 to 1.0 if such incurrence
occurs thereafter.
The foregoing limitation shall not apply to: (i) Indebtedness
evidenced by the Initial Notes; (ii) the Existing Indebtedness, consisting of
(A) Indebtedness of the Company under the Transtel-Siemens Purchase Agreement in
an amount not to exceed $3.4 million; and (B) the Obligations of the Restricted
Subsidiaries under the
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Global I Leases, Global II Leases and Global III Leases, which in the aggregate
shall not exceed $95.0 million; (C) Obligations of the Company under the DIAN
Financing in an amount not to exceed $25.0 million; (D) Obligations of the
Company under the IBM Financing in an amount not to exceed $3.4 million; (E)
Obligations of the Company under the purchase money financing existing on the
Issue Date in an amount not to exceed $6.5 million; and (F) Obligations of the
Company under the Certificate Guarantee; (iii) the Other Existing Indebtedness;
(iv) the incurrence by the Company or its Restricted Subsidiaries of Bank
Indebtedness in an aggregate principal amount at any one time outstanding,
together with Indebtedness incurred under clause (xi) below, not to exceed $25.0
million, as such amount may be permanently reduced as specified in Section 4.12;
provided that the use of the proceeds of such Bank Indebtedness shall not be
used to make Investments; (v) (A) the Guarantee by Restricted Subsidiaries of
Bank Indebtedness permitted to be incurred by the Company and (B) the Guarantee
by the Company of Bank Indebtedness permitted to be incurred by Restricted
Subsidiaries, in each case pursuant to clause (iv) above; (vi) Indebtedness of
the Company to any Restricted Subsidiary; provided that (a) any such
Indebtedness is unsecured and subordinated, pursuant to a Subordination
Agreement, in right of payment to the Notes and (b) any subsequent issuance or
transfer of any Capital Stock which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of such
Indebtedness to a Person not a Restricted Subsidiary shall be deemed, in each
case, to constitute an incurrence of such Indebtedness not permitted by this
clause (vi); (vii) Indebtedness of a Restricted Subsidiary issued to and held by
the Company; provided that (a) any subsequent issuance or transfer of any
Capital Stock which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such Indebtedness to a
Person not a Restricted Subsidiary shall be deemed, in each case, to constitute
an incurrence of such Indebtedness not permitted by this clause (vii) and (b) if
such Indebtedness arises from loans or advances made to a Restricted Subsidiary
by the Company with the proceeds of the Notes, such Indebtedness shall be
evidenced by an Intercompany Note; (viii) the incurrence by the Company or its
Restricted Subsidiaries of additional Indebtedness in an aggregate principal
amount not to exceed $10.0 million at any one time outstanding; (ix) the
incurrence (a "Permitted Refinancing") by the Company or its Restricted
Subsidiaries of Indebtedness issued in exchange for, or the proceeds of which
are used to extend, refinance, renew, replace or refund Indebtedness incurred
pursuant to the first paragraph of this clause (a) or pursuant to clauses (i)
(but, only as to clause (i), only to the extent the proceeds thereof are used to
purchase Notes tendered in an Offer to Purchase made as a result of a Change of
Control), (ii), (iv), (v), (vii) and (viii) above or theretofore incurred
pursuant to this clause (ix) ("Refinancing Indebtedness"); provided that: (a)
the net proceeds of such Refinancing Indebtedness shall not exceed the principal
amount of and required premium, if any, and accrued interest on the Indebtedness
so extended, refinanced, renewed, replaced, substituted or refunded (or
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if such Indebtedness was issued at an original issue discount, the face amount
of such Indebtedness less the remaining unamortized portion of the original
issue discount of such Indebtedness at the time of the repayment of such
Indebtedness) and reasonable expenses incurred in connection therewith; (b) the
Refinancing Indebtedness shall have a final maturity not sooner than, and an
Average Life equal to or greater than, the final maturity and remaining Average
Life of the Indebtedness being extended, refinanced, renewed, replaced or
refunded; (c) if the Indebtedness being extended, refinanced, renewed, replaced
or refunded is subordinated in right of payment to the Notes, the Refinancing
Indebtedness shall be subordinated in right of payment to the Notes pursuant to
a Subordination Agreement; (d) the obligor with respect to the Refinancing
Indebtedness shall be the same as the obligor with respect to the Indebtedness
being extended, refinanced, renewed or replaced or refunded, and there shall be
no additional guarantors (direct or indirect) with respect to any such
Refinancing Indebtedness; and (e) the Refinancing Indebtedness shall be
unsecured, secured in compliance with Section 4.09, or, if the Indebtedness
being extended, refinanced, renewed, replaced or refunded is secured, the
respective Refinancing Indebtedness may be secured, but only to the same extent
as the Indebtedness being refinanced, renewed, replaced or refunded; (x)
Indebtedness of the Company or any Restricted Subsidiary (A) in respect of
performance, surety or appeal bonds provided in the ordinary course of business,
(B) in respect of Currency Agreements or Interest Rate Agreements incurred for
the purpose of hedging against currency or interest rate risks with respect to
Indebtedness incurred in accordance with the first paragraph of clause (a) of
this Section and which the Company in good faith determines is non-speculative
in nature and is a bona fide hedge against fluctuations in currency values or
interest rates, respectively; provided, that in the case of Currency Agreements
that relate to other Indebtedness, such Currency Agreement does not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or by reasons of fees,
indemnities and compensation payable thereunder and in the case of Interest Rate
Agreements, the notional amount of such Interest Rate Agreement does not exceed
the underlying obligation or amount to which such Interest Rate Agreement
relates; and (C) arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds securing any obligations of
the Company or any of its Restricted Subsidiaries pursuant to such agreements,
in any case incurred in connection with the disposition of any business, assets
or Restricted Subsidiary of the Company (other than Guarantees of Indebtedness
incurred by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary of the Company for the purpose of financing such
acquisition), in a principal amount not to exceed the gross proceeds actually
received by the Company or any Restricted Subsidiary in connection with such
disposition; and (xi) Guarantees by the Company of operating leases expensed
under GAAP of its Restricted Subsidiaries; provided that the Company's
Obligations
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under such Guarantees and Indebtedness incurred under clause (iv) shall not
exceed $25.0 million. The Company and its Subsidiaries may incur Acquired Debt
only in compliance with this covenant.
(b) For purposes of determining any particular amount of Indebtedness
under this Section, Liens on such Persons' assets or obligations of such Persons
with respect to letters of credit supporting Indebtedness otherwise included in
the determination of such particular amount shall not be included. For purposes
of determining compliance with this Section, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above paragraph, the Company shall classify such item of
Indebtedness and only be required to include the amount of such Indebtedness in
one of such types of Indebtedness and (B) the amount of Indebtedness issued at a
price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in conformity with GAAP.
Notwithstanding any other provision of this Section, the maximum amount of
Indebtedness that the Company or a Restricted Subsidiary may incur pursuant to
this Section shall not be deemed to be exceeded due solely to the result of
fluctuations in the exchange rates of currencies after the date of the
respective incurrence of Indebtedness otherwise in conformity with the
provisions of this Section.
Section 4.09. Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, except for Permitted Liens.
If the Company or any of its Restricted Subsidiaries shall create,
incur, assume or suffer to exist any Lien, other than a Permitted Lien, on any
assets or other property to secure Indebtedness in violation of this covenant,
the Company or such Restricted Subsidiary, as the case may be, shall make
effective provision for securing the Notes equally and ratably with such
Indebtedness as to such assets or other property for so long as such
Indebtedness shall be so secured.
Notwithstanding the foregoing, Permitted Liens may not extend to the
Escrow Account, the Refinancing Account, the Escrow and Disbursement Agreement
or the Intercompany Notes.
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Section 4.10. Limitation on Issuance and Sale of Capital Stock of
Restricted Subsidiaries.
The Company shall not sell, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any shares of Capital Stock
of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (i) to the Company, a Wholly-Owned
Subsidiary or, in the case of Restricted Subsidiaries, the Municipal
Shareholders of such Restricted Subsidiary so long as such Restricted Subsidiary
remains a Subsidiary of the Company; (ii) if, immediately after giving effect to
such issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary; (iii) issuances or sales to foreign nationals of shares
of Capital Stock of Restricted Subsidiaries, to the extent required by
applicable law; and (iv) issuances or sales of Capital Stock of Restricted
Subsidiaries to persons who after such issuance or sale will hold a minority
interest in such Restricted Subsidiary, provided that in the case of clauses
(ii) and (iv), the Company or such Restricted Subsidiary applies the Net Cash
Proceeds, if any, of any such sale in accordance with Section 4.12.
Section 4.11. Limitation on Preferred Stock of Subsidiaries.
The Company shall not permit any of its Subsidiaries to issue,
directly or indirectly, any Preferred Stock, except (i) Preferred Stock of
Subsidiaries outstanding on the Issue Date, (ii) Preferred Stock issued to and
held by the Company or a Subsidiary, except that any subsequent issuance or
transfer of any Capital Stock which results in any Wholly-Owned Subsidiary
ceasing to be a Wholly-Owned Subsidiary or any transfer of such Preferred Stock
to a Person not a Wholly-Owned Subsidiary will be deemed an issuance of
Preferred Stock; (iii) Preferred Stock issued by a Person prior to the time (a)
such Person became a Subsidiary, (b) such Person merges with or into a
Subsidiary or (c) another Person merges with or into such Person (in a
transaction in which such Person becomes a Subsidiary), in each case if such
Preferred Stock was not issued in anticipation of such transaction; and (iv)
Preferred Stock issued in exchange for, or the proceeds of which are used to
refund Indebtedness or refinance Preferred Stock referred to in clause (i) or
issued pursuant to clauses (ii) or (iii) (other than Preferred Stock which by
its terms (or by the terms of any security into which it is convertible or for
which it is exchangeable) is redeemable at the option of the holder thereof or
is otherwise redeemable, pursuant to sinking fund obligations or otherwise,
prior to the date of redemption or maturity of the Preferred Stock or
Indebtedness being so refunded or refinanced); provided that (a) the liquidation
value of such Preferred Stock so issued shall not exceed the principal amount or
the liquidation value of the Indebtedness or Preferred Stock, as the case may
be, so refunded or refinanced and (b)
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the Preferred Stock so issued (1) shall have a stated maturity not earlier than
the stated maturity of the Indebtedness or Preferred Stock being refunded or
refinanced and (2) shall have a Weighted Average Life to Maturity equal to or
greater than the remaining Weighted Average Life to Maturity of the Indebtedness
or Preferred Stock being refunded or refinanced.
Section 4.12. Limitation on Asset Sales.
The Company shall not, and shall not permit any Restricted Subsidiary
to, consummate any Asset Sale, unless (i) the consideration received by the
Company or such Restricted Subsidiary is at least equal to the Fair Market Value
of the assets sold or disposed of (as determined in good faith by the Company's
Board of Directors or if the Fair Market Value of such assets (A) exceeds $10.0
million but is less than $25.0 million, the Company shall receive from an
independent internationally recognized investment banking firm or independent
Colombian investment banking firm or (B) exceeds $25.0 million, the Company
shall receive from an independent internationally recognized investment banking
firm, a written opinion in customary form as to the fairness, to the Company, of
such Asset Sale) and (ii) at least 75% of the consideration received consists of
cash or Cash Equivalents.
Upon the consummation of an Asset Sale, the Company may apply, or
cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to
such Asset Sale within 270 days of receipt thereof either to (A) permanently
prepay any Bank Indebtedness and, in the case of any Bank Indebtedness
outstanding under a revolving credit facility, to effect a permanent reduction
in the availability under such revolving credit facility, (B) invest in property
or assets that are used in a Telecommunications Business, or the acquisition of
Capital Stock of any Person primarily engaged in a Telecommunications Business
if, as a result of such acquisition, such Person would become a Restricted
Subsidiary and such acquisition is in compliance with Section 4.07 or (C) a
combination of prepayment and investment permitted by the foregoing clauses (A)
and (B). On the 271st day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply any portion of the Net Cash Proceeds relating to such
Asset Sale as set forth in Clauses (A), (B) or (C) of the preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (A), (B) or (C) of the preceding sentence
(each a "Net Proceeds Offer Amount") shall be applied by the Company to make an
offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer
Payment Date") not less than 30 nor more than 45 days following the applicable
Net Proceeds Offer Trigger Date, from the Holders on a pro rata basis
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that amount of Notes equal to the Net Proceeds Offer Amount at a price equal to
100% of the principal amount of the Notes to be purchased, plus accrued and
unpaid interest thereon, if any, to the date of purchase; provided, however,
that if at any time any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale under
this Indenture and the Net Cash Proceeds thereof shall be applied in accordance
with this covenant.
Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less
than $5.0 million, the application of the Net Cash Proceeds constituting such
Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such
time as such Net Proceeds Offer Amount plus the aggregate amount of all Net
Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date
relating to such initial Net Proceeds Offer Amount from all Asset Sales by the
Company and its Restricted Subsidiaries aggregates at least $5.0 million, at
which time the Company shall apply all Net Cash Proceeds constituting all Net
Proceeds Offer Amounts that have been so deferred to make a Net Proceeds Offer
(the first date the aggregate of all such deferred Net Proceeds Offer Amounts is
equal to $5.0 million or more shall be deemed to be a Net Proceeds Offer Trigger
Date).
Each Net Proceeds Offer shall be mailed within not less than 30 nor
more than 45 days following the applicable Net Proceeds Offer Trigger Date to
the record Holders as shown on the register of Holders, with a copy to the Pass
Through Trustee and the Indenture Trustee, and shall comply with the procedures
set forth in this Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender its Notes in whole or in part in integral multiples
of $1,000 in exchange for cash. To the extent Holders properly tender Notes in
an amount exceeding the Net Proceeds Offer Amount, Notes of tendering Holders
shall be purchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder in
connection with the repurchase of Notes (and the repurchase by the Trust of the
Certificates) pursuant to a Net Proceeds Offer (whether or not such rule by its
terms would be applied to such offer as a matter of law). To the extent that
the provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall
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not be deemed to have breached its obligations under the "Asset Sale" provisions
of this Indenture by virtue thereof
Section 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
So long as any of the Notes are outstanding, the Company shall not,
and shall not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction of any kind on the ability of any Restricted Subsidiary to (i) pay
dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or any
other Restricted Subsidiary or (iv) transfer any of its property or assets to
the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Issue Date, including those in this Indenture
or in the Existing Indebtedness, and any Permitted Refinancings thereof,
provided that the encumbrances and restrictions in any such Permitted
Refinancings are in the aggregate not materially more restrictive than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law and not due to any contractual arrangement; (iii) in the case of
clause (iv) of the first paragraph of this covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this Indenture, (C) arising or
agreed to in the ordinary course of business, not relating to any Indebtedness
for borrowed money, and that do not, individually or in the aggregate, detract
from the value of property or assets of the Company or any Restricted Subsidiary
in any manner material to the Company or any Restricted Subsidiary, (D) existing
pursuant to any purchase money obligations for property solely with respect to
the property acquired or (E) existing pursuant to any mortgage or construction
financing that imposes restrictions solely on the real property acquired or
improved; (iv) with respect to a Restricted Subsidiary and imposed pursuant to
an agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property or assets of, such
Restricted Subsidiary; or (v) included in Bank Indebtedness or Guarantees
incurred pursuant to clauses (iv) and (v) of the second paragraph of Section
4.08, respectively, so long as, in the case of this
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clause (v), the relevant restrictions in no event restrict payments to the
Company to be used by it to make payments of principal, interest or other
amounts as required pursuant to the terms of the Notes or this Indenture other
than to require that no such payment be made if there is a default or event of
default with respect to the Bank Indebtedness or Guarantees. Nothing contained
in this Section shall prevent the Company or any Restricted Subsidiary from (1)
creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in Section 4.09 or (2) restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries that
secure Indebtedness of the Company or any of its Restricted Subsidiaries.
Section 4.14. Limitation on Transactions with Shareholders and
Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any legal or
beneficial owner (or any Affiliate of such holder) of 5% or more of any class of
Capital Stock of the Company or with any Affiliate of the Company or any
Restricted Subsidiary (each of the foregoing, an "Affiliate Transaction"),
unless: (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or such Restricted Subsidiary than those that would have been
obtained at the time of such transaction or at the time of the execution of the
agreement providing therefor in a comparable arm's-length transaction with a
Person that is not such a Related Person and (ii) the Company delivers to the
Indenture Trustee: (x) with respect to any Affiliate Transaction involving
aggregate payments in excess of $250,000 but less than $2.5 million, a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above, (y) with respect to any Affiliate Transaction involving aggregate
payments equal to or greater than $2.5 million but less than $15.0 million, a
resolution of the Board of Directors of the Company set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and (A) that such Affiliate Transaction has been approved by at least
three disinterested directors of the Board of Directors of the Company and, in
any case, by a majority of the disinterested directors of the Board of Directors
of the Company or (B) a written opinion as to the fairness to the Company or
such Restricted Subsidiary from a financial point of view issued by an
independent internationally recognized investment banking firm or independent
Colombian investment banking firm with respect to any such Affiliate
Transaction, and (z) with respect to any Affiliate Transaction involving
aggregate payments equal to or greater than $15.0 million, a resolution of the
Board of Directors of the Company set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and a
written opinion as to the
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fairness to the Company or such Restricted Subsidiary from a financial point of
view issued by an independent internationally recognized investment banking firm
with respect to any such Affiliate Transaction.
Notwithstanding the foregoing, the following shall not be deemed
Affiliate Transactions: (i) any transaction between the Company and any of its
Restricted Subsidiaries or between Restricted Subsidiaries, provided such
transaction complies with clause (i) in the first paragraph above (other than
for amounts paid by a Restricted Subsidiary to the Company in respect of
corporate overhead); (ii) the payment of reasonable and customary regular fees
to directors of the Company who are not employees of the Company; (iii) any
payments or other transactions pursuant to any tax-sharing agreement between the
Company and any other Person with which the Company files a consolidated tax
return or with which the Company is part of a consolidated group for tax
purposes; (iv) Global I Leases, Global II Leases and Global III Leases, and any
extension, amendment, replacement or renewal thereof on substantially similar
terms; (v) any Restricted Payments not prohibited by Section 4.07; or (vi)
equipment leases with Affiliates entered into after the Issue Date; provided
such leases comply with clause (i) in the first paragraph above and the Company
delivers to the Indenture Trustee a resolution of the Board of Directors of the
Company set forth in an Officer's Certificate certifying that such Affiliate
Transaction complies with clause (i) in the first paragraph above, and contains
terms substantially similar to the terms of Global I leases, Global II Leases
and Global III Leases, and any extension, amendment, replacement or renewal
thereof.
Section 4.15. Limitation on Issuances of Guarantees by Restricted
Subsidiaries.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a Subsidiary Guarantee and (ii) such Restricted Subsidiary waives
and shall not in any manner whatsoever claim or take the benefit or advantage
of, any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided
that this paragraph shall not be applicable to any Guarantee of any Restricted
Subsidiary that (A) (x) existed at the time such Person became a Restricted
Subsidiary and (y) was not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary or (B) Guarantees of Bank
Indebtedness incurred by the Company pursuant to clause (iv) of the second
paragraph of Section 4.08. If the Guaranteed Indebtedness is (A) pari passu
with the
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Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari passu
with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated
to the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Company's
and each Wholly-Owned Subsidiary's Capital Stock in such Restricted Subsidiary
(which sale, exchange or transfer is not prohibited by this Indenture) or (ii)
the release or discharge of the Guarantee or other Indebtedness which resulted
in the creation of such Subsidiary Guarantee, except a release or discharge by
or as a result of payment under such Guarantee.
Under certain circumstances, the Company may cause the execution and
delivery of Subsidiary Guarantees. Each Subsidiary Guarantee delivered by a
Restricted Subsidiary is limited to such amount as will not, after giving effect
thereto, and to all other liabilities of such Restricted Subsidiary, result in
such amount constituting a fraudulent transfer or conveyance.
Section 4.16. Limitation on Modifications to Certain Documents.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to: (a) after the issuance thereof, amend or modify (or permit the
amendment or modification of) any of the terms or provisions of the Intercompany
Notes in any manner adverse to the interests of the Holders and the Indenture
Trustee under the Pledge Agreement, or forgive or reduce (except to extent
resulting from actual repayment to the Company in cash) the principal amount of
the Indebtedness evidenced thereunder, or (b) amend or modify any of the terms
or provisions of its estatutos sociales or other charter documents and, in the
case of the Restricted Subsidiaries, any lease agreement to which an Affiliate
of such Restricted Subsidiary or an Affiliate of the Company is a party, in any
manner adverse to the interests of the Holders.
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Section 4.17. Conduct of Business.
The Company and its Restricted Subsidiaries may not, directly or
indirectly, engage in any business other than the Telecommunications Business in
Latin America; provided that in the event a Change of Control occurs in which
one or more Strategic Equity Investors gain control of the Company this covenant
shall no longer be of force or effect.
Section 4.18. Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall be
required to offer to repurchase (the "Offer to Purchase") all or a portion of
each Holder's Notes, in integral multiples of $1,000 pursuant to the offer
described in paragraph (b) below, at a purchase price equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, to
the date of repurchase. The Offer to Purchase shall remain open for at least 20
Business Days and until the close of business on the second Business Day prior
to the Change of Control Payment Date.
(b) Within 30 days following the date upon which the Change of
Control occurred (the "Change of Control Date"), the Company shall send, by
first class mail, a notice to each Holder, with a copy to the Indenture Trustee
and Paying Agent, which notice shall govern the terms of the Offer to Purchase.
The notice to the Holders shall contain all instructions and materials necessary
to enable such Holders to tender Notes pursuant to the Offer to Purchase. Such
notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.18 and that all Notes tendered and not withdrawn will be accepted
for payment;
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Offer to Purchase shall cease to
accrue interest after the Change of Control Payment Date;
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(5) that Holders electing to have a Note purchased pursuant to a
Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day prior to the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter, signature guaranteed, setting forth the name of the Holder, the
principal amount of the Notes the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Notes
purchased;
(7) that Holders whose Notes are purchased only in part will be
issued new Notes in a principal amount equal to the unpurchased portion of
the Notes surrendered; provided, however, that each Note purchased and each
new Note issued shall be in an original principal amount of $1,000 or
integral multiples thereof; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Offer to
Purchase, (ii) deposit with the Paying Agent in accordance with Section 2.14,
U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if
any, of all Notes so tendered, (iii) deliver to the Indenture Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof being purchased by the Company and (iv) deliver to the Paying Agent an
Officers' Certificate specifying the Notes or portions thereof being purchased
by the Company and the payees of the purchase price. Upon receipt by the Paying
Agent of the monies specified in clause (ii) above and a copy of the Officers'
Certificate specified in clause (iii) above, the Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price plus accrued interest, if any, and the Indenture Trustee shall
promptly authenticate and mail to such Holders new Notes equal in principal
amount to any unpurchased portion of the Notes surrendered. Any Notes not so
accepted shall be promptly mailed by the Company to the Holder thereof. For
purposes of this Section 4.18, the Indenture Trustee shall act as the Paying
Agent.
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Any amounts remaining after the purchase of Notes pursuant to a Offer
to Purchase shall be returned by the Paying Agent (i) to the Company upon its
written request if, immediately prior to such Offer to Purchase, the balance of
the Escrow Account Available Funds in the Escrow Account equalled zero, or (ii)
to the Escrow Agent if the Escrow Account Available Funds from the Escrow
Account have been used, in whole or in part, to make such Change of Control
Offer and any such funds remain, as the case may be.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes and the repurchase by the Trust of the Certificates)
pursuant to a Offer to Purchase. To the extent that the provisions of any
securities laws or regulations conflict with the foregoing provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
foregoing provisions of this Indenture by virtue thereof.
Section 4.19. Disbursement of Funds; Escrow Account.
The Company shall, on the date of this Indenture, enter into the
Escrow and Disbursement Agreement and, pursuant thereto, shall place the Escrow
Amount in the Escrow Account held by the Escrow Agent for the benefit of the
Holders of the Notes and the Indenture Trustee (in its capacity as such).
Section 4.20. Payment of Additional Amounts.
For so long as the Trust is required to pay any amounts on the
Certificates, the Company shall pay to the Trust as additional sums on the Notes
(a) such amounts as may be required so that the payments payable by the Trust
will not be reduced as a result of any Taxes imposed by any Taxing Authority on
payments to the Trust under the Indenture except to the extent that the Trust
would not have been obligated to pay Additional Amounts with respect to such
amounts if such payment had been made directly by the Trust to the
Certificateholder, and (b) such amounts as may be necessary in order to satisfy
the obligation of the Trust to pay any (i) Additional Amounts in respect of the
Certificates, and (ii) any stamp, issue, transfer, sales, use, value-added
property, registration, documentary, enforcement or other similar taxes and
other duties (including interest and penalties) payable to any Taxing Authority
in respect of the creation, issue or offering of the Certificates or any other
documents directly related to such creation, issue or offering; and (c) such
amounts as may be required so
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that the payments payable by the Trust will not be reduced as a result of any
Taxes or other liabilities imposed on the Trust, except to the extent that the
Company is required to pay such Taxes pursuant to (a) or (b) of this section
4.20.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets.
The Company shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property or assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company (other than a consolidation or merger
with or into a Restricted Subsidiary with a positive net worth where minority
shareholders of Restricted Subsidiaries receive only stock of the surviving
entity; provided that, in connection with any such merger or consolidation,
clauses (i) and (iv) below are complied with and no consideration (other than
Common Stock in the surviving Person or the Company) shall be issued or
distributed to the shareholders of the Company) unless: (i) the Company shall be
the surviving Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or leased
such property and assets of the Company shall be a corporation organized and
validly existing under the laws of Colombia or the United States of America, any
State thereof or the District of Columbia, and shall expressly assume, by a
supplemental indenture, executed and delivered to the Indenture Trustee, all of
the obligations of the Company under the Notes and this Indenture; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Company, or any Person
becoming the successor obligor of the Notes, could incur at least $1.00 of
Indebtedness under the first paragraph of clause (a) of Section 4.08 (without
reliance upon any of the exceptions in (a)(i) through (xi) under Section 4.08);
and (iv) the Company delivers to the Indenture Trustee an Officers' Certificate
(attaching, if applicable, the arithmetic computations to demonstrate compliance
with clause (iii)) and Opinion of Counsel, in each case stating that such
consolidation, merger or transfer and such supplemental indenture complies with
this provision and that all conditions precedent provided for herein relating to
such transaction have been complied with.
Section 5.02. Successor Corporation Substituted.
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Upon any consolidation, combination or merger or any transfer of all
or substantially all of the assets of the Company in accordance with Section
5.01, the surviving entity shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and the
Notes with the same effect as if such surviving entity had been named as such;
provided that solely for purposes of computing amounts described in clause (C)
of the first paragraph of Section 4.07, any such surviving entity to the Company
shall only be deemed to have succeeded to and be substituted for the Company
with respect to periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
Each of the following constitutes a "Event of Default":
(a) default in the payment of principal of, or premium, if any, on,
the Notes when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise;
(b) default in the payment of interest on the Notes when the same
becomes due and payable and such default continues for a period of 30 days;
(c) failure to perform or comply with the provisions described under
Sections 4.12 and 4.18, or the failure by the Company to deposit the amounts
required to be deposited in the Escrow Account and Refinancing Account, each in
accordance with the Escrow and Disbursement Agreement;
(d) failure to comply with the provisions of Article 5;
(e) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture, the Notes or the Escrow
and Disbursement Agreement and such default or breach continues for a period of
30 consecutive days after written notice by the Indenture Trustee or the Holders
of 25% or more in aggregate principal amount of the Notes outstanding (other
than those refer-red to in (a), (b), (c) or (d));
(f) there occurs with respect to (A) any issue or issues of
Indebtedness (other than Intercompany Notes) of the Company or any Subsidiary
having
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an outstanding principal amount of $5 million or more in the aggregate for all
such issues of all such Persons or (B) any Intercompany Note of any Restricted
Subsidiary, in each case, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder thereof
to declare such Indebtedness to be due and payable prior to its final Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days following such
acceleration and/or (II) the failure to make a principal payment at the final
Stated Maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default or any longer grace period
provided for in such Indebtedness;
(g) one or more final judgments rendered against the Company or any
of its Subsidiaries (other than any judgment as to which a reputable insurance
or bonding company has accepted full liability in writing) aggregating in excess
of $5.0 million which judgments are not stayed within 60 days after their entry;
(h) the Company or any Subsidiary of the Company pursuant to or
within the meaning, of any Bankruptcy Law:
(i) commences a voluntary case, including a "concordato" proceeding
or a voluntary liquidation;
(ii) consents to the entry of an order for relief against it in an
involuntary case;
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property; or
(iv) makes a general assignment for the benefit of its creditors;
(i) a court or administrative authority of competent jurisdiction
enters an order or decree under any Bankruptcy Law that:
(i) is for relief against the Company or any Subsidiary of the
Company in an involuntary case;
(ii) appoints a Custodian of the Company or any Subsidiary of the
Company or for all or substantially all of the property of the Company or
any Subsidiary of the Company; or
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(iii) orders the liquidation of the Company or any Subsidiary of the
Company,
and the order or decree remains unstayed and in effect for 60 consecutive days.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law;
(j) there occurs with respect to the Global I Purchase Agreement,
the Global II Purchase Agreement, the purchase agreements to be entered into in
connection with the Global III Leases, or any future Global arrangements
permitted under this Indenture an event of default that has caused Siemens to
declare Global's Obligations under such purchase agreements to be due and
payable prior to such Obligations' Stated Maturity and (A) such Obligations have
not been discharged in full, or (B) such acceleration has not been rescinded or
annulled within 10 days following such acceleration; and
(k) failure by Global to perform or comply with the Global
Undertaking Letter, or Global rejects being bound by the terms of the Global
Undertaking or repudiation by the Company of its obligations under the Escrow
and Disbursement Agreement for any reason.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clauses 6.01(h) that occurs with respect to the Company and (i) above) occurs
and is continuing under this Indenture, the Indenture Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be immediately due and payable at 100% of the unpaid principal
thereof plus accrued and unpaid interest thereon, if any, by notice in writing
to the Company and the Indenture Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice").
Upon such declaration, the principal of, premium, if any, and accrued interest
on the Notes shall become immediately due and payable. Notwithstanding the
foregoing, in the case of an Event of Default specified in clause (h) or (i)
with respect to the Company or (j) of Section 6.01, the foregoing amount shall
ipso facto become due and payable without further action or notice. No premium
is payable upon acceleration of the Notes except that in the case of an Event of
Default that is the result of an action or inaction by the Company or any of its
Subsidiaries intended to avoid premiums related to redemptions of the Notes
contained in this Indenture or the Notes, the amount declared due and payable
will include the
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premium that would have been applicable on a voluntary prepayment of the Notes
or, if voluntary prepayment is not then permitted, the premium set forth in this
Indenture.
At any time after a declaration of acceleration with respect to the
Notes as described in the preceding paragraph, but before a judgment or decree
for the payment of money due has been obtained by the Indenture Trustee, the
Holders of at least a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except non payment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Indenture Trustee
its reasonable compensation and reimbursed the Indenture Trustee for its
expenses, disbursements and advances and (v) in the event of the cure or waiver
of an Event of Default specified in clause (h) of Section 6.01, the Indenture
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Event of Default has been cured or waived.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Indenture Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture or the Escrow and Disbursement Agreement.
The Indenture Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Indenture Trustee or any Holder of a Note in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default.
All remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding, by notice to the Indenture Trustee, may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under this Indenture, except a continuing Default or Event of
Default in the payment
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of interest or premium on, or the principal of, the Notes, or in respect of a
covenant or a provision which cannot be amended or modified without the consent
of all Holders.
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 impair any right consequent thereon.
Section 6.05. Control by Majority.
Subject to 2.09, holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Indenture Trustee or
exercising any trust or power conferred on it. However, the Indenture Trustee
may refuse to follow any direction that conflicts with the law or this Indenture
that the Indenture Trustee determines may be unduly prejudicial to the rights of
other Holders of Notes or that may involve the Indenture Trustee in personal
liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Indenture Trustee written
notice of a continuing Event of Default,
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Indenture Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Indenture Trustee indemnity satisfactory to the
Indenture Trustee against any loss, liability or expense;
(d) the Indenture Trustee does not comply with the request within 15
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
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(e) during such 15-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Indenture Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder of the Note.
Section 6.08. Collection Suit by Indenture Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Indenture Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium, if any, and interest remaining unpaid on the
Notes and interest on overdue principal and, to the extent lawful, interest and
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 Indenture Trustee, its agents and counsel.
Section 6.09. Indenture Trustee May File Proofs of Claim.
The Indenture Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel) and the Holders of the Notes allowed in any judicial
proceedings relative to the Company (or any other obligor upon the Notes), the
Company's creditors or the Company's property and shall be entitled and
empowered to participate as a member, voting or otherwise, of any official
committee of creditors appointed in such matter and to collect, receive and
distribute any money or other property payable or deliverable on any such claims
and any custodian in any such judicial proceeding is hereby authorized by each
Holder
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of a Note to make such payments to the Indenture Trustee, and in the event that
the Indenture Trustee shall consent to the making of such payments directly to
the Holders of the Notes, to pay to the Indenture Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel, and any other amounts due the
Indenture Trustee under Section 7.07. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel, and any other amounts due the Indenture Trustee under
Section 7.07 out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be paid out
of, any and all distributions, dividends, money, securities and other properties
which the Holders of the Notes may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or accept or adopt on behalf of any Holder of
a Note any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder of a Note thereof, or to
authorize the Indenture Trustee to vote in respect of the claim of any Holder of
a Note in any such proceeding.
Section 6.10. Priorities.
If the Indenture Trustee collects any money pursuant to this Article,
it shall pay out the money in the following order:
First: to the Indenture Trustee, the Agents, and their agents and
attorneys for amounts due under Section 7.07, including payment of all
compensation, expense and liabilities incurred, and all advances made, by the
Indenture Trustee and the costs and expenses of collection;
Second: to Holders of Notes, for amounts due and unpaid on such
Notes for principal, premium, if any, and interest, ratably, without preference
or priority of any kind to the extent of moneys and securities collected under
the Escrow and Disbursement Agreement according to the amounts due and payable
on the Notes for principal, premium, if any, and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Indenture Trustee may fix a record date and payment date for any
payment to Holders of Notes.
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Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Indenture Trustee for any action taken or
omitted by it as a Indenture Trustee, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the costs of
the suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Indenture Trustee, a
suit by a Holder of a Note pursuant to Section 6.07 or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
INDENTURE TRUSTEE
Section 7.01. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Indenture Trustee and the Agents shall be
determined solely by the express provisions of this Indenture and the
Indenture Trustee and the Agents need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee and the Agents, and
(ii) in the absence of bad faith on their part, the Indenture Trustee
and the Agents may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and the Agents and conforming
to the requirements of this Indenture. However, the Indenture Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture but shall not be
obligated to verify the accuracy of the contents thereof.
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(c) The Indenture Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) neither the Indenture Trustee nor any Agent shall be liable for
any error of judgment made in good faith by a Responsible Officer, unless
it is proved that the Indenture Trustee or such Agent was negligent in
ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Indenture Trustee or any Agent
is subject to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or incur any liability. The Indenture
Trustee shall be under no obligation to exercise any of its rights and powers
under this Indenture at the request of any Holders of Notes, unless such Holder
shall have offered to the Indenture Trustee security and indemnity satisfactory
to the Indenture Trustee against any loss, liability or expense including
attorneys fees that might be incurred by it in compliance with such request or
direction.
(f) Neither the Indenture Trustee nor any Agent shall be liable for
interest on any money received by it except as the Indenture Trustee or such
Agent, as the case may be, may agree in writing with the Company. Money held in
trust by the Indenture Trustee or such Agent, as the case may be, need not be
segregated from other funds except to the extent required by law.
(g) Each Holder of Notes, by its acceptance thereof, consents and
agrees to the terms of the Escrow and Disbursement Agreement as provided in
Section 10.01 and the Global Undertaking Letter. Each Holder of Notes, by its
acceptance thereof, authorizes and directs the Indenture Trustee to enter into
the Escrow and Disbursement Agreement and the Global Undertaking Letter and to
perform its obligations and exercise its rights thereunder in accordance
therewith.
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Section 7.02. Rights of Indenture Trustee.
(a) The Indenture Trustee and each Agent may conclusively rely upon
any document believed by them to be genuine and to have been signed or presented
by the proper Person. Neither the Indenture Trustee nor any Agent need
investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee or any Agent acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of Counsel or
both. Neither the Indenture Trustee nor any Agent shall be liable for any
action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel. The Indenture Trustee or any Agent may
consult with counsel and the advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Indenture Trustee and any Agent may act through their
attorneys and agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Indenture Trustee and any Agent shall not be liable for any
action they take or omit to take in good faith which they believe to be
authorized or within their rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by two Officers of the Company.
(f) The Indenture 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 unless such Holders shall have offered to the
Indenture Trustee reasonable security or indemnity against the costs, expenses
and liabilities that might be incurred by it in compliance with such request or
direction.
Section 7.03. Individual Rights of Indenture Trustee.
The Indenture Trustee in its individual or any other capacity may
become the owner or pledge of Notes and may otherwise deal with the Company or
any Affiliate of the Company with the same rights it would have if it were not
Indenture Trustee, including (i) acting as escrow agent pursuant to the Escrow
and Disbursement
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Agreement dated as of October 28, 1997 among the Indenture Trustee, in its
capacity as such and as escrow agent, and the Company, (ii) acting as collateral
agent pursuant to the Pledge Agreement, dated as of October 28, 1997, between
the Indenture Trustee, in its capacity as collateral agent, and the Company and
(iii) acting as Guarantee Trustee under the Guarantee (as defined in the Trust
Agreement). However, in the event that the Indenture Trustee acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue as trustee or resign. Any Agent may
do the same with like rights and duties. The Indenture Trustee is also subject
to Sections 7.10 and 7.11.
Section 7.04. Indenture Trustee's Disclaimer.
The Indenture Trustee and the Agents shall not be responsible for and
make no representation as to the validity or adequacy of this Indenture, the
Pledge Agreement, the Escrow and Disbursement Agreement, the Global Undertaking
Letter the Guarantee or the Notes, shall not be accountable for the Company's
use of the proceeds from the Notes or any money paid to the Company or upon the
Company's direction under any provision of this Indenture, shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Indenture Trustee and shall not be responsible for any statement
or recital herein or any statement in the Notes or any other document in
connection with the sale of the Notes or pursuant to this Indenture other than
its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee
shall mail to Holders of Notes a notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any Note,
the Indenture Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding the notice is
in the interests of the Holders of the Notes.
Section 7.06. Reports by Indenture Trustee to Holders of the Notes.
Within 60 days after each April 15 beginning with the April 15
following the date of this Indenture, the Indenture Trustee shall mail to the
Holders of the Notes
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a brief report dated as of such reporting date that complies with TIA (S) 313(a)
(but if no event described in TIA (S) 313(a) has occurred within the twelve
months preceding the reporting date, no report need be transmitted). The
Indenture Trustee also shall comply with TIA (S) 313(b)(2). The Indenture
Trustee shall also transmit by mail all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing, to the Holders of
Notes shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Notes are listed. The Company shall promptly notify
the Indenture Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Indenture Trustee and the Agents from
time to time reasonable compensation as agreed in writing from time to time for
their acceptance of this Indenture and services hereunder. The Indenture
Trustee's and the Agents' compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Indenture Trustee and the Agents promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by them in addition to the
compensation for their services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Indenture Trustee's and the
Agents' agents and counsel.
The Company shall indemnify the Indenture Trustee and the Agents
against any and all losses, liabilities or expenses incurred by them arising out
of or in connection with the acceptance or administration of their duties under
this Indenture, the Notes, or the Escrow and Disbursement Agreement, except any
such loss, liability or expense as may be attributable to the negligence or bad
faith of the Indenture Trustee or such Agent. The Indenture Trustee or such
Agent shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Indenture Trustee or such Agent to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Indenture Trustee shall cooperate in the defense.
The Indenture Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
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To secure the Company's payment obligations in this Section, the
Indenture Trustee and the Agents shall have a lien prior to the Notes on all
money or property held or collected by the Indenture Trustee and the Agents,
except that held in trust to pay principal, premium, if any, and interest on
particular Notes. Such lien shall survive the satisfaction and discharge or
termination of this Indenture (including any termination under any Bankruptcy
Law) or the resignation or removal of any Agent or the Indenture Trustee, as the
case may be.
When the Indenture Trustee or any Agent incurs expenses or renders
services after an Event of Default specified in Section 6.01(h) or (i) occurs,
the expenses and the compensation for the services (including the fees and
expenses of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.08. Replacement of Indenture Trustee.
A resignation or removal of the Indenture Trustee and appointment of a
successor Indenture Trustee shall become effective only upon the successor
Indenture Trustee's acceptance of appointment as provided in this Section.
The Indenture Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Indenture Trustee by so notifying the Indenture Trustee and the
Company in writing. The Company may remove the Indenture Trustee if:
(a) the Indenture Trustee falls to comply with Section 7.10;
(b) the Indenture Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Indenture Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Indenture
Trustee or its property; or
(d) the Indenture Trustee becomes incapable of acting,
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason, the Company shall promptly
appoint a successor Indenture Trustee. Within one year after the successor
Indenture Trustee
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takes office, the Holders of a majority in principal amount of the then
outstanding Notes may appoint a successor Indenture Trustee to replace the
successor Indenture Trustee appointed by the Company.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Company, or the Holders of Notes of at least 10% in
principal amount of the then outstanding Notes may petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.
If the Indenture Trustee after written request by any Holder of a Note
who has been a Holder of a Note for at least six months fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
Jurisdiction for the removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee and to the Company.
Thereupon, the resignation or removal of the retiring Indenture Trustee shall
become effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The successor
Indenture Trustee shall mail a notice of its succession to Holders of the Notes.
The retiring Indenture Trustee shall promptly transfer all property held by it
as Indenture Trustee to the successor Indenture Trustee, provided all sums owing
to the Indenture Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07. Notwithstanding replacement of the Indenture
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 shall continue for the benefit of the retiring Indenture Trustee.
Section 7.09. Successor Indenture Trustee by Merger, etc.
If the Indenture Trustee consolidates, merces or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Indenture Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be an Indenture Trustee hereunder which shall
be a corporation organized and doing business under the laws of the United
States of America or of any state thereof authorized under such laws to exercise
corporate trustee
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power, shall be subject to supervision or examination by Federal or state
authority and shall have a combined capital and surplus of at least $25 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Indenture Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Indenture Trustee is
subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Indenture Trustee is subject to TIA (S) 311(a), excluding any
creditor relationship listed in TIA (S) 311(b). A Indenture Trustee who has
resigned or been removed shall be subject to TIA (S) 311(a) to the extent
indicated therein.
Section 7.12. Appointment of Co-Trustee or Separate Trustee
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction the Indenture
Trustee shall have the power and shall execute and deliver all instruments to
appoint one or more Persons to act (at the expense of the Company) as co-trustee
or co-trustees, jointly with the Indenture Trustee, or to act as separate
trustee or separate trustees, and to vest in such Person or Persons, in such
capacity, such title to the property of the Trust, or any part thereof, and,
subject to the other provisions of this Section 7.12, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. Except as required by applicable law, the appointment of a co-
trustee or separate trustee shall not relieve the Indenture Trustee of its
responsibilities hereunder. No co-trustee or separate trustee hereunder shall
be required to meet the terms of eligibility as a successor Trustee under
Section 7.09 hereunder and no notice to Holders of Notes of the appointment of
co-trustee(s) or separate trustee(s) shall be required hereunder.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 7.12, all rights, powers, duties and obligations
conferred or imposed upon the Indenture Trustee shall be conferred or imposed
upon and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Indenture Trustee shall be incompetent or unqualified to perform such
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act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the property of the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed by such
separate trustee or co-trustee solely at the direction of the Indenture Trustee.
No trustee under this Indenture shall be personally liable by reason
of any act or omission of any other trustee under this Indenture, unless such
act or omission results from the negligence or willful misconduct of such
trustee. The Indenture Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article 7. Every such instrument shall be filed with the
Indenture Trustee. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Indenture Trustee or
separately, as may be provided therein, subject to all the provisions of this
Indenture, specifically including every provision of this Indenture relating to
the conduct of, affecting the liability of, or affording protection to, the
Indenture Trustee.
Any separate trustee or co-trustee may, at any time, constitute the
Indenture Trustee its agent or attorney-in-fact, with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee. The appointment of a co-trustee or
separate trustee shall not relieve the Indenture Trustee of its duties
hereunder.
ARTICLE 8
SATISFACTION AND DISCHARGE
Section 8.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Notes herein
expressly
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provided for), and the Indenture Trustee, on demand of and at the expense of the
Company, shall execute instruments in form and substance satisfactory to the
Indenture Trustee and the Company acknowledging satisfaction and discharge of
this Indenture, when
(1) either
(A) the Company shall have irrevocably paid in full all
Guaranteed Obligations (as such term is defined in the Certificate
Guarantee) to the Guarantee Trustee (as such term is defined in the
Certificate Guarantee) pursuant to the terms of the Certificate
Guarantee; or
(B) all Notes theretofore authenticated and issued (other than
(i) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.07 and (ii) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Indenture Trustee or discharged from such trust, as provided in
Section 2.04) have been delivered to the Indenture Trustee for
cancellation; or
(C) all such Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable; or
(ii) will become due and payable within one year,
and the Company, in the case of (C)(i) or (ii) above, has deposited or
caused to be deposited with the Indenture Trustee as trust funds in
trust an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Indenture
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) together with irrevocable
instructions from the Company directing the Indenture Trustee to apply
such funds to the payment thereof at maturity or redemption, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
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(3) the Company has delivered to the Indenture 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 Indenture Trustee and the Agents under Section
7.07, the obligations of the Indenture Trustee to any Authenticating Agent under
Section 2.02 and, if money shall have been deposited with the Indenture Trustee
pursuant to subclause (C) of clause (1) of this Section 8.01, the obligations of
the Indenture Trustee under Section 7.05 shall survive.
Section 8.02. Application of Monies for Satisfaction and Discharge.
All money deposited with the Indenture Trustee pursuant to Section
8.01 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
Indenture Trustee may determine, to the Persons entitled thereto, of the
principal and interest for whose payment such money has been deposited with the
Indenture Trustee.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
From time to time, the Company and the Indenture Trustee, without the
consent of the Holders of the Notes, may amend this Indenture for the following
purposes, so long as such change does not adversely affect the rights of any of
the Holders. The Indenture Trustee will be entitled to rely on such evidence as
it deems appropriate, including, without limitation, solely on an Opinion of
Counsel that such change does not adversely affect the rights of any Holder, in
executing any supplemental indenture.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Indenture Trustee may amend or supplement this Indenture, the Notes or the
Escrow and Disbursement Agreement without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
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(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes in the case of a merger or consolidation pursuant to
Article 5;
(d) to execute and deliver any documents necessary or appropriate to
release Liens on the Escrow Account and the Refinancing Account as permitted by
Section 10.03;
(e) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Notes; or
(f) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the written request of the Company accompanied by a resolution of the Board
of Directors of the Company authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Indenture Trustee of the
documents described in Section 9.06, the Indenture Trustee shall join with the
Company in the execution of any amended or supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Indenture
Trustee shall not be obligated to enter into such amended or supplemental
Indenture which affects its own rights, duties or immunities under this
Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
The Company and the Indenture Trustee may amend or supplement this
Indenture, the Notes or the Escrow and Disbursement Agreement or any amended or
supplemental Indenture with the written consent of the Holders of Notes of not
less than a majority in aggregate principal amount of the Notes then
outstanding, and any existing Default and its consequences or compliance with
any provision of this Indenture, the Notes or the Escrow and Disbursement
Agreement may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such amended
or supplemental Indenture, and upon the filing with the Indenture Trustee of
evidence
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satisfactory to the Indenture Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Indenture Trustee of the documents described
in Section 9.06, the Indenture Trustee shall join with the Company in the
execution of such amended or supplemental Indenture unless such amended or
supplemental Indenture affects the Indenture Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Indenture
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such amended notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected thereby, an amendment or waiver may not (with respect to
any Notes held by a non-consenting Holder of Notes):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change or have the effect of changing
the fixed maturity of any Note or change the date on which any Note may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price thereof;
(c) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any Notes;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default
relating solely to the principal or interest that has become due solely
because of the acceleration);
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(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or interest on the Notes on or after the due date
thereof or to bring suit to enforce such payment;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 4.12 and 4.18);
(h) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in the event
of a Change of Control or make and consummate a Net Proceeds Offer with
respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto;
(i) make any change in the foregoing amendment and waiver provisions;
or
(j) directly or indirectly release Liens on all or substantially all
of the collateral except as permitted by the Escrow and Disbursement
Agreement.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Indenture Trustee receives
written notice of revocation before the date the waiver, supplement or amendment
becomes effective. An
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amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder of a Note.
The Company may fix a record date for determining which Holders of the
Notes must consent to such amendment, supplement or waiver. If the Company
fixes a record date, the record date shall be fixed at (i) the later of 30 days
prior to the first solicitation of such consent or the date of the most recent
list of Holders of Notes furnished to the Indenture Trustee prior to such
solicitation pursuant to Section 2.05 or (ii) such other date as the Company
shall designate.
Section 9.05. Notation on or Exchange of Notes.
The Indenture Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Indenture Trustee shall
authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Indenture Trustee to Sign Amendments, etc.
The Indenture Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Indenture
Trustee. If it does, the Indenture Trustee may but need not sign it. In
signing such amendment the Indenture Trustee shall be entitled to receive
indemnity reasonably satisfactory to it and to receive, and (subject to Section
7.01) shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that such amendment is authorized or permitted by
this Indenture.
ARTICLE 10
COLLATERAL AND SECURITY
Section 10.01. Escrow and Disbursement Agreement.
The due and punctual payment of the principal of and interest on the
Notes when and as the same shall be due and payable, whether on an Interest
Payment
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Date, at the Stated Maturity, by acceleration, repurchase, redemption or
otherwise, and interest on the overdue principal of and interest (to the extent
permitted by law), if any, on the Notes and performance of all other obligations
of the Company to the Holders of Notes or the Indenture Trustee under this
Indenture with respect to the Notes, and the Notes, according to the terms
hereunder or thereunder, shall be secured as provided in the Escrow and
Disbursement Agreement which the Company, the Escrow Agent and the Indenture
Trustee have entered into simultaneously with the execution of this Indenture.
Each Holder of Notes, by its acceptance thereof, consents and agrees to the
terms of the Escrow and Disbursement Agreement (including, without limitation,
the provisions providing for foreclosure and disbursement of the amounts
deposited in the Escrow Account or the Refinancing Account) as the same may be
in effect or may be amended from time to time in accordance with its terms and
authorizes and directs the Escrow Agent and the Indenture Trustee to enter into
the Escrow and Disbursement Agreement and to perform its obligations and
exercise its rights thereunder in accordance therewith. The Company shall
deliver to the Indenture Trustee copies of the Escrow and Disbursement
Agreement, and shall do or cause to be done all such acts and things as may be
necessary or proper, or as may be required by the provisions of the Escrow and
Disbursement Agreement, to assure and confirm to the Indenture Trustee the
security interest in the Escrow Account and the Refinancing Account contemplated
by the Escrow and Disbursement Agreement or any part thereof, as from time to
time constituted, so as to render the same available for the security and
benefit of this Indenture with respect to, and of, the Notes, according to the
intent and purposes expressed in the Escrow and Disbursement Agreement. The
Company shall take any and all actions reasonably required to cause the Escrow
and Disbursement Agreement to create and maintain (to the extent possible under
applicable law), as security for the obligations of the Company hereunder, a
valid and enforceable perfected first priority Lien in and on all the amounts
deposited in the Escrow Account and Refinancing Account, in favor of the
Indenture Trustee for the benefit of the Holders of Notes, superior to and prior
to the rights of all third Persons and subject to no other Liens.
Section 10.02. Recording and Opinions.
(a) The Company shall furnish to the Indenture Trustee simultaneously
with the execution and delivery of this Indenture an Opinion of Counsel either
(i) stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Escrow and Disbursement Agreement, and reciting with respect
to the security interests in the Escrow Account and Refinancing Account, the
details of such action, or (ii)
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stating that, in the opinion of such counsel, no such action is necessary to
make such Lien effective.
(b) The Company shall furnish to the Escrow Agent and the Indenture
Trustee on October 28, 1997, and on each October 28 thereafter until the date
upon which the balance of Escrow Account Available Funds and Refinancing Account
Available Funds shall have been reduced to zero, an Opinion of Counsel, dated as
of such date, either (i) stating that (A) in the opinion of such counsel, action
has been taken with respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further assurance as
is necessary to maintain the Lien of the Escrow and Disbursement Agreement and
reciting with respect to the security interests in the Escrow Account and the
Refinancing Account the details of such action or referring to prior Opinions of
Counsel in which such details are given and (B) based on relevant laws as in
effect on the date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are necessary as of
such date and during the succeeding 12 months fully to preserve and protect, to
the extent such protection and preservation are possible by filing, the rights
of the Holders of Notes and the Indenture Trustee hereunder and under the Escrow
and Disbursement Agreement with respect to the security interests in the Escrow
Account and the Refinancing Account or (ii) stating that, in the opinion of such
counsel, no such action is necessary to maintain such Lien and assignment.
Section 10.03. Release of Amounts Deposited in the Escrow Account or
the Refinancing Account.
(a) Subject to subsections (b), (c) and (d) of this Section 10.03,
amounts in the Escrow Account or the Refinancing Account may be released from
the Lien and security interest created by the Escrow and Disbursement Agreement
only in accordance with the provisions of the Escrow and Disbursement Agreement.
(b) Except to the extent that any Lien on proceeds of the Escrow
Account or the Refinancing Account is automatically released by operation of
Section 9-306 of the Uniform Commercial Code or other similar law, no amounts
deposited in the Escrow Account or the Refinancing Account shall be released
from the Lien and security interest created by the Escrow and Disbursement
Agreement pursuant to the provisions of the Escrow and Disbursement Agreement,
other than pursuant to the terms thereof, unless there shall have been delivered
to the Indenture Trustee the certificate required by Section 10.03(d) and
Section 10.04.
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(c) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Notes issued on the Issue Date shall have
been accelerated (whether by declaration or otherwise), no amounts deposited in
the Escrow Account or the Refinancing Account shall be released pursuant to the
provisions of the Escrow and Disbursement Agreement, and no release of amounts
deposited in the Escrow Account or the Refinancing Account in contravention of
this Section 10.03(c) shall be effective as against the Holders of Notes, except
for the disbursement of all Escrow Account Available Funds and Refinancing
Account Available Funds to the Indenture Trustee pursuant to Section 6(b) of the
Escrow and Disbursement Agreement.
(d) The release of any amounts deposited in the Escrow Account or the
Refinancing Account from the Liens and security interests created by this
Indenture and the Escrow and Disbursement Agreement shall not be deemed to
impair the security under this Indenture in contravention of the provisions
hereof if and to the extent the amounts deposited in the Escrow Account or the
Refinancing Account are released pursuant to the terms hereof or, subject to
complying with the requirements of this Section 10.03, pursuant to the terms of
the Escrow and Disbursement Agreement. To the extent applicable, the Company
shall cause TIA (S) 314(d) relating to the release of property or securities
from the Lien and security interest of the Escrow and Disbursement Agreement to
be complied with. Any certificate or opinion required by TIA (S) 314(d) may be
made by an Officer of the Company except in cases where TIA (S) 314(d) requires
that such certificate or opinion be made by an independent Person, which Person
shall be an independent engineer, appraiser or other expert selected or approved
by the Indenture Trustee in the exercise of reasonable care.
Section 10.04. Certificates of the Company.
The Company shall furnish to the Indenture Trustee, prior to any
proposed release of the amounts in the Escrow Account or the Refinancing Account
other than pursuant to the express terms of the Escrow and Disbursement
Agreement, (i) all documents required by Section 314(d) of the TIA and (ii) an
Opinion of Counsel, which may be rendered by internal counsel to the Company, to
the effect that such accompanying documents constitute all documents required by
Section 314(d) of the TIA. The Indenture Trustee may, to the extent permitted
by Sections 7.01 and 7.02, accept as conclusive evidence of compliance with the
foregoing provisions the appropriate statements contained in such documents and
such Opinion of Counsel.
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Section 10.05. Authorization of Actions to be Taken by the Indenture
Trustee Under the Escrow and Disbursement Agreement.
Subject to the provisions of Section 7.01 and 7.02, the Indenture
Trustee may, without the consent of the Holders of Notes, on behalf of the
Holders of Notes, take all actions it deems necessary or appropriate in order to
(a) enforce any of the terms of the Escrow and Disbursement Agreement and (b)
collect and receive any and all amounts payable in respect of the Obligations of
the Company hereunder. The Indenture Trustee shall have power to institute and
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Escrow Account or the Refinancing Account by any acts that may
be unlawful or in violation of the Escrow and Disbursement Agreement or this
Indenture, and such suits and proceedings as the Indenture Trustee may deem
expedient to preserve or protect its interests and the interests of the Holders
of Notes in the Escrow Account and the Refinancing Account (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Holders of Notes or
of the Indenture Trustee).
Section 10.06. Authorization of Receipt of Funds by the Indenture
Trustee Under the Escrow and Disbursement Agreement.
The Indenture Trustee is authorized to receive any funds for the
benefit of the Holders of Notes disbursed under the Escrow and Disbursement
Agreement, and to make further distributions of such funds to the Holders of
Notes according to the provisions of this Indenture.
Section 10.07. Termination of Security Interest.
Upon the earliest to occur of (i) the date upon which the balance of
Escrow Account Available Funds and Refinancing Account Available Funds shall
have been reduced to zero, and (ii) the payment in full of all obligations of
the Company under this Indenture and the Notes, the Indenture Trustee shall, at
the written request and cost of the Company, release the Liens pursuant to this
Indenture and the Escrow and Disbursement Agreement upon the Company's
compliance with the provisions of the TIA pertaining to release of collateral.
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ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits. qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Company or the Indenture Trustee to
the other is duly given if in writing and delivered in Person, by telex,
facsimile or overnight air courier guaranteeing next day delivery, to the
other's address:
If to the Company:
Transtel S.A.
Calle 19N, No. 2-29
40th Floor
Cali, Colombia
Facsimile No.: (572) 667-5423
Attention: Guillermo Lopez, President
If to the Indenture Trustee:
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005
Facsimile No.: (212) 658-6425
Attention: Corporate Trust Department - Transtel
The Company or the Indenture Trustee, by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications hereunder shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; when
answered back, if telexed; when receipt acknowledged, if sent by facsimile; and
upon acknowledgment of receipt by the recipient thereof, if sent by overnight
air courier.
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Any notice or notification to a Holder of a Note shall be given by
overnight air courier guaranteeing next day delivery or by hand to its address
shown on the register kept by the Registrar. Any notice or communication shall
also be so delivered to any Person described in TIA (S) 313(c), to the extent
required by the TIA. Failure to deliver a notice or communication to a Holder
of a Note or any defect in it shall not affect its sufficiency with respect to
other Holders of Notes.
If the Company delivers a notice or communication to Holders of Notes,
it shall deliver a copy to the Indenture Trustee and each Agent at the same
time.
All notices and communications hereunder shall be in English or
accompanied by an English translation.
Section 11.03. Communication by Holders of Notes with Other Holders
of Notes.
Holders of the Notes may communicate pursuant to TIA (S) 312(b) with
other Holders of Notes with respect to their rights under this Indenture or the
Notes. The Company, the Indenture Trustee, the Registrar and anyone else shall
have the protection of TIA (S) 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Indenture
Trustee or any Agent to take any action under this Indenture, the Company shall
furnish to the Indenture Trustee or such Agent:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Indenture Trustee or such Agent (which shall include
the statements set forth in Section 11.05) stating that, in the opinion of
the signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Indenture Trustee or such Agent (which shall include
the statements set forth in Section 11.05) stating that, in the opinion of
such counsel, all such conditions precedent and covenants have been
satisfied.
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Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 11.06. Rules by Indenture Trustee and Agents.
The Indenture Trustee may make reasonable rules for action by or at a
meeting of Holders of Notes. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
Section 11.07. No Personal Liability of Partners, Directors,
Officers, Employees and Stockholders.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes, this Indenture or the Escrow and Disbursement Agreement or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of the Notes, by accepting a Note, waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the Notes.
-94-
<PAGE>
Section 11.08. Governing Law.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE
THIS INDENTURE AND THE NOTES WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF ANY NEW YORK
STATE OR U.S. FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, NEW YORK CITY,
NEW YORK, U.S.A., IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE.
The Company has appointed CT Corporation Systems, Inc., 1633 Broadway,
New York, New York 10019, as its authorized agent ("Authorized Agent") to
receive on its behalf service of copies of the summons and complaints and any
other process which may be served in any legal suit, action or proceeding
arising out of or relating to this Indenture or the Notes which may be
instituted in any federal or state court sitting in The City of New York,
expressly consents to the jurisdiction of any such court in respect of any such
action, and waives any other requirements of or objections to personal
jurisdiction with respect thereto. Such appointment shall be irrevocable for a
period of three years from the Stated Maturity of the Notes. Such service may
be made by delivering a copy of such process to the Company in care of the
Authorized Agent at the address specified above for the Authorized Agent and
obtaining a receipt therefor, and the Company hereby irrevocably authorizes and
directs such Authorized Agent to accept such service on its behalf. The Company
represents and warrants that the Authorized Agent has agreed to act as said
agent for service of process, and agrees that service of process in such manner
upon the Authorized Agent shall be deemed in every respect effective service of
process upon the Company in any such suit, action or proceeding. The Company
further agrees to take any and all actions as may be necessary to maintain such
designation and appointment of such Authorized Agent in full force and effect.
If the Authorized Agent shall cease to act as the Company's agent in The City of
New York for service of process, the Company shall appoint without delay another
such agent and notify the Indenture Trustee of such appointment.
To the extent that the Company or any of its revenues, assets or
properties shall be entitled, with respect to any proceeding at any time brought
against the Company or any of its revenues, assets or properties or with respect
to any suit, action or proceeding at any time brought for the purpose of
enforcing or executing any judgment in any jurisdiction in which any specified
court or other court is located, to any immunity from suit, from the
jurisdiction of any such court, from attachment prior to judgment, from
attachment in aid of execution of judgment, from execution of a judgment or from
any other legal or judicial process or remedy, to the extent of such immunity,
the Company irrevocably agrees not to claim and irrevocably waives such
-95-
<PAGE>
immunity to the fullest extent permitted by the laws of such jurisdiction
(including without limitation, the Foreign Sovereign Immunities Act of 1976 of
the United States).
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Indenture Trustee in this Indenture
shall bind its successor.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes 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 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
-96-
<PAGE>
SIGNATURES
TRANSTEL S.A.
By: /s/ Guillermo O. Lopez
__________________________________
Name: Guillermo O. Lopez
Title: President and Chief Executive Officer
MARINE MIDLAND BANK
By: /s/ Robert A. Conrad
__________________________________
Name: Robert A. Conrad
Title: Vice President
<PAGE>
EXHIBIT A
---------
CUSIP No.: ___________
TRANSTEL S.A.
12 1/2% SENIOR NOTE DUE 2007
No. ______
TRANSTEL S.A., a sociedad anonima organized under the laws of the
Republic of Colombia (the "Company", which term includes any successor entity),
for value received promises to pay to or registered assigns,
the principal sum of Dollars, on November 1, 2007.
Interest Payment Dates: May 1 and November 1
Record Dates (whether or not a Business Day): April 15 and October 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
[The following legend to be placed on each Note that constitutes a Restricted
Security:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
SECURITY, EXCEPT (A) TO THE ISSUER, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE INDENTURE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
INDENTURE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 PROMULGATED UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
A-1
<PAGE>
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE INDENTURE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, WRITTEN 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 IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTIONS," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.]
[The following legend to be placed on each Global Note:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF 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
SECTION 2.17 OF THE INDENTURE.]
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted herein.
TRANSTEL S.A.
By:___________________________________________
Name:
Title:
Dated: ______ __, ____
CERTIFICATE OF AUTHENTICATION
This is one of the 12 1/2% Senior Notes due 2007 referred to in the
within-mentioned Indenture.
MARINE MIDLAND BANK, as Authenticating Agent
By:___________________________________________
Authorized Signatory
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<PAGE>
(REVERSE OF SECURITY)
12 1/2% Senior Note due 2007
The Company acknowledges that the initial Holder of the Notes is the
Transtel Pass Through Trust, a special purpose Delaware business trust (the
"Trust"). The Trust will purchase the Notes with the proceeds of the sale of
its 12 1/2% Pass Through Trust Certificates due 2007 (the "Certificates").
1. Interest. TRANSTEL S.A., a Sociedad anonima organized under the
law of the Republic of Colombia (the "Company"), promises to pay interest on the
principal amount of this Note at the rate per annum shown above. If the Company
fails to fulfill its obligations under Section 2 or Section 3 of the
Registration Rights Agreement, dated as of October 28, 1997, among the Company,
the Trust and the Initial Purchaser (as defined in the Indenture) (the
"Registration Rights Agreement"), the Company shall pay, as liquidated damages,
additional interest on the Notes ("Additional Interest") as follows (each such
-------------------
event referred to in clauses (i) through (iii) below, a "Registration Default"
--------------------
and each of which shall be given independent effect):
(i) if the Exchange Offer Registration Statement (as defined in the
Registration Rights Agreement) has not been filed on or prior to the 150th
day following the Issue Date, then commencing on the 151st day after the
Issue Date, Additional Interest shall accrue on the Notes over and above
the accrued interest at a rate of 0.50% per annum for the first 90 days
immediately following such 151st day;
(ii) if the Exchange Offer Registration Statement is not declared
effective by the SEC on or prior to the 210th day following the Issue Date,
then commencing on the 211th day after the Issue Date, Additional Interest
shall accrue on the Notes included or which should have been included in
such Registration Statement over and above the accrued interest at a rate
of 0.50% per annum for the first 90 days immediately following such 211th
day; and
(iii) if (A) the Trust has not exchanged Exchange Certificates (as
defined in the Registration Rights Agreement) for all Certificates validly
tendered in accordance with the terms of the Exchange Offer (as defined in
the Registration Rights Agreement), (B) the Shelf Registration Statement
(as defined in the Registration Rights Agreement) is not filed on or prior
to the 30th day following delivery of the Shelf Notice (as defined in the
Registration Rights Agreement), (C) the Shelf Registration Statement is not
declared effective on or prior to the 60th day following the delivery of
the Shelf Notice or (D) the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, has been declared
effective and ceases to be effective, then Additional Interest shall accrue
on the
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<PAGE>
Notes over and above the accrued interest at a rate of 0.50% per annum for
the first 90 days commencing on the day after such Registration Default;
such Additional Interest rate, in the case of each of (i), (ii) and (iii) above,
to increase by an additional 0.50% per annum at the beginning of each subsequent
90-day period; provided, however, that in no event shall the amount of
-------- -------
Additional Interest exceed 2.00% in the aggregate pursuant to this Section 1;
provided further, that (1) upon the filing of the Exchange Offer Registration
- ----------------
Statement (in the case of clause (i) of this Section 1), (2) upon the
effectiveness of the Exchange Offer Registration Statement (in the case of
clause (ii) of this Section 1), or (3) upon the exchange of Exchange
Certificates for all Certificates tendered (in the case of clause (iii)(A) of
this Section 1), the filing of the Shelf Registration Statement (in the case of
clause (iii)(B) of this Section 1), the effectiveness of the Shelf Registration
Statement (in the case of clause (iii)(C) of this Section 1), or upon the
effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, which had ceased to remain effective
(in the case of clause (iii)(D) of this Section 1), Additional Interest on the
Notes as a result of such clause (or the relevant subclause thereof), as the
case may be, shall cease to accrue; provided, however, that at such time as the
Shelf Registration Statement or the Exchange Offer Registration Statement, as
the case may be, shall again cease to remain effective, Additional Interest
shall resume to accrue in the manner and for the time periods specified above.
Interest on the Notes will accrue from the most recent date on which
interest has been paid or, if no interest has been paid, from October 28, 1997.
The Company will pay interest and Additional Interest, if any, semi-annually in
arrears on each Interest Payment Date, commencing May 1, 1998. Interest will be
computed on the basis of a 360-year of twelve 30-day months and, in the case of
a partial month, the actual number of days elapsed. The Company shall pay
interest on overdue principal and on overdue installments of interest (without
regard to any applicable grace periods) from time to time on demand at the rate
borne by the Notes plus 2% per annum, to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) or on Additional Interest, if any, in respect of the
Notes to the Persons who are the registered Holders at the close of business on
the Record Date immediately preceding the Interest Payment Date even if the
Notes are canceled on registration of transfer or registration of exchange after
such Record Date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company shall pay principal and interest in money of
the United States that at the time of payment is legal tender for payment of
public and private debts ("U.S. Legal Tender"). However, the Company may pay
principal and interest by its check payable in such U.S. Legal Tender. The
Company may deliver any such interest payment to the Paying Agent or to a Holder
at the Holder's registered address.
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<PAGE>
3. Paying Agent and Registrar. Initially, Marine Midland Bank will
act as Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
dated as of October 28, 1997 (the "Indenture"), between the Company and Marine
Midland Bank, as Indenture Trustee (the "Indenture Trustee"). This Note is one
of a duly authorized issue of Notes of the Company designated as its 12 1/2%
Senior Notes due 2007 (the "Notes"). The Notes are limited in aggregate
principal amount to $180,000,000, except as otherwise provided in the Indenture.
The Notes are treated as a single class of securities under the Indenture.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. 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 of
1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of
the Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are general unsecured
obligations of the Company.
5. Optional Redemption. (a) The Notes will not be redeemable at the
Company's option prior to November 1, 2002. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on November 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002...................... 106.250%
2003...................... 104.688%
2004...................... 103.125%
2005...................... 101.565%
2006 and thereafter....... 100.000%.
</TABLE>
(b) Optional Redemption Upon Sale of Equity to Strategic Equity
Investor. Notwithstanding the foregoing, in the event of the sale by the
Company prior to November 1, 2000 of at least $25.0 million of its Capital Stock
(other than Disqualified Stock) in one or more Public Equity Offerings, or to
one or more Strategic Equity Investors, the Company may, at its option, use the
Net Cash Proceeds of such sale or sales of Capital Stock to redeem up to 35% of
the Notes at a redemption price equal to 112.50% of the principal amount thereof
plus accrued and unpaid interest thereon, if any, to the date of redemption;
provided that at least 65% of the initial principal amount of the Notes
(including in such initial principal amount, the initial principal amount of any
Additional Notes issued as contemplated by Section 2.02 of the Indenture, if
issued prior to the date of redemption pursuant to this paragraph) remains
outstanding immediately after such redemption. In
A-6
<PAGE>
order to effect the foregoing redemption with the proceeds of any such sale of
Capital Stock (other than Disqualified Stock), the Company shall make such
redemption not more than 120 days after the consummation of any such sale of
Capital Stock.
The Notes are not entitled to the benefit of any sinking fund.
6. Notice of Redemption. Notice of 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 registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
7. Offers to Purchase. Sections 4.12 and 4.18 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture) subject to
further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
8. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange 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 certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not resister the transfer of
or exchange of any Notes or portions thereof selected for redemption.
9. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
10. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years after such principal or interest has
become due and payable, the Indenture Trustee and the Paying Agent will pay such
money back to the Company. After that, all liability of the Indenture Trustee
and such Paying Agent with respect to such money shall cease.
11. Discharge Prior to Redemption or Maturity. If the Company at any
time deposits with the Indenture Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient
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<PAGE>
to pay the principal of and interest on the Notes to redemption or maturity and
complies with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Notes (including certain covenants, but excluding its obligation to pay the
principal of and interest on the Notes).
12. Amendment; Supplement; Waiver. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of not less than a majority
in aggregate principal amount of the Notes then outstanding, and any past
Default or Event of Default or noncompliance with any provision may be waived
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding. Without notice to or consent of
any Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among, other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Notes in addition to or in place of certificated
Notes, or comply with Article 5 of the Indenture or make any other change that
does not adversely affect the rights of any Holder of a Note.
13. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, make certain Investments, incur liens, enter into
transactions with Affiliates, create dividend or other payment restrictions
affecting Subsidiaries, issue Preferred Stock of its Subsidiaries, merge or
consolidate with any other Person, sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.04 of the Indenture, the
Company must annually report to the Indenture Trustee on compliance with such
limitations.
14. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
15. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Indenture Trustee or the Holders of not less than 25% in
aggregate principal amount of Notes then outstanding may declare all the Notes
to be due and payable in the manner, at the time and with the effect provided in
the Indenture. Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Indenture Trustee is not obligated to
enforce the Indenture or the Notes unless it has received indemnity reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Indenture Trustee in its exercise of any
trust or power. The Indenture Trustee may withhold from Holders of Notes notice
of any continuing Default or Event of Default (except a Default in payment of
principal or interest when due, for any reason or a Default in compliance with
Article 5 of the Indenture) if it determines that withholding notice is in their
interest.
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<PAGE>
16. Indenture Trustee Dealings with Company. The Indenture Trustee
under the Indenture, in its individual or an other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Company, its
Subsidiaries or their respective Affiliates as if it were not the Indenture
Trustee.
17. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
18. Authentication. This Note shall not be valid until the Indenture
Trustee or Authentication Agent manually signs the certificate of authentication
on this Note.
19. Governing Law. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflict of laws.
20. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note 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).
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
22. Indenture. Each Holder, by accepting a Note, agrees to be bound
by all of the terms and provisions of the Indenture, as the same
may be amended from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note in
larger type. Requests may be made to: Transtel S.A., Calle 19N, No. 2-29, 40th
Floor, Cali, Colombia, Attention: Guillermo Lopez, President.
A-9
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ________________________________, agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
Dated: ___________________ Signed: ____________________
NOTICE: The signature to any endorsement hereon must
correspond with the name as written upon the face of the
Note in every particular, without alteration or enlargement
or any change whatever.
If the endorsement be executed by an attorney, executor,
administrator, trustee or guardian, the person executing the
endorsement must give his full title in such capacity and
proper evidence of authority to act in such capacity, if not
on file with the Note, must be forwarded with this Note.
(Sign exactly as your name appears
on the other side of this Note)
Signature guarantee: __________________
All endorsements or assignments of the Note must be
guaranteed by an "eligible guarantor institution"
(including, but not limited to, a
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<PAGE>
New York Stock Exchange member firm or member of the
Clearing House of the American Stock Exchange Clearing
Corporation or by bank or trust company having an office or
correspondent in The City of New York) meeting the
requirements of the Indenture Trustee, which requirements
will include membership or participation in STAMP or such
other "signature guarantee program" as may be determined by
the Indenture Trustee in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
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<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.12 or 4.18 of the Indenture, check the appropriate box:
Section 4.12 [ ]
Section 4.18 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.12 or 4.18 of the Indenture, state the amount you
elect to have purchased:
$___________________
Dated: _____________ ______________________________
NOTICE: The signature to any endorsement hereon must
correspond with the name as written upon the face of
the Note in every particular, without alteration or
enlargement or any change whatever.
If the endorsement be executed by an attorney,
executor, administrator, trustee or guardian, the
person executing the endorsement must give his full
title in such capacity and proper evidence of
authority to act in such capacity, if not on file with
the Note, must be forwarded with this Note.
Signature guarantee: ____________________________________
All endorsements or assignments of the Note must be
guaranteed by an "eligible guarantor institution"
(including, but not limited to, a New York Stock
Exchange member firm or member of the Clearing House
of the American Stock Exchange Clearing Corporation or
by bank or trust company having an office or
correspondent in The City of New York) meeting the
requirements of the Indenture Trustee, which
requirements will include membership or participation
in STAMP or such other "signature guarantee program"
as may be determined by the Indenture Trustee in
addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934,
as amended.
A-12
<PAGE>
EXHIBIT B
FORM OF INTERCOMPANY NOTE
In the city of Cali, Colombia, this ___ ( ) day of the month of ______, of
one thousand nine hundred and ninety seven (1997), the undersigned, [NAME OF
RESTRICTED SUBSIDIARY], (hereinafter referred to as "THE COMPANY"), incorporated
on ________, through Public Deed No.___ issued by the _________ Notary Public
Office of _______, and registered before the Mercantile Registry of the Chamber
of Commerce of _____ on ____________________ under number ______, Volume ___,
being represented in this act by ____________________ identified with
citizenship identification card No. _______________________ of legal age,
domiciled in the city of _____, in his capacity as its manager and legal
representative pursuant to the corporate by-laws of the corporation as evidenced
in the certificate of compliance which is attached hereto as an integral part of
this Promissory Note, shall pay unconditionally to TRANSTEL S.A. or to its
order, the sum of ____________ DOLLARS OF THE UNITED STATES OF AMERICA ( ), on
____ of ________, one thousand nine hundred ninety _________ ( ), unless the
payment of this Promissory Note is accelerated prior thereto as described below.
[The rate of exchange to be used to be defined].
The COMPANY promises to pay ________ ( %) interest on the unpaid principal
amount hereof in like manner at the offices of TRANSTEL S.A. in Cali, Colombia
from the date hereof until the principle amount hereof is fully paid.
In the event of delayed payment, the COMPANY shall pay interest at the rate of
_________ percent ( %) from the date on which payment is due until the amount
due is fully paid.
This Promissory Note evidences certain permitted Intercompany Indebtedness
referred to in the Indenture dated as of October 28, 1997 between TRANSTEL S.A.
and Marine Midland Bank as trustee (as amended modified or supplemented from
time to time, the Indenture) and is subject to the provisions thereof, and shall
be pledged by TRANSTEL S.A. pursuant to the PLEDGE AGREEMENT (as defined in the
Indenture). The COMPANY hereby acknowledges and agrees that the PLEDGEE pursuant
to and as
<PAGE>
defined in the PLEDGE AGREEMENT as in effect from time to time, may exercise all
rights provided therein with respect to this Promissory Note.
This Promissory Note shall automatically become due and payable upon the
acceleration of the 12.5% Senior Notes due 2007 issued by TRANSTEL S.A. under
the Indenture.
This Promissory Note represents a senior unsecured obligation of the COMPANY and
ranks senior in right of payment to all existing and future subordinated
indebtedness of the company and ranks pari passu with all existing and future
senior indebtedness of the COMPANY.
In witness whereof, this negotiable instrument is executed on the date above
written.
The Restricted Subsidiary,
____________________________________
Name of the Restricted Subsidiary
MMI/SJS
10355/201
<PAGE>
EXHIBIT C
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (the "AGREEMENT") is made and entered into as of the 28th
day of the month of October, of one thousand nine hundred and ninety seven
(1997), by and between MARINE MIDLAND BANK, not in its individual capacity but
solely as collateral agent for the benefit of the holders of the Senior Notes
(hereinafter referred to as the "PLEDGEE") a banking corporation and trust
company domiciled in 140 Broadway, New York, NY 10005, United States of
America, incorporated under the laws of the State of New York, United States of
America, on December 31, 1993, being represented in this act by Robert Conrad,
of legal age, domiciled in the city of New York, in his capacity as (capacity
of the person executing the pledge) pursuant to the corporate by-laws of the
corporation; and, TRANSTEL S.A., (hereinafter referred to as the "PLEDGOR"), a
corporation domiciled in Cali, Colombia, incorporated on August 23, 1993,
through Public Deed No. 3097 issued by the Fourteenth Notary Public Office in
Cali, and registered before the Mercantile Registry of the Chamber of Commerce
of Cali on September 10, 1993 under number 69826, Volume IX, and Tax
Identification Number 800.206.541-0, being represented in this act by GUILLERMO
O. LOPEZ ESQUIVEL, of legal age, domiciled in the city of Cali, identified with
citizen identification card number 16.614.481 issued in Cali, in his capacity
as manager and legal representative of the corporation pursuant to the
corporate by-laws of the corporation as evidenced in the certificate of
compliance which is attached hereto as an integral part of this AGREEMENT.
<PAGE>
-2-
WHEREAS, the PLEDGOR has entered into an Indenture, dated as of October 28,
1997, (as amended, modified or supplemented from time to time, the "Indenture"),
with Marine Midland Bank, as trustee (together with any successor thereto
pursuant to the terms of the Indenture, the "Trustee"), providing for the
issuance by the PLEDGOR of up to $180.000.000 principal amount of its 12.5k
Senior Notes due 2007 (as amended, modified or supplemented from time to time,
the "Senior Notes"), the holders from time to time of the Senior Notes being
hereinafter called the "Noteholders";
WHEREAS, the PLEDGOR has issued initially US$150.000.000 principal amount
of Senior Notes, under a private placement in the State of New York, United
States of America, the 28th day of the month of October, of one thousand nine
hundred and ninety seven (1997) (hereinafter referred to as the "Issue");
WHEREAS, the net proceeds of the Issue will be used by the PLEDGOR as
described in the final Offering Memorandum, dated October 21, l997, including
the making of intercompany loans to its Restricted Subsidiaries (as defined in
the Indenture);
WHEREAS, the PLEDGOR will grant to the PLEDGEE for the benefit of the
Noteholders, in order to secure the PLEDGOR's obligations under the Senior
Notes, a pledge of all of the Intercompany Notes (as defined in the Indenture
issued by its Restricted Subsidiaries to secure loans made by the PLEDGOR to
such Restricted Subsidiaries with the proceeds of the Senior Notes;
<PAGE>
-3-
WHEREAS, these Intercompany Notes evidence certain permitted Intercompany
Indebtedness of each Restricted Subsidiary:
WHEREAS, it is a condition precedent to the issuance of the Senior Notes
pursuant to the Indenture, that the PLEDGOR shall have executed and delivered to
the PLEDGEE this AGREEMENT;
WHEREAS, the PLEDGOR desires to execute this AGREEMENT to satisfy the
conditions described in the preceding paragraph;
THE PLEDGOR AND THE PLEDGEE; HEREBY AGREE; AS FOLLOWS:
All capitalized words not defined herein shall have the meaning assigned to
them in the Indenture.
CLAUSE ONE (1): The PLEDGOR in accordance with the Colombian Commercial
Code (articles 1200 to 1206) hereby constitute a Closed Pledge with Tenancy in
favor of THE PLEDGEE over all INTERCOMPANY NOTES at any time issued to the
PLEDGOR by its Restricted Subsidiaries, which INTERCOMPANY NOTES shall be in the
form of Exhibit A hereto.
Thus, the PLEDGOR assigns to the PLEDGEE the power to collect the same at
their maturity with the specific purpose that said sums secure the prompt
payment of any and all amounts owed under the Senior Notes including, without
limitation, principal, interest, default interest, taxes, commissions, and all
other expenses incurred by the PLEDGEE (including attorneys fees in the event of
a judicial claim).
<PAGE>
-4-
The PLEDGEE is expressly and irrevocably authorized to apply any amounts that
it receives, to the payment o$ any obligations under the Senior Notes. However
if the amounts recovered under this Pledge are insufficient to pay the
obligations under the Senior Notes THE PLEDGOR shall be obligated to pay such
amounts as remain outstanding
CLAUSE TWO (2): This AGREEMENT shall secure the obligation consisting of
the full and prompt payment when due by the PLEDGOR of: (i) the principal amount
of the Senior Notes, payable on November 1, 2007, or in the event of a
redemption or acceleration or otherwise, each in accordance with the terms of
the Indenture, and (ii) the semi-annual payment of the interest accrued on the
Senior Notes at the rate of 12.5%, commencing on May 1, 1998. However, this
pledge shall be in effect for so long as there are any amounts outstanding under
the Senior Notes.
CLAUSE THREE (3): The signatories of this AGREEMENT agree that the
following shall constitute events of default under this AGREEMENT ( each such
event hereinafter referred to as an "Event of) Default"): (i) an Event of
Default (as defined in the Indenture) occurs under the Indenture and such Event
of Default is continuing, (ii) if in the opinion of the PLEDGEE, there is any
deterioration of the value of the Intercompany Notes given in pledge. and (iii)
if there shall be any material adverse change in the financial condition of the
PLEDGOR.
CLAUSE FOUR (4): Upon the occurrence of any Event of Default, the PLEDGEE
may exercise any and all of the following rights and remedies: (i) declare all
indebtedness secured hereby, or any part thereof, immediately due and
<PAGE>
-5-
payable without demand or notice and proceed to collect the same, this exercise
any or all of the rights, powers and remedies with respect to the Intercompany
Notes available under the Colombian Commercial Code or Civil Procedure Code,
(iii) receive directly all amounts payable in respect of the Intercompany Notes
to the PLEDGOR, (iv) transfer all or any part of the Intercompany Notes into the
PLEDGEE's name or the name of its nominee or nominees, and (v) accelerate any
Intercompany Note which may be accelerated in accordance with its terms, and
take any other action to collect upon any Intercompany Note (including without
limitation to make any demand for payment thereon).
CLAUSE FIVE (5): The PLEDGOR hereby represents and warrants to the PLEDGEE
that: (i) it is the legal owner of record and beneficial owner of, and has a
good and marketable title to, all Intercompany Notes pledged by it hereunder,
subject to no pledge, lien, mortgage, hypothecation or security interest, except
as created by this AGREEMENT; (ii) it has full power, authority, and legal right
to pledge all of the Intercompany Notes pledged by it pursuant to this
AGREEMENT, (iii) this AGREEMENT has been duly authorized, executed and delivered
by the PLEDGOR and constitutes a legal, binding obligation of the PLEDGOR
enforceable in accordance with its terms, (iv) no consent of any other party
(including without limitation, any stockholder or creditor of the PLEDGOR or any
of its Restricted Subsidiaries) and its consent, license, permit, approval, or
authorization of exemption by, notice or report to, or registration, filing or
declaration with any governmental authority is required to be obtained by the
PLEDGOR in connection with the execution, delivery or performance of this
AGREEMENT, (iv) the execution, delivery and performance of this AGREEMENT does
not violate any provision of
<PAGE>
-6-
any applicable law or regulation or of any order of any judge, arbitrator or
governmental authority, domestic or foreign, or of the by-laws of the PLEDGOR
or its Restricted Subsidiaries, or of any mortgage, indenture, lease, deed of
trust, loan agreement, credit agreement, or other material agreement,
instrument or undertaking to which the Pledgor or any of its Restricted
Subsidiaries is a party or which purports to be binding upon the PLEDGOR or any
of its Restricted Subsidiaries or upon any of their respective assets, and will
not result in the creation or impression of any lien or encumbrance on any of
the assets of the PLEDGOR or any of its Restricted Subsidiaries except as
contemplated by this AGREEMENT, each of the Intercompany Notes when executed by
the relevant Restricted Subsidiary thereof will be a legal valid and binding
obligation of such Restricted Subsidiary, and (vi) the pledge of the
Intercompany Notes to the PLEDGEE pursuant to this AGREEMENT, together with the
delivery of the Intercompany Notes to the PLEDGEE pursuant to this AGREEMENT,
creates a valid and perfected first priority security interest in such
Intercompany Notes and the proceeds thereof, subject to no prior lien or
encumbrance or to any agreement purporting to grant to any third party a lien
or encumbrance on the property or assets of the PLEDGOR which would include the
Intercompany Notes.
CLAUSE SIX (6): The PLEDGOR covenants and agrees that it will defend the
PLEDGEE's right, title, and security interest in and to the Intercompany Notes
and the proceeds thereof against the claims and demands of all persons
whomsoever.
CLAUSE SEVEN (7): when all the liabilities specified in CLAUSE TWO (2)
hereof shall have been paid in full, this AGREEMENT shall terminate, and the
PLEDGEE shall
<PAGE>
-7-
deliver to the PLEDGOR the pledged Intercompany Notes then held by it.
CLAUSE EIGHT (8): This AGREEMENT shall in a11 respects be construed in
accordance with and governed by the laws of the Republic of Colombia.
CLAUSE NINE (9): The PLEDGOR agrees that it will join with the PLEDGEE in
executing and, at the PLEDGOR's own expense, file such documents ae the PLEDGEE
may deem necessary or sand wherever required or permitted by law in order to
perfect and preserve the PLEDGEE's security interest in the Intercompany Notes,
and agrees to do such further acts and things and to execute and deliver to the
PLEDGEE such additional conveyances, assignments, agreements, and instruments as
the PLEDGEE may reasonably require or deem advisable to carry into effect the
purposes of this AGREEMENT or to further assure and confirm unto the PLEDGEE its
rights, powers and remedies hereunder.
IN WITNESS WHEREOF the parties hereto have executed this AGREEMENT THE DAY AND
YEAR FIRST ABOVE WRITTEN.
<PAGE>
-8-
TRANSTEL, S.A.,
/s/ GUILLERMO O. LOPEZ ESQUIVEL
- ----------------------------------------
GUILLERMO O. LOPEZ ESQUIVEL
Legal Representative
MARINE MIDLAND BANK, as collateral
agent for the benefit of the holders
of the Senior Notes.
/s/ ROBERT A. CONRAD
- ----------------------------------------
ROBERT A. CONRAD
Vice President
<PAGE>
EXHIBIT D
---------
FORM OF SUBSIDIARIES GUARANTEE
------------------------------
SUBSIDIARIES GUARANTEE, dated as of __________, __ _____ (as amended,
modified or supplemented from time to time, this "Guarantee"), made by
____________ (the "Guarantor"). Except as otherwise defined herein, capitalized
terms used herein and defined in the Indenture (as defined below) shall be used
herein as thereon defined.
W I T N E S S E T H:
-------------------
WHEREAS, this agreement is entered into in connection with the Indenture,
dated as of October 28, 1997, between Transtel S.A., a Colombian corporation
(the "Borrower"), and Marine Midland Bank, as trustee (the "Indenture Trustee"),
pursuant to which the Borrower issued its 12 1/2% Senior Notes due 2007 (the
"Notes");
WHEREAS, under Section 4.15 of the Indenture, the Guarantor is not
permitted to guarantee any indebtedness of the Borrower, unless, among other
things, the Guarantor simultaneously executes and delivers a guarantee in the
form of this Guarantee in favor of the Indenture Trustee for the benefit of the
Holders (the "Secured Creditors"), under which the Guarantor (i) guarantees the
due, full and punctual payment of the principal, premium, if any, and interest
on the Notes, whether at stated maturity or interest payment date, by
acceleration, call for redemption or otherwise, (b) the due and punctual payment
of interest on the overdue principal of and interest, if any, on the Notes, to
the extent lawful, and (c) in case of any extension of time of payment or
renewal of any Notes, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity by acceleration or otherwise and (ii) agrees to pay any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Indenture Trustee or any Holder in enforcing any rights under this Guarantee
(together, the "Indenture Obligations").
WHEREAS, the Guarantor is a direct or indirect Subsidiary of the Borrower;
WHEREAS, the Guarantor desires to execute this Guarantee in order to
satisfy the conditions described in the preceding paragraphs;
<PAGE>
EXHIBIT D
Page 2
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to the Guarantor, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby makes the following representations and
warranties to the Secured Creditors and hereby covenants and agrees with each
Secured Creditor as follows:
1. The Guarantor irrevocably, absolutely and unconditionally
guarantees: to the Secured Creditors the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of the Indenture
Obligations and all other obligations, liabilities and indebtedness owing by the
Borrower to the Secured Creditors under the Indenture (including, without
limitation, indemnities, fees and interest thereon), whether now existing or
hereafter incurred under, arising out of or in connection with the Indenture and
the due performance and compliance by the Borrower with all of the terms,
conditions and agreements contained in the Indenture (all such principal,
interest, liabilities, indebtedness and obligations being herein collectively
called the "Guaranteed Obligations"), whether now in existence or hereafter
arising. The Guarantor understands, agrees and confirms that the Secured
Creditors may enforce this Guarantee up to the full amount of the Guaranteed
Obligations against the Guarantor without proceeding against any other
guarantor, the Borrower, against any security for the Guaranteed Obligations, or
under any other guaranty covering all or a portion of the Guaranteed
Obligations. This Guarantee shall constitute a guaranty of payment, and not of
collection.
2. The liability of the Guarantor hereunder is primary, absolute and
unconditional and is exclusive and independent of any security for or other
guaranty of the indebtedness of the Borrower or any Subsidiary thereof whether
executed by the Guarantor, any other guarantor or by any other party, and the
liability of the Guarantor hereunder shall not be affected or impaired by any
circumstance or occurrence whatsoever, including, without limitation: (a) any
direction as to application of payment by the Borrower or any Subsidiary thereof
or by any other party, (b) any other continuing or other guaranty, undertaking
or maximum liability of a guarantor or of any other party as to the Guaranteed
Obligations, (c) any payment on or in reduction of any such other guaranty or
undertaking, (d) any dissolution, termination or increase, decrease or change in
personnel by the Borrower or any Subsidiary thereof, (e) any payment made to any
Secured Creditor which such Secured Creditor repays the Borrower or any
Subsidiary thereof pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and the Guarantor
waives any right to the deferral or modification of its obligations hereunder by
reason of any such proceeding, (f) any action or inaction by the Secured
Creditor as contemplated in Section 5 hereof or (g) any invalidity, irregularity
or unenforceability of all or any part of the Guaranteed Obligations or of any
security therefor.
3. The obligations of the Guarantor hereunder are independent of the
obligations of any other guarantor, the Borrower or any Subsidiary thereof, and
a separate
<PAGE>
EXHIBIT D
Page 3
action or actions may be brought and prosecuted against the Guarantor whether or
not action is brought against any other guarantor, the Borrower or any
Subsidiary thereof and whether or not any other guarantor, the Borrower or any
Subsidiary thereof be joined in any such action or actions. The Guarantor
waives, to the fullest extent permitted by law, the benefits of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or any Subsidiary thereof or other circumstance which
operates to toll any statute of limitations as to the Borrower or any such
Subsidiary shall operate to toll the statute of limitations as to the Guarantor.
4. The Guarantor hereby waives notice of acceptance of this
Guarantee and notice of any liability to which it may apply, and waives
promptness, diligence, presentment demand of payment, protest, notice of
dishonor or nonpayment of any such liabilities, suit or taking of other action
by the Indenture Trustee or any other Secured Creditor against, and any other
notice to, any party liable thereon (including the Guarantor, any other
guarantor, the Borrower or any Subsidiary thereof).
5. Any Secured Creditor may at any time and from time to time
without the consent of, or notice to, the Guarantor, without incurring
responsibility to the Guarantor, without impairing or releasing the obligations
of the Guarantor hereunder, upon or without any terms or conditions and in whole
or in part:
(a) exercise or refrain from exercising any rights against the
Borrower, any guarantor (including the Guarantor), any Subsidiary thereof
or otherwise act or refrain from acting;
(b) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower or any Subsidiary thereof to the
Secured Creditors regardless of what liabilities of the Borrower or such
Subsidiary remain unpaid;
(c) consent to or waive any breach of, or any act, omission or
default under, the Indenture or any of the instruments or agreements
referred to therein;
(d) act or fail to act in any manner referred to in this Guarantee
which may deprive the Guarantor of its right to subrogation against the
Borrower or any Subsidiary thereof to recover full indemnity for any
payments made pursuant to this Guarantee; and/or
(e) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
the Guarantor from its liabilities under this Guarantee.
<PAGE>
EXHIBIT D
Page 4
6. This Guarantee is a continuing one and all liabilities to which
it applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Secured Creditor in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly specified are cumulative and not exclusive of any
rights or remedies which any Secured Creditor would otherwise have. No notice to
or demand on the Guarantor in any case shall entitle the Guarantor to any other
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Secured Creditor to any other or further action in
any circumstances without notice or demand. It is not necessary for any Secured
Creditor to inquire into the capacity or powers of the Borrower or any
Subsidiary thereof or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
7. Any indebtedness of the Borrower or any Subsidiary thereof now or
hereafter held by the Guarantor is hereby subordinated to the indebtedness of
the Borrower or such Subsidiary to the Secured Creditors, and such indebtedness
of the Borrower or such Subsidiary to the Guarantor, if the Indenture Trustee,
after the occurrence and during the continuance of an Event of Default, so
requests, shall be collected, enforced and received by the Guarantor as trustee
for the Secured Creditors and be paid over to the Secured Creditors on account
of the indebtedness of the Borrower or such Subsidiary to the Secured Creditors,
but without affecting or impairing in any manner the liability of the Guarantor
under the other provisions of this Guarantee. Without limiting the generally of
the foregoing, the Guarantor hereby agrees with the Secured Creditors that it
will not exercise any right of subrogation which it may at any time otherwise
have as a result of this Guarantee until all Guaranteed Obligations have been
irrevocably paid in full in cash.
8. (a) The Guarantor waives any right (except as shall be required by
applicable law and cannot be waived) to require the Secured Creditors to: (i)
proceed against the Borrower, any Subsidiary thereof, any other guarantor of the
Guaranteed Obligations or any other party; (ii) proceed against or exhaust any
security held from the Borrower, any Subsidiary thereof, any other guarantor of
the Guaranteed Obligations or any other party; or (iii) pursue any other remedy
in the Secured Creditors' power whatsoever. The Guarantor waives any defense
based on or arising out of any defense of the Borrower, any Subsidiary thereof,
any other guarantor of the Guaranteed Obligations or any other party other than
payment in full of the Guaranteed Obligations, including, without limitation,
any defense based on or arising out of the disability of the Borrower, any
Subsidiary thereof, any other guarantor of the Guaranteed Obligations or any
other party, or the unenforceability of the Guaranteed Obligations or any part
thereof from any cause,
<PAGE>
EXHIBIT D
Page 5
or the cessation from any cause of the liability of the Borrower or any
Subsidiary thereof other than payment in full of the Guaranteed Obligations. The
Secured Creditors may, at their election, foreclose on any security held by the
Indenture Trustee or the other Secured Creditors by one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable, or exercise any other right or remedy the Secured Creditors may have
against the Borrower or any Subsidiary thereof or any other party, or any
security, without affecting or impairing in any way the liability of the
Guarantor hereunder except to the extent the Guaranteed Obligations have been
paid in full. The Guarantor waives any defence arising out of any such election
by the Secured Creditors, even though such election operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
the Guarantor against the Borrower or any Subsidiary thereof or any other party
or any security.
(b) The Guarantor waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Guarantee, and notices of the existence, creation or incurring of new or
additional indebtedness. The Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower's and each of its Subsidiary's financial
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Guaranteed Obligations and the nature, scope and extent of the
risks which the Guarantor assumes and incurs hereunder, and agrees that the
Secured Creditors shall have no duty to advise the Guarantor of information
known to them regarding such circumstances or risks.
9. The Secured Creditors agree that this Guarantee may be enforced
only by the action of the Indenture Trustee and that no other Secured Creditors
shall have any right individually to seek to enforce or enforce this Guarantee.
The Secured Creditors further agree that this Guarantee may not be enforced
against any director, officer, employee, partner or stockholder of the Guarantor
(except to the extent such partner or stockholder is also a Guarantor
hereunder).
10. The Guarantor represents, warrants and covenants that:
(a) It (i) is a duly organized and validly existing corporation or
partnership in good standing under the laws of the jurisdiction of its
organization, (ii) has the corporate or partnership power and authority to
own its property and assets and to transact the business in which it is
engaged and presently proposes to engage and (iii) is duly qualified and is
authorized to do business and is in good standing in each jurisdiction
where the conduct of its business requires such qualification except for
failures to be so qualified which, individually or in the aggregate, could
not reasonably be expected to have a material adverse effect on the
business, opera-
<PAGE>
EXHIBIT D
Page 6
tions property, assets, liabilities, conditions (financial or otherwise) or
prospects of the Borrower or of the Borrower and its Subsidiaries taken as
a whole.
(b) It has the corporate or partnership power and authority to
execute, deliver and perform the terms and provisions of this Guarantee and
has taken all necessary corporate or partnership actions to authorize the
execution, delivery and performance by it of this Guarantee. The Guarantor
has duly executed and delivered this Guarantee, and this Guarantee
constitutes the legal, valid and binding obligation of the Guarantor
enforceable in accordance with its terms, except to the extent that the
enforceability hereof or thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally
affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
(c) Neither the execution, delivery or performance by the Guarantor
of this Guarantee, nor compliance by it with the terms and provisions
hereof, will (i) contravene any provision of any applicable law, statute,
rule or regulation or any applicable order, writ, injunction or decree of
any court or governmental instrumentality, (ii) conflict with or result in
any breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or
the obligation to create or impose) any Lien upon any of the property or
assets of the Guarantor or any of its Subsidiaries pursuant to the terms of
any indenture, mortgage, deed of trust, loan agreement, credit agreement,
or any other material agreement, contract or instrument to which the
Guarantor or any of its Subsidiaries is a party or by which it or any of
its property or assets is bound or to which it may be subject or (iii)
violate any provision of the certificate of incorporation or by-laws (or
equivalent organizational documents) of the Guarantor or any of its
Subsidiaries.
(d) No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with (except as have been obtained
or made), or exemption by, any governmental or public body or authority, or
any subdivision thereof, is required to authorize, or is required for, (i)
the execution, delivery and performance of this Guarantee by the Guarantor
or (ii) the legality, validity, binding effect or enforceability of this
Guarantee to which the Guarantor is a party.
(e) There are no actions, suits or proceedings pending or threatened
(i) with respect to this Guarantee or (ii) with respect to the Guarantor
that could reasonably be expected to materially and adversely affect (a)
the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Borrower or of the Borrower
and its Subsidiaries taken as a whole or (b) the rights or remedies
<PAGE>
EXHIBIT D
Page 7
of the Secured Creditors hereunder or the ability of the Guarantor to
perform its respective obligations to the Secured Creditors hereunder.
11. The Guarantor hereby agrees to pay all reasonable out-of-pocket
costs and expenses of each Secured Creditor in connection with the enforcement
of this Guarantee and of the Indenture Trustee in connection with any amendment,
waiver or consent relating hereto (including in each case, without limitation,
the reasonable fees and disbursements of counsel employed by each Secured
Creditor).
12. This Guarantee shall be binding upon the Guarantor and its
successors and assigns and shall inure to the benefit of the Secured Creditors
and their successors and assigns.
13. Neither this Guarantee nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of the
Guarantor and with the written consent of the holders of a majority of the
outstanding principal amount of the Notes at any time after the Issue Date.
14. The Guarantor acknowledges that an executed (or conformed) copy of
the Indenture has been made available to its principal executive officers and
such officers are familiar with the contents thereof.
15. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of an Event of Default (such term to mean
and include any "Event of Default" as defined in the Indenture), each Secured
Creditor is hereby authorized, at any time or from time to time, without notice
to the Guarantor or to any other Person, any such notice being 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 Secured
Creditor to or for the credit or the account of the account of the Guarantor,
against and on account of the obligations and liabilities of the Guarantor to
such Secured Creditor under this Guarantee, irrespective of whether or not such
Secured Creditor shall have made any demand hereunder and although said
obligations, liabilities, deposits or claims, or any of them, shall be
contingent or unmatured.
16. The Guarantor hereby confirms that it is its intention that this
Guarantee not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, Title 11 of the United
States Code entitled "Bankruptcy", or any similar Federal or state law. To
effectuate the foregoing intention, the Guarantor hereby irrevocably agrees that
the Guaranteed Obligations guaranteed by the Guarantor shall be limited to such
amount as will, after giving effect to such maximum
<PAGE>
EXHIBIT D
Page 8
amount and all other (contingent or otherwise) liabilities of the Guarantor that
are relevant under such laws, result in the Guaranteed Obligations of the
Guarantor in respect of such maximum amount not constituting a fraudulent
transfer or conveyance.
17. All notices, requests, demands or other communications pursuant hereto
shall be deemed to have been duly given or made when delivered to the Person to
which such notice, request, demand or other communication is required or
permitted to be given or made under this Guarantee, addressed to such party at
(i) in the case of the Indenture Trustee, as provided in the Indenture, (ii) in
the case of the Guarantor, as provided in the Indenture and (iii) in the case of
any Holder, at such address as such Holder shall have specified in writing to
the Indenture Trustee; or in any case at such other address as any of the
Persons listed above may hereafter notify the others in writing.
18. If claim is ever made upon any Secured Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower or any Subsidiary thereof), then
and in such event the Guarantor agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon thee Guarantor, notwithstanding
any revocation hereof or other instrument evidencing any liability of the
Borrower or any Subsidiary thereof, and the Guarantor shall be and remain liable
to the aforesaid payees hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by any such
payee.
19. (a) THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF THE SECURED
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Guarantee may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Guarantee, the Guarantor hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Guarantor hereby
further irrevocably waives any claim that any such court lacks personal
jurisdiction over the Guarantor, and agrees not to plead or claim in any legal
action or proceeding with respect to this Guarantee brought in any of the
aforesaid courts that any such court lacks personal jurisdiction over the
Guarantor. The Guarantor 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 Company as set forth in the Indenture. The Guarantor hereby
<PAGE>
EXHIBIT D
Page 9
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder that such service of process was in any way invalid or
ineffective. Nothing herein shall affect the right of any of the Secured
Creditors to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Guarantor in any other
jurisdiction.
(b) The Guarantor hereby irrevocably waives (to the fullest extent
permitted by applicable law) 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 Guarantee brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that such action or proceeding brought in any such
court has been brought in an inconvenient forum.
(c) THE GUARANTOR AND EACH SECURED CREDITOR (BY ITS ACCEPTANCE OF THE
BENEFITS OF THIS GUARANTEE) HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS GUARANTEE, THE OTHER CREDIT DOCUMENTS TO WHICH THE GUARANTOR IS A PARTY OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
20. In the event that all of the capital stock of the Guarantor is
sold or otherwise disposed of or liquidated in compliance with the requirements
of Section 4.10 of the Indenture and the proceeds of such sale, disposition or
liquidation are applied in accordance with the provisions of the Indenture, to
the extent applicable, the Guarantor shall upon consummation of such sale or
other disposition (except to the extent that such sale or disposition is to the
Borrower or another Subsidiary thereof) be released from this Guarantee
automatically and without further action and this Guarantee shall, as to the
Guarantor, terminate, and have no further force or effect (it being understood
and agreed that the sale of one or more Persons that own, directly or
indirectly, all of the capital stock or partnership interests of the Guarantor
shall be deemed to be a sale of the Guarantor for the purposes of this Section
21).
21. This Guarantee may be executed in any number of counterparts and
by the different parties hereto on separate counteparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Guarantor and the Indenture Trustee.
<PAGE>
EXHIBIT D
Page 10
22. All payments made by the Guarantor hereunder will be made without
setoff, counterclaim or other defense.
***
<PAGE>
EXHIBIT D
Page 11
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be
executed and delivered as of the date first above written.
[NAME OF GUARANTOR]
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT E
---------
FORM OF UNDERTAKING LETTER
_______________
Marine Midland Bank,
as Indenture Trustee (as defined below)
140 Broadway, 12th Floor
New York, New York 10005
Siemens A.G.
[Address]
Germany
Ladies & Gentlemen:
This letter confirms the agreements made by the undersigned, Global
Telecommunications Operations, Inc., a British Virgin Islands company
("Global"), in connection with the offering by Transtel S.A., a Colombian
corporation ("Transtel"), of 12 1/2% Senior Notes due 2007 (the "Senior Notes"),
as described in the Offering Memorandum, dated October 21, 1997 (the "Offering
Memorandum"). Global is owned by the same shareholders who own Transtel (the
"Shareholders"). The Senior Notes will be issued under the Indenture, dated as
of October 28, 1997, between Transtel and Marine Midland Bank, as indenture
trustee for the benefit of the holders of the Senior Notes (the "Indenture
Trustee").
BACKGROUND
Global was formed by the Shareholders in January 1995 for the exclusive
purpose of acting as a financing vehicle for the purchase of telecommunications
equipment from Siemens A.G. ("Siemens") to be used by the subsidiaries of
Transtel (the "Operating Subsidiaries") for the
E-1
<PAGE>
Marine Midland Bank and Siemens A.G.
development of their telephone networks. Generally, Siemens finances its sale
of equipment to Global (the "Siemens Financing"), and then Global on-leases such
equipment to an Operating Subsidiary pursuant to a lease agreement (each, a
"Lease") with terms substantially similar to the Siemens Financing.
As part of the Expansion Plan (as defined and described in the Offering
Memorandum), Global has entered into the purchase agreements described in
Exhibit A hereto and has signed the letters of intent described in Exhibit A
hereto which is intended to result in one or more additional purchase agreement
(such purchase agreements and the letters of intent, are referred to herein as
the "Purchase Agreements"). For purposes of this letter agreement, all
telecommunications equipment purchased by Global from Siemens prior to and after
the date hereof under any of the Purchase Agreements, and all replacements and
upgrades of such equipment, is referred to herein as the "Equipment".
In consideration for Siemens agreeing to modify certain terms to the
existing Purchase Agreements, the Company has agreed to guaranty Global's
obligations under the Siemens Financing. In addition, Global has agreed to
assign to Siemens the lease payments under each of the Leases in the event of an
event of default under the Purchase Agreements.
It is a condition to the issuing of the Senior Notes under the Indenture
that Global shall have executed and delivered this letter agreement. Global
will obtain benefits from the issuance of the Senior Notes by Transtel and
desires to execute this letter agreement in order to satisfy the condition
described in the preceding sentence.
AGREEMENTS
Subject to the terms of this letter agreement, for so long as the Senior
Notes are outstanding, Global hereby agrees to the following:
1. Not to, directly or indirectly, engage in any business other than the
business of purchasing telecommunications equipment and the leasing of such
telecommunications equipment to Transtel or an Operating Subsidiary.
2. Not to incur any indebtedness ("Global Indebtedness"), unless Transtel
and the Operating Subsidiaries are in compliance with Section 4.08 of the
Indenture after giving effect to any lease or guaranty arrangements entered into
by Transtel or any Operating Subsidiary which constitute the incurrence of
Indebtedness (as defined in the Indenture) under the Indenture in connection
with such Global Indebtedness and such Global Indebtedness is used for the
purchase of telecommunications equipment to be leased to an Operating
Subsidiary.
E-2
<PAGE>
Marine Midland Bank and Siemens A.G.
3. To the extent it sells or otherwise disposes of any of the Equipment,
it agrees to apply all cash proceeds received by it in respect of any sale of,
collection from, or other realization upon any Equipment to prepay on a pro rata
basis the Senior Notes and any amounts owing by Global to Siemens under any
purchase agreement for Equipment.
REPRESENTATIONS AND WARRANTIES
Global represents and warrants that: (i) it has the corporate power and
authority to execute, deliver and perform this letter agreement, and the
execution, delivery and performance of this letter agreement by Global have been
duly authorized and approved by all required corporate action of Global, (ii)
this letter agreement has been duly executed and delivered by Global and is a
legal, valid and binding obligation of Global, and (iii) it has received a copy
of the Offering Memorandum and the Indenture.
GENERAL
This letter agreement contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
This letter agreement may not be changed orally, but only by an agreement
in writing signed by the parties hereto. Any provision of this letter agreement
can be terminated, waived, amended, supplemented or modified by written
agreement of the parties hereto.
This letter agreement may be executed in two or more counterparts, all of
which taken together shall constitute one instrument.
This letter agreement shall be governed by the laws of the State of New
York, United States of America.
E-3
<PAGE>
Marine Midland Bank and Siemens A.G.
If the foregoing is in accordance with your understanding, please sign and
return this letter acknowledging your agreement with the terms of this letter
agreement.
Very truly yours,
GLOBAL TELECOMMUNICATIONS OPERATIONS, INC.
By________________________________________
Name:
Title:
Acknowledged and agreed
____ day of ____________, 1997.
MARINE MIDLAND BANK, in its sole capacity
as Indenture Trustee for the benefit of
the holders of the Notes
By_______________________________________
Name:
Title:
SIEMENS A.G.
By_______________________________________
Name:
Title:
TRANSTEL S.A.
By_______________________________________
Name:
Title:
E-4
<PAGE>
EXHIBIT A
---------
1. Purchase Agreement, dated May 2, 1996, between Global and Siemens, to
purchase landline telecommunications equipment to be used for the development of
each of TelePalmira, TeleJamundi and Unitel's (each as defined in the Offering
Memorandum) respective wireline networks for an aggregate amount of U.S.$20
million.
2. Purchase Agreement, dated May 30, 1997, between Global and Siemens, to
purchase landline telecommunications equipment to be used for the development of
each of TeleCartago's, Bugatel's and Unitel Wireless' (each as defined in the
Offering Memorandum) respective networks for an aggregate amount of U.S.$34
million.
3. Letter of Intent, dated April 25, 1997, for the purchase and financing
of various telecommunications equipment to be used by Transtel to substantially
complete the Expansion Plan.
4. Letter of Intent, dated September 25, 1997, for the purchase and
financing of various telecommunications equipment to be used by Transtel to
substantially complete the Expansion Plan.
<PAGE>
EXHIBIT F
---------
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
_______________, ______
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Department - Transtel
Re: Transtel S.A.
(the "Company") 12 1/2% Senior Notes due 2007
(the "Notes")
----------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_______________ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of October 28, 1997 relating to the Notes (the "Indenture") and
the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Notes except in compliance with, such restrictions
and conditions and the Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered or sold except as
permitted in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter stated, that
if we should sell any Notes within two years after the original issuance of
the Notes, we will do so only (A) to the Company or any subsidiary thereof,
(B) inside the United States in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein),
(C) inside the United States to an "institutional accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on
its behalf by a U.S. broker-dealer) to you a signed letter substantially in
the form of this letter, (D) outside the United States in accordance with
Rule 904
F-1
<PAGE>
EXHIBIT F
---------
of Regulation S under the Securities Act, (E) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act (if
available), or (F) pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to any person
purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Company such certification, written
legal opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment, as the case may be.
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, the Agents, the Company and counsel for 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.
Very truly yours,
[Name of Transferee]
By:__________________________________________
Authorized Signature
F-2
<PAGE>
EXHIBIT G
---------
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
__________________, _____
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Department - Transtel
Re: Transtel S.A. (the "Company") 12 1/2% Senior Notes due 2007 (the
"Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $_________________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed 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;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
G-1
<PAGE>
EXHIBIT G
---------
You, the Company and counsel for 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
G-2
<PAGE>
EXHIBIT H
---------
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO RULE 144A
__________________, _____
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Department - Transtel
Re: Transtel S.A. (the "Company") 12 1/2% Senior Notes due 2007 (the
"Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $_________________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Rule 144A under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the Notes are being transferred to a person that the undersigned
and any person acting on its behalf reasonably believe is a "qualified
institutional buyer" within the meaning of Rule 144A, acquiring for its own
account or for the account of a qualified institutional buyer; and
(2) the undersigned and any person acting on its behalf have taken
reasonable steps to ensure that the transferee is aware that the
undersigned may be relying on Rule 144A in connection with the transfer.
You, the Company and counsel for 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
H-1
<PAGE>
EXHIBIT 4.2
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
FORM OF EXCHANGE CERTIFICATE
TRANSTEL PASS THROUGH TRUST
12 1/2% Pass Through Exchange Certificate
CUSIP No. ____________
evidencing a fractional undivided interest in a trust, the property of
which includes certain Senior Notes.
Certificate
No.__________ $__________________ Fractional Undivided Interest
THIS CERTIFIES THAT ______________________________, for value
received, is the registered owner of a $______________________________
(________________________ dollars) Fractional Undivided Interest in the Transtel
Pass Through Trust (the "Trust") created, pursuant to a Trust Agreement dated as
of October 20, 1997, between Transtel S.A., a sociedad anonima organized under
the laws of the Republic of Colombia (the "Company") and Wilmington Trust
Company, a Delaware banking corporation, as trustee (the "Pass Through
Trustee"), as amended and restated by the Amended and Restated Trust Agreement
dated as of October 28, 1997 (as so amended, the "Agreement"), among the
Depositor, the Pass Through Trustee, and Marine Midland Bank, a banking
corporation and trust company incorporated under New York law as Registrar and
Paying Agent ("Marine Midland"), a summary of certain of the pertinent
provisions of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings assigned to them in
the Agreement. This Certificate is one of the duly authorized Certificates
designated as "12 1/2% Pass Through Certificates" (herein called the
"Certificates"). This Certificate is
<PAGE>
issued under and is subject to the terms, provisions, and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound. The property of the
Trust includes certain Senior Notes (the "Trust Property").
Subject to and in accordance with the terms of the Agreement, from
funds then available to the Pass Through Trustee, there will be distributed on
each November 1 and May 1, commencing May 1, 1998 (a "Distribution Date"), to
the person in whose name this Certificate is registered at the close of business
on the day of the month which is 15 days preceding the Distribution Date, an
amount in respect of the Scheduled Payments on the Senior Notes due on such
Distribution Date, the receipt of which has been confirmed by the Pass Through
Trustee, equal to the product of the percentage interest in the Trust evidenced
by this Certificate and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and the terms of
this Certificate, in the event that Special Payments on the Senior Notes are
received by the Paying Agent, from funds then available to the Paying Agent,
there shall be distributed on the applicable Special Distribution Date, to the
Person in whose name this Certificate is registered at the close of business on
the day of the month which is 15 days preceding the Special Distribution Date,
an amount in respect of such Special Payments on the Senior Notes, the receipt
of which has been confirmed by the Paying Agent, equal to the product of the
percentage interest in the Trust evidenced by this Certificate and an amount
equal to the sum of such Special Payments so received. If a Distribution Date
or Special Distribution Date is not a Business Day, distribution shall be made
on the immediately following Business Day. The Special Distribution Date shall
be the 2nd day of the month determined as provided in the Agreement. The Paying
Agent shall mail notice of each Special Payment and the Special Distribution
Date therefor to the Holders of the Certificates.
Distributions on this Certificate will be made by the Paying Agent by
(i) wire transfer of immediately available funds or (ii) check mailed to the
person entitled thereto, without the presentation or surrender of this
Certificate or the making of any notation hereon. Except as otherwise provided
in the Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Paying Agent of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency of the Paying Agent specified in such
notice.
The statements set forth in the legend, if any, set forth above are an
integral part of the terms of this Certificate and by acceptance hereof each
holder of this Certificate agrees to be subject to and bound by the terms and
provisions set forth in such legend, if any.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE.
<PAGE>
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Pass Through Trustee or an authenticating agent, by manual signature, this
Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Pass Through Trustee has caused this
Certificate to be duly executed.
TRANSTEL PASS THROUGH TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as Pass Through
Trustee
By: ________________________________
Title:
[FORM OF THE PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
Dated:
This is one of the Certificates referred
to in the withinmentioned Agreement.
[This is the Global Certificate referred
to in the withinmentioned Agreement.]/1/
Wilmington Trust Company, as Pass
Through Trustee
By: _______________________________
Authorized Officer
or
Wilmington Trust Company, as Pass
Through Trustee
By: Marine Midland Bank, as
Authenticating Agent
By: ____________________________
Authorized Officer
- -----------
/1/ For Global Certificate only.
<PAGE>
[Reverse of Certificate]
Except as set forth in the Exchange Certificate Guarantee, the
Certificates do not represent a direct obligation of, or an obligation
guaranteed by, or an interest in, the Company or the Pass Through Trustee or any
affiliate thereof. The Certificates are limited in right of payment, all as
more specifically set forth in the Agreement. All payments or distributions
made to Certificateholders under the Agreement shall be made only from the Trust
Property and only to the extent that the Paying Agent shall have sufficient
income or proceeds from the Trust Property to make such payments in accordance
with the terms of the Agreement. Each Holder of this Certificate, by its
acceptance hereof, agrees that it will look solely to the income and proceeds
from the Trust Property to the extent available for distribution to such Holder
as provided in the Agreement. This Certificate does not purport to summarize
the Agreement and reference is made to the Agreement for information with
respect to the interests, rights, benefits, obligations, proceeds, and duties
evidenced hereby. A copy of the Agreement may be examined during normal
business hours at the principal office of the Pass Through Trustee, and at such
other places, if any, designated by the Pass Through Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Pass Through Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
a majority in interest in the Trust. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Registrar, or by any successor Registrar,
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Registrar, duly executed by the Holder hereof or such
Holder's attorney, duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons initially in minimum denominations of $250,000 Fractional Undivided
Interest and any integral multiples of $1,000 in excess thereof. At such time
as certain restrictions on transfer have been removed, the minimum denominations
of the Certificates shall be reduced to $1,000 or any integral multiples of
$1,000 in excess thereof. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations
<PAGE>
evidencing the same aggregate Fractional Undivided Interest in the Trust, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Pass Through Trustee shall require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Pass Through Trustee, the Registrar, and any agent of the Pass
Through Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither the
Pass Through Trustee, the Registrar, nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Agreement and the Trust
created thereby shall terminate upon the distribution to Certificateholders of
all amounts required to be distributed to them pursuant to the Agreement and the
disposition of all property held as part of the Trust Property.
<PAGE>
EXHIBIT 4.3
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (the "AGREEMENT") is made and entered into as of the 28th
day of the month of October, of one thousand nine hundred and ninety seven
(1997), by and between MARINE MIDLAND BANK, not in its individual capacity but
solely as collateral agent for the benefit of the holders of the Senior Notes
(hereinafter referred to as the "PLEDGEE") a banking corporation and trust
company domiciled in 140 Broadway, New York, NY 10005, United States of
America, incorporated under the laws of the State of New York, United States of
America, on December 31, 1993, being represented in this act by Robert Conrad,
of legal age, domiciled in the city of New York, in his capacity as (capacity
of the person executing the pledge) pursuant to the corporate by-laws of the
corporation; and, TRANSTEL S.A., (hereinafter referred to as the "PLEDGOR"), a
corporation domiciled in Cali, Colombia, incorporated on August 23, 1993,
through Public Deed No. 3097 issued by the Fourteenth Notary Public Office in
Cali, and registered before the Mercantile Registry of the Chamber of Commerce
of Cali on September 10, 1993 under number 69826, Volume IX, and Tax
Identification Number 800.206.541-0, being represented in this act by GUILLERMO
O. LOPEZ ESQUIVEL, of legal age, domiciled in the city of Cali, identified with
citizen identification card number 16.614.481 issued in Cali, in his capacity
as manager and legal representative of the corporation pursuant to the
corporate by-laws of the corporation as evidenced in the certificate of
compliance which is attached hereto as an integral part of this AGREEMENT.
<PAGE>
-2-
WHEREAS, the PLEDGOR has entered into an Indenture, dated as of October 28,
1997, (as amended, modified or supplemented from time to time, the "Indenture"),
with Marine Midland Bank, as trustee (together with any successor thereto
pursuant to the terms of the Indenture, the "Trustee"), providing for the
issuance by the PLEDGOR of up to $180.000.000 principal amount of its 12.5k
Senior Notes due 2007 (as amended, modified or supplemented from time to time,
the "Senior Notes"), the holders from time to time of the Senior Notes being
hereinafter called the "Noteholders";
WHEREAS, the PLEDGOR has issued initially US$150.000.000 principal amount
of Senior Notes, under a private placement in the State of New York, United
States of America, the 28th day of the month of October, of one thousand nine
hundred and ninety seven (1997) (hereinafter referred to as the "Issue");
WHEREAS, the net proceeds of the Issue will be used by the PLEDGOR as
described in the final Offering Memorandum, dated October 21, l997, including
the making of intercompany loans to its Restricted Subsidiaries (as defined in
the Indenture);
WHEREAS, the PLEDGOR will grant to the PLEDGEE for the benefit of the
Noteholders, in order to secure the PLEDGOR's obligations under the Senior
Notes, a pledge of all of the Intercompany Notes (as defined in the Indenture
issued by its Restricted Subsidiaries to secure loans made by the PLEDGOR to
such Restricted Subsidiaries with the proceeds of the Senior Notes;
<PAGE>
-3-
WHEREAS, these Intercompany Notes evidence certain permitted Intercompany
Indebtedness of each Restricted Subsidiary:
WHEREAS, it is a condition precedent to the issuance of the Senior Notes
pursuant to the Indenture, that the PLEDGOR shall have executed and delivered to
the PLEDGEE this AGREEMENT;
WHEREAS, the PLEDGOR desires to execute this AGREEMENT to satisfy the
conditions described in the preceding paragraph;
THE PLEDGOR AND THE PLEDGEE; HEREBY AGREE; AS FOLLOWS:
All capitalized words not defined herein shall have the meaning assigned to
them in the Indenture.
CLAUSE ONE (1): The PLEDGOR in accordance with the Colombian Commercial
Code (articles 1200 to 1206) hereby constitute a Closed Pledge with Tenancy in
favor of THE PLEDGEE over all INTERCOMPANY NOTES at any time issued to the
PLEDGOR by its Restricted Subsidiaries, which INTERCOMPANY NOTES shall be in the
form of Exhibit A hereto.
Thus, the PLEDGOR assigns to the PLEDGEE the power to collect the same at
their maturity with the specific purpose that said sums secure the prompt
payment of any and all amounts owed under the Senior Notes including, without
limitation, principal, interest, default interest, taxes, commissions, and all
other expenses incurred by the PLEDGEE (including attorneys fees in the event of
a judicial claim).
<PAGE>
-4-
The PLEDGEE is expressly and irrevocably authorized to apply any amounts that
it receives, to the payment o$ any obligations under the Senior Notes. However
if the amounts recovered under this Pledge are insufficient to pay the
obligations under the Senior Notes THE PLEDGOR shall be obligated to pay such
amounts as remain outstanding
CLAUSE TWO (2): This AGREEMENT shall secure the obligation consisting of
the full and prompt payment when due by the PLEDGOR of: (i) the principal amount
of the Senior Notes, payable on November 1, 2007, or in the event of a
redemption or acceleration or otherwise, each in accordance with the terms of
the Indenture, and (ii) the semi-annual payment of the interest accrued on the
Senior Notes at the rate of 12.5%, commencing on May 1, 1998. However, this
pledge shall be in effect for so long as there are any amounts outstanding under
the Senior Notes.
CLAUSE THREE (3): The signatories of this AGREEMENT agree that the
following shall constitute events of default under this AGREEMENT ( each such
event hereinafter referred to as an "Event of) Default"): (i) an Event of
Default (as defined in the Indenture) occurs under the Indenture and such Event
of Default is continuing, (ii) if in the opinion of the PLEDGEE, there is any
deterioration of the value of the Intercompany Notes given in pledge. and (iii)
if there shall be any material adverse change in the financial condition of the
PLEDGOR.
CLAUSE FOUR (4): Upon the occurrence of any Event of Default, the PLEDGEE
may exercise any and all of the following rights and remedies: (i) declare all
indebtedness secured hereby, or any part thereof, immediately due and
<PAGE>
-5-
payable without demand or notice and proceed to collect the same, this exercise
any or all of the rights, powers and remedies with respect to the Intercompany
Notes available under the Colombian Commercial Code or Civil Procedure Code,
(iii) receive directly all amounts payable in respect of the Intercompany Notes
to the PLEDGOR, (iv) transfer all or any part of the Intercompany Notes into the
PLEDGEE's name or the name of its nominee or nominees, and (v) accelerate any
Intercompany Note which may be accelerated in accordance with its terms, and
take any other action to collect upon any Intercompany Note (including without
limitation to make any demand for payment thereon).
CLAUSE FIVE (5): The PLEDGOR hereby represents and warrants to the PLEDGEE
that: (i) it is the legal owner of record and beneficial owner of, and has a
good and marketable title to, all Intercompany Notes pledged by it hereunder,
subject to no pledge, lien, mortgage, hypothecation or security interest, except
as created by this AGREEMENT; (ii) it has full power, authority, and legal right
to pledge all of the Intercompany Notes pledged by it pursuant to this
AGREEMENT, (iii) this AGREEMENT has been duly authorized, executed and delivered
by the PLEDGOR and constitutes a legal, binding obligation of the PLEDGOR
enforceable in accordance with its terms, (iv) no consent of any other party
(including without limitation, any stockholder or creditor of the PLEDGOR or any
of its Restricted Subsidiaries) and its consent, license, permit, approval, or
authorization of exemption by, notice or report to, or registration, filing or
declaration with any governmental authority is required to be obtained by the
PLEDGOR in connection with the execution, delivery or performance of this
AGREEMENT, (iv) the execution, delivery and performance of this AGREEMENT does
not violate any provision of
<PAGE>
-6-
any applicable law or regulation or of any order of any judge, arbitrator or
governmental authority, domestic or foreign, or of the by-laws of the PLEDGOR
or its Restricted Subsidiaries, or of any mortgage, indenture, lease, deed of
trust, loan agreement, credit agreement, or other material agreement,
instrument or undertaking to which the Pledgor or any of its Restricted
Subsidiaries is a party or which purports to be binding upon the PLEDGOR or any
of its Restricted Subsidiaries or upon any of their respective assets, and will
not result in the creation or impression of any lien or encumbrance on any of
the assets of the PLEDGOR or any of its Restricted Subsidiaries except as
contemplated by this AGREEMENT, each of the Intercompany Notes when executed by
the relevant Restricted Subsidiary thereof will be a legal valid and binding
obligation of such Restricted Subsidiary, and (vi) the pledge of the
Intercompany Notes to the PLEDGEE pursuant to this AGREEMENT, together with the
delivery of the Intercompany Notes to the PLEDGEE pursuant to this AGREEMENT,
creates a valid and perfected first priority security interest in such
Intercompany Notes and the proceeds thereof, subject to no prior lien or
encumbrance or to any agreement purporting to grant to any third party a lien
or encumbrance on the property or assets of the PLEDGOR which would include the
Intercompany Notes.
CLAUSE SIX (6): The PLEDGOR covenants and agrees that it will defend the
PLEDGEE's right, title, and security interest in and to the Intercompany Notes
and the proceeds thereof against the claims and demands of all persons
whomsoever.
CLAUSE SEVEN (7): when all the liabilities specified in CLAUSE TWO (2)
hereof shall have been paid in full, this AGREEMENT shall terminate, and the
PLEDGEE shall
<PAGE>
-7-
deliver to the PLEDGOR the pledged Intercompany Notes then held by it.
CLAUSE EIGHT (8): This AGREEMENT shall in a11 respects be construed in
accordance with and governed by the laws of the Republic of Colombia.
CLAUSE NINE (9): The PLEDGOR agrees that it will join with the PLEDGEE in
executing and, at the PLEDGOR's own expense, file such documents ae the PLEDGEE
may deem necessary or sand wherever required or permitted by law in order to
perfect and preserve the PLEDGEE's security interest in the Intercompany Notes,
and agrees to do such further acts and things and to execute and deliver to the
PLEDGEE such additional conveyances, assignments, agreements, and instruments as
the PLEDGEE may reasonably require or deem advisable to carry into effect the
purposes of this AGREEMENT or to further assure and confirm unto the PLEDGEE its
rights, powers and remedies hereunder.
IN WITNESS WHEREOF the parties hereto have executed this AGREEMENT THE DAY AND
YEAR FIRST ABOVE WRITTEN.
<PAGE>
-8-
TRANSTEL, S.A.,
/s/ GUILLERMO O. LOPEZ ESQUIVEL
- ----------------------------------------
GUILLERMO O. LOPEZ ESQUIVEL
Legal Representative
MARINE MIDLAND BANK, as collateral
agent for the benefit of the holders
of the Senior Notes.
/s/ ROBERT A. CONRAD
- ----------------------------------------
ROBERT A. CONRAD
Vice President
<PAGE>
EXHIBIT 4.4
TRUST AGREEMENT
OF
TRANSTEL PASS THROUGH TRUST
THIS TRUST AGREEMENT, dated as of October 20, 1997 (this "Trust
Agreement"), by and between Transtel, S.A, a socieded anonima incorporated under
the laws of the Republic of Colombia, as depositor (the "Depositor") and
Wilmington Trust Company, a Delaware banking corporation (the "Pass Through
Owner Trustee"). The Depositor and the Pass Through Trustee hereby agree as
follows:
1. The trust created hereby shall be known as "Transtel Pass Through Trust,
in which name the Pass Through Trustee or the Depositor, to the extent provided
herein, may conduct the business of the Trust, make and execute contracts, and
sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. Such amount shall constitute the initial trust estate. It
is the intention of the parties hereto that the Trust created hereby constitute
a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
(S)3801, et seq. (the "Business Trust Act"), and that this document constitute
the governing instrument of the Trust. The Pass Through Trustee is hereby
authorized and directed to execute and file a certificate of trust with the
Delaware Secretary of State in such form as the Pass Through Trustee may
approve.
3. The Depositor and the Pass Through Trustee will enter into an amended
and restated Trust Agreement or Declaration satisfactory to each such party to
provide for the contemplated operation of the Trust created hereby and the
issuance of the Certificates referred to therein. Prior to the execution and
delivery of such amended and restated Trust Agreement or Declaration, the Pass
Through Trustee shall not have any duty or obligation hereunder or with respect
of the trust estate, except (i) to execute on behalf of the Trust the Purchase
Agreement, to be dated as of October 20, 1997, among the Trust, the Depositor,
Global Telecommunications Operations, Inc. and BT Alex. Brown Incorporated, as
initial purchaser and (ii) as otherwise required by applicable law or as may be
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise. Notwithstanding the
foregoing, the Pass Through Trustee may take all actions deemed proper as are
necessary to effect the transactions contemplated herein.
4. The Depositor, as depositor of the Trust, is hereby authorized, in its
discretion, to prepare or cause to be prepared and executed any and all
assignments in connection with the transfer of assets to the Trust
5. This Declaration may be executed in one or more counterparts.
6. The number of trustees of the Trust initially shall be one (1 ) and
thereafter the number of trustees of the Trust shall be such number as shall be
fixed from time to time by a written instrument signed by the Depositor which
may increase or decrease the number of
<PAGE>
trustees of the Trust; provided, however, that to the extent required by the
Business Trust Act, one trustee of the Trust shall either be a natural person
who is a resident of the State of Delaware or, if not a natural person, an
entity which has its principal place of business in the State of Delaware.
Subject to the foregoing, the Depositor is entitled to appoint or remove
without cause any trustee of the Trust at any time. The Pass Through Trustee of
the Trust may resign upon thirty days' prior written notice to the Depositor.
7. This Trust Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware (without regard to conflict of laws
principles).
8. To the fullest extent permitted by applicable law, the Depositor shall
indemnify and hold harmless the Pass Through Trustee from and against any loss,
damage or claim incurred by the Pass Through Trustee by reason of any act or
omission performed or omitted by the Pass Through Trustee in good faith on
behalf of the Trust and in a matter the Pass Through Trustee reasonably believed
to be within the scope of authority conferred on the Pass Through Trustee by
this Declaration, except that the Pass Through Trustee shall not be entitled to
be indemnified in respect of any loss, damage or claim incurred by the Pass
Through Trustee by reason of gross negligence or willful misconduct with respect
to such acts or omissions.
-2-
<PAGE>
IN WITNEES WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executive as of the day and year first above written.
TRANSTEL, S.A., as Depositor
By:/s/ GUILLERMO LOPEZ
----------------------
Name: GUILERMO LOPEZ
Title: PRESIDENT
WILMINGTON TRUST COMPANY,
as Pass Through Trustee
By:/s/ EMMETT R. HARMON
--------------------
Name: EMMETT R. HARMON
Title: Vice President
<PAGE>
EXHIBIT 4.5
EXECUTION COPY
AMENDED AND RESTATED PASS THROUGH TRUST AGREEMENT
among
TRANSTEL S.A.,
as Depositor
and
WILMINGTON TRUST COMPANY,
as Pass Through Trustee
and
MARINE MIDLAND BANK,
as Registrar and Paying Agent
___________________________
Dated as of October 28, 1997
___________________________
$150,000,000
Transtel Pass Through Trust
12 1/2% Pass Through Certificates
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS................................................................1
Section 1.01. Definitions.........................................................1
Section 1.02. Compliance Certificates and Opinions................................9
Section 1.03. Form of Documents Delivered to Pass Through Trustee.................9
Section 1.04. Acts of Holders....................................................10
ARTICLE II DECLARATION OF TRUST; PURPOSES AND POWERS................................11
Section 2.01. Declaration of Trust...............................................11
Section 2.02. Statement of Intent................................................11
Section 2.04. Legal Title to Trust Property......................................12
Section 2.05. Office.............................................................12
Section 2.06. Situs of Trust.....................................................12
Section 2.07. Activities of Trust................................................12
ARTICLE III ACQUISITION OF SENIOR NOTES; ORIGINAL ISSUANCE OF CERTIFICATES..........12
Section 3.01. Issuance of Certificates; Acquisition of Senior Notes..............12
Section 3.02. Acceptance by Pass Through Trustee.................................13
ARTICLE IV THE CERTIFICATES.........................................................13
Section 4.01. Form, Denomination and Execution of Certificates...................13
Section 4.02. Authentication of Certificates.....................................14
Section 4.03. [intentionally left blank].........................................14
Section 4.04. Registration of Transfer and Exchange of Certificates..............15
Section 4.05. Mutilated, Destroyed, Lost or Stolen Certificates..................15
Section 4.06. Persons Deemed Owners..............................................16
Section 4.07. Cancellation.......................................................16
Section 4.08. Limitation of Liability for Payments...............................16
Section 4.09. BookEntry Provisions for U.S. Global Certificate and
Offshore Global Certificate.....................................16
Section 4.10. Special Transfer Provisions........................................18
Section 4.11. CUSIP Numbers......................................................20
Section 4.12. Registration Rights................................................20
ARTICLE V DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS...........................21
Section 5.01. Certificate Account and Special Payments Account...................21
Section 5.02. Distributions from Certificate Account and Special
Payments Account................................................21
Section 5.03. Statements to Certificateholders...................................23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 5.04. [intentionally left blank].........................................23
Section 5.05. Additional Amounts.................................................23
Section 5.06. Stamp, Issue and Certain Other Taxes...............................24
ARTICLE VI THE COMPANY..............................................................24
Section 6.01. Maintenance of Corporate Existence.................................24
Section 6.02. Consolidation, Merger or Sale of Assets Permitted..................24
Section 6.03. Availability of Certain Information Concerning the Company.........25
Section 6.04. Notification of Certain Company Acquisitions of Certificates.......25
ARTICLE VII DEFAULT.................................................................25
Section 7.01. Events of Default..................................................25
Section 7.02. Incidents of Sale of Senior Notes..................................26
Section 7.03. Judicial Proceedings Instituted by Pass Through Trustee............26
Section 7.04. Control by Certificateholders......................................27
Section 7.05. Waiver of Defaults.................................................28
Section 7.06. Undertaking to Pay Court Costs.....................................28
Section 7.07. Right of Certificateholders to Receive Payments
Not to Be Impaired .............................................29
Section 7.08. Certificateholders May Not Bring Suit Except Under
Certain Conditions..............................................29
Section 7.09. Remedies Cumulative................................................29
ARTICLE VIII THE PASS THROUGH TRUSTEE...............................................30
Section 8.01. Certain Duties and Responsibilities................................30
Section 8.02. Notice of Defaults.................................................32
Section 8.03. Certain Rights of Pass Through Trustee.............................32
Section 8.04. Not Responsible for Recitals or Issuance of Certificates...........35
Section 8.05. May Hold Certificates..............................................35
Section 8.06. Money Held in Trust................................................35
Section 8.07. Compensation and Reimbursement.....................................35
Section 8.08. Corporate Trustee Required: Eligibility............................36
Section 8.09. Resignation and Removal; Appointment of Successor..................37
Section 8.10. Co-Trustees and Successor Trustees.................................38
Section 8.11. Merger, Conversion Consolidation or Succession to Business.........40
Section 8.12. Maintenance of Agencies............................................40
Section 8.13. Money for Certificate Payments to Be Held in Trust.................42
Section 8.14. Registration of Senior Notes in Pass Through Trustee's Name........43
Section 8.15. Representations and Warranties of Pass Through Trustee.............43
Section 8.16. Withholding Taxes; Information Reporting...........................44
Section 8.17. Pass Through Trustee's Liens.......................................45
Section 8.18. Availability of Certain Information Concerning the Trust...........45
ARTICLE IX CERTIFICATEHOLDERS' LISTS AND REPORTS....................................45
Section 9.01. [intentionally left blank].........................................45
Section 9.02. Preservation of Information; Communication to
Certificateholders..............................................45
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 9.03. Reports by the Company.............................................46
ARTICLE X SUPPLEMENTAL TRUST AGREEMENTS.............................................46
Section 10.01. Supplemental Trust Agreement Without Consent
of Certificateholders...........................................46
Section 10.02. Supplemental Trust Agreements with Consent of
Certificateholders..............................................47
Section 10.03. Documents Affecting Immunity or Indemnity..........................48
Section 10.04. Execution of Supplemental Trust Agreements.........................48
Section 10.05. Effect of Supplemental Trust Agreements............................48
Section 10.06. Reference in Certificates to Supplemental Trust Agreements.........48
ARTICLE XI AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS..............................49
Section 11.01. Voting; Amendments and Supplements to Indenture and
Other Note Documents............................................49
ARTICLE XII TERMINATION OF TRUST....................................................49
Section 12.01. Termination of the Trust...........................................49
ARTICLE XIII INDEMNIFICATION AND MISCELLANEOUS PROVISIONS...........................50
Section 13.01. Indemnification....................................................50
Section 13.02. Limitation on Rights of Certificateholders.........................51
Section 13.03. Certificates Nonassessable and Fully Paid..........................51
Section 13.04. Notices............................................................52
Section 13.05. Governing Law; Consent To Jurisdiction; Waiver Of Immunity;
Waiver Of Jury Trial............................................52
Section 13.06. Severability of Provisions.........................................53
Section 13.07. Effect of Headings and Table of Contents...........................53
Section 13.08. Successors and Assigns.............................................53
Section 13.09. Benefits of Trust Agreement........................................53
Section 13.10. Legal Holidays.....................................................53
Section 13.11. Counterparts.......................................................54
</TABLE>
EXHIBIT A - Certificate of Trust
EXHIBIT B - Form of Trust Certificate
EXHIBIT C-1 - Form of Restricted Securities Legends
EXHIBIT C-2 - Form of Restricted Securities Legends
EXHIBIT D - Form of Assignment
EXHIBIT E - Form of DTC Letter of Representations
EXHIBIT F - Form of Accredited Investors Transfer Certificate
EXHIBIT G - Form of Regulation S Transfer Certificate
EXHIBIT H - Form of Rule 144A Transfer Certificate
SCHEDULE I - Description of Senior Notes to be Purchased
iii
<PAGE>
This AMENDED AND RESTATED PASS THROUGH TRUST AGREEMENT, dated as of
October 28, 1997, is made with respect to the formation of the Transtel Pass
Through Trust (the "Trust"), among Transtel S.A., a sociedad anonima organized
under the laws of the Republic of Colombia (the "Company"), Wilmington Trust
Company, a Delaware banking corporation ("Wilmington Trust"), as Pass Through
Trustee (the "Pass Through Trustee") and Marine Midland Bank, a New York banking
corporation and trust company, as Registrar and Paying Agent ("Marine Midland").
WITNESSETH:
WHEREAS, pursuant to the terms and conditions of the Trust Agreement,
dated October 20, 1997 (the "Original Trust Agreement"), between the Company, as
depositor (the "Depositor"), and Wilmington Trust, as trustee, Transtel Pass
Through Trust was formed as a Delaware business trust;
WHEREAS, pursuant to the terms and conditions of the Purchase
Agreement, dated October 21, 1997 (the "Purchase Agreement"), among the
Depositor, the Trust, Global Telecommunications Operations, Inc. and BT Alex.
Brown Incorporated, as initial purchaser (the "Initial Purchaser"), the Trust
agreed to sell to the Initial Purchaser, and the Initial Purchaser agreed to
purchase from the Trust, certain Certificates to be issued by the Trust;
WHEREAS, the proceeds from the sale of the Certificates are to be used
by the Trust to purchase certain 12 1/2% Senior Notes due 2007 issued by the
Company (the "Senior Notes") pursuant to the Indenture, dated as of October 28,
1997 (the "Indenture"), between the Company, as issuer, and Marine Midland, in
its capacity as indenture trustee (the "Indenture Trustee"); and
WHEREAS, the Original Trust Agreement is being amended and restated in
its entirety to provide for the operation and management of the Trust and the
issuance of the Certificates.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of the other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) For all purposes of this Trust
-----------
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(1) the terms used herein that are defined in this Article have the
meanings assigned to them in this Article, and include the plural as well
as the singular;
(2) all references in this Trust Agreement to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this Trust Agreement; and
<PAGE>
(3) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
(b) For all purposes of this Trust Agreement, the following
capitalized terms have the following respective meanings:
Act: When used with respect to any Holder, has the meaning specified
---
in Section 1.04.
Additional Amounts: Has the meaning specified in Section 5.05 and
------------------
Section 13.01(b).
Affiliate: Of any specified Person, means any other Person which
---------
directly or indirectly controls or is controlled by, or is under common
control with, such specified Person. For the purposes of this definition,
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
Authorized Agent: Means any Paying Agent or Registrar.
----------------
Avoidable Tax: Has the meaning specified in Section 8.07.
-------------
Business Day: Means any day (other than a Saturday or Sunday), on
------------
which DTC, Euroclear, Cedel and banks in New York, Delaware and Colombia
are opened for business.
Business Trust Statute: Means the Delaware Business Trust Act, 12
----------------------
Del.C. (S)3801 et seq.
Cedel: Means Cedel Bank, a societe anonyme.
-----
Certificate: Means any one of the certificates executed and
-----------
authenticated by the Pass Through Trustee, substantially in the form of
Exhibit B hereto. For all purposes of this Trust Agreement, the term
"Certificates" shall include all Initial Certificates and all Exchange
Certificates, and, for purposes of this Trust Agreement, all Initial
Certificates and all Exchange Certificates shall vote together as one
series of Certificates under this Trust Agreement.
Certificate Account: Means the account or accounts created and
-------------------
maintained pursuant to Section 5.01(a).
Certificate of Trust: Means the certificate of trust of the Trust in
--------------------
the form attached hereto as Exhibit A, filed with the Secretary of State.
2
<PAGE>
Certificateholder: Means the Person in whose name a Certificate is
-----------------
registered in the Register.
Clearing Agency: Means an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
Clearing Agency Participant: Means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects, directly or indirectly, book-entry transfers and pledges of
securities deposited with the Clearing Agency.
Code: Means the U.S. Internal Revenue Code of 1986, as amended, and
----
any successor code.
Commission: Means the Securities and Exchange Commission, as from
----------
time to time constituted, created under the Securities Exchange Act of
1934.
Company: Has the meaning specified in the recitals hereto.
-------
Consideration: Has the meaning specified in Section 3.01.
-------------
Corporate Trust Office: Means, (i) with respect to the Pass Through
----------------------
Trustee, the office of such trustee in the city at which at any particular
time its corporate trust business shall be principally administered, which
office is located at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration, (ii) with respect to the Indenture Trustee, the office of
such trustee in the city at which at any particular time its corporate
trust business shall be principally administered which office for the
Indenture Trustee is located at 140 Broadway, New York, New York 10005,
Attention: Corporate Trust Department-Transtel and (iii) with respect to
the Registrar and Paying Agent, means the office of such Registrar and
Paying Agent in the city at which at any particular time its corporate
trust business shall be principally administered, which office is located
at 140 Broadway, New York, New York 10005, Attention: Corporate Trust
Department-Transtel.
Default: Means any event which is, or after notice or lapse of time
-------
or both would become, an Event of Default.
Depositor: Means the Company, as depositor under the Trust Agreement.
---------
Direction: Has the meaning specified in Section 1.04(c).
---------
Distribution Date: With respect to distributions of Scheduled
-----------------
Payments, means each November 1 and May 1, commencing May 1, 1998 until
payment of all the Scheduled Payments to be made under the Senior Notes has
been made.
DTC: Means The Depository Trust Company and any successor clearing
---
agency.
3
<PAGE>
Escrow and Disbursement Agreement: Means the Escrow and Disbursement
---------------------------------
Agreement dated as of October 28, 1997, among the Company, Marine Midland
Bank as escrow agent, and the Indenture Trustee.
Euroclear: Means Morgan Guaranty Trust Company of New York, Brussels
---------
Office, as operator of the Euroclear system.
Event of Default: Means an event described in Section 7.01.
----------------
Exchange Certificates: Means any Certificate executed and
---------------------
authenticated by the Pass Through Trustee containing terms substantially
identical to the Initial Certificates (except that such Exchange
Certificates shall not contain terms with respect to transfer restrictions)
that are issued and exchanged for the Initial Certificates in the Exchange
Offer pursuant to the Registration Rights Agreement and this Trust
Agreement.
Exchange Offer: Means the exchange offer that may be effected
--------------
pursuant to the Registration Rights Agreement.
Fractional Undivided Interest: Means the fractional undivided
-----------------------------
interest in the Trust that is evidenced by a Certificate.
Global Certificate: Has the meaning specified in Section 4.01.
------------------
Guarantee: Means the Certificate Guarantee dated as of October 28,
----------
1997, issued by the Company in favor of the Certificateholders pursuant to
which the Company will irrevocably and unconditionally guarantee to the
Certificateholders the payment obligations of the Trust under this
Agreement.
Holder: See Certificateholder.
------ -----------------
Initial Certificates: means the Certificates originally issued on the
--------------------
date hereof and any Certificates issued in exchange or replacement thereof
pursuant to the terms of this Trust Agreement, other than the Exchange
Certificates.
Indenture: Means the Indenture, dated as of October 28, 1997, between
---------
the Company, and Marine Midland, as Indenture Trustee; as such Indenture
may be amended or supplemented in accordance with its terms.
Indenture Event of Default: Means any Event of Default (as such term
--------------------------
is defined in the Indenture).
Indenture Trustee: Means Marine Midland, as indenture trustee under
-----------------
the Indenture; and any successor to such Indenture Trustee as such trustee.
Investor Letter: Means an investor letter provided by each Holder, in
---------------
the forms attached hereto as Exhibit F, G or H.
4
<PAGE>
Letter of Representations: Means the agreement among the Trust, the
-------------------------
Registrar and Paying Agent, the Pass Through Trustee and DTC, dated as of
October 28, 1997, substantially in the form attached hereto as Exhibit E.
Non-U.S. Certificateholder: Means a Certificateholder that is not a
--------------------------
United States Person as defined in Section 7701(a)(30) of the Code.
Note Documents: Means, with respect to any Senior Note, the
--------------
Indenture, Registration Rights Agreement, the Escrow and Disbursement
Agreement and the Purchase Agreement.
Offshore Global Certificates: Has the meaning provided in Section
----------------------------
4.01.
Officer's Certificate: Means a certificate signed (i) in the case of
---------------------
a corporation by the President, any Vice President or the Treasurer, of
such corporation, (ii) in the case of a partnership by the Chairman of the
Board, the President or any Vice President, the Treasurer or an Assistant
Treasurer of a corporate general partner and the managing general partner
if there is no corporate general partner, and (iii) in the case of the Pass
Through Trustee, a certificate signed by a Responsible Officer of the Pass
Through Trustee.
Opinion of Counsel: Means an opinion in writing, signed by legal
------------------
counsel designated by the Company, whether or not such counsel is an
employee of the Company and who shall be reasonably acceptable to the Pass
Through Trustee.
Outstanding: When used with respect to Certificates, means, as of the
-----------
date of determination, all Certificates theretofore authenticated and
delivered under this Trust Agreement, except:
(i) Certificates theretofore canceled by the Registrar or
delivered to the Pass Through Trustee or the Registrar for
cancellation;
(ii) Certificates for which money in the full amount has been
theretofore deposited with the Pass Through Trustee or any Paying
Agent in trust for the Holders of such Certificates as provided in
Section 5.01 pending distribution of such money to the
Certificateholders pursuant to the final distribution payment to be
made pursuant to Section 12.01 hereof; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to this
Trust Agreement.
Pass Through Trustee: Means Wilmington Trust, acting not in its
--------------------
individual capacity but solely as trustee under the Trust Agreement, or its
successor in interest, and any successor trustee appointed as provided
herein.
Paying Agent: Means the paying agent maintained and appointed
------------
pursuant to Section 8.12.
5
<PAGE>
Person: Means any individual, corporation, partnership, limited
------
liability company, association, trust, unincorporated organization, or
government or any agency or political subdivision thereof.
Physical Certificates: Has the meaning provided in Section 4.01.
---------------------
Purchase Agreement: Has the meaning specified in the SECOND recital
------------------
to this Agreement.
QIB: Means a "qualified institutional buyer," as defined in Rule 144A
---
under the Securities Act.
Record Date: Means (i) for Scheduled Payments to be distributed on
-----------
any Distribution Date, other than the final distribution, the day (whether
or not a Business Day) which is 15 days preceding such Distribution Date,
and (ii) for Special Payments to be distributed on any Special Distribution
Date, if any, other than the final distribution, the day (whether or not a
Business Day) which is 15 days preceding such Special Distribution Date.
Register and Registrar: Means the register maintained pursuant to
----------------------
Section 4.04 and the registrar appointed pursuant to Section 8.12.
Registration Rights Agreement: Means the Registration Rights
-----------------------------
Agreement dated as of October 28, 1997, among the Company, the Trust and BT
Alex. Brown Incorporated, as the initial purchaser of the Certificates.
Request: Means a request by the Company setting forth the subject
-------
matter of the request accompanied by an Officer's Certificate and an
Opinion of Counsel as provided in Section 1.02.
Responsible Officer: When used with respect to the Pass Through
-------------------
Trustee means any officer in the Corporate Trust Office; when used with
respect to any successor Pass Through Trustee, or successor Indenture
Trustee, means the chairman or vice-chairman of the board of directors or
trustees, the chairman or vice-chairman of the executive or standing
committee of the board of directors or trustees, the president, the
chairman of the committee on trust matters, any vice-president, any second
vice-president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, any trust officer or assistant trust officer, the
comptroller and any assistant comptroller; and, when used with respect to
the Pass Through Trustee, also means any other officer of the Pass Through
Trustee customarily performing functions similar to those performed by any
of the above designated officers and also means, when used with respect to
the Pass Through Trustee 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 Securities Legends: Has the meaning specified in Section
-----------------------------
4.01.
6
<PAGE>
Restricted Subsidiaries: Means Empresa de Telefonos de Palmira S.A.
-----------------------
E.S.P., Telefonos de Cartago S.A. E.S.P., Caucatel S.A. E.S.P., Empresa de
Telefonos de Jamundi S.A. E.S.P., Bugatel S.A. E.S.P. and Unitel S.A.
E.S.P.
Scheduled Payment: With respect to a Distribution Date, means any
-----------------
payment (other than a Special Payment or Additional Amount) of principal
and interest on a Senior Note, due from the Indenture Trustee, which
payment represents the payment of a regularly scheduled installment of
principal then due on such Senior Note, or the payment of regularly
scheduled interest accrued on such Senior Note.
Secretary of State: Means the Office of the Secretary of State of the
------------------
State of Delaware.
Senior Note: Means any one of the Notes (as defined in the Indenture)
-----------
described on Schedule I attached hereto, including any Senior Note (as so
defined) issued under the Indenture in replacement or substitution therefor
held by the Trust.
Securities Act: Means the Securities Act of 1933, as amended from
--------------
time to time.
Securities Exchange Act: Means the Securities Exchange Act of 1934,
-----------------------
as amended from time to time.
Special Distribution Date: Means (i) with respect to the prepayment
-------------------------
of any Senior Notes, the 2nd day of the month on which such prepayment is
scheduled to occur pursuant to the terms of the Indenture and (ii) with
respect to any Special Payment relating to a Senior Note other than as
described in clause (i) of the definition of Special Payment, the earliest
2nd day of a month for which it is practicable for the Pass Through Trustee
to give notice pursuant to Section 5.02(c) 20 days prior thereto.
Special Payment: With respect to a Senior Note, means (i) any payment
---------------
of principal, premium, if any, and interest on such Senior Note resulting
from the prepayment, redemption or repurchase, as the case may be, of such
Senior Note pursuant to Sections 3.07, 4.12 or 4.18 of the Indenture, (ii)
any payment of principal and interest (including any interest accruing upon
default) on, or any other amount in respect of, such Senior Note upon an
Indenture Event of Default in respect thereof or upon the exercise of
remedies under the Indenture relating to such Senior Note, (iii) any
Scheduled Payment or any Special Payment referred to in clause (i) of this
definition which is not in fact paid within five days of the Distribution
Date or Special Distribution Date applicable thereto, or (iv) any proceeds
from the sale of any Senior Note by the Pass Through Trustee, on behalf of
the Trust, pursuant to Article VII hereof; and Special Payments means all
of such Special Payments.
Special Payments Account: Means the account or accounts created and
------------------------
maintained pursuant to Section 5.01(b).
Specified Investments: Means (i) direct obligations of the United
---------------------
States of America and agencies thereof for which the full faith and credit
of the United States is pledged, (ii) obligations fully guaranteed by the
United States of America,
7
<PAGE>
(iii) certificates of deposit issued by, or bankers' acceptances of, or
time deposits with, any bank, trust company or national banking association
incorporated or doing business under the laws of the United States of
America or one of the States thereof having combined capital and surplus
and retained earnings of at least $500,000,000 (including the Indenture
Trustee if such conditions are met), (iv) commercial paper of companies,
banks, trust companies or national banking associations incorporated or
doing business under the laws of the United States of America or one of the
States thereof and in each case having a rating assigned to such commercial
paper by Standard & Poor's Corporation or Moody's Investors Service, Inc.
(or, if neither such organization shall rate such commercial paper at any
time, by any nationally recognized statistical rating organization in the
United States of America) equal to the highest rating assigned by such
organization, and (v) purchase agreements with any financial institution
having a combined capital and surplus of at least $750,000,000 fully
collateralized by obligations of the type described in clauses (i) through
(iv) above; provided that if all of the above investments are unavailable,
the entire amount to be invested may be used to purchase Federal Funds from
an entity described in (iii) above; and provided further that no investment
shall be eligible as a "Specified Investment" unless the final maturity or
date of return of such investment is 91 days or less from the date of
purchase thereof.
Taxes: Means any present or future tax, duty, fee, levy, impost,
-----
assessment or other governmental charge (including penalties, interest,
additions to tax and any other liabilities related thereto) imposed or
levied by or on behalf of any Taxing Authority.
Taxing Authority: Means Colombia, the United States, or any other
----------------
jurisdiction in which the Trust, the Company or any of the Company's
Restricted Subsidiaries is organized or engaged in business for tax
purposes.
Transfer Date: Means October 28, 1997.
-------------
Trust: Means the trust created by this Trust Agreement, the estate of
-----
which consists of the Trust Property.
Trust Agreement: Means this Amended and Restated Trust Agreement,
---------------
dated as of October 28, 1997, among the Depositor, the Pass Through Trustee
and Marine Midland, as Paying Agent and Registrar.
Trust Documents: Means the Certificates, this Agreement, the Purchase
---------------
Agreement, the Registration Rights Agreement, the DTC Letter of
Representation and any other document, certificate or instrument to be
executed by the trust in connection with the transactions contemplated
hereby.
Trust Indenture Act: Means the Trust Indenture Act of 1939, as
-------------------
amended from time to time.
Trust Property: Means the Senior Notes held as the property of the
--------------
Trust created hereby and all monies at any time paid thereon and all monies
due and to become due thereunder, funds from time to time deposited in the
Certificate Account and the Special
8
<PAGE>
Payments Account and any proceeds from the sale by the Pass Through Trustee
pursuant to Article VII hereof of any Senior Note.
U.S. Global Certificate: Has the meaning provided in Section 4.01.
-----------------------
United States Person: Means either (a) a citizen or resident of the
--------------------
United States, (b) a domestic partnership, (c) a domestic corporation, (d)
any estate (other than an estate the income of which, from sources without
the United States which is not effectively connected with the conduct of a
trade or business within the United States, is not includible in such
estate's gross income) or (e) any trust if (i) a U.S. court is able to
exercise primary supervision over the administration of the trust and (ii)
one or more U.S. persons have the authority to control all substantial
decisions of the trust.
Wilmington Trust: Means Wilmington Trust Company, a Delaware banking
----------------
corporation.
Section 1.02. Compliance Certificates and Opinions. Upon any
------------------------------------
application or request by the Company to the Pass Through Trustee to take any
action under any provision of this Trust Agreement, the Company shall furnish to
the Pass Through Trustee an Officer's Certificate stating that, in the opinion
of the signer, all conditions precedent, if any, provided for in this Trust
Agreement 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 Trust Agreement 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 Trust Agreement 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 1.03. Form of Documents Delivered to Pass Through 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
9
<PAGE>
other such Persons as to other matters and any such Person may certify or give
an opinion as to such matters in one or several documents.
Any Opinion of Counsel stated to be based on the opinion of other
counsel shall be accompanied by a copy of such other opinion.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Trust Agreement, they may, but need not, be consolidated
and form one instrument.
Section 1.04. Acts of Holders. (a) Any direction, consent, waiver or
---------------
other action provided by this Trust Agreement to be given or taken by Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the Pass
Through Trustee and, where it is hereby expressly required, to the Company or
the Indenture Trustee. 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 Trust Agreement and (subject to Section 8.01) conclusive
in favor of the Pass Through Trustee, and the Indenture Trustee, 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 certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgements of deeds
or administer oaths that the Person executing such instrument acknowledged to
him the execution thereof, or by an affidavit of a witness to such execution
sworn to before any such notary or such other officer and where such execution
is by an officer of a corporation or association or a member of a partnership,
on behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his 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 reasonable manner
which the Pass Through Trustee deems sufficient.
(c) In determining whether the Holders of the requisite Fractional
Undivided Interests of Certificates Outstanding have given any direction,
consent or waiver (a "Direction"), under this Trust Agreement, Certificates
owned by the Company or any Affiliate of the Company shall be disregarded and
deemed not to be Outstanding under this Trust Agreement for purposes of any such
determination. In determining whether the Pass Through Trustee shall be
protected in relying upon any such Direction, only Certificates which the Pass
Through Trustee knows to be so owned shall be so disregarded. Notwithstanding
the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding,
such Certificates shall not be so disregarded as aforesaid, and (ii) if any
amount of Certificates so owned by any such Person have been pledged in good
faith, such Certificates shall not be disregarded as aforesaid if the pledgee
establishes to the satisfaction of the Pass Through Trustee the pledgee's right
so to act with respect to such Certificates and that the pledgee is not the
Company or any Affiliate of the Company.
10
<PAGE>
(d) Any direction, consent, waiver or other action by the Holder of
any Certificate shall bind the Holder of every Certificate issued upon the
transfer thereof or in exchange therefor or in lieu thereof, whether or not
notation of such action is made upon such Certificate.
(e) Except as otherwise provided in Section 1.04(c), Certificates
owned by or pledged to any Person shall have an equal and proportionate benefit
under the provisions of this Trust Agreement, without preference, priority, or
distinction as among all of the Certificates.
ARTICLE II
DECLARATION OF TRUST; PURPOSES AND POWERS
Section 2.01. Declaration of Trust. The Trust shall be known as
---------------------
"Transtel Pass Through Trust," in which name the Pass Through Trustee may
conduct the affairs of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued on behalf of the Trust.
The Depositor hereby appoints Wilmington Trust as trustee of the Trust effective
as of the date hereof, to have all the rights, powers and duties set forth
herein and in the Business Trust Statute. Wilmington Trust hereby agrees to hold
the Trust Property as Pass Through Trustee on behalf of the Trust upon the terms
and conditions and for the use and benefit of the Certificateholders as herein
set forth.
Section 2.02. Statement of Intent. (a) It is the intention of the
-------------------
parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Trust Agreement constitute the governing instrument
of the Trust. Effective as of the date hereof, the Pass Through Trustee shall
have all rights, powers and duties set forth herein and in the Business Trust
Statute with respect to accomplishing the purposes of the Trust.
(b) It is the intention of the parties hereto that, for purposes of
federal income taxes, state and local income and franchise taxes and any other
taxes imposed upon, measured by, or based upon gross or net income, the Trust
shall be treated as a grantor trust within the meaning of the Code with the
Certificateholders as the grantors thereof and the provisions of this Agreement
shall be interpreted in a manner consistent with such intention.
(c) Notwithstanding any other provision in this Agreement, no
amendment, supplement or other modification of this Agreement shall be effective
without the written consent of the Company if such change would cause the Trust
to be treated other than as a grantor trust for the purposes specified in
Section 2.02(b) hereof.
Section 2.03. Transfer of Trust Property to Trust. (a) On the
Transfer Date, the following will simultaneously occur: (i) the Trust will issue
and sell the Certificates pursuant to this Trust Agreement; and (ii) the Trust
will use the proceeds of the sale of the Certificates to purchase the Senior
Notes in accordance with the provisions of this Agreement, the Purchase
Agreement and the Indenture.
(b) The Pass Through Trustee hereby agrees to have and to hold the
Trust Property on behalf of the Trust, together with all revenues, issues,
profits and proceeds, if any, thereof and therefrom and appurtenances thereto,
until this Trust Agreement terminates pursuant
11
<PAGE>
to Section 12.01, in trust under and subject to the conditions and agreements
hereinafter set forth, for the benefit and security of the Certificateholders.
Section 2.04. Legal Title to Trust Property. Legal title to all
-----------------------------
Trust Property shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Trust Property to be vested in a trustee or trustees, in which case
legal title shall be deemed to be vested in the Pass Through Trustee, a co-
trustee and/or a separate trustee, as the case may be.
Section 2.05. Office. The office of the Trust shall be in care of
------
the Pass Through Trustee at the Corporate Trust Office.
Section 2.06. Situs of Trust. The Trust shall be located and
--------------
administered in, and all bank accounts of the Trust maintained in, the State of
Delaware or the State of New York. Payments shall be received by the Trust only
in the State of Delaware or the State of New York and payments will be made by
the Trust only from the State of Delaware or the State of New York.
Section 2.07. Activities of Trust. (a) The Trust shall not engage in
-------------------
any activities other than those required or authorized by the terms of this
Trust Agreement relating to the issuance, sale and payment of the Certificates
in accordance with their terms and the terms of the Note Documents, relating to
the acquisition, management, collection and holding of the Senior Notes and the
collection and distribution of moneys deposited in the Certificate Account and
the Special Payment Account, all in accordance with this Trust Agreement and the
Indenture.
(b) The Pass Through Trustee is hereby authorized to take any and all
actions on behalf of the Trust in connection with the issuance and sale of the
Certificates and the purchase of the Senior Notes. In furtherance of the
foregoing, the Pass Through Trustee, simultaneously with the execution and
delivery of the Trust Agreement, shall also execute and deliver the other Trust
Documents on behalf of the Trust.
(c) The Trust is constituted solely for the purpose of making the
investment in the Senior Notes, and, except as set forth herein, the Pass Though
Trustee is not authorized or empowered to acquire any other investments or
engage in any other activities and, in particular, the Pass Through Trustee is
not authorized or empowered to do anything that would cause the Trust to fail to
qualify as a "grantor trust" for U.S. federal income tax purposes.
ARTICLE III
ACQUISITION OF SENIOR NOTES;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 3.01. Issuance of Certificates; Acquisition of Senior Notes.
-----------------------------------------------------
Upon request of the Company, the Pass Through Trustee shall execute and deliver
on behalf of the Trust and shall authenticate Certificates equaling in the
aggregate the total aggregate principal amount of the Senior Notes to be
simultaneously purchased by the Trust on the Transfer Date and evidencing the
entire beneficial ownership of the Trust. The Pass Through Trustee, on behalf of
the Trust, shall issue and sell such Certificates on the Transfer Date to the
Initial
12
<PAGE>
Purchaser pursuant to the Purchase Agreement, in authorized denominations and in
such Fractional Undivided Interests, so as to result in the receipt of
consideration in an amount equal to the aggregate principal amount of such
Senior Notes (the "Consideration"). The Pass Through Trustee, on behalf of the
Trust, shall purchase and the Company shall sell to the Trust, pursuant to the
terms hereof, the Senior Notes on the Transfer Date at an aggregate purchase
price equal to the amount of the Consideration so received. Except as provided
in Sections 4.04 and 4.05 hereof, the Pass Through Trustee shall not execute or
deliver Certificates in excess of the aggregate amount specified in this
paragraph.
Section 3.02. Acceptance by Pass Through Trustee. The Pass Through
-----------------------------------
Trustee, upon the execution and delivery of this Trust Agreement, acknowledges
its acceptance of all right, title, and interest, on behalf of the Trust, in and
to the Senior Notes as Trust Property acquired pursuant to Section 3.01 hereof
and the Indenture and declares that the Pass Through Trustee holds and will hold
such right, title, and interest, together with all other property constituting
the Trust Property, for the benefit of all present and future
Certificateholders, upon the trusts herein set forth. By its payment for and
acceptance of each Certificate issued to it hereunder, each initial
Certificateholder agrees to be bound by the terms of this Trust Agreement as if
it were a signatory hereto.
ARTICLE IV
THE CERTIFICATES
Section 4.01. Form, Denomination and Execution of Certificates. The
------------------------------------------------
Certificates shall be substantially in the form of Exhibit B hereto. The
Certificates may have notations, legends or endorsements required by law, stock
exchange rule or depository rule or usage. The Company shall approve the form of
the Certificates and any notation, legend or endorsement on them and shall
furnish the same to the Pass Through Trustee, which shall be in form and
substance satisfactory to the Pass Through Trustee.
The terms and provisions contained in the Certificates, annexed hereto
as Exhibit B, shall constitute, and are hereby expressly made, a part of this
Trust Agreement and, to the extent applicable, the Company and the Pass Through
Trustee, by their execution and delivery of this Trust Agreement, expressly
agree to such terms and provisions and to be bound thereby.
Certificates offered and sold in reliance on Rule 144A under the
Securities Act shall be issued initially in the form of one or more permanent
global Certificates in registered form, substantially in the form set forth in
Exhibit B (a "U.S. Global Certificate"), deposited with the Registrar, as
custodian for DTC, or its nominee, duly executed and authenticated by the Pass
Through Trustee as hereinafter provided and shall bear the legends set forth in
Exhibits C-1 (the "Restricted Securities Legend") and C-2. The aggregate
principal amount of a U.S. Global Certificate may from time to time be increased
or decreased by adjustments made on the records of the Registrar, as custodian
for DTC, or its nominee, as hereinafter provided. Certificates offered and sold
in offshore transactions in reliance on Regulation S under the Securities Act
shall be issued in the form of one or more permanent global Certificates in
registered form in substantially the form set forth in Exhibit B (an "Offshore
Global Certificate"), deposited with the Registrar, as custodian for DTC, or its
nominee, for the operator of Euroclear and Cedel for
13
<PAGE>
credit to the respective accounts of the beneficial owners of the Offshore
Global Certificate, duly executed and authenticated by the Pass Through Trustee
as hereinafter provided and shall bear the legends set forth in Exhibits C-1 and
C-2. The aggregate principal amount of an Offshore Global Certificate may from
time to time be increased or decreased by adjustments made on the record of the
Registrar as custodian for DTC, or its nominee, as hereinafter provided. The
U.S. Global Certificate and Offshore Global Certificate are sometimes
collectively herein referred to as the "Global Certificates."
Certificates offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued in the form of permanent certificated Certificates in
registered form, in substantially the form set forth in Exhibit B (the "Physical
Certificates") duly executed and authenticated by the Pass Through Trustee as
hereinafter provided and shall, if issued prior to the Exchange Offer, bear the
legend set forth in Exhibit C-1.
The Certificates shall be initially issued in minimum denominations of
$250,000, or integral multiples of $1,000 in excess thereof.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of a Responsible Officer of the Pass Through Trustee.
Certificates bearing the manual or facsimile signature of an individual who was,
at the time when such signature was affixed, authorized to sign on behalf of the
Pass Through Trustee shall be valid and binding obligations of the Pass Through
Trustee, notwithstanding that such individual has ceased to be so authorized
prior to the authentication and delivery of such Certificates or did not hold
such office at the date of such Certificates. No Certificate shall be entitled
to any benefit under this Trust Agreement, or be valid for any purposes, unless
there appears on such Certificate a certificate of authentication substantially
in the form set forth on Exhibit B hereto.
Section 4.02. Authentication of Certificates. The Pass Through
------------------------------
Trustee, on the Transfer Date, shall cause to be authenticated and delivered,
simultaneously with the sale to the Trust of the Senior Notes pursuant to
Section 3.01 hereof, Certificates duly authenticated by the Pass Through
Trustee, in authorized denominations equaling in the aggregate the aggregate
principal amount of the Senior Notes so purchased and evidencing the entire
ownership of the Trust.
The Pass Through Trustee may appoint an authenticating agent
acceptable to the Company to authenticate the Certificates. Unless limited by
the terms of such appointment, an authenticating agent may authenticate the
Certificates whenever the Pass Through Trustee may do so. Each reference in this
Agreement to authentication by the Pass Through Trustee includes authentication
by such appointment. An authenticating agent has the same rights as an
Authorized Agent. Marine Midland is hereby appointed authenticating agent by the
Pass Through Trustee.
No Opinion of Counsel need be delivered in connection with the
authentication of certificates hereunder.
Section 4.03. [intentionally left blank]
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Section 4.04. Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Registrar shall cause to be kept at the office or agency to be
maintained by it in accordance with the provisions of Section 8.12 a register
(the "Register") in which, subject to the provisions of this Section 4.04 and
the Certificates, the Registrar shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
Marine Midland shall initially be the registrar (the "Registrar") for the
purpose of registering Certificates and transfers and exchanges of Certificates
as herein provided.
(b) Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office of the Registrar or such other office or agency, the
Pass Through Trustee at the request of the Registrar shall execute, authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Certificates in authorized denominations of a like aggregate Fractional
Undivided Interest. At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of authorized denominations of a like aggregate
Fractional Undivided Interest, upon surrender of the Certificates to be
exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange, the Pass Through Trustee, at the request of the
Registrar, shall execute, authenticate and deliver the Certificates that the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in the form of
Exhibit D or any other form satisfactory to the Pass Through Trustee and the
Registrar duly executed by the Holder thereof or his attorney duly authorized in
writing.
(c) Any Holder of a Global Certificate shall, by acceptance of such
Global Certificate, agree that transfers of beneficial interests in such Global
Certificate may be effected only through a book entry system maintained by the
Holder of such Global Certificate (or its agent), and that ownership of a
beneficial interest in the Certificate shall be required to be reflected in a
book entry. When Certificates are presented to the Registrar or a co-Registrar
with a request to register the transfer or to exchange them for an equal
principal amount of Certificates of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if its
requirements for such transactions are met. To permit registrations of transfers
and exchanges, the Pass Through Trustee shall execute and authenticate
Certificates at the Registrar's request. No service charge shall be made for any
registration of transfer or exchange of the Certificates, but the Company and
the Registrar may require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith.
(d) All Certificates surrendered for registration of transfer and
exchange shall be cancelled and subsequently destroyed by the Registrar.
Section 4.05. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate is surrendered to the Registrar, or the Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Registrar and the Pass Through
Trustee such security, indemnity or bond, as may be required by them to save
each of them harmless, then, in the absence of notice to the Registrar or the
Pass Through Trustee that such Certificate has been acquired by a bona fide
purchaser, the Pass Through Trustee, at the request of the Registrar, shall
execute, authenticate and deliver, in
15
<PAGE>
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Fractional Undivided Interest with the
same final Distribution Date. In connection with the issuance of any new
Certificate under this Section 4.05, the Pass Through Trustee and the Registrar
shall 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 Pass Through Trustee and the
Registrar) connected therewith. Any duplicate Certificate issued pursuant to
this Section 4.05 shall constitute conclusive evidence of the appropriate
Fractional Undivided Interest in the Trust, as if originally issued, whether or
not the lost, stolen or destroyed Certificate shall be found at any time.
Section 4.06. Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Pass Through Trustee, the
Registrar, and any Paying Agent of the Pass Through Trustee may treat the person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 5.02 and for all
other purposes whatsoever, and neither the Pass Through Trustee, the Registrar,
nor any Paying Agent of the Pass Through Trustee shall be affected by any notice
to the contrary.
Section 4.07. Cancellation. All Certificates surrendered for payment
------------
or transfer or exchange shall, if surrendered to any Person party hereto other
than the Registrar, be delivered by such Person to the Registrar for
cancellation. No Certificates shall be authenticated in lieu of or in exchange
for any Certificates cancelled as provided in this Section, except as expressly
permitted by this Trust Agreement. All cancelled Certificates held by the
Registrar shall be destroyed and a certification of their destruction delivered
to the Pass Through Trustee.
Section 4.08. Limitation of Liability for Payments. All payments or
------------------------------------
distributions made to Certificateholders under this Trust Agreement shall be
made only from the Trust Property and only to the extent that the Paying Agent
shall have sufficient income or proceeds from the Trust Property to make such
payments in accordance with the terms of Article V of this Trust Agreement. Each
Holder of a Certificate, by its acceptance of such Certificate, agrees that it
will look solely to the income and proceeds from the Trust Property to the
extent available for distribution to the Holder thereof as provided in this
Trust Agreement. Nothing in this Trust Agreement shall be construed as an
agreement, or otherwise creating an obligation, of the Company, the Pass Through
Trustee or the Paying Agent to pay any of the principal, premium, if any, and
interest due from time to time under the Senior Notes or in respect of the
Certificates.
Section 4.09. BookEntry Provisions for U.S. Global Certificate and
----------------------------------------------------
Offshore Global Certificate. (a) Each Global Certificate initially shall (i) be
- ---------------------------
registered in the name of DTC, or its nominee, (ii) be delivered to the
Registrar as custodian for DTC, or its nominee, and (iii) bear legends as set
forth in Exhibits C-1 and C-2.
Members of, or participants in, DTC ("Agent Members") shall have no
rights under this Trust Agreement with respect to a Global Certificate, held on
their behalf by DTC, or the Registrar as its custodian, or under a Global
Certificate, and DTC may be treated by the Company, the Pass Through Trustee,
the Paying Agent, the Registrar and any agent of the Company, the Pass Through
Trustee, the Paying Agent, the Registrar as the absolute owner of such a Global
Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Pass Through Trustee or any agent of the
Company or the
16
<PAGE>
Pass Through Trustee 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 holder of any Certificate.
(b) Transfers of a Global Certificate shall be limited to transfers
of such Global Certificate in whole, but not in part, to DTC, its successors or
their respective nominee. Interests of beneficial owners in a Global Certificate
may be transferred in accordance with the rules and procedures of DTC and the
provisions of Section 4.10. In addition, Physical Certificates shall be
transferred to all beneficial owners in exchange for their beneficial interests
in a Global Certificate, if (i) DTC notifies the Company that it is unwilling or
unable to continue as depositary for a Global Certificate, and a successor
depositary is not appointed by the Company within 90 days of such notice or (ii)
an Event of Default has occurred and is continuing and the Registrar has
received a request from DTC to issue Physical Certificates.
(c) Any beneficial interest in one of the Global Certificates that is
transferred to a Person who takes delivery in the form of an interest in the
other Global Certificate will, upon transfer, cease to be an interest in such
Global Certificate and become an interest in the other Global Certificate and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Certificate for as long as it retains such an interest.
(d) In connection with any transfer of a portion of the beneficial
interests in a Global Certificate to beneficial owners pursuant to paragraph (b)
of this Section, the Registrar shall (if one or more Physical Certificates is to
be issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Certificate in an amount equal to the principal
amount of the beneficial interest in such Global Certificate to be transferred,
and the Pass Through Trustee shall execute, authenticate and deliver one or more
Physical Certificates of like tenor and amount.
(e) In connection with the transfer of an entire Global Certificate
to beneficial owners pursuant to paragraph (b) of this Section, such Global
Certificate, shall be deemed to be surrendered to the Registrar for
cancellation, and the Pass Through Trustee, at the request of the Registrar,
shall execute, authenticate and deliver to each beneficial owner identified by
DTC in exchange for its beneficial interest in such Global Certificate, an equal
aggregate principal amount of Physical Certificates of authorized denominations.
(f) Any Physical Certificate delivered in exchange for an interest in
a Global Certificate, pursuant to paragraph (b) or (d) of this Section shall,
except as otherwise provided by paragraph (c) of Section 4.10, bear the
Restricted Securities Legend.
(g) The registered holder of a Global Certificate 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 Trust Agreement or the Certificates.
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<PAGE>
Section 4.10. Special Transfer Provisions. (a) Notwithstanding any
---------------------------
other provision of this Trust Agreement, transfers and exchanges of Certificates
and beneficial interests in a Global Certificate shall be made only in
accordance with this Section 4.10.
(i) U.S. Global Certificate to Offshore Global Certificate.
------------------------------------------------------
If the beneficial owner of a U.S. Global Certificate wishes at any
time to transfer all or any portion of such interest to a Person who
wishes to take delivery thereof in the form of a beneficial interest
in an Offshore Global Certificate, such transfer may be effected only
in accordance with the provisions of this clause (a)(i). Upon receipt
by the Registrar of (A) a written order from DTC or its authorized
representative directing the Registrar to credit or cause to be
credited to a specified Agent Member's account beneficial interest in
the Offshore Global Certificate to be so transferred, and (B) the
proposed transferor of the beneficial interest of the U.S. Global
Certificate delivers a certificate in the from of Exhibit G to the
Registrar, then the Registrar shall (1) reduce the aggregate principal
amount of the U.S. Global Certificate, (2) increase the aggregate
principal amount of the Offshore Global Certificate by the principal
amount of such Certificates so transferred, (3) endorse the
appropriate schedules of each such Global Certificate in the amount of
such reduction and increase, respectively, and (4) credit or cause to
be credited to the account of the Person specified in such
instructions a beneficial interest in the Offshore Global Certificate
having a principal amount equal to the amount equal to the amount so
transferred.
(ii) Offshore Global Certificate to U.S. Global Certificate.
------------------------------------------------------
If the beneficial owner of an Offshore Global Certificate wishes at
any time to transfer all or any portion of such interest to a Person
who wishes to take delivery thereof in the from of a beneficial
interest in a U.S. Global Certificate, such transfer may be effected
only in accordance with the provisions of this clause (a)(ii). Upon
receipt by the Registrar of (A) a written order from an Agent Member
directing the Registrar to credit or cause to be credited to a
specified Agent Member's account a beneficial interest in the Offshore
Global Certificate to be so transferred, and (B) the proposed
transferor of the beneficial interest of the Offshore Global
Certificate delivers a certificate in the form of Exhibit H to the
Registrar, then the Registrar shall (1) reduce the aggregate principal
amount of the U.S. Global Certificate, (2) increase the aggregate
principal amount of the U.S. Global Certificate by the principal
amount of such Certificate so transferred, (3) endorse the appropriate
schedules of each such Global Certificate in the amount of such
reduction and increase, respectively, and (4) credit or cause to be
credited to the account of the Person specified in such instructions a
beneficial interest in the U.S. Global Certificate having a principal
amount equal to the amount so transferred.
(iii) Physical Certificate to Global Certificate. If the Holder
------------------------------------------
of a Physical Certificate wishes at any time to transfer all or any
portion of such Certificate to a Person who wishes to take delivery
thereof in the from of a beneficial interest in a Global Certificate,
such transfer may be effected only in accordance with the provisions
of this clause (a)(iii). Upon receipt by the Registrar of (a) such
18
<PAGE>
Certificate as provided in Section 4.04 and instructions satisfactory
to the Registrar directing that a specified principal amount not
greater than the principal amount of such Certificate be credited to a
specified Agent Member's account or Euroclear or Cedel participant's
account, as the case may be, and (B) the proposed transferor of the
Physical Certificate delivers a certificate in the from of, in the
case of sales under Rule 144A of the Securities Act, Exhibit H, and
the case of sales under Regulation S of the Securities Act, Exhibit G,
to the Registrar, then the Registrar shall cancel such Physical
Certificate (and the Pass Through Trustee, at the request of the
Registrar, shall authenticate and deliver a new Physical Certificate
in respect of any untransferred portion thereof) and increase the
aggregate principal amount of the Global Certificate by the principal
amount of such Physical Certificate so transferred.
(iv) Physical Certificate to Physical Certificate. A Physical
--------------------------------------------
Certificate may be transferred, in whole or in part, to a Person who
takes delivery in the form of another Physical Certificate, provided
--------
that if the Physical Certificate bears a Restricted Securities Legend,
then the Registrar shall have received a certificate from the
transferee in the form of Exhibit F from the transferor.
(v) Global Certificate to Physical Certificate. A beneficial
------------------------------------------
interest in a Global Certificate may be exchanged for a security that
is not a Global Certificate only as provided in Section 4.09.
(b) Notwithstanding any other provision of this Trust Agreement,
Certificates or portions thereof may be transferred or exchanged only in
principal amounts of not less than the minimum authorized denomination
therefore, and only if, following such transfer or exchange, each Holder would
hold Certificates with a principal amount of not less than such minimum
authorized denomination. Any transfer, exchange or other disposition of
Certificates in contravention of this Section 4.10(b) shall be deemed to be void
and of no legal effect whatsoever, any such transferee shall be deemed not to be
the Holder or owner of any beneficial interest in such Certificates for any
purpose, including but not limited to the receipt of interest payable on such
Certificates, and such transferee shall be deemed to have no interest whatsoever
in such Certificates.
(c) Restricted Securities Legend. Upon the transfer, exchange or
----------------------------
replacement of Certificates not bearing the Restricted Securities Legend, the
Registrar shall deliver Certificates that do not bear the Restricted Securities
Legend. Upon the transfer, exchange or replacement of Certificates bearing the
Restricted Securities Legend, the Registrar shall deliver only Certificates that
bear the Restricted Securities Legend unless either (i) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company, the
Registrar and the Pass Through 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 or (ii) Exchange
Certificates are being issued in exchange for Initial Certificates pursuant to
the Exchange Offer.
(d) General. By its acceptance of any Certificate bearing the
-------
Restricted Securities Legend, each Holder of such a Certificate acknowledges the
restrictions on transfer of such Certificate set forth in this Trust Agreement
and in the Restricted Securities Legend and agrees
19
<PAGE>
that it will transfer such Certificate only as provided in this Trust Agreement.
The Registrar shall not register a transfer of any Certificate unless such
transfer complies with the restrictions on transfer of such Certificate set
forth in this Trust Agreement. In connection with any transfer of Certificates,
each Holder agrees by its acceptance of the Certificates to furnish the
Registrar or the Company such certifications, legal opinions or other
information as any 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
--------
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.
Notwithstanding anything contained herein to the contrary, neither the
Pass Through Trustee nor the Registrar shall be responsible for ascertaining
whether any transfer complies with the registration provisions or exemptions
from the Securities Act, the Securities Exchange Act, applicable state
securities law or the Investment Company Act of 1940, as amended; provided,
--------
however, that if a certificate is specifically required to be delivered to the
- -------
Registrar by a purchaser or transferee of a Certificate, the Registrar shall be
under a duty to examine the same to determine whether it conforms to the
requirements of this Trust Agreement and shall promptly notify the party
delivering the same if such certificate does not so conform.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 4.09 or this Section 4.10.
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 Registrar.
Section 4.11. CUSIP Numbers. The Trust in issuing the Certificates
-------------
may use "CUSIP" and "CINS" numbers (if then generally in use), and the Pass
Through Trustee and the Registrar shall use CUSIP numbers or CINS numbers, as
the case may be, in notices of exchange as a convenience to Holders; provided
--------
that any such notice shall state that no representation is made as to the
correctness of such numbers either as printed on the Certificates or as
contained in any notice of exchange and that reliance may be placed only on the
other identification numbers printed on the Certificates.
Section 4.12. Registration Rights. Pursuant to and in accordance
-------------------
with the Registration Rights Agreement, each of the Company and the Trust have
agreed to file a registration statement for the issuance of registered
certificates with substantially identical terms to the Certificates, except that
the registered certificates will not contain terms with respect to transfer
restrictions. The interest rate payable on the Senior Notes shall be increased
by an amount equal to .50% per annum at the times specified in the Registration
Rights Agreement if either the Company or the Trust fails to satisfy certain
provisions of such Registration Rights Agreement to allow the Certificates to be
freely transferable by Certificateholders under the Securities Act.
20
<PAGE>
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 5.01. Certificate Account and Special Payments Account. (a)
------------------------------------------------
The Pass Through Trustee shall establish and maintain with the Paying Agent on
behalf of the Certificateholders an account (the "Certificate Account") as one
or more non-interest-bearing accounts. The Paying Agent shall hold the
Certificate Account in the name of the Trust or the Pass Through Trustee on
behalf of the Trust, in trust for the benefit of the Certificateholders, and
shall make or permit withdrawals therefrom only as provided in this Trust
Agreement. On each day when a Scheduled Payment is made under the Indenture to
the Trust, as holder of the Senior Notes issued under such Indenture, the Paying
Agent upon receipt shall immediately deposit the aggregate amount of such
Scheduled Payment in the Certificate Account.
(b) The Pass Through Trustee shall establish and maintain with the
Paying Agent on behalf of the Certificateholders an account (the "Special
Payments Account") as one or more accounts, which shall be noninterest bearing
except as provided in Section 5.04. The Paying Agent shall hold the Special
Payments Account in the name of the Trust or the Pass Through Trustee on behalf
of the Trust, in trust for the benefit of the Certificateholders, and shall make
or permit withdrawals therefrom only as provided in this Trust Agreement. On
each day when a Special Payment (other than a Special Payment that represents
the proceeds of any sale pursuant to Article VII hereof by the Pass Through
Trustee, on behalf of the Trust, of a Senior Note) is made under the Indenture
to the Trust, as holder of the Senior Notes issued under such Indenture, the
Paying Agent upon receipt shall immediately deposit the aggregate amounts of
such Special Payments in the Special Payments Account. Upon the sale of any
Senior Note by the Pass Through Trustee, on behalf of the Trust, pursuant to
Article VII hereof and the realization of any proceeds thereof upon receipt by
the Paying Agent, the Paying Agent shall deposit the aggregate amount of such
proceeds as a Special Payment in the Special Payments Account.
(c) The Pass Through Trustee, on behalf of the Trust, shall present
to the Indenture Trustee each Senior Note on the date of its stated final
maturity, or in the case of any Senior Note which is to be redeemed in whole
pursuant to the Indenture, on the applicable prepayment date under such
Indenture.
Section 5.02. Distributions from Certificate Account and Special
--------------------------------------------------
Payments Account. (a) On each Distribution Date or as soon thereafter as the
- ----------------
Paying Agent has confirmed receipt of the payment of the Scheduled Payments due
on the Senior Notes on such date, the Pass Through Trustee shall cause the
Paying Agent to distribute out of the Certificate Account the amount, net of any
applicable withholdings or deductions for taxes, deposited therein pursuant to
Section 5.01(a). There shall be so distributed to each Certificateholder of
record on the Record Date with respect to such Distribution Date (other than as
provided in Section 12.01 concerning the final distribution) by (i) check mailed
to such Certificateholder at the address appearing in the Register or (ii) upon
application to the Paying Agent, by wire transfer in immediately available funds
to an account maintained by the Certificateholder with a bank, such
Certificateholder's pro rata share (based on the aggregate Fractional Undivided
Interest held by such Certificateholder) of the aggregate amount in the
Certificate Account.
21
<PAGE>
(b) On each Special Distribution Date with respect to any Special
Payment or as soon thereafter as the Paying Agent has confirmed receipt of the
Special Payments due on the Senior Notes or realized upon the sale of any Senior
Note, the Pass Through Trustee shall cause the Paying Agent to distribute out of
the Special Payments Account, net of any applicable withholdings or deductions
for taxes, the amount deposited therein pursuant to Section 5.01(b) of such
Special Payment. There shall be so distributed to each Certificateholder of
record on the Record Date with respect to such Special Distribution Date (other
than as provided in Section 12.01 concerning the final distribution) by (i)
check mailed to such Certificateholder at the address appearing in the Register
or (ii) upon application to the Paying Agent, by wire transfer in immediately
available funds to an account maintained by the Certificateholder with a bank,
such Certificateholder's pro rata share (based on the aggregate Fractional
Undivided Interest held by such Certificateholder) of the aggregate amount in
the Special Payments Account on account of such Special Payment.
(c) The Pass Through Trustee shall cause the Paying Agent, at the
expense of the Company, to give notice of each Special Payment to each
Certificateholder at his address as it appears in the Register. In the event of
prepayment of Senior Notes, such notice shall be mailed not less than 20 days
prior to the date any such Special Payment is scheduled to be distributed. In
the case of any other Special Payments, such notice shall be mailed as soon as
practicable after the Paying Agent has confirmed that it has received funds for
such Special Payment. Notices mailed by the Paying Agent shall set forth:
(i) the Special Distribution Date and the Record Date therefor
(except as otherwise provided in Section 12.01);
(ii) the amount of the Special Payment for each $1,000 face
amount Certificate and the amount thereof constituting principal,
premium, if any, and interest;
(iii) the reason for the Special Payment; and
(iv) if the Special Distribution Date is the same date as a
Distribution Date, the total amount to be received on such date for
each $1,000 face amount Certificate.
If the amount of premium payable upon the redemption of a Senior Note
has not been calculated at the time that the Paying Agent mails notice of a
Special Payment, it shall be sufficient if the notice sets forth the other
amounts to be distributed and states that any premium received will also be
distributed.
If any redemption of the Senior Notes held in the Trust is cancelled,
the Pass Through Trustee shall cause the Paying Agent, as soon as possible after
learning thereof, to mail notice thereof to each Certificateholder at its
address as it appears on the Register.
(d) Any amounts paid to the Certificateholders as a result of the
exercise of the rights under the Guarantee shall be in full satisfaction of the
corresponding obligation to make payment under the Certificates.
22
<PAGE>
Section 5.03. Statements to Certificateholders. (a) On each
--------------------------------
Distribution Date and Special Distribution Date, if any, included with each
distribution to Certificateholders will be a statement prepared by the Paying
Agent, giving effect to such distribution to be made on such Distribution Date
or Special Distribution Date, as the case may be, setting forth the following
information (per a $1,000 face amount Certificate as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and
the amount allocable to premium, if any; and
(ii) the amount of such distribution allocable to interest.
(b) Within a reasonable period of time after the end of each calendar
year but not later than the latest date permitted by law, the Paying Agent shall
furnish to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) with respect to the Trust for
such calendar year or, in the event such Person was a Certificateholder of
record during a portion of such calendar year, for the applicable portion of
such year, and such other items as are readily available to the Paying Agent and
which a Certificateholder shall reasonably request as necessary for the purpose
of such Certificateholder's preparation of its U.S. federal income tax returns.
Such report and such other items shall be prepared on the basis of information
supplied to the Paying Agent by the Clearing Agency Participants and shall be
delivered by the Paying Agent to such Clearing Agency Participants to be
available for forwarding by such Clearing Agency Participants to
Certificateholders.
Section 5.04. [intentionally left blank]
--------------------------
Section 5.05. Additional Amounts. (a) Except as provided in Section
------------------
5.05(b) hereof and subject to the Company having provided the Trust with the
necessary funds, if the Trust is required to withhold or deduct or if the Trust
is otherwise required to pay any amount for or on account of Taxes imposed by a
Taxing Authority, from or in respect of any payment made under Section 5.02 of
this Trust Agreement, the Trust will pay, together with the payment under
Section 5.02, such additional amounts ("Additional Amounts") as may be necessary
so that the net amount received by each Certificateholder (including Additional
Amounts) after such withholding or deduction or other payment of Taxes will not
be less than the amount the Certificateholder would have received if such Taxes
had not been withheld or deducted or paid.
(b) No Additional Amounts will be payable with respect to a payment
made to a Certificateholder in any of the following circumstances:
(i) With respect to any Tax which would not have been imposed,
payable or due
(A) but for the existence of any present or former
connection between the Certificateholder (or the beneficial
owner of, or person having a right to acquire an interest in,
such Certificate) and a Taxing Authority, other than the mere
holding of the Certificates;
23
<PAGE>
(B) if the Certificates are held in definitive
registered form and the presentation of the definitive
Certificate for payment had occurred within 30 days after the
date such payment was due and payable or was provided for,
whichever is later; or
(C) but for the failure of a Non-U.S. Certificateholder
to comply with certification, information or other reporting
requirements concerning the nationality, residence, identity or
business activity within the United States of such
Certificateholder (or, if applicable, the beneficial owner of,
or other person having a right to acquire an interest in, the
Certificate) if such compliance is a condition to such Taxes
not being imposed, payable or due with respect to the payment;
or
(ii) If, had the beneficial owner of, or other person having a
right to acquire an interest in, such Certificate been the
Certificateholder, such person would not have been entitled to the
payment of Additional Amounts.
(c) Except as provided in the Section 13.01(b) hereof, in no event
will Additional Amounts be payable with respect to any tax that is payable
otherwise than by withholding from payments under Section 5.02 hereof.
Section 5.06. Stamp, Issue and Certain Other Taxes. The Trust will
------------------------------------
pay any stamp, issue, transfer, sales, use, value-added, property, registration,
documentary, enforcement or other similar taxes and other duties (including
interest and penalties) payable to any Taxing Authority in respect of the
creation, issue or offering of the Certificates or any other documents directly
related to such creation, issue or offering.
ARTICLE VI
THE COMPANY
Section 6.01. Maintenance of Corporate Existence. The Company, at
----------------------------------
its own cost and expense, will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises, except as otherwise specifically permitted in Section 6.02;
provided, however, that the Company shall not be required to preserve any right
- -------- -------
or franchise if it shall determine that the preservation thereof is no longer
desirable in the conduct of its business and that the loss thereof is not
prejudicial in any material respect to the Certificateholders.
Section 6.02. Consolidation, Merger or Sale of Assets Permitted.
-------------------------------------------------
The Company shall not merge or consolidate with or into any other corporation or
sell, convey or otherwise dispose of all or substantially all of its assets to
any Person unless such merger or consolidation is permitted by the terms of the
Indenture and the surviving corporation shall expressly assume the due and
punctual performance and observance of all of the covenants and conditions of
this Trust Agreement to be performed by the Company by supplemental agreement
given by such successor corporation to the Pass Through Trustee.
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Section 6.03. Availability of Certain Information Concerning the
--------------------------------------------------
Company. Until such time as the Certificates have been registered for resale by
- -------
the Certificateholders pursuant to the Securities Act by the Company, the
Company will furnish to any Certificateholder upon request, copies of the
information required to be delivered to Certificateholders or prospective
purchasers of Certificates from Certificateholders in order to enable such
Certificateholders to comply with Rule 144A under the Securities Act.
Section 6.04. Notification of Certain Company Acquisitions of
-----------------------------------------------
Certificates. Until such time as the Certificates have been registered for
- ------------
resale by the Certificateholders pursuant to the Securities Act by the Company,
the Company shall not acquire any beneficial interest, and will cause its
"affiliates" (as defined in paragraph (a)(l) of Rule 144 under the Securities
Act) not to acquire any beneficial interest, in any Certificate unless they
notify the Pass Through Trustee and Registrar of such acquisition. The Pass
Through Trustee, the Registrar and all Certificateholders shall be entitled to
rely without further investigation on any such notification (or the lack
thereof).
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. If any Indenture Event of Default
-----------------
(an "Event of Default") shall occur and be continuing, then, and in each and
every case, so long as such Indenture Event of Default shall be continuing, and
upon the direction of the Certificateholders evidencing Fractional Undivided
Interests aggregating not less than 25% interest in the Trust, the Pass Through
Trustee shall vote a corresponding 25% of such Senior Notes, in favor of
directing the Indenture Trustee, to declare the unpaid principal amount of the
Senior Notes then outstanding and accrued interest thereon to be due and payable
under, and in accordance with the provisions of, the Indenture. In addition, if
an Indenture Event of Default shall have occurred and be continuing, and upon
the direction of the Certificateholders evidencing Fractional Undivided Interest
aggregating not less than a majority in interest of the Trust, the Pass Through
Trustee shall vote a corresponding majority of such Senior Notes to direct the
Indenture Trustee regarding the exercise of remedies provided in Article VI of
the Indenture.
At any time after a declaration of acceleration with respect to the
Senior Notes as described in the preceding paragraph, but before a judgment or
decree for the payment of money due has been obtained by the Indenture Trustee,
the Certificateholders evidencing at least a majority in interest in the Trust
may rescind and cancel such declaration and its consequences (i) if the
recission would not conflict with any judgment or decree, (ii) if all existing
Indenture Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration,
(iii) to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iv) if the Company has
paid the Indenture Trustee its reasonable compensation and reimbursed the
Indenture Trustee for its expenses, disbursements and advances and (v) in the
event of the cure or waiver of an Indenture Event of Default specified in clause
(h) of Section 6.01 of the Indenture, the Indenture Trustee shall have received
an Officer's Certificate and an Opinion of Counsel that such Event of Default
has been cured or waived.
25
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In addition, after an Event of Default shall have occurred and be
continuing, the Pass Through Trustee, upon the direction of the
Certificateholders evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust shall, by such officer or agent as
it may appoint, subject to complying with the terms of the Indenture and the
Senior Notes, sell, convey, transfer and deliver such Senior Note or Senior
Notes, without recourse to or warranty by the Pass Through Trustee or any
Certificateholder, to any Person. In any such case, the Pass Through Trustee
shall, on behalf of the Trust, sell, assign, contract to sell or otherwise
dispose of and deliver such Senior Note or Senior Notes in one or more parcels
at public or private sale or sales, at any location or locations selected by the
Certificateholders, all upon such terms and conditions, and at such prices, for
cash as it shall be directed by the Certificateholders. If the Pass Through
Trustee so decides or is required to sell or otherwise dispose of any Senior
Note pursuant to this Section, the Pass Through Trustee shall take such of the
actions described above, as it shall be directed by the Certificateholders, as
it may reasonably deem most effectual to complete the sale or other disposition
of such Senior Note, so as to provide for the payment in full of all amounts due
on the Certificates. The Pass Through Trustee shall give notice to the Company
promptly after any such sale.
Section 7.02. Incidents of Sale of Senior Notes. Upon any sale of all
---------------------------------
or any part of the Senior Notes made either under the power of sale given under
this Trust Agreement or otherwise for the enforcement of this Trust Agreement,
the following shall be applicable:
(1) Certificateholders and Pass Through Trustee May Purchase Senior
---------------------------------------------------------------
Notes. Any Certificateholder, the Pass Through Trustee in its individual or
-----
any other capacity or any other Person may bid for and purchase any of the
Senior Notes, and upon compliance with the terms of sale, may hold, retain,
possess and dispose of such Senior Notes in their or its or his own
absolute right without further accountability.
(2) Receipt of Pass Through Trustee Shall Discharge Purchaser. The
---------------------------------------------------------
receipt of the Pass Through Trustee or the Paying Agent or of the officer
making such sale shall be a sufficient discharge to any purchaser for his
purchase money, and, after paying such purchase money and receiving such
receipt, such purchaser or his personal representative or assigns shall not
be obliged to see to the application of such purchase money, or be in any
way answerable for any loss, misapplication or nonapplication thereof.
(3) Application of Moneys Received upon Sale. Any moneys collected by the
----------------------------------------
Paying Agent at the direction of the Pass Through Trustee upon any sale
made either under the power of sale given by this Trust Agreement or
otherwise for the enforcement of this Trust Agreement, shall be applied as
provided in Section 5.02.
Section 7.03. Judicial Proceedings Instituted by Pass Through Trustee.
-------------------------------------------------------
(a) Pass Through Trustee May Bring Suit. If there shall be a failure to make
-----------------------------------
payment of the principal of, premium, if any, or interest on any Senior Note,
then the Pass Through Trustee, in its own name, and as trustee of an express
trust, as holder of such Senior Notes, shall be, to the extent permitted by and
in accordance with the terms of the Note Documents, entitled and empowered to
(but shall be under no affirmative obligation) to institute any suits, actions
or proceedings at law, in equity or otherwise, for the collection of the sums so
due and unpaid on such Senior Notes and
26
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may prosecute any such claim or proceeding to judgment or final decree with
respect to the whole amount of any such sums so due and unpaid.
(b) Pass Through Trustee May File Proofs of Claim; Appointment of
-------------------------------------------------------------
Pass Through Trustee as Attorney-in-Fact in Judicial Proceedings. Upon demand
- ----------------------------------------------------------------
by the Company, the Pass Through Trustee in its own name, or as trustee of an
express trust, or as attorney-in-fact for the Certificateholders, or in any one
or more of such capacities (irrespective of whether distributions on the
Certificates shall then be due and payable, or the payment of the principal on
the Senior Notes shall then be due and payable, as therein expressed or by
declaration or otherwise and irrespective of whether the Pass Through Trustee
shall have made any demand to the Indenture Trustee for the payment of overdue
principal, premium (if any) or interest on the Senior Notes), shall be entitled
and empowered to (but shall be under no affirmative obligation) to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Pass Through Trustee and of the
Certificateholders allowed in any receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or any other judicial proceedings
relative to the Company, their respective creditors or property. Any receiver,
assignee, trustee, liquidator sequestrator (or similar official) in any such
judicial proceeding is hereby authorized by each Certificateholder to make
payments in respect of such claim to the Pass Through Trustee, and in the event
that the Pass Through Trustee shall consent to the making of such payments
directly to the Certificateholders, to pay to the Pass Through Trustee any
amount due to it for the reasonable compensation, expenses, disbursements,
indemnity and advances of the Pass Through Trustee, its agents and counsel.
Nothing contained in this Trust Agreement shall be deemed to give to the Pass
Through Trustee any right to accept or consent to any plan of reorganization or
otherwise by action of any character in any such proceeding to waive or change
in any way any right of any Certificateholder.
Section 7.04. Control by Certificateholders. The Certificateholders
-----------------------------
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Pass Through
Trustee, or exercising any trust or power conferred on the Pass Through Trustee
under this Trust Agreement, including any right of the Pass Through Trustee as
holder of the Senior Notes, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Trust Agreement and would not involve the Pass Through Trustee in
personal liability or expense,
(2) the Pass Through Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Certificateholders not taking
part in such direction,
(3) the Pass Through Trustee may take any other action deemed proper
by the Pass Through Trustee which is not inconsistent with such direction,
(4) if an Indenture Event of Default shall have occurred and be
continuing, such direction shall not obligate the Pass Through Trustee to
vote more than a corresponding majority, of the related Senior Notes held
by the Trust in favor of directing any action by the Indenture Trustee with
respect to such Indenture Event of Default, and
27
<PAGE>
(5) in the case of the Pass Through Trustee exercising any right as
holder of the Senior Notes, if the Indenture provides that such right can
only be exercised upon a vote of the Senior Noteholders aggregating greater
than a majority of the principal amount outstanding of such Notes (a
"Required Percentage"), then the Pass Through Trustee may only exercise
such right upon a direction of the Certificateholders evidencing a
Fractional Undivided Interest aggregating a percentage of the Certificates
Outstanding equal to such Required Percentage.
Section 7.05. Waiver of Defaults. The Certificateholders evidencing
------------------
Fractional Undivided Interests aggregating not less than a majority in interest
in the Trust may on behalf of the Certificateholders of all the Certificates
waive any existing Default or Event of Default hereunder and its consequences or
may instruct the Pass Through Trustee to waive any default pursuant to Section
6.04 of the Indenture and its consequences, except a Default:
(1) in the deposit of any Scheduled Payment or Special Payment under
Section 5.01 or in the distribution of any payment under Section 4.02 on
the Certificates, or
(2) in the payment of the principal of, premium, if any, or interest
on any Senior Notes, or
(3) in respect of a covenant or provision hereof which under Article
X hereof cannot be modified or amended without the consent of the
Certificateholder of each Outstanding Certificate affected.
Upon any such waiver, such Default shall cease to exist with respect
to this Trust Agreement, and any Event of Default arising therefrom shall be
deemed to have been cured for every purpose of this Trust Agreement and any
direction given by the Pass Through Trustee on behalf of such Holders to the
Indenture Trustee shall be annulled with respect thereto; but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon. Upon any such waiver, the Pass Through Trustee
shall vote the Senior Notes issued under the Indenture to waive the
corresponding Indenture Default or Indenture Event of Default.
Section 7.06. Undertaking to Pay Court Costs. All parties to this
------------------------------
Trust Agreement, and each Certificateholder by his acceptance of a Certificate,
shall be deemed to have agreed that any court may in its discretion require, in
any suit, action or proceeding for the enforcement of any right or remedy under
this Trust Agreement, or in any suit, action or proceeding against the Pass
Through Trustee for any action taken or omitted by it as Pass Through Trustee
hereunder, the filing by any party litigant in such suit, action or proceeding
of an undertaking to pay the costs of such suit, action or proceeding, and that
such court may, in its discretion, assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, action or proceeding,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided, however, that the provisions of this Section
-------- -------
shall not apply to (a) any suit, action or proceeding instituted by any
Certificateholder or group of Certificateholders evidencing Fractional Undivided
Interests aggregating more than 10% of the Trust, (b) any suit, action or
proceeding instituted by any Certificateholder for the enforcement
28
<PAGE>
of the distribution of payments pursuant to Section 5.02 hereof on or after the
respective due dates expressed herein or (c) any suit, action or proceeding
instituted by the Pass Through Trustee.
Section 7.07. Right of Certificateholders to Receive Payments Not to
------------------------------------------------------
Be Impaired. Anything in this Trust Agreement to the contrary notwithstanding,
- -----------
including without limitation Section 7.08 hereof, the right of any
Certificateholder to receive distributions of payments required pursuant to
Section 5.02 hereof on the Certificates when due, or to institute suit for the
enforcement of any such payment on or after the applicable Distribution Date or
Special Distribution Date, shall not be impaired or affected without the consent
of such Certificateholder.
Section 7.08. Certificateholders May Not Bring Suit Except Under
--------------------------------------------------
Certain Conditions. A Certificateholder shall not have the right to institute
- ------------------
any suit, action or proceeding at law or in equity or otherwise with respect to
this Trust Agreement, for the appointment of a receiver or for the enforcement
of any other remedy under this Trust Agreement, unless:
(1) such Certificateholder previously shall have given written notice
to the Pass Through Trustee of a continuing Event of Default;
(2) the Certificateholders evidencing Fractional Undivided Interests
aggregating not less than a majority in interest of the Trust shall have
requested the Pass Through Trustee in writing to institute such action,
suit or proceeding and shall have offered to the Pass Through Trustee
indemnity as provided in Section 8.03(e);
(3) the Pass Through Trustee shall have refused or neglected to
institute any such action, suit or proceeding for 60 days after receipt of
such notice, request and offer of indemnity; and
(4) no direction inconsistent with such written request has been
given to the Pass Through Trustee during such 60-day period by the
Certificateholders evidencing Fractional Undivided Interests aggregating
not less than a majority in interest in the Trust.
It is understood and intended that no one or more of the
Certificateholders shall have any right in any manner whatsoever hereunder or
under the Certificates to (i) surrender, impair, waive, affect, disturb or
prejudice any Trust Property, or the rights of the Certificateholders or the
holders of the Senior Notes, (ii) obtain or seek to obtain priority over or
preference to any other such Holder or (iii) enforce any right under this Trust
Agreement, except in the manner herein provided and for the equal, ratable and
common benefit of all the Certificateholders subject to the provisions of this
Trust Agreement.
Section 7.09. Remedies Cumulative. Every remedy given hereunder to
-------------------
the Pass Through Trustee or to any of the Certificateholders shall not be
exclusive of any other remedy or remedies, and every such remedy shall be
cumulative and in addition to every other remedy given hereunder or now or
hereafter given by statute, law, equity or otherwise.
29
<PAGE>
ARTICLE VIII
THE PASS THROUGH TRUSTEE
Section 8.01. Certain Duties and Responsibilities. (a) The Pass
-----------------------------------
Through Trustee is authorized and directed to execute and deliver the Trust
Documents on behalf of the Trust and each certificate or other document attached
as an exhibit to or contemplated by the Trust Documents and any amendment
thereto, in each case, in such form as the Depositor shall approve as evidenced
conclusively by the Pass Through Trustee's execution thereof. In addition to the
foregoing, the Pass Through Trustee is authorized, but shall not be obligated,
to take all actions required of the Trust pursuant to the Trust Documents. The
Pass Through Trustee is further authorized from time to time to take such action
as the Depositor or the Certificateholders recommend or direct in writing
pursuant to this Trust Agreement and the Trust Documents.
(b) The Pass Through Trustee undertakes to perform such duties and
only such duties as are set forth in this Trust Agreement, and no implied
covenants or obligations shall be read into this Trust Agreement against the
Pass Through Trustee.
(c) It shall be the duty of the Pass Through Trustee to discharge (or
cause to be discharged) all of its responsibilities pursuant to the terms of
this Trust Agreement and to administer the Trust in the interest of the
Certificateholders in accordance with the provisions of this Trust Agreement.
Notwithstanding the foregoing, the Pass Through Trustee shall be deemed to have
discharged its duties and responsibilities hereunder to the extent the
Depositor, the Paying Agent or the Registrar agrees to perform any act or to
discharge any duty of the Pass Through Trustee or the Trust hereunder or under
any Trust Document, and the Pass Through Trustee shall not be liable for the
default or failure of the Depositor, the Paying Agent or the Registrar to carry
out its obligations under this Trust Agreement or any Trust Document.
(d) Notwithstanding the foregoing, the Pass Through Trustee shall not
be required to take any action hereunder or under any Trust Document if the Pass
Through Trustee shall reasonably determine, or shall have been advised by
counsel in writing, that such action is likely to result in personal liability
to the Pass Through Trustee (in such capacity or individually), is contrary to
the terms of this Trust Agreement or any Trust Document or is otherwise contrary
to law.
(e) In the event the Pass Through Trustee is uncertain as to the
application of any provision of this Trust Agreement, or such provision is
ambiguous as to its application or is, or appears to be, in conflict with any
other provision hereof, or in the event that this Trust Agreement permits any
determination by the Pass Through Trustee or is silent or incomplete as to the
course of action which the Pass Through Trustee is required to take with respect
to a particular set of facts, then the Pass Through Trustee may seek
instructions from the Certificateholders and shall not be liable to any person
to the extent that it acts in good faith in accordance with the instructions of
the Certificateholders.
(f) The duties and obligations of the Pass Through Trustee shall be
determined solely by the express provisions of this Trust Agreement. The Pass
Through Trustee (i) shall not be liable except for the performance of such
duties and obligations as are specifically set forth in
30
<PAGE>
this Trust Agreement against the Pass Through Trustee and (ii) shall not have
any liability, duty or obligation to manage, inspect, insure, make any payment
with respect to, register, record, sell, dispose of, create, maintain or perfect
title or a security interest in, or otherwise deal with the Trust Property,
prepare, file or record any document (including any financing or continuation
statements) or to otherwise take or refrain from taking any action under, or in
connection with, any document contemplated hereby to which the Trust is a party,
except as expressly provided by the terms of this Trust Agreement or in any
written instruction received by the Pass Through Trustee from the
Certificateholders. No implied powers, duties or obligations shall be read into
this Trust Agreement against the Pass Through Trustee.
(g) The Pass Through Trustee shall not manage, control, use, sell,
dispose of or otherwise deal with any part of the Trust Property except (i) in
accordance with the powers granted to and the authority conferred upon the Pass
Through Trustee pursuant to this Trust Agreement, and (ii) in accordance with
the express terms hereof or to the extent they do not conflict with any of the
express terms hereof with any written instruction delivered to the Pass Through
Trustee by the Certificateholders;
(h) Notwithstanding anything contained herein to the contrary,
neither Wilmington Trust nor the Pass Through Trustee shall be required to take
any action in any jurisdiction other than in the State of Delaware if the taking
of such action will (i) require the consent or approval or authorization or
order of or the giving of notice to, or the registration with or the taking of
any other action in respect of, any state or other governmental authority or
agency of any jurisdiction other than the State of Delaware; (ii) result in any
fee, tax or other governmental charge under the laws of any jurisdiction or any
political subdivisions thereof in existence on the date hereof other than the
State of Delaware becoming payable by Wilmington Trust; or (iii) subject
Wilmington Trust to personal jurisdiction in any jurisdiction other than the
State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust or the Pass Through
Trustee, as the case may be, contemplated hereby. The Pass Through Trustee shall
be entitled to obtain advice of counsel (which advice shall be an expense of the
Depositor) to determine whether any action required to be taken pursuant to this
Trust Agreement results in the consequences described in clauses (i), (ii) and
(iii) of the preceding sentence. In the event that said counsel advises the Pass
Through Trustee that such action will result in such consequences, the Pass
Through Trustee will appoint an additional trustee pursuant to Section 8.10
hereof to proceed with such action; and
(i) In the absence of bad faith on its part, the Pass Through Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Pass Through Trustee and conforming to the requirements of this Trust Agreement.
(j) No provision of this Trust Agreement shall be construed to
relieve the Pass Through Trustee from liability for its own negligence with
respect to notices of Default or handling of funds hereunder, its own grossly
negligent action, its own grossly negligent failure to act, or its own willful
misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
31
<PAGE>
(2) the Pass Through Trustee shall not be liable for any error made
in good faith by a Responsible Officer of the Pass Through Trustee unless
it shall be proved that the Pass Through Trustee was negligent with respect
to notices of Default or handling of funds hereunder or grossly negligent
in ascertaining the pertinent facts;
(3) the Pass Through Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Certificateholders evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust
relating to the time, method and place of conducting any proceeding for any
remedy available to the Pass Through Trustee, or exercising any trust or
power conferred upon the Pass Through Trustee, under this Trust Agreement;
and
(4) no provision of this Trust Agreement shall require the Pass
Through Trustee to expend or risk its own funds 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 is not reasonably assured to
it.
(k) Whether or not herein expressly so provided, every provision of
this Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Pass Through Trustee shall be subject to the
provisions of this Section.
(l) The Pass Through Trustee shall, at the direction of the Company,
execute such instruments and take all such actions as may be necessary or
desirable in order to carry out the Exchange Offer, the issuance of the Exchange
Certificates and any other transactions contemplated by the Registration Rights
Agreement.
Section 8.02. Notice of Defaults. As promptly as practicable after,
------------------
and in any event within 90 days after, the occurrence of any Default hereunder,
the Pass Through Trustee shall transmit by mail to the Company and the Indenture
Trustee in accordance with Section 13.03 and to all Certificateholders, as their
names and addresses appear in the Register, notice of such Default hereunder
actually known to the Pass Through Trustee, unless such Default shall have been
cured or waived; provided, however, that, except in the case of a Default in the
-------- -------
payment of the principal of, premium, if any, or interest on any Senior Note,
the Pass Through Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Pass Through Trustee in good faith
determine that the withholding of such notice is in the interests of the
Certificateholders.
Section 8.03. Certain Rights of Pass Through Trustee. Except as
--------------------------------------
otherwise provided in Section 8.01:
(a) the Pass Through Trustee may rely and shall be protected in
acting or refraining from acting in reliance upon any signature, resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties. The
Pass Through Trustee may accept a certified copy of a resolution of
32
<PAGE>
the board of directors or other governing body of any corporate party as
conclusive evidence that such resolution has been duly adopted by such body and
that the same is in full force and effect. As to any fact or matter the manner
of ascertainment of which is not specifically prescribed herein, the Pass
Through Trustee may for all purposes hereof rely on a certificate, signed by the
president or any vice president or by the treasurer or any assistant treasurer
or the secretary or any assistant secretary of the relevant party, as to such
fact or matter, and such certificate shall constitute full protection to the
Pass Through Trustee for any action taken or omitted to be taken by it in good
faith in reliance thereon;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Request;
(c) whenever in the administration of this Trust Agreement the Pass
Through Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Pass Through
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officer's Certificate of the
Company;
(d) the Pass Through Trustee may consult with counsel and the 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;
(e) the Pass Through Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the request
or direction of any of the Certificateholders pursuant to this Trust Agreement,
unless such Certificateholders shall have offered to the Pass Through Trustee
reasonable security or indemnity against the cost, expenses and liabilities
which might be incurred by it in compliance with such request or direction;
(f) the Pass Through 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 or other paper or document;
(g) The Pass Through Trustee shall not be required to take any action
that (i) is inconsistent with the purposes of the Trust set forth in Article II
or (ii) would, to the actual knowledge of a Responsible Officer of the Pass
Through Trustee, result in the Trust's becoming an association taxable as a
corporation for federal income tax purposes;
(h) Under no circumstances shall the Pass Through Trustee be
personally liable for any representation, warranty, covenant, agreement,
indebtedness or obligation of the Trust;
(i) The Pass Through Trustee shall not be liable for the default or
misconduct of the Registrar or Paying Agent and shall not be liable for any act
or omission taken at the request or direction of the Registrar or Paying Agent;
(j) In the exercise or administration of the trusts hereunder, the
Pass Through Trustee (i) may act directly or, at the expense of the Trust,
through agents or attorneys pursuant to agreements entered into with any of
them, and the Pass Through Trustee shall not be liable for
33
<PAGE>
the default or misconduct of such agents or attorneys if such agents or
attorneys shall have been selected by the Pass Through Trustee with reasonable
care; and (ii) may, at the expense of the Trust, consult with counsel,
accountants and other skilled persons to be selected with reasonable care and
employed by it, and it shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons;
(k) Except as previously provided herein, in accepting the trusts
hereby created the Pass Through Trustee acts solely as trustee hereunder and not
in its individual capacity, and all persons having any claim against the Pass
Through Trustee by reason of the transactions contemplated by this Trust
Agreement shall look only to the Trust Property for payment or satisfaction
thereof;
(l) The Pass Through Trustee shall not be answerable or accountable
under any circumstances, except for the willful misconduct or gross negligence
of the Pass Through Trustee or simple negligence of the Pass Through Trustee
with respect to notices of Default or handling of funds hereunder, except for
liabilities that may result from the inaccuracy of any representation or
warranty of the Pass Through Trustee in this Trust Agreement;
(m) Except in accordance with the written instructions furnished by
the Depositor or Certificateholders and except as provided herein, the Pass
Through Trustee shall have no duty (i) to see any recording or filing of any
document, (ii) to see to the payment or discharge of any tax, assessment or
other governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust, (iii) to confirm
or verify any financial statements of the Depositor or (iv) to inspect the
Depositor's books and records at any time;
(n) The Pass Through Trustee may fully rely upon and shall have no
liability in connection with calculations or instructions forwarded to the Pass
Through Trustee by the Depositor, the Certificateholders or Paying Agent;
(o) The Pass Through Trustee shall not have any responsibility or
liability for or with respect to the genuineness, value, sufficiency or validity
of the Trust Property. The Pass Through Trustee shall in no event assume or
incur any liability, duty or obligation to the Certificateholders or any other
Person other than as expressly provided for herein, and in no event shall the
Pass Through Trustee have any implied duties or obligations hereunder;
(p) The Pass Through Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement, or to
institute, conduct or defend any litigation, at the request, order or direction
of the Depositor or the Certificateholders or any other Person, unless the
Depositor or such Certificateholders, as the case may be or such Person have
offered to the Pass Through Trustee security or indemnity satisfactory to it
against the costs, expenses and liabilities that may be incurred by Pass Through
Trustee (including, without limitation, the reasonable fees and expenses of its
counsel) therein or thereby, including such advances as the Pass Through Trustee
shall request;
(q) The Pass Through Trustee shall incur no liability if, by reason
of any provisions of any present or future law or regulation thereunder, or by
any force majeure event,
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including, but not limited to, natural disaster, war or other circumstances
beyond its control, the Pass Through Trustee shall be prevent or forbidden from
doing or performing any act or thing which the terms of this Trust Agreement
provide shall or may be done or performed;
(r) Prior to taking any action under this Trust Agreement, the Pass
Through Trustee shall be entitled to receive written instructions of the
Certificateholders pursuant to Section 1.04 hereof. The Pass Through Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on the instruction of such Certificateholders;
(s) The Pass Through 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 or other paper or document; and
(t) Every provisions of this Trust Agreement relating to the Pass
Through Trustee shall be subject to the provisions of this Section 8.03.
Section 8.04. Not Responsible for Recitals or Issuance of
-------------------------------------------
Certificates. The recitals contained herein and in the Certificates, except the
- ------------
certificates of authentication, shall not be taken as the statements of the Pass
Through Trustee, and the Pass Through Trustee assumes no responsibility for
their correctness. Subject to Section 8.15, the Pass Through Trustee makes, no
representations as to the validity or sufficiency of this Trust Agreement, the
Note Documents, the Indenture, the Senior Notes or the Certificates, except that
the Pass Through Trustee hereby represents and warrants that this Trust
Agreement has been, and each Certificate will be, executed and delivered by one
of its officers who is duly authorized to execute and deliver such document on
its behalf.
Section 8.05. May Hold Certificates. The Pass Through Trustee, any
---------------------
Paying Agent, Registrar or any other agent, in their respective individual or
any other capacity, may become the owner or pledgee of Certificates and may
otherwise deal with the Company or the Indenture Trustee with the same rights it
would have if it were not Pass Through Trustee, Paying Agent, Registrar or such
other agent.
Section 8.06. Money Held in Trust. Money held by the Paying Agent in
-------------------
trust hereunder need not be segregated from other funds except to the extent
required herein or by law and the Paying Agent shall have no liability for
interest upon any such moneys except as provided for herein.
Section 8.07. Compensation and Reimbursement. The Company agrees
------------------------------
(1) to pay, or cause to be paid, to the Pass Through Trustee from
time to time the compensation set forth in the agreement between the Pass
Through Trustee and the Company 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) except as otherwise expressly provided herein, to reimburse, or
cause to be reimbursed the Pass Through Trustee upon its request for all
reasonable out-of-pocket expenses, disbursements and advances incurred or
made by the Pass Through Trustee in
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accordance with any provision of this Trust Agreement (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 (or its agent or counsel) negligence, willful
misconduct or bad faith or as may be incurred due to the Pass Through
Trustee's breach of its representations and warranties set forth in Section
8.15;
(3) to indemnify, or cause to be indemnified, the Pass Through
Trustee in accordance with Section 13.01 hereof. The Pass Through Trustee
shall notify the Company promptly of any claim for which it may seek
indemnity. The Company shall defend the claim and the Pass Through Trustee
shall cooperate in the defense. The Pass Through Trustee may have separate
counsel with the consent of the Company and the Company will pay the
reasonable fees and expenses of such counsel. The Company need not pay for
any settlement made without its consent; and
(4) to indemnify, or cause to be indemnified, each of Wilmington
Trust, solely in its capacity as the Pass Through Trustee, and any
replacement Pass Through Trustee, for, and to hold it harmless against, any
Taxes (provided that no indemnification shall be available with respect to
any Taxes attributable to the Pass Through Trustee's compensation for
serving as such, as provided for in Section 8.07(1) or otherwise) incurred
without gross negligence, willful misconduct or bad faith, on its part, or
incurred without negligence with respect to the delivery of notices of
Default or the handling of funds, arising out of or in connection with the
acceptance or administration of this Trust, including any reasonable costs
and expenses incurred in contesting the imposition of any such Taxes.
Wilmington Trust and the Pass Through Trustee, as the case may be, shall
notify the Company promptly of any Taxes for which it may seek indemnity.
The Company shall defend against the imposition of such Taxes and
Wilmington Trust and the Pass Through Trustee, as the case may be, shall
cooperate in the defense. Wilmington Trust and the Pass Through Trustee, as
the case may be, may have separate counsel with the consent of the Company
and the Company will pay the reasonable fees and expenses of such counsel.
The Company need not pay for any Taxes paid, in settlement or otherwise,
without its consent, which consent will not be unreasonably withheld.
In addition, Wilmington Trust and the Pass Through Trustee shall be
entitled to reimbursement from, and shall have a lien prior to the Certificates
upon, all property and funds held or collected by the Pass Through Trustee in
its capacity as Pass Through Trustee for any Taxes for which it is entitled to
be indemnified (including costs and expenses for which it is entitled to be
indemnified (as provided in Section 8.07(4)). If the Pass Through Trustee
reimburses itself for any such Taxes it will within 30 days mail a brief report
setting forth the circumstances thereof to all Certificateholders as their names
and addresses appear in the Register.
Section 8.08. Corporate Trustee Required: Eligibility. The Pass
---------------------------------------
Through Trustee shall at all times: (a) be a corporation satisfying the
provisions of Section 3807(a) of the Business Trust Statute; (b) be authorized
to exercise corporate trust powers; (c) having a combined capital and surplus of
at least $50,000,000, and subject to supervision or examination by U.S. federal
or state authority; and (d) be a United States Person. If such corporation
36
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publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid 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 Pass Through 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 8.09. Resignation and Removal; Appointment of Successor. (a)
-------------------------------------------------
No resignation or removal of the Pass Through Trustee and no appointment of a
successor Pass Through Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Pass Through Trustee under
Section 8.10.
(b) The Pass Through Trustee may resign at any time by giving written
notice thereof to the Company and the Indenture Trustee. If an instrument of
acceptance by a successor Pass Through Trustee shall not have been delivered to
the Company and the Indenture Trustee within 30 days after the giving of such
notice of resignation, the resigning Pass Through Trustee may petition any court
of competent jurisdiction for the appointment of a successor Pass Through
Trustee.
(c) The Pass Through Trustee may be removed at any time by Act of the
Holders holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust delivered to the
Pass Through Trustee, the Company and the Indenture Trustee.
(d) If at any time:
(1) the Pass Through Trustee shall cease to be eligible under Section
8.08 and shall fail to resign after written request therefor by the Company
or by any such Certificateholder; or
(2) the Pass Through Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Pass Through
Trustee or of its property shall be appointed or any public officer shall
take charge or control of the Pass Through Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any case, (i) the Company may remove the Pass Through Trustee or (ii)
subject to Section 7.06, any Certificateholder who has been a bona fide Holder
of a Certificate 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 Pass Through Trustee and the appointment of a successor Pass
Through Trustee.
(e) If a Responsible Officer of the Pass Through Trustee shall obtain
actual knowledge of an Avoidable Tax (as hereinafter defined) which has been or
is likely to be asserted, the Pass Through Trustee shall promptly notify the
Company and shall, within 30 days of such notification, resign hereunder unless
within such 30-day period the Pass Through Trustee shall have received notice
that the Company has agreed to pay such tax. The Company shall promptly appoint
a successor Pass Through Trustee in a jurisdiction where there are no
37
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Avoidable Taxes. As used herein an Avoidable Tax means a state or local tax: (i)
upon (w) the Trust, (x) the Trust Property, (y) Holders of the Certificates or
(z) the Pass Through Trustee for which the Pass Through Trustee is entitled to
seek reimbursement from the Trust Property, and (ii) which would be avoided if
the Pass Through Trustee were located in another state, or jurisdiction within a
state, within the United States. A tax shall not be an Avoidable Tax if the
Company shall agree to pay, and shall pay, such tax.
(f) If the Pass Through Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Pass
Through Trustee for any cause, the Company shall promptly appoint a successor
Pass Through Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Pass Through
Trustee shall be appointed by Act of the Holders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than 25% interest in the
Trust delivered to the Company, the Indenture Trustee and the retiring Pass
Through Trustee, the successor Pass Through Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Pass
Through Trustee and supersede the successor Pass Through Trustee appointed as
provided above. If no successor Pass Through Trustee shall have been so
appointed as provided above and accepted appointment in the manner hereinafter
provided, any Certificateholder who has been a bona fide Holder of a Certificate
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 Pass Through Trustee.
(g) The successor Pass Through Trustee shall give notice of the
resignation and removal of the Pass Through Trustee and appointment of the
successor Pass Through Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Holders of Certificates as their names
and addresses appear in the Register. Each notice shall include the name of such
successor Pass Through Trustee and the address of its Corporate Trust Office
Section 8.10. Co-Trustees and Successor Trustees. (a) Every successor
----------------------------------
Pass Through Trustee appointed hereunder shall execute, acknowledge and deliver
to the Company and to the retiring Pass Through Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring Pass
Through Trustee shall become effective and such successor Pass Through Trustee,
without any further act, deed or conveyance, shall become vested with all
rights, powers, trusts and duties of the retiring Pass Through Trustee; but, on
request of the Company or the successor Pass Through Trustee, such retiring Pass
Through Trustee shall execute and deliver an instrument transferring to such
successor Pass Through Trustee all the rights, powers and trusts of the retiring
Pass Through Trustee and shall duly assign, transfer and deliver to such
successor Pass Through Trustee all property and money held by such retiring Pass
Through Trustee hereunder, subject nevertheless to its lien, if any, provided
for in Section 8.07. Upon request of any such successor Pass Through Trustee,
the Company, the retiring Pass Through Trustee and such successor Pass Through
Trustee shall execute and deliver any and all instruments containing such
provisions as shall be necessary or desirable to transfer and confirm to, and
for more fully and certainly vesting in, such successor Pass Through Trustee all
such rights, powers and trusts.
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No successor Pass Through Trustee shall accept its appointment unless
at the time of such acceptance such successor Pass Through Trustee shall be
qualified and eligible under this Article.
(b) At any time or times, for the purpose of meeting any legal
requirements of any jurisdiction in which any of the Trust Property may at the
time be located, or in the event that the Pass Through Trustee is unwilling to
perform any act in any jurisdiction other than the State of Delaware, the Pass
Through Trustee shall have the power (with the consent of the Company) to
appoint one or more individuals or corporations either to act as co-trustee or
co-trustees jointly with the Pass Through Trustee or to act as separate trustee
or separate trustees and to vest in such person or persons, in such capacity,
such title to the Trust Property or any part thereof, and such rights, powers,
duties, trusts or obligations as may be necessary for the Trust to carry out the
purposes hereunder, subject to the remaining provisions of this Section 8.10.
(c) Unless otherwise provided in the instrument appointing such co-
trustee or separate trustee, every co-trustee or separate trustee shall, to the
extent permitted by law, be appointed subject to the following terms, namely:
(1) All rights, powers, trusts, duties and obligations conferred by
this Trust Agreement upon the Pass Through Trustee in respect of the
custody, control or management of moneys, papers, securities and other
personal property shall be exercised solely by the Pass Through Trustee;
(2) All rights, powers, trusts, duties and obligations conferred or
imposed by this Trust Agreement upon the trustees shall be conferred or
imposed upon and exercised or performed by the Pass Through Trustee, or by
the Pass Through Trustee and such co-trustee or co-trustees, or separate
trustee and separate trustees jointly, except to the extent that, under the
law of any jurisdiction in which any particular act or acts are to be
performed, the Pass Through Trustee shall be incompetent or unqualified to
perform such act or acts, or in the event that the Pass Through Trustee is
unwilling to perform any act in any jurisdiction other than the State of
Delaware, in which event such act or acts shall be performed by such co-
trustee or co-trustees or separate trustee or separate trustees alone;
(3) Any request in writing by the Pass Through Trustee to any co-
trustee or separate trustee to take or refrain from taking any action
hereunder shall be sufficient warrant for the taking, or the refraining
from taking, of such action by such co-trustee or separate trustee;
(4) Any co-trustee or separate trustee to the extent permitted by law
may delegate to the Pass Through Trustee the exercise of any right, power,
trust, duty or obligation, discretionary or otherwise;
(5) The Pass Through Trustee at any time, by an instrument in writing
may accept the resignation of or remove any co-trustee or separate trustee
appointed under this Section 8.10. A successor to any co-trustee or
separate trustee so resigned or removed may be appointed in the manner
provided in this Section 8.10;
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(6) Neither the Pass Through Trustee nor any co-trustee or separate
trustee appointed hereunder shall be personally liable by reason of any act
or omission of any other trustee hereunder selected by it with reasonable
care;
(7) Any demand, request, direction, appointment, removal, notice,
consent, waiver or other action in writing executed by the Holders and
delivered to the Pass Through Trustee shall be deemed to have been
delivered to each such co-trustee or separate trustee; and
(8) Any moneys, papers, securities or other items of personal
property received by any such co-trustee or separate trustee hereunder
shall forthwith, so far as may be permitted by law, be turned over to the
Pass Through Trustee to be held pursuant to the terms hereof.
(d) Upon the acceptance in writing of such appointment by any such
co-trustee or separate trustee, it or he shall be vested with the estate, right,
title and interest in the Trust Property, or portion thereof, and with such
rights, powers, duties, trusts or obligations, jointly or separately with the
Pass Through Trustee, as set forth herein or otherwise, all as shall be
specified in the instrument of appointment, subject to all the terms hereof.
Every such acceptance shall be filed with the Pass Through Trustee.
(e) In case any co-trustee or separate trustee shall die, become
incapable of acting, resign or be removed, the estate, right, title and interest
in the Trust Property and all rights, powers, trusts, duties and obligations of
said co-trustee or separate trustee shall, so far as permitted by law, vest in
and be exercised by the Pass Through Trustee unless and until a successor co-
trustee or separate trustee shall be appointed pursuant to this Section 8.10.
Section 8.11. Merger, Conversion Consolidation or Succession to
-------------------------------------------------
Business. Any corporation into which the Pass Through 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 Pass Through Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Pass Through Trustee, shall be the successor
of the Pass Through 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 Certificates shall have been authenticated, but not delivered, by
the Pass Through Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Pass Through Trustee may adopt such
authentication and deliver the Certificates so authenticated with the same
effect as if such successor Pass Through Trustee had itself authenticated such
Certificates.
Section 8.12. Maintenance of Agencies. (a) There shall at all times
-----------------------
be maintained an office or agency where Certificates may be presented or
surrendered for registration of transfer or for exchange, and for payment
thereof and where notices and demands to or upon the Pass Through Trustee in
respect of the Certificates or of this Trust Agreement may be served. Such
office or agency shall be initially at Marine Midland Bank, 140 Broadway, New
York, New York 10005, Attention: Corporate Trust Department - Transtel. Written
notice of the location of each such other office or agency and of any change of
location thereof shall be
40
<PAGE>
given by the Pass Through Trustee to the Company, the Paying Agent and the
Registrar, the Indenture Trustee and the Certificateholders. In the event that
no such office or agency shall be maintained or no such notice of location or of
change of location shall be given, presentations and demands may be made and
notices may be served at the Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a Paying Agent
hereunder. Each such Authorized Agent shall be a bank or trust company, shall be
a corporation organized and doing business under the laws of the United States
or any state, with a combined capital and surplus of at least $50,000,000, and
shall be authorized under such laws to exercise corporate trust powers, subject
to supervision by Federal or state authorities. Marine Midland shall initially
be the Paying Agent and, as provided in Section 4.04, Registrar hereunder. Each
Registrar shall furnish to the Pass Through Trustee, at stated intervals of not
more than six months, and at such other times as the Pass Through Trustee may
request in writing, a copy of the Register.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.
(d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Pass Through Trustee, the Company and the Indenture
Trustee. The Company may, and at the request of the Pass Through Trustee shall,
at any time terminate the agency of any Authorized Agent by giving written
notice of termination to such Authorized Agent and to the Pass Through Trustee.
Upon the resignation or termination of an Authorized Agent or in case at any
time any such Authorized Agent shall cease to be eligible under this Section
(when, in either case, no other Authorized Agent performing the functions of
such Authorized Agent shall have been appointed), the Company shall promptly
appoint one or more qualified successor Authorized Agents, reasonably
satisfactory to the Pass Through Trustee, to perform the functions of the
Authorized Agent which has resigned or whose agency has been terminated or who
shall have ceased to be eligible under this Section. The Company shall give
written notice of any such appointment made by it to the Pass Through Trustee
and the Indenture Trustee; and in each case the Pass Through Trustee shall mail
notice of such appointment to all Holders as their names and addresses appear on
the Register. The provisions of Sections 8.01, 8.03, 8.04 and 8.07 shall be
applicable to each Authorized Agent.
(e) The Company agrees to pay, or cause to be paid, from time to time
to each Authorized Agent the compensation as set forth in the agreement between
to by each Authorized Agent and the Company for its services and to reimburse it
for its reasonable expenses.
(f) Marine Midland, in its capacity as registrar and paying agent
hereunder, hereby represents and warrants that:
41
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(i) Marine Midland is New York banking corporation and trust
company duly organized, validly existing, and in good standing under
the laws of the United States;
(ii) Marine Midland has full power, authority and legal right
to execute, deliver, and perform this Trust Agreement and has taken
all necessary action to authorize the execution, delivery, and
performance by it of this Trust Agreement;
(iii) the execution, delivery and performance by Marine Midland
of this Trust Agreement (a) will not violate any provision of any
United States or other law or regulation governing the banking and
trust powers of Marine Midland or any order, writ, judgment, or decree
of any court, arbitrator, or governmental authority applicable to
Marine Midland or any of its assets, (b) will not violate any
provision of the articles of association or bylaws of Marine Midland,
or (c) will not violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the
creation or imposition of any lien on any properties included in the
Trust Property pursuant to the provisions of any mortgage, indenture,
contract, agreement or other undertaking to which it is a party, which
violation, default or lien could reasonably be expected to have an
adverse effect on Marine Midland's performance or ability to perform
its duties hereunder or thereunder or on the transactions contemplated
herein or therein;
(iv) the execution, delivery and performance by Marine Midland
of this Trust Agreement will not require the authorization, consent,
or approval of, the giving of notice to, the filing or registration
with, or the taking of any other action in respect of, any United
States governmental authority or agency regulating the banking and
corporate trust activities of Marine Midland; and
(v) this Trust Agreement has been duly executed and delivered
by Marine Midland and constitutes a legal, valid, and binding
agreement of Marine Midland enforceable in accordance with its terms,
provided that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and general principles of equity.
Section 8.13. Money for Certificate Payments to Be Held in Trust.
--------------------------------------------------
All moneys deposited with any Paying Agent for the purpose of any payment on
Certificates shall be deposited and held in trust for the benefit of the Holders
of the Certificates entitled to such payment, subject to the provisions of this
Section. Moneys so deposited and held in trust shall constitute a separate trust
fund for the benefit of the Holders of the Certificates with respect to which
such money was deposited.
The Pass Through Trustee will cause each Paying Agent other than
Marine Midland and the Pass Through Trustee to execute and deliver to it an
instrument in which such Paying Agent shall agree with the Pass Through Trustee,
subject to the provisions of this Section, that such Paying Agent will
42
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(1) hold all sums held by it for payments on Certificates 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 Pass Through Trustee notice of any default by any
obligor upon the Certificates in the making of any such payment; and
(3) at any time during the continuance of any such default, upon the
written request of the Pass Through Trustee, forthwith pay to the Pass
Through Trustee all sums so held in trust by such Paying Agent.
The Pass Through Trustee may at any time, for the purpose of obtaining
the satisfaction and discharge of this Trust Agreement or for any other purpose,
direct any Paying Agent to pay to the Pass Through Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Pass Through Trustee
upon the same trusts as those upon which such sums were held by such Paying
Agent; and, upon such payment by any Paying Agent to the Pass Through Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Section 8.14. Registration of Senior Notes in Pass Through Trustee's
------------------------------------------------------
Name. The Pass Through Trustee agrees that all Senior Notes shall be issued in
- ----
the same name of the Trust or its nominee and held by the Trust, or, if not so
held, the Trust or its nominee shall be reflected as the owner of such Senior
Notes in the register of the issuer of such Senior Notes under the applicable
provisions of the Uniform Commercial Code in effect where the Trust holds such
Senior Notes or other applicable law then in effect.
Section 8.15. Representations and Warranties of Pass Through Trustee.
------------------------------------------------------
The Pass Through Trustee hereby represents and warrants that:
(i) the Pass Through Trustee is Delaware banking corporation
duly organized, validly existing, and in good standing under the laws
of the United States;
(ii) the Pass Through Trustee has full power, authority and
legal right to execute, deliver, and perform this Trust Agreement and,
to execute and deliver on behalf of the Trust the Purchase Agreement
and the Registration Rights Agreement and has taken all necessary
action to authorize the execution, delivery, and performance by it of
this Trust Agreement and, on behalf of the Trust, the Purchase
Agreement and the Registration Rights Agreement;
(iii) the execution, delivery and performance by the Pass Through
Trustee of this Trust Agreement, and on behalf of the Trust the
Registration Rights Agreement and the Purchase Agreement (a) will not
violate any provision of any United States or other law or regulation
governing the banking and trust powers of the Pass Through Trustee or
any order, writ, judgment, or decree of any court, arbitrator, or
governmental authority applicable to the Pass Through Trustee or any
of its assets, (b) will not violate any provision of the articles of
association or bylaws of the Pass Through Trustee, or (c) will not
violate any provision of, or
43
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constitute, with or without notice or lapse of time, a default under,
or result in the creation or imposition of any lien on any properties
included in the Trust Property pursuant to the provisions of any
mortgage, indenture, contract, agreement or other undertaking to which
it is a party, which violation, default or lien could reasonably be
expected to have an adverse effect on the Pass Through Trustee's
performance or ability to perform its duties hereunder or thereunder
or on the transactions contemplated herein or therein;
(iv) the execution, delivery and performance by the Pass Through
Trustee of this Trust Agreement, and on behalf of the Trust the
Registration Rights Agreement and the Purchase Agreement will not
require the authorization, consent, or approval of, the giving of
notice to, the filing or registration with, or the taking of any other
action in respect of, any United States governmental authority or
agency regulating the banking and corporate trust activities of the
Pass Through Trustee (other than the filing of the Certificate of
Trust with the Secretary of State, which certificate has been duly
filed); and
(v) this Trust Agreement, and on behalf of the Trust the
Registration Rights Agreement and the Purchase Agreement have been
duly executed and delivered by the Pass Through Trustee and the Trust
Agreement constitutes a legal, valid, and binding agreement of the
Pass Through Trustee enforceable in accordance with its terms,
provided that enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and general principles of equity.
Section 8.16. Withholding Taxes; Information Reporting. (a) The
----------------------------------------
Paying Agent shall exclude and withhold from each distribution of principal,
premium, if any, and interest and other amounts due hereunder or under the
Certificates any and all withholding taxes applicable thereto as required by
law. The Paying Agent agrees (i) to act as such withholding agent and, in
connection therewith, whenever any present or future taxes or similar charges
are required to be withheld with respect to any amounts payable in respect of
the Certificates, to withhold such amounts and timely pay the same to the
appropriate authority in the name of and on behalf of the Certificateholders,
(ii) that it will file any necessary withholding tax returns or statements when
due, and (iii) that, as promptly as possible after the payment thereof, it will
deliver to each Certificateholder within 60 days after the date that the payment
of any taxes so deducted or withheld is due pursuant to applicable law, either
certified copies of tax receipts evidencing such payment by or on behalf of the
Trust or, if such receipts are not obtainable, other evidence of such payments
by or on behalf of the Trust. The Paying Agent agrees to file any other
information reports as it may be required to file under United States law. If
the Company, the Trust or the Pass Through Trustee become aware that any such
deduction or withholding is or will be required, such party shall immediately
notify the Paying Agent and supply all available details thereof and all such
other information as shall reasonably be required to enable the Paying Agent to
comply with the requirements of this Section 8.16.
(b) The Pass Through Trustee agrees to cause to be prepared and filed
on behalf of the Trust any and all tax and information reports and filings
required under United States law and the laws of the State of Delaware. The Pass
Through Trustee shall be entitled to satisfy its
44
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obligations with respect to this Section 8.16(b) by retaining, at the expense of
the Depositor, a firm of independent public accountants, selected in good faith,
which shall perform the obligations of the Pass Through Trustee hereunder.
Section 8.17. Pass Through Trustee's Liens. The Pass Through
----------------------------
Trustee, in its individual capacity, agrees that it will at its own cost and
expense promptly take any action as may be necessary to duly discharge and
satisfy in full any mortgage, pledge, lien, charge, encumbrance, security
interest or claim ("Pass Through Trustee's Liens") on or with respect to the
Trust Property which is either (i) attributable to the Pass Through Trustee in
its individual capacity and which is unrelated to the transactions contemplated
by this Trust Agreement, the Purchase Agreement or the Note Documents, or (ii)
which is attributable to the Pass Through Trustee as trustee hereunder or in its
individual capacity and which arise out of acts or omissions which are
prohibited by this Trust Agreement.
Section 8.18. Availability of Certain Information Concerning the
--------------------------------------------------
Trust. The Pass Through Trustee shall furnish to any Certificateholder upon
- -----
request, copies of the information with respect to the Trust required to be
delivered to Certificateholders or prospective purchasers of Certificates from
Certificateholders in order to enable such Certificateholders to comply with
Rule 144A under the Securities Act. The Depositor shall provide such information
to the Pass Through Trustee to the extent such information does not solely
relate to the Pass Through Trustee.
ARTICLE IX
CERTIFICATEHOLDERS' LISTS AND REPORTS
Section 9.01. [intentionally left blank]
--------------------------
Section 9.02. Preservation of Information; Communication to
---------------------------------------------
Certificateholders. (a) The Pass Through Trustee shall preserve, in as current a
- ------------------
form as is reasonably practicable, the names and addresses of Holders of
Certificates contained in the most recent list furnished to the Pass Through
Trustee as provided in Section 8.12(b). The Pass Through Trustee may destroy any
list furnished to it as provided in Section 8.12(b) upon receipt of a new list
so furnished.
(b) If three or more Certificateholders (such Holders hereinafter
referred to as "applicants") apply in writing to the Pass Through Trustee, and
furnish to the Pass Through Trustee reasonable proof that each such applicant
has owned a Certificate for a period of at least six months preceding the date
of such application, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Trust Agreement or under the Certificates and is accompanied by a copy of
the form of proxy or other communication which such applicants propose to
transmit, then the Pass Through Trustee shall, within 5 Business Days after the
receipt of such application, at its election, either
(i) afford such applicants access to the information preserved
at the time by the Pass Through Trustee in accordance with Section
9.02(a), or
(ii) inform such applicants as to the approximate number of
Certificateholders whose names and addresses appear in the information
45
<PAGE>
preserved at the time by the Pass Through Trustee in accordance with
Section 9.02(a), and as to the approximate cost of mailing to such
Certificateholders the form of proxy or other communication, if any,
specified in such application.
If the Pass Through Trustee shall elect not to afford such applicants
access to such information, the Pass Through Trustee shall, upon the written
request of such applicants, mail to each Certificateholder whose name and
address appear in the information preserved at the time by the Pass Through
Trustee in accordance with Section 9.02(a), a copy of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Pass Through Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Pass Through Trustee shall mail
to such applicants a written statement to the effect that, in the opinion of the
Pass Through Trustee, such mailing would be contrary to the best interests of
the Holders of Certificates or would be in violation of applicable law. Such
written statement shall specify the basis of such opinion. If the applicants
shall obtain a court order, after notice to the Pass Through Trustee and
opportunity for hearing, so directing the Pass Through Trustee, the Pass Through
Trustee shall mail copies of such material to all such Certificateholders with
reasonable promptness after the entry of such order and the renewal of the
applicants' tender.
(c) Every Certificateholder, by receiving and holding the same,
agrees with the Company, the Registrar and the Pass Through Trustee that none of
the Company, the Registrar or the Pass Through Trustee shall be held accountable
by reason of the disclosure of any such information as to the names and
addresses of the Certificateholders in accordance with Section 9.02(b),
regardless of the source from which such information was derived, and that the
Pass Through Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under Section 9.02(b).
Section 9.03. Reports by the Company. The Pass Through Trustee shall
----------------------
transmit by mail to all Certificateholders, as their names and addresses appear
in the Register, within 30 days after the filing thereof with the Pass Through
Trustee, such summaries of any information, documents and reports required to be
filed by the Company pursuant to the Indenture and as may hereafter be required
by rules and regulations prescribed form time to time by the Commission.
ARTICLE X
SUPPLEMENTAL TRUST AGREEMENTS
Section 10.01. Supplemental Trust Agreement Without Consent of
-----------------------------------------------
Certificateholders. Without the consent of any Certificateholder, the Company
- ------------------
may, and the Pass Through Trustee, the Registrar and the Paying Agent (subject
to Section 10.03), shall, at any time and from time to time, enter into one or
more agreements supplemental hereto, in form satisfactory to the Pass Through
Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company,
and the assumption by any such successor of the covenants of the Company,
as applicable herein contained; or
46
<PAGE>
(2) to add to the covenants of the Company, for the benefit of the
Holders of the Certificates, or to surrender any right or power herein
conferred upon the Company; or
(3) 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 with respect to matters or questions
arising under this Trust Agreement; provided that any such action shall not
adversely affect the interests of the Holders of the Certificates; or
(4) to modify, eliminate or add to the provisions of this Trust
Agreement to such extent as shall be necessary to qualify this Trust
Agreement (including any supplemental agreement) under the Trust Indenture
Act or under any similar Federal statute hereafter enacted, and to add to
this Trust Agreement such other provisions as may be expressly permitted by
the Trust Indenture Act, excluding, however, the provisions referred to in
Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of
which this instrument was executed or any corresponding provision in any
similar Federal statute hereafter enacted; or
(5) to make provision for issuance of the Exchange Certificates to be
issued in exchange for the Initial Certificates in the Exchange Offer as
contemplated by the Registration Rights Agreement.
Section 10.02. Supplemental Trust Agreements with Consent of
---------------------------------------------
Certificateholders. With the consent of the Holders of Certificates evidencing
- ------------------
Fractional Undivided Interests aggregating not less than a majority in interest
in the Trust, by Act of said Holders delivered to the Company and the Pass
Through Trustee, the Company may, and the Pass Through Trustee, the Registrar
and the Paying Agent (subject to Section 10.03) shall, enter into an agreement
or agreements supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Trust
Agreement or of modifying in any manner the rights and obligations of the
Holders of the Certificates under this Trust Agreement; provided, however, that
-------- -------
no such supplemental agreement shall, without the consent of the Holder of each
Outstanding Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing of, any
receipts by the Pass Through Trustee of payments on the Senior Notes or
distributions that are required to be made herein on any Certificate, or
change any date of payment on any Certificate, or change the place of
payment where, or the coin or currency in which, any Certificate is
payable, or impair the right to institute suit for the enforcement of any
such payment or distribution on or after the Distribution Date or Special
Distribution applicable thereto; or
(2) permit the disposition of any Senior Note in the Trust Property
except as permitted by this Trust Agreement, or otherwise deprive any
Certificateholder of the benefit of the ownership of the Senior Notes in
the Trust; or
(3) reduce the percentage of the aggregate Fractional Undivided
Interests of the Trust which is required for any such supplemental
agreement, or reduce such percentage
47
<PAGE>
required for any waiver (of compliance with certain provisions of this
Trust Agreement or certain defaults hereunder and their consequences)
provided for in this Trust Agreement; or
(4) modify any of the provisions of this Section or Section 7.05,
except to increase any such percentage or to provide that certain other
provisions of this Trust Agreement cannot be modified or waived without the
consent of the Holder of each Certificate affected thereby; or
(5) have the effect of any of the events described in Section 9.02 of
the Indenture; or
(6) otherwise adversely affect such Certificateholder.
It shall not be necessary for any Act of Certificateholders under this
Section to approve the particular form of any proposed supplemental agreement,
but it shall be sufficient if such Act shall approve the substance thereof.
Section 10.03. Documents Affecting Immunity or Indemnity.
-----------------------------------------
If in the opinion of the Pass Through Trustee, the Paying Agent or the Registrar
any document required to be executed by any of them pursuant to the terms of
Section 10.01 or 10.02 affects any interest, right, duty, immunity or indemnity
in favor of such party under this Trust Agreement, such party may in its
discretion decline to execute such document.
Section 10.04. Execution of Supplemental Trust Agreements.
------------------------------------------
In executing, or accepting the additional trusts created by, any supplemental
agreement permitted by this Article or the modifications thereby of the trusts
created by this Trust Agreement, the Pass Through Trustee shall be entitled to
receive, and (subject to Section 8.01) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental agreement
is authorized or permitted by this Trust Agreement.
Section 10.05. Effect of Supplemental Trust Agreements.
---------------------------------------
Upon the execution of any supplemental agreement under this Article, this Trust
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Trust Agreement for all purposes; and every
Holder of Certificates theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 10.06. Reference in Certificates to Supplemental Trust
-----------------------------------------------
Agreements. Certificates authenticated and delivered after the execution of any
- ----------
supplemental agreement pursuant to this Article may bear a notation in form
approved by the Pass Through Trustee as to any matter provided for in such
supplemental agreement; and, in such case, suitable notation may be made upon
Outstanding Certificates after proper presentation and demand.
48
<PAGE>
ARTICLE XI
AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS
Section 11.01. Voting; Amendments and Supplements to Indenture and
---------------------------------------------------
Other Note Documents. (a) So long as the Senior Notes are held by the
- --------------------
Trust, the Pass Through Trustee will not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee,
or execute any trust or power conferred on the Pass Through Trustee with respect
to the Senior Notes, (ii) waive any past default that is waivable under the
Senior Notes, (iii) exercise any right to rescind or annul a declaration that
the Senior Notes are due and payable, (iv) consent to any amendment,
modification or termination of the Indenture or the Senior Notes, where such
consent is required, without, in each case, complying with the provisions of
Section 11.01(b), or (v) take any other action, except as set forth in Section
11.01(b).
(b) In the event that the Trust or the Pass Through Trustee on behalf
of the Trust, as holder of any Senior Note in trust for the benefit of the
Certificateholders, receives a request for a consent to any amendment,
modification, waiver or supplement under the Indenture or other Note Document,
which requires the consent of the Certificateholders, the Pass Through Trustee
shall forthwith send a notice of such proposed amendment, modification, waiver
or supplement, to each Certificateholder registered on the Register as of such
date. The Pass Through Trustee shall request from the Certificateholders
Directions as to (i) whether or not to direct the Indenture Trustee to take or
refrain from taking any action which a holder of such Senior Note has the option
to direct, (ii) whether or not to give or execute any waivers, consents,
amendments, modifications or Supplements as a holder of such Senior Note and
(iii) how to vote any Senior Note if a vote has been called for with respect
thereto. Provided such a request for Certificateholder Direction shall have been
made, in directing any action or casting any vote or giving any consent as the
holder of any Senior Note, the Pass Through Trustee shall vote or consent with
respect to such Senior Note in the same proportion as the Certificates were
actually voted by Acts of Holders delivered to the Pass Through Trustee prior to
two Business Days before the Pass Through Trustee directs such action or casts
such vote or gives such consent. Notwithstanding the foregoing, but subject to
Section 7.04, in the case that an Event of Default hereunder shall have occurred
and be continuing, the Pass Through Trustee may, in its own discretion and at
its own direction, consent and notify the Indenture Trustee of such consent to
any amendment, modification, waiver or supplement under the Indenture or other
Note Document.
ARTICLE XII
TERMINATION OF TRUST
Section 12.01. Termination of the Trust.
------------------------
The respective obligations and responsibilities of the Company, the Pass
Through Trustee, the Registrar and the Paying Agent created hereby and the Trust
created hereby shall terminate upon the distribution to all Certificateholders
of all amounts required to be distributed to them to this Trust Agreement and
the disposition of all property held as part of the Trust Property; provided,
--------
however, that in no event shall the trust created hereby continue beyond the
- -------
expiration of 21 years from the death of
49
<PAGE>
the last survivor of the descendants of William Clinton, President of the United
States, living on the date of this Trust Agreement.
Notice of any termination, specifying the Distribution Date (or
Special Distribution Date, as the case may be) upon which the Certificateholders
may surrender their Certificates to the Pass Through Trustee for payment of the
final distribution and cancellation, shall be mailed promptly by the Pass
Through Trustee to Certificateholders not earlier than the 60th day and not
later than the 20th day next preceding such final distribution specifying (A)
the Distribution Date (or Special Distribution Date, as the case may be) upon
which final payment of the Certificates will be made upon presentation and
surrender of Certificates at the office or agency of the Pass Through Trustee
therein specified, (B) the amount of any such final payment, and (C) that the
Record Date otherwise applicable to such Distribution Date (or Special
Distribution Date, as the case may be) is not applicable, payments being made
only upon presentation and surrender of the Certificates at the office or agency
of the Pass Through Trustee therein specified. The Pass Through Trustee shall
give such notice to the Registrar at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Certificates, the
Pass Through Trustee shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date or Special Distribution Date, as the
case may be, pursuant to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the abovementioned written notice, the Pass Through Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. In the event that any money held by the Pass Through Trustee for the
payment of distributions on the Certificates shall remain unclaimed for two
years (or such lesser time as the Pass Through Trustee shall be satisfied, after
sixty days' notice from the Company, is one month prior to the escheat period
provided under applicable law) after the final distribution date with respect
thereto, the Pass Through Trustee shall pay to Indenture Trustee the appropriate
amount of money relating to such Indenture Trustee and shall give written notice
thereof to the Company.
Upon the winding up of the Trust and its termination, the Pass Through
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Act.
ARTICLE XIII
INDEMNIFICATION AND MISCELLANEOUS PROVISIONS
Section 13.01. Indemnification.
---------------
(a) The Depositor hereby agrees, whether or not any of the transactions
contemplated hereby shall be consummated, to assume liability for, and hereby
indemnifies, protects, saves and keeps harmless Wilmington Trust, the Pass
Through Trustee, the Registrar and the Paying Agent, their successors, assigns,
legal representatives, agents and servants (each, an "Indemnified Party," and
collectively, the "Indemnified Parties"), from and against any and all
liabilities, obligations, losses, damages, penalties, tax (excluding any taxes
(i) attributable to, measured by or imposed on any compensation received by an
50
<PAGE>
Indemnified Party for their services hereunder, (ii) which would have been
imposed notwithstanding such Indemnified Party providing services hereunder and
(iii) imposed in respect of or arising under or in connection with transactions
that are unrelated to the services of such Indemnified Party hereunder or (iv)
specifically excluded from indemnity under another provision of this Agreement),
claims, actions, suits, costs, expenses or disbursements (including, without
limitation, reasonable legal fees and expenses, and including, without
limitation, any liability of an owner, any strict liability and any liability
without fault) of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against such Indemnified Party hereunder, except that
the Depositor shall not be required to indemnify an Indemnified Party for any
liability, obligation, loss, damage, penalty, tax, claim, action, suit, costs,
expense or disbursement which might result from the gross negligence or willful
misconduct of such Indemnified Party, the negligence of such Indemnified Party
with respect to the handling of funds and the delivery of notices of Default or
the inaccuracy of any representation or warranty of such Indemnified Party, in
its individual capacity. The indemnities contained in this Section shall
survive the termination of this Trust Agreement. The payor of any indemnity
under this Section shall be subrogated to any right of the person indemnified in
respect of the mater as to which such indemnity was paid.
(b) Subject to the exclusions set forth in Section 5.05(b) and
provided that reasonable supporting documentation is provided, the Trust will,
upon written request of a Certificateholder reimburse each such
Certificateholder for the amount of any Taxes levied or imposed by any Taxing
Authority and paid by such Certificateholder as a result of payment made by the
Trust pursuant to Section 5.02 hereof to such Certificateholder with respect to
the Certificates. Any payment pursuant to this Section 13.01(b) shall be
considered an Additional Amount.
Section 13.02. Limitation on Rights of Certificateholders.
------------------------------------------
The death or incapacity of any Certificateholder shall not operate to terminate
this Trust Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations, and liabilities of the parties
hereto or any of them.
Section 13.03. Certificates Nonassessable and Fully Paid.
-----------------------------------------
Certificateholders shall not be personally liable for obligations of the Trust,
the Fractional Undivided Interests represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever, and Certificates upon authentication thereof by the Pass Through
Trustee pursuant to Section 4.02 are and shall be deemed fully paid. No
Certificateholder shall have any right (except as expressly provided herein) to
vote or in any manner otherwise control the operation and management of the
Trust Property, the Trust established hereunder, or the obligations of the
parties hereto, nor shall anything set forth herein, or contained in the terms
of the Certificates, be construed so as to constitute the Certificateholders
from time to time as partners or members of an association.
Section 13.04. Notices.
-------
All demands, notices, and communications hereunder shall be in writing (in
English), personally delivered , mailed by certified mailreturn receipt
requested, by facsimile or by next-day air courier, and shall be deemed to have
been duly given
51
<PAGE>
upon receipt, in the case of the Company, at the following address: Transtel
S.A., Calle 19N, No: 2-29 Oficina 501A, Post Office Box 3360, Cali, Colombia;
Attention: Guillermo Lopez, and, in the case of the Pass Through Trustee, the
Registrar and the Paying Agent at the Corporate Trust Office of such party or,
in each case, at such other address as shall be designated by such party in a
written notice to the other parties; provided,however, that notwithstanding
-------- -------
the preceding sentence, no documents, notices or communications shall be sent to
the Company by mail. Any notice required or permitted to he given to a
Certificateholder hereunder shall be mailed by first class mail, postage
prepaid, at the address of such Holder as shown in the Register. Any notice so
mailed within the time prescribed in this Trust Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder received
such notice. The Pass Through Trustee shall promptly furnish the Company with a
copy of each demand, notice or written communication received by the Pass
Through Trustee hereunder from any Certificateholder or the Indenture Trustee.
Section 13.05. Governing Law; Consent To Jurisdiction; Waiver Of
-------------------------------------------------
Immunity; Waiver Of Jury Trial. THIS TRUST AGREEMENT AND THE CERTIFICATES
- ------------------------------
SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Each of the parties hereto irrevocably agrees that any legal dispute,
action or proceeding arising out of or based upon this Trust Agreement, may be
instituted in any New York State or U.S. Federal court sitting in the Borough of
Manhattan, New York City, New York, U.S.A. (each a "New York Court" and
collectively, the "New York Courts"), irrevocably waives, to the extent
permitted by applicable law, any objection which it may now or hereafter have to
the laying of venue to any such proceeding and irrevocably submits to the non-
exclusive jurisdiction of such courts in any such suit, action or proceeding.
The Company has appointed CT Corporation Systems, Inc., 1633 Broadway, New York,
New York 10019, as its authorized agent ("Authorized Agent") to receive on its
behalf service of copies of the summons and complaints and any other process
which may be served in any legal suit, action or proceeding arising out of or
relating to this Trust Agreement which may be instituted in any federal or state
court sitting in The City of New York, expressly consents to the jurisdiction of
any such court in respect of any such action, and waives any other requirements
of or objections to personal jurisdiction with respect thereto. Such
appointment shall be irrevocable for a period of three years. Such service may
be made by delivering a copy of such process to the Company in care of the
Authorized Agent at the address specified above for the Authorized Agent and
obtaining a receipt therefor, and the Company hereby irrevocably authorizes and
directs such Authorized Agent to accept such service on its behalf. The Company
represents and warrants that the Authorized Agent has agreed to act as said
agent for service of process, and agrees that service of process in such manner
upon the Authorized Agent shall be deemed in every respect effective service of
process upon the Company in any such suit, action or proceeding. The Company
further agrees to take any and all actions as may be necessary to maintain such
designation and appointment of such Authorized Agent in full force and effect.
If the Authorized Agent shall cease to act as the Company's agent in The City of
New York for service of process, the Company shall appoint without delay another
such agent and notify the Pass Through Trustee of such appointment.
52
<PAGE>
To the extent that the Company or any of its revenues, assets or
properties shall be entitled, with respect to any proceeding at any time brought
against the Company or any of its revenues, assets or properties or with respect
to any suit, action or proceeding at any time brought for the purpose of
enforcing or executing any judgment in any jurisdiction in which any specified
court or other court is located, to any immunity from suit, from the
jurisdiction of any such court, from attachment prior to judgment, from
attachment in aid of execution of judgment, from execution of a judgment or from
any other legal or judicial process or remedy, to the extent of such immunity,
the Company irrevocably agrees not to claim and irrevocably waives such immunity
to the fullest extent permitted by the laws of such jurisdiction (including
without limitation, the Foreign Sovereign Immunities Act of 1976 of the United
States).
Each of the parties to this Trust Agreement hereby irrevocably waives
all right to a trial by jury in any action, proceeding or counterclaim (whether
based upon contract, tort or otherwise) arising out of or relating to this Trust
Agreement or the transactions contemplated hereby.
Section 13.06. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions, or terms of this Trust Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions,
or terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Trust Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Trust Agreement or
the Trust, or of the Certificates or the rights of the Holders thereof.
Section 13.07. 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 13.08. Successors and Assigns. All covenants, agreements,
----------------------
representations and warranties in this Trust Agreement by the Pass Through
Trustee, or the Company shall bind and, to the extent permitted hereby, shall
inure to the benefit of and be enforceable by their respective successors and
assigns, whether so expressed or not.
Section 13.09. Benefits of Trust Agreement. Nothing in this Trust
---------------------------
Agreement or in the Certificates, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder, and the Holders of
Certificates, any benefit or any legal or equitable right, remedy or claim under
this Trust Agreement.
Section 13.10. Legal Holidays. In any case where any Distribution
--------------
Date or Special Distribution Date relating to any Certificate shall not be a
Business Day, then (notwithstanding any other provision of this Trust Agreement)
payment 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 such Distribution Date
or Special Distribution Date, and no interest shall accrue during the
intervening period.
Section 13.11. Counterparts. For the purpose of facilitating the
------------
execution of this Trust Agreement and for other purposes, this Trust Agreement
may be executed simultaneously
53
<PAGE>
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.
* * * * *
54
<PAGE>
IN WITNESS WHEREOF, the Company, the Registrar, the Paying Agent and
the Pass Through Trustee have caused this Trust Agreement to be duly executed by
their respective officers and their respective seals, duly attested, to be
hereunto affixed, all as of the day and year first above written.
TRANSTEL S.A.
By: /s/ Gullermo O. Lopez
------------------------
Name: Gullermo O. lopez
Title: President
WILMINGTON TRUST COMPANY,
as Pass Through Trustee
By: /s/ James P. Lawler
------------------------
Name: James P. Lawler
Title: Vice President
MARINE MIDLAND BANK,
as Registrar and Paying Agent
By: /s/ Robert A. Conrad
------------------------
Name: Robert A. Conrad
Title: Vice President
55
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST
OF
TRANSTEL PASS THROUGH TRUST
THIS Certificate of Trust of Transtel Pass Through Trust (the "Trust"),
dated as of October 20, 1997, is being duly executed and filed by Wilmington
Trust Company, a Delaware banking corporation, as trustee, to form a business
trust under the Delaware Business Trust Act (12 Del. C. (S)3801 et seq.).
------- ------
1. Name. The name of the business trust formed hereby is Transtel Pass
----
Through Trust.
2. Delaware Trustee. The name and business address of the trustee of
----------------
the Trust in the State of Delaware is Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective as of
--------------
the date filed.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first-above
written.
WILMINGTON TRUST COMPANY,
as trustee
By: /s/ Patricia A. Evans
--------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
<PAGE>
Exhibit B
FORM OF CERTIFICATE OF TRUST
TRANSTEL PASS THROUGH TRUST
12 1/2% Pass Through Certificate
CUSIP ____________
evidencing a fractional undivided interest in a trust, the property of
which includes certain Senior Notes.
Certificate
No.__________ $__________________ Fractional Undivided Interest
THIS CERTIFIES THAT ______________________________, for value received, is
the registered owner of a $______________________________
(________________________ dollars) Fractional Undivided Interest in Pass Through
Trust (the "Trust") created, pursuant to a Trust Agreement dated as of October
20, 1997, between Transtel S.A., a sociedad anonima organized under the laws of
the Republic of Colombia (the "Company") and Wilmington Trust Company, a
Delaware banking corporation, as trustee (the "Pass Through Trustee"), as
amended and restated by the Amended and Restated Trust Agreement dated as of
__________, 1997 (as so amended, the "Trust Agreement"), among the Depositor,
the Pass Through Trustee, and Marine Midland Bank, a banking corporation and
trust company incorporated under New York law as Registrar and Paying Agent
("Marine Midland"), a summary of certain of the pertinent provisions of which is
set forth below. To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "12 1/2%
Pass Through Certificates" (herein called the "Certificates"). This Certificate
is issued under and is subject to the terms, provisions, and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound. The property of the
Trust includes certain Senior Notes (the "Trust Property").
Subject to and in accordance with the terms of the Trust Agreement,
from funds then available to the Pass Through Trustee, there will be distributed
on each November 1 and May 1, commencing May 1, 1998 (a "Distribution Date"), to
the person in whose name this Certificate is registered at the close of business
on the day of the month which is 15 days preceding the Distribution Date, an
amount in respect of the Scheduled Payments on the Senior Notes due on such
Distribution Date, the receipt of which has been confirmed by the Pass Through
Trustee, equal to the product of the percentage interest in the Trust evidenced
by this Certificate and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and the terms of
this Certificate, in the event that Special Payments on the Senior Notes are
received by the Paying Agent, from funds then
B-1
<PAGE>
available to the Paying Agent, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the day of the month which is 15 days
preceding the Special Distribution Date, an amount in respect of such Special
Payments on the Senior Notes, the receipt of which has been confirmed by the
Paying Agent, equal to the product of the percentage interest in the Trust
evidenced by this Certificate and an amount equal to the sum of such Special
Payments so received. If a Distribution Date or Special Distribution Date is not
a Business Day, distribution shall be made on the immediately following Business
Day. The Special Distribution Date shall be the 2nd day of the month determined
as provided in the Agreement. The Paying Agent shall mail notice of each Special
Payment and the Special Distribution Date therefor to the Holders of the
Certificates.
Distributions on this Certificate will be made by the Paying Agent by
(i) wire transfer of immediately available funds or (ii) check mailed to the
person entitled thereto, without the presentation or surrender of this
Certificate or the making of any notation hereon. Except as otherwise provided
in the Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Paying Agent of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency of the Paying Agent specified in such
notice.
[The holder of this Certificate is entitled to the benefits of the
Registration Rights Agreement (the "Registration Rights Agreement") dated as of
October 28, 1997, among the Company, the Trust and BT Alex. Brown Incorporated,
as the initial purchaser of this Certificate. In the event that on or before
the Filing Date (as defined in the Registration Rights Agreement), the Company
shall fail to (A) commence an exchange offer registered with the Securities and
Exchange Commission or (b) cause a shelf registration statement providing for
the resale of the Certificates by the holders hereof to be declared effective,
all as more fully provided in the Registration Rights Agreement, the interest
rate payable on the Senior Notes shall be permanently increased by .50% per
annum as of such date.]/1/
The statements set forth in the legend, if any, set forth above are an
integral part of the terms of this Certificate and by acceptance hereof each
holder of this Certificate agrees to be subject to and bound by the terms and
provisions set forth in such legend, if any.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Pass Through Trustee or an authenticating agent, by manual signature, this
Certificate shall not be entitled to any benefit under the Agreement or be valid
for any purpose.
________________________
/1/Not to be included in Exchange Certificates.
<PAGE>
IN WITNESS WHEREOF, the Pass Through Trustee has caused this
Certificate to be duly executed.
TRANSTEL PASS THROUGH TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as Pass Through
Trustee
By:____________________________________________
Title:____________________________________
[FORM OF THE PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
Dated:
This is one of the Certificates referred
to in the withinmentioned Trust Agreement.
[This is the Global Certificate referred
to in the withinmentioned Agreement.]/2/
Wilmington Trust Company, as Pass Through Trustee
By:________________________________________
Authorized Officer
or
Wilmington Trust Company, as Pass Through Trustee
By: Marine Midland Bank, as Authenticating
Agent
By:________________________________________
Authorized Officer
_______________________
/2/ For Global Certificate only.
<PAGE>
[Reverse of Certificate]
Except as set forth in the Guarantee, the Certificates do not
represent a direct obligation of, or an obligation guaranteed by, or an interest
in, the Company or the Pass Through Trustee or any affiliate thereof. The
Certificates are limited in right of payment, all as more specifically set forth
in the Agreement. All payments or distributions made to Certificateholders
under the Agreement shall be made only from the Trust Property and only to the
extent that the Paying Agent shall have sufficient income or proceeds from the
Trust Property and only to the extent that the Paying Agent shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Holder of this Certificate, by
its acceptance hereof, agrees that it will look solely to the income and
proceeds from the Trust Property to the extent available for distribution to
such Holder as provided in the Agreement. This Certificate does not purport to
summarize the Agreement and reference is made to the Agreement for information
with respect to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby. A copy of the Agreement may be examined during normal
business hours at the principal office of the Pass Through Trustee, and at such
other places, if any, designated by the Pass Through Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Pass Through Trustee with the consent of the Holders of
Certificates evidencing Fractional Undivided Interests aggregating not less than
a majority in interest in the Trust. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Registrar, or by any successor Registrar,
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Registrar, duly executed by the Holder hereof or such
Holder's attorney, duly authorized in writing, and thereupon one or more new
Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons initially in minimum denominations of $250,000 Fractional Undivided
Interest and any integral multiples of $1,000 in excess thereof. At such time
as certain restrictions on transfer have been removed, the minimum denominations
of the Certificates shall be reduced to $1,000 or any integral multiples of
$1,000 in excess thereof. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust, as requested by the Holder
surrendering the same.
<PAGE>
No service charge will be made for any such registration of transfer
or exchange, but the Pass Through Trustee shall require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Pass Through Trustee, the Registrar, and any agent of the Pass
Through Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither the
Pass Through Trustee, the Registrar, nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
<PAGE>
SCHEDULE TO CERTIFICATE
Initial Principal Amount
$[Insert initial principal amount]
<TABLE>
<CAPTION>
Amount of Registration Amount of
Registration Principal Number of Principal
Number of Increased Upon Certificated Decreased upon
Amount of Certificated Transfer and Certificate issue of Certificated
Principal Certificate Cancellation of issued upon Certificate or Aggregate
Repurchased Transferred Certificated Transfer of portion Redemption Principal
Date or Redeemed and Cancelled Certificate of Global Certificate or Repurchase Amount
---- ----------- ------------- ----------- --------------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
B-6
<PAGE>
Exhibit C-1
Each Global Certificate and Physical Certificate (other than the Exchange
Certificates) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE CERTIFICATEHOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE ACT), (B) IT IS AN
"ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A UNITED
STATES PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT THIS
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (A) TO THE COMPANY, OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR THAT IS
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF SUCH ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM AMOUNT OF $250,000 AND, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS
BEHALF BY A UNITED STATES BROKER-DEALER) TO THE
CERTIFICATE REGISTRAR A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
CERTIFICATE REGISTRAR FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
C-1-1
<PAGE>
REGISTRATION STATEMENT UNDER THE ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR,
THE CERTIFICATEHOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE CERTIFICATE REGISTRAR AND
THE ISSUER 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 IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTIONS," "UNITED STATES" AND
"UNITED STATES PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE ACT.
C-1-2
<PAGE>
Exhibit C-2
Each Global Certificate shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON 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.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF 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 SECTION 4.10 OF THE TRUST AGREEMENT.
C-2-1
<PAGE>
All endorsements or assignments of the Certificate must be guaranteed by an
"eligible guarantor institution" (including, but not limited to, a New York
Stock Exchange member firm or member of the Clearing House of the American Stock
Exchange Clearing Corporation or by bank or trust company having an office or
correspondent in The City of New York) meeting the requirements of the Pass
Through Trustee, which requirements will include membership or participation in
STAMP or such other "signature guarantee program" as may be determined by the
Pass Through Trustee in addition to, or in substitution form STAMP, all in
accordance with the Securities and Exchange Act of 1934, as amended.
(Sign exactly as your name appears on the other side of this Certificate)
Signature guarantee: ____________________
C-2
<PAGE>
Exhibit D
ASSIGNMENT FORM
If you the Holder want to assign this Certificate, fill in the form below
and have your signature Guaranteed:
I or we assign and transfer this Certificate to:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ______________, agent to transfer this Certificate on
the books of the Company. The agent may substitute another to act for him.
Dated: __________ Signed: __________
(Sign exactly as your name appears
on the other side of this Certificate)
NOTICE: The signature to any endorsement hereon must correspond with the name
as written upon the face of the Certificate in every particular, without
alteration or enlargement or any change whatever.
If the endorsement be executed by an attorney, executor, administrator, trustee
or guardian, the person executing the endorsement must give his full title in
such capacity and proper evidence of authority to act in such capacity, if not
of file with the Certificate, must be forwarded with this Certificate.
D-1
<PAGE>
EXHIBIT E
FORM OF DTC LETTER OF REPRESENTATIONS
BOOK-ENTRY-ONLY COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)
(WITHOUT OWNER OPTION TO REDEEM)
OTHER ASSET-BACKED SECURITIES AND PASS-THROUGH CERTIFICATES
Letter of Representations
[To be Completed by Issuer and Agent]
________________________________________
[Name of Issuer]
_________________________________________
[Name of Agent]
_________________________________________ ___________
[Date]
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street, 49th Floor
New York, NY 10041-0099
Re: _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
[Issue Description]
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Agent will act as
trustee, paying agent, fiscal agent, or other such agent of Issuer with respect
to the Securities pursuant to a trust indenture, trust agreement, or other
such document dated ________________, 199__ (the "Document").
_______________________________________ is distributing the Securities
["Underwriter"]
through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Agent make the following representations to DTC:
1. Prior to closing on the Securities on __________________, 199__,
there shall be deposited with DTC one Security certificate registered in the
name of DTC's nominee, Cede & Co., for each
<PAGE>
stated maturity of the Securities in the face amounts set forth on Schedule A
hereto, the total of which represents 100% of the principal amount of such
Securities. If, however, the aggregate principal amount of any maturity exceeds
$200 million, one certificate will be issued with respect to each $200 million
of principal amount and an additional certificate will be issued with respect to
any remaining principal amount. Each Security certificate shall bear the
following legend:
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
2. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificates by virtue of submission of such certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Agent shall establish a record date for
such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent possible, send notice of such
record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt
of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC
pursuant to this Paragraph by mail or by any other means shall be sent to DTC's
Reorganization Department as indicated in Paragraph 5.
4. In the event of a full or partial redemption, Issuer or Agent send a
notice to DTC specifying: (a) the amount of the redemption or refunding; (b) in
the case of a refunding, the maturity date(s) established under the refunding;
and (c) the date such notice is to be mailed to Security holders or published
(the "Publication Date"). Such notice shall be sent to DTC by a secure means
(e.g., legible telecopy, registered or certified mail, overnight delivery) in a
timely manner designed to assure that such notice is in DTC's possession no
later than the close of business on the business day before or, if possible, two
business days before the Publication Date. Issuer or Agent shall forward such
notice either in a separate secure transmission for each CUSIP number or in a
secure transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 30 days nor more than 60 days prior to the redemption date or, in the
case of an advance refunding, the date that the proceeds are deposited in
escrow. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Call Notification Department at (516) 227-4039 or (516) 227-4190. If the
party sending the notice does not receive a telecopy receipt from DTC confirming
that the notice has been received, such party shall telephone (516) 227-4070.
Notices to DTC pursuant to this Paragraph by mail or by any other means shall be
sent to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
-2-
<PAGE>
5. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Agent to
Security holders specifying the terms of the tender and the Publication Date of
such notice shall be sent to DTC by a secure means in the manner set forth in
the preceding Paragraph. Notices to DTC pursuant to this Paragraph and notices
of other corporate actions by telecopy shall be sent to DTC's Reorganization
Department at (212) 709-1093 or (212) 709-1094, and receipt of such notices
shall be confirmed by telephoning (212) 709-6884. Notices to DTC pursuant to the
above by mail or by any other means shall be sent to:
Manager: Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695
6. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.
7. Issuer or Agent shall send DTC written notice with respect to the
dollar amount per $1,000 original face value (or other minimum authorized
denomination is less than $1,000 face value) payable on each payment date
allocated as to the interest and principal portions thereof preferably 5, but
not less than 2, business days prior to such payment date. Such notices, which
shall also contain the current pool factor, any special adjustments to
principal/interest rates (e.g., adjustments due to deferred interest or
shortfall), and Agent contact's name and telephone number, shall be sent to
telecopy to DTC's Dividend Department at (212) 709-1723, or if by mail or by any
other means to:
Manager: Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695
8. [Note: Issuer must represent one of the following, and cross out the
other:] [The interest accrual period is payment date to payment date.]
9. Issuer or Agent shall provide a written notice of interest payment
information to a standard interest announcement service subscribed to by DTC as
soon as the information is available. In the unlikely event that no such service
exists, Issuer or Agent shall provide such notice directly to DTC
electronically, as previously arranged by Issuer or Agent and DTC, as soon as
the information is available. If electronic transmission is not available,
absent any other arrangements between Issuer or Agent and DTC, such information
should be sent by telecopy to DTC's Dividend Department at (212) 709-1723 or
(212) 709-1686, and receipt of such notices shall be confirmed by telephoning
(212) 709-1270. Notices to DTC pursuant to the above by mail or by any other
means shall be sent to:
Manager: Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695
-3-
<PAGE>
10. Issuer or Agent shall provide CUSIP numbers for each issue for which
payment is being sent, as well as the dollar and cent amount of the payment for
each issue to DTC, no later than noon (Eastern Time) on the payment date.
11. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns, in same-day funds no later than 2:30 p.m.
(Eastern Time) on each payment date. Absent any other arrangements between
Issuer or Agent and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank
ABA # 021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Dividend Deposit Account # 066-026776
12. Maturity and redemption payments allocated with respect to each
CUSIP number shall be received by Cede & Co., as nominee of DTC, or its
registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on
the payment date. Absent any other arrangements between Issuer or Agent and DTC,
such funds shall be wired as follows:
The Chase Manhattan Bank
ABA # 021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Redemption Deposit Account # 066-027306
13. Principal payments (plus accrued interest, if any) as the result of
optional tenders for purchase effected by means of DTC's Repayment Option
Procedures shall be received by Cede & Co., as nominee of DTC, or its registered
assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on the first
payment date. Absent any other arrangements between Issuer or Agent and DTC,
such funds shall be wired as follows:
The Chase Manhattan Bank
ABA # 021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Reorganization Deposit Account # 066-027608
14. DTC may direct Issuer or Agent to use any other number or address as
the number or address to which notices or payments of interest or principal may
be sent.
15. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tender made and accepted in response to Issuer's or Agent's
invitation) necessitating a reduction in the aggregate principal amount of
Securities outstanding or an advance refunding of part of the Securities
outstanding, DTC, in its discretion: (a) may request Issuer or Agent to issue
and authenticate a new Security certificate; or (b) may make an appropriate
notation on the Security certificate indicating the date and amount of such
reduction in principal except in the case of final maturity, in which case the
certificate will be presented to Issuer or Agent prior to payment, if required.
16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Agent
shall notify DTC of the availability of certificates. In
-4-
<PAGE>
such event, Issuer or Agent shall issue, transfer, and exchange certificates in
appropriate amounts, as required by DTC and others.
17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Agent (at which time DTC will confirm with Issuer or Agent the aggregate
principal amount of Securities outstanding). Under such circumstances, at DTC's
request Issuer and Agent shall cooperate fully with DTC by taking appropriate
action to make available one or more separate certificates evidencing Securities
to any DTC Participant having Securities credited to its DTC accounts.
18. Nothing herein shall be deemed to require Agent to advance funds on
behalf of Issuer.
19. This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts together shall constitute but one and the same
instrument.
20. The Letter of Representations is governed by, and shall be construed
in accordance with, the laws of the State of New York.
21. The following riders, attached hereto, are hereby incorporated into
this Letter of Representations:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Notes: Very truly yours,
- -----
A. If there is an Agent (as defined
in this Letter of Representations),
Agent as well as Issuer must sign this
Letter. If there is no Agent, in
signing this Letter Issuer itself
undertakes to perform all of the
obligations set forth herein.
B. Schedule B contains statements ---------------------------------
that DTC believes accurately (Issuer)
describe DTC, the method of effecting
book-entry transfers of securities
distributed through DTC, and certain
related matters. By: _________________________________
(Authorized Officer's Signature)
_________________________________
(Agent)
By: _________________________________
(Authorized Officer's Signature)
_________________________________
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: _________________________________ By: _________________________________
CC: Underwriter
Underwriter's Counsel
<PAGE>
SCHEDULE A
----------
_________________________________________________
_________________________________________________
(Describe Issue)
CUSIP Number Principal Amount Maturity Date Interest Rate
- ------------ ---------------- ------------- -------------
<PAGE>
SCHEDULE B
----------
SAMPLE OFFICIAL STATEMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
-----------------------------------
(Prepared by DTC--bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities will
be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). Only fully-registered Security certificates will be
issued for [each issue of] the Securities, [each] in the aggregate principal
amount of such issue, and will be deposited with DTC . [If, however, the
aggregate principal amount of [any] issue exceeds $200 million, one certificate
will be issued with respect to each $200 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchasers of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
[6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.]
-i-
<PAGE>
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
8. Principal and interest payments on the Securities will be made to
Cede & Co., as nominee of DTC. DTC's practice is to credit Direct Participants'
accounts, upon DTC's receipt of funds and corresponding detail information from
Issuer or Agent, on payable date in accordance with their respective holdings
shown on DTC's records. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of
DTC. Agent, or Issuer, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and interest to Cede &
Co. is the responsibility of Issuer or Agent, disbursement of such payments to
Direct Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to Agent [or
Tender/Remarketing Agent] and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the
Securities, on DTC's records, to Agent [or Tender/Remarketing Agent]. The
requirement for physical delivery of Securities in connection with an optional
tender or a mandatory purchase will be deemed satisfied when the ownership
rights in the Securities are transferred by Direct Participants on DTC's
records and followed by a book-entry credit of tendered Securities to Agent [or
Tender/Remarketing Agent's] DTC Account.]
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and
delivered.
11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.
-ii-
<PAGE>
REPRESENTATIONS FOR RULE 144A SECURITIES--
to be included in DTC Letter of Representations
1. Issuer represents that at the time of initial registration in the
name of DTC's nominee, Cede & Co., the Securities were Legally or Contractually
Restricted Securities,/1/ eligible for transfer under Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"), and identified by a
CUSIP or CINS identification number that was different from any CUSIP or CINS
number assigned to any securities of the same class that were not Legally or
Contractually Restricted Securities. Issuer shall ensure that a CUSIP or CINS
identification number is obtained for all unrestricted securities of the same
class that is different from any CUSIP or CINS identification number assigned to
a Legally or Contractually Restricted Security of such class, and shall notify
DTC promptly in the event that it is unable to do so. Issuer represents that it
has agreed to comply with all applicable information requirements of Rule 144A.
2. Issuer represents that the Securities are [Note: Issuer must
represent one of the following, and may cross out the other]
[included within , a Self-Regulatory Organization system
approved by the Securities and Exchange Commission for the reporting of
quotation and trade information of securities eligible for transfer pursuant to
Rule 144A (an "SRO 144A System").]
3. If the Securities are not Investment-Grade Securities, Issuer and
Agent acknowledge that if such Securities cease to be included in an SRO Rule
144A System during any period in which such Securities are Legally or
Contractually Restricted Securities, such Securities shall no longer be eligible
for DTC's services. Furthermore, DTC may discontinue providing its services as
securities depository with respect to the Securities at any time by giving
reasonable notice to Issuer or Agent. Under any of the aforementioned
circumstances, at DTC's request, Issuer and Agent shall cooperate fully with DTC
by taking appropriate action to make available one or more separate certificates
evidencing Securities to any Participant having Securities credited to its DTC
accounts .
- ----------
/1/ A "Legally Restricted Security" is a security that is a restricted
security, as defined in Rule 144(a)(3). A "Contractually Restricted Security" is
a security that upon issuance and continually thereafter can only be sold
pursuant to Regulation S under the Securities Act, Rule 144A, Rule 144, or in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4 of the Securities Act and not involving any public
offering; provided, however, that once the security is sold pursuant to the
provisions of Rule 144, including Rule 144(k), it will thereby cease to be a
"Contractually Restricted Security." For purposes of this definition, in order
for a depositary receipt to be considered a "Legally or Contractually Restricted
Security," the underlying security must also be a "Legally or Contractually
Restricted Security."
<PAGE>
4. Issuer and Agent acknowledge that so long as Cede & Co. is a record
owner of the Securities, Cede & Co. shall be entitled to all applicable voting
rights and to receive the full amount of all distributions payable with respect
thereto. Issuer and Agent acknowledge that DTC shall treat any DTC Participant
("Participant") having Securities credited to its DTC accounts as entitled to
the full benefits of ownership of such Securities. Without limiting the
generality of the preceding sentence, Issuer and Agent acknowledge that DTC
shall treat any Participant having Securities credited to its DTC accounts as
entitled to receive distributions (and voting rights, if any) in respect to
Securities, and to receive from DTS certificates evidencing Securities, Issuer
and Agent recognize that DTC does not in any way undertake to, and shall not
have any responsibility to, monitor or ascertain the compliance of any
transactions in the Securities with any of the provisions: (a) of Rule 144A; (b)
of other exemptions from registration under the Securities Act or of any other
state or federal securities laws; or (c) of the offering document.
<PAGE>
[LOGO OF DTC]
REPRESENTATIONS FOR DEPOSIT/WITHDRAWAL AT CUSTODIAN ("DWAC") --
to be included in DTC Letter of Representations
-----------------------------------------------
The Security certificate(s) shall remain in Agent's custody as a
"Balance Certificate" subject to the provisions of the Balance Certificate
Agreement between Agent and DTC currently in effect.
On each day on which Agent is open for business and on which it receives
an instruction originated by a Participant through DTC's Deposit/Withdrawal at
Custodian ("DWAC") system to increase the Participant's account by a specified
number of shares, units, or obligations (a "Deposit Instruction"), Agent shall,
before 6:30 p.m. (Eastern Time) that day, either approve or cancel the Deposit
Instruction through the DWAC system.
On each day on which Agent is open for business and on which it receives
an instruction originated by a Participant through the DWAC system to decrease
the Participant's account by a specified number of shares, units, or obligations
(a "Withdrawal Instruction"), Agent shall, before 6:30 p.m. (Eastern Time) that
day, either approve or cancel the Withdrawal Instruction through the DWAC
system.
Agent agrees that its approval of a Deposit or Withdrawal Instruction
shall be deemed to be the receipt by DTC of a new, reissued or reregistered
certificated security on registration of transfer to the name of Cede & Co. for
the quantity of Securities evidenced by the Balance Certificate after the
Deposit or Withdrawal Instruction is effected.
<PAGE>
[LOGO OF DTC]
REPRESENTATIONS FOR SECURITIES ELIGIBLE FOR TRANSFER
PURSUANT TO REGULATION S
WHERE ISSUER HAS REQUESTED A TEMPORARY "CHILL"
ON DELIVER ORDERS --
to be included in DTC Letter of Representations
-----------------------------------------------
Issuer has requested that, with respect to the Securities that are
eligible for transfer pursuant to Regulation S, which have been identified by a
separate CUSIP number (the "Regulation S Securities"), DTC not effect book-entry
deliveries (except deliveries via DTC's DWAC system in Participant accounts
maintained by the banks that act as depositaries for Cedel and Euroclear) until
______________________, 199_ [, or--if not specified--until further notice in
the manner set forth below].
In the event that Issuer desires an extension or shortening of this
"Deliver Order Chill," Issuer or Agent shall send DTC a notice requesting that
the Deliver Order Chill be eliminated as of a specified date. Such notice shall
be sent to DTC by a secure means (e.g., legible telecopy, registered or
certified mail, overnight delivery) in a timely manner designed to assure that
such notice is in DTC's possession no later than the close of business two
business days prior to the date specified for elimination of the Deliver Order
Chill. If sent by telecopy, such notice shall be sent to (212) 344-1531 or (212)
855-3728. Issuer or Agent shall confirm DTC's receipt of such telecopy by
telephoning DTC's Underwriting Department at (212) 855-3731. If delivered by
hand or sent by mail or overnight delivery, such notice shall be sent to:
Manager; Eligibility Section
Underwriting Department
The Depository Trust Company
55 Water Street, 19th Floor
New York, NY 10041-0099
<PAGE>
[LOGO OF DTC]
Representations for Change of Control Provision
To be included in DTC Letter of Representations
-----------------------------------------------
It is understood that if the holders of the Securities shall at any time
have the right to tender the Securities to Issuer and require that Issuer
repurchase such holder's Securities pursuant to the Document and Cede & Co., as
nominee of DTC, or its registered assigns, as the record owner, is entitled to
tender the Securities, such tenders will be effected by means of DTC's Repayment
Option Procedures. Under the Repayment Option Procedures, DTC will receive
during the applicable tender period instructions from its Participants to tender
Securities for purchase. The undersigned agree that such tender for purchase may
be made by DTC by means of a book-entry credit of such Securities to the account
of Trustee, as agent for Issuer, provided that such credit is made on or before
the final day of the applicable tender period. DTC agrees that promptly after
the recording of any such book-entry credit, it will provide to Trustee, as
agent for Issuer, an Agent Receipt and Confirmation or the equivalent in
accordance with the Repayment Option Procedures; identifying the Securities and
the aggregate principal amount thereof as to which such tender for purchase has
been made.
Trustee or Issuer shall send DTC a notice regarding such optional tender
by hand or by a secure means (e.g. legible facsimile transmission, registered or
certified mail, overnight delivery) in a timely manner designed to assure that
such notice is in DTC's possession no later than the close of business two
business days before the Publication Date. The Publication Date shall be not
less than 15 days prior to the expiration date of the applicable tender period.
Such notice shall state whether any partial redemption of the Securities is
scheduled to occur during the applicable optional tender period.
If delivered by hand or sent by mail or overnight delivery, such notice
shall be sent to:
Supervisor, Put Bond Unit
Reorganization Department
The Depository Trust Company
7 Hanover Square - 23rd Floor
New York, NY 10004-2695
If sent by facsimile transmission, such notice shall be sent to (212)
709-6895. Trustee or Issuer shall confirm DTC's receipt of such facsimile
transmission by telephoning (212) 709-1470.
<PAGE>
EXHIBIT F
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
______________, ______
Marine Midland Bank, as Registrar
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Department-Transtel
Re: Transtel Pass Through Trust 12 1/2%
Certificates due 2007 (the "Certificates")
Ladies and Gentlemen:
In connection with our proposed purchase of $______________
aggregate principal amount of the Certificates, we confirm that:
1. We understand that any subsequent transfer of the
Certificates is subject to certain restrictions and conditions set forth in
the Pass Through Trust Agreement dated as of _________ __, 1997 relating to
the Certificates and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Certificates except in compliance
with, such restrictions and conditions and the Securities Act of 1933, as
amended (the "Securities Act").
2. We understand that the Certificates have not been
registered under the Securities Act, and that the Certificates may not be
offered or sold except as permitted in the following sentence. We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Certificates within two
years after the original issuance of the Certificates, we will do so only
(A) to the Company or any subsidiary thereof, (B) inside the United States
in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined therein), (C) inside the United States to
an "institutional accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S. broker-
dealer) to you a signed letter substantially in the form of this letter,
(D) outside the United States in accordance with Rule 904 of Regulation S
under the Securities Act, (E) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (F)
pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing any of the
Certificates from us a notice advising such purchaser that resales of the
Certificates are restricted as stated herein.
F-1
<PAGE>
3. We understand that, on any proposed resale of any
Certificates, we will be required to furnish to you and the Company such
certification, written legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the
Certificates purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Certificates, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment, as
the case may be.
5. We are acquiring the Certificates purchased by us for our
own account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You, the Trust, the Pass Through Trustee, the Company and
counsel for 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.
Very truly yours,
[Name of Transferee]
By:______________________________
Authorized Signature
F-2
<PAGE>
EXHIBIT G
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
______________, ______
Marine Midland Bank, as Registrar
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Department-Transtel
Re: Transtel Pass Through Trust 12 1/2% Certificates due 2007 (the
"Certificates")
Ladies and Gentlemen:
In connection with our proposed sale of $_______________ aggregate principal
amount of the Certificates, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Certificates was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed 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;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Senior Notes.
G-1
<PAGE>
You, the Trust, the Pass Through Trustee, the Company and counsel for 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
G-2
<PAGE>
EXHIBIT H
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO RULE 144A
______________, ______
Marine Midland Bank, as Registrar
140 Broadway, 12th Floor
New York, New York 10005
Attention: Corporate Trust Department-Transtel
Re: Transtel Pass Through Trust 12 1/2% Certificates (the "Certificates")
Ladies and Gentlemen:
In connection with our proposed sale of $_______________ aggregate
principal amount of the Certificates, we confirm that such sale has been
effected pursuant to and in accordance with Rule 144A under the U.S. Securities
Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent
that:
(1) the Certificates are being transferred to a person that the
undersigned and any person acting on its behalf reasonably believe is a
"qualified institutional buyer" within the meaning of Rule 144A, acquiring
for its own account or for the account of a qualified institutional buyer;
and
(2) the undersigned and any person acting on its behalf have taken
reasonable steps to ensure that the transferee is aware that the
undersigned may be relying on Rule 144A in connection with the transfer.
You, the Trust, the Pass Through Trustee, the Company and counsel for 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
H-1
<PAGE>
SCHEDULE I
Description of Senior Notes to be Purchased:
<TABLE>
<CAPTION>
CERTIFICATE NO. PRINCIPAL AMOUNT MATURITY DATE INTEREST RATE
-------------- ---------------- ------------- -------------
<S> <C> <C> <C>
1 $116,950,000 November 1, 2007 12 1/2%
1 $ 33,050,000 November 1, 2007 12 1/2%
</TABLE>
SI-1
<PAGE>
EXHIBIT 4.6
ESCROW AND DISBURSEMENT AGREEMENT
This ESCROW AND DISBURSEMENT AGREEMENT (this "Agreement"), dated as of
---------
October 28, 1997, among Marine Midland Bank, as escrow agent (in such capacity,
the "Escrow Agent"), Marine Midland Bank, as Indenture Trustee (in such
------------
capacity, the "Indenture Trustee") under the Indenture (as defined herein), and
-----------------
Transtel S.A., a Colombian corporation (the "Company").
-------
RECITALS
A. Pursuant to the Indenture, dated as of October 28, 1997 (the
"Indenture"), between the Company and the Indenture Trustee, the Company is
---------
issuing $150,000,000 aggregate principal amount of its 12 1/2% Senior Secured
Notes due 2007 (the "Notes").
-----
B. As security for its obligations under the Notes and the
Indenture, including, in the case of the Refinancing Account (as defined herein)
its obligation to refinance the Other Existing Indebtedness, the Company hereby
grants to the Indenture Trustee, for the exclusive benefit of the holders of the
Notes, a valid and enforceable first priority lien and security interest,
subject to and pending disbursement pursuant to this Agreement, in the Escrow
Account (as defined herein) and the Refinancing Account (as defined herein).
C. Whereas the Escrow Account and Refinancing Account each
constitute a "securities account" as defined in Article 8 of the UCC (as defined
herein) and the parties hereto intend that the Indenture Trustee obtain
"control", as such term is defined in the UCC, over the Escrow Account and the
Refinancing Account and all of the assets within such accounts.
D. The parties have entered into this Agreement in order to set
forth the conditions upon which, and the manner in which, funds will be
disbursed from the Escrow Account and the Refinancing Account and released from
the security interest and lien described above.
<PAGE>
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. In addition to any other defined terms used
-------------
herein, the following terms shall constitute defined terms for purposes of this
Agreement and shall have the meanings set forth below. Any term not defined
herein shall have the meaning assigned to such term in the Indenture.
"Account Statement" shall have the meaning given in Section 2(f)
-----------------
hereof.
"Accounts" means the Escrow Account and the Refinancing Account.
--------
"Affiliate" of any specified person means (i) any other person which,
---------
directly or indirectly, is in control of, is controlled by or is under common
control with such specified person or (ii) any other person who is a director or
officer (A) of such specified person, (B) of any subsidiary of such specified
person or (C) of any person described in clause (i) above or (iii) any person in
which such person has, directly or indirectly, a 5% or greater voting or
economic interest or the power to control. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management or policies of such person whether through the
ownership of voting securities or by contract or otherwise and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applied" means that disbursed funds have been applied (A) in the case
-------
of the Escrow Account, (i) to the payment of interest on the Notes, (ii) to the
payment of principal of and premium, if any, on the Notes, upon a repurchase or
redemption thereof in accordance with Sections 3.07, 4.12 or 4.18 of the
Indenture; or (iii) to any combination of the foregoing and (B) in the case of
the Refinancing Account, to the payment of Other Existing Indebtedness.
"Business Day" means any day excluding Saturday, Sunday and any day
------------
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close.
"Collateral" shall have the meaning given in Section 6(a) hereof.
----------
"Eligible Institution" means a commercial banking institution that has
--------------------
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" (or higher) according to Standard &
Poor's ("S&P")
-2-
<PAGE>
or Moody's Investors Service, Inc. ("Moody's") at the time as of which any
investment or rollover therein is made.
"Escrow Account" shall mean an escrow account established pursuant to
--------------
Section 2 hereof.
"Escrow Account Available Funds" means (A) the sum of (i) the Initial
------------------------------
Escrow Amount and (ii) interest earned or dividends paid on the funds in the
Escrow Account (including holdings of Marketable Securities), less (B) the
aggregate disbursements previously made pursuant to this Agreement.
"Escrow Account Payment Notice and Disbursement Request" means a
------------------------------------------------------
notice sent or delivered by the Indenture Trustee to the Escrow Agent notifying
the Escrow Agent of an upcoming Interest Payment Date or other payment date in
respect of the Notes and requesting a disbursement, in substantially the form of
Exhibit A hereto. Each Escrow Account Payment Notice and Disbursement Request
shall be signed by an officer of the Indenture Trustee designated in a
certificate of the Indenture Trustee setting forth specimen signatures of
authorized officers delivered to the Escrow Agent.
"Initial Escrow Amount" shall mean $35 million of the net proceeds
---------------------
from the offering of the Notes.
"Initial Refinancing Account Escrow Amount" shall mean $32,767,036 of
-----------------------------------------
the net proceeds from the offering of the Notes.
"Interest Payment Date" means May 1 and November 1 of each year,
---------------------
commencing on May 1, 1998.
"Issue Date" means October 28, 1997.
----------
"Marketable Securities" means
---------------------
(i) U.S. Government Securities maturing not more than two years
after the date of acquisition;
(ii) any certificate of deposit maturing not more than 270 days
after the date of acquisition issued by, or time deposit of, an Eligible
Institution;
(iii) commercial paper maturing not more than 270 days after the date
of acquisition issued by a corporation (other than an Affiliate of the
Company)
-3-
<PAGE>
with a rating, at the time as of which any investment therein is made, of
"A-1" (or higher) according to S&P or "P-1" (or higher) according to
Moody's;
(iv) any banker's acceptances or money market deposit accounts
issued or offered by an Eligible Institution; and
(v) any fund investing exclusively in investments of the types
described in clauses (i) through (iv) above.
"Other Existing Indebtedness" means indebtedness outstanding on the
---------------------------
Issue Date owed to various financial institutions by the Company, and listed in
Schedule 1 hereto.
"Refinancing Account" shall mean an escrow account established
-------------------
pursuant to Section 2 hereof.
"Refinancing Account Available Funds" means (A) the sum of (i) the
-----------------------------------
Initial Refinancing Account Escrow Amount and (ii) interest earned or dividends
paid on the funds in the Refinancing Account (including holdings of Marketable
Securities), less (B) the aggregate disbursements previously made pursuant to
this Agreement.
"Refinancing Account Payment Notice and Disbursement Request" means a
-----------------------------------------------------------
notice sent by the Company to the Escrow Agent notifying the Escrow Agent of an
upcoming refinancing of Other Existing Indebtedness and requesting a
disbursement, in substantially the form of Exhibit B hereto. Each Refinancing
Account Payment Notice and Disbursement Request shall be signed by an officer of
the Company designated in a certificate of the Company setting forth specimen
signatures of authorized officers delivered to the Escrow Agent.
"UCC" means the Uniform Commercial Code as enacted in the State of New
---
York on the date hereof.
2. Accounts; Escrow Agent.
----------------------
(a) Appointment of Escrow Agent. The Company and the Indenture
---------------------------
Trustee hereby appoint the Escrow Agent, and the Escrow Agent hereby accepts
appointment, as escrow agent, under the terms and conditions of this Agreement.
(b) (A) Establishment of Escrow Account. Concurrently with the
-------------------------------
execution and delivery of this Agreement, the Escrow Agent shall establish the
Escrow Account at its office located at 140 Broadway, New York, N.Y. 10005.
Subject to the
-4-
<PAGE>
terms and conditions of this Agreement, all funds accepted by the Escrow Agent
for deposit in the Escrow Account pursuant to this Agreement shall be held for
the exclusive benefit of the Indenture Trustee. All such funds shall be held in
the Escrow Account until disbursed in accordance with the terms hereof. The
Escrow Account shall be held by the Escrow Agent and all amounts held in the
Escrow Account shall be held for the exclusive benefit of the Indenture Trustee.
Concurrently with the execution and delivery of this Agreement, the Company
shall deliver the Initial Escrow Amount to the Escrow Agent for deposit into the
Escrow Account against the Escrow Agent's written acknowledgment and receipt of
the Initial Escrow Amount. The Company and the Escrow Agent hereby agree that
all cash held in the Escrow Account shall be deemed a "financial asset" as
defined in Article 8-102 of the UCC.
(B) Establishment of Refinancing Account. Concurrently with the
------------------------------------
execution and delivery of this Agreement, the Escrow Agent shall establish the
Refinancing Account at its office located at 140 Broadway, New York, N.Y. 10005.
Subject to the terms and conditions of this Agreement, all funds accepted by the
Escrow Agent for deposit in the Refinancing Account pursuant to this Agreement
shall be held for the exclusive benefit of the Indenture Trustee. All such funds
shall be held in the Refinancing Account until disbursed in accordance with the
terms hereof. The Refinancing Account shall be held by the Escrow Agent. All the
amounts held in the Refinancing Account shall be held for the exclusive benefit
of the Indenture Trustee. Concurrently with the execution and delivery of this
Agreement, the Company shall deliver the Initial Refinancing Amount to the
Escrow Agent for deposit into the Refinancing Account against the Escrow Agent's
written acknowledgment and receipt of the Initial Refinancing Account Escrow
Amount. The Company and the Escrow Agent hereby agree that all cash held in the
Refinancing Account shall be deemed a "financial asset" as defined in Article 8-
102 of the UCC.
(c) Escrow Agent Compensation. The Company shall pay to the Escrow
-------------------------
Agent such compensation for services to be performed by it under this Agreement
as the Company and the Escrow Agent may agree in writing from time to time. The
Escrow Agent shall be entitled to disburse from the Accounts all such amounts
due to the Escrow Agent as agreed upon by the Company and the Escrow Agent
(including the reasonable expenses described in the next succeeding paragraph).
The Escrow Agent shall disburse such amounts due to the Escrow Agent, if any,
from the Escrow Account and the Refinancing Account on a pro rata basis.
--- ----
The Company shall reimburse the Escrow Agent upon request for all
reasonable expenses, disbursements, and advances incurred or made by the Escrow
Agent in implementing any of the provisions of this Agreement, including
compensation and the reasonable expenses and disbursements of its counsel,
except any such expense,
-5-
<PAGE>
disbursement, or advance as may arise from the Company's gross negligence or
willful misconduct.
(d) Investment of Funds in Accounts. Funds deposited in the Accounts
-------------------------------
shall be invested and reinvested upon the following terms and conditions:
(i) Acceptable Investments. All funds deposited in the Accounts
----------------------
shall be initially invested by the Escrow Agent in cash items (including,
without limitation, interest bearing deposit accounts) and Marketable
Securities in accordance with the Company's written instructions to the
Escrow Agent. Upon the deposit of funds in the Escrow Account or the
Refinancing Account, as the case may be, a book entry shall indicate that a
"financial asset" as defined in Article 8-102 of the UCC has been credited
to the Escrow Account or the Refinancing Account, as the case may be, or
the Escrow Agent shall accept such financial asset for credit to the Escrow
Account or the Refinancing Account, as the case may be. Thereafter, the
Escrow Agent shall invest all funds (including proceeds of any such
investments at maturity and interest earned and dividends paid on any such
investments) in the Accounts in cash items or Marketable Securities
designated by the Company in writing from time to time and shall credit
such financial assets in accordance with the immediately preceding
sentence. All Marketable Securities shall be assigned to and held in the
possession of the Escrow Agent for the exclusive benefit of the Indenture
Trustee, or, in the case of Marketable Securities maintained in book entry
form with the Federal Reserve Bank, transferred to a book entry account in
the name of The Bank of New York for the benefit of the Escrow Agent, to be
held by the Escrow Agent for the exclusive benefit of the Indenture Trustee
(subject to Section 3 and Section 5), with such guarantees as are
customary, except that Marketable Securities maintained in book entry form
with the Federal Reserve Bank shall be transferred to a book entry account
in the name of The Bank of New York for the benefit of the Escrow Agent, to
be held by the Escrow Agent for the exclusive benefit of the Indenture
Trustee, at the Federal Reserve Bank that includes only Marketable
Securities held by the Escrow Agent for its customers and segregated by
separate recordation in the books and records of the Escrow Agent, subject
to the provisions of Section 5 hereof.
(ii) Upon (x) the deposit of the Initial Refinancing Account Escrow
Amount and the Initial Escrow Amount, (y) the purchase of any Marketable
Securities using amounts on deposit in the Accounts (including proceeds of
Marketable Securities), or (z) the disposition of any Marketable
Securities, the Escrow Agent shall be deemed to have made the following
representations and agreements:
-6-
<PAGE>
(a) the Escrow Agent is a "securities intermediary" as defined in
Article 8 of the UCC and is acting in that capacity, (b) the Escrow
Agent has maintained and will continue to maintain the accounts in
accordance with Section 2 hereof, (c) each of the Accounts is a
"securities account" as defined in Article 8 of the UCC and the
Escrow Agent will treat the other parties hereto as entitled to
exercise the rights that comprise the "financial assets" (as
defined in Article 8 of the UCC) credited to either of the Accounts
from time to time in accordance with this Agreement, (d) the Escrow
Agent will treat any and all cash, securities and other property
held in or credited to either of the Accounts from time to time as
"financial assets" under Article 8 of the UCC, (e) until the Escrow
Agent has received notice from the Indenture Trustee that the
security interest granted pursuant to Section 6 hereof has been
released, the Escrow Agent will maintain each of the Accounts in
the name of the Indenture Trustee so that the Indenture Trustee
will become an "entitlement holder" as defined in Article 8 of the
UCC, and (f) until the Escrow Agent has received notice from the
Indenture Trustee that the security interest granted pursuant to
Section 6 hereof has been released, the Escrow Agent will comply
with any and all "entitlement orders" (as defined in Article 8 of
the UCC) originated by the Indenture Trustee with respect to any
and all of the Collateral without the future consent by the Company
or any other person.
(iii) Interest and Dividends. All interest earned and dividends
----------------------
paid on funds invested in Marketable Securities shall be deposited in the
respective Accounts as additional Collateral for the exclusive benefit of
the Indenture Trustee (subject to Section 3 and Section 5) and shall be
reinvested in accordance with the terms hereof at the Company's written
instruction.
(iv) Limitation on Escrow Agent's Responsibilities. The Escrow
---------------------------------------------
Agent's sole responsibilities under this Section 2 shall be (A) to retain
possession of certificated Marketable Securities (except, however, that the
Escrow Agent may surrender possession to the issuer of any such Marketable
Security for the purposes of affecting assignment, crediting interest, or
reinvesting such security or reducing such security to cash) and to be the
registered or designated owner of Marketable Securities which are not
cer tificated, (B) to follow the Company's written instructions given in
accordance with Section 2(d)(i) hereof, (C) to invest and reinvest funds
pursuant to and in accordance with this Section 2(d) and (D) to use
reasonable efforts to reduce to
-7-
<PAGE>
cash such Marketable Securities as may be required to fund any disbursement
in accordance with Section 3 hereof. In connection with clause (A) above,
the Escrow Agent will maintain continuous possession in the State of New
York of certificated Marketable Securities and cash included in the
Collateral and will cause uncertificated Marketable Securities to be
registered in the book-entry system of, and transferred to an account in
the name of The Bank of New York for the benefit of the Escrow Agent, to be
held by the Escrow Agent for the exclusive benefit of the Indenture
Trustee, at the Federal Reserve Bank.
(e) Substitution of Escrow Agent. The Escrow Agent may resign by
----------------------------
giving not less than 30 days prior written notice to the Company and the
Indenture Trustee. Such resignation shall take effect upon the later to occur of
(i) delivery of all funds and Marketable Securities maintained by the Escrow
Agent hereunder and copies of all books, records, plans and other documents in
the Escrow Agent's possession relating to such funds or Marketable Securities or
this Agreement to a successor escrow agent mutually approved by the Company and
the Indenture Trustee (which approvals shall not be unreasonably withheld) and
(ii) the Company, the Indenture Trustee and such successor escrow agent entering
into this Agreement or any written successor agreement no less favorable to the
interests of the holders of the Notes and the Indenture Trustee than this
Agreement; and the Escrow Agent shall thereupon be discharged of all obligations
under this Agreement and shall have no further duties, obligations or
responsibilities in connection herewith. If a successor escrow agent has not
been appointed or has not accepted such appointment within 30 days after notice
of resignation is given to the Company, the Escrow Agent may apply to a court of
competent jurisdiction for the appointment of a successor escrow agent.
(f) Account Statement. Each month, the Escrow Agent shall deliver to
-----------------
the Company and the Indenture Trustee a statement signed by the Escrow Agent in
a form satisfactory to the Company and the Indenture Trustee setting forth with
reasonable particularity the balance of funds then in each Account and the
manner in which such funds are invested (each an "Account Statement"). The
-----------------
parties hereto irrevocably instruct the Escrow Agent that on the first date upon
which the balance in any Account (including the holdings of all Marketable
Securities) is reduced to zero, the Escrow Agent shall deliver to the Company
and to the Indenture Trustee a notice that the balance in such Account has been
reduced to zero.
(g) Covenants of the Escrow Agent. The Escrow Agent hereby covenants
-----------------------------
and agrees that the Escrow Agent shall (i) treat the Accounts as "securities
accounts" within the meaning of Article 8 of the UCC, and (ii) treat the other
parties hereto as entitled to exercise the rights that comprise the "financial
assets" within the meaning of Article 8 of the UCC) credited to either of the
Accounts from time to time.
-8-
<PAGE>
3. Disbursements.
-------------
(A) Escrow Account.
--------------
(a) Escrow Account Payment Notice and Disbursement Request;
-------------------------------------------------------
Disbursements. The Indenture Trustee shall, five (5) Business Days prior to an
- -------------
Interest Payment Date or to a date of redemption or repurchase pursuant to
Sections 3.07, 4.12 or 4.18 of the Indenture in respect of the Notes, submit to
the Escrow Agent a completed Escrow Account Payment Notice and Disbursement
Request substantially in the form of Exhibit A hereto. The Indenture Trustee
hereby agrees with the Company that prior to the Maturity Date (as defined in
the Indenture) it will deliver such Notice and that such subsequent release of
funds shall be credited as partial satisfaction of its payment obligations under
the Indenture.
The Escrow Agent's disbursement pursuant to any Escrow Account Payment
Notice and Disbursement Request shall be subject to the satisfaction of the
applicable conditions set forth in Section 3(A)(b) hereof. Provided such Escrow
Account Payment Notice and Disbursement Request is not rejected by it, the
Escrow Agent, within two (2) Business Days following receipt of such Escrow
Account Payment Notice and Disbursement Request, shall disburse the funds
requested in such Escrow Account Payment Notice and Disbursement Request by wire
or book-entry transfer of immediately available funds to the account of the
Indenture Trustee for the exclusive benefit of the holders of the Notes. The
Escrow Agent shall notify the Indenture Trustee as soon as reasonably possible
(but not later than two (2) Business Days from the date of receipt of the Escrow
Account Payment Notice and Disbursement Request) if any Escrow Account Payment
Notice and Disbursement Request is rejected and the reasons therefor. In the
event such rejection is based upon nonsatisfaction of the condition in Section
3(A)(b)(A) below, the Indenture Trustee shall thereupon resubmit the Escrow
Account Payment Notice and Disbursement Request with appropriate changes.
(b) Conditions Precedent to Disbursement. The Escrow Agent's payment
------------------------------------
of any disbursement shall be made only if: (A) the Indenture Trustee shall have
submitted, in accordance with the provisions of Section 3(A)(a) herein, a
completed Escrow Account Payment Notice and Disbursement Request to the Escrow
Agent substantially in the form of Exhibit A with blanks appropriately filled in
and (B) the Escrow Agent shall not have received any notice from the Indenture
Trustee that as a result of an Event of Default (as defined in the Indenture)
the indebtedness represented by the Notes has been accelerated and has become
due and payable (in which event the Escrow Agent shall apply all Escrow Account
Available Funds as required by Section 6(b)(vi) hereof).
-9-
<PAGE>
(c) Retired Notes. In the event a portion of the Notes has been
-------------
retired by the Company, funds representing four interest payments on the retired
Notes shall, upon the written request of the Company to the Escrow Agent and the
Indenture Trustee, be paid to the Company upon compliance with the release of
collateral provisions contained in Section 314(d) of the TIA and upon receipt of
a notice relating thereto from the Indenture Trustee.
(B) Refinancing Account.
-------------------
(a) Refinancing Account Payment Notice and Disbursement Request;
------------------------------------------------------------
Disbursements. The Company shall, five (5) Business Days prior to the payment
- -------------
of any portion of Other Existing Indebtedness, submit to the Escrow Agent a
completed Refinancing Account Payment Notice and Disbursement Request
substantially in the form of Exhibit B hereto.
The Escrow Agent's disbursement pursuant to any Refinancing Account Payment
Notice and Disbursement Request shall be subject to the satisfaction of the
applicable conditions set forth in Section 3(B)(b) hereof. Provided such
Refinancing Account Payment Notice and Disbursement Request is not rejected by
it, the Escrow Agent, within two (2) Business Days following receipt of such
Refinancing Account Payment Notice and Disbursement Request, shall disburse the
funds requested in such Refinancing Account Payment Notice and Disbursement
Request by wire or book-entry transfer of immediately available funds to the
account of the lender of the Other Existing Indebtedness as designated by the
Company. The Escrow Agent shall notify the Company as soon as reasonably
possible (but not later than two (2) Business Days from the date of receipt of
the Refinancing Account Payment Notice and Disbursement Request) if any
Refinancing Account Payment Notice and Disbursement Request is rejected and the
reasons therefor. In the event such rejection is based upon nonsatisfaction of
the condition in Section 3(B)(b)(A) below, the Company shall thereupon resubmit
the Refinancing Account Payment Notice and Disbursement Request with appropriate
changes.
(b) Conditions Precedent to Disbursement. The Escrow Agent's payment
------------------------------------
of any disbursement shall be made only if: (A) the Company shall have
submitted, in accordance with the provisions of Section 3(B)(a) herein, a
completed Refinancing Account Payment Notice and Disbursement Request to the
Escrow Agent substantially in the form of Exhibit B with blanks appropriately
filled in and (B) the Escrow Agent shall not have received any notice from the
Indenture Trustee that as a result of an Event of Default (as defined in the
Indenture) the indebtedness represented by the Notes has been accelerated and
has become due and payable (in which event the
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<PAGE>
Escrow Agent shall apply all Refinancing Account Available Funds as required by
Section 6(b)(vi) hereof).
4. Escrow Agent. Limitation of the Escrow Agent's Liability;
------------ -------------------------------------------
Responsibilities of the Escrow Agent. The Escrow Agent's responsibility and
- ------------------------------------
liability under this Agreement shall be limited as follows: (i) the Escrow
Agent does not represent, warrant or guaranty to the holders of the Notes from
time to time the performance of the Company; (ii) the Escrow Agent shall have no
responsibility to the Company or the holders of the Notes or the Indenture
Trustee from time to time as a consequence of performance by the Escrow Agent
hereunder, except for any gross negligence or willful misconduct of the Escrow
Agent; (iii) the Company shall remain solely responsible for all aspects of the
Company's business and conduct; and (iv) the Escrow Agent is not obligated to
supervise, inspect, or inform the Company or any third party of any matter
referred to above.
No implied covenants or obligations shall be inferred from this Agreement
against the Escrow Agent, nor shall the Escrow Agent be bound by provisions of
any agreement beyond the specific term hereof. Specifically and without
limiting the foregoing, the Escrow Agent shall in no event have any liability in
connection with its investment, reinvestment or liquidation, in good faith and
in accordance with the terms hereof, of any funds or Marketable Securities held
by it hereunder, including without limitation, any liability for any delay not
resulting from gross negligence or willful misconduct in such investment,
reinvestment or liquidation, or for any loss of principal or income incident to
any such delay.
The Escrow Agent shall be entitled to rely upon any judicial order or
judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Company or the
Indenture Trustee in compliance with the provisions of this Agreement without
being required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of service thereof. The Escrow Agent
may act in reliance upon any instrument comporting with the provisions of this
Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
At any time the Escrow Agent may request in writing an instruction in
writing from the Company, and may at its own option include in such request the
course of action it proposes to take and the date on which it proposes to act,
regarding any matter arising in connection with its duties and obligations
hereunder; provided, however, that the Escrow Agent shall state in such request
-------- -------
that it believes in good faith that such
-11-
<PAGE>
proposed course of action is consistent with another identified provision of
this Agreement. The Escrow Agent shall not be liable to the Company for acting
without the Company's consent in accordance with such a proposal on or after the
date specified therein if (i) the specified date is at least two (2) Business
Days after the Company receives the Escrow Agent's request for instructions and
its proposed course of action, and (ii) prior to so acting, the Escrow Agent has
not received the written instructions requested from the Company.
The Escrow Agent may act pursuant to the written advice of counsel chosen
by it with respect to any matter relating to this Agreement and (subject to
Section 4(ii)) shall not be liable for any action taken or omitted in accordance
with such advice.
The Escrow Agent shall not be called upon to advise any party as to selling
or retaining, or taking or refraining from taking any action with respect to,
any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement with
respect to any funds or property deposited hereunder, the Escrow Agent shall be
entitled to refuse to comply with any and all claims, demands or instructions
with respect to such property or funds, and the Escrow Agent shall not be or
become liable for its failure or refusal to comply with conflicting claims,
demands or instructions. The Escrow Agent shall be entitled to refuse to act
until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, or the Escrow Agent shall have received security or an indemnity
satisfactory to the Escrow Agent sufficient to save the Escrow Agent harmless
from and against any and all loss, liability or expense which the Escrow Agent
may incur by reason of its acting. The Escrow Agent may in addition elect in
its sole option to commence an interpleader action or seek other judicial relief
or orders as the Escrow Agent may deem necessary.
No provision of this Agreement shall require the Escrow Agent to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder.
5. Indemnity. The Company shall indemnify, hold harmless and defend the
---------
Escrow Agent and its directors, officers, agents, employees and controlling
persons, from and against any and all claims, actions, obligations, liabilities
and expenses, including defense costs, investigative fees and costs, legal fees,
and claims for damages, arising from the Escrow Agent's performance under this
Agreement, except to the extent that such liability, expense or claim is
attributable to the gross negligence or
-12-
<PAGE>
willful misconduct of any of the foregoing persons. In connection with any
claim, action, obligation, liability or expense for which indemnification is
sought by the Escrow Agent hereunder, the Escrow Agent shall be entitled to
recover its costs from funds available in the each Account as provided in
Section 2(c), provided, however, that the Company agrees to pay such costs if
-------- -------
funds in any Account are insufficient. The provisions of this Section shall
survive any termination, satisfaction or discharge of this Agreement as well as
the resignation or removal of the Escrow Agent.
6. Grant of Security Interest; Instructions to Escrow Agent.
--------------------------------------------------------
(a) The Company hereby irrevocably grants a valid and
enforceable first priority security interest in, pledges, assigns and sets over
to the Indenture Trustee all of the Company's right, title and interest in and
to each Account, all funds held therein and all Marketable Securities held by
(or otherwise maintained in the name of) the Escrow Agent pursuant to Section 2
hereof, any and all financial assets and security entitlements of the Company in
any and all of the foregoing, any and all rights of the Company under this
Agreement and any and all proceeds of any and all of the foregoing
(collectively, the "Collateral"), in order to secure all obligations and
----------
indebtedness of the Company under the Notes and any other obligation, now or
hereafter arising, of every kind and nature, owed by the Company under the
Indenture to the holders of the Notes or to the Indenture Trustee. The Company
shall take all reasonable actions necessary on its part to insure the
continuance of a valid and enforceable first priority perfected security
interest in the Collateral in favor of the Indenture Trustee in order to secure
all such obligations and indebtedness.
(b) The Company and the Indenture Trustee hereby irrevocably
instruct the Escrow Agent to, and the Escrow Agent will (i) hold all funds in
each Account for the exclusive benefit of the Indenture Trustee to the extent
specifically required herein, (ii) maintain, or cause its agent within the State
of New York to maintain, possession of all certificated Marketable Securities
purchased hereunder that are physically possessed by the Escrow Agent in order
for the Indenture Trustee to enjoy a continuous valid and enforceable first
priority perfected security interest therein under the law of the State of New
York (the Company hereby agreeing that in the event any certificated Marketable
Securities are in the possession of the Company or a third party, the Company
shall use its best efforts to deliver all such certificates to the Escrow
Agent), (iii) take all steps set forth in the opinion of counsel described in
paragraph (a) above to cause the Indenture Trustee to enjoy a continuous valid
and enforceable first priority perfected security interest under the New York
Uniform Commercial Code and any applicable law of the State of New York in all
Marketable Securities purchased hereunder that are not certificated and (iv)
maintain
-13-
<PAGE>
the Collateral free and clear of all liens, security interests, safekeeping or
other charges, demands and claims against the Escrow Agent of any nature now or
hereafter existing in favor of anyone other than the Indenture Trustee; (v)
promptly notify the Indenture Trustee if the Escrow Agent receives written
notice that any person other than the Indenture Trustee has a lien or security
interest upon any portion of the Collateral (other than any claim which Escrow
Agent may have against any Account for unpaid fees and expenses) and (vi) in
addition to disbursing amounts held in escrow pursuant to any Escrow Account
Payment Notice and Disbursement Request given to it by the Indenture Trustee or
any Refinancing Account Payment Notice and Disbursement Request given to it by
the Company, in each case pursuant to Section 3, upon receipt of written notice
from the Indenture Trustee of the acceleration of the maturity of the Notes or
the failure by the Company to pay principal on the Notes, and direction from the
Indenture Trustee to disburse all Available Funds to the Indenture Trustee, as
promptly as practicable, after following the procedures set forth in the fourth
paragraph of Section 4(a), disburse all funds held in each Account to the
Indenture Trustee and transfer title to all Marketable Securities held by the
Escrow Agent hereunder to the Indenture Trustee. The lien and security interest
provided for by this Section 6 shall automatically terminate and cease as to,
and shall not extend or apply to, and the Indenture Trustee shall have no
security interest in, any funds disbursed by the Escrow Agent to the Company
pursuant to this Agreement. The Escrow Agent shall act solely as the Indenture
Trustee's agent in connection with the duties under this Section 6,
notwithstanding any other provision contained in this Agreement, without any
right to receive compensation from the Indenture Trustee and without any
authority to obligate the Indenture Trustee or to compromise or pledge its
security interest hereunder.
(c) Any money and Marketable Securities collected by the
Indenture Trustee pursuant to Section 6(b) shall be applied as provided in the
Indenture.
(d) Upon demand, the Company will execute and deliver to the
Indenture Trustee such instruments and documents as the Indenture Trustee may
reasonably deem necessary or advisable to maintain or perfect the rights of the
Indenture Trustee under this Agreement and the Indenture Trustee's interest in
the Collateral. The Indenture Trustee will take all necessary action to preserve
and protect the security interest created hereby as a valid and enforceable
first priority perfected lien and encumbrance upon the Collateral.
(e) The Company hereby appoints the Indenture Trustee as its
attorney-in-fact effective upon and during the continuance of an Event of
Default under the Indenture with full power of substitution to do any act which
the Company is obligated hereto to do, and the Indenture Trustee may exercise
such rights as the
-14-
<PAGE>
Company might exercise with respect to the Collateral and to take any action in
the Company's name to protect the Indenture Trustee's security interest
hereunder.
(f) (i) Notwithstanding the provisions of Section 2(d), (x) until the
Escrow Agent has received notice from the Indenture Trustee that its security
interest in the rights and assets in the Escrow Account or the Refinancing
Account has been released, an authorized officer of Indenture Trustee may give
any written instructions of any kind or character in regard to the Escrow
Account or the Refinancing Account or any securities or other assets in the
Escrow Account or the Refinancing Account (including, without limitation,
instructions and orders with respect to the sale, or other disposition, transfer
or redemption of any securities or other assets in the Escrow Account or the
Refinancing Account), and the Escrow Agent agrees to comply with such
instructions without further action or consent by the Company or Indenture
Trustee; (y) with respect to any instructions given in accordance with this
Section 2(f) it is hereby understood and agreed that the Escrow Agent shall have
no duty nor authority whatsoever of any kind of character to determine whether
or not such instructions, or any certification or other statement contained
therein, are correct or given in conformity with the Indenture Trustee's rights
pursuant to any other agreement, nor to seek conformity with the Indenture
Trustee's rights pursuant to any other agreement, nor to seek confirmation
thereof from the Company or the Indenture Trustee; and (z) pursuant to this
Section 2(f), the Indenture Trustee hereby instructs the Escrow Agent to credit
any proceeds, income, distributions (in cash or in kind) and any other amounts
or property deriving from any securities or other property in the Escrow Account
or the Refinancing Account, as the case may be, to the Escrow Account or the
Refinancing Account, as the case may be, and to hold all money or cash credited
(or required to be credited) to the Escrow Account or the Refinancing Account,
as the case may be, as Collateral hereunder, and the Escrow Agent hereby agrees
that it will comply with such instruction absent any instructions from the
Indenture Trustee to the contrary.
(g) By this Agreement the Company and Indenture Trustee intend and
agree that the Indenture Trustee has obtained "control" (within the meaning of
Section 8-106(d) of the UCC of the Escrow Account and the Refinancing Account
and the respective assets in the Escrow Account and the Refinancing Account.
(h) Until the Escrow Agent has received notice from the Indenture
Trustee that its security interest in the Collateral has been released, the
Escrow Agent shall not exercise any right of combination, consolidation, merger
or set-off which the Escrow Agent may have in respect of any Collateral.
-15-
<PAGE>
7. Termination. This Agreement shall terminate automatically ten (10)
-----------
days following disbursement of all funds remaining in each Account (including
Marketable Securities), unless sooner terminated by agreement of the parties
hereto (in accordance with the terms hereof and not in violation of the
Indenture); provided, however, that the obligations of the Company under Section
-------- -------
5 (and any existing claims thereunder) shall survive termination of this
Agreement or the resignation of the Escrow Agent; and provided further, that
-------- -------
until such tenth day, the Company will cause this Agreement (or any permitted
successor agreement) to remain in effect and will cause there to be an escrow
agent (including any permitted successor thereto) acting hereunder (or under any
such permitted successor agreement).
8. Miscellaneous.
-------------
(a) Waiver. Any party hereto may specifically waive any breach
------
of this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is in writing, signed by the waiving party and
specifically designating the breach waived, nor shall any such waiver constitute
a continuing waiver of similar or other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of
----------
the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties
----------
hereto, and the rights and duties of any party hereunder shall not be assignable
except with the prior written consent of the other parties. Notwithstanding the
foregoing, this Agreement shall inure to and be binding upon the parties and
their successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and
-------
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof; provided, however, that the holders of the Notes and their
-------- -------
permitted assigns shall be entitled to the benefits hereof and to enforce this
Agreement.
(e) Time. Time is of the essence of each provision of this
----
Agreement.
-16-
<PAGE>
(f) Entire Agreement; Amendments. This Agreement and the
----------------------------
Indenture contain the entire agreement among the parties with respect to the
subject matter hereof and supersede any and all prior agreements, understandings
and commitments, whether oral or written. This Agreement may be amended only by
a writing signed by a duly authorized representative of each party.
(g) Notices. All notices and other communications required or
-------
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received, regardless of when and whether
received, either: (a) on the day of hand delivery; (b) three (3) Business Days
following the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as follows; (c)
when transmitted by telecopy with verbal confirmation of receipt by the telecopy
operator; or (d) one Business Day following the day timely delivered to a next-
day air courier; provided, however, that (i) no notice or other communication
-------- -------
given to or by the Company may be sent by mail and (ii) notices and other
communications given to or by the Company for delivery by air courier shall be
deemed to have been duly given and received upon acknowledgment of receipt by
the recipient thereof.
To Escrow Agent:
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005
Attention: Corporate Trust Department - Transtel
Telecopy: 212-658-6425
Telephone: 212-658-6029
To Indenture Trustee:
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005
Attention: Corporate Trust Department - Transtel
Telecopy: 212-658-6425
Telephone: 212-658-6029
-17-
<PAGE>
To the Company:
Transtel S.A.
Calle 19N, No. 2-29
Oficina 501A
P.O. Box 3360
Cali, Colombia
Attention: Guillermo Lopez
Telecopy: (572) 667-5423
Telephone: (572) 660-4860
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
All notices and communications given hereunder shall be in English or
accompanied by an English translation.
(h) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience
--------
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(j) Applicable Law; Consent to Jurisdiction; Waiver of Immunity.
-----------------------------------------------------------
THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS
SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY
THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS THEREOF RELATING TO CONFLICTS
OF LAW. THE PARTIES HERETO INTENDED AND, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, AGREE THAT THIS IS AN AGREEMENT BETWEEN A SECURITIES INTERMEDIARY AND ITS
ENTITLEMENT HOLDER FOR PURPOSES OF 31 C.F.R. 357.11(b)(1) AND (S)8-110(e)(1) OF
THE UCC.
Each of the parties hereto irrevocably agrees that any legal dispute,
action or proceeding arising out of or based upon this Agreement may be
instituted in any New York State or U.S. Federal court sitting in the Borough of
Manhattan, New York City,
-18-
<PAGE>
New York, U.S.A. (each a "New York Court" and collectively, the "New York
Courts"), irrevocably waives, to the extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of venue to any such
proceeding and irrevocably submits to the non-exclusive jurisdiction of such
courts in any such suit, action or proceeding. The Company has appointed CT
Corporation Systems, Inc., 1633 Broadway, New York, New York 10019, as its
authorized agent ("Authorized Agent") to receive on its behalf service of copies
of the summons and complaints and any other process which may be served in any
legal suit, action or proceeding arising out of or relating to this Agreement
which may be instituted in any federal or state court sitting in The City of New
York, expressly consents to the jurisdiction of any such court in respect of any
such action, and waives any other requirements of or objections to personal
jurisdiction with respect thereto. Such appointment shall be irrevocable for a
period of three years from the date of this Agreement. Such service may be made
by delivering a copy of such process to the Company in care of the Authorized
Agent at the address specified above for the Authorized Agent and obtaining a
receipt therefor, and the Company hereby irrevocably authorizes and directs such
Authorized Agent to accept such service on its behalf. The Company represents
and warrants that the Authorized Agent has agreed to act as said agent for
service of process, and agrees that service of process in such manner upon the
Authorized Agent shall be deemed in every respect effective service of process
upon the Company in any such suit, action or proceeding. The Company further
agrees to take any and all actions as may be necessary to maintain such
designation and appointment of such Authorized Agent in full force and effect.
If the Authorized Agent shall cease to act as the Company's agent in The City of
New York for service of process, the Company shall appoint without delay another
such agent and notify the Escrow Agent of such appointment.
(k) To the extent that the Company or any of its revenues,
assets or properties shall be entitled, with respect to any proceeding at any
time brought against the Company or any of its revenues, assets or properties or
with respect to any suit, action or proceeding at any time brought for the
purpose of enforcing or executing any judgment in any jurisdiction in which any
specified court or other court is located, to any immunity from suit, from the
jurisdiction of any such court, from attachment prior to judgment, from
attachment in aid of execution of judgment, from execution of a judgment or from
any other legal or judicial process or remedy, to the extent of such immunity,
the Company irrevocably agrees not to claim and irrevocably waives such immunity
to the fullest extent permitted by the laws of such jurisdiction (including
without limitation, the Foreign Sovereign Immunities Act of 1976 of the United
States).
(l) The Company hereby represents and warrants that this
Agreement has been duly authorized, executed and delivered on its behalf and
constitutes the legal, valid and binding obligation of the Company enforceable
in
-19-
<PAGE>
accordance with its terms. The execution, delivery and performance of this
Agreement by the Company does not violate any applicable law or regulation to
which the Company is subject or any organizational document of the Company and
does not require the consent of any governmental or other regulatory body to
which the Company is subject, except for such consents and approvals as have
been obtained and are in full force and effect.
(m) Each of the Escrow Agent and the Indenture Trustee hereby
represents and warrants that this Agreement has been duly authorized, executed
and delivered on its behalf and constitutes its legal, valid and binding
obligation.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow and Disbursement Agreement as of the day first above written.
MARINE MIDLAND BANK, in its
capacity as Escrow Agent
By /s/ ROBERT A CONRAD
--------------------------------
Name: ROBERT A CONRAD
Title: VICE PRESIDENT
MARINE MIDLAND BANK, in its
capacity as Indenture Trustee
By /s/ ROBERT A CONRAD
--------------------------------
Name: ROBERT A CONRAD
Title: VICE PRESIDENT
TRANSTEL S.A., in its capacity as
the Company
By /s/ Guillermo O. Lopez
--------------------------------
Name: Guillermo O. Lopez
Title: President
<PAGE>
SCHEDULE 1
----------
List of Other Existing Indebtedness
-----------------------------------
<PAGE>
SCHEDULE
--------
Indebtedness to be Repaid
-------------------------
<TABLE>
<CAPTION>
Principal Amount Outstanding as of
Name of Lender October 21, 1997, in U.S. Dollars*
- -------------- ----------------------------------
<S> <C>
Banco Popular 3,484,746
Banco Cafetero 788,426
Banco Santander 689,941
Banco Ganadero 847,557
BIC 1,004,270
Banco de Credito 375,613
Banco Colpatria 1,818,757
Banco del Estado 2,791,476
Banco de Occidente 1,316,659
Banco del Pacifico 2,194,446
Overdrafts 2,107,793
Standard C. Bank 4,000,000
Pacific National Bank 1,840,000
Corfes 2,599,999
Morgan 6,000,000
IFI 907,445
---------
Total 32,767,036**
</TABLE>
______________
* Loans denominated in Colombian pesos have been converted to U.S. dollars
using the exchange rate as of October 21, 1997, which was equivalent to
1,264.6 Colombian pesos per U.S. dollars.
** An additional Ps.480 million ($379,627) of indebtedness is expected to be
incurred prior to the Closing Date.
<PAGE>
EXHIBIT A
Form of Escrow Account Payment, Notice and Disbursement Request
---------------------------------------------------------------
(Letterhead of the Indenture Trustee)
[Date]
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Attn: Corporate Trust Department - Transtel
Re: Disbursement Request No. ___________
Ladies and Gentlemen:
We refer to the Escrow and Disbursement Agreement, dated as of October
28, 1997 (the "Escrow Agreement") among you (the "Escrow Agent"), the
---------------- ------------
undersigned as Indenture Trustee, and TRANSTEL S.A., a sociedad anonima
organized under the laws of the Republic of Colombia (the "Company").
-------
Capitalized terms used herein shall have the meaning given in the Escrow
Agreement.
This letter constitutes an Escrow Account Payment Notice and Disburse
ment Request under the Escrow Agreement.
[Choose one of the following, as applicable]
[The undersigned hereby notifies you that a scheduled interest payment
in the amount of $___________ is due and payable on _________ ___, 199_, and
requests a disbursement of funds contained in the Escrow Account in such
amount.]
[The undersigned hereby notifies you that a scheduled interest payment
in the amount of $____________ is due and payable on _____________ ___, 199_,
which amount exceeds the amount of remaining Escrow Account Available Funds.
<PAGE>
EXHIBIT A
Page 2
Accordingly, you are hereby requested to disburse all remaining funds contained
in the Escrow Account such that the balance in the Escrow Account is reduced to
zero.]
[The undersigned hereby notifies you that a payment of $_______ is due
and payable on ______________, 199_ in connection with a repurchase or
redemption of Notes, plus accrued interest, if any, pursuant to the provisions
of [Section 3.07][Section 4.12][Section 4.18] of the Indenture and requests a
disbursement of funds contained in the Escrow Account in such amount. [The
undersigned hereby notifies you that a payment of $________ is due and payable
on ___________, 199_ in connection with a repurchase or redemption of Notes,
plus accrued interest, if any, pursuant to the provisions of [Section
3.07][Section 4.12][Section 4.18] of the Indenture, which amount exceeds the
amount of remaining Escrow Account Available Funds. Accordingly, you are hereby
requested to disburse all remaining funds contained in the Escrow Account such
that the balance in the Escrow Account is reduced to zero.]
[The undersigned hereby notifies you that Notes equaling $____________
in aggregate principal amount have been retired and authorizes you to release
$_____________ of funds in the Escrow Account to the Company (to an account
designated by the Company in writing), which amount represents the interest
payments on such retired Notes.]
In connection with the requested disbursement, the undersigned hereby
notifies you that:
1. The Notes have not, as a result of an Event of Default (as
defined in the Indenture), been accelerated and become due and payable.
2. All prior disbursements from the Escrow Account have been
Applied.
3. [add wire instructions]
-2-
<PAGE>
EXHIBIT A
Page 3
The Escrow Agent is entitled to rely on the foregoing in disbursing
funds relating to this Escrow Account Payment Notice and Disbursement Request.
MARINE MIDLAND BANK, in its capacity
as Indenture Trustee
By__________________________________
Name:
Title:
-3-
<PAGE>
EXHIBIT B
Form of Refinancing Account Payment, Notice and Disbursement Request
--------------------------------------------------------------------
(Letterhead of the Company)
[Date]
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005
Attn: Corporate Trust Department - Transtel
Re: Disbursement Request No. ___________
Ladies and Gentlemen:
We refer to the Escrow and Disbursement Agreement, dated as of October
28, 1997 (the "Escrow Agreement") among you (the "Escrow Agent"), Marine Midland
---------------- ------------
Bank, in its capacity as Indenture Trustee, and the undersigned, a sociedad
anonima organized under the laws of the Republic of Colombia (the "Company").
-------
Capitalized terms used herein shall have the meaning given in the Escrow
Agreement.
This letter constitutes a Refinancing Account Payment Notice and
Disbursement Request under the Escrow Agreement.
The undersigned hereby notifies you that on _________ __, 1997, it
expects to repay $__________ to [Name of Lender of Other Existing Indebtedness]
under the [Describe credit/loan document.]
Please wire $_________ on __________ __, 1997 to the account of [Name
of Lender of Other Existing Indebtedness at [Wire Instructions.]
<PAGE>
EXHIBIT B
Page 2
In connection with the requested disbursement, the undersigned hereby
confirms to you that the Notes have not, as a result of an Event of Default (as
defined in the Indenture), been accelerated and become due and payable.
The Escrow Agent is entitled to rely on the foregoing in disbursing
funds relating to this Refinancing Account Payment Notice and Disbursement
Request.
TRANSTEL S.A.
By_______________________________
Name:
Title:
-2-
<PAGE>
EXHIBIT C
[DESCRIPTION OF US GOVERNMENT INVESTMENTS]
<PAGE>
FUND FLOWS FOR TRANSTEL
<TABLE>
<CAPTION>
Strip Maturity Date CUSIP Face Value USD Purchase Cost of Strips
<S> <C> <C> <C>
23-Apr-98 9127946M1 9,375,000 9,147,757.81
15-Oct-98 9127945A8 9,375,000 8,921,250.00
15-Feb-99 912833BZ2 9,375,000 8,738,693.04
15-Aug-99 912833CA6 9,375,000 8,496,502.31
TOTAL COST 37,500,000 35,304,203.16
</TABLE>
<PAGE>
EXHIBIT D
Transtel, S.A.
Calle 19N, No: 2-29
Officina 501A
Post Office Box 3360
Cali, Colombia
Attention: Guillermo Lopez
Marine Midland Bank,
as Indenture Trustee
140 Broadway, 12th Floor
New York, Ny 10005
________________, 199_
Re:. Account No._______ (the "Account"),___
Ladies and Gentlemen:
We hereby acknowledge and confirm the following:
1. We have been informed that the Collateral (as defined in the Escrow
and Disbursement Agreement dated as of October 28, 1997, among the Company (as
defined below), the Indenture Trustee (as defined below) and us (the "Escrow and
----------
Disbursement Agreement")) including, without limitation, security entitlements
- ----------------------
in the securities set forth on Schedule A annexed hereto (the "Securities"),
----------
which are held and maintained in or credited to the [Escrow Account][Refinancing
Account], the proceeds thereof, the [Escrow Account][Refinancing Account] and
any other property held and maintained in or credited to the [Escrow
Account][Refinancing Account] have been pledged by Transtel S.A., a sociedad
anonima incorporated under the laws of the Republic of Colombia (the "Company")
-------
and are subject to a security interest to and in favor of Marine Midland Bank,
as indenture trustee (the "Indenture Trustee") under the Escrow and Disbursement
-----------------
Agreement. The security interest of the Indenture Trustee is reflected on our
books and records and will remain so reflected unless a change thereto is
consented to by the Indenture Trustee.
2. We have not received actual notice of any adverse claim (as defined in
Section 8-102(a)(1) of the Uniform Commercial Code, Revised Article 8,
Investment Securities (with Conforming and Miscellaneous Amendments to Articles
1, 4, 5, 9, and 10) 1994 Official Text, and incorporated by reference in 31
C.F.R. Part 357 and/or as enacted in the State of New York and in effect from
time to time (the "Revised Article 8") to, or any default, dishonour or defense
with respect to, the Securities. We have not created or received notice of any
liens, claims (including, but not limited to, claims of ownership) or
encumbrances with respect to the Securities other than as described in
<PAGE>
paragraph 1 above.
3. We are a "securities intermediary," as defined in Section 8-102(a)(14)
of the Revised Article 8.
4. We are not a "clearing corporation," as defined in Section 8-102(a)(5)
of the Revised Article 8.
5. We have credited Securities in our records by "book entry" to the
[Escrow Account][Refinancing Account] and have identified the securities as
subject to a first priority security interest in favor of the Indenture Trustee.
In the case of Securities issued by the U.S. government the Securities are
"Book-Entry Securities" as defined in 31 C.F.R. 357.2, such Securities have been
acquired for our account by a securities intermediary which is a "Participant"
as defined in 31 C.F.R. 357.2, and we further confirm that, with respect to such
Securities, (i) each of such Securities shall be carried in the Participant's
securities account with the Federal Reserve Bank of New York and (ii) we are
reflected in such Participant's records as the transferee and holder of such
Securities, and we agree that we will not instruct the Participant to change
any such records except in accordance with the Escrow and Disbursement
Agreement.
6. We hereby confirm the purchase (as defined in Section 1-201(32) of the
New York Uniform Commercial Code) of the Securities by the Company.
7. We have not confirmed any interest in the Securities to any person
other than the Company and the Indenture Trustee and our books and records do
not indicate any person other than the Company and the Indenture Trustee as
having any interest in the Securities.
THIS ACKNOWLEDGMENT IS BEING DELIVERED IN NEW YORK, AND SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
Very truly yours,
MARINE MIDLAND BANK,
As Escrow Agent
By:______________________________
Name:
Title:
<PAGE>
Exhibit 4.7
FORM OF EXCHANGE CERTIFICATE GUARANTEE
--------------------------------------
THIS EXCHANGE CERTIFICATE GUARANTEE (the "Guarantee"), made this day of
, 1998 by TRANSTEL S.A., a sociedad anonima incorporated under the laws of the
Republic of Colombia (the "Guarantor") in favor of Marine Midland Bank, a New
York banking corporation and trust company (the "Guarantee Trustee") and the
holders (the "Exchange Certificateholders") of 12 1/2% Pass Through Exchange
Certificates due 2007, representing interests in 12 1/2% Senior Notes issued by
the Guarantor (the "Exchange Certificates").
W I T N E S S E T H
-------------------
WHEREAS, the Guarantor, Wilmington Trust Company (the "Pass Through
Trustee") and the Guarantee Trustee, as registrar and paying agent, have entered
into the Amended and Restated Pass Through Trust Agreement dated as of October
28, 1997 (such agreement, including all exhibits thereto, as it may from time to
time be amended, modified or supplemented, is hereinafter referred to as the
"Trust Agreement"), pursuant to which Transtel Pass Through Trust (the "Trust")
issued the Exchange Certificates to the Exchange Certificateholders;
WHEREAS, the Guarantor executed and delivered on October 28, 1997 a
guarantee agreement (the "Original Certificate Guarantee"), with substantially
identical terms to this Guarantee, for the benefit of the Original
Certificateholders;
WHEREAS, as an incentive for the holders (the "Original
Certificateholders") of 12 1/2% Pass Through Trust Certificates due 2007,
representing interests in 12 1/2% Senior Notes issued by the Guarantor (the
"Original Certificates") to exchange their Original Certificates for Exchange
Certificates, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to be obligated to the Exchange
Certificateholders under the Guaranteed Obligations (as defined herein);
NOW, THEREFORE, in consideration of the exchange by Original
Certificateholders of Original Certificates for Exchange Certificates which
exchange the Guarantor hereby acknowledges shall benefit the Guarantor, and for
other good and valuable consideration, receipt and sufficiency of which is
hereby acknowledged, the Guarantor hereby represents and warrants to, and
covenants and agrees with the Guarantee Trustee and the Exchange
Certificateholders, as follows:
<PAGE>
1. The Guarantor hereby irrevocably and unconditionally guarantees to the
Exchange Certificateholders (a) the punctual payment of the full amount, when
due (whether by demand, acceleration or otherwise), of the principal of and
interest on, and fees and expenses due pursuant to, the Exchange Certificates,
and (b) full and timely payment on the Exchange Certificates as if payment had
been made on a full and timely basis on the Senior Notes (all of the liabilities
and obligations included in clauses (a) and (b) of this paragraph 1 are
hereinafter referred to collectively as the "Guaranteed Obligations"). This is
a guaranty of payment and not of collection, and is the primary obligation of
the Guarantor; and Guarantee Trustee, on behalf of the Exchange
Certificateholders, may enforce this Guarantee against the Guarantor without any
prior enforcement of the Guaranteed Obligations against the Trust. Any action
to enforce this Guarantee shall be undertaken by the Guarantee Trustee upon the
written direction of Exchange Certificateholders representing not less than a
majority of the outstanding Exchange Certificates.
2. All payments made by the Guarantor under or by virtue of this Guarantee
shall be paid to the Guarantee Trustee at its office at 140 Broadway, 12th
Floor, New York, New York 10005, U.S.A. or such other place as the Guarantee
Trustee may hereafter designate in writing. The Guarantor hereby agrees to make
all payments under or by virtue of this Guarantee to the Guarantee Trustee, on
behalf of the Exchange Certificateholders, as aforesaid. The Guarantee Trustee
shall not be required otherwise to establish its authority to receive any
payment made hereunder. During such time as the Guarantee Trustee is acting as
paying agent under the Trust Agreement, the Guarantee Trustee shall apply any
payments received under this Guarantee in its capacity as paying agent as
provided under the Trust Agreement. Following such time as the Guarantee
Trustee ceases to be paying agent under the Trust Agreement, the Guarantee
Trustee shall pay any payments received hereunder to the successor paying agent
or the Guarantee Trustee for payment in accordance with the terms of the Trust
Agreement.
3. The Guarantor hereby waives notice of acceptance of this Guarantee,
notice of the creation, renewal or accrual of any of the Guaranteed Obligations
and notice of any other liability to which this Guarantee may apply, and notice
or proof of reliance by the Exchange Certificateholders upon this Guarantee, and
waives diligence, protest, notice of protest, presentment, demand of payment,
notice of dishonor or nonpayment of any of the Guaranteed Obligations, suit or
taking other action or making any demand against, and any other notice to the
Trust or any other party liable thereon.
4. So far as the Guarantor is concerned, the Guarantee Trustee or the
Exchange Certificateholders may, at any time and from time to time, without the
consent of, or notice to the Guarantor, and without impairing or releasing any
of the obligations of the Guarantor hereunder, upon or without any terms or
conditions and in whole or in part:
(a) exercise or refrain from exercising any rights against the Pass
Through Trustee, the Trust or others or otherwise act or refrain from acting;
and
2
<PAGE>
(b) to the extent set forth in the Trust Agreement, amend or otherwise
modify the Trust Agreement, consent to or waive any breach of, or any act,
omission or default under the Trust Agreement, the Exchange Certificates, or any
agreements, instruments or documents referred to therein or executed and
delivered pursuant thereto or in connection therewith, and this Guarantee shall
apply to the Guaranteed Obligations as set forth in each of such documents as so
amended and modified. Any such action shall not impair or release any of the
obligations of the Guarantor hereunder.
5. No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations or of any security therefor shall affect, impair or
be a defense to this Guarantee, and this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
the validity, regularity or enforceability of the Trust Agreement, the Exchange
Certificates or any of the other Guaranteed Obligations or any collateral
security therefor or guaranty thereof or rights of offset with respect thereto
at any time or from time to time held by the Exchange Certificateholders and
without regard to any defense, offset or counterclaim which may at any time be
available to or be asserted by the Trust against the Exchange Certificateholders
and which constitutes, or might be construed to constitute, an equitable or
legal discharge of the Trust for the Guaranteed Obligations or any part thereof,
or of the Guarantor under this Guarantee, bankruptcy or in any other instance.
6. Until such time that the Guaranteed Obligations are paid in full, the
Guarantor hereby irrevocably waives, for the benefit of the Exchange
Certificateholders, any and all rights which it presently has, or may hereafter
have, whether by virtue of any payment or payments hereunder or otherwise, to be
subrogated to the rights of the Exchange Certificateholders against the Trust
with respect to any indebtedness of the Trust to the Exchange
Certificateholders.
7. The Guarantor makes the following representations and warranties, which
shall survive the execution and delivery of this Guarantee:
(a) The Guarantor is a corporation, duly organized, validly existing and in
good standing under the laws of Colombia. The Guarantor has all requisite power
and authority, corporate or otherwise, to execute, deliver and perform this
Guarantee, and has taken all necessary action, corporate or otherwise, to
authorize the execution, delivery and performance of this Guarantee. This
Guarantee has been duly executed and delivered and constitutes the valid and
legally binding obligation of the Guarantor, enforceable in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or moratorium laws, now or hereafter in effect,
relating to or affecting the enforcement of creditors' rights generally, and
further subject to the discretion of the court in granting the remedy of
specific performance and other equitable remedies; and
(b) No consent or approval of any Person (including, without limitation,
stockholders of the Guarantor), no waiver of any Lien or other similar right and
no
3
<PAGE>
consent, license, approval, authorization or declaration of, any governmental
authority, bureau or agency, is or will be required in connection with the
execution, delivery, performance, validity, enforcement or priority of this
Guarantee, or any other agreements, instruments or documents to be executed or
delivered pursuant hereto or thereto.
8. All notices, requests, demands or other communications hereunder shall
be in writing, either by letter (delivered by hand or commercial messenger
service or sent by certified mail, return receipt requested) or telegram or
telecopy, addressed as follows:
(a) if to the Guarantor:
Calle 19N
No. 2-29
40th Floor
Cali, Colombia
Attention: Guillermo Lopez
Telecopier No.: 57.2.667.5423
(b) if to the Guarantee Trustee or the Exchange Certificateholders
Marine Midland Bank, as Guarantee Trustee
140 Broadway, 12th Floor
New York, New York 10005
U.S.A.
Attention: Corporate Trust Department - Transtel
Telecopier No.: (212) 658-6425
Any notice, request, demand or other communication hereunder shall be deemed to
have been given on the day on which it is delivered to such party at its address
specified above. The Guarantee Trustee or the Guarantor may change the person,
address or telecopier number to whom or which notices are to be given hereunder,
by notice duly given hereunder.
9. No delay on the part of the Guarantee Trustee or the Exchange
Certificateholders in exercising any of their options, powers or rights, and no
partial or single exercise thereof, whether arising hereunder, under the Trust
Agreement, the Exchange Certificates, or otherwise, shall constitute a waiver
thereof or affect any right hereunder. No waiver of any of such rights and no
modification, amendment or discharge of this Guarantee shall be deemed to be
made by the Guarantee Trustee or the Exchange Certificateholders or shall be
effective unless the same shall be in writing executed and delivered and then
such waiver shall apply only with respect to the specific instance involved and
shall in no way impair the rights of the Guarantee Trustee or the Exchange
Certificateholders or the obligations of the Guarantor to the Guarantee Trustee
or the Exchange Certificateholders in any other respect at any other time.
4
<PAGE>
10. THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF THE GUARANTEE
TRUSTEE, THE EXCHANGE CERTIFICATEHOLDERS AND THE GUARANTOR HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN
SUCH STATE. THE GUARANTOR WAIVES TRIAL BY JURY IN ANY LITIGATION IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS GUARANTEE. IN THE
EVENT THE EXCHANGE CERTIFICATEHOLDERS BRINGS ANY ACTION TO ENFORCE ANY OR ALL
LIABILITIES OF THE GUARANTOR HEREUNDER, SERVICE OF PROCESS MAY BE MADE UPON THE
GUARANTOR BY MAILING A COPY OF THE SUMMONS TO CT CORPORATION SYSTEMS, INC., 1633
BROADWAY, NEW YORK, NEW YORK 10019, AS THE COMPANY'S AUTHORIZED AGENT BY
CERTIFIED OR REGISTERED MAIL, AND THE GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OVER THE
PERSON OF THE GUARANTOR AND HEREBY WAIVES ANY CLAIM THAT NEW YORK COUNTY OR THE
SOUTHERN DISTRICT OF NEW YORK IS AN INCONVENIENT FORUM. THE GUARANTOR HEREBY
WAIVES THE RIGHT TO INTERPOSE COUNTERCLAIM OR SET-OFFS OF ANY KIND AND
DESCRIPTION IN ANY SUCH ACTION OR SUIT ARISING HEREUNDER OR IN CONNECTION
HEREWITH.
11. If claim is ever made upon the Guarantee Trustee or the Exchange
Certificateholders for repayment or recovery of any amount or amounts received
by it in payment or on account of any of the Guaranteed Obligations and it
repays all or part of such amount by reason of any: (a) judgment, decree or
order of any court or administrative body having jurisdiction over it or any of
its property, or (b) settlement or compromise of any such claim effected by it
with any such claimant (including the Trust), then, and in either such event,
the Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantor, notwithstanding the cancellation
of any instrument evidencing any of the Guaranteed Obligations, and the
Guarantor shall be and remain liable hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by the Exchange Certificateholders.
12. (a) The Guarantee Trustee is authorized from time to
time to take such action as the Exchange Certificateholders recommend or direct
in writing pursuant to this Guarantee.
(b) The Guarantee Trustee undertakes to perform such duties and only
such duties as are set forth in this Guarantee, and no implied covenants or
obligations shall be read into this Guarantee against the Guarantee Trustee.
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(c) It shall be the duty of the Guarantee Trustee to discharge (or cause
to be discharged) all of its responsibilities pursuant to the terms of this
Guarantee in the interests of the Exchange Certificateholders in accordance with
the provisions of this Guarantee.
(d) Notwithstanding the foregoing, the Guarantee Trustee shall not be
required to take any action hereunder if the Guarantee Trustee shall reasonably
determine, or shall have been advised by counsel in writing, that such action is
likely to result in personal liability to the Guarantee Trustee (in such
capacity or individually), is contrary to the terms of this Guarantee or is
otherwise contrary to law.
(e) In the event the Guarantee Trustee is uncertain as to the
application of any provision of this Guarantee, or such provision is ambiguous
as to its application or is, or appears to be, in conflict with any other
provision hereof, or in the event that this Guarantee permits any determination
by the Guarantee Trustee or is silent or incomplete as to the course of action
which the Guarantee Trustee is required to take with respect to a particular set
of facts, then the Guarantee Trustee may seek instructions from the Exchange
Certificateholders and shall not be liable to any person to the extent that it
acts in good faith in accordance with the instructions of the Exchange
Certificateholders.
(f) The duties and obligations of the Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee. The Guarantee
Trustee shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Guarantee against the
Guarantee Trustee. No implied powers, duties or obligations shall be read into
this Guarantee against the Guarantee Trustee.
(g) In the absence of bad faith on its part, the Guarantee Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Guarantee Trustee.
(h) No provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Guarantee Trustee shall not be liable for any error of made in
good faith unless it shall be proved that the Guarantee Trustee was negligent
in ascertaining the pertinent facts;
(3) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Exchange Certificateholders holding Exchange
Certificates evidencing not less than a majority in interest in the Trust
relating to the time, method and place of
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conducting any proceeding for any remedy available to the Guarantee Trustee,
or exercising any trust or power conferred upon the Guarantee Trustee, under
this Guarantee; and
(4) no provision of this Guarantee shall require the Guarantee Trustee
to expend or risk its own funds 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 is not reasonably assured to it.
(i) Whether or not herein expressly so provided, every provision of
this Guarantee relating to the conduct or affecting the liability of or
affording protection to the Guarantee Trustee shall be subject to the provisions
of this Section.
13. Except as otherwise provided in Section 12:
(a) the Guarantee Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any signature, resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties. The
Guarantee Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the manner of ascertainment of
which is not specifically prescribed herein, the Guarantee Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or any assistant treasurer or the secretary or any
assistant secretary of the relevant party, as to such fact or matter, and such
certificate shall constitute full protection to the Guarantee Trustee for any
action taken or omitted to be taken by it in good faith in reliance thereon;
(b) the Guarantee Trustee may consult with counsel and the 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;
(c) the Guarantee Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Guarantee at the request or
direction of any of the Exchange Certificateholders pursuant to this Guarantee,
unless such Exchange Certificateholders shall have offered to the Guarantee
Trustee reasonable security or indemnity against the cost, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(d) the Guarantee Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument,
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<PAGE>
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document;
(e) The Guarantee Trustee shall not be answerable or accountable under
any circumstances, except for the willful misconduct or negligence of the
Guarantee Trustee, except for the Guarantee Trustee's failure to use ordinary
care to disburse funds and except for liabilities that may result from the
inaccuracy of any representation or warranty of the Guarantee Trustee in this
Guarantee;
(f) The Guarantee Trustee shall incur no liability if, by reason of
any provisions of any present or future law or regulation thereunder, or by any
force majeure event, including, but not limited to, natural disaster, war or
other circumstances beyond its control, the Guarantee Trustee shall be prevented
or forbidden from doing or performing any act or thing which the terms of this
Guarantee provide shall or may be done or performed; and
(g) Prior to taking any action under this Guarantee, the Guarantee
Trustee shall be entitled to receive written directions of the Exchange
Certificateholders pursuant to Section 1 hereof. The Guarantee Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on the instruction of such Exchange Certificateholders.
14. The Guarantor agrees
(a) to pay, or cause to be paid, to the Guarantee Trustee from time
to time the compensation set forth in the agreement between the Guarantee
Trustee and the Guarantor 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);
(b) except as otherwise expressly provided herein, to reimburse, or
cause to be reimbursed the Guarantee Trustee upon its request for all
reasonable outofpocket expenses, disbursements and advances incurred or
made by the Guarantee Trustee in accordance with any provision of this
Guarantee (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 (or its agent or
counsel) negligence, willful misconduct or bad faith or as may be incurred
due to the Guarantee Trustee's breach of its representations and
warranties;
(c) to indemnify, or cause to be indemnified, the Guarantee Trustee
from and against any and all liabilities, obligations, losses, damages,
penalty, tax, claims, actions, suits (including reasonable legal fees and
expenses) relating to this Guarantee, provided that the Guarantor shall not
be required to indemnify the Guarantee Trustee for any liability which
results from the negligence or willful misconduct of the Guarantee Trustee.
The Guarantee Trustee shall notify the Guarantor promptly of any claim for
which it may seek indemnity. The
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<PAGE>
Guarantor shall defend the claim and the Guarantee Trustee shall cooperate
in the defense. The Guarantee Trustee may have separate counsel with the
consent of the Guarantor and the Guarantor will pay the reasonable fees and
expenses of such counsel. The Guarantor need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
15. (a) No resignation or removal of the Guarantee Trustee
and no appointment of a successor Guarantee Trustee pursuant to this Section
shall become effective until the acceptance of appointment by the successor
Guarantee Trustee under Section 15(e).
(b) The Guarantee Trustee may resign at any time by giving written
notice thereof to the Guarantor and the Indenture Trustee. If an instrument of
acceptance by a successor Guarantee Trustee shall not have been delivered to the
Guarantor and the Indenture Trustee within 30 days after the giving of such
notice of resignation, the resigning Guarantee Trustee may petition any court of
competent jurisdiction for the appointment of a successor Guarantee Trustee.
(c) If the Guarantee Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Guarantee
Trustee for any cause, the Guarantor shall promptly appoint a successor
Guarantee Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Guarantee Trustee
shall be appointed by Act of the Exchange Certificateholders holding Exchange
Certificates evidencing not less than a 25% interest in the Trust delivered to
the Guarantor, the Pass Through Trustee and the retiring Guarantee Trustee, the
successor Guarantee Trustee so appointed shall, forthwith upon its acceptance of
such appointment, become the successor Guarantee Trustee and supersede the
successor Guarantee Trustee appointed as provided above. If no successor
Guarantee Trustee shall have been so appointed as provided above and accepted
appointment in the manner hereinafter provided, any Exchange Certificateholder
who has been a bona fide Exchange Certificateholder 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 Guarantee Trustee.
(d) The successor Guarantee Trustee shall give notice of the
resignation and removal of the Guarantee Trustee and appointment of the
successor Guarantee Trustee by mailing written notice of such event by
firstclass mail, postage prepaid, to the Exchange Certificateholders as their
names and addresses appear in the Register. Each notice shall include the name
of such successor Guarantee Trustee and the address of its principal corporate
trust office.
(e) Every successor Guarantee Trustee appointed hereunder shall
execute, acknowledge and deliver to the Guarantor and to the retiring Guarantee
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Guarantee Trustee shall become effective and such
successor Guarantee Trustee, without any further act, deed or conveyance, shall
become vested with all rights,
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<PAGE>
powers, trusts and duties of the retiring Guarantee Trustee; but, on request of
the Guarantor or the successor Guarantee Trustee, such retiring Guarantee
Trustee shall execute and deliver an instrument transferring to such successor
Guarantee Trustee all the rights, powers and trusts of the retiring Guarantee
Trustee and shall duly assign, transfer and deliver to such successor Guarantee
Trustee all property and money held by such retiring Guarantee Trustee
hereunder,. Upon request of any such successor Guarantee Trustee, the Guarantor,
the retiring Guarantee Trustee and such successor Guarantee Trustee shall
execute and deliver any and all instruments containing such provisions as shall
be necessary or desirable to transfer and confirm to, and for more fully and
certainly vesting in, such successor Guarantee Trustee all such rights, powers
and trusts.
(f) Any corporation into which the Guarantee 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 Guarantee Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Guarantee Trustee, shall be the successor of
the Guarantee 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.
16. This Guarantee shall be binding upon the Guarantor and its successors
and assigns, a nd shall inure to the benefit of the Guarantee Trustee and the
Exchange Certificateholders and their respective successors and assigns;
provided, however, that the Guarantor shall not be entitled to assign or
delegate any of its rights or obligations under this Guarantee without the prior
written consent of each of the Exchange Certificateholders, and any purported
assignment in the absence of such consent shall be void. This Guarantee embodies
the entire agreement and understanding between the Guarantee Trustee, the
Exchange Certificateholders and the Guarantor relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof.
17. This Guarantee may not be amended without the prior approval of
Exchange Certificateholders of not less than a majority in aggregate principal
amount of the Exchange Certificates outstanding.
18. The provisions of this Guarantee are severable. If any clause or
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision in this Guarantee in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly
executed and delivered on the day and year first above written.
TRANSTEL S.A.
By:
-----------------------------------
Title:
ACKNOWLEDGED AND AGREED
MARINE MIDLAND BANK,
as Guarantee Trustee
By:
----------------------------------------
Title
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EXHIBIT 10.1
AA 0292526
OFFICIALLY RECORDED PROCEEDING NUMBER: ONE THOUSAND SIX HUNDRED FIFTY-EIGHT
(1658)
In the city of Girardot, administrative district of Cundinamarca, Republic of
Colombia, on the thirty-first (31st) day of the month of December of one
thousand nine hundred ninety-seven (1997), before me, MAGDA JULIETH QUIMBAYO
MAHECHA, Second Commissioned Notary of the Girardot association, there appeared
Messrs: JAIRO BELTRAN GALVIS, GUILLERMO O. LOPEZ ESQUIVEL AND JORGE ENRIQUE
MARTINEZ OCAMPO, of legal age, the first a resident of the municipality of
Girardot and the others of the city of Cali, identified with citizenship
documents numbers: 13,259,169, 16,614,481 and 7,506,436, issued in order, the
first in Cucuta, the second in Cali, the third in Armenia, respectively, with
marital status married and with marital partnership in effect, legally competent
to enter into contract and bind themselves, and stated:
FIRST: That the appearing party Doctor JAIRO BELTRAN GALVIS, with vital-
statistics data as noted, is acting in this instrument in his capacity of Mayor
of the municipality of Girardot, administrative district of Cundinamarca,
Republic of Colombia, and as such in representation thereof, in exercise of the
powers granted by Resolution number 026 of the fourteenth (14th) of November of
1997, issued by the Honorable Council of the Municipality of Girardot,
circumstances which he proves with a copy of the aforementioned resolution and
with the record of incumbency in the office which he holds, which documents he
attaches to this proceeding in order that they may form a part thereof and of
the copies of same which may be issued.
SECOND: That the appearing party Mr. GUILLERMO O. LOPEZ ESQUIVEL, with the
vital-statistics data as noted previously, is acting in his capacity of
President and legal representative of the company TRANSTEL S.A., and also as
General Manager of the company COMPANIA DE INVERSIONES S.C.S. CONINVERSIONES
S.C.S., the first constituted by means of officially recorded proceeding number
3,097, executed on the 23rd of August of 1993, at Notarial Office Fourteen of
the Cali association, and the second constituted by means of officially
<PAGE>
recorded proceeding number 8,383, executed on the 28th of December of 1973, at
the Second Notarial Office of the Cali association and amended by means of
officially recorded proceeding number 4795, executed on the 12th of December of
1997, at Notarial Office Fourteen of the Cali association, duly empowered by the
corporate bylaws, circumstances which he proves with the certificates of
existence and legal representation of the aforementioned companies, issued by
the Chamber of Commerce of Cali, which documents he attaches to this proceeding
in order that they may form a part thereof and of the copies of same which may
be issued.
THIRD: That the appearing party Mr. JORGE ENRIQUE MARTINEZ OCAMPO, with the
vital-statistics data as noted previously, is acting in his capacity of Deputy
General Manager of the companies UNITEL S.A. EMPRESA DE SERVICIOS PUBLICOS,
UNITEL S.A. E.S.P. and EMPRESA DE TELEFONOS DE PALMIRA S.A., EMPRESA DE
SERVICIOS PUBLICOS, "TELEPALMIRA S.A. E.S.P.," the first constituted by
officially recorded proceeding number 0284, executed on the 11th of March of
1994, at the Sole Notarial Office of Yumbo and the second by means of officially
recorded proceeding number 1468, executed on the 31st of May of 1995, at the
First Notarial Office of the Palmira association, circumstances which he proves
with the certificates of existence and representation of the aforementioned
companies issued by the Chamber of Commerce of Cali and Palmira, respectively,
which documents he attaches to this proceeding in order that they may form a
part thereof and of the copies of same which may be issued.
FOURTH: That under the conditions as noted and by means of this officially
recorded proceeding, the appearing parties constitute a corporation, a public-
service company of a commercial nature, called EMPRESA DE TELECOMUNICACIONES DE
GIRARDOT S.A. E.S.P. and which is governed by the following:
BYLAWS.- CHAPTER I. NATURE - NAME - DOMICILE - DURATION.- ARTICLE ONE: NATURE.-
The company which is governed by these bylaws is a public-service company, of
the limited-liability type, of a commercial nature, of Colombian nationality,
with its own legal capacity, with full administrative autonomy and independent
capital, the organization and
2
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AA 0292540
operation of which are governed by the system of private law and by the
following bylaws, barring the exceptions which the law may set forth.
ARTICLE TWO: COMPANY NAME.- The company is called EMPRESA DE TELECOMUNICACIONES
DE GIRARDOT S.A. E.S.P.; it has as its principal domicile the municipality of
Girardot, administrative district of Cundinamarca, Republic of Colombia, but
following a resolution by its Board of Directors, it may establish offices,
agencies, branches and divisions in other cities or locations in the country or
abroad.
ARTICLE THREE: DURATION.- The company shall have an indefinite term of duration
starting from the execution of this instrument.
CHAPTER II. ARTICLE FOUR: PURPOSE.- The company has as corporate purpose the
provision of basic switched public residential telephone service, within the
area of the municipality of Girardot as well as other municipalities, whether in
the urban perimeter or in the rural area. In any case, the company likewise may
undertake all the activities related, connected and complementary to said
principal purpose, in general developing any activity related to the
telecommunications sector under the terms of the law. In the development
thereof, the company may carry out the following activities: A) Investment in
personal or real property, urban and/or rural, and the purchase of one and the
other for the purpose of operating them in accordance with the nature and
intended use of same, as well as the management, leasing, encumbrance and/or
transfer of that personal or real property; concluding contracts for usufruct or
antichresis; using the financial mechanisms of trusteeship and leasing when they
are applicable; B) Purchase, sale, distribution, import and/or export,
acquisition, obtaining and utilization in any context of any type of goods and
services relating to the corporate purpose; C) Investment of capital funds in
bonds; time deposits; accounts at financial institutions; listed securities;
shares or interests, stock in public or private, domestic or foreign companies,
whether through the formation of other firms or the purchase of said stock or
shares or interests and the negotiation of any type of rights, provided that in
such occurrences the company does not become involved in middleman financial
3
<PAGE>
activity; D) Entering into all types of actions or contracts conducive to the
fulfillment or appropriate culmination of the corporate purpose of the company,
for which it may carry out, among other things, projects under the system most
efficient, practical and appropriate for the current financial and economic
situation of the country, being able to opt for the implementation of programs
under the following forms: construction, operation and conveyance (BOT);
construction, operation, temporary ownership and conveyance (BOOT);
construction, operation, maintenance and conveyance (BOOM); assignment, target
cost, turnkey or others which totally or partially involve third parties; E)
Reciprocally giving or accepting cash or kind without becoming involved in
middleman financial activity; F) Applying for patents, registrations of
trademarks or names, and entering into contracts relating to industrial
property; G) Entering into a checking-account contracts; H) Drawing, endorsing,
collecting, protesting, paying all types of instruments; I) Appearing at public
or private biddings and tendering the corresponding bids; J) Carrying out
actions and entering into contracts of a civil, labor, fiscal and administrative
nature, conducive to the development of the corporate purpose; K) Providing to
third parties with personnel, with its own or others' equipment, specialized
technology and services relating to any of the corporate businesses.
PARAGRAPH: The exercise of the corporate purpose of the company and the conduct
of all the related, connected or complementary or accessory actions essential
for developing it, shall be governed by the rules of private law, barring the
exceptions which the law may provide.
CHAPTER III. ARTICLE FIVE: CAPITAL, SHARES, SHAREHOLDERS.-
The authorized capital of the company is TWENTY-FIVE BILLION PESOS
($25,000,000,000.00 LEGAL TENDER), represented in a like number of registered
shares with a value of ONE PESO ($1.00) LEGAL TENDER each.
ARTICLE SIX: VARIATION IN CAPITAL.- The general meeting of shareholders may
increase or decrease the capital of the company, but if it is a question of
decreasing, it is to be subject to the
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AA 0292541
requirements set forth by Article 145 of the Commercial Code.
ARTICLE SEVEN: ISSUE OF SHARES.- The shares shall be placed in accordance with
the subscription regulations drawn up by the Board of Directors and without, in
accordance with the provisions of Article 19.10 of Law 142 of 1994, prior
authorization's being required from any administrative authority. In any case,
the meeting or the Board of Directors may issue privileged, industry, preferred
and preferential-dividend and non-voting shares under the terms of the law.
ARTICLE EIGHT: SECURITIES.- All the shares shall be registered; the security or
certificate which proves his capacity of shareholder shall be issued to each one
of the shareholders. The securities, provisional as well as definitive, shall
comprise the elements and requirements determined by Article 401 of the
Commercial Code and which are described in the following Article. Shares owned
by State entities shall be issued in a format and series different from the
private class. The former shall be class A and all the others class B, the
latter being those which correspond to the domestic and foreign private
shareholders. In each subscription of shares, the securities shall be issued
within thirty (30) days following the date on which their subscription is
finalized.
ARTICLE NINE: CONTENT OF THE SECURITIES.- The securities shall be issued with
the characteristics which are set forth below: 1) They shall be numbered
consecutively and shall bear the facsimile signature of the Manager and the
Secretary of the company. 2) They shall indicate the authorized capital, the
name and principal domicile of the company, the number, the date and the
notarial office for the articles of association. 3) They shall note the number
of shares represented in each security and the face value, the class and series
letter of same. 4) They shall include the full name of the holder and his tax
identification document.
ARTICLE TEN: PROVISIONAL CERTIFICATES.- As long as the value of the subscribed
shares has not been paid in full, a provisional certificate shall be delivered
to the subscribers. The assignment of these certificates shall be subject to
the same conditions required for that of the definitive securities, and assignor
as well as assignee shall be jointly liable for the unpaid contribution.
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<PAGE>
Once said amount has been covered, the provisional certificate shall be replaced
by the corresponding definitive security.
ARTICLE ELEVEN: PREFERENTIAL RIGHT IN CASE OF SUBSCRIPTION.- The shareholders
shall have preference in subscribing to any issue of shares in an amount
directly proportional to the amount of shares which they hold on the date of
approval of the respective regulation for placement of shares passed by the
Board of Directors of the company. The offer shall be made privately, by means
of a written communication sent by mail to the most recent address which each
shareholder has recorded at the company. The right to subscribe shares shall be
freely negotiable and the shareholders shall be able to assign it within the
terms of the subscription regulation.
ARTICLE TWELVE: EFFECT OF THE OWNERSHIP OF SHARES.- The ownership of any number
of shares entails for their owner the acceptance of the bylaws of the company,
regardless of the source of his security.
ARTICLE THIRTEEN: RULES FOR THE TRADING OF SHARES.- So that the trading of
shares may become effective with respect to the company and third parties, their
entry in the shareholders' registry book shall be required through a written
order from the assignor or through an endorsement made on the security; the new
entry and the forwarding of the security to the assignee shall be effected after
that of the assignor has been canceled. In order to trade shares encumbered
with a pledge, the authorization of the creditor shall be required. When
recording in the shareholders' book of assignment of class A shares is requested
by a party other than a State entity, the requested entry shall be undertaken
once the original security is canceled and another, of class B, is issued to
replace it. The same shall be done when a State entity becomes holder of class
B shares, in which case the corresponding entry shall be made in the
shareholders'
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AA 0292542
book after the original security is canceled and another belonging to class A
has been issued.
ARTICLE FOURTEEN: TRANSFER OF SHARES.- Shareholders who wish to transfer their
shares in whole or in part are to offer them first to the company. The offer
shall be made in writing through the Manager of the company and there shall be
indicated therein the number of shares to be transferred, the price and the form
of payment of same. The company shall have a period of thirty (30) business
days to accept or reject the offer, complying with the provisions in the law.
When the preceding period has expired, if the company does not make any
announcement or if it opts to acquire the shares or decides to acquire them in
part, the Manager shall officially inform the other shareholders within three
(3) business days following the expiration of the preceding period, so that they
may endeavor to acquire all or the remainder of the offered shares, as the case
may be, for which they likewise shall have a term of thirty (30) business days.
It is understood that the shareholders may acquire the shares in proportion to
those which they possess in the company, and after the cited period has expired,
the shares not acquired by the company or by the shareholders may be transferred
freely to third parties provided that such transfer is not effected under
conditions more favorable than those offered to the other shareholders and that
it is finalized no later than forty-five (45) days following the date on which
the term which the remaining shareholders had for exercising the preferential
right established in this Article has terminated. If the company or the
shareholders, as the case may be, should be interested in acquiring the shares
in whole or in part, but they disagree with the offering party regarding the
price or the form of payment or both, these shall be set by experts appointed
under the terms of Decree 2,282 of 1989. In this case, negotiation shall be
finalized within five (5) days following rendering of the expert report.
FIRST PARAGRAPH.- Notwithstanding the provisions of this Article, it is
understood that the State entities which possess Series A shares are to comply,
prior to the company offering, with the principle of democratization in
shareholder interest provided for by Article 60 of the National Constitution as
regulated by the law.
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SECOND PARAGRAPH: The preferential right regulated here shall not apply when it
is a question of transfer of shares among companies which have the nature of
controlled companies, affiliates, subsidiaries or parent companies as defined in
commercial law.
THIRD PARAGRAPH: This clause shall be in force as long as the shares of the
company are not listed on the Stock Exchange.
ARTICLE FIFTEEN: RIGHTS OF THE SHAREHOLDERS.- Without prejudice to the others
which the law, the regulations and the bylaws grant thereto, the shareholders
shall have the following rights:
1) That of participating in the deliberations of the meeting and voting therein
without any restriction as determined by Article 19.9 of Law 142 of 1994; 2)
That of receiving a portion of the corporate profits which the balance sheets
show at the end of the fiscal year, in proportion to the value of their shares;
3) That of trading their shares under the terms of these bylaws; 4) That of
freely examining, within the thirty (30) calendar days prior to the ordinary
sessions of the meeting, or at which that same body is to approve the financial
statements of the company, the books and other documents to which Articles 446
and 447 of the Commercial Code refer; 5) That of receiving, in proportion to the
value of their shares, a portion of the corporate assets at the time of
liquidation, after the outside liabilities of the company have been paid.
CHAPTER IV. MANAGEMENT AND ADMINISTRATION OF THE COMPANY. ARTICLE SIXTEEN:
BODIES OF THE COMPANY.- The company shall be managed by the general meeting of
shareholders, the Board of Directors, and the management according to the
responsibilities and functions which are indicated in these bylaws. In
addition, the company shall have an auditor who shall serve as a permanent
control body.
ARTICLE SEVENTEEN: GENERAL MEETING OF SHAREHOLDERS. COMPOSITION AND FUNCTIONS.-
The shareholders convened within the conditions indicated in these bylaws
constitute the meeting. In addition to those which are not allocated in the
bylaws to other bodies of the company, the
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functions of the meeting shall be the following: 1) To set up the measures
conducive to ensuring the fulfillment of the corporate purpose of the company.
2) To consider the reports and projects submitted to it by the Board of
Directors, the Manager, the auditor and the committees which the same meeting
may appoint. 3) To consider and to approve or disapprove the balance sheets and
schedules for the end of the fiscal year and to close or annotate the accounts
which are to be submitted therewith. 4) To order the setting up of the reserves
which, in addition to the legal ones, it may deem advisable, and possibly to
discontinue them. 5) To determine and to decide, in accordance with the law,
the distribution of the profits which are set forth on the balance sheet, once
the sums which are to be posted to the legal reserve or those which the same
meeting sets up are deducted; to determine the amount of the profit to be
distributed, the period and the manner of payment of the dividends. 6) To agree
on the manner of write-off of losses, if there are any. 7) To examine the
condition of the company and to consider the memorandum or annual report
presented thereto, separately or jointly, by the Board of Directors, and the
Manager, concerning the progress of same. 8) To consider the auditor's report.
9) To approve the appraisal of the assets which are to be received in payment of
subscription of shares. 10) To order the increase or decrease of the company
capital in accordance with these bylaws and the law; 11) To authorize any issue
of preferential-dividend, preferred or privileged shares and to order the
reduction or elimination of the privileges; 12) To order the relevant legal
actions to be brought against the administrators and other executive officers or
the auditor, without prejudice to the duties which the laws impose on the other
bodies of the company concerning the matter; 13) To appoint committees assigned
to carry out some of the special functions of the meeting which, because of
their nature, might be able to be delegated. 14) To decide on the structure of
the fiscal auditor's office and to approve the annual budget therefor. 15) To
freely elect and remove the members of the Board of Directors, principals and
alternates, the auditor or his alternates or, in place of this auditor, to
designate an accounting group or firm to perform the audit in accordance with
the legal provisions. In the election of the Board of Directors, the
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meeting is to see to it that representation directly proportional to the
shareholding exists thereon. 16) To set the remunerations for the Board of
Directors and the auditor and to agree on that for the agents on whom it confers
assignments which by their characteristics entail fees. 17) To Revise the
bylaws of the company. 18) To decide on the dissolution or extension of the
company and to authorize its transformation or merger with another company or
companies. 19) The others which may correspond thereto in accordance with the
laws.
ARTICLE EIGHTEEN: ORDINARY SESSIONS.- The ordinary sessions of the meeting shall
be held each year within the first three (3) months of the year. If the meeting
is not convened, it shall be held in its own right on the first business day of
the month of April at ten (10:00) o'clock in the morning, on the premises where
the administration operates, in the location of the principal domicile of the
company.
ARTICLE NINETEEN: EXTRAORDINARY SESSIONS.- Extraordinary sessions shall be held
when the Board of Directors, the Manager or the auditor may deem it advisable.
Also, the Office of the Superintendent of Public Services, in the cases provided
for by the law, may issue or request issue of the notice of meeting.
ARTICLE TWENTY: NOTICE OF MEETING.- Any notice of meeting of shareholders shall
be effected by written communication which shall be sent to the most recent
address of the shareholder which appears on record with the administration. The
agenda shall be inserted in the text of the notice of meeting. The notice of
meeting for the ordinary meetings or those others at which the financial
statements of the company are to be approved shall be effected at least fifteen
(15) working days in advance of the date on which the session is to be held,
excluding the days of the notice of meeting and the session. For extraordinary
sessions, an advance notice of eight (8) calendar days shall be sufficient.
ARTICLE TWENTY-ONE: LOCATION OF THE MEETING.- The Meeting shall be held at the
location of the principal domicile of the company, on the day, at the time and
in the place indicated in the text of the notice of meeting. It likewise may be
held, without prior invitation
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AA 0292544
and at any location, when all of the subscribed shares are represented. The
extraordinary meeting may not pass resolutions on topics not included on the
agenda inserted in the notice of meeting. In any event and at any time, it may
remove the members of the Board of Directors and other executives whose
appointment devolves thereon.
PARAGRAPH: In the event that circumstances so permit and the legal budgets
referred to in Articles 19 and 20 of Law 222 of 1995 are met, an unattended
meeting may be held. The minutes corresponding to unattended meetings and to
resolutions of the general meeting of shareholders set forth in writing are to
be drawn up and entered in the book of minutes within thirty (30) days following
the one on which the resolution was passed. Such minutes shall be signed by the
Manager and the Secretary of the company. In the absence of the latter, they
shall be signed by one of the shareholders.
ARTICLE TWENTY-TWO: VOTES.- For resolutions of the meeting, one vote shall
correspond to each share, without any restriction.
ARTICLE TWENTY-THREE: QUORUM FOR DELIBERATING.- The meeting shall deliberate at
its ordinary or extraordinary sessions with the attendance of a plurality of the
individuals who hold or represent at least fifty-one percent (51%) of the
subscribed shares.
ARTICLE TWENTY-FOUR: QUORUM FOR RESOLVING.- For validity of the resolutions of
the meeting, the favorable vote of at least fifty-one percent (51%) of the
subscribed shares shall be required, except in cases in which a different
majority may be required in the law or in these bylaws. When the meeting is
convened in an ordinary or extraordinary session, if the quorum to which this
Article refers is not attained, a new notice of meeting shall be effected. At
the meeting deriving from this last notice of meeting, deliberations and
resolutions shall be effected with a plurality of individuals who hold any
number of shares, except in the cases in which a special deciding quorum may be
required. The new meeting may not be held before the following ten (10)
business days, or after the subsequent thirty (30) business days, calculated
starting from the date set for the meeting in the first notice of meeting.
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ARTICLE TWENTY-FIVE: SUSPENSION AND CONCLUSION OF DELIBERATIONS.- The
deliberations of the meeting may be suspended as many times as necessary, to be
resumed later, within a period which is not to exceed three (3) days by a
resolution adopted by a plurality of those in attendance which corresponds to at
least fifty-one percent (51%) of the shares represented at the meeting. This
rule does not prevent the individual who is presiding over the session from
ordering the recesses customary at this type of meeting.
ARTICLE TWENTY-SIX: EXTENSION OF DELIBERATIONS.- The deliberations may not be
extended for more than three (3) days, if the entirety of the subscribed shares
is not represented.
ARTICLE TWENTY-SEVEN: ELECTIONS.- Whenever it is a question of electing two or
more individuals to make up the same Board, committee or managerial body, the
electoral quotient system shall be applied. This shall be determined by
dividing the total number of valid votes cast by that of the individuals who
are to be elected. The counting of votes shall begin with the slate which has
obtained the greatest number of votes and so on in descending order. From each
slate there shall be declared as elected as many names as times the quotient
goes into the number of votes cast for same. If posts remain to be filled,
these shall correspond to the highest remainders, counting them also in
descending order. In the case of a tie in the remainders, a drawing shall
decide. Blank ballots are counted in order to determine the electoral quotient.
The individuals who are elected may not be replaced in partial elections without
undertaking a new election, in which the electoral quotient system is to be
employed, unless the vacancies are filled unanimously.
ARTICLE TWENTY-EIGHT: MINUTES.- An official transcript of what occurred at the
session shall be set down in the book of minutes of the meeting, placed on
record and paginated at the Chamber of Commerce of the corporate domicile. The
minutes of any session shall begin with the serial number which corresponds
thereto and shall state at least the place, the date and the
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AA 0292545
time of the meeting, the form and advance time of the notice of meeting, the
list of those in attendance with the indication of the number of shares owned or
represented and the total shares, the subjects taken up, the resolutions adopted
and the number of votes in favor, against and blank, the records made by those
in attendance, and the date and time of closing. The meeting may approve or
protest the minutes at the same meeting to which the latter correspond or
delegate such power to a plural committee which shall submit a written report.
The minutes are to be signed by the Chairman of the meeting and by the
Secretary. Copies of the minutes approved by the Secretary and by a
representative of the company, shall be sufficient proof of the events which are
set forth therein, as long as the falsity of the respective copy or minutes is
not demonstrated.
ARTICLE TWENTY-NINE: BOARD OF DIRECTORS.- The company shall have a Board of
Directors composed of five (5) principal directors, each one of whom shall have
an alternate individual who shall replace him in his temporary or extended
absences.
ARTICLE THIRTY: ELECTION.- The principal and alternate members of the Board of
Directors shall be elected and removed freely by the general meeting of
shareholders.
ARTICLE THIRTY-ONE: TERM.- The term of service of the Board of Directors shall
be one (1) year, which shall begin as of the 1st of April of each year and shall
end on March 31st of the following year.
PARAGRAPH: The members of the Board of Directors shall remain in their posts as
long as they are not removed.
ARTICLE THIRTY-TWO: FUNCTIONS OF THE BOARD OF DIRECTORS.- In addition to the
special functions which the meeting entrusts thereto, the Board of Directors
shall have the following: 1) To set the course and general guidelines for the
management of the company in accordance with the directives established by the
general meeting of shareholders. 2) To comply with the bylaws and to ensure
compliance with them, and in general to make decisions in order that the company
may fulfill its purposes. 3) To request information concerning his work from
any executive of
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the company and to advise the Manager on the matters on which it is asked for an
opinion or when it may consider it advisable to do so. 4) To hear the Manager
and the auditor as many times as it may deem necessary. 5) To authorize the
establishment of offices, agencies and branches outside the principal domicile
of the company. 6) To propose the revisions to the bylaws which it may consider
advisable. 7) To hear and to decide on resignations tendered by the executives
whose appointment is the responsibility thereof. 8) To authorize the
participation of the company in other companies. 9) To regulate the placement
of company shares. 10) To freely appoint and remove the Manager and his
alternates; to inform them of their remuneration and to decide on their
resignations, vacations and leaves of absence. 11) To authorize extraordinary
investments in cases of emergency in order to ensure the normal development of
the company. 12) To examine at any time the accounting books, the
correspondence and in general the documents of the company as well as the
statement of holdings and to examine and to approve or disapprove the general
budget and the accounts of the company submitted by the Manager. 13) To convene
the general meeting for extraordinary sessions without prejudice to the
statutory powers of other bodies or executives. 14) To appoint special working
committees. 15) To submit annually for the consideration of the meeting at its
ordinary session and in association with the Manager and following their study
and approval, the balance sheet, accounts and supporting documents for the
company and the plan for distribution of profits or for write-off or posting of
losses. 16) To present annually to the meeting at its ordinary sessions and in
association with the Manager, or separately, a report concerning the economic
and financial position of the company and concerning the management conducted
during its term of office, accompanied by the relevant recommendations. 17) To
study the reports concerning the economic and financial position of the company.
18) To present to the meeting, at its ordinary and extraordinary sessions, the
other reports and recommendations which it may deem advisable. 19) To delegate
to the Manager one or some of its functions which, in accordance with the law,
may be delegated. 20) To authorize the Manager of the company to execute
actions or contracts
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AA 0292512
the amount of which exceeds the sum which corresponds in pesos to the amount of
EIGHT HUNDRED FIFTY (850) MINIMUM MONTHLY LEGAL WAGES IN FORCE; 21) In addition
to the preceding functions, the duties, responsibilities and actions referred to
in Articles 24 and 25 of Law 222 of 1995 shall be applicable.
ARTICLE THIRTY-THREE: ORDINARY SESSIONS.- The Board of Directors shall meet in
ordinary sessions at least once a month, on the dates which the Board itself
shall indicate in accordance with the requirements of the firm.
ARTICLE THIRTY-FOUR: EXTRAORDINARY SESSIONS.- Extraordinary sessions of the
Board may be convened by the Manager, the auditor or by at least two (2) members
of the Board who are acting as principals, to take up urgent matters.
ARTICLE THIRTY-FIVE: NOTICE OF MEETING.- The notice of meeting for the Board
shall be effected by letter no less than three (3) calendar days in advance,
including that of the notice of meeting. The agenda shall be included in the
aforesaid notice of meeting. Nonetheless, the Board may convene without a
notice of meeting when all those who at that time are acting as principals are
in attendance.
ARTICLE THIRTY-SIX: PLACE OF THE MEETING.- The Board of Directors shall meet on
the date, at the time and in the place stated in the notice of meeting or as
determined by all those who comprise it.
PARAGRAPH: In the event that circumstances so permit and the legal budgets
referred to in Articles 19 and 20 of Law 222 of 1995 are met, an unattended
Board Meeting may be held. The minutes corresponding to unattended meetings and
to resolutions of the Board of Directors set forth in writing are to be drawn up
and entered in the book of minutes within thirty (30) days following the one on
which the resolution was passed. Such minutes are to be signed by the Manager
and the Secretary of the company. In the absence of the latter, they shall be
signed by one of the members of the Board of Directors.
ARTICLE THIRTY-SEVEN: VOTES.- Each one of the members acting as a principal on
the Board of Directors shall have one vote.
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ARTICLE THIRTY-EIGHT: QUORUM.- The Board of Directors shall deliberate and shall
pass resolutions with the presence and the favorable vote of the majority of its
members.
ARTICLE THIRTY-NINE: MINUTES.- An official transcript of what occurred at the
meetings shall be set down in the book of minutes of the Board of Directors,
placed on record and paginated at the Chamber of Commerce. The minutes of any
session shall begin with the serial number which corresponds thereto and shall
state at least the place, the date and the time of the meeting, the form and
advance time of the notice of meeting, the list of those in attendance, the
matters taken up, the resolutions adopted and the number of votes cast in favor,
against and blank, the records made by the participants and the date and time of
closing. The Board may approve or protest the minutes at the same meeting to
which the latter correspond or at the following meeting, or delegate this power
to a plural committee which shall provide a written report. All the minutes are
to be signed by the Chairman and the Secretary and in their absence by whomever
is taking their place.
ARTICLE FORTY: MANAGER.- The administration of the company, its legal
representation and the conduct of its business shall be the responsibility of
the Manager, who shall have an alternate who shall replace him in the event of
temporary or extended absences.
ARTICLE FORTY-ONE: ELECTION.- The Manager shall be elected by the Board of
Directors. The Board also shall appoint the executive who shall have the
position of alternate for the Manager and who shall replace him in temporary
absences or in extended ones while the holder of the office is being appointed.
ARTICLE FORTY-TWO: TERM.- The Manager and his alternate may be removed by the
Board of Directors at any time.
ARTICLE FORTY-THREE: FUNCTIONS OF THE MANAGER.- The Manager shall have the
following functions: 1) To participate in the various operations of the company
in order to ensure the best use of the economic resources; 2) To monitor the
company's receipts for the various items which arise; 3) To direct the
management of the funds and assets of the company in accordance with the
instructions of the meeting of shareholders and the Board of Directors; 4)
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AA 0292547
To expedite all types of studies and measures relating to the financing and
debt service of the company; 5) To expedite the financial studies intended to
make the regular operations of the company more efficient; 6) To comply with the
resolutions of the meeting and the Board of Directors; 7) To represent the
company legally before authorities of any type and nature and before other legal
entities or individuals, judicially or extrajudicially, with broad general
powers for the proper conduct of his office and with the special powers which
the law requires in order to substitute, settle, agree and waive and even to
appear at legal proceedings in which the ownership of real property is
discussed, except in cases in which a special authorization is required in
accordance with the law or these by laws; 8) To manage the business and
operations of the company, with respect to the outside as well as those relating
to its internal activity and in particular technical operations, accounting,
correspondence and supervision of its property, all within the guidelines and
instructions deriving from the meeting and the Board of Directors; 9) To
conclude, without authorization from the Board of Directors, any type of action
or contract for the development of the corporate purpose of the company,
provided that its amount does not exceed the sum which corresponds in pesos to
the amount of EIGHT HUNDRED FIFTY (850) MINIMUM MONTHLY LEGAL WAGES IN FORCE;
10) To freely appoint and remove the individuals who are to fill the positions
created by the firm, except for those whom the meeting or the Board of Directors
is responsible for appointing or removing; 11) To establish special authorized
agents to attend to judicial and extrajudicial matters, as well as the
proceedings which are to be expedited before authorities of any type; 12) To
keep the Board of Directors informed frequently concerning the operation of the
company and to provide it with the data and documents which it may request
therefrom; 13) To draw up and implement the budget which the Board of Directors
approves for the company; 14) To order and approve feasibility studies; 15) To
make decisions on the commercial business of the company which does not require
the approval of the Board of Directors; 16) To coordinate and monitor the
management of the company and to maintain the public relations for same; 17) To
organize, direct and monitor the
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upkeep of the company; 18) To see to it that the accounting and the books of the
company are maintained correctly, to authorize and sign the balance sheets and
periodic reports and submit them for consideration by the Board of Directors,
the same as for the financial statements; 19) To present for consideration by
the Board of Directors at each of its meetings reports on the progress of the
company and on its commercial, administrative and financial position by means of
monthly trial balance sheets; 20) To present annually and in timely manner to
the Board of Directors and to the general meeting of shareholders, the accounts,
the schedules, the balance sheet and the profit and loss statement together with
a report on the progress of company business during the immediately preceding
fiscal year, the innovations introduced and those to be undertaken in the future
for the proper fulfillment of the corporate purpose; 21) To determine the
investment of available funds which are not required for the immediate
operations of the company, subject to the limitation of obtaining the prior
authorization of the Board of Directors for those the value of which exceeds the
sum which corresponds in pesos to the amount of EIGHT HUNDRED FIFTY (850)
MINIMUM MONTHLY LEGAL WAGES IN FORCE as indicated in number 9) above; 22) To
comply with and to ensure compliance with the bylaws of the company; 23) To
exercise the other legal and statutory functions; 24) To appear before a notary
in order to authenticate the resolutions of the meeting which are required to be
placed on official record; 25) In addition to the preceding functions, the
duties, responsibilities and actions referred to in Articles 24 and 25 of Law
222 of 1995 shall be applicable.
ARTICLE FORTY-FOUR: SECRETARY GENERAL.- The company shall have a Secretary
General, who likewise shall be that of the meeting and the Board of Directors.
ARTICLE FORTY-FIVE: ELECTION.- The Secretary General shall be elected and
removed freely by the Board of Directors.
ARTICLE FORTY-SIX: FUNCTIONS.- In addition to those which the meeting, and the
Board of Directors occasionally may assign thereto, the Secretary General shall
have the following functions: 1) To prepare for the sessions of the general
meeting and the Board of Directors. 2) To draw up, in agreement with the
Manager, the terms and agendas for the sessions and in
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AA 0292548
general to take the measures necessary for the proper functioning thereof. 3)
To draw up and read the minutes of the meeting and the Board of Directors; to
sign them after they are approved by the respective statutory body and have been
signed by the Chairman and to maintain the book where these are entered. 4) To
receive, handle and retain the proposals and records which are presented to the
meeting or the Board of Directors, setting down an official transcript of what
has been decided with respect thereto. 5) To provide the reports which the
general meeting or the Board of Directors might request thereof with respect to
the matters specific to the Office of the Secretary. 6) To communicate to the
interested party the decisions of the general meeting or the Board of Directors.
7) To sign the share certificates jointly with the Manager. 8) To see to it
that the shareholders' registry book is maintained in due form and to keep it
under its care. 9) To see to it that the receipt, recording, opening,
distribution, answering, sending and filing of the correspondence of the general
meeting and the Board of Directors is handled in proper manner. 10) To provide
for the organization and safekeeping of the document files under its care. 11)
To issue certified copies of the documents the originals of which remain in the
company and concerning which confidentiality need not be maintained. 12) To
certify concerning all the acts and circumstances which relate to the life and
development of the company. 13) To make the necessary arrangements for the
organization and maintenance of the general file. 14) To record new
shareholders in the case of transfer of shares, following written order from the
assignor and after the procedure provided for in these bylaws has been carried
out. 15) To assist the Manager in the performance of his functions. 16) The
others which the general meeting, the Board of Directors and the Manager may
assign thereto.
CHAPTER V. ARTICLE FORTY-SEVEN. CONCERNING THE AUDITOR: AUDITOR.- The company
shall have an auditor and an alternate for same, who shall replace him in his
temporary or extended absences.
ARTICLE FORTY-EIGHT: ELECTION OF THE AUDITOR.- The auditor and his alternate
shall be elected and removed freely by the general meeting of shareholders.
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ARTICLE FORTY-NINE: TERM.- The term of the auditor and his alternate shall be
one (1) year, which shall begin as of the 1st of April of each year and end on
March 31st of the following year, and both may be reelected indefinitely.
PARAGRAPH: The auditor and his alternate shall remain in their posts as long as
they are not removed.
ARTICLE FIFTY: FUNCTIONS.- Aside from the powers and duties which occasionally
may be assigned thereto by the meeting, functions of the auditor shall be: 1) To
organize and effect the control of the accounting and financial operations of
the company and the status of its assets, subject to the law and within the
guidelines and instructions determined by the meeting. 2) To submit for
consideration by the meeting the plans relating to the auditor's office with
respect to its administrative structure with specification of its facilities,
services of the latter and number of employees with their functions and
remunerations. 3) To freely appoint and remove the employees of the auditor's
office whose positions have been created by the general meeting. 4) To submit
annually to the meeting the expense budget for the auditor's office, accompanied
by the data necessary for its proper consideration. 5) To monitor and check
that the accounting is maintained in accordance with the law and to examine in
an ongoing manner the accounting operations and the corresponding internal and
external supporting documents, in order to determine the accuracy of same with
power to prescribe technical standards for their improved control and to request
of the Board of Directors and all the executives, data, documents and, in
general, collaboration in order that said control may be effected
satisfactorily. 6) To see to it that the books, supporting documents, machines
and other elements used in the accounting are maintained and safeguarded in due
manner. 7) To see to it that the book of minutes of the meeting of shareholders
and the Board of Directors and the shareholders' registers are maintained and
kept in order and to examine them at any time it may deem advisable. 8) To make
sure that the company operations are in conformity with the bylaws and the
resolutions of the meeting and the Board of Directors, with power to review the
methods of receipt, recording, opening, distribution, answering, sending and
filing of the correspondence and to revise them at any time.
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AA 0292549
9) To exercise ongoing control over the assets of the firm and those of others
which the latter has in its possession, with power to convey instructions and to
perform inspections, reviews, cash audits, inventories and in general to use the
means conducive to protecting said assets and verifying their status. 10) To
convene the general meeting or the Board of Directors in extraordinary sessions
when the interests of the company or the need to comply with the bylaws so
requires. 11) To attend the general meeting with a right to speak but without a
vote. 12) To attend the Board of Directors meeting with a right to speak but
without a vote, provided he is called therefor. 13) To approve the general
balances at the end of the fiscal year with his signature, when he has found
them to be correct. 14) To draw up an opinion on each of said balances in which
there is stated at least: A) Whether he has had available the information
necessary for its examination. B) Whether the recommended accounting-practice
procedures have been followed in the course of the review. C) Whether in his
opinion the accounting is maintained in accordance with legal standards and
accounting practice and whether the operations recorded are in conformity with
the bylaws and the decisions of the general meeting and the Board of Directors,
respectively. D) Whether the balance sheet and the profit and loss statement
accurately correspond to the books and whether, in his judgment, the first
presents in a reliable manner, in accordance with generally accepted accounting
standards, the financial position of the company at the close of the period
reviewed, and whether the second correctly expresses the result of the
operations of said period. E) The reservations, qualifications, suggestions
which he may have concerning the financial statements. 15) To draw up an annual
report for the ordinary session of the meeting in which there is stated at
least: A) Whether the actions of the members of the Board of Directors, the
Manager and the highest executives of the company were in accordance with the
bylaws and the decisions and instructions of the general meeting and the Board
of Directors respectively. B) Whether the books, supporting documents and other
accounting documents, as well as the books of minutes and shareholders' register
kept and are adequately maintained. C) Whether the correspondence is attended to
and maintained adequately.
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D) Whether there are measures for internal control, maintenance and safekeeping
of the corporate assets and those of third parties which may be in the
possession of the firm and, if so, whether such measures are adequate. E) The
manner in which the budget for the auditor's office was implemented during the
fiscal year. 16) To inform officially, in a timely manner and in writing, the
meeting, the Board of Directors, or Manager, as the case may be, concerning
irregularities which may occur in the internal functioning of the company or in
its transactions with outsiders. 17) To provide to the meeting the reports
which it may request, on everything relating to the progress of the company and
the performance of his assignment. 18) To provide to the Board of Directors and
the Manager all the reports which they may request of him and which are not
incompatible with the control functions which the auditor is to exercise over
one and the other. 19) To maintain strict confidentiality concerning the
functions, actions, documents and in general concerning matters relating to the
company of which he may have knowledge by reason of his assignment and which
should be kept confidential, without prejudice to communicating them, subject to
the corresponding legal or statutory procedure, to those who, pursuant to the
law or the bylaws, might have a right to know them. 20) To comply with and to
ensure compliance with the laws, the bylaws and the resolutions of the meeting.
21) To perform the audit in such manner that it does not interfere with the
functions of the other corporate bodies or hinder or paralyze the progress of
the company. The purpose of the auditor's functions is to conduct an effective
examination of the property and activities of the company, but he shall not have
capacity to participate in the administrative functions of same; he may perform
only the administrative functions inherent to the organization of the audit
itself; 22) The others which may be indicated therefor in Article 207 of the
Commercial Code.
ARTICLE FIFTY-ONE: AUDIT OF THE CONTRIBUTIONS OF STATE ENTITIES.- State entities
which have or may come to have the capacity of shareholders of the company shall
comply with the provisions in Article 27.4 of Law 142 of 1994. For this purpose
the company shall provide to
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AA 0292550
the employees of the Municipal or Administrative District Auditor's Office full
collaboration for due fulfillment of the functions which the law assigns to said
employees.
CHAPTER VI. BALANCE SHEET, PROFIT AND LOSS STATEMENT. ARTICLE FIFTY-TWO:
BALANCE SHEET.- A balance sheet shall be drawn up at the close of the company's
fiscal year, which shall run from the first (1st) of January to the thirty-first
(31st) of December of each year. The accounting shall be maintained in
accordance with standards accepted by the law by means of procedures which allow
for the recording of operations in a complete and reliable manner and knowledge
and proof of the general conditions of the firm's business.
ARTICLE FIFTY-THREE: ATTACHMENTS TO THE BALANCE SHEET.- The year-end balance
sheet which the Board of Directors and the Manager are to present to the general
meeting shall be accompanied by the following documents: 1) The complete detail
of the profit and loss account, with stipulation of the appropriations made by
way of depreciation of fixed assets and amortization of intangibles. 2) A plan
for distribution of divisible profits, after deduction of the sum calculated for
the payment of income and additional taxes for the corresponding fiscal year.
3) The report which the Board of Directors, and the Manager are to present to
the general meeting of shareholders concerning the economic and financial
position of the company furthermore shall contain: A) The detail of expenditures
by way of salaries, fees, travel allowances, representation costs,
transportation expenses, and any other type of remunerations which each of the
managing executives of the company might have collected. B) The listing of
expenses for the same items indicated in the preceding clause, incurred in favor
of consultants or agents, relating to procedures conducted outside the company.
C) The detail of transfers of assets free of charge or in comparable manner. D)
The detail of expenses for advertising, public relations, one distinguished from
the other. E) The list of assets of the company abroad and its
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obligations in foreign currency. F) The detail of the company's investments in
other companies, with stipulation of domestic and foreign companies and their
respective domiciles. 4) A written report from the Manager concerning his
management, which is to include the measures the adoption of which he recommends
to the meeting. 5) The auditor's report.
ARTICLE FIFTY-FOUR: PROFIT AND LOSS STATEMENT.- The corresponding profit and
loss statement shall be drawn up at the close of each fiscal year. In order to
determine the results of the operations, it shall be necessary first to
appropriate, in accordance with the law and accounting practices, the items
required to provide for depreciation, devaluation and guarantee of net worth or
the funds intended for legal, statutory or voluntary reserves. Inventories
shall be evaluated in accordance with the methods permitted by the tax rules.
CHAPTER VII. RESERVES. ARTICLE FIFTY-FIVE: RESERVES.- The Company shall set up
a legal reserve which shall amount to at least fifty percent (50%) of the
subscribed capital, constituted with ten percent (10%) of the net earnings for
each fiscal year. Whenever this reserve falls below the legal limit, ten
percent (10%) of the aforesaid earnings shall be reappropriated until again
attaining this limit. In addition to the reserves ordered by the law, the
meeting may set up incidental ones which it may deem advisable, provided that
they have a specific intended use and are approved and substantiated according
to the law.
CHAPTER VIII. MISCELLANEOUS. ARTICLE FIFTY-SIX: EARNINGS.- Subject to the
rules set forth in the law relating to earnings, those approved by the meeting
which are substantiated by reliable balance sheets shall be distributed among
the shareholders, after the legal and incidental reserves and the appropriations
for payment of taxes have been set up. If the sum of the legal and incidental
reserves exceeds one hundred percent (100%) of the subscribed capital, the
mandatory percentage of net earnings which the company is to distribute
according to the law shall amount to seventy percent (70%). Barring
determination to the contrary, approved with
24
<PAGE>
AA 0292511
votes which represent the absolute majority of the shares represented at the
meeting, the company is to distribute by way of dividend among its
shareholders, in proportion to the paid part of the face value of the shares for
each year, no less than fifty percent (50%) of the net earnings for each fiscal
year or of the remainder of same if it does not have to wipe out losses for
prior fiscal years.
ARTICLE FIFTY-SEVEN: PAYMENT OF DIVIDENDS.- The payment of dividends shall be
made in cash at such times as the meeting may approve and to those who have the
capacity of shareholders at the time each payment becomes due. Nonetheless,
dividends may be paid in the form of shares of the same company which were
issued, if the meeting so decides by means of the vote of the absolute majority
of the shares represented at the meeting. Lacking this majority, such shares
may be delivered to the shareholders by way of dividend only if the meeting so
orders.
ARTICLE FIFTY-EIGHT: LOSSES.- The losses, if any, shall be wiped out with the
reserves intended for that purpose and in their absence, with the legal reserve.
Reserves the purpose of which might be to absorb specific losses may not be used
to cover other different ones, except if the meeting so decides. Should the
legal reserve be insufficient to wipe out the losses, there shall be applied for
this purpose the corporate profits for the following fiscal years, until said
losses are wiped out, before these may have any other use. The meeting may take
and order measures conducive to the restoration of fifty percent (50%) of the
subscribed capital which may have been lost, such as the sale of appraised
corporate assets, reduction of the subscribed capital effected in accordance
with the law or the issue of new shares. Any of these measures is to be taken
within six (6) months following the determination of the loss which gives rise
to that situation. Otherwise the dissolution of the company shall be
undertaken.
ARTICLE FIFTY-NINE: CORPORATION DISSOLUTION.- The company shall be dissolved: 1)
Because of the impossibility of developing the corporate purpose. 2) Because of
reduction in the number of shareholders to fewer than five (5). 3) Because of
mandatory liquidation of the
25
<PAGE>
company. 4) Because of resolution of the general meeting, adopted with the vote
of shareholders who represent at least seventy percent (70%) of the subscribed
capital. 5) Because of decision of a competent authority. 6) When losses occur
which reduce the net worth below fifty percent (50%) of the subscribed capital.
7) In the event that all the subscribed shares come to belong to a sole
shareholder.
ARTICLE SIXTY: CORPORATE LIQUIDATION.- When the company is dissolved, its
liquidation shall be started immediately. No new operations may be undertaken
which involve the exercise of its purpose, and its legal capacity shall be
limited to the actions necessary to conclude the liquidation condition. Barring
explicit legal exception, any action unrelated to this purpose which may be
undertaken shall make the liquidator or liquidators and the auditor who have not
raised any objection liable in joint and unlimited manner. The words "in
liquidation" shall be added to the corporate name, and if this requirement is
not fulfilled, the liquidator or liquidators and the auditor who have not raised
any objection shall be answerable in joint and unlimited manner for the damages
which may occur. Aside from the provisions in these bylaws concerning
liquidation, the latter shall be governed by Chapter X of Title I of the second
volume of the Commercial Code.
ARTICLE SIXTY-ONE: ARBITRATION.- If with respect to the company, whether during
its existence, at the time of liquidation or subsequent thereto, some dispute
should arise among the partners or between the latter and the company or the
liquidator, which cannot be resolved directly by the interested parties, the
dispute shall be submitted to the ruling of a court of arbitration made up of
three arbitrators, which court lawfully shall decide. The arbitrators shall be
appointed by the Chamber of Commerce, upon written request of either of the
interested parties, in which the matter or matters which are to be the subject
of decision are to be indicated. The court shall function in Santafe de Bogota,
Capital District D.C., and its rulings shall be lawful. In matters not provided
for in this clause, Arbitration shall be governed by the rules set forth in
Decree 2279 of 1989 and Law 23 of 1991, or in the legal provisions which may
regulate, amend, repeal or replace it.
26
<PAGE>
AA 0292521
ARTICLE SIXTY-TWO: PROHIBITIONS.- Without prejudice to those set forth in the
laws or in other Articles of these bylaws, the prohibitions shall be of two
types, namely: 1) FOR THE COMPANY: That it shall not refuse to enter in the
shareholders' registry book the shares traded in accordance with the appropriate
practices. 2) FOR THE AUDITOR: That he may not: A) Be a shareholder of the
company. B) Be a partner in any affiliate or subsidiary thereof. C) Be
connected by marriage or family relationship, within the fourth degree of
consanguinity or first civil or second by marriage with members of the Board of
Directors or with the Manager, the Secretary, the Treasurer, the accountant or
any other executive of the company. D) Hold or conclude company contracts with
the executives indicated in the immediately preceding provision. E) Be a joint
holder with any of said executives.
ARTICLE SIXTY-THREE: SANCTIONS.- Without prejudice to the actions established in
the law, the violation of any of the prohibitions set forth in the preceding
clauses shall result in loss of position for the executives involved, which
violation is to be decreed by the body which has made the appointment.
ARTICLE SIXTY-FOUR: REVISIONS OF THE BYLAWS.- Resolutions for revisions of these
bylaws are to be approved by the meeting in a single discussion, in ordinary or
extraordinary sessions, by means of the vote of seventy percent (70%) of the
subscribed capital validly present at the meeting.
TRANSITIONAL PROVISIONS:
ONE: SUBSCRIBED CAPITAL. Of the authorized capital of the company, the
founding shareholders have subscribed on this date FIFTEEN BILLION TWO HUNDRED
FIFTY MILLION TWO HUNDRED TWO THOUSAND TWO HUNDRED TWENTY (15,250,202,220)
SHARES, as follows:
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<PAGE>
1) MUNICIPALITY OF GIRARDOT:
SIX BILLION ONE HUNDRED MILLION EIGHTY THOUSAND EIGHT HUNDRED EIGHTY-EIGHT
(6,100,080,888) SERIES A SHARES;
2) TRANSTEL S.A.:
NINE BILLION ONE HUNDRED FIFTY MILLION ONE HUNDRED TWENTY-ONE THOUSAND THREE
HUNDRED THIRTY-TWO (9,150,121,332) SERIES B SHARES;
3) COMPANIA DE INVERSIONES S.C.S. CONINVERSIONES S.C.S.:
ONE (1) SERIES B SHARE;
4) UNITEL S.A. E.S.P.:
ONE (1) SERIES B SHARE;
5) TELEPALMIRA S.A. E.S.P.:
ONE (1) SERIES B SHARE;
TWO: CAPITAL PAID-IN: Of the subscribed capital, which amounts to the sum of
FIFTEEN BILLION TWO HUNDRED FIFTY MILLION TWO HUNDRED TWO THOUSAND TWO HUNDRED
TWENTY PESOS ($15,250,202,220) LEGAL TENDER, the shareholders have paid in the
following sums:
1) COMPANIA DE INVERSIONES S.C.S. CONINVERSIONES S.C.S., UNITEL S.A. E.S.P., and
TELEPALMIRA S.A. E.S.P. have paid in the entirety of their contributions on this
date in cash and to the entire satisfaction of the company;
2) TRANSTEL S.A. has paid in the entirety of its contribution, that is, the
amount of NINE BILLION ONE HUNDRED FIFTY MILLION ONE HUNDRED TWENTY-ONE THOUSAND
THREE HUNDRED TWENTY-NINE PESOS ($9,150,121,329.00) LEGAL TENDER, as follows:
A) By means of a loan made to EMPRESA DE TELECOMUNICACIONES DE GIRARDOT E.S.P.
for a value of FIVE HUNDRED MILLION PESOS ($500,000,000.00) LEGAL TENDER, on the
twenty-ninth (29) day of December of nineteen hundred ninety-seven (1997), which
is set off
28
<PAGE>
AA 0292520
against THE REPORT OF ASSETS AND LIABILITIES referred to in the Minutes of the
Preliminary Meeting as a contribution of Shareholders.
B) By means of a loan made to EMPRESA DE TELECOMUNICACIONES DE GIRARDOT E.S.P.
for a value of TWO HUNDRED MILLION PESOS ($200,000,000.00) LEGAL TENDER, on the
twenty-ninth (29) day of December of nineteen hundred ninety-seven (1997), which
is set off as a contribution against THE REPORT OF ASSETS AND LIABILITIES
referred to in the Minutes of the Preliminary Meeting of Shareholders.
C) The remaining balance, that is, the sum of EIGHT BILLION FOUR HUNDRED FIFTY
MILLION ONE HUNDRED TWENTY-ONE THOUSAND THREE HUNDRED TWENTY-NINE PESOS
(8,450,121,329.00) LEGAL TENDER, by means of a check made out to the name of the
company, which is delivered to it with the signing of this recorded document,
which check the company declares it has received to its full and complete
satisfaction.
3) THE MUNICIPALITY OF GIRARDOT has paid the amount of SIX BILLION ONE HUNDRED
MILLION EIGHTY THOUSAND EIGHT HUNDRED EIGHTY-EIGHT PESOS ($6,100,080,888), LEGAL
TENDER, on this date, arising from the equity equation referred to in Point No.
4 of the Agenda of Meeting of the Minutes of the Preliminary Meeting of Founding
Shareholders and as a result of the transfer of THE REPORT OF LIABILITIES in
accordance with the meaning given thereto in the said Minutes of the Preliminary
Meeting of Shareholders, which includes A) The Assets, B) Liabilities, C)
Agreements, D) Licenses, Other Rights and Obligations, as each one of these
concepts is defined in the following:
3.1) "ASSETS" means the entirety of the real property by nature, real property
by accession and personal property, as well as the cash, the investments, the
accounts receivable and other rights assets, presently payable or in the process
of accrual in favor of the Municipality of Girardot which are contributed to
EMPRESA DE TELECOMUNICACIONES DE GIRARDOT S.A. E.S.P. and are listed in EXHIBITS
1 and 2 to the Minutes of the Preliminary Meeting of Shareholders held on this
date by the founding shareholders.
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<PAGE>
3.2) "LIABILITIES" means the entirety of the obligations to third parties,
including but not limited to A) public debt, B) financial obligations, C)
foreign and domestic suppliers, D) contractors, E) creditors, F) employees and
pensioners, as well as all such other obligations incurred, in the process of
being incurred or contingently incurred in accordance with accounting
principles, against the Municipality of Girardot, which it contributes to
EMPRESA DE TELECOMUNICACIONES DE GIRARDOT S.A. E.S.P. and are listed in EXHIBITS
3 and 4 to the Minutes of the Preliminary Meeting of Shareholders held on this
date by the founding shareholders.
3.3) "AGREEMENTS" means and includes all of the contracts and agreements signed
by the Municipality of Girardot which directly or indirectly affect the Assets
and Liabilities thereof and whose status as obligor and/or contractual status is
transferred to EMPRESA DE TELECOMUNICACIONES DE GIRARDOT S.A. E.S.P., whether
contracts or agreements entered into for the providing of basic, switched,
public telephone service or on the assets for the rendering thereof, and which
agreements are with, but not limited to, A) TELECOM (interconnection), B)
subscribers or customers, C) vendors, suppliers and other third parties who
supply goods or services, D) leases of goods and services (including the receipt
of rent arising therefrom and, in particular, rent arising from the leasing of
its own property given for the providing of service), E) maintenance and/or
warranties, F) other contracts relating to the property or to the achievement of
the purpose of residential public service, G) agreements with the operators of
cellular telephone service, H) personal warranties, or those of sureties, for
service covering the property transferred, or which have been constituted by
contractors in favor of the company, I) agreements for the gratuitous use real
property, and J) a contract for the bartering of real property and K) all such
other agreements in force in which the Municipality is a party [illegible
remainder of line or lines]
30
<PAGE>
AA 0292515
held on this date by the founding shareholders.
3.4) "LICENSES, OTHER RIGHTS AND OBLIGATIONS" means the entirety of the other
rights and obligations which, whether or not directly affecting the Assets, the
Liabilities or the Agreements, involve a right or an obligation, respectively,
conferred on or borne by the Municipality of Girardot and which are not
encompassed by the preceding definitions (3.1, 3.2 and 3.3) but which constitute
intangible assets or liabilities inherent to the providing of the service or
relating to the property for so providing, and which are contributed by the
Municipality of Girardot by virtue of this public document, which intangibles
may be contained in governmental licenses, unilateral concessions or permits.
Also deemed to be encompassed by this definition are the contingent liabilities
and the rights to record the real property where the remote concentrators of San
Marcos and Jose Maria Cordoba are located, and the right of use for the spaces
where the remote concentrators of Canada, La Esmeralda and La Esperanza are
located. Finally, deemed to be encompassed by the definition of other rights
and obligations are those in force in which the Municipality of Girardot is a
party, whether or not listed in EXHIBITS 5, 6 and 7 of the Minutes of the
Preliminary Meeting of Shareholders held on this date by the founding
shareholders.
By means of this recorded document the Municipality of Girardot proceeds to
transfer to the company "EMPRESA DE TELECOMUNICACIONES DE GIRARDOT S.A. E.S.P."
the entirety of A) The Assets, B) The Liabilities, C) Agreements, D) Licenses,
Other Rights and Obligations in accordance with the definitions given for each
one of these concepts in this provision, in order to issue, on this date, SIX
BILLION ONE HUNDRED MILLION EIGHTY THOUSAND EIGHT HUNDRED EIGHTY-EIGHT
(6,100,080,888) SHARES of one peso ($1.00) each. Several of the assets which
are the subject matter of the transfer are itemized in this document as follows:
1. REAL PROPERTY BY NATURE.
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1.1 A lot of land with a surface area of two hundred eighty-five square meters
(285 m/2/) along with all of its buildings, improvements, uses and
appurtenances, located in the Municipality of Girardot, Administrative District
of Cundinamarca, situated on Carrera 11, No. 18-01, and Calle 18, No. 11-02, in
accordance with the present urban listing, recorded in the Office of the
Registrar of Public Instruments of Girardot as Real Property Record No. 307-
30123, identified by Survey Certificate No. 01-03-013-0010-000, delineated by
the following special metes and bounds, in accordance with Public Deed No. 516
of the eighth (8) day of March, 1991, of the Sole Notarial Office of the
Girardot Association, as follows "ON THE NORTH: approximately twenty (20) meters
in length, with the heirs of Federico Perez; ON THE SOUTH: approximately twenty
(20) meters in length, with the Sucre Park; Calle 18 at the center; ON THE EAST:
for about sixty-three (63) meters with the present Carrera Eleven (11), and; ON
THE WEST: for the same distance with the Cathedral of Girardot." This real
property is listed in EXHIBIT NO. 2.1.1 to the Minutes of the Preliminary
Meeting of Shareholders held on this date by the founding shareholders, which
minutes are attached to this recorded document in order to form part hereof,
along with the exhibits thereto.
1.1.1 That the lot of land referred to above includes the construction of three
(3) plants built upon it as well as all of the constructions, appurtenances,
facilities, uses and servitudes thereof.
1.2 Lot of Land No. Twelve (12), Block U, part of Block N of Greater Extension
Map No. Five (5), with a surface area of two hundred fifty square meters (250
m/2/), located in the Municipality of Flandes, Administrative District of
Tolima, located on Carrera Seven (7), at the corner with Calle Eight (8), urban
listing, recorded in the Office of the Registrar of Public Instruments of
Espinal (Tolima) as Real Property Record No. 357-0014193, identified by Survey
Certificate No. 01-03-0008-0015-000, delineated by the following special metes
and bounds, in accordance with Public Deed No. 119 of March 15, 1996, of the
Sole Notarial Office of Flandes (Tolima), as follows "ON THE NORTH: Extending
twenty-eight (28) meters and forty-three (43) centimeters
32
<PAGE>
AA 0292516
along Lot No. Thirteen (13) of the block in mention; ON THE SOUTH: extending
twenty-nine (29) meters along Calle Seven (7) at the center and the land of Juan
N. Gomez; ON THE EAST: extending eight (8) meters and ninety-five (95)
centimeters with part of Lot No. Eleven (11) of Mr. Antonio Maria Cita; ON THE
WEST: extending eight (8) meters and eight (8) centimeters along the central
highway which goes from Flandes to Espinal (Tolima)." This real property is
listed in EXHIBIT NO. 2.1.2 to the Minutes of the Preliminary Meeting of
Shareholders held on this date by the founding shareholders, which minutes are
attached to this recorded document in order to form part hereof, along with the
exhibits thereto.
Notwithstanding the mention of the content and metes and bounds indicated, the
transfer is carried out as a defined unit.
1.3 CONVEYANCE: That The Assets itemized in Point No. 1 were acquired by the
Municipality of Girardot as follows:
1.3.1 The real property described in Point No. 1.1 of this Transitional
Provision was acquired by transfer carried out by EMPRESA DE TELECOMUNICACIONES
DE GIRARDOT E.S.P. by means of Public Deed No. 1,641 issued on the thirtieth
(30) day of December, 1997 at the Second Notarial Office of the Girardot
Association. 1.3.2 The real property described in Point No. 1.2 of this
Transitional Provision was acquired by gratuitous transfer carried out by
EMPRESA DE TELECOMUNICACIONES DE GIRARDOT E.S.P. by means of Public Deed No.
1,641 issued on the thirtieth (30) day of December, 1997 at the Second Notarial
Office of the Girardot Association.
2. REAL PROPERTY BY ACCESSION: Among the Assets which are the subject matter
of this transfer there are also included items of personal property which are
deemed to be real property by accession, which include the networks, lines and
cables listed in EXHIBIT NO. 2.2 to the Minutes of the Preliminary Meeting of
Shareholders held on this date by the founding shareholders, which minutes are
attached to this recorded document in order to form part hereof, along with the
exhibits thereto.
33
<PAGE>
3. OTHER ASSETS: Among the Assets which are the subject matter of this transfer
there are also included the other assets declared in accordance with the
EXHIBITS to this recorded document, as well as cash, investments, accounts
receivable, inventories, machinery, plant and equipment and other assets
itemized in EXHIBIT 2.3 to the Minutes of the Preliminary Meeting of
Shareholders held on this date by the founding shareholders, which minutes are
attached to this recorded document in order to form part hereof, along with the
exhibits thereto.
3.1 CONVEYANCE: That the ownership of and the other rights to the personal
property assets deemed to be real property by accession as referred to in Point
No. 2 and the other assets referred to in Point No. 3, which are hereby
contributed to EMPRESA DE TELECOMUNICACIONES DE GIRARDOT S.A. E.S.P., were
acquired by the Municipality of Girardot by transfer by means of Public Deed No.
1,641 issued on December 30, 1997 at the Second Notarial Office of the Girardot
Association.
4. LIABILITIES: The Liabilities declared in the exhibits to this recorded
document are transferred, such as the public debt, financial obligations,
accounts payable and provisions which are itemized in the EXHIBITS, included
from 3.1 to 4.3, to the Minutes of the Preliminary Meeting of Shareholders held
on this date by the founding shareholders, which minutes are attached to this
recorded document in order to form part hereof, and of the copies thereof issued
in accordance with the definition established in Transitional Provision Two of
this recorded document.
5. AGREEMENTS: The Agreements of the Municipality of Girardot are transferred,
as are all of the agreements and contracts which are listed in EXHIBITS 5 [sic]
to the Minutes of the Preliminary Meeting of Shareholders held on this date by
the founding shareholders, which minutes are attached to this recorded document
in order to form part hereof, and of the copies thereof issued.
6. LICENSES, OTHER RIGHTS AND OBLIGATIONS: The following Licenses, Other Rights
and Obligations are transferred:
34
<PAGE>
AA 0292517
6.1 Deemed to be comprised are other rights and obligations which, whether or
not directly affecting the Assets, the Liabilities or the Agreements, involve a
right or an obligation, respectively, conferred on or borne by the Municipality
of Girardot and which are not encompassed by the preceding Points (1, 2, 3, 4
AND 5) but which constitute intangible assets or liabilities inherent to the
providing of the service or relating to the property for so providing, and which
are transferred by the Municipality of Girardot by virtue of this public
document, which intangibles may be contained in governmental licenses,
unilateral concessions or permits, as listed in EXHIBIT 7 to the Minutes of the
Preliminary Meeting of Shareholders held on this date by the founding
shareholders, which minutes are attached to this recorded document in order to
form part hereof, and of the copies thereof issued.
6.2 Deemed to be comprised are the contingent liabilities listed in EXHIBIT 3.8
to the Minutes of the Preliminary Meeting of Shareholders held on this date by
the founding shareholders, which minutes are attached to this recorded document
in order to form part hereof, and of the copies thereof issued.
6.3 Deemed to be comprised are the rights to record the real property where the
remote concentrators of San Marcos and Jose Maria Cordoba are located, and the
right of use for the spaces where the remote concentrators of Canada, La
Esmeralda and La Esperanza are located, as listed in EXHIBIT 7 to the Minutes of
the Preliminary Meeting of Shareholders held on this date by the founding
shareholders, which minutes are attached to this recorded document in order to
form part hereof, and of the copies thereof issued.
PARAGRAPH ONE: That the assets transferred by means of this public instrument
have been possessed under ownership and dominion in a regular, peaceful, public
and material manner; that they have not been alienated or transferred by an act
preceding the present act, that their ownership is free of all manner of
encumbrances, such as mortgages, pledges, usufruct, use, occupancy, antichresis,
ground rent, leasehold by public recorded document, limitations and conditions
of reversion of ownership, and they have not been comprised of unalienable
property,
35
<PAGE>
and nor are they the subject matter of a civil complaint, attachment or seizure.
In any event the Municipality of Girardot engages to cure title in accordance
with the law.
PARAGRAPH TWO. That delivery is made to the company of all of the assets, both
real property by nature as well as the personal property deemed to be real
property by accession, and all the other property among the Assets, authorizing
the lawful representative of the new company to take material, full and final
possession of all of the other rights, actions and obligations transferred to it
by means of this public instrument.
TRANSITIONAL PROVISION FOUR: The founding Shareholders commit themselves to the
terms of Point 7 of the Agenda of Meeting for the Preliminary Meeting of
Shareholders and they agree that such obligations as may arise between them and
the company as a result of the stipulations under that number shall take
executory effect.
TRANSITIONAL PROVISION FIVE: The shareholders agree to sign a record of
delivery for all of the tangible assets which are the subject matter of the
transfer by the Municipality of Girardot to the company covered by this
formation. The said record shall be made and signed by representatives of the
Municipality and of the Company within a term not greater than thirty calendar
days commencing from the signing of this recorded document.
TRANSITIONAL PROVISION SIX: DESIGNATIONS. The following designations are made:
A. BOARD OF DIRECTORS
FULL MEMBERS: ALTERNATES:
MUNICIPAL MAYOR SECRETARY OF GOVERNMENT
SECRETARY OF THE TREASURY SECRETARY OF PUBLIC WORKS
GUILLERMO O. LOPEZ E. GONZALO CAICEDO TORO
C.C. 16,614,481 OF CALI C.C. 14,945,396 OF CALI
CARLOS ALBERTO ARANGO ANIBAL E. PEREZ
C.C. 16,580,293 OF CALI C.C. 16,611,702 OF CALI
JORGE ENRIQUE MARTINEZ JAVIER SALGADO PINILLA
C.C. 7,506,435 OF ARMENIA C.C. NO. 19,396,552 OF BOGOTA
36
<PAGE>
AA 0292524
B. GENERAL MANAGER: GABRIEL ARMANDO VELOZA
C.C. 19,389,855 OF BOGOTA
C. ALTERNATE MANAGER: JORGE ENRIQUE MARTINEZ
C.C. 7,506,435 OF ARMENIA
D. AUDITOR: The founding shareholders designate as the Auditors for the company
the firm PRICE WATERHOUSE and they request that, in a separate letter sent to
the Meeting of Shareholders, the said firm report the names and registration
numbers of the accountants to be in charge of such auditing.
THE CHARTER/BYLAWS AND THE MEMORANDUM OF MEETING END HERE. After this public
instrument was read to the appearing parties, they approved it with respect to
each and all of its parts, and they signed it before me, the notary, to all of
which I attest.
This recorded document was made on sheets of notarial paper numbered:
AA - 0292526, AA - 0292540, AA - 0292541, AA - 0292542, AA - 0292543, AA -
0292544, AA - 0292545, AA - 0292512, AA - 0292547, AA - 0292548, AA - 0292549,
AA - 0292550, AA - 0292511, AA - 0292521, AA - 0292520, AA - 0292515, AA -
0292516, AA - 0292517, AA - 0292524, AA - 0292525.
NOTARIAL FEES: 67,236,000.00 pesos.
VALUE-ADDED TAX: 10,765,440.00 pesos.
STAMP TAX: 125,000,000.00 pesos.
NATIONAL NOTARIAL FUND: 1,500.00 pesos.
NOTARIAL SURCHARGE: 1,500.00 pesos.
CORRECTION "MAGDA JULIETH QUIMBAYO MAHECHA, Second Commissioned Notary of the
Girardot Association" IS VALID.
CORRECTION "67,236,000, 10,765,440, 125,000,000.00" IS VALID.
37
<PAGE>
/s/
JAIRO BELTRAN GALVIS
MAYOR OF THE MUNICIPALITY OF GIRARDOT
[fingerprint]
/s/
GUILLERMO LOPEZ ESQUIVEL
PRESIDENT AND LEGAL REPRESENTATIVE
TRANSTEL, S.A.
[fingerprint]
/s/
GUILLERMO LOPEZ ESQUIVEL
GENERAL MANAGER, COMPANIA DE INVERSIONES S.C.S.
CONINVERSIONES S.C.S.
[fingerprint]
/s/
JORGE ENRIQUE MARTINEZ OCAMPO
ALTERNATE LEGAL REPRESENTATIVE
UNITEL S.A. E.S.P.
[fingerprint]
38
<PAGE>
AA 0292525
/s/
JORGE ENRIQUE MARTINEZ OCAMPO
ALTERNATE LEGAL REPRESENTATIVE
TELEPALMIRA S.A. E.S.P.
[fingerprint]
[rubber-stamped seal with emblem:]
Republic of Colombia, Second Notarial Office, Acting [illegible line]
s/
MAGDA JULIETH QUIMBAYO MAHECHA, Commissioned Notary of the Girardot
Association
[rubber-stamped text:]
I ATTEST THAT THIS IS THE THIRD COPY MADE OF ITS ORIGINAL, COMPRISED OF TWENTY
OFFICIAL SHEETS ISSUED TODAY, 1/2/98, FOR THE PURPOSE OF APPLYING FOR THE
TAXPAYERS' IDENTIFICATION NUMBER.
Fees in accordance with the law: [blank] Second Notarial Office
[rubber-stamped notarial seal]
s/
MAGDA JULIETH QUIMBAYO MAHECHA, Commissioned Notary of the Girardot
Association
[Each page of the original bears initials, inked notarial stamps, and the
printed notation "THIS PAPER IS WITHOUT ANY COST FOR THE USER."]
39
<PAGE>
EXHIBIT 10.2
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of October 28, 1997
among
TRANSTEL PASS THROUGH TRUST
as the Issuer
TRANSTEL S.A.
as the Company
and
BT ALEX. BROWN INCORPORATED
as Initial Purchaser
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C>
1. Definitions..................................................... 1
2. Exchange Offer.................................................. 6
3. Shelf Registration.............................................. 10
4. Additional Interest............................................. 11
5. Registration Procedures......................................... 13
6. Registration Expenses........................................... 23
7. Indemnification................................................. 24
8. Rules 144 and 144A.............................................. 28
9. Underwritten Registrations...................................... 29
10. Miscellaneous................................................... 29
</TABLE>
(i)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
October 28, 1997, among Transtel Pass Through Trust, a special purpose Delaware
business trust (the "Trust"), Transtel S.A., a sociedad anonima organized under
-----
the laws of the Republic of Colombia (the "Company"), and BT Alex. Brown
-------
Incorporated (the "Initial Purchaser").
-----------------
This Agreement is entered into in connection with the Purchase
Agreement, dated October 21, 1997, among the Company, the Trust, Global
Telecommunications Operations, Inc., and the Initial Purchaser (the "Purchase
--------
Agreement") which provides for the sale by the Trust to the Initial Purchaser,
- ---------
and the purchase by the Initial Purchaser from the Trust, of $150,000,000
aggregate principal amount of the Trust's 12 1/2% Pass Through Trust
Certificates due 2007 (the "Certificates"). The gross proceeds of the sale of
------------
the Certificates will be used immediately upon issuance by the Trust to purchase
$150,000,000 aggregate principal amount of the Company's 12 1/2% Senior Notes
due 2007 (the "Notes"). In order to induce the Initial Purchaser to enter into
-----
the Purchase Agreement, each of the Trust and the Company has agreed to provide
the registration rights set forth in this Agreement for the benefit of the
Initial Purchaser and its direct and indirect transferees and assigns. The
Company's and the Trust's execution and delivery of this Agreement is a
condition precedent to the Initial Purchaser's obligation to purchase the
Certificates under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
-----------
have the following meanings:
"Additional Interest" has the meaning set forth in Section 4(a)
-------------------
hereof.
"Advice" has the meaning set forth in the last paragraph of Section 5
------
hereof.
"Agreement" has the meaning set forth in the introductory paragraphs
---------
hereto.
<PAGE>
"Applicable Period" has the meaning set forth in Section 2(b) hereof.
-----------------
"Business Day" means any day excluding Saturday, Sunday and any day
------------
which shall be in the City of New York or the State of Delaware a legal
holiday or a day on which banking institutions are authorized by law or
other governmental actions to close.
"Company" has the meaning set forth in the introductory paragraphs
-------
hereto.
"Effectiveness Date" means, with respect to the Exchange Offer
------------------
Registration Statement, the 210th day after the Issue Date and, with
respect to the Shelf Registration Statement, the 60th day after delivery of
the Shelf Notice.
"Effectiveness Period" has the meaning set forth in Section 3(a)
--------------------
hereof.
"Event Date" has the meaning set forth in Section 4(b) hereof.
----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the SEC promulgated thereunder.
"Exchange Agent" means Marine Midland Bank, as exchange agent under
--------------
this Agreement with respect to the Exchange Offer.
"Exchange Certificates" has the meaning set forth in Section 2(a)
---------------------
hereof.
"Exchange Offer" has the meaning set forth in Section 2(a) hereof.
--------------
"Exchange Offer Registration Statement" has the meaning set forth in
-------------------------------------
Section 2(a) hereof.
"Filing Date" means with respect to the Exchange Offer Registration
-----------
Statement, the 150th day after the Issue Date and, with respect to the
Shelf Registration Statement, the 30th day after delivery of the Shelf
Notice.
"Holder" means any holder of a Registrable Certificate or Registrable
------
Certificates.
"Indemnified Person" has the meaning set forth in Section 7(c) hereof.
------------------
-2-
<PAGE>
"Indemnifying Person" has the meaning set forth in Section 7(c)
-------------------
hereof.
"Indenture" means the Indenture, dated as of October 28, 1997 between
---------
the Company and Marine Midland Bank, as Indenture Trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
"Indenture Trustee" means Marine Midland Bank, as the trustee under
-----------------
the Indenture.
"Initial Purchaser" has the meaning set forth in the introductory
-----------------
paragraphs hereto.
"Inspectors" has the meaning set forth in Section 5(o) hereof.
----------
"Issue Date" means the date on which the Certificates were sold to the
----------
Initial Purchaser pursuant to the Purchase Agreement.
"NASD" has the meaning set forth in Section 5(v) hereof.
----
"Notes" has the meaning set forth in the introductory paragraphs
-----
hereto.
"Participant" has the meaning set forth in Section 7(a) hereof.
-----------
"Participating Broker-Dealer" has the meaning set forth in Section
---------------------------
2(b) hereof.
"Pass Through Trustee" means Wilmington Trust Company, not on its
--------------------
individual capacity but solely as the pass through trustee under the Trust
Agreement.
"Person" means an individual, trustee, corporation, partnership, joint
------
stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
"Private Exchange" has the meaning set forth in Section 2(b) hereof.
----------------
"Private Exchange Certificates" has the meaning set forth in Section
-----------------------------
2(b) hereof.
-3-
<PAGE>
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act),
as amended or supplemented by any prospectus supplement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Purchase Agreement" has the meaning set forth in the introductory
------------------
paragraphs hereto.
"Records" has the meaning set forth in Section 5(o) hereof.
-------
"Registrable Certificates" means each Certificate upon original
------------------------
issuance of the Certificate and at all times subsequent thereto, each
Exchange Certificate as to which Section 2(c)(iv) hereof is applicable upon
original issuance and at all times subsequent thereto and each Private
Exchange Certificate upon original issuance thereof and at all times
subsequent thereto, until in the case of any such Certificate, Exchange
Certificate or Private Exchange Certificate, as the case may be, the
earliest to occur of (i) a Registration Statement (other than, with respect
to any Exchange Certificate as to which Section 2(c)(iv) hereof is
applicable, the Exchange Offer Registration Statement) covering such
Certificate, Exchange Certificate or such Private Exchange Certificate, as
the case may be, having been declared effective by the SEC and such
Certificate, Exchange Certificate or such Private Exchange Certificate, as
the case may be, having been disposed of in accordance with such effective
Registration Statement, (ii) such Certificate, Exchange Certificate or
Private Exchange Certificate, as the case may be, being eligible for sale
to the public pursuant to Rule 144, (iii) such Certificate having been
exchanged for an Exchange Certificate pursuant to an Exchange Offer which
may be resold without restriction under state and federal securities laws,
or (iv) such Certificate, Exchange Certificate or Private Exchange
Certificate, as the case may be, ceasing to be outstanding for purposes of
the Trust Agreement.
"Registration Default" has the meaning set forth in Section 4(a)
--------------------
hereof.
"Registration Statement" means any registration statement of the
----------------------
Company, including, but not limited to, the Exchange Offer Registration
Statement, filed with the SEC pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
-4-
<PAGE>
statement, including post effective amendments, all exhibits, and all
material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Rule 415" means Rule 415 promulgated under the Securities Act, as
--------
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC.
"Rule 144" means Rule 144 promulgated under the Securities Act, as
--------
such Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers
and sales of securities made in compliance therewith resulting in offers
and sales by subsequent holders that are not affiliates of an issuer of
such securities being free of the registration and prospectus delivery
requirements of the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act, as
---------
such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the SEC.
"SEC" means the U.S. Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the SEC promulgated thereunder.
"Shelf Notice" has the meaning set forth in Section 2(c) hereof.
------------
"Shelf Registration Statement" has the meaning set forth in Section
----------------------------
3(a) hereof.
"Subsequent Shelf Registration Statement" has the meaning set forth in
---------------------------------------
Section 3(b) hereof.
"TIA" means the Trust Indenture Act of 1939, as amended.
---
"Trust Agreement" means the Amended and Restated Trust Agreement,
---------------
dated as of October 28, 1997, among the Company and Wilmington Trust
Company, as Pass Through Trustee, and Marine Midland Bank, as registrar and
paying agent thereunder, pursuant to which the Certificates are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
-5-
<PAGE>
"underwritten registration" or "underwritten offering" means a
------------------------- ---------------------
registration in which securities of the Company are sold to an underwriter
for reoffering to the public.
2. Exchange Offer. (a) The Company, together with the Trust,
--------------
shall, at the Company's expense, use its best efforts to file with the SEC no
later than the Filing Date, a registration statement under the Securities Act
with respect to a registered offer to exchange (the "Exchange Offer") any and
--------------
all of the Registrable Certificates (other than Private Exchange Certificates,
if any) for a like aggregate principal amount of certificates issued by the
Trust which are identical in all material respects to the Certificates (the
"Exchange Certificates"), except that the Exchange Certificates shall have been
---------------------
registered pursuant to an effective Registration Statement under the Securities
Act and shall contain no restrictive legend thereon, and which are entitled to
the benefits of the Trust Agreement or a trust agreement which is identical in
all material respects to the Trust Agreement. Each Exchange Certificate will
represent a pro rata interest in any and all of the assets and held by the Trust
from time to time, including the Notes and all payments of principal, interest
and premium, if any, and additional amounts, if any, made in respect of the
Notes. The Exchange Certificates shall be registered under the Securities Act
on an appropriate form (the "Exchange Offer Registration Statement") and the
-------------------------------------
Exchange Offer shall comply with all applicable tender offer rules and
regulations under the Exchange Act. The Company and the Trust shall use its
best efforts to cause the Exchange Offer Registration Statement to be declared
effective by the SEC under the Securities Act on or before the Effectiveness
Date. Upon the Exchange Offer Registration Statement being declared effective,
the Trust shall offer the Exchange Certificates in exchange for the surrender of
the Certificates. The Company shall use its best efforts to keep the Exchange
Offer open for at least 30 calendar days (or longer if required by applicable
law) after the date that notice of the Exchange Offer is mailed to Holders. For
purposes of this Section 2(a) only, if after such Exchange Offer Registration
Statement is initially declared effective by the SEC, the Exchange Offer or the
issuance of the Exchange Certificates pursuant to the Exchange Offer is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Exchange Offer
Registration Statement shall be deemed not to have become effective for purposes
of this Agreement. Each Holder who participates in the Exchange Offer will be
required to represent and warrant that any Exchange Certificate received by such
Holder in connection with the Exchange Offer will be acquired by such Holder in
the ordinary course of such Holder's business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Certificates in violation of the provisions of the Securities Act, and that such
Holder is not an affiliate of the Company
-6-
<PAGE>
or the Trust within the meaning of the Securities Act or, if it is an affiliate,
it will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this Agreement shall
continue to apply, mutatis mutandis, solely with respect to Registrable
------- --------
Certificates that are Private Exchange Certificates and Exchange Certificates
held by Participating Broker-Dealers, and the Company shall have no further
obligation to register Registrable Certificates pursuant to Section 3 hereof
(other than Private Exchange Certificates and other than in respect of any
Exchange Certificates as to which clause 2(c)(iv) hereof applies). No
securities other than the Exchange Certificates shall be included in the
Exchange Offer Registration Statement.
(b) The Company shall include within the Prospectus included in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reason ably acceptable to the Initial Purchaser in form and substance, which
shall contain a summary statement of the positions taken or policies made by the
Staff of the Division of Corporation Finance of the SEC (the "Staff") with
-----
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Certificates received by such broker-dealer pursuant to the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
---------------------------
publicly disseminated by the Staff or whether such positions or policies, in the
judgment of the Initial Purchaser, represent the prevailing views of the Staff.
Such "Plan of Distribution" section shall also expressly permit the use of the
Prospectus by all Persons subject to the prospectus delivery requirements of the
Securities Act, including all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may offer
and resell the Exchange Certificates.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein as may be required by the Securities Act, in order to permit
such Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirements of the Securities Act for such period of time
as is necessary to comply with applicable law in connection with any resale of
the Exchange Certificates; provided, however, that such period shall not exceed
-------- -------
180 days after the Exchange Offer Registration Statement is declared effective
(or such longer period if extended pursuant to the last paragraph of Section 5
hereof) (the "Applicable Period").
-----------------
If, prior to consummation of the Exchange Offer, the Initial Purchaser
holds any Certificates acquired by it and having, or which are reasonably likely
to be determined to have, the status of an unsold allotment in the initial
distribution, or any
-7-
<PAGE>
other Holder is not entitled to participate in the Exchange Offer, the Company
upon the request of the Initial Purchaser or any such Holder shall
simultaneously with the delivery of the Exchange Certificates in the Exchange
Offer, issue and deliver to the Initial Purchaser and any such Holder, in
exchange (the "Private Exchange") for such Certificates held by such Initial
----------------
Purchaser and any such Holder, a like principal amount of certificates issued by
the Trust that are identical in all material respects to the Exchange
Certificates (the "Private Exchange Certificates") (and which are entitled to
-----------------------------
the benefits of the Trust Agreement or a trust agreement which is identical in
all material respects to the Trust Agreement); provided, however, the Company
-------- -------
shall not be required to effect such exchange if, in the written opinion of
counsel for the Company (a copy of which shall be in form and substance
reasonably satisfactory to the Initial Purchaser and be delivered to the Initial
Purchaser and any Holder affected thereby), such exchange cannot be effected
without registration under the Securities Act. The Private Exchange
Certificates shall bear the same CUSIP number as the Exchange Certificates.
Interest on the Senior Notes underlying the Exchange Certificates and
the Private Exchange Certificates will accrue from (A) the later of (i) the last
interest payment date on which interest was paid on the Senior Notes underlying
the surrendered Certificates surrendered in exchange therefor or (ii) if the
Certificates are surrendered for exchange on a date in a period which includes
the record date for an interest payment date on such Senior Notes to occur on or
after the date of such exchange and as to which interest will be paid, the date
of such interest payment date or (B) if no interest has been paid on such Senior
Notes, from the Issue Date.
In connection with the Exchange Offer, the Company, on behalf of the
Trust, shall:
(i) mail to each Holder a copy of the Prospectus included in
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York;
(iii) permit Holders to withdraw tendered Certificates at any time
prior to the close of business, New York time, on the last business day on
which the Exchange Offer shall remain open; and
(iv) otherwise comply in all material respects with all applicable
laws, rules and regulations.
-8-
<PAGE>
As soon as practicable after close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Certificates tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Pass Through Trustee for cancellation all
Certificates so accepted for exchange; and
(iii) cause the Pass Through Trustee to authenticate and deliver
promptly to each Holder of Certificates, Exchange Certificates or Private
Exchange Certificates, as the case may be, equal in principal amount to the
Certificates of such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or the Private Exchange,
as the case may be, does not violate applicable law, rule, regulation or any
applicable interpretation of the Staff, (ii) no action or proceeding is
instituted or threatened in any court or by any governmental agency which might
materially impair the ability of the Company or the Trust to proceed with the
Exchange Offer or the Private Exchange and no material adverse development has
occurred in any existing action or proceeding with respect to the Company or the
Trust and (iii) all U.S. governmental approvals have been obtained, which
approvals the Company deems necessary for the consummation of the Exchange Offer
or Private Exchange.
The Exchange Certificates and the Private Exchange Certificates may be
issued under (i) the Trust Agreement or (ii) a trust agreement identical in all
material respects to the Trust Agreement, which in either event shall provide
that the Exchange Certificates shall not be subject to the transfer restrictions
set forth in the Trust Agreement. The Trust Agreement or such trust agreement
shall provide that the Exchange Certificates, the Private Exchange Certificates
and the Certificates shall vote and consent together on all matters as one class
and that neither the Exchange Certificates, the Private Exchange Certificates or
the Certificates will have the right to vote or consent as a separate class on
any matter.
(c) If, (i) because of any change in law, rule, regulation or in
currently prevailing interpretations of the Staff, the Company is not permitted
to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within
240 days of the Issue Date, (iii) any holder of Private Exchange Certificates so
requests within 210 days after the consummation of the Private Exchange, or (iv)
in the case of any Holder that
-9-
<PAGE>
participates in the Exchange Offer, such Holder does not receive Exchange
Certificates on the date of the exchange that may be sold without restriction
under state and federal securities laws (other than due solely to the status of
such Holder as an affiliate of the Company or the Trust within the meaning of
the Securities Act) and so notifies the Company within 60 days after such Holder
first becomes aware of any such restriction and provides the Company with a
reasonable basis for its conclusion, in the case of each of clauses (i), (ii),
(iii) and (iv) of this sentence, then the Company shall promptly deliver to the
Holders of Registrable Certificates and the Pass Through Trustee written notice
thereof (the "Shelf Notice") and shall use its best efforts to file a Shelf
------------
Registration Statement pursuant to Section 3 hereof.
3. Shelf Registration. If a Shelf Notice is delivered as
------------------
contemplated by Section 2(c) hereof, then:
(a) Shelf Registration. The Company, together with the Trust, shall,
------------------
at the Company's expense, file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Certificates (the "Shelf Registration Statement"). If the
----------------------------
Company shall not have filed an Exchange Offer Registration Statement, the
Company shall use its best efforts to file with the SEC the Shelf Registration
Statement as promptly as practicable, but no later than the Filing Date. The
Shelf Registration Statement shall be on Form F-1 or another appropriate form
permitting registration of such Registrable Certificates for resale by Holders
in the manner or manners designated by them (including, without limitation, one
or more underwritten offerings). The Company shall not permit any securities
other than the Registrable Certificates to be included in the Shelf Registration
Statement or any Subsequent Shelf Registration Statement.
The Company shall use its best efforts to cause the initial Shelf
Registration Statement to be declared effective by the SEC under the Securities
Act on or prior to the Effectiveness Date after the delivery of the Shelf Notice
and to keep the Shelf Registration Statement continuously effective under the
Securities Act until the second anniversary of its effective date, subject to
extension pursuant to the last paragraph of Section 5 hereof (the "Effectiveness
-------------
Period"), or such shorter period ending when (i) all Registrable Certificates
- ------
covered by the Shelf Registration Statement have been sold in the manner set
forth and as contemplated in the initial Shelf Registration Statement or (ii) a
Subsequent Shelf Registration Statement covering all of the Registrable
Certificates has been declared effective by the SEC under the Securities Act;
provided, however, that the Effectiveness Period in respect of the initial Shelf
Registration Statement shall be extended to the extent required to permit
dealers to comply with the applicable prospectus delivery requirement of Rule
174 under the Securities Act and as otherwise provided herein.
-10-
<PAGE>
(b) Subsequent Shelf Registrations. If the initial Shelf
------------------------------
Registration Statement or any Subsequent Shelf Registration Statement ceases to
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the Registrable Certificates registered
thereunder), the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within 30 days of such cessation of effectiveness amend the Shelf
Registration Statement in a manner to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the Registrable Certificates (a
"Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration
---------------------------------------
Statement is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective by the SEC under the
Securities Act as soon as practicable after such filing and to keep such Shelf
Registration Statement continuously effective for a period equal to the number
of days in the Effectiveness Period less the aggregate number of days during
which the Shelf Registration Statement or any Subsequent Shelf Registration was
previously continuously effective. As used herein the term "Shelf Registration
------------------
Statement" means the Shelf Registration Statement and any Subsequent Shelf
- ---------
Registration Statement.
(c) Supplements and Amendments. The Company shall promptly
--------------------------
supplement and amend the Shelf Registration Statement (including any prospectus
contained therein) if required by the rules, regulations or instructions
applicable to the registration form used for such Shelf Registration Statement,
if required by the Securities Act, or if reasonably requested by the Holders of
a majority in aggregate principal amount of the Registrable Certificates covered
by such Shelf Registration Statement or by any underwriter of such Registrable
Certificates.
4. Additional Interest. (a) The Company and the Initial Purchaser
-------------------
agree that the Holders of Certificates will suffer damages if either of the
Company or the Trust fails to fulfill its obligations under Section 2 or Section
3 hereof and that it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, the Company agrees to pay, as liquidated
damages, additional interest on the Notes ("Additional Interest") (which
-------------------
Additional Interest will be paid by the Company to the Trust and distributed by
the Trust to the Holders of the Certificates) under the circumstances and to
the extent set forth below (each such event referred to in clauses (i) through
(iii) below, a "Registration Default" and each of which shall be given
--------------------
independent effect):
(i) if the Exchange Offer Registration Statement has not been
filed on or prior to the Filing Date, then commencing on the 151st day
after the Issue Date, Additional Interest shall accrue on the Notes (and,
therefore, the
-11-
<PAGE>
Certificates) over and above the accrued interest on the Notes (and
therefore the Certificates) at a rate of 0.50% per annum for the first 90
days immediately following such 151st day;
(ii) if the Exchange Offer Registration Statement is not declared
effective by the SEC on or prior to the Effectiveness Date, then commencing
on the 211th day after the Issue Date, Additional Interest shall accrue on
the Notes (and, therefore, the Certificates) over and above the accrued
interest at a rate of 0.50% per annum for the first 90 days immediately
following such 211th day; and
(iii) if (A) the Trust has not exchanged Exchange Certificates for
all Certificates validly tendered in accordance with the terms of the
Exchange Offer, (B) the Shelf Registration Statement has not been filed on
or prior to the Filing Date, (C) the Shelf Registration Statement is not
declared effective on or prior to the 60th day following the delivery of
the Shelf Notice or (D) the Shelf Registration Statement or the Exchange
Offer Registration Statement, as the case may be, has been declared
effective and ceases to be effective, then Additional Interest shall accrue
on the Notes (and, therefore, the Certificates) over and above the accrued
interest at a rate of 0.50% per annum for the first 90 days commencing on
the day after such Registration Default;
such Additional Interest rate, in the case of each of (i), (ii) and (iii) above,
to increase by an additional 0.50% per annum at the beginning of each subsequent
90-day period; provided, however, that in no event shall the amount of
-------- -------
Additional Interest exceed 2.00% in the aggregate pursuant to this Section 4;
provided further, that (A) upon the filing of the Exchange Offer Registration
- ----------------
Statement (in the case of clause (i) of this Section 4(a)), (B) upon the
effectiveness of the Exchange Offer Registration Statement (in the case of
clause (ii) of this Section 4(a)), or (C) upon the exchange of Exchange
Certificates for all Certificates tendered (in the case of clause (iii)(A) of
this Section 4(a)), or upon the filing of a Shelf Registration Statement (in the
case of clause (iii)(B) of this Section 4(a)), or upon the effectiveness of the
Shelf Registration Statement (in the case of clause (iii)(C) of this Section
4(a)), or upon the effectiveness of the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, which had ceased to remain
effective (in the case of clause (iii)(D) of this Section 4(a)), Additional
Interest on the Notes (and, therefore, the Certificates) as a result of such
clause (or the relevant subclause thereof), as the case may be, shall cease to
accrue until such time as the Shelf Registration Statement, or the Exchange
Offer Registration Statement, as the case may be, shall again cease to remain
effective whereupon the Additional Interest shall resume to accrue in the manner
and for the time periods specified in this Section 4(a).
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<PAGE>
(b) The Company shall notify the Pass Through Trustee and the
Indenture Trustee of a Registration Default within one business day after any
such Registration Default (an "Event Date"). Any amounts of Additional Interest
----------
due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable
in cash semi-annually on each May 1 and November 1 (to the holders of record on
the April 15 and October 15 immediately preceding such dates), commencing with
the first such date occurring after any such Additional Interest commences to
accrue. The amount of Additional Interest will be determined by multiplying the
applicable rate of Additional Interest by the principal amount of the
Registrable Certificates, multiplied by a fraction, the numerator of which is
the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months and, in the case of a partial month, the actual number of days elapsed),
and the denominator of which is 360.
5. Registration Procedures. In connection with the filing of any
-----------------------
Registration Statement pursuant to Section 2 or 3 hereof, the Company and the
Trust shall effect such registrations to permit the sale of the securities
covered thereby in accordance with the intended method or methods of disposition
thereof, and pursuant thereto and in connection with any Registration Statement
filed by the Company and the Trust hereunder, the Company and the Trust shall:
(a) Prepare and file with the SEC on or prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section
2 or 3 hereof, and use its best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein;
provided, however, that, if (i) such filing is to be made pursuant to
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Section 3 hereof, or (ii) a Prospectus contained in an Exchange Offer
Registration Statement to be filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Certificates during the Applicable Period,
before filing any such Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to counsel
selected by the Holders of a majority in aggregate principal amount of the
Registrable Certificates (the "Holders' Counsel"), counsel for such
----------------
Participating Broker-Dealer and the managing underwriters, if any, and the
Holders of the Registrable Certificates covered by such Registration
Statement or each such Participating Broker-Dealer, as the case may be, a
reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (in each case at least five business
days prior to such filing, or such later date as is reasonable under the
circumstances). The Company shall not file any Registration Statement or
Prospectus or any amendments or
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<PAGE>
supplements thereto if the Holders of a majority in aggregate principal
amount of the Registrable Certificates covered by such Registration
Statement and the Holders' Counsel, or any such Participating Broker-Dealer
and its counsel, as the case may be, or the managing underwriters, if any,
shall reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period, as the case may be; cause the related
Prospectus to be supplemented as required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange Act applicable to it with
respect to the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and with
respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus. The Company
shall be deemed not to have used its best efforts to keep a Registration
Statement effective during the Applicable Period if it voluntarily takes
any action that would result in selling Holders of the Registrable
Certificates covered thereby or Participating Broker-Dealers seeking to
sell Exchange Certificates not being able to sell such Registrable
Certificates or such Exchange Certificates during that period unless such
action is required by applicable law.
(c) If (i) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (ii) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Certificates during the Applicable Period, notify
the selling Holders of Registrable Certificates and Holders' Counsel, or
each such Participating Broker-Dealer and their counsel, as the case may
be, and the managing underwriters, if any, promptly (but in any event
within two business days), (i) when a Prospectus or any Prospectus
supplement or post-effective amendment thereto has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when
the same has become effective under the Securities Act (including in such
notice a written statement that any Holder may, upon request, obtain, at
the sole expense of the Company, one conformed copy of such Registration
Statement or post-effective amendment thereto including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of
any
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<PAGE>
stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary Prospectus or
the initiation of any proceedings for that purpose, (iii) if at any time
when a Prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Certificates or resales of
Exchange Certificates by Participating Broker-Dealers the representations
and warranties of the Company contained in any agreement (including any
underwriting agreement), contemplated by Section 5(n) hereof, to the
knowledge of the Company, cease to be true and correct in all material
respects, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Certificates or the Exchange Certificates to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event, or any information becoming known that makes any statement made in
such Registration Statement, or any post-effective amendment thereto,
Prospectus or any supplement or post-effective amendment thereto, or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes
in or amendments or supplements to such Registration Statement, Prospectus
or documents so that, in the case of the Registration Statement, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Company's determination that a post-
effective amendment to a Registration Statement would be appropriate.
(d) If (i) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (ii) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Certificates during the Applicable Period, use its
best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Certificates or the
Exchange Certificates to be sold by any Participating Broker-Dealer, for
sale in any jurisdiction, and, if any such order
-15-
<PAGE>
is issued, to use its best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If a Shelf Registration Statement is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if any), the
Holders of a majority in aggregate principal amount of the Registrable
Certificates being sold in connection with an underwritten offering or any
Participating Broker-Dealer, (i) promptly incorporate in a supplement to
the Prospectus or post-effective amendment thereto such information as the
managing underwriter or underwriters (if any), their counsel, such Holders,
Holders' Counsel, any Participating Broker-Dealer or their counsel
determine is reasonably necessary to be included therein, (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment, and (iii) supplement or make
amendments to such Registration Statement.
(f) If (i) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (ii) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Certificates during the Applicable Period, furnish
to each selling Holder of Registrable Certificates, Holders' Counsel and to
each such Participating Broker-Dealer who so requests and its counsel and
each managing underwriter, if any, at the sole expense of the Company, one
conformed copy of the Registration Statement or Registration Statements and
each post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits.
(g) If (i) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (ii) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Certificates during the Applicable Period, deliver
to each selling Holder of Registrable Certificates and Holders' Counsel, or
each such Participating Broker-Dealer and its counsel, as the case may be,
and the underwriters, if any, at the sole expense of the Company, as many
copies of the Prospectus or Prospectuses (including each form of
preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the
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<PAGE>
last paragraph of this Section 5, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the
selling Holders of Registrable Certificates or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if any,
and dealers (if any), in connection with the offering and sale of the
Registrable Certificates covered by, or the sale by Participating Broker-
Dealers of the Exchange Certificates pursuant to, such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Registrable Certificates or any
delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Certificates during the Applicable Period, use its best efforts to
cooperate with the selling Holders of Registrable Certificates and Holders'
Counsel or each such Participating Broker-Dealer and its counsel, as the
case may be, the managing underwriter or underwriters, if any, and their
counsel in connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable Certificates
for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder, Participating
Broker-Dealer, or the managing underwriter or underwriters reasonably
request; provided, however, that where Exchange Certificates held by
-------- -------
Participating Broker-Dealers or Registrable Certificates are offered other
than through an underwritten offering, the Company agrees to cause the
Company's counsel to perform Blue Sky investigations and file registrations
and qualifications required to be filed pursuant to this Section 5(h); keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange
Certificates held by Participating Broker-Dealers or the Registrable
Certificates covered by the applicable Registration Statement; provided,
--------
however, that the Company shall not be required (A) to qualify generally
-------
to do business in any jurisdiction where it is not then so qualified, (B)
to take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or (C) to subject
itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Certificates and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Certificates to be sold, which certificates shall not bear any restrictive
legends and shall be in a form
-17-
<PAGE>
eligible for deposit with The Depository Trust Company; and enable such
Registrable Certificates to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
request.
(j) Use its best efforts to cause the Registrable Certificates
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be reasonably
necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Certificates, except as may be required solely as a consequence of the
nature of such selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such registration
statement and the granting of such approvals.
(k) If (i) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (ii) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Certificates during the Applicable Period, upon the
occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi)
hereof, as promptly as practicable prepare and (subject to Section 5(a)
hereof) file with the SEC, at the sole expense of the Company, a supplement
or post-effective amendment to the Registration Statement or a supplement
to the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Certificates being sold thereunder or to the purchasers of the Exchange
Certificates to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(l) Use its best efforts to cause the Registrable Certificates
covered by a Registration Statement or the Exchange Certificates, as the
case may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Certificates covered by such Registration Statement or the
Exchange Certificates, as the case may be, or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Certificates, (i) provide the Pass Through
Trustee with
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<PAGE>
certificates for the Registrable Certificates in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Registrable Certificates.
(n) In connection with any underwritten offering of Registrable
Certificates pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings of debt
securities similar to the Registrable Certificates and take all such other
actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or the
disposition of such Registrable Certificates and, in such connection, (i)
make such representations and warranties to, and covenants with, the
underwriters with respect to the business of the Company and its
subsidiaries (including any acquired business, properties or entity, if
applicable) and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in
each case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Registrable
Certificates, and confirm the same in writing if and when requested; (ii)
use best efforts to obtain the written opinions of counsel to the Company
and written updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by the managing underwriter or underwriters; (iii) use best
efforts to obtain "cold comfort" letters and updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by
the Company for which financial statements and financial data are, or are
required to be, included or incorporated by reference in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings and such
------------
other matters as reasonably requested by the managing underwriter or
underwriters as permitted by the Statement on Auditing Standards No. 72;
and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable than
those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal
amount of Registrable Certificates covered by such Registration Statement
and the managing underwriter or underwriters or agents) with respect to all
parties to be indemnified pursuant to said Section.
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<PAGE>
The above shall be done at each closing under such underwriting agreement,
or as and to the extent required thereunder.
(o) If (i) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (ii) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Certificates during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Certificates being
sold, or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Registrable
Certificates, if any, and any attorney, accountant or other agent retained
by any such selling Holder or each such Participating Broker-Dealer, as the
case may be, or underwriter (collectively, the "Inspectors"), at the
----------
offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and instruments
of the Company and each of its subsidiaries (collectively, the "Records")
-------
as shall be reasonably necessary to enable them to exercise any applicable
due diligence responsibilities, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such
Registration Statement; provided, however, that all information shall be
-------- -------
kept confidential by each such Inspector, except to the extent that (i) the
disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction, (iii) disclosure of such information is, in the
opinion of counsel for any Inspector, necessary or advisable in connection
with any action, claim, suit or proceeding, directly or indirectly,
involving or potentially involving such Inspector and arising out of, based
upon, relating to, or involving this Agreement, or any transactions
contemplated hereby or arising hereunder; provided, however, that prior
-------- -------
notice be provided as soon as practicable to the Company of the potential
disclosure of any information by such Inspector pursuant to clause (ii) or
this clause (iii) to permit the Company to obtain a protective order (or
waive the provisions of this paragraph (o)) and that such Inspector shall
take such actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the extent such
action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holders or any Inspector, or
(iv) the information in such Records otherwise has been made generally
available to the public. Each selling Holder of such Registrable Securities
and each such Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall be deemed
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<PAGE>
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuer unless and until such
information is generally available to the public. Each selling Holder of
such Registrable Certificates and each such Participating Broker-Dealer
will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company to undertake appropriate
action to prevent disclosure of the Records deemed confidential at the
Company's sole expense.
(p) Provide a pass through trustee for the Registrable Certificates or
the Exchange Certificates, as the case may be.
(q) Cause the Indenture for the Notes to be qualified under the TIA
not later than the effective date of the Exchange Offer or the first
Registration Statement relating to the Registrable Certificates; and in
connection therewith, cooperate with the Indenture Trustee under the
Indenture and the Holders of the Registrable Certificates, to effect such
changes to the Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use its
best efforts to cause the Indenture Trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner.
(r) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable
Certificates are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(s) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Company, in a form customary for under
written transactions, addressed to the Pass Through Trustee for the benefit
of all Holders of Registrable Certificates participating in the Exchange
Offer or the Private Exchange, as the case may be, that the Exchange
Certificates or Private Exchange Certificates, as the case may be, and the
related trust agreement
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<PAGE>
constitute legal, valid and binding obligations of the Trust, enforceable
against the Trust in accordance with their respective terms, subject to
customary exceptions and qualifications.
(t) Upon consummation of an Exchange Offer or Private Exchange, obtain
an opinion of counsel to the Company, addressed to the Pass Through Trustee
for the benefit of all Holders of Registrable Certificates participating in
the Exchange Offer or a Private Exchange, as the case may be, that the
Trust is not an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended, and the rules and registrations
thereunder.
(u) If an Exchange Offer or a Private Exchange is to be consummated
upon delivery of the Registrable Certificates by Holders to the Company (or
to such other Person as directed by the Company) in exchange for the
Exchange Certificates or the Private Exchange Certificates, as the case may
be, the Company shall mark, or cause to be marked, on such Registrable
Certificates that such Registrable Certificates are being cancelled in
exchange for the Exchange Certificates or the Private Exchange
Certificates, as the case may be; in no event shall such Registrable
Certificates be marked as paid or otherwise satisfied.
(v) Cooperate with each seller of Registrable Certificates covered by
any Registration Statement, Holders' Counsel and each underwriter, if any,
participating in the disposition of such Registrable Certificates and its
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
----
(w) Use its best efforts to take all other steps necessary or
advisable to effect the registration of the Exchange Certificates and/or
Registrable Certificates covered by a Registration Statement contemplated
hereby.
The Company may require each seller of Registrable Certificates as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Certificates as the Company may, from time to time, reasonably request. The
Company may exclude from such registration the Registrable Certificates of any
seller who fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any registration pursuant to a
Shelf Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such seller not materially
misleading.
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<PAGE>
Each Holder of Registrable Certificates and each Participating Broker-
Dealer agrees by acquisition of such Registrable Certificates or Exchange
Certificates to be sold by such Participating Broker-Dealer, as case may be,
that, upon actual receipt of any notice from the Company of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi)
hereof, such Holder will forthwith discontinue disposition of such Registrable
Certificates covered by such Registration Statement or Prospectus or Exchange
Certificates to be sold by such Holder or Participating Broker-Dealer, as the
case may be, until such Holder's or Participating Broker-Dealer's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof, or until it is advised in writing (the "Advice") by the Company that the
------
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto and, if so directed by the Company, such
Holder or Participating Broker-Dealer, as the case may be, will deliver to the
Company all copies, other than permanent file copies, then in such Holder's or
Participating Broker-Dealer's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, each of the Effectiveness Period
and the Applicable Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Certificates covered by such
Registration Statement or Exchange Certificates to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice.
6. Registration Expenses. (a) All fees and expenses incident to the
---------------------
performance of or compliance with this Agreement by the Company or the Trust
shall be borne by the Company whether or not the Exchange Offer is consummated
or a Shelf Registration Statement is filed or becomes effective, including,
without limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the NASD
in connection with an underwritten offering, (B) fees with respect to filings
with the SEC, and (C) fees and expenses of compliance with state securities or
Blue Sky laws (including, without limitation, reasonable fees and disbursements
of counsel in connection with Blue Sky qualifications of the Registrable
Certificates or Exchange Certificates and determination of the eligibility of
the Registrable Certificates or Exchange Certificates for investment under the
laws of such jurisdictions (x) where the holders of Registrable Certificates are
located, in the case of the Exchange Certificates, or (y) as provided in Section
5(h) hereof, in the case of Registrable Certificates or Exchange Certificates to
be sold by a Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses, including, without limitation, expenses of printing
certificates for Registrable Certificates or Exchange Certificates in a form
eligible for deposit with The Depository Trust Company and of
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<PAGE>
printing prospectuses if the printing of prospectuses is requested by the
managing underwriter or underwriters, if any, by the Holders of a majority in
aggregate principal amount of the Registrable Certificates included in any
Registration Statement or in respect of Registrable Certificates or Exchange
Certificates to be sold by any Participating Broker-Dealer during the Applicable
Period, as the case may be, (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, the Exchange Agent, the
Indenture Trustee, the Trust and the Pass-Through Trustee and reasonable fees
and disbursements of Holders' counsel (subject to the provisions of Section 6(b)
hereof), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
------------
required by or incident to such performance), (vi) rating agency fees, (vii)
Securities Act liability insurance, if the Company desires such insurance,
(viii) fees and expenses of all other Persons retained by the Company, (ix)
internal expenses of the Company (including, without limitation, all salaries
and expenses of officers and employees of the Company performing legal or
accounting duties), (x) the expense of any annual audit, (xi) the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange, if applicable, (xii) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement and (xiii)
fees and expenses of the Pass Through Trustee, Indenture Trustee, and the
Exchange Agent.
(b) The Company shall reimburse the Holders of the Registrable
Certificates being registered in a Shelf Registration Statement for the
reasonable fees and disbursements of Holders' counsel (in addition to
appropriate local counsel) and other out-of-pocket expenses of such Holders of
Registrable Certificates incurred in connection with the registration and sale
of the Registrable Certificates.
7. Indemnification. (a) The Company agrees to indemnify and hold
---------------
harmless each Holder of Registrable Certificates and each Participating Broker-
Dealer selling Exchange Certificates during the Applicable Period, the officers
and directors of each such Person, and each Person, if any, who controls any
such Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant"), from and against any and
-----------
all losses, claims, damages and liabilities (including, without limitation, and
subject to Section 7(c) below, the reasonable legal fees and other expenses
actually incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) or
any pre-
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<PAGE>
liminary Prospectus, or caused by, arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the case of the Prospectus in
the light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Participant
furnished to the Company in writing by such Participant expressly for use
therein; provided, however, that the Company shall not be required to indemnify
-------- -------
any such Person if such untrue statement or omission or alleged untrue statement
or omission was contained or made in any preliminary prospectus and corrected in
the Prospectus or any amendment or supplement thereto and the Prospectus does
not contain any other untrue statement or omission or alleged untrue statement
or omission of a material fact that was the subject matter of the related
proceeding and any such loss, liability, claim, damage or expense suffered or
incurred by the Participants resulted from any action, claim or suit by any
Person who purchased Registrable Certificates or Exchange Certificates which are
the subject thereof from such Participant and it is established in the related
proceeding that such Participant failed to deliver or provide a copy of the
Prospectus (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Certificates or Exchange
Certificates sold to such Person if required by applicable law, unless such
failure to deliver or provide a copy of the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section 5 of
this Agreement. Any amounts advanced to an Indemnified Person (as hereafter
defined) pursuant to this Section 7 shall be promptly refunded if it shall be
finally determined that such Indemnified Person was not entitled to such
indemnification.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each Person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Participant,
but only with reference to information relating to such Participant furnished to
the Company in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of Registrable
Certificates or Exchange Certificates giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding
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<PAGE>
paragraphs, such Person (the "Indemnified Person") shall promptly notify the
------------------
Person against whom such indemnity may be sought (the "Indemnifying Person") in
-------------------
writing, and the Indemnifying Person, upon request of the Indemnified Person,
shall retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Indemnified Person may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses actually incurred by such counsel related to such proceeding; provided,
--------
however, that the failure to so notify the Indemnifying Person shall not relieve
- -------
it of any obligation or liability which it may have hereunder or otherwise
unless and only to the extent that it is directly and materially prejudiced by
such failure and the Company was not otherwise aware of such action or claim).
In any such proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed in writing to the contrary, (ii)
the Indemnifying Person shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person or any affiliate and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that,
unless there exists a conflict among Indemnified Persons, the Indemnifying
Person shall not, in connection with any one such proceeding or separate but
substantially similar related proceeding in the same jurisdiction arising out of
the same general allegations, be liable for the fees and expenses of more than
one separate firm (in addition to any appropriate local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed
promptly after receipt of the invoice therefor as they are incurred. Any such
separate firm for the Participants and such control Persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Certificates and Exchange Certificates sold by all such
Participants and any such separate firm for the Company, its directors, its
officers and such control Persons of the Company shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its prior written consent (which consent
shall not be unreasonably withheld), but if settled with such consent or if
there be a final judgment for the plaintiff for which the Indemnified Person is
entitled to indemnification pursuant to this Agreement, the Indemnifying Person
agrees to indemnify and hold harmless each Indemnified Person from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an Indemnified Person shall have
requested an Indemnifying Person to reimburse the Indemnified Person for
reasonable fees and expenses actually incurred by counsel as contemplated by the
second sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its prior
written consent
-26-
<PAGE>
if (i) such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement; provided, however, that the Indemnifying
-------- -------
Person shall not be liable for any settlement effected without its consent
pursuant to this sentence if the Indemnifying Person is contesting, in good
faith, the request for reimbursement. No Indemnifying Person shall, without the
prior written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld), effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement or compromise (A) includes an
unconditional written release of such Indemnified Person, in form and substance
reasonably satisfactory to such Indemnified Person, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of any Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to (other than by
reason of exceptions provided therein), or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the
Certificates or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Participants on the other shall be deemed to be
in the same proportion as the total proceeds from the offering (net of discounts
and commissions but before deducting expenses) of the Certificates received by
the Company bears to the total proceeds received by such Participant from the
sale of Registrable Certificates or Exchange Certificates, as the case may be.
The relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or such
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<PAGE>
Participant or such other Indemnified Person, as the case may be, on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties 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 Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable
Certificates or Exchange Certificates, as the case may be, exceeds the amount of
any damages that such Participant has otherwise been required to pay or has paid
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A. The Company covenants that it will file the
------------------
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time the Company is not required to file such reports, it will,
upon the request of Holders of a majority in aggregate principal amount of
Registrable Certificates, make publicly available annual reports and such
information, documents and other reports of the type specified in Sections 13
and 15(d) of the Exchange Act. The Company further covenants, for so long as
any Registrable Certificates remain outstanding, to make available to any Holder
or beneficial owner of Registrable Certificates in connection with any sale
thereof and any prospective purchaser of such Registrable Certificates from such
Holder or beneficial owner, the information required by Rule 144A(d)(4)
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<PAGE>
under the Securities Act in order to permit resales of such Registrable
Certificates pursuant to Rule 144A.
9. Underwritten Registrations. If any of the Registrable
--------------------------
Certificates covered by any Shelf Registration Statement 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 Holders of a
majority in aggregate principal amount of such Registrable Certificates included
in such offering and reasonably acceptable to the Company.
No Holder of Registrable Certificates may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Certificates 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.
10. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, and the Company shall not after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Certificates 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. The Company has not entered and will not
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back registration rights with respect to a Registration
Statement.
(b) Adjustments Affecting Registrable Certificates. The Company
----------------------------------------------
shall not, directly or indirectly, take any action with respect to the
Registrable Certificates as a class that would adversely affect the ability of
the Holders of Registrable Certificates to include such Registrable Certificates
in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Holders of not less than a majority in aggregate principal
amount of the then outstanding Registrable Certificates and (B) in circumstances
that would adversely affect
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<PAGE>
the Participating Broker-Dealers, the Participating Broker-Dealers holding not
less than a majority in aggregate principal amount of the Exchange Certificates
held by all Participating Broker-Dealers; provided, however, that Section 7 and
-------- -------
this Section 10(c) may not be amended, modified or supplemented without the
prior written consent of each Holder and each Participating Broker-Dealer
(including any person who was a Holder or Participating Broker-Dealer of
Registrable Certificates or Exchange Certificates, as the case may be, disposed
of pursuant to any Registration Statement). Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Registrable Certificates
whose securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect, impair, limit or compromise the rights
of other Holders of Registrable Certificates may be given by Holders of at least
a majority in aggregate principal amount of the Registrable Certificates being
sold by such Holders pursuant to such Registration Statement.
(d) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile; provided, however, that no
notice or communication provided for or permitted hereunder to or from the
Company or to or from any Holder (if such Holder is located in the Republic of
Colombia at the time such notice or communication is given) may be made by mail:
(i) if to a Holder of the Registrable Certificates or any
Participating Broker-Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case may be, set forth on the records
of the registrar under the Trust Agreement, with a copy in like manner to
the Initial Purchaser as follows:
BT Alex. Brown Incorporated
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No.: (212) 250-7200
Attention: Finance Transaction Management
(ii) if to the Initial Purchaser, at the address specified in
Section 10(d)(i);
(iii) if to the Company, at the addresses as follows:
Transtel S.A.
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<PAGE>
Calle 19N, No. 2-29
Oficina 501A
P.O. Box 3360
Cali, Colombia
Facsimile No.: (572) 667-5423
Attention: Guillermo Lopez, President
(iv) if to the Pass Through Trustee, at the addresses as follows:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Facsimile No.: (302) 651-8882
Attention: Corporate Trust Administration
(v) if to the Indenture Trustee, at the addresses as follows:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Facsimile No.: 212-658-6425
Attention: Corporate Trust Department-Transtel
Robert Conrad
All such notices and communications shall be deemed to have been duly
given and received: when delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed; one
business day after being timely delivered to a next-day air courier; and when
receipt is acknowledged by the addressee, if sent by facsimile; provided,
however, that in the case of notices and communications given to or by the
Company or to or by any Holder (if such Holder is located in the Republic of
Colombia at the time such notice or communication is given) by next-day air
courier, such notice or communication shall be deemed to have been duly given
and received upon acknowledgment of receipt by the recipient thereof.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Pass Through Trustee
at the address set forth above and in the manner specified above. All notices
and
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<PAGE>
communications given hereunder shall be in English or accompanied by an English
translation.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers; provided, however,
-------- -------
that this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless such successor or assign holds
Registrable Certificates.
(f) 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.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Third Party Beneficiaries. Holders of Registrable Certificates,
-------------------------
all Indemnified Persons entitled to indemnification under Section 7 and
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
(k) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, the Indenture and the Trust Agreement, is intended by the parties as
a final
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<PAGE>
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Initial
Purchaser on the one hand and the Company on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof and
thereof are merged herein and replaced hereby.
(l) Underwriting Agreement. Notwithstanding the provisions of
----------------------
Sections 3(d), 5, 6 and 7, in the event of a Shelf Registration pursuant to
Section 3 hereof, to the extent that the Holders of Registrable Certificates
shall enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such Sections with
substantially similar effect, the provisions contained in such Sections
addressing such issue or issues shall be of no force or effect with respect to
the registration of securities being effected in connection with such
underwriting or similar agreement.
(m) Termination. This Agreement shall terminate and be of no further
-----------
force or effect when there shall not be any Registrable Certificates, except
that the provisions of Section 4, 6, 7 and Sections 10(h) and (j) shall survive
any such termination.
(n) Consent to Jurisdiction; Waiver of Immunity. Each of the parties
-------------------------------------------
hereto irrevocably agrees that any legal dispute, action or proceeding arising
out of or based upon this Agreement may be instituted in any New York State or
U.S. Federal court sitting in the Borough of Manhattan, New York City, New York,
U.S.A. (each a "New York Court" and collectively, the "New York Courts"),
irrevocably waives, to the extent permitted by applicable law, any objection
which it may now or hereafter have to the laying of venue to any such proceeding
and irrevocably submits to the non-exclusive jurisdiction of such courts in any
such suit, action or proceeding. The Company has appointed CT Corporation
Systems, Inc., 1633 Broadway, New York, New York 10019, as its authorized agent
("Authorized Agent") to receive on its behalf service of copies of the summons
and complaints and any other process which may be served in any legal suit,
action or proceeding arising out of or relating to this Agreement which may be
instituted in any federal or state court sitting in The City of New York,
expressly consents to the jurisdiction of any such court in respect of any such
action, and waives any other requirements of or objections to personal
jurisdiction with respect thereto. Such appointments shall be irrevocable for a
period of three years from the date of this Agreement. Such service may be made
by delivering a copy of such process to the Company in care of the Authorized
Agent at the address specified above for the Authorized Agent and obtaining a
receipt therefor, and the Company
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<PAGE>
hereby irrevocably authorizes and directs such Authorized Agent to accept such
service on its behalf. The Company represents and warrants that the Authorized
Agent has agreed to act as said agent for service of process, and agrees that
service of process in such manner upon the Authorized Agent shall be deemed in
every respect effective service of process upon the Company in any such suit,
action or proceeding. The Company further agrees to take any and all actions as
may be necessary to maintain such designation and appointment of such Authorized
Agent in full force and effect. If the Authorized Agent shall cease to act as
the Company's agent in The City of New York for service of process, the Company
shall appoint without delay another such agent and notify the Escrow Agent of
such appointment.
(o) To the extent that the Company or any of its revenues, assets or
properties shall be entitled, with respect to any proceeding at any time brought
against the Company or any of its revenues, assets or properties or with respect
to any suit, action or proceeding at any time brought for the purpose of
enforcing or executing any judgment in any jurisdiction in which any specified
court or other court is located, to any immunity from suit, from the
jurisdiction of any such court, from attachment prior to judgment, from
attachment in aid of execution of judgment, from execution of a judgment or from
any other legal or judicial process or remedy, and to the extent of such
immunity, the Company irrevocably agrees not to claim and irrevocably waives
such immunity to the fullest extent permitted by the laws of such jurisdiction
(including without limitation, the Foreign Sovereign Immunities Act of 1976 of
the United States).
(p) Limitation of Liability of Wilmington Trust Company. It is
---------------------------------------------------
expressly understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as trustee of the Transtel Pass Through Trust under the
Trust Agreement dated as of October 28, 1997, among the Pass Through Trustee,
the Company and Marine Midland Bank, as registrar and paying agent thereunder,
in the exercise of the powers and authority conferred and vested in it therein,
(b) each of the representations, undertakings and agreements herein made on the
part of the Trust is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose of binding only the Trust, (c) nothing herein contained shall be
construed as creating any liability on the part of Wilmington Trust Company,
individually or personally, to perform any covenant either express or implied
herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under such parties and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this Agreement or any other related document.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreements as of the date first written above.
TRANSTEL PASS THROUGH TRUST, as the Issuer
By Wilmington Trust Company,
not in its individual capacity but
solely as Pass Through Trustee
By /s/ JAMES P. LAWLER
----------------------------------------
Name: JAMES P. LAWLER
Title: Vice President
TRANSTEL S.A., as the Company
By /s/ Guillermo O. Lopez
----------------------------------------
Name: Guillermo O. Lopez
Title: President
BT ALEX. BROWN INCORPORATED, as Initial
Purchaser
By /s/ George A, Ordonez
---------------------------------------
Name: George A, Ordonez
Title: Vice President
-35-
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES OF TRANSTEL S.A.
-------------------------------------
Empresa de Telefonos de Palmira S.A. E.S.P.
Telefonos de Cartago S.A. E.S.P.
Caucatel S.A. E.S.P.
Empresa de Telefonos de Jamundi S.A. E.S.P.
Bugatel S.A. E.S.P.
Unitel S.A. E.S.P.
Empresa de Comunicaciones de Girardot
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form F-4 of our report dated January 30, 1998 relating
to the consolidated financial statements of Transtel S.A., which appears in such
Prospectus. We also consent to the references to us under the headings "Experts"
and "Selected Financial and Other Data" in such Prospectus. However, it should
be noted that Price Waterhouse has not prepared or certified such "Selected
Financial and Other Data".
/s/ PRICE WATERHOUSE
Cali, Colombia
April 8, 1998
<PAGE>
EXHIBIT 25.1
Conformed Copy
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)
__________
MARINE MIDLAND BANK
(Exact name of trustee as specified in its charter)
New York 16-1057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, N.Y. 10005-1180
(212) 658-1000 (Zip Code)
(Address of principal executive offices)
Charles E. Bauer
Vice President
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-1792
(Name, address and telephone number of agent for service)
TRANSTEL S.A.
(Exact name of obligor as specified in its charter)
Columbia Calle 19N, No. 2-29
(State or other jurisdiction 40th Floor
of incorporation or organization) Cali, Columbia
(Address of principal executive offices)
12 1/2% SENIOR NOTES DUE 2007 ISSUED BY TRANSTEL S.A.
(Title of Indenture Securities)
<PAGE>
General
Item 1. General Information.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory
authority to which it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
--------------------------
If the obligor is an affiliate of the trustee, describe
each such affiliation.
None
<PAGE>
Item 16. List of Exhibits.
-----------------
Exhibit
- -------
T1A(i) * - Copy of the Organization
Certificate of Marine Midland
Bank.
T1A(ii) * - Certificate of the State of
New York Banking Department
dated December 31, 1993 as to
the authority of Marine
Midland Bank to commence
business.
T1A(iii) - Not applicable.
T1A(iv) * - Copy of the existing By-Laws
of Marine Midland Bank as
adopted on January 20, 1994.
T1A(v) - Not applicable.
T1A(vi) * - Consent of Marine Midland Bank
required by Section 321(b) of
the Trust Indenture Act of
1939.
T1A(vii) - Copy of the latest report of
condition of the trustee
(December 31, 1997), published
pursuant to law or the
requirement of its supervisory
or examining authority.
T1A(viii) - Not applicable.
T1A(ix) - Not applicable.
* Exhibits previously filed with the Securities and Exchange Commission
with Registration No. 33-53693 and incorporated herein by reference
thereto.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Marine Midland Bank, a banking corporation and trust company organized 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 18th day of March, 1998.
MARINE MIDLAND BANK
By: /s/ Robert A. Conrad
---------------------
Robert A. Conrad
Vice President
<PAGE>
EXHIBIT T1A (VII)
Board of Governors of the
Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance
Corporation OMB
Number: 3064-0052
Office of the Comptroller of
the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 2000
- --------------------------------------------------------------------------------
Please refer to page i, [1]
Table of Contents, for
the required disclosure
of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND
FOREIGN OFFICES--FFIEC 031
REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1997
This report is required by law; 12 U.S.C. (S)324 (State member banks); 12 U.S.C.
(S) 1817 (State nonmember banks); and 12 U.S.C. (S)161 (National banks).
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National Banks.
I, Gerald A. Ronning, Executive VP & Controller
--------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and believe.
/s/ Gerald A. Ronning
-----------------------------------------
Signature of Officer Authorized to Sign Report
1/26/98
- ----------------------------------------------
Date of Signature
SUBMISSION OF REPORTS
Each Bank must prepare its Reports of Condition and Income either:
(a) in automated formand then file the computer data file directly with the
banking agencies' collection agent, Electronic Data System Corporation
(EDS), by modem or computer diskette; or
(971231)
--------------
(RCRI 9999)
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement subsidiaries
foreign branches, consolidated foreign subsidiaries, or International Banking
Facilities.
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ Malcolm Burnett
- ----------------------------------------------
Director (Trustee)
/s/ Bernard J. Kennedy
- ----------------------------------------------
Director (Trustee)
/s/ Sal H. Alfiero
- ----------------------------------------------
Director (Trustee)
(b) in hard-copy (paper) form and arrange for another party to convert the
paper report to automated form. That party (if other than EDS) must
transmit the bank's computer data file to EDS
To fulfill the signature and attestation requirement for the Reports of
Condition and Income for this report date, attach this signature page to the
hard-copy of the completed report that the bank places in its files.
- --------------------------------------------------------------------------------
FDIC Certificate Number 0 0 5 8 9
------------
(RCRI 9030)
<PAGE>
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
Marine Midland Bank of Buffalo
Name of Bank City
in the state of New York, at the close of business
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
Thousands
of dollars
Cash and balances due from depository
institutions:
<S> <C>
Noninterest-bearing balances
currency and coin.................................. $ 928,754
Interest-bearing balances.......................... 2,571,410
Held-to-maturity securities........................ 0
Available-for-sale securities...................... 3,968,837
Federal funds sold and securities purchased
under agreements to resell......................... 497,992
Loans and lease financing receivables:
Loans and leases net of unearned
income............................................. 21,550,115
LESS: Allowance for loan and lease
losses............................................. 407,355
LESS: Allocated transfer risk reserve.............. 0
Loans and lease, net of unearned
income, allowance, and reserve..................... 21,142,760
Trading assets..................................... 979,454
Premises and fixed assets (including
capitalized leases)................................ 225,646
Other real estate owned............................... 8,092
Investments in unconsolidated
subsidiaries and associated companies................. 0
Customers' liability to this bank on
acceptances outstanding............................... 24,795
Intangible assets..................................... 479,713
Other assets.......................................... 488,168
Total assets.......................................... 31,315,621
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices................................ 20,072,724
Noninterest-bearing................................ 4,090,858
Interest-bearing................................... 15,981,866
In foreign offices, Edge, and Agreement
subsidiaries, and IBFs................................ 3,834,827
Noninterest-bearing................................ 0
Interest-bearing................................... 3,834,827
Federal funds purchased and securities sold
under agreements to repurchase..................... 2,007,482
Demand notes issued to the U.S. Treasury.............. 192,186
Trading Liabilities................................... 215,748
Other borrowed money:
With a remaining maturity of one year
or less............................................ 1,402,449
With a remaining maturity of more than
one year through three years....................... 63,601
With a remaining maturity of more than
three years........................................ 61,707
Bank's liability on acceptances
executed and outstanding.............................. 24,795
Subordinated notes and debentures..................... 497,774
Other liabilities..................................... 719,423
Total liabilities..................................... 29,092,716
EQUITY CAPITAL
Perpetual preferred stock and related
surplus............................................... 0
Common Stock.......................................... 205,000
Surplus............................................... 1,984,326
Undivided profits and capital reserves................ 8,678
Net unrealized holding gains (losses)
on available-for-sale securities...................... 24,901
Cumulative foreign currency translation
adjustments........................................... 0
Total equity capital.................................. 2,222,905
Total liabilities, limited-life
preferred stock, and equity capital................... 31,315,621
</TABLE>
<PAGE>
EXHIBIT 25.2
Registration No.
================================================================================
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) ___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
TRANSTEL S.A.
(Exact name of obligor as specified in its charter)
Colombia
(State of incorporation) (I.R.S. employer identification no.)
Calle 19N, No. 2-29
40th Floor
Cali, Colombia
(Address of principal executive offices) (Zip Code)
12 1/2% Pass Through Exchange Certificates due 2007,
representing
interests in 12 1/2% Senior Notes due 2007
(Title of the indenture securities)
================================================================================
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an affiliate
of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to
exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 5th day
of March, 1998.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ W. Chris Sponenberg By:/s/ James P. Lawler
------------------------------ ------------------------
Assistant Secretary Name: James P. Lawler
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON MAY 9, 1987
<PAGE>
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
WILMINGTON TRUST COMPANY, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "WILMINGTON TRUST COMPANY" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
FIRST: - The name of this corporation is WILMINGTON TRUST COMPANY.
SECOND: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is WILMINGTON TRUST COMPANY whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
THIRD: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity and to make and use a common seal, and alter the seal at
pleasure, to hold, purchase, convey, mortgage or otherwise deal in
real and personal estate and property, and to appoint such officers
and agents as the business of the
<PAGE>
Corporation shall require, to make by-laws not inconsistent with the
Constitution or laws of the United States or of this State, to
discount bills, notes or other evidences of debt, to receive deposits
of money, or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or necessary
for the transaction of the business of the Corporation hereby
created.
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real
or personal, against any claim or claims, adverse to his interest
therein, and to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description,
and to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort
and kind, from executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all fiduciaries, and
from all other persons and individuals, and from all corporations
whether state, municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting
the stock, bonds or other obligations of any corporation,
association, state or municipality, and may receive and manage any
sinking fund therefor on such terms as may be agreed upon between the
two parties, and in like manner may act as Treasurer of any
corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction
with any other person or persons, corporation or corporations.
2
<PAGE>
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of
responsibility or trust; to become surety for any person, or persons,
for the faithful performance of any trust, office, duty, contract or
agreement, either by itself or in conjunction with any other person,
or persons, corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation, judgment, suit,
order, or decree to be entered in any court of record within the
State of Delaware or elsewhere, or which may now or hereafter be
required by any law, judge, officer or court in the State of Delaware
or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust
capacity in the receiving, holding, managing, and disposing of any
and all estates and property, real, personal or mixed, and to be
appointed as such trustee, trustee in bankruptcy, receiver, assignee,
assignee in bankruptcy, executor, administrator, guardian or bailee
by any persons, corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this Corporation is so
appointed by any person, corporation, court, officer or authority
such trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as security for
the performance of the duties devolving upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for
the assumption of any responsibility the said Corporation may be
entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any private,
public or municipal corporation within and without the State of
Delaware, or of the Government of the United States, or of any state,
territory, colony, or possession thereof, or of any foreign
government or country; to receive, collect, receipt for, and dispose
of interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property
held and owned by it, and to exercise in respect of all such bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property,
any and all the rights, powers and privileges of individual
3
<PAGE>
owners thereof, including the right to vote thereon; to invest and
deal in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and
from time to time to vary or realize such investments; to issue bonds
and secure the same by pledges or deeds of trust or mortgages of or
upon the whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and when the Board
of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law,
to lease, purchase, hold, sell, assign, transfer, pledge, mortgage
and convey real and personal property of any name and nature and any
estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that
the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the
world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to hold or in
any manner to dispose of the whole or any part of the property so
purchased; to conduct in any lawful manner the whole or any part of
any business so acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without
limit as to amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, and other negotiable or transferable
instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire,
to hold, own, to mortgage, sell, convey or otherwise dispose of, real
and personal property, of every class and description, in any State,
District, Territory or Colony of the United States, and in any
foreign country or place.
4
<PAGE>
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any other
clause of this or any other paragraph in this charter, but that the
objects, purposes and powers specified in each of the clauses of this
paragraph shall be regarded as independent objects, purposes and
powers.
FOURTH: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and
the preferences and relative, participating, optional and other special
rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and, subject to the provisions of
subparagraph 1 of Paragraph (c) of this Article FOURTH, the Board of
Directors of the Corporation is hereby expressly granted authority to fix
by resolution or resolutions adopted prior to the issuance of any shares
of a particular series of Preferred Stock, the voting powers and the
designations, preferences and relative, optional and other special rights,
and the qualifications, limitations and restrictions of such series,
including, but without limiting the generality of the foregoing, the
following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of
5
<PAGE>
stock and whether such dividends shall be cumulative or non-
cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject
to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of section
(b) of this Article FOURTH), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed in accordance with the provisions of section (b)
of this Article FOURTH), and subject further to any conditions which may
be fixed in accordance with the provisions of section (b) of this Article
FOURTH, then and not otherwise the holders of Common Stock shall be
entitled to receive such dividends as may be declared from time to time by
the Board of Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article FOURTH), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up, of the Corporation, the
holders of the Common Stock shall be entitled to
6
<PAGE>
receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively.
(3) Except as may otherwise be required by law or by the provisions
of such resolution or resolutions as may be adopted by the Board of
Directors pursuant to section (b) of this Article FOURTH, each holder
of Common Stock shall have one vote in respect of each share of
Common Stock held on all matters voted upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or exchangeable for stock,
or carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or others, and upon
such terms as may be deemed advisable by the Board of Directors in the
exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as fixed
from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section (b) of this
Article FOURTH and the consent, by class or series vote or otherwise, of
the holders of such of the series of Preferred Stock as are from time to
time outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether or not the
powers, preferences and rights of such other series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers,
preferences and rights of such outstanding series, or any of them;
provided, however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock adopted
pursuant to section (b) of this Article FOURTH that the consent of the
holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
7
<PAGE>
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased from
time to time by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote thereon.
FIFTH: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the time in office,
and provided further, that the number of directors constituting the whole
Board shall be twenty-four until otherwise fixed by a majority of the
whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term expiring at the
next succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding annual
meeting and directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting. Any vacancies
in the Board of Directors for any reason, and any newly created
directorships resulting from any increase in the directors, may be filled
by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall
hold office until the next annual election of directors. At such
election, the stockholders shall elect a successor to such director to
hold office until the next election of the class for which such director
shall have been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall shorten the term
of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the
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Corporation may be removed at any time without cause, but only by the
affirmative vote of the holders of two-thirds or more of the outstanding
shares of capital stock of the Corporation entitled to vote generally in
the election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered
or mailed, as prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on
behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such
nominee and (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
SIXTH: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find
necessary or proper.
SEVENTH: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized
under the Act entitled "An Act Providing a General Corporation Law",
approved March 10, 1899, as from time to time amended.
EIGHTH: - This Act shall be deemed and taken to be a private Act.
9
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NINTH: - This Corporation is to have perpetual existence.
TENTH: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
ELEVENTH: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
TWELFTH: - The Corporation may transact business in any part of the world.
THIRTEENTH: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or more
of the outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this purpose
as one class).
FOURTEENTH: - Meetings of the Directors may be held outside of the State
of Delaware at such places as may be from time to time designated by the
Board, and the Directors may keep the books of the Company outside of the
State of Delaware at such places as may be from time to time designated by
them.
FIFTEENTH: - (a) In addition to any affirmative vote required by law, and
except as otherwise expressly provided in sections (b) and (c) of this
Article FIFTEENTH:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or
not itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
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(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or more,
or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article FIFTEENTH as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
FIFTEENTH shall mean any transaction which is referred to any one
or more of clauses (A) through (E) of paragraph 1 of the section
(a).
(b) The provisions of section (a) of this Article FIFTEENTH shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article FIFTEENTH:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on
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such business combination, or immediately prior to the consummation of any
such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or indirectly,
of not less than 10% of the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested Stockholder,
and such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
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(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article FIFTEENTH on the basis of
information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an Affiliate
or Associate of another, (3) whether a person has an agreement,
arrangement or understanding with another as to the matters referred
to in paragraph (3) of section (c), or (4) whether the assets subject
to any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,00,000 or more.
(e) Nothing contained in this Article FIFTEENTH shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
SIXTEENTH: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles FIFTH, THIRTEENTH, FIFTEENTH or
SIXTEENTH of this Charter or Act of Incorporation.
SEVENTEENTH: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
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EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON JANUARY 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its
<PAGE>
members, or at the call of the Chairman of the Board of Directors or the
President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
ARTICLE III
COMMITTEES
Section I. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who
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shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office
of the Company or elsewhere in its discretion at such times to be determined by
a majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall
be kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of the Company
by its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
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Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than
thirteen members who shall be selected by the Board of Directors, a majority of
whom shall be members of the Board of Directors and who shall hold office during
the pleasure of the Board.
(B) The Trust Committee shall have general supervision over
the Trust Department and the investment of trust funds, in all matters, however,
being subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be
kept and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint
Committees and/or designate officers or employees of the Company to whom
supervision over the investment of trust funds may be delegated when the Trust
Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over
the Audit Division in all matters however subject to the approval of the Board
of Directors; it shall consider all matters brought to its attention by the
officer in charge of the Audit Division, review all reports of examination of
the Company made by any governmental agency or such independent auditor employed
for that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more
than
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<PAGE>
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon
all matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at
any time by the Chairman of the Compensation Committee, the Chairman of the
Board of Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by
the Board of Directors as an associate director, to serve during the pleasure of
the Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absence or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of
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Directors shall preside at all meetings of the Board of Directors at which the
Chairman of the Board shall not be present and shall have such further authority
and powers and shall perform such duties as the Board of Directors or the
Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
6
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There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of
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any dividend, or to any allotment or rights, or to exercise any rights in
respect of any change, conversion or exchange of capital stock, or in connection
with obtaining the consent of stockholders for any purpose, which record date
shall not be more than 60 nor less than 10 days proceeding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
8
<PAGE>
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in
defending any proceeding in advance of its final disposition, provided, however,
-------- -------
that the payment of expenses incurred by a Director officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses,
under this Article X is not paid in full within ninety days after a written
claim therefor has been received by the Corporation the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification of payment of expenses
9
<PAGE>
under applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
SECTION 321(B) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: March 5, 1998 By: /s/ James P. Lawler
--------------------
Name: James P. Lawler
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been
approved by any state banking authorities. Refer to your
appropriate state banking authorities for your state publication
requirements.
<TABLE>
<CAPTION>
R E P O R T OF C O N D I T I O N
<S> <C> <C>
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- -------------------------------------------- ----------------------------------
Name of Bank City
in the State of DELAWARE , at the close of business on December 31, 1997.
------------
</TABLE>
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins............... 236,646
Interest-bearing balances......................................... 0
Held-to-maturity securities............................................. 331,880
Available-for-sale securities........................................... 1,258,661
Federal funds sold and securities purchased under agreements to resell.. 91,500
Loans and lease financing receivables:
Loans and leases, net of unearned income................ 3,822,320
LESS: Allowance for loan and lease losses.............. 59,373
LESS: Allocated transfer risk reserve.................. 0
Loans and leases, net of unearned income, allowance, and reserve.. 3,762,947
Assets held in trading accounts......................................... 0
Premises and fixed assets (including capitalized leases)................ 129,740
Other real estate owned................................................. 2,106
Investments in unconsolidated subsidiaries and associated companies..... 22
Customers' liability to this bank on acceptances outstanding............ 0
Intangible assets....................................................... 4,905
Other assets............................................................ 100,799
Total assets............................................................ 5,919,206
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Deposits:
In domestic offices......................................................... 4,034,633
Noninterest-bearing......................................... 839,928
Interest-bearing............................................ 3,194,705
Federal funds purchased and Securities sold under agreements to repurchase.. 575,827
Demand notes issued to the U.S. Treasury.................................... 61,290
Trading liabilities (from Schedule RC-D).................................... 0
Other borrowed money:....................................................... ///////
With original maturity of one year or less............................ 673,000
With original maturity of more than one year.......................... 43,000
Bank's liability on acceptances executed and outstanding.................... 0
Subordinated notes and debentures........................................... 0
Other liabilities (from Schedule RC-G)...................................... 76,458
Total liabilities........................................................... 5,464,208
</TABLE>
<TABLE>
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus............................... 0
Common Stock................................................................ 500
Surplus (exclude all surplus related to preferred stock).................... 62,118
Undivided profits and capital reserves...................................... 385,018
Net unrealized holding gains (losses) on available-for-sale securities...... 7,362
Total equity capital........................................................ 454,998
Total liabilities, limited-life preferred stock, and equity capital......... 5,919,206
</TABLE>
2
<PAGE>
EXHIBIT 25.3
Conformed Copy
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)
-----------
MARINE MIDLAND BANK
(Exact name of trustee as specified in its charter)
New York 16-1057879
(Jurisdiction of incorporation (I.R.S. Employer
or organization if not a U.S. Identification No.)
national bank)
140 Broadway, New York, N.Y. 10005-1180
(212) 658-1000 (Zip Code)
(Address of principal executive offices)
Charles E. Bauer
Vice President
Marine Midland Bank
140 Broadway
New York, New York 10005-1180
Tel: (212) 658-1792
(Name, address and telephone number of agent for service)
TRANSTEL S.A.
(Exact name of obligor as specified in its charter)
Columbia Calle 19N, No. 2-29
(State or other jurisdiction 40th Floor
of incorporation or organization) Cali, Columbia
(Address of principal executive
offices)
TRANSTEL S.A. EXCHANGE GUARANTEE WITH RESPECT TO THE
12 1/2% PASS THROUGH TRUST CERTIFICATES DUE 2007,
REPRESENTING INTERESTS IN 12 1/2% SENIOR NOTES DUE 2007
(Title of Indenture Securities)
<PAGE>
General
Item 1. General Information.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory
authority to which it is subject.
State of New York Banking Department.
Federal Deposit Insurance Corporation, Washington, D.C.
Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
--------------------------
If the obligor is an affiliate of the trustee, describe
each such affiliation.
None
<PAGE>
Item 16. List of Exhibits.
-----------------
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
T1A(i) * - Copy of the Organization Certificate of
Marine Midland Bank.
T1A(ii) * - Certificate of the State of New York
Banking Department dated December 31,
1993 as to the authority of Marine Midland
Bank to commence business.
T1A(iii) - Not applicable.
T1A(iv) * - Copy of the existing By-Laws of Marine
Midland Bank as adopted on January 20,
1994.
T1A(v) - Not applicable.
T1A(vi) * - Consent of Marine Midland Bank required
by Section 321(b) of the Trust Indenture
Act of 1939.
T1A(vii) - Copy of the latest report of condition of
the trustee (December 31, 1997), published
pursuant to law or the requirement of its
supervisory or examining authority.
T1A(viii) - Not applicable.
T1A(ix) - Not applicable.
</TABLE>
* Exhibits previously filed with the Securities and Exchange Commission
with Registration No. 33-53693 and incorporated herein by reference
thereto.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
Marine Midland Bank, a banking corporation and trust company organized 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 18th day of March, 1998.
MARINE MIDLAND BANK
By: /s/ Robert A. Conrad
---------------------
Robert A. Conrad
Vice President
<PAGE>
EXHIBIT T1A (VII)
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 2000
- ----------------------------------------------------------------------------------------------------------
Please refer to page i, [1]
Table of Contents, for
the required disclosure
of estimated burden.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND
FOREIGN OFFICES--FFIEC 031 REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1997
REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1997
This report is required by law; 12 U.S.C. (S)324 (State member banks); 12 U.S.C.
(S) 1817 (State nonmember banks); and 12 U.S.C. (S)161 (National banks).
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National Banks.
I, Gerald A. Ronning, Executive VP & Controller
- -----------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and believe.
/s/ Gerald A. Ronning
------------------------------------------------
Signature of Officer Authorized to Sign Report
1/26/98
- -----------------------------------------------------
Date of Signature
SUBMISSION OF REPORTS
Each Bank must prepare its Reports of Condition and Income either:
(a) in automated formand then file the computer data file directly with the
banking agencies' collection agent, Electronic Data System Corporation
(EDS), by modem or computer diskette; or
(971231)
-----------
(RCRI 9999)
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement subsidiaries
foreign branches, consolidated foreign subsidiaries, or International Banking
Facilities.
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/ Malcolm Burnett
- -----------------------------------------------------
Director (Trustee)
/s/ Bernard J. Kennedy
- -----------------------------------------------------
Director (Trustee)
/s/ Sal H. Alfiero
- -----------------------------------------------------
Director (Trustee)
(b) in hard-copy (paper) form and arrange for another party to convert the
paper report to automated form. That party (if other than EDS) must
transmit the bank's computer data file to EDS
To fulfill the signature and attestation requirement for the Reports of
Condition and Income for this report date, attach this signature page to the
hard-copy of the completed report that the bank places in its files.
- --------------------------------------------------------------------------------
FDIC Certificate Number [0][0][5][8][9]
(RCRI 9030)
<PAGE>
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the
Marine Midland Bank of Buffalo
Name of Bank City
in the state of New York, at the close of business December 31, 1997
<TABLE>
ASSETS
Thousands
of dollars
<S> <C>
Cash and balances due from depository
institutions:
Noninterest-bearing balances
currency and coin............................ $ 928,754
Interest-bearing balances.................... 2,571,410
Held-to-maturity securities.................. 0
Available-for-sale securities................ 3,968,837
Federal funds sold and securities purchased
under agreements to resell................... 497,992
Loans and lease financing receivables:
Loans and leases net of unearned
income....................................... 21,550,115
LESS: Allowance for loan and lease
losses....................................... 407,355
LESS: Allocated transfer risk reserve 0
Loans and lease, net of unearned
income, allowance, and reserve............... 21,142,760
Trading assets............................... 979,454
Premises and fixed assets (including
capitalized leases).......................... 225,646
Other real estate owned......................... 8,092
Investments in unconsolidated
subsidiaries and associated companies........... 0
Customers' liability to this bank on
acceptances outstanding......................... 24,795
Intangible assets............................... 479,713
Other assets.................................... 488,168
Total assets.................................... 31,315,621
</TABLE>
<PAGE>
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices....................... 20,072,724
Noninterest-bearing....................... 4,090,858
Interest-bearing.......................... 15,981,866
In foreign offices, Edge, and Agreement
subsidiaries, and IBFs....................... 3,834,827
Noninterest-bearing....................... 0
Interest-bearing.......................... 3,834,827
Federal funds purchased and securities sold
under agreements to repurchase............ 2,007,482
Demand notes issued to the U.S. Treasury 192,186
Trading Liabilities.......................... 215,748
Other borrowed money:
With a remaining maturity of one year
or less................................... 1,402,449
With a remaining maturity of more than
one year through three years.............. 63,601
With a remaining maturity of more than
three years............................... 61,707
Bank's liability on acceptances
executed and outstanding..................... 24,795
Subordinated notes and debentures............ 497,774
Other liabilities............................ 719,423
Total liabilities............................ 29,092,716
EQUITY CAPITAL
Perpetual preferred stock and related
surplus...................................... 0
Common Stock................................. 205,000
Surplus...................................... 1,984,326
Undivided profits and capital reserves....... 8,678
Net unrealized holding gains (losses)
on available-for-sale securities............. 24,901
Cumulative foreign currency translation
adjustments.................................. 0
Total equity capital......................... 2,222,905
Total liabilities, limited-life
preferred stock, and equity capital.......... 31,315,621
</TABLE>
<PAGE>
EXHIBIT 99.1
FORM OF LETTER OF TRANSMITTAL
Offer to Exchange All Outstanding
12 1/2% Pass Through Trust Certificates due 2007,
representing interests in
12 1/2% Senior Notes due 2007
for
12 1/2% Pass Through Exchange Certificates due 2007,
representing interests in
12 1/2% Senior Notes due 2007
issued by
TRANSTEL S.A.
Pursuant to the Prospectus
dated , 1998
______________
- ------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998 (AS SUCH DATE MAY BE EXTENDED, THE
"EXPIRATION DATE").
- ------------------------------------------------------------------------------
______________
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
MARINE MIDLAND BANK
By Registered or Certified Mail: By Hand or Overnight Delivery:
------------------------------- -----------------------------
Marine Midland Bank Marine Midland Bank
140 Broadway, Level A 140 Broadway, Level A
New York, New York 10005-1180 New York, New York 10005-1180
Attention: Corporate Trust Services Attention: Corporate Trust Services
Confirm by Telephone:
(212) 658-5931
Facsimile Transmissions:
(ELIGIBLE INSTITUTIONS ONLY)
(212) 658-2292
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE>
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by Original
Certificateholders (as defined herein) either if 12 1/2% Pass Through Trust
Certificates due 2007, representing interests in 12 1/2% Senior Notes due 2007
issued by Transtel S.A. (the "Original Certificates") are to be forwarded
herewith or if tenders of Original Certificates are to be made by book-entry
transfer to an account maintained by Marine Midland Bank (the "Exchange Agent")
at The Depository Trust Company ("DTC") pursuant to the procedures set forth in
"The Exchange Offer--Procedures for Tendering Original Certificates" in the
Prospectus and an Agent's Message (as defined herein) is not delivered.
Holders of Original Certificates (the "Original Certificateholders") whose
certificates are not immediately available or who cannot deliver their Original
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis must tender their Original
Certificates according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
ALL TENDERING ORIGINAL CERTIFICATEHOLDERS COMPLETE THIS BOX:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
DESCRIPTION OF ORIGINAL CERTIFICATES TENDERED
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Name and Address of Registered Original ORIGINAL CERTIFICATE(S) ENCLOSED
Certificateholder(s) (PLEASE LIST BELOW--
(IF BLANK, PLEASE FILL IN, EXACTLY AS ATTACH ADDITIONAL LIST IF NECESSARY.
APPEARS ON ORIGINAL CERTIFICATE(S)) IF YOU CANNOT LOCATE ANY OF YOUR ORIGINAL
CERTIFICATES,
CHECK THE SMALL BOX IMMEDIATELY BELOW THIS
TABLE.)
- -----------------------------------------------------------------------------------------
ORIGINAL NUMBER OF
CERTIFICATE ORIGINAL CERTIFICATES
NUMBER(S)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Total Number of
Original
Certificates
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
[ ] Check here if you cannot locate any of your Original Certificate(s) and require
assistance in replacing the same. Upon receipt of notification on this Letter
of Transmittal, the Exchange Agent will contact you directly with replacement
instructions.
</TABLE>
2
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED ORIGINAL CERTIFICATES ARE BEING DELIVERED BY BOOK-
ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH
DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
DTC Account Number
Transaction Code Number
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED ORIGINAL CERTIFICATES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Original Certificateholder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
If Guaranteed Delivered is to be made By Book-Entry Transfer:
Name of Tendering Institution _________________________________________________
DTC Account Number ____________________________________________________________
Transaction Code Number _______________________________________________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED ORIGINAL
CERTIFICATES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET
FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL
CERTIFICATES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
------------------------------------------
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Transtel Pass Through Trust, a statutory
business trust formed under the laws of the State of Delaware (the "Trust"), the
above described number of certificates representing 12 1/2% Pass Through Trust
Certificates due 2007 (the "Original Certificates"), issued by the Trust,
representing a pro rata interest in 12 1/2% Senior Notes due 2007 (the "Senior
Notes"), issued by Transtel S.A. (the "Company" or "Transtel"), a sociedad
anonima incorporated under the laws of the Republic of Colombia, in exchange for
a like number of certificates representing 12 1/2% Pass Through Exchange
Certificates due 2007 (the "Exchange Certificates"), issued by the Trust,
representing a pro rata interest in the Senior Notes, which have been registered
under the Securities Act of 1933 (the "Securities Act"), upon the terms and
subject to the conditions set forth in the Prospectus dated ,
1998, (as the same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitute the "Exchange
Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Original Certificates tendered herewith in accordance with the
terms and conditions of the Exchange Offer (including, if the Exchange Offer is
extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Trust all right, title and interest in and to such Original
Certificates as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company and the Trust in connection with the Exchange Offer) with respect to the
tendered Original Certificates, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (i)
deliver the Original Certificates to the Company or the Trust together with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Trust, upon receipt by the Exchange Agent, as the undersigned's agent, of
the Exchange Certificates to be issued in exchange for such Original
Certificates, (ii) present such Original Certificates for transfer, and to
transfer the Original Certificates on the books of the Trust, and (iii) receive
for the account of the Trust all benefits and otherwise exercise all rights of
beneficial ownership of such Original Certificates, all in accordance with the
terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
ORIGINAL CERTIFICATES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, THE TRUST WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE ORIGINAL CERTIFICATES TENDERED HEREBY ARE NOT SUBJECT TO ANY
ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE TRUST OR THE EXCHANGE AGENT TO BE
NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, SALE, ASSIGNMENT AND TRANSFER
OF THE ORIGINAL CERTIFICATES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY
WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT (AS DEFINED IN THE
PROSPECTUS). THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Original
Certificates (the "Original Certificateholder(s)") tendered hereby should be
printed above, if they are not already set forth above, as they appear on the
Original Certificates. The Original Certificate number(s) and the number of
Original Certificates that the undersigned wishes to tender should be indicated
in the appropriate boxes above.
If any tendered Original Certificates are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more
Original Certificates than are tendered or accepted for exchange, certificates
for such nonexchanged or nontendered Original Certificates will be returned (or,
in the case of Original Certificates tendered by book-entry transfer, such
Original Certificates will be credited to an account maintained at DTC), without
expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.
4
<PAGE>
The undersigned understands that tenders of Original Certificates pursuant
to any one of the procedures described in "The Exchange Offer--Procedures for
Tendering Original Certificates" in the Prospectus and in the instruction will,
upon the Trust's acceptance for exchange of such tendered Original Certificates,
constitute a binding agreement between the undersigned and the Trust upon the
terms and subject to the conditions of the Exchange Offer. The undersigned
recognizes that, under certain circumstances set forth in the Prospectus, the
Trust may not be required to accept for exchange any of the Original
Certificates tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange
Certificates be issued in the name(s) of the undersigned or, in the case of a
book-entry transfer of Original Certificates, that such Exchange Certificates be
credited to the account indicated above maintained at DTC. If applicable,
substitute certificates representing Original Certificates not exchanged or not
accepted for exchange will be issued to the undersigned or, in the case of a
book-entry transfer of Original Certificates, will be credited to the account
indicated above maintained at DTC. Similarly, unless otherwise indicated under
"Special Delivery Instructions" below, please deliver Exchange Certificates to
the undersigned at the address shown below the undersigned's signature.
BY TENDERING ORIGINAL CERTIFICATES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE
UNDERSIGNED IS NOT AN "AFFILIATE" OF THE COMPANY OR THE TRUST WITHIN THE MEANING
OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY EXCHANGE CERTIFICATES TO BE
RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS
BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY
PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES
ACT) OF EXCHANGE CERTIFICATES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF
THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND
DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE
SECURITIES ACT) OF SUCH EXCHANGE CERTIFICATES. BY TENDERING ORIGINAL
CERTIFICATES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF
TRANSMITTAL, AN ORIGINAL CERTIFICATEHOLDER WHICH IS A BROKER-DEALER REPRESENTS
AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF
THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO
THIRD PARTIES, THAT (A) SUCH ORIGINAL CERTIFICATES HELD BY THE BROKER-DEALER ARE
HELD ONLY AS A NOMINEE, OR (B) SUCH ORIGINAL CERTIFICATES WERE ACQUIRED BY SUCH
BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR
OTHER TRADING ACTIVITIES AND IT WILL DELIVER A PROSPECTUS (AS AMENDED OR
SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT
IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE CERTIFICATES (PROVIDED THAT, BY
SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE
DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES
ACT).
THE COMPANY AND THE TRUST HAVE AGREED THAT, SUBJECT TO THE PROVISIONS OF
THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS
DEFINED BELOW) IN CONNECTION WITH RESALES OF EXCHANGE CERTIFICATES RECEIVED IN
EXCHANGE FOR ORIGINAL CERTIFICATES, WHERE SUCH ORIGINAL CERTIFICATES WERE
ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING 90
DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER CERTAIN LIMITED
CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH
EXCHANGE CERTIFICATES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER.
IN THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED ORIGINAL CERTIFICATES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH ORIGINAL CERTIFICATES AND
EXECUTING THIS LETTER OF TRANSMITTAL OR DELIVERING AN AGENT'S MESSAGE IN LIEU
THEREOF, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OR THE TRUST OF
THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY
STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY
MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE
THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE
SALE OF EXCHANGE CERTIFICATES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY OR
THE TRUST HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH
MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED
PROSPECTUS TO THE PARTICIPATING
5
<PAGE>
BROKER-DEALER OR THE COMPANY OR THE TRUST HAS GIVEN NOTICE THAT THE SALE OF THE
EXCHANGE CERTIFICATES MAY BE RESUMED, AS THE CASE MAY BE. IF THE COMPANY OR THE
TRUST GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE EXCHANGE CERTIFICATES, IT
SHALL EXTEND THE 90-DAY PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING
BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE
OF EXCHANGE CERTIFICATES BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND
INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN
PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR
AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES OF THE EXCHANGE CERTIFICATES OR
TO AND INCLUDING THE DATE ON WHICH THE COMPANY OR THE TRUST HAS GIVEN NOTICE
THAT THE SALE OF EXCHANGE CERTIFICATES MAY BE RESUMED, AS THE CASE MAY BE.
As a result, a Participating Broker-Dealer who intends to use the
Prospectus in connection with resales of Exchange Certificates received in
exchange for Original Certificates pursuant to the Exchange Offer must notify
the Company or the Trust, or cause the Company or the Trust to be notified, on
or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such
notice may be given in the space provided above or may be delivered to the
Exchange Agent at the address set forth in the Prospectus under "The Exchange
Offer--Exchange Agent."
The Original Certificateholders whose Original Certificates are accepted
for exchange will not receive Distributions on such Original Certificates after
May 1, 1998 and the undersigned waives the right to receive any Distribution on
such Original Certificates accumulated from May 1, 1998. Accordingly, holders
of Exchange Certificates ("Exchange Certificateholders") as of the record date
for the payment of Distributions on November 1, 1998 will be entitled to
Distributions accumulated from May 1, 1998.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Trust or the Exchange Agent to be necessary or desirable
to complete the exchange, sale, assignment and transfer of the Original
Certificates tendered hereby. All authority herein conferred or agreed to be
conferred in this Letter of Transmittal shall survive the death or incapacity of
the undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees in
bankruptcy, legal representatives, successors and assigns of the undersigned.
Except as stated in the Prospectus, this tender is irrevocable.
6
<PAGE>
- --------------------------------------------------------------------------------
ORIGINAL CERTIFICATEHOLDER(S) SIGN HERE
(See Instructions 2, 5 and 6)
(Note: Signature(s) must be guaranteed if required by Instruction 2)
The following must be signed by registered holder(s) exactly as name(s)
appear(s) on the Original Certificates hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certificates and other information as may be required by the Trust or
the Exchange Agent to comply with the restrictions on transfer applicable to the
Original Certificates). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another acting in
a fiduciary capacity or representative capacity, please set forth the signer's
full title. See Instruction 5.
(SIGNATURE(S) OF ORIGINAL CERTIFICATEHOLDER(S))
Date _____________, 1998
Name(s) _______________________________________________________________________
(PLEASE PRINT)
Area Code(s) and Telephone Number _____________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(See Instructions 2 and 5)
Authorized Signature __________________________________________________________
Name __________________________________________________________________________
(PLEASE PRINT)
Date _____________, 1998
Capacity or Title _____________________________________________________________
Name of Firm __________________________________________________________________
Address _______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _________________________________________________
- --------------------------------------------------------------------------------
7
<PAGE>
- ----------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if Exchange
Certificates and/or any Original
Certificates that are not tendered
are to be issued in the name of
someone other than the registered
Original Certificateholder whose
name(s) appear(s) above.
Issue:
[ ] Exchange Certificates to:
[ ] Original Certificates not
tendered to:
Name ____________________________
(PLEASE PRINT)
Address _________________________
_________________________________
_________________________________
(INCLUDE ZIP CODE)
__________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NO.)
- ------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5 and 6)
To be completed ONLY if Exchange
Certificates and/or any Original
Certificates that are not tendered
be sent to someone other than the
registered Original Certificateholder
whose name(s) appear(s) above, or the
registered holder(s) at an address
other than that shown above.
Mail:
[ ] Exchange Certificates to:
[ ] Original Certificates not
tendered to:
Name ____________________________
(PLEASE PRINT)
Address _________________________
_________________________________
_________________________________
(INCLUDE ZIP CODE)
__________________________________
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NO.)
- ------------------------------------
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND ORIGINAL CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a)
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in "The Exchange Offer--Procedures for Tendering Original
Certificates" in the Prospectus and an Agent's Message is not delivered or
Original Certificates are to be forwarded herewith. Timely confirmation of a
book-entry transfer of such Original Certificates into the Exchange Agent's
account at DTC (a "book-entry confirmation"), as well as this Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its addresses
set forth herein on or prior to the Expiration Date. Tenders by book-entry
transfer may also be made by delivering an Agent's Message in lieu of this
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the DTC participant, which acknowledgment states that such participant has
received and agrees to be bound by the Letter of Transmittal (including the
representations contained herein) and that the Trust and the Company may enforce
the Letter of Transmittal against such participant. Original Certificates may be
tendered in whole or in part in principal amount of not less than $250,000 and
integral multiples of $1,000 in excess thereof; provided that, if any Original
--------
Certificates are tendered for exchange in part, the untendered thereof must be
$250,000 or any integral multiple of $1,000 in excess thereof.
Original Certificateholders who wish to tender their Original Certificates
and (i) who cannot complete the procedures for delivery by book-entry transfer
on a timely basis, (ii) who cannot deliver their Original Certificates, this
Letter of Transmittal and all other required documents to the Exchange Agent on
or prior to the Expiration Date or (iii) whose Original Certificates are not
immediately available may tender their Original Certificates by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for
Tendering Original Certificates" in the Prospectus. Pursuant to such
procedures: (a) such tender must be made by or through an Eligible Institution
(as defined below); (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying this Letter of
Transmittal, must be received by the Exchange Agent on or prior to the
Expiration Date; and (c) the Original Certificates (or a book-entry
confirmation) representing tendered Original Certificates, in proper form for
transfer, together with a Letter of Transmittal (or facsimile thereof or Agent's
Message in lieu thereof), properly completed and duly executed, with any
required signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer--Procedures for Tendering
Original Certificates" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Original
Certificates to be properly tendered pursuant to the guaranteed delivery
procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or
prior to the Expiration Date. As used herein and in the Prospectus, "Eligible
Institution" means a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as "an eligible guarantor institution," including (as such terms
are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association.
THE METHOD OF DELIVERY OF ORIGINAL CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
ORIGINAL CERTIFICATEHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY
SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Neither the Company nor the Trust will accept any alternative, conditional
or contingent tenders. Each tendering holder, by execution of a Letter of
Transmittal (or facsimile thereof), waives any right to receive any notice of
the acceptance of such tender.
9
<PAGE>
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC whose
name appears on a security position listing as the owner of the Original
Certificates) of Original Certificates tendered herewith, unless such holder(s)
has completed either the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" above, or
(ii) such Original Certificates are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Original Certificates" is inadequate, the Certificate number(s)
of Original Certificates and any other required information should be listed on
a separate signed schedule which is attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Original Certificates
will be accepted only in the amount of $250,000 and integral multiples of $1,000
in excess thereof, provided that if any Original Certificates are tendered for
--------
exchange in part, the untendered thereof must be $250,000 or any integral
multiple of $1,000 in excess thereof. All Original Certificates delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Certificates may
be withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above or in the
Prospectus on or prior to the Expiration Date. Any such notice of withdrawal
must specify the name of the person who tendered the Original Certificates to be
withdrawn, the aggregate amount of Original Certificates to be withdrawn, and
(if Certificates for Original Certificates have been tendered) the name of the
registered Original Certificates as set forth on the Original Certificates, if
different from that of the person who tendered such Original Certificates. If
Certificates for the Original Certificates have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of the
Original Certificates, the tendering holder must submit the serial numbers shown
on the particular Original Certificates to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Original Certificates tendered for the account of an Eligible
Institution. If Original Certificates have been tendered pursuant to the
procedures for book-entry transfer set forth in "The Exchange Offer--Procedures
for Tendering Original Certificates," the notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawal of
Original Certificates, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission on or prior to the Expiration Date. Withdrawals of tenders of
Original Certificates may not be rescinded. Original Certificates properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described in the Prospectus
under "The Exchange Offer--Procedures for Tendering Original Certificates."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties.
Neither the Company, the Trust, any affiliates or assigns of the Company or the
Trust, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Original Certificates
which have been tendered but which are withdrawn will be returned to the holder
thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Original
Certificates tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Original Certificates tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
10
<PAGE>
If any tendered Original Certificates are registered in different name(s)
on several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of certificates.
If this Letter of Transmittal or any Original Certificates or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of Companies or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company and the Trust, in their sole discretion, of
such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Original Certificates listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless Exchange
Certificates are to be issued in the name of a person other than the registered
Original Certificateholder(s). Signature(s) on such Original Certificate(s) or
bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Original Certificates listed, the Original
Certificates must be endorsed or accompanied by appropriate bond powers, signed
exactly as the name or names of the registered owner(s) appear(s) on the
certificates, and also must be accompanied by such opinions of counsel,
certifications and other information as the Trust or the Exchange Agent may
require in accordance with the restrictions on transfer applicable to the
Original Certificates. Signatures on such Original Certificates or bond powers
must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Certificates
are to be issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Certificates are to be sent to someone other than
the signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Original Certificates not exchanged will be returned by mail or, if tendered by
book-entry transfer, by crediting the account indicated above maintained at DTC
unless the appropriate boxes on this Letter of Transmittal are completed. See
Instruction 4.
7. IRREGULARITIES. The Company and the Trust will determine, in their sole
discretion, all questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of
Original Certificates, which determination shall be final and binding on all
parties. The Company and the Trust reserve the absolute right, in their sole and
absolute discretion, to reject any and all tenders determined by them not to be
in proper form or the acceptance of which, or exchange for, may, in the view of
counsel to the Company and the Trust, be unlawful. The Company and the Trust
also reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer set forth in the Prospectus under "The Exchange
Offer--Conditions to the Exchange Offer" or any conditions or irregularity in
any tender of Original Certificates of any particular holder whether or not
similar conditions or irregularities are waived in the case of other holders.
The Company's and the Trust's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Original Certificates will be
deemed to have been validly made until all irregularities with respect to such
tender have been cured or waived. Neither the Company, the Trust, any affiliates
or assigns of the Company, the Trust, the Exchange Agent, nor any other person
shall be under any duty to give notification of any irregularities in tenders or
incur any liability for failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal and the Notice
of Guaranteed Delivery may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. WAIVER OF CONDITIONS. The Company and the Trust reserve the absolute
right, subject to applicable law, to waive satisfaction of any or all conditions
enumerated in the Prospectus.
10. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering holders of Original Certificates, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of Original Certificates for exchange.
Neither the Company, the Trust, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Original Certificates nor shall any of them incur any liability for
failure to give any such notice.
11
<PAGE>
11. LOST, DESTROYED OR STOLEN ORIGINAL CERTIFICATES. If any Original
Certificates have been lost, destroyed or stolen, the holder should promptly
notify the Exchange Agent. The holder will then be instructed as to the steps
that must be taken in order to replace the Original Certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost, destroyed or stolen Original Certificate(s) have been
followed.
12. SECURITY TRANSFER TAXES. Holders who tender their Original
Certificates for exchange will not be obligated to pay any transfer taxes in
connection therewith. If, however, Exchange Certificates are to be delivered to,
or are to be issued in the name of, any person other than the registered
Original Certificateholder tendered, or if a transfer tax is imposed for any
reason other than the exchange of Original Certificates in connection with the
Exchange Offer, then the amount of any such transfer tax (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
12
<PAGE>
EXHIBIT 99.2
FORM OF NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ALL OUTSTANDING 12 1/2% PASS THROUGH TRUST CERTIFICATES
DUE 2007, REPRESENTING INTERESTS IN 12 1/2%
SENIOR NOTES DUE 2007
ISSUED BY
TRANSTEL S.A.
The Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis, (ii) certificates for the Trust's (as defined below) 12 1/2% Pass Through
Trust Certificates due 2007, representing interests in 12 1/2% Senior Notes due
2007 issued by Transtel S.A. (the "Original Certificates") are not immediately
available, or (iii) Original Certificates, the Letter of Transmittal and all
other required documents cannot be delivered to Marine Midland Bank (the
"Exchange Agent") on or prior to the Expiration Date (as defined in the
Prospectus referred to below). This Notice of Guaranteed Delivery may be
delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See "The Exchange Offer -- Procedures for
Tendering Original Certificates" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
MARINE MIDLAND BANK
By Registered or Certified Mail: By Hand or Overnight Delivery:
- -------------------------------- ---------------------------------------
Marine Midland Bank Marine Midland Bank
140 BROADWAY, LEVEL A 140 BROADWAY, LEVEL A
NEW YORK, NEW YORK 10005-1180 NEW YORK, NEW YORK 10005-1180
ATTN: CORPORATE TRUST SERVICES ATTN: CORPORATE TRUST SERVICES
CONFIRM BY TELEPHONE:
---------------------
(212) 658-5931
FACSIMILE TRANSMISSIONS
-----------------------
(ELIGIBLE INSTITUTIONS ONLY)
(212) 658-2292
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA A
FACSIMILE 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" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Transtel Pass Through Trust, a statutory
business trust formed under the laws of the State of Delaware (the "Trust"),
upon the terms and subject to the conditions set forth in the Prospectus dated
, 1998 (as the same may be amended or supplemented from time to time, the
"Prospectus"), and the related Letter of Transmittal (which together constitute
the "Exchange Offer"), receipt of which is hereby acknowledged, the number of
Original Certificates set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus under the caption "The Exchange Offer --
Procedures for Tendering Original Certificates."
No. of Certificate(s) Name(s) of Registered Holder(s):
Tendered:__________________________ ___________________________________
Certificate No(s). (if available): Address(es):
___________________________________ ___________________________________
___________________________________
If Original Certificates will be tendered Area Code and Telephone Number(s):
by book-entry transfer, provide the __________________________________
following information: __________________________________
DTC Account Signature(s):_____________________
Number:___________________________ __________________________________
__________________________________
Date:______________________________
THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (1) a bank; (2) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (3) a credit union;
(4) a national securities exchange, registered securities association or
clearing agency; or (5) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Original
Certificates tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Original Certificates to the Exchange Agent's
account at The Depository Trust Company ("DTC"), pursuant to the procedures for
book-entry transfer set forth in the Prospectus, in either case together with
one or more properly completed and duly executed Letter(s) of Transmittal (or
facsimile thereof) and any other required documents within three New York Stock
Exchange trading days after the date of execution of this Notice of Guaranteed
Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of Transmittal
and the Original Certificates tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
Name of
Firm:____________________________ -----------------------------------
(Authorized Signature)
Address:------------------------- Title:_____________________________
- --------------------------------- Name:______________________________
(zip code) (Please type or print)
Area Code and
Telephone
Number:__________________________ Date:______________________________
NOTE: DO NOT SEND ORIGINAL CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY.
ACTUAL SURRENDER OF ORIGINAL CERTIFICATES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS.
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<PAGE>
EXHIBIT 99.3
, 1998
FORM OF EXCHANGE AGENT AGREEMENT
--------------------------------
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Ladies and Gentlemen:
Transtel Pass Through Trust, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), proposes to make an offer (the
"Exchange Offer") to exchange all outstanding 12 1/2% Pass Through Trust
Certificates due 2007, representing interests in 12 1/2% Senior Notes due 2007
issued by Transtel S.A. (the "Company") (the "Original Certificates") for
12 1/2% Pass Through Exchange Certificates due 2007, representing interests in
12 1/2% Senior Notes due 2007 issued by the Company (the "Exchange
Certificates"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"). The terms and conditions of the Exchange Offer
as currently contemplated are set forth in a prospectus, dated , 1998
(the "Prospectus"), proposed to be distributed to all record holders of the
Original Certificates. The Original Certificates and the Exchange Certificates
are collectively referred to herein as the "Certificates." Capitalized terms
used herein and not otherwise defined shall have the meanings assigned to them
in the Prospectus.
The Trust hereby appoints Marine Midland Bank to act as exchange agent (the
"Exchange Agent") in connection with the Exchange Offer. References hereinafter
to "you" shall refer to Marine Midland Bank.
The Exchange Offer is expected to be commenced by the Trust on or about
, 1998. The Letter of Transmittal accompanying the Prospectus is to be used by
the holders of the Original Certificates (the "Original Certificateholders") to
accept the Exchange Offer and contains certain instructions with respect to (i)
the delivery of certificates for Original Certificates tendered in connection
therewith and (ii) the book entry transfer of Certificates to the Exchange
Agent's account at The Depository Trust Company ("DTC").
<PAGE>
The Exchange Offer shall expire at 5:00 p.m., New York City time, on
_______________________ , 1998 or on such later date or time to which the
Trust or the Company may extend the Exchange Offer (the "Expiration Date").
Subject to the terms and conditions set forth in the Prospectus, the Trust and
the Company expressly reserve the right to extend the Exchange Offer from time
to time by giving oral (to be confirmed in writing) or written notice to you no
later than 5:00 p.m., New York City time, on the business day following the
previously scheduled Expiration Date.
The Trust and the Company expressly reserve the right to amend or terminate
the Exchange Offer, and not to accept for exchange any Original Certificates not
theretofore accepted for exchange, upon the occurrence of any of the conditions
of the Exchange Offer specified in the Prospectus under the caption "The
Exchange Offer -- Conditions to the Exchange Offer." The Trust or the Company
will give oral (to be confirmed in writing) or written notice of any amendment,
termination or nonacceptance of Original Certificates to you as promptly as
practicable.
In carrying out your duties as Exchange Agent, you are to act in accordance
with the following instructions:
1. You will perform such duties and only such duties as are specifically
set forth in the section of the Prospectus captioned "The Exchange Offer" and as
specifically set forth herein and such duties which are necessarily incidental
thereto; provided, however, that in no way will your general duty to act in good
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faith be discharged by the foregoing.
2. You will establish an account with respect to the Original
Certificates at DTC (the "Book-Entry Transfer Facility") for purposes of the
Exchange Offer within two business days after the date of the Prospectus, and
any financial institution that is a participant in the Book Entry Transfer
Facility's systems may make book-entry delivery of the Original Certificates by
causing the Book-Entry Transfer Facility to transfer such Original Certificates
into your account in accordance with the Book-Entry Transfer Facility's
procedure for such transfer.
3. You are to examine each of the Letters of Transmittal, certificates for
Original Certificates (or confirmations of book-entry transfers into your
account at the Book-Entry Transfer Facility) and any Agent's Message or other
documents delivered or mailed to you by or for Original Certificateholders to
ascertain whether: (i) the Letters of Transmittal and any such other documents
are duly executed and properly completed in accordance with instructions set
forth therein and (ii) the Original Certificates have otherwise been properly
tendered. In each case where the Letter of Transmittal or any other document has
been improperly completed or executed or any of the certificates for Original
Certificates are not in proper form for transfer or some other irregularity in
connection with the acceptance of the Exchange Offer exists, you will endeavor
to inform the presenters of the need for fulfillment of all requirements and to
take any other action as may be necessary or advisable to cause such
irregularity to be corrected.
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<PAGE>
4. With the approval of the Pass Through Trustee of the Trust or any
person designated in writing by the Company (a "Designated Officer") (such
approval, if given orally, to be confirmed in writing) or any other party
designated by the Pass Through Trustee or Designated Officer in writing, you are
authorized to waive any irregularities in connection with any tender of Original
Certificates pursuant to the Exchange Offer.
5. Tenders of Original Certificates may be made only as set forth in
the Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer -- Procedures for Tendering Original Certificates" and Original
Certificates shall be considered properly tendered to you only when tendered in
accordance with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Original Certificates
which the Pass Through Trustee of the Trust or Designated Officer of the Company
shall approve as having been properly tendered shall be considered to be
properly tendered (such approval, if given orally, shall be confirmed in
writing).
6. You shall advise the Trust and the Company with respect to any Original
Certificates delivered subsequent to the Expiration Date and accept their
instructions with respect to disposition of such Original Certificates.
7. You shall accept tenders:
a) in cases where the Original Certificates are registered in two or
more names only if signed by all named holders;
b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of such person's authority to so act is submitted; and
c) from persons other than the registered Original Certificateholder
provided that customary transfer requirements, including payment of any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Original Certificates where so
indicated and as permitted in the Letter of Transmittal and deliver certificates
for Original Certificates to the transfer agent for split-up and return any
untendered Original Certificates to the holder (or to such other person as may
be designated in the Letter of Transmittal) as promptly as practicable after
expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Trust will notify you (such notice, if given orally, to be confirmed
in writing) of the Company's and the Trust's acceptance, promptly after the
Expiration Date, of all Original Certificates properly tendered and you, on
behalf of the Trust, will
3
<PAGE>
exchange such Original Certificates for Exchange Certificates and cause such
Original Certificates to be canceled. Delivery of Exchange Certificates will be
made on behalf of the Trust by you in $1,000 denominations; provided, however,
------------------
that in all cases, Original Certificates tendered pursuant to the Exchange Offer
will be exchanged only after timely receipt by you of certificates for such
Original Certificates (or confirmation of book-entry transfer into your account
at the Book-Entry Transfer Facility), a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees (or an Agent's Message in lieu thereof) and any other required
documents. You shall issue Exchange Certificates only in denominations of $1,000
or any integral multiple thereof. Original Certificates may be tendered in whole
or in part in minimum denominations of $250,000 and integral multiples of $1,000
in excess thereof, provided that if any Original Certificates are tendered for
exchange in part, the untendered amount must be $250,000 or any integral
multiple of $1,000 in excess thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and upon the conditions set forth in the Prospectus
and the Letter of Transmittal, Original Certificates tendered pursuant to the
Exchange Offer may be withdrawn at any time on or prior to the Expiration Date.
10. The Company and the Trust shall not be required to exchange any
Original Certificates tendered if any of the conditions set forth in the
Exchange Offer are not met. Notice of any decision by the Company and the Trust
not to exchange any Original Certificates tendered shall be given (such notice,
if given orally, shall be confirmed in writing) by the Company or the Trust to
you.
11. If, pursuant to the Exchange Offer, the Company or the Trust does
not accept for exchange all or part of the Original Certificates tendered
because of an invalid tender, the occurrence of certain other events set forth
in the Prospectus under the caption "The Exchange Offer -- Conditions to the
Exchange Offer" or otherwise, you shall as soon as practicable after the
expiration or termination of the Exchange Offer return those certificates for
unaccepted Original Certificates (or effect the appropriate book-entry transfer
of the unaccepted Original Certificates), together with any related required
documents and the Letters of Transmittal relating thereto that are in your
possession, to the persons who deposited them.
12. All certificates for reissued Original Certificates, unaccepted
Original Certificates or for Exchange Certificates shall be forwarded by (a)
first-class mail under a blanket surety bond protecting you, the Trust and the
Company from loss or liability arising out of the non-receipt or non-delivery of
such certificates or (b) by registered mail insured separately for the
replacement value of each of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
4
<PAGE>
a) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any of
the certificates or the Original Certificates represented thereby deposited with
you pursuant to the Exchange Offer, and will not be required to and will make no
representation as to the validity, value or genuineness of the Exchange Offer;
provided, however, that in no way will your general duty to act in good faith be
- -------- -------
discharged by the foregoing;
b) shall not be obligated to take any legal action hereunder which might in
your reasonable judgment involve any expense or liability, unless you shall have
been furnished with reasonable indemnity;
c) may rely on and shall be protected in acting in good faith in reliance
upon any certificate, instrument, opinion, notice, letter, facsimile or other
document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
d) may act upon any tender, statement, request, agreement or other
instrument whatsoever not only as to its due execution and validity and
effectiveness of its provisions, but also as to the truth and accuracy of any
information contained therein, which you shall in good faith reasonably believe
to be genuine or to have been signed or represented by a proper person or
persons;
e) may conclusively rely on and shall be protected in acting upon written or
oral instructions from the Pass Through Trustee of the Trust or from any
Designated Officer of the Company with respect to the Exchange Offer;
f) shall not advise any person tendering Original Certificates pursuant to
the Exchange Offer as to the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any Original Certificates;
and
g) may consult with your counsel with respect to any questions relating to
your duties and responsibilities, and the written opinion of such counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by you hereunder in good faith and in accordance with
such written opinion of such counsel.
15. You shall take such action as may from time to time be requested by
the Pass Through Trustee of the Trust, any Designated Officer of the Company, or
Dewey Ballantine LLP, special counsel for the Company and the Trust, (and such
other action as you may reasonably deem appropriate) to furnish copies of the
Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery, or such
other forms as may be approved from time to time by the Company or the Trust, to
all persons requesting such documents and to accept and comply with telephone
requests for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or withdrawing
from) the Exchange Offer. The Company or the Trust will furnish you with copies
of such documents at your request. All other
5
<PAGE>
requests for information relating to the Exchange Offer shall be directed to the
Company, Attention: Guillermo O. Lopez.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Guillermo O. Lopez of the Company, and
such other person or persons as the Trust or the Company may request, daily (and
more frequently during the week immediately preceding the Expiration Date and if
otherwise requested) up to and including the Expiration Date, as to the amount
of the Original Certificates which have been tendered pursuant to the Exchange
Offer and the items received by you pursuant to this Agreement, separately
reporting and giving cumulative totals as to items properly received and items
improperly received and items covered by Notices of Guaranteed Delivery. In
addition, you will also inform, and cooperate in making available to, the
Company and the Trust or any such other person or persons as the Company or the
Trust requests from time to time prior to the Expiration Date of such other
information as they or such person reasonably request. Such cooperation shall
include, without limitation, the granting by you to the Company, the Trust and
such person as the Company or the Trust may request of access to those persons
on your staff who are responsible for receiving tenders, in order to ensure that
immediately prior to the Expiration Date, the Company and the Trust shall have
received information in sufficient detail to enable them to decide whether to
extend the Exchange Offer. You shall prepare a list of persons who failed to
tender or whose tenders were not accepted and the aggregate amount of Original
Certificates not tendered or Original Certificates not accepted and deliver said
list to the Company and the Trust at least seven days prior to the Expiration
Date. You shall also prepare a final list of all persons whose tenders were
accepted, the aggregate amount of Original Certificates tendered and the
aggregate amount of Original Certificates accepted and deliver said list to the
Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall
be stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company at the address set forth below for notices.
18. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation and reimbursement of reasonable out-of-pocket
expenses as set forth on Schedule I attached hereto.
19. You hereby acknowledge receipt of the Prospectus and the Letter
of Transmittal and further acknowledge that you have examined each of them to
the extent necessary to perform your duties hereunder. Any inconsistency
between this Agreement, on the one hand, and the Prospectus and the Letter of
Transmittal (as they may be amended from time to time), on the other hand, shall
be resolved in favor of the latter two documents, except with respect to the
duties, liabilities and indemnification of you as Exchange Agent, which shall be
controlled by this Agreement.
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<PAGE>
20. (a) The Company agrees to indemnify and hold you harmless in
your capacity as Exchange Agent hereunder against any liability, cost or
expense, including reasonable attorneys' fees, arising out of or in connection
with any act, omission, delay or refusal made by you in reasonable reliance upon
any signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document reasonably believed by you to be
valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Original Certificates reasonably believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept any tenders or
effect any transfer of Original Certificates; provided, however, that the
-------- -------
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expense to the extent arising out of your negligence, willful
misconduct or bad faith. In no case shall the Company be liable under this
indemnity with respect to any claim against you unless the Company shall be
notified by you, by letter or by facsimile confirmed by letter, of the written
assertion of a claim against you or of any other action commenced against you,
promptly after you shall have received any such written assertion or notice of
commencement of action. The Company shall be entitled to participate at its own
expense in the defense of any such claim or other action, and, if the Company so
elects, the Company shall assume the defense of any suit brought to enforce any
such claim. In the event that the Company shall assume the defense of any such
suit, the Company shall not thereafter be liable for the fees and expenses of
any counsel retained by you so long as the Company shall retain counsel
reasonably satisfactory to you to defend such suit; provided that the Company
shall not be entitled to assume the defense of any such suit if the named
parties to such suit include both the Company and you and representation of both
parties by the same legal counsel would, in the written opinion of counsel to
you, be inappropriate due to actual or potential conflicting interests between
them.
(b) You agree that, without the prior written consent of the Company
(which consent shall not be unreasonably withheld or delayed), you will not
settle, compromise or consent to the entry of judgment in connection with any
pending or threatened claim, action, or proceeding in respect of which
indemnification could be sought in accordance with the indemnification
provisions of this Agreement (whether or not you or the Company or any of its
officers, directors or controlling shareholders is an actual or potential party
to such claim, action or proceeding), unless such settlement, compromise or
consent includes an unconditional release of the Company and its officers,
directors and controlling shareholders from all liability arising out of such
claim, action or proceeding.
21. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
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<PAGE>
22. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
23. In case any provision of this Agreement 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.
24. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by each party thereto. This Agreement may not be modified
orally.
25. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to the Company:
Transtel S.A.
Calle 19N, No. 2-29
40th Floor
Cali, Colombia
Facsimile: (572) 667-5423
Attention: Guillermo O. Lopez
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<PAGE>
With a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 259-6333
Attention: Bernard E. Kury
If to the Trust:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: TranstelPass Through Trustee
If to the Exchange Agent:
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005
Facsimile: (212) 658-6425
Attention: Transtel-Exchange Agent
26. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days following the Expiration Date. Notwithstanding the foregoing,
paragraphs 18 and 20 shall survive the termination of this Agreement. Upon any
termination of this Agreement, you shall promptly deliver to the Company any
certificates for Certificates or property (including, without limitation,
Letters of Transmittal and any other documents relating to the Exchange Offer)
then held by you as Exchange Agent under this Agreement.
27. This Agreement shall be binding and effective as of the date
hereof.
9
<PAGE>
Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
TRANSTEL S.A.
By:
----------------------------------------------
Name:
Title:
TRANSTEL PASS THROUGH TRUST
By: Wilmington Trust Company,
as Pass Through Trustee
By:
---------------------------------------------
Name:
Title:
Accepted as of the date
first above written:
MARINE MIDLAND BANK,
as Exchange Agent
By:
-----------------------------------
Name:
Title:
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<PAGE>
SCHEDULE I
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EXPENSES
11
