<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _________)*
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV)
- -------------------------------------------------------------------------------
(Name of Issuer)
NATIONAL TELEPHONE COMPANY OF VENEZUELA (CANTV)
- -------------------------------------------------------------------------------
(Translation of Name of Issuer Into English)
CLASS D COMMON SHARES,
NOMINAL VALUE Bs. 36.90182224915 PER SHARE (the "Class D Shares")
AMERICAN DEPOSITARY SHARES EACH REPRESENTING
SEVEN CLASS D SHARES (the "ADSs")
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(Title of Class of Securities)
P3055Q103 (Class D Shares); 204421101 (ADSs)
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(CUSIP Number)
Marianne Drost, One Stamford Forum, Stamford,
Connecticut 06904 Tel: (203) 965-2000
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
November 27, 1996
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
CUSIP No. P3055Q103 (Class D Shares) PAGE 2
204421101 (ADSs)
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GTE Venezuela Incorporated
IRS Identification No. 13-3634506
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
Not Applicable
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
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7 SOLE VOTING POWER
Class D Shares: 48,965,000
NUMBER OF ADSs: 6,995,000
SHARES ----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY Class D Shares: None
EACH ADSs: None
REPORTING ----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH Class D Shares: 48,965,000
ADSs: 6,995,000
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
Class D Shares: None
ADSs: None
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Class D Shares: 48,965,000
ADSs: 6,995,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
Not Applicable
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Class D Shares: 15.6%
ADSs: 15.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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CUSIP No. P3055Q103 (Class D Shares) PAGE 3
204421101 (ADSs)
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GTE Corporation
IRS Identification No. 13-1678633
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
Not Applicable
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of New York
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7 SOLE VOTING POWER
Class D Shares: 48,965,000
NUMBER OF ADSs: 6,995,000
SHARES ----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY Class D Shares: None
EACH ADSs: None
REPORTING ----------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH Class D Shares: 48,965,000
ADSs: 6,995,000
----------------------------------------------------------
10 SHARED DISPOSITIVE POWER
Class D Shares: None
ADSs: None
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Class D Shares: 48,965,000
ADSs: 6,995,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
Not Applicable
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Class D Shares: 15.6%
ADSs: 15.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE> 4
4
ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D relates to 6,995,000 American
Depositary Shares (the "ADSs") each representing seven Class D Shares nominal
value Bs. 36.90182224915 per share (the "Class D Shares") of Compania Anonima
Nacional Telefonos de Venezuela (CANTV) (the "Issuer") owned beneficially by
GTE Corporation through its indirect wholly-owned subsidiary GTE Venezuela
Incorporated. CANTV has its principal executive offices at Edificio CANTV,
Primer Piso, Avenida Libertador, Caracas, Venezuela. The ADSs are evidenced by
American Depositary Receipts ("ADRs") issued under a Deposit Agreement dated as
of November 27, 1996 among CANTV, Citibank, N.A., as depositary (the
"Depositary"), and the holders and beneficial owners from time to time of ADRs
issued thereunder. The principal executive offices of the Depositary are 111
Wall Street, New York, New York 10005.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed by GTE Corporation, which is
incorporated in New York, and by its indirect wholly-owned subsidiary, GTE
Venezuela Incorporated ("GTE Venezuela"), which is incorporated in Delaware.
GTE Corporation is one of the largest publicly held telecommunications
companies in the world. GTE Corporation is also the largest U.S.-based local
telephone company and a leading cellular-service provider, with wireline and
wireless operations that form a market area covering about one-third of the
country's population. Outside the United States, where GTE Corporation has
operated for more than 40 years, GTE Corporation serves over 6 million
customers. GTE Corporation is also a leader in government and defense
communications systems and equipment, aircraft passenger telecommunications,
directories and telecommunications-based information services and systems. GTE
Venezuela acts as a holding company for GTE Corporation's investment in the
Issuer. GTE Corporation and GTE Venezuela are sometimes referred to herein as
the "Reporting Persons". GTE Venezuela is a wholly-owned subsidiary of GTE
International Telecommunications Incorporated ("GTE International"), a Delaware
corporation, which in turn is a wholly-owned subsidiary of GTE Corporation.
The principal business office of GTE Corporation, GTE International and GTE
Venezuela is One Stamford Forum, Stamford, Connecticut 06904.
The name, residence or business address, principal occupation or
employment and citizenship of each of the executive officers and directors of
the Reporting Persons are set forth in Schedule A hereto.
Within the last five years, neither GTE Corporation, GTE
International, GTE Venezuela nor, to the best of the Reporting Persons'
knowledge, any of persons listed on Schedule A have been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors) or
have been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
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5
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
GTE Corporation made capital contributions aggregating approximately
US$170,000,000 from its working capital to GTE International which in turn
made capital contributions to GTE Venezuela in the same aggregate amount to
enable GTE Venezuela to purchase the ADSs to which this Schedule 13D relates.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Persons acquired beneficial ownership of the ADSs to
which this Schedule 13D relates in the recent SEC-registered initial public
offering of ADSs and Class D Shares by the Republic of Venezuela and in open
market transactions following such public offering. At the time of such
offering, GTE Corporation had announced its intention to purchase ADSs up to an
aggregate of US$200,000,000 and that it had placed an order with the global
coordinators for such offering.
In addition to the ADSs to which this Schedule 13D relates, in December
1991 the Reporting Persons, through a subsidiary 51% owned by GTE Venezuela,
VenWorld Telecom, C.A. ("VenWorld"), a company organized under the laws of
Venezuela, acquired operational control and 40% of the equity share capital of
the Issuer from the Government of Venezuela for a purchase price of
approximately US$1.885 billion. The shares owned by VenWorld constitute all of
the issued and outstanding Class A shares, nominal value Bs. 36.90182224915 per
share (the "Class A Shares"), of the Issuer. The 49% of VenWorld not held by
the Reporting Persons is held directly or by wholly-owned subsidiaries of T.I.
Telefonica Internacional de Espana, S.A. (16%), La Electricidad de Caracas,
S.A.C.A., S.A.I.C.A. (16%), Banco Mercantil as trustee for 239 trusts
established as a result of the liquidation of Inversiones Cimatel, C.A. (12%),
and AT&T Corporation (5%) (collectively, together with the Reporting Persons,
the "Consortium Participants").
The Reporting Persons acquired the ADSs to which this Schedule 13D
relates because they believe that the ADSs represent an attractive investment
opportunity. In connection with GTE Corporation's acquisition of shares of the
Issuer in the initial public offering of the Class D Shares by the Republic of
Venezuela, GTE Corporation issued a press release in which GTE Corporation's
Chairman and Chief Executive Officer, Charles R. Lee, said "We are extremely
pleased with CANTV's progress and remain committed to Venezuela and optimistic
about its future. We are seeing an improvement in both the country and the
Company, and believe GTE's further investment makes good sense for our
shareholders and reinforces our commitment to Venezuela". The acquisition of the
ADSs to which this Schedule 13D relates principally provides to the Reporting
Persons an increased economic stake in the Issuer. In addition, after January 1,
2001 the holders of ADSs will be entitled to vote together with holders of
shares of classes other than Class D Shares in the election of a majority of the
directors of the Issuer, and the purchase of the ADSs will increase the
Reporting Persons' voting power at that time. See Item 6 below. The Reporting
Persons may make additional purchases of ADSs or Class D Shares or other
securities of the Issuer either in the open market, in private transactions or
otherwise depending on such factors as the Reporting Persons' evaluation of the
Issuer's business, prospects and financial condition, the market for such
securities, other opportunities available to the Reporting Persons, prospects
<PAGE> 6
6
for the Reporting Persons' own businesses, general economic conditions,
including economic conditions in the Republic of Venezuela, the Issuer's
principal market, stock market conditions and other future developments.
Depending on similar factors, the Reporting Persons may decide to sell all or
part of their investment in the ADSs or other securities of the Issuer, although
they have no current intention to do so. The Reporting Persons may from time to
time seek to influence business strategies of the Issuer with respect to such
matters as acquisitions, dispositions, and changes in management or dividend
policies or other extraordinary transactions.
Except as indicated above, the Reporting Persons have no plans or
proposals that relate to or would result in (a) the acquisition by any person
of additional securities of the Issuer, or the disposition of securities of the
Issuer; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Issuer or any of
its subsidiaries; (d) any change in the present board of directors or
management of the Issuer, including any plans or proposals to change the number
or term of directors or to fill any existing vacancies on the board; (e) any
material change in the present capitalization or dividend policy of the Issuer;
(f) any other material change in the Issuer's business or corporate structure;
(g) changes in the Issuer's charter, bylaws or instruments corresponding
thereto or other actions that may impede the acquisition of control of the
Issuer by any person; (h) causing a class of securities of the Issuer to be
delisted from a national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national securities
association; (i) a class of equity securities of the Issuer becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or (j) any action similar to any of those enumerated
above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The Reporting Persons and GTE International beneficially own
6,995,000 ADSs each representing seven Class D Shares. The Class D Shares
represented by these ADSs represent approximately 15.6% (14.0% after exercise
of the underwriters' overallotment option) of the total number of outstanding
Class D Shares on November 27, 1996, or approximately 4.9% of the Issuer's
total share capitalization. To the best of the Reporting Persons' knowledge,
none of the persons listed in Schedule A hereto owns beneficially any Class D
Shares or ADSs representing Class D Shares, except as follows:
<PAGE> 7
7
<TABLE>
<CAPTION>
ADSs
Name and Position owned beneficially % of Class D Shares represented
----------------- ------------------ ---------------------------------
<S> <C> <C>
Charles R. Lee, 11,000 *
Chairman, Chief
Executive Officer
and Chief Operating
Officer,
GTE Corporation;
Director,
GTE Corporation
Kent B. Foster, 1,000 *
President,
GTE Corporation;
Director,
GTE Corporation
Michael T. Masin, 4,350 *
Vice Chairman and
President-
International,
GTE Corporation;
Director,
GTE Corporation
Robert C. Calafell, 2,000 *
Senior Vice
President-Corporate
Planning and
Development,
GTE Corporation
Armen Der 1,000 *
Marderosian, Senior
Vice President-
Technology and
Systems,
GTE Corporation
Dan J. Cohrs, 1,000 *
Treasurer,
GTE Corporation
John P.Z. Kent, Vice 500 *
President-Taxes,
GTE Corporation
Russell E. Palmer, 1,000 *
Director,
GTE Corporation
</TABLE>
_______________
*Less than .1%.
<PAGE> 8
8
<TABLE>
<CAPTION>
ADSs
Name and Position owned beneficially % of Class D Shares represented
----------------- ------------------ ---------------------------------
<S> <C> <C>
Bruce E. Haddad, 4,350 *
President,
GTE Venezuela
Alfred C. Giammarino,
Vice President-Finance 2,000 *
and Planning,
GTE Venezuela
Andrew T. Jones, 4,000 *
Vice President,
GTE Venezuela
</TABLE>
_______________
*Less than .1%.
(b) The Reporting Persons and, to the best of the Reporting
Persons' knowledge, the persons listed in the above chart each has the sole
power to vote and the sole power to dispose of the ADSs and the Class D Shares
represented thereby as held by each of them.
(c) In the past sixty days from the date of this statement, the
Reporting Persons acquired ADSs each representing seven Class D Shares as
follows:
<PAGE> 9
9
<TABLE>
<CAPTION>
Date of Number of Price Place and Manner
Acquisition* ADSs Acquired Trade Date per ADS of Acquisition
------------ ------------- ---------- ------- --------------
<S> <C> <C> <C> <C>
November 27, 1996 4,350,000 N.A. US$23.00 Purchase in initial
public offering
November 27, 1996 188,000 November 22, 1996 25.125 Purchase in an open
45,000 " 25.250 market transaction
36,000 " 25.375 effected on the New York
40,000 " 25.500 Stock Exchange
25,000 " 25.625 "
304,000 " 25.750 "
941,700 " 25.875 "
212,300 " 26.000 "
88,000 " 26.125 "
20,000 " 26.250 "
179,600 November 25, 1996 25.500 "
10,400 " 25.625 "
5,000 " 25.750 "
50,000 November 27, 1996 25.000 "
80,000 " 25.125 "
10,000 " 25.375 "
5,000 " 25.500 "
8,000 " 25.625 "
37,000 " 25.750 "
December 2, 1996 1,000 December 2, 1996 25.500 "
1,500 " 25.625 "
7,500 " 25.750 "
16,500 " 25.875 "
63,500 " 26.000 "
December 4, 1996 5,000 December 4, 1996 26.375 "
20,000 " 26.500 "
10,000 " 26.625 "
39,500 " 26.750 "
24,000 " 26.875 "
16,500 " 27.000 "
December 6, 1996 50,000 December 6, 1996 26.500 "
48,600 " 26.625 "
16,000 " 26.750 "
24,000 " 26.875 "
16,400 " 27.000 "
</TABLE>
________________________
*Later of November 27 (closing date for sale of shares in initial public
offering) or trade date.
In the past sixty days from the date of this statement, the persons
listed in paragraph (a) above acquired ADSs each representing seven Class D
Shares as follows:
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10
<TABLE>
<CAPTION>
Place and Manner
Name of Purchaser Date of Acquisition* Number of ADSs Price per ADS of Acquisition
----------------- ------------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Charles R. Lee November 27, 1996 11,000 $23.00 Purchase in initial
public offering
Kent B. Foster " 1,000 " "
Michael T. Masin " 4,350 " "
Robert C. Calafell " 2,000 " "
Armen Der Marderosian " 1,000 " "
Dan J. Cohrs " 1,000 " "
John P.Z. Kent " 500 " "
Russell E. Palmer " 1,000 " "
Bruce E. Haddad " 4,350 " "
Alfred C. Giammarino " 2,000 " "
Andrew T. Jones " 4,000 " "
- ------------------------
</TABLE>
*All shares acquired on November 27 (closing date for sale of shares in initial
public offering).
(d) Inapplicable.
(e) Inapplicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The Issuer's bylaws (the "Issuer Bylaws"), the Association Agreement
entered into by the Consortium Participants or their affiliates on August 1,
1991 (the "Association Agreement") and the Stock Purchase and Sale Agreement,
dated December 3, 1991, among the Republic of Venezuela, VenWorld and GTE
Corporation (the "Stock Purchase Agreement") contain certain restrictions
concerning the voting of Class A Shares and Class D Shares and regarding the
transferability of Class A Shares. These restrictions are described below.
Voting
Holders of Class D Shares do not at present have the right, voting as
a separate class, to elect any of the nine directors of the Issuer. VenWorld,
as the holder of the Class A Shares, has the right, until the year 2000, to
elect five members of the Board of Directors. As of January 2001, a majority
<PAGE> 11
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of the Board of Directors will be elected by all holders of the Company's
capital stock as set forth below. The Government of Venezuela has the right,
until the year 2001, to elect two directors and as of January 2001 will have the
right to elect one director, provided that it owns at least one Class B share of
the Issuer. The Government of Venezuela owns Class B shares representing
approximately 17.8% (14.2% after exercise of the underwriters' overallotment
option) of the Issuer's total capitalization and has indicated its intention to
retain at least one Class B share. Employees, retirees and other holders of
Class C shares of the Issuer will have the right voting as a separate class to
elect two directors so long as the Class C shares of the Issuer constitute at
least 8% of the total share capital of the Issuer and one director so long as
the Class C shares represent at least 3% of the total share capital of the
Issuer. The Class C shares presently represent approximately 10.8% of the
Issuer's total capitalization and the Government of Venezuela has indicated its
intention to convert certain Class B shares held by it representing
approximately 7% of the Issuer's total capitalization into Class C shares and to
offer such shares to employees and retirees of the Issuer. Holders of Class D
Shares will have the right to elect, in conjunction with the other classes of
the Issuer's stock, any directors not elected by other holders of the Issuer's
capital stock voting as separate classes including (i) six directors as of 2001,
and (ii) up to two additional directors in the event that holders of Class C
shares reduce their ownership below the required minimum percentages set forth
above.
The Association Agreement provides that all decisions relating to the
operations of VenWorld and the Issuer will be decided by consensus of the
Consortium Participants, provided that if no consensus is reached, the views of
GTE Venezuela, as majority shareholder of VenWorld, will prevail and provided
further that resolutions on the following matters require the affirmative vote
(x) of GTE Venezuela and two other Consortium Participants for such time as
VenWorld is owned by the original Consortium Participants and (y) thereafter,
of investors holding at least 66 2/3% of VenWorld: (i) dissolution or
liquidation of VenWorld or the decision of VenWorld to support the dissolution
or liquidation of the Issuer; (ii) change in the corporate purpose of VenWorld
or the decision of VenWorld to support a change in the corporate purpose of the
Issuer; (iii) any merger or consolidation involving VenWorld or the decision of
VenWorld to support any merger or consolidation involving the Issuer; (iv)
sale or transfer of all or substantially all the assets of VenWorld or the
decision of VenWorld to support the transfer of all or substantially all of the
assets of the Issuer; (v) increase or decrease in the capital of VenWorld, or
the decision of VenWorld to support an increase or decrease in the capital of
the Issuer or to subscribe to any such increase; (vi) fixing of the general
dividend policy of VenWorld, or the decision of VenWorld to support a
particular general dividend policy of the Issuer; (vii) the incurrence by
VenWorld of any indebtedness outside the ordinary course of business, or the
decision of VenWorld to support the incurrence by the Issuer of indebtedness
outside the ordinary course of business; (viii) any amendment to the Charter
and By-laws (estatutos) of VenWorld; (ix) investment of VenWorld's funds in
another entity or business or the decision of VenWorld to support the
investment of the Issuer's funds in another entity or business; (x) authorizing
any issuance, sale, purchase or redemption of VenWorld's equity securities or a
decision of VenWorld to support the Issuer's authorizing any issuance, sale,
purchase or redemption of the Issuer's equity securities; (xi) entry into any
new line or field of business, other than related to telecommunications, or the
discontinuance of any line or field of business, or a decision of VenWorld to
support the Issuer's entry into any new line or field of business, other than
related to telecommunications, or the discontinuance of any line or field or
<PAGE> 12
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business; and (xii) appointment of auditors or VenWorld's decision to support
a proposal by the Issuer to appoint auditors.
The Association Agreement also requires the board of directors of
VenWorld to cause VenWorld to cast its votes in order that a majority of the
Issuer's directors to be elected by VenWorld are persons nominated by the
directors of VenWorld who are selected by GTE Venezuela so long as it remains
the majority shareholder of VenWorld. Subject to the foregoing, the board of
directors of VenWorld shall cause VenWorld to cast its votes for the selection
of such directors of the Issuer in order that such directors are allocated over
a period of years in a manner so as to reflect the respective ownership
interests of the Consortium Participants and to maintain at least one of the
Issuer's directors who is nominated by VenWorld directors who are elected by
one of the two Venezuelan Consortium Participants and at least one of the
Issuer's directors who is nominated by VenWorld directors who are elected by
one of the two non-Venezuelan Consortium Participants (in each case other than
GTE Venezuela), if possible. Alternate and replacement directors of the Issuer
will be appointed by VenWorld directors who had the right to appoint the
corresponding directors of the Issuer.
Transferability
Pursuant to the Issuer Bylaws and the Stock Purchase Agreement, prior
to January 1, 1997, the Class A Shares or the rights derived therefrom may not
be transferred or encumbered in any manner. On or after January 1, 1997, but
prior to January 1, 1999, Class A Shares may be transferred or encumbered so
long as VenWorld and the Consortium Participants continue to own, directly and
free from all encumbrances, shares that represent in the aggregate at least 30%
of the equity share capital of the Issuer. On or after January 1, 1999, but
prior to January 1, 2001, Class A Shares may be transferred or encumbered so
long as VenWorld and the Consortium Participants continue to own, directly and
free from all encumbrances, shares that represent in the aggregate at least 20%
of the equity share capital of the Issuer. Any transfer of Class A Shares on
or prior to January 1, 2001 to any person or entity other than a Consortium
Participant will cause such transferred shares to be automatically converted on
January 2, 2001 into an equal number of Class D Shares. After January 1, 2001,
any transfer of Class A Shares to any person other than VenWorld, the
Consortium Participants or other affiliates wholly-owned and controlled by any
of them will cause such transferred shares to be automatically converted into
an equal number of Class D Shares upon such transfer. In addition, prior to
January 1, 2001, no Class A Shares and the rights derived therefrom may be
transferred to, and no encumbrances with respect to such shares or rights
derived therefrom may be made in favor of, any company whose principal
corporate purpose is the manufacture of telecommunications equipment.
The Stock Purchase Agreement also requires (x) GTE Corporation to
maintain, until January 1, 2001, the title to, control over, and the complete
economic interest in shares of VenWorld representing at least 51% of the right
to vote and 40% of the equity share capital of VenWorld, free of all liens and
encumbrances, and (y) GTE Corporation and VenWorld to (i) cause the Issuer to
take such action as a public sector entity in Venezuela, as holder of all Class
B shares of common stock, may reasonably request to effect sales of such Class
B shares, and (ii) cooperate with the Issuer in connection therewith.
<PAGE> 13
13
Under the Association Agreement, every Consortium Participant holds a
pro rata right of first refusal with respect to any transfer of VenWorld shares
by another Consortium Participant. If the right of first refusal is not duly
exercised as provided in the Association Agreement, the Consortium Participant
who intends to transfer VenWorld shares may, subject to the provisions of the
Association Agreement, including a provision requiring unanimous approval by
the Consortium Participants, which approval may not be unreasonably withheld,
transfer such shares to a third party. Beginning on December 4, 2000,
Consortium Participants may redeem all or part of their VenWorld shares for
shares of the Issuer held by VenWorld in an amount equal to the product of (i)
the total number of the Issuer's shares then held by VenWorld, and (ii) a
fraction, the numerator of which is the number of VenWorld Shares to be
redeemed and the denominator of which is the number of outstanding shares of
VenWorld, provided that any Consortium Participant wishing to exercise such
redemption option must offer to sell the Issuer shares so redeemed to the other
Consortium Participants at a price equal to 95% of the market price for the
shares of the Issuer on the date of sale to the other Consortium Participants.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
2(a) Press release of GTE Corporation dated November 20, 1996
3(a) Stock Purchase and Sale Agreement dated December 3, 1991
3(b) Provisions of the Association Agreement dated August 1, 1991
relating to voting and transfer
</TABLE>
<PAGE> 14
14
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
GTE CORPORATION
Date: December 9, 1996 By: /s/ MARIANNE DROST
-----------------------------
Marianne Drost, Secretary
GTE VENEZUELA INCORPORATED
Date: December 9, 1996 By: /s/ MARIANNE DROST
-----------------------------
Marianne Drost, Secretary
<PAGE> 15
15
SCHEDULE A
GTE CORPORATION
<TABLE>
<CAPTION>
(a) Executive Officers
Name and Address Principal Occupation Citizenship
---------------- -------------------- -----------
<S> <C> <C>
Charles R. Lee* Chairman, Chief Executive Officer United States
and Chief Operating Officer, GTE
Corporation
Kent B. Foster* President, GTE Corporation United States
Michael T. Masin* Vice Chairman and President- United States
International, GTE Corporation
William P. Barr* Senior Vice President and General United States
Counsel, GTE Corporation
Robert C. Calafell* Senior Vice President - Corporate United States
Planning and Development, GTE
Corporation
Armen Der Marderosian* Senior Vice President - United States
Technology and Systems, GTE
Corporation
J. Michael Kelly* Senior Vice President - Finance, United States
GTE Corporation
J. Randall MacDonald* Senior Vice President - Human United States
Resources and Administration, GTE
Corporation
Dan J. Cohrs* Vice President and Treasurer, GTE United States
Corporation
Geoffrey C. Gould* Vice President - Government and United States
Federal Regulatory Affairs, GTE
Corporation
John P. Z. Kent* Vice President - Taxes, GTE United States
Corporation
Lawrence R. Whitman* Vice President and Controller, United States
GTE Corporation
Marianne Drost* Secretary, GTE Corporation United States
(b) Directors
Name and Address Principal Occupation Citizenship
---------------- -------------------- -----------
Edwin L. Artzt* Chairman of the Executive United States
Committee and Director of The
Procter & Gamble Company
James R. Barker* Chairman of The Interlake Steamship United States
Co. and Vice Chairman of Mormac
Marine Group, Inc. and the Moran
Towing Company
</TABLE>
<PAGE> 16
16
<TABLE>
<S> <C> <C>
Edward H. Budd* Retired Chairman of the Board United States
of the Travelers Group
Robert F. Daniell* Retired Chairman of United United States
Technologies Corporation
Kent B. Foster* President, GTE Corporation United States
James L. Johnson* Retired Chairman and Chief United States
Executive Officer, GTE
Corporation
Richard W. Jones* Business Consultant, PaineWebber United States
James L. Ketelsen* Retired Chairman of Tenneco Inc., United States
GTE Corporation
Charles R. Lee* Chairman, Chief Executive Officer United States
and Chief Operating Officer, GTE
Corporation
Michael T. Masin* Vice Chairman and President- United States
International, GTE Corporation
Sandra O. Moose* Senior Vice President, Director United States
and Chair of the East Coast
Practice, The Boston Consulting
Group, Inc.
Russell E. Palmer* Chairman and Chief Executive United States
Officer of The Palmer Group
Robert D. Storey* Partner with the Cleveland law United States
firm of Thompson, Hine and Flory
GTE VENEZUELA INCORPORATED
(a) Executive Officers
Name and Address Principal Occupation Citizenship
---------------- -------------------- -----------
Bruce E. Haddad* President, GTE Venezuela United States
Incorporated; Senior Vice
President-Latin America,
International Operations Group of
GTE Service Corporation
Alfred C. Giammarino* Vice President-Finance and United States
Planning, GTE Venezuela
Incorporated; Vice President-
Finance, International Operations
Group of GTE Service Corporation
</TABLE>
<PAGE> 17
17
<TABLE>
<S> <C> <C>
Andrew T. Jones* Vice President, GTE Venezuela United States
Incorporated; Vice President-
Operations Support, International
Operations Group of GTE Service
Corporation
Lawrence R. Whitman* Vice President and Controller, United States
GTE Venezuela Incorporated and
GTE Corporation
Marianne Drost* Secretary, GTE Venezuela United States
Incorporated and GTE Corporation
Dan J. Cohrs* Treasurer, GTE Venezuela United States
Incorporated; Vice President and
Treasurer, GTE Corporation
(b) Directors
Name and Address Principal Occupation Citizenship
---------------- -------------------- -----------
Marianne Drost* Secretary, GTE Corporation United States
Alfred C. Giammarino* Vice President-Finance, United States
International Operations Group of
GTE Service Corporation
James J. Jacobs* Director of International United States
Development, International
Operations Group of GTE Service
Corporation
</TABLE>
*Business address at One Stamford Forum, Stamford, Connecticut 06904
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
2(a) Press release of GTE Corporation dated November 20, 1996
3(a) Stock Purchase and Sale Agreement dated December 3, 1991
3(b) Provisions of the Association Agreement dated August 1, 1991
relating to voting and transfer
</TABLE>
<PAGE> 1
Exhibit 2(a)
- --------------------------------------------------------------------------------
Corporate Communications One Stamford Forum [GTE LOGO]
Department Stamford, Connecticut 06904
NEWS
- --------------------------------------------------------------------------------
Nov. 20, 1996
SUMMARY: GTE INTENDS TO ACQUIRE CANTV SHARES IN IPO.
STAMFORD, Conn. -- In connection with the public offering of the common shares
of Compania Anonima Nacional Telefonos de Venezuela (CANTV), GTE today
announced its intention to acquire up to $200 million of these shares, and
placed an order with the global coordinators, Lehman Brothers and SBC Warburg,
for the shares. These shares would be acquired at a price within the
$21.50-$24.50 per American Depositary Share price range indicated in the
preliminary prospectus.
CANTV was privatized in 1991 through the sale of 40 percent of the
company and operating control to VenWorld, a consortium that is 51 percent
owned by GTE. Through this consortium, GTE currently owns 20.4 percent of
CANTV. Since the privatization, CANTV's lines in-service have grown by more
than 60 percent. The network has been extensively modernized, many new
products have been introduced and service quality has improved.
"We are extremely pleased with CANTV's progress and remain committed
to Venezuela and optimistic about its future," said GTE Chairman and Chief
Executive Officer Charles R. Lee. "We are seeing an improvement in both the
country and the company, and believe GTE's further investment makes good sense
for our shareholders and reinforces our commitment to Venezuela," he added.
<PAGE> 1
Exhibit 3(a)
I, Ida E. Anderson M., Public Translator in and for the Republic of Venezuela
in the English language, as published in Official Gazette No. 29891 dated
August 28, 1972, and in accordance the Certificate registered at the Main
Registry of the Federal District under No. 462, page 221, of the First and Main
Protocol, Volume 3, and inscribed at the Court of First Instance on September
20, 1972, do hereby certify that the attached document, originally written in
Spanish, was presented to me for translation and reads as follows:
- ----------------------------- CONTRACT FOR PURCHASE AND SALE OF SHARES BETWEEN
"FONDO DE INVERSIONES DE VENEZUELA", THE PURCHASER AND THE PARENT COMPANY.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
CLAUSE 1: PURCHASE AND SALE OF SHARES 2
1.1 Purchase of Shares 2
1.2 Purchase Price 2
1.3 The Closing 2
1.4 Requirements for the Closing 3
CLAUSE 2: DELIVERIES TO BE MADE AT THE CLOSING 4
2.1 Deliveries to be Made by the Seller 4
2.2 Deliveries to be Made by the Buyer 4
CLAUSE 3: ACTIONS TO BE CARRIED OUT BY THE PARTIES 4
3.1 Actions to be Carried Out by the Parties 4
CLAUSE 4: OBLIGATIONS OF THE BUYER AND THE PARENT COMPANY 5
4.1 Fulfillment of the Concession Contract 5
4.2 Restrictions with Respect to the Transfer of the Shares 5
</TABLE>
<PAGE> 2
2
<TABLE>
<S> <C>
4.3 Restrictions with Respect to the Parent Company 7
4.4 Restrictions With Respect to Transfers of Interests in The
Buyer 7
4.5 Workers 9
4.6 Later Offers of Shares by the Seller 9
4.7 Access to Information 16
4.8 Setting up of a Program for Assignment 16
4.9 Financial Obligations 17
4.10 Cellular Concession 17
4.11 Guarantee of the Parent Company 17
4.12 Agreements for Consortium 17
CLAUSE 5: DECLARATIONS AND GUARANTEES OF THE SELLER 18
5.1 Organization, Authorization, Signing and Effect 18
5.2 Non-infringement 18
5.3 Constitution and Fulfillment of its Obligations by CANTV 19
5.4 Capital 20
5.5 Ownership of the Shares 21
5.6 Financial Statements 21
5.7 Indebtedness 22
5.8 Retirements and Other Benefits 23
5.9 Fulfillment of the Law 24
5.10 Lawsuits 24
5.11 Taxes 24
5.12 Fees for the Success of the Transaction 25
</TABLE>
<PAGE> 3
3
<TABLE>
<S> <C>
5.13 Substantial Contracts 25
5.14 Operations 25
5.15 Documents for the Negotiation 27
CLAUSE 6: DECLARATIONS AND GUARANTEES MADE BY THE BUYER AND THE
PARENT COMPANY 28
6.1 Constitution and Validity 28
6.2 Authorization, Signing and Effect 29
6.3 Consents 29
6.4 Non-infringement 30
6.5 Capital 31
6.6 Investigation of CANTV 33
6.7 Fees for the Success of the Transaction 35
CLAUSE 7: OBLIGATIONS OF THE SELLER 36
7.1 The Board of Directors of CANTV 36
7.2 Concession of Cellular Service 36
7.3 Real Estate 36
CLAUSE 8: MISCELLANEOUS 37
8.1 Maintenance of the Declarations and Guarantees 37
8.2 Successors and Assignees 38
8.3 Non-existence of Benefits for Third Parties 38
8.4 Notices 38
8.5 Complete Contract 39
8.6 Amendments 40
</TABLE>
<PAGE> 4
4
<TABLE>
<S> <C>
8.7 Resignation 40
8.8 Expenses 40
8.9 Partial Invalidity 40
8.10 Applicable Law 40
8.11 Submittal to Jurisdiction 40
8.12 Representative in Processes 41
8.13 Interpretation 41
8.14 Domicile 42
</TABLE>
<PAGE> 5
CONTRACT FOR PURCHASE AND SALE OF SHARES
OF
COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV)
Between "Fondo de Inversiones de Venezuela" (Venezuelan Investment
Fund) (the "Seller"), an Autonomous Institute domiciled in this city,
incorporated by Decree No. 151 dated June 11, 1974, published in official
Gazette of the Republic of Venezuela No. 30.430 dated June 21, 1974, which is
governed by the Law dated December 30, 1980, published in Official Gazette of
the Republic of Venezuela No. 2.709 (Extraordinary), of that same date,
represented herein by its President, Gerber Torres, who is a Venezuelan citizen
of full age domiciled in this city, holder of Identification Card No.
4.164.495, and who has been sufficiently authorized for this purpose by the
Executive Directory of the Fondo de Inversiones de Venezuela at the meeting No.
869 held on October 22, 1991, on one hand, and on the other: VENWORLD TELECOM,
C.A., a Venezuelan company (the "Buyer"), and GTE Corporation, a foreign
company incorporated in the State of New York, United States of America, the
operator pre-qualified by the Ministry of Transportation and Communications on
April 4, 1991 (the "Parent Company"), it has been agreed to celebrate the
present Contract for the Purchase and Sale of Shares (the "Contract"):
<PAGE> 6
2
CLAUSE 1: PURCHASE AND SALE OF SHARES
1.1 Purchase of Shares: Subject to the provisions of Clause 1.4,
the Seller hereby sells to the Buyer, and the Buyer hereby purchases from the
Seller, 400,000,000 Class "A" shares of Compania Anonima Nacional Telefonos de
Venezuela (CANTV), which belong to the Seller (the "Shares"). These Shares are
all of the Class "A" shares belonging to CANTV, and represent forty percent
(40%) of the capital stock of CANTV at the date of Closing (as defined
hereunder).
1.2 Purchase Price: The Purchase Price for the Shares is the
amount of four United States Dollars and seven thousand one hundred and
twenty-five ten-millionths (US$ 4,7125) per Share, being the total purchase
price of same, one thousand eight hundred and eighty-five million Dollars of
the United States (US$ 1,885,000,000.00), payable exclusively in said currency,
the equivalent value of same in bolivars, for the sole purpose of fulfilling
the provisions of Article 98 of the Law of the Banco Central de Venezuela, is
calculated at the rate of 60.70 bolivars per Dollar of the United States as of
December 3, 1991 (the "Purchase Price"), which subject to the provisions of
Clause 1.4, the Buyer pays simultaneously with the Closing, to the entire
satisfaction of the Seller.
1.3 The Closing: The delivery of the Shares by the Seller, and
the payment of the Purchase Price by the Buyer is mentioned herein as the
"Closing". Subject to the Dispositions of Clause 1.4, the Closing shall be
carried out on December 4, 1991, unless one or more of the conditions specified
in Clause 1.4.1 have not been satisfied or waived on or before said date, in
which case the Closing shall be carried out on the first banking day following
that on which all of the conditions have been satisfied or waived by all of the
parties. The Closing shall not be made before December 4, 1991 without the
prior consent of both the Seller as well as the Parent Company and the Buyer.
<PAGE> 7
3
1.4 Requirements for the Closing:
1.4.1 The obligation of the Buyer to purchase and pay for the
Shares, and the obligation of the Seller to sell the Shares, shall be subject
to the occurrence of the following happenings, simultaneously with the Closing:
(a) The declarations and guarantees of the Seller proposed in
Clause 5.1, Clause 5.2 parts (a) and (c) only, the first sentence of Clause
5.3, Clause 5.4, Clause 5.5, Clause 5.14, part (b) only, and Clause 5.15, shall
be true and correct in all of their essential points at said date, and the
Seller has delivered to the Buyer, a statement signed by a duly authorized
officer of the Seller, on the date of the Closing, certifying same;
(b) That the Seller has delivered to the Buyer, an opinion issued
by Lares, Ramos y Ferreira, S.C., Venezuelan Legal Advisors of the Buyer, at
the date of the Closing, substantially in the form shown in Attachment 1.4.1
(b); and
(c) That at the date of the Closing the Seller has delivered a
copy of the opinion issued by the Attorney General of the Republic of
Venezuela, dated October 11, 1991, in the form shown in attachment 1.4.1 (c).
1.4.2 If all of the conditions stated in Clause 1.4.3 above have not
been fulfilled on or before December 31, 1991, the Buyer and the Parent Company
shall be under no obligation to purchase and pay for, and the Seller shall be
under no obligation to sell, the Shares in accordance with the terms of this
Contract, excepting if all of the parties have waived all of said happenings as
a condition for the Closing. The parties agree that none of them shall be
under any obligation with respect to the others by reason of this Contract or
in any other form, should the conditions stated in Clause 1.4.1 not have been
satisfied, and as a result of same the purchase and sale of the Shares is not
completed.
<PAGE> 8
4
CLAUSE 2: DELIVERIES TO BE MADE AT THE CLOSING
2.1 Deliveries to be Made by the Seller: Simultaneously with the
Closing and the delivery of the Purchase Price by the Buyer, the Seller shall
deliver to the Buyer, all of the titles representing the shares transferred to
the name of the Buyer, and the documents mentioned in paragraphs (a), (b) and
(c) of Clause 1.4.1. The Seller also undertakes to make the entry for the
transfer of the Shares in the shareholders book of CANTV, together with the
Buyer and simultaneously with the Closing.
2.2 Deliveries to be Made by the Buyer: Simultaneously with the
Closing and the delivery by the Seller of the documents mentioned in paragraphs
(a), (b) and (c) of Clause 1.4.1, the Buyer shall deliver the Purchase Price to
the Seller by means of a bank transfer of funds to be immediately available,
which shall be confirmed by a telegraph communication, deposited in an account
designated in writing at least three (3) banking days before the date of the
Closing by the Seller.
CLAUSE 3: ACTIONS TO BE CARRIED OUT BY THE PARTIES
3.1 Actions to be Carried Out by the Parties: If at any time
after the Closing, the Seller, the Buyer or the Parent Company should
reasonably determine that any other action is required according to the law to
complete or confirm that the Buyer is the owner of the Shares, or to fulfill
the purposes of this Contract, or to carry out the operations covered in same,
the parties shall complete and deliver all of the documents required by the
law, and do all things necessary and adequate in order to complete and confirm
that the Buyer holds the title to the Shares or can complete the object of this
Contract, or carry out the operations covered in same.
<PAGE> 9
5
CLAUSE 4: OBLIGATIONS OF THE BUYER AND THE PARENT COMPANY
4.1 Fulfillment of the Concession Contract:
4.1.1 Starting from the date of Closing, while the Buyer, the Parent
Company and the Participants in the Consortium (as defined in Clause 6.5) are
entitled to elect the majority of the Board of Directors of CANTV, the Buyer
shall exert his best efforts, subject to the provisions of Clauses 4.1.2 and
4.9, (including, without limitations, to lend CANTV, and apply in the
management and operation of CANTV, the skill and managerial, technical and
marketing experience of the Participants in the Consortium, the Parent Company
and its affiliates), in order to help CANTV to fully comply with the terms and
conditions of the Concession Contract, including the Agreement for
Modifications to said Contract, a copy of which is included as Attachment A
(the "Concession Contract").
4.1.2 If in executing the obligations assumed by the Buyer under this
Clause 4.1, the Parent Company or the Participants in the Consortium and their
respective affiliates have offered to make available to CANTV any specific
goods or services under terms which are in accordance with those stated in
Clause 20 of the Concession Contract and Article 19 of the By-laws in force (as
defined in Clause 5.15.3), but notwithstanding the obligations of the Buyer and
the Parent Company (which are subject to the dispositions of Clause 4.9) under
this clause 4.1., the Board of Directors of CANTV refuses said terms, then the
Buyer shall not be deemed to have failed in fulfilling his obligations under
this Clause 4.1.
4.2 Restrictions with Respect to the Transfer of the Shares
4.2.1 Excepting as permitted in Clause 4.4, before January 11, 1997,
the Buyer shall not directly or indirectly transfer or encumber in any other
form, or permit levying of any Lien (as defined in Clause 5.2), or grant any
option or any other rights ("Rights Against the Shares"), with respect to any
of the Shares or the rights derived from same. After said date, transfer and
Lien of the Shares
<PAGE> 10
6
and the rights derived from same may be made, as well as of the Rights Against
the Shares with respect to same, and the rights of same which may be granted,
providing that the conditions stated in Clause 4.2.2 have been fulfilled, and
that said transfer, Lien or Right Against the Shares are in accordance with the
terms of this Contract and the terms of the By-laws in force.
4.2.2 Until January 1, 1999, the Buyer shall maintain the direct
title to the Class "A" Shares of CANTV free of all Lien and Rights Against
Shares, related with said shares and the rights derived from same, which
together with any other shares of CANTV held by the Buyer and the Participants
in the Consortium, directly and free of all Lien and Rights Against Shares,
should represent at least thirty percent (30%) of the capital stock of CANTV;
and until January 1, 2001, the Buyer shall maintain the direct title to the
Class "A" shares of CANTV, free of all Lien and Rights Against Shares related
with said shares, and the rights derived from same, which together with any
other shares of CANTV held by the Buyer or the Participants in the Consortium
directly and free of all Lien and Rights Against Shares, should represent at
least twenty percent (20%) of the capital stock of CANTV. In no case shall any
transfer or Lien of the shares and the rights derived from same, or granting of
Rights Against Shares, be made in any form before January 1, 2001, in favor of
companies whose principal social object is manufacturing telecommunications
equipment.
4.2.3 Any act or operation carried out, which constitutes a breach
of the dispositions contained in this Clause 4.2, shall be void and without any
effect whatsoever. A mention of the prohibitions stated in this Clause 4.2
shall be noted in the respective titles and in the By-laws in force.
4.2.4 Should there be any contradiction between the provisions of
this Clause 4.2 and the By-laws in force, said By-laws shall prevail.
<PAGE> 11
7
4.3 Restrictions with Respect to the Parent Company:
4.3.1 Until January 1, 2001, the Parent Company shall directly or
indirectly maintain the title to, control over, and the complete economic
interest in, the shares which jointly represent at least fifty-one percent
(51%) of the right to vote, and forty percent (40%) of the capital stock of the
Buyer, free of all Lien and Rights Against Shares, with respect to said shares
and the rights derived from same.
4.3.2 Any act or operation carried out, which constitutes a breach
of this Clause 4.3, shall be void and without any effect whatsoever. The Buyer
shall have the dispositions contained in this Clause 4.3 and the restrictions
provided in Clause 1.4, included in the by-laws of the Buyer, and a mention of
said provisions shall also be made in the titles to the shares of the Buyer.
The Buyer agrees that said provisions in his bylaws shall not be modified
before January 1, 2001.
4.4 Restrictions With Respect to Transfers of Interests in The Buyer:
4.4.1 Subject at all times to the provisions of Clause 4.3, before
January 1, 1997, (i) neither the Buyer nor any of the Holders (as defined in
Clause 6.5), shall directly or indirectly issue any shares of their capital
stock or grant any Rights Against Shares, related with said shares or any
rights derived from same, or register or recognize any transfers of any shares
of their capital stock, and (ii), neither the Parent Company nor any
Participant in the Consortium, shall directly or indirectly transfer or
encumber in any form, nor permit levying any Lien with respect to any shares of
the capital stocks of any of the Holders or the Buyer, nor any rights derived
from same, or grant any Right Against Shares with respect of same, excepting
for the shares issued or transferred to the Participants in the Consortium or
the Holders, or any affiliate totally owned and controlled by any of them (for
the purposes of this Contract, those affiliates shall be considered as
Holders), providing that, before any such transfers, said affiliate shall agree
in writing with the Buyer, to immediately return the shares to
<PAGE> 12
8
the original assigner, should the affiliate cease to be totally controlled and
owned in said manner, with the understanding that said shares shall be
immediately transferred before the affiliate ceases to be totally owned and
controlled. Notwithstanding the above and subject to the dispositions of
Clause 4.3, the Parent Company, any Participant in the Consortium or any
Holders shall have the right to transfer shares of the capital stock of the
Buyer or of any Holder when they have received the consent of the Ministry of
Transportation and Communications or of any other government agency which may
be responsible for the administration of the Concession Contract (hereinafter
called the "MTC"). Said consent shall be granted totally or partially, at the
sole discretion of the MTC. In determining if any of said consents are to be
granted, the MTC shall consider, among other circumstances, if a
concessionaire: a) has a conflict of interests, b) has been declared in fault,
or c) has been condemned for actions against properties or against the National
Treasury. In relation to any request for a consent, the MTC shall exert its
best efforts to answer said petition as soon as reasonably possible. Said
concessionaire shall have to agree in writing with the Seller, before making
any permitted transfer, that they are obligated by the restrictions for
transfers related with said shares, contained in this Contract.
Notwithstanding the above, in no case shall any transfer or Lien be made with
respect to the shares of the Buyer or any Holder of said shares, or of the
rights derived from same, or grant any Right Against Shares with respect to
same, or the rights derived from same, before January 1, 2001, to or in favor
of companies whose principal object is manufacturing telecommunications
equipment.
4.4.2 Any action or operation which constitutes a breach of this
Clause 4.4 shall be void and without effect. The Buyer shall have the
Participants in the Consortium and the Holders abide by this Contract, and
hereby guarantees without conditions, that the Participants in the Consortium
and the Holders, shall fully comply with the terms of this Clause 4.4. Without
limiting the general nature of
<PAGE> 13
9
the above, the Buyer shall see that the restrictions applicable to the shares
of each Holder are included in the by-laws (or other incorporation document) of
each Holder, to the extent where said inclusion is required under the
applicable law to ensure that such dispositions may be enforceable, and when so
included, the Buyer agrees that such dispositions included in the by-laws or
other incorporation documents, shall not be modified before January 1, 1997.
4.5 Workers:
4.5.1 The Buyer, as long as the Buyer, the Parent Company and the
Participants in the Consortium are entitled to elect the majority of the Board
of Directors of CANTV, shall see that CANTV does not oppose or interfere with
the program for the sale of the Class "C" shares of CANTV (the "Workers
Shares"), to present or future workers and retired personnel of CANTV and its
affiliate companies ("Workers of CANTV"), described in the Trust Fund
celebrated by the Seller, substantially under the terms provided in Attachment
C (the "Trust Fund Contracts").
4.5.2 The Buyer, as long as the Buyer, the Parent Company and the
Participants in the Consortium are entitled to elect the majority or the Board
of Directors of CANTV, shall see that CANTV fulfills the terms and provisions
of the organic Labor Law and the Collective Work Contract in force from January
1, 1991 to December 31, 1992 (the "Collective Contract") celebrated between
CANTV and the Federation of Telecommunications workers of Venezuela (the
"Syndicate").
4.6 Later Offers of Shares by the Seller:
4.6.1 The Buyer and the Parent Company agree that should the Seller
notify CANTV that he or any other shareholder of the public sector has decided
to encumber a part or the total amount of the CANTV shares owned by the Seller
or said other shareholder, through one or mare public or private offers
("Offers"), CANTV shall (i) adopt all of the measures which the Seller may
reasonably request on several occasions, with the purpose of facilitating and
completing any of the offers, in accordance
<PAGE> 14
10
with the applicable legislation in the jurisdiction where the Seller or said
other shareholder decides to make the Offer, including, but not limited to, the
preparation and presentation of the necessary documents for the registry of
said offers (hereinafter called "Declaration of Registry"), to carry out said
operations, and (ii) abstain from adopting any measure which would reasonably
be expected to prevent, delay or in any other manner damage the capacity of the
Seller or said other shareholder from the public sector, to complete said
Offer. Without prejudice of the above, and providing that the Seller requests
the registry of any of the CANTV shares which the Seller or any other
shareholder from the public sector is holding, or the sale of same in
accordance with the applicable legal dispositions, with the purpose of
facilitating an Offer, or which must be admitted for negotiation or quotation
on the stock market or an automatized negotiation system, CANTV shall exercise
its best efforts to make said registry and the approval of the sale or
admission for quotation, as soon as possible. With respect to any petition
made with these characteristics, as soon as possible, CANTV shall:
(a) prepare and present to the Seller, insurer, broker, promoter
or any other agent designated by the Seller (hereinafter called the "Insurer"),
if designated, any Offer or Declaration of Registry requested, as well as any
modifications and supplements to same (in all cases, together with all of the
respective attachments), the printed emission booklet (if same exists),
included in said Declaration of Registry (including all of the preliminary
booklets) and any other documents which the Seller may reasonably request in
order to facilitate the Offer; shall answer any comments made by the Seller and
the Insurer with respect to said documents, after the Seller or the insurer has
had an opportunity to examine said documents; at the request of the Seller,
present any of said documents to the applicable administrative authorities and
exercise its best efforts to have said document declared in force, as soon as
reasonably possible, and that they should remain in force during the period
requested
<PAGE> 15
11
by the Seller, and present to the Seller and the Insurer, the number of copies
of said documents which the Seller may reasonably request with the purpose of
facilitating the Offer, in accordance with the method or methods for disposal
placed in effect by the Seller (or said other shareholder from the public
sector) or the Insurer mentioned in said Declaration of Registry or in the
supplementary booklets;
(b) prepare and present to the adequate administrative authorities
designated by the Seller, in accordance with paragraph (a) above, all of the
supplements and modifications to said Declaration of Registry which may be
necessary to maintain the Declaration of Registry in force during the period
requested by the Seller or the Insurer; CANTV shall also prepare and present
any related booklet on the emission and any supplementary material, requested
by each and all of the government authorities and appropriate regulating
agencies, and in general, shall fulfill all of the legal dispositions,
regulations or others, as far as may be necessary to facilitate the Offer;
(c) exercise its best efforts to register or qualify the shares to
be sold by the Seller or the other shareholder from the public sector, in
accordance with the provisions of the legislation regarding stock values in the
applicable jurisdictions, which may be reasonably requested by the Seller and
adopt any other reasonable measures which may be necessary or convenient to
allow the Seller or the other shareholder from the public sector to carry
through the Offer in those jurisdictions; however, neither the Buyer nor the
Parent Company or CANTV may be requested to (i) be authorized with a general
nature, to carry out mercantile activities in any jurisdiction in which it
would not otherwise be under the obligation to be authorized, if it were not
for the purposes stated in this paragraph (c), (ii) to be subject to taxes in
any of such jurisdictions, or (iii) give consent for the reception of legal
demands or notices in general, in any of said jurisdictions;
<PAGE> 16
12
(d) exercise its best efforts in order that the shares referred to
in the Declaration of Registry, may be registered or authorized by the
necessary government authorities, in view of the mercantile and operational
activities carried out by the Buyer, the Parent Company, the Participants in
the Consortium, the Holders and CANTV, to allow the Seller or the other
shareholder from the public sector or the Insurer to complete the Offer;
(e) notify the Seller and the Insurer, as soon as possible after
coming into the knowledge of the fact, with respect to (i) the date of
presentation of any Declaration of Registry or booklet on emission,
supplemental information or modification, and with respect to the Declaration
of Registry or the modifications to same, the date on which they become
effective, (ii) the existence of any request made by the administrative
authorities for the presentation of modifications or supplements to the
Declaration of Registry or any other booklet attached, or any other additional
information or comments of administrative authorities with respect to said
documents, (iii) any order for suspension of a Declaration of Registry issued
by any administrative authority, or the initiation of any procedure for the
purpose of suspending the effect of same, (iv) any notice received with respect
to the suspension of the authorization for the sale of any of the shares to be
sold in any jurisdiction, or the initiation or imminence of any procedure
directed to such effect, or (v) any other happening which implies the falsehood
of any Declaration of Registry, booklet on emission, or any other document
incorporated to same as reference, in any substantial aspect, or which requires
the introduction of modifications into said Declaration of Registry, booklet on
emission or document, with the purpose of avoiding that said documents should
contain any declarations which are not the truth with respect to substantial
matters, nor any substantial matter be omitted from the documents, when said
declarations are obligatory or necessary for the declarations contained in such
documents not lead to errors, and as soon as possible,
<PAGE> 17
13
shall prepare all necessary or convenient supplements and modifications for the
continuation of the applicable Offer, and shall adopt any other measures in
answer to said happenings;
(f) exercise its best efforts, as soon as possible, to obtain the
withdrawal of any order or measure suspending the validity of the Declaration
of Registry or the authorization for the sale of shares in any jurisdiction;
(g) at the reasonable request of the Insurers of the Offer, if
any, or of the Seller, and as soon as reasonably Possible, CANTV shall add to
the supplement or modification for the booklet on emission, any information
which was reasonably determined by the Insurers or the Seller, to be included
in same, with respect to the Offer, and present said supplement or modification
to the booklet on emission, to all of the applicable authorities, as soon as
reasonably possible, after receiving notice of the matters which should be
added to same;
(h) exercise its best efforts so that all of the shares included
in the respective Declaration of Registry, be admitted for negotiation or
quotation at the stock markets or automatic negotiation systems, as requested
by the Seller, and execute the customary contracts, including if necessary,
contracts for request of admission to quotation and indemnification, in the
usual form, and make available a transfer agent for any of the shares covered
in said Declaration of Registry;
(i) celebrate the customary contracts (including a contract for
insurance in the usual form), and adopt any other measures which may be
reasonably necessary to speed up, facilitate or complete the Offer; however,
and in connection with any such insurance contract, the Seller shall be
responsible for all information related with the Seller, furnished in writing
by the Seller, to be included in any Declaration of Registry or prospect;
(j) in a reasonable manner, shall make available for inspection by
the Seller or the other shareholder from the public sector, or any insurer
participating in the Offer, and any lawyer,
<PAGE> 18
14
accounting advisor or other representative engaged by the Seller or the other
shareholder from the public sector, or by the Insurer (collectively called the
"Inspectors"), all of the pertinent accounting and other records, and other
pertinent corporate and property documents of CANTV (collectively called the
"Records"), as far as reasonably necessary, in order to allow them to carry out
the auditing in accordance with principles of diligence, and see that the
officers, directors and other workers of CANTV furnish all of the information
reasonably requested by any Inspector in connection with said offer, providing
that (a) CANTV is permitted to have its own representatives present at said
inspections, and (b) that said Inspectors shall not reveal the Records and
other information determined by CANTV in good faith, to be of a confidential
nature, and has notified the Inspectors of said confidential nature, unless (i)
revealing of said Records or information is necessary to avoid or correct
errors or omissions in the Declaration of Registry, or (ii) that publication of
said Records or other information be required by the law;
(k) exercise its best efforts to obtain from the CANTV independent
auditors, a "cold comfort" letter in the usual form, with respect to the
matters usually stated in said letters, as may be reasonably requested by the
Seller or the Insurer;
(l) exercise its best efforts to obtain standard opinions from the
CANTV legal advisors; and
(m) cooperate with the Seller and exercise its best efforts to
adopt any other reasonable or necessary measures to complete registry of the
shares, with the purpose of facilitating and completing the Offer, as stated in
the present Contract.
4.6.2 The Seller undertakes to cooperate with the Buyer, the Parent
Company and CANTV, and furnish them with any information regarding any proposed
Offer, which they may reasonably request at any time in order to make a
proposed Offer, as stated in the present Contract. The Seller
<PAGE> 19
15
shall be responsible for, and pay for, all fees of the Insurer, printing
expenses and the reasonable expenses of the Parent Company and CANTV, which the
latter may prove to have incurred as a direct result of any offer, including,
without limitations, lawyers fees and accountants fees (but not the expenses of
their personnel or other general expenses, or those expenses which may be
proved in the annual financial statements of CANTV). The Seller agrees to
consult with CANTV regarding the selection of the adequate time for said Offer;
however, the terms and the time for the Offer shall be at the sole discretion
of the Seller. In addition: (i) CANTV shall not be obligated make more than
four (4) inscriptions of CANTV shares in accordance with this Contract, within
each period of five (5) years; and (ii) CANTV shall not have to make any Offer
according to this Contract, before one (1) year after the date of Closing,
excepting that with respect to any Offer made within said period of one (1)
year, the Seller agrees to indemnify CANTV for any losses or damages suffered
by CANTV as a direct result of said Offer, being said losses or damages (x)
related with the operations of CANTV before the date of Closing, and (y) they
are based on facts and circumstances unknown to the Buyer or the Parent Company
when said offer is made.
4.6.3 The Buyer and the Parent Company both undertake to cooperate
with the Seller and CANTV to make any offer under the terms and conditions
provided in Clause 4.6.1, including without limitations, the obligation to have
the respective officers, directors and employees of the Buyer, the Parent
Company, the Participants in the Consortium and the Holders, furnish all
information which may be reasonably requested by any inspector in connection
with the Offer, providing that the Records and other information determined by
the Buyer or the Parent Company in good faith to be of a confidential nature,
may not be revealed by the Inspectors unless (i) revealing said Records or
other information is necessary to avoid or correct a falsehood or omission in
the Declaration of Registry, or (ii) publication of said Records or other
information is required by the law. In addition, as long as the
<PAGE> 20
16
Buyer, the Parent Company and the Participants in the Consortium have the right
to elect the majority of the Board of Directors of CANTV, the Buyer and the
Parent Company shall see that CANTV fulfills the obligations established in
this Clause 4.6 at the time of a request by the Seller to make an Offer.
4.7 Access to Information: After the Closing, CANTV shall permit
the Seller and his representatives to have access to all of the books and
records belonging to CANTV, related with matters arising from the possession or
operation of CANTV by the Seller, and shall have its top management and other
workers cooperate with the Seller and give him any reasonable assistance
requested in relation to said matter; it is understood that those books,
documentation and other information which CANTV has determined in good faith to
be confidential, shall not be revealed by the Seller and his representatives,
excepting if the revelation of said books, documentation and other information
is required by the law.
4.8 Setting up of a Program for Assignment: Within four (4)
months following the date of Closing, CANTV shall (i) establish an irrevocable
trust fund (the "Trust Fund for Assignment"), for a program of assignment of
shares for the workers of CANTV, as provided for in Clause Six of the Trust
Fund Contract, (ii) shall supply said trust fund with sufficient funds to
purchase the Class "C" CANTV shares held by the trustees under the Trust Fund
Contracts, said shares representing one percent (1%) of the CANTV capital stock
at the date of Closing, and (iii) shall have the trustee under the Trust Fund
for Assignment, purchase said shares. The purchase price for each of said
shares shall be determined in accordance with Clause Seven of the Trust Fund
Contracts. Before the date of transferring the Class "C" shares to the Trust
Fund for Assignment, CANTV shall establish a committee (the "Committee") to
administrate the program for assignment and determine the operation and
policies of said program. As long as the Buyer, the Parent Company and the
Participants in the
<PAGE> 21
17
Consortium have the right to elect the majority of the Board of Directors of
CANTV, the Buyer shall have CANTV maintain the Committee and the program for
assignment, as provided for in this Clause 4.8, until all of said shares have
been distributed between the CANTV workers.
4.9 Financial Obligations: Excepting as specifically provided in
Clause 4.10, no statement in this Contract shall: (i) require the Buyer, the
Parent Company or any Participant in the Consortium or holder, to make
contributions of capital or financing to CANTV, to make loans to CANTV, or in
any other form, to place additional funds at the disposition of CANTV, or
guarantee any obligation of CANTV, or (ii) impose on the Buyer any
responsibility to have his representatives in the Board of Directors of CANTV
act against their duties or responsibilities towards CANTV or its shareholders
under the applicable law.
4.10 Cellular Concession: On or before the date on which the
payment mentioned in this clause is due, the Buyer shall contribute to, or make
payments in the name of, CANTV or its Affiliate which has been incorporated
with the purpose of rendering a cellular mobile telephone service, of forty per
cent (40%) of the necessary funds to pay for the rights of the cellular
concession, to be paid in accordance with Clause 1 (ch) of the Concession
Contract.
4.11 Guarantee of the Parent Company: The Parent Company
guarantees without conditions, the absolute fulfillment by the Buyer, and
undertakes to make the Buyer fulfill all of the obligations assumed under this
Contract, with the exception of the obligations of the Buyer stated in Clause
4.5.2.
4.12 Agreements for Consortium: The Buyer agrees, on behalf of the
Participants in the Consortium and the Holders, that the Agreements for
Consortium (as defined in Clause 6.5) shall not be modified in any form which
is contrary to the dispositions of this Contract or the By-laws in force.
<PAGE> 22
18
CLAUSE 5: DECLARATIONS AND GUARANTEES OF THE SELLER
By the present Contract, the Seller guarantees and certifies to the
Buyer on the date of Closing, as follows:
5.1 Organization, Authorization, Signing and Effect:
5.1.1 The Seller is an Autonomous Institute created by Decree No.
151 dated June 11, 1974, published in Official Gazette of the Republic of
Venezuela No. 30.430 dated June 21, 1974, and validly existing in accordance
with the Law dated December 30, 1980, published in Official Gazette of the
Republic of Venezuela No. 2709 (Extraordinary) of that same date. The signing,
delivery and fulfillment of this Contract by the Seller, as well as fulfillment
of the operations stated in same according to the terms contained herein, are
within his faculties and in agreement with the applicable Venezuelan laws and
regulations provided for in this Contract (collectively called the
"Legislation"), and have been duly authorized by all necessary actions by the
Seller. All of the requirements established in the Legislation for signing and
delivering the present Contract and to carry out the operations covered herein
by the Seller, have been satisfied.
5.1.2 The present Contract has been duly and validly signed and
delivered by the Seller, and after having the required authorization, signature
and delivery by the Buyer and the Parent Company, shall constitute a valid and
binding obligation of the Seller.
5.2 Non-infringement: Neither the signing, delivery of the
present Contract by the Seller, nor the completion of the operations covered in
this Contract by the Seller, in accordance with the terms of same, shall (a)
constitute an infringement of any disposition contained in the By-laws in
force, (b) enter in conflict, or constitute a breach or infringement (or a
happening which, by notice or in the course of time, or in both cases, may
constitute a breach), or result in the termination or cancellation, or
anticipation of the required fulfillment, or result in the creation or
imposition of any
<PAGE> 23
19
lien, charge, guarantee, pledge, pawn or similar interest of any third party
(hereinafter called collectively "Liens"), which may be imposed on the Shares
or on any of the assets of CANTV or any of its Affiliates (as defined
hereunder), under any writ, mortgage, financial lease, trust fund, obligation,
contract for loan or credit, plan for loans or titles to shares for employees,
collective or other type of contract, compromise, agreement or restriction of
any kind or nature, in which the Seller or CANTV or any of its Affiliates are a
party, or to which the shares of any of them are subject, (c) constitute an
infringement of any law, regulation, norm or other decree, nor any verdict,
order or legal requirement from any court or Administrative organization (as
defined hereunder), which may be applicable to CANTV or any of its Affiliates
or their shares, (ch) require notice, presentation, registry, authorization,
consent or approval not previously obtained (jointly called "Consents"), from
any third person, including without limitations, a government organization,
department, commission, authority, council, office or agency, both national,
state, local, foreign, administrative or regulating (hereinafter called jointly
an "Administrative Organization"), excepting, with respect to the matters
stated above in Clauses (b), (c) and (ch), for breaches, infringements,
terminations, accelerations, Liens and violations, which, together with the
failure in obtaining the Consents, shall not (i) have a substantial adverse
effect on the activities or operations of CANTV and its Affiliates, considered
as a whole, as conducted at present, nor on the capacity of the Seller to carry
out his obligations under the present Contract, or (ii) shall not delay or
obstruct the fulfillment of the operations covered in the present Contract, or
require, or result in the disposal by the Seller, of any interest held in the
Shares, or the disposal by the Parent Company or any Holder of any interests in
the Buyer.
5.3 Constitution and Fulfillment of its Obligations by CANTV:
CANTV is a duly incorporated and validly existing company, in accordance with
the laws of the Republic of
<PAGE> 24
20
Venezuela. CANTV and all of its Affiliates are duly authorized and empowered
to carry out mercantile activities in all of the jurisdictions wherein said
authorization is necessary due to the nature of its activities or for the
ownership, leasing or operation or its respective properties and assets,
excepting in those jurisdictions where the non-existence of said authorization
would not have a substantial adverse effect on the activities or operations of
CANTV and its Affiliates, considered as a whole, as conducted at present.
CANTV and all of its Affiliates are validly incorporated as mercantile
companies and are in possession of all of the necessary concessions, licenses,
permits, authorizations, consents and approvals to carry out their activities
as conducted at present, excepting for those concessions, licenses, permits,
authorizations, consents and approvals which, if not obtained, would not have a
substantial adverse effect on the activities or operations of CANTV and its
Affiliates, considered as a whole, as conducted at present.
5.4 Capital:
(a) The capital stock of CANTV is composed of one thousand million
(1,000,000,000) nominal shares classified in four (4) Classes: "A", "B", "C"
and "D". The Class "B" shares are the property of the Republic and other
agencies of the Venezuelan public sector, and together represent forty-nine per
cent (49%) of the CANTV capital stock. At the time of the Closing, all of the
Class "A" shares shall become the property of the Buyer, and represent forty
percent (40%) of the capital stock of CANTV. The Class "C" shares have been
transferred to, and are held by, the trust funds, in accordance with the
provisions of the
<PAGE> 25
21
Trust Fund Contracts, and together represent eleven per cent (11%) of the.
capital stock of CANTV. No Class "D" shares have been issued.
(b) All of the CANTV shares which have been issued at the date of
Closing have been validly authorized and issued, entirely subscribed and paid
for, and are not subject to any Liens or Rights Against Shares (or any rights
for preferential subscription) excepting as provided for in this Contract, the
Trust Fund Contracts and the By-laws in Force. Excepting for the sale of
Shares to the Buyer covered herein, and excepting for the provisions of Clauses
4.5.1 and 4.8, and as provided for in the By-laws in Force, there are no other
rights for subscription, options, contracts, convertible or exchangeable
values, or any other obligations of any nature in circulation, under which
CANTV or the Seller would have the obligation to issue, sell, purchase or
amortize any shares of the capital stock or other values of CANTV.
5.5 Ownership of the Shares: Immediately before the sale of the
shares covered in this Contract, the Seller has the full property over the
Shares, free of any kind of Liens and Rights Against Shares, excepting for the
provisions stated in this Contract and in the By-laws in Force, and when said
Closing occurs, said property right shall be transferred to the Buyer, subject
to the terms of this Contract and the By-laws in Force.
5.6 Financial Statements: The Seller has previously delivered to
the Parent Company, the reports issued by Krygier, Montilla & Asociados,
independent auditors of CANTV, with respect to the audited financial statements
of CANTV for the years 1989 and 1990, and for the six months ending on June 30,
1991, prepared in accordance with the accounting principles generally accepted
in Venezuela (including the notes attached to same,
<PAGE> 26
22
all together called the "Venezuelan Financial Statements"), and the financial
statements audited by CANTV for the years 1989 and 1990, prepared in accordance
with the accounting principles generally accepted in the United States of
America (including the notes attached to said financial statements, together
called the "United States Financial Statements"). Subject to the qualification
indicated in such reports and financial statements, (i) the audited Venezuelan
Financial Statements shall reasonably reflect the financial situation of CANTV,
the financial results of its operations and the changes in its financial
situation on the date or during the indicated period, in accordance with the
accounting principles generally accepted in Venezuela, applied on a uniform
basis, and (ii) the United States Financial Statements shall fairly represent,
in all substantial aspects, the financial position of CANTV and the results of
its operations and cash flow during said years, in accordance with the
accounting principles generally accepted in the United States.
5.7 Indebtedness:
5.7.1 Attachment 5.7 contains the list of all of the obligations of
CANTV derived from credits (both as the principal debtor as well as the
guarantor), which are in effect as of September 30, 1991, which individually
exceed the amount of US$500,000, including obligations for debts with suppliers
and commercial credits. Copies of the contracts or other documents (including
all of their modifications), under which said obligations were contracted, were
placed at the disposal of the Parent Company in the "Data Room" of CANTV on or
before October 11, 1991. Excepting as stated in Attachment 5.7 or Attachment
5.14, none of the contracts or other documents included in Attachment 5.7, have
<PAGE> 27
23
been modified in any substantial point since October 11, 1991, and CANTV is
fulfilling said contracts in all substantial aspects. All of the obligations
of CANTV arising from credits, including obligations for debts with suppliers
and commercial credits in force as of September 30, 1991, which were
individually less than US$500,000 and together not adding up to more than
US$46,000,000 at said date.
5.7.2. The debts listed in Attachment 5.7 under the heading of "Debts
to be Capitalized", have been cancelled in exchange by issuing to the Seller,
the Class "A", "B" and "C" shares of CANTV (all of said Class "A" shares shall
be transferred to the Buyer at the Closing, and all of the Class "C" shares
have been transferred by the Seller to the trust funds under the Trust Fund
Contracts, before the date of the Closing), and CANTV has no additional
responsibility with any other person or agency with respect to said debts.
Attachment 5.7 also describes the operation under which the capitalization of
said indebtedness has been effected.
5.8 Retirements and Other Benefits: CANTV does not maintain any
benefits plans for its workers, aside from those described in the Collective
Contract and in Attachment 5.8. Copies of the Collective Contract and said
other benefits plans (including all of the modifications to same), were placed
at the disposal of the Parent Company in the "Data Room" of CANTV on or before
October 11, 1991. Excepting for the dispositions of Attachment 5.8, none of
said benefits Plans or the Collective Contract have been modified in any
substantial aspect since December 31, 1990. Excepting for the provisions in
Attachment 5.8, CANTV is complying with the Collective Contract and said
benefits plans, in
<PAGE> 28
24
all substantial aspects. Based on the methodologies and assumptions proposed
in the report prepared by the Consultant Actuaries and Associates, a copy of
which has been placed at the disposal of the Parent Company in the "Data Room"
of CANTV on or before October 11, 1991, the total of the liabilities for the
retirement plan of CANTV under its retirement plan for workers as provided in
the Collective Contract (not including the costs of medical benefits) as of
December 31, 1990, do not exceed the amount of Bs. 5,300,000,000.
5.9 Fulfillment of the Law: Excepting as provided in Attachment
5.9, CANTV's business, as presently being conducted, operates in compliance
with all substantial aspects of all applicable laws and regulations, the breach
of which would lead to a substantial adverse effect over said business as
conducted at present.
5.10 Lawsuits: Excepting as established in Attachment 5.10, there
are no actions, suits, arbitrations or other legal procedures pending against
CANTV, or verdicts not executed, which individually exceed the amount of US
$500,000, or in any case, which would be unfavorably decided against CANTV, to
produce a substantial adverse effect on its business as presently conducted.
5.11 Taxes: CANTV has presented all of the national, state, local
and foreign tax returns and reports ("Tax Returns"), which are to be recorded
by CANTV with any government agencies for the years ending on December 31, 1986
to December 31, 1990, and has paid for all taxes owed for said years or has
accumulated an adequate reserve in the Venezuelan Financial Statements for June
30, 1991.
<PAGE> 29
25
5.12 Fees for the Success of the Transaction: CANTV has not
subscribed any contract undertaking to make any payment of any amount
whatsoever, for the purpose of securing the success of the sale of Shares
covered herein.
5.13 Substantial Contracts: A copy of all of the contracts for
supplies, interconnection, international interchange, collective work contracts
and any other contracts executed by CANTV before September 30, 1991 (including
all of their modifications) which include payments by CANTV of amounts
equivalent to US $500,000 or more in any year (collectively called the
"Substantial Contracts"), have been furnished to the Parent Company in the
"Data Room" on or before October 11, 1991. Excepting as indicated in
Attachments 5.7, 5.8 and 5.14, none of the Substantial Contracts have been
modified in any substantial aspects since October 11, 1991. Excepting for the
Collective Contract and the benefits plans for the workers, which are mentioned
in Attachment 5.8, CANTV has not executed any other contract with any of its
workers or directors.
5.14 Operations: Excepting as provided in Attachment 5.14:
(a) Excepting for the statutory modification of CANTV recorded at
the First Mercantile Registry in the Judicial Circumscription of the Federal
District and the State of Miranda on May 8, 1991, under No. 80, Volume 45-A
First, the modification to the By-laws of CANTV recorded at the First
Mercantile Registry in the Judicial Circumscription of the Federal District and
the State of Miranda on September 16, 1991 under No. 76, Volume 119-A First,
the modifications to the By-laws of CANTV to capitalize the indebtedness
mentioned in Clause 5.7.2 and the classification of the shares of the capital
stock of CANTV into four
<PAGE> 30
26
classes as provided for in Clause 5.4, the adoption of the By-laws in Force,
and as otherwise described and provided for in this Contract, after June 30,
1991, CANTV has not made any changes in its By-laws, nor issued or sold any
shares of its capital stock or values which may be converted into, or exchanged
for shares of its capital stock;
(b) Since June 30, 1991, CANTV has not declared or paid any
dividends or other distributions to any of its shareholders;
(c) Since June 30, 1991, CANTV and its Affiliates have not changed
any of their methods, principles, practices or principal accounting policies in
any substantial point;
(d) Since September 30, 1991, CANTV has not incurred any
obligations for credits, including obligations due to debts with suppliers and
business credits, which individually exceed the amount of US $500,000 or which
in total exceed US $26,000,000 (not including any other obligations exceeding
US $ 500,000 individually);
(e) Since September 30, 1991, excepting for the extension of the
contracts for services rendered, from September 30, 1991 to December 31, 1991,
CANTV has not executed any contract aside from obligations for credits
(including obligations for debts with suppliers and commercial credits),
involving payments by CANTV of amounts equivalent to US $200,000 or more during
any year; and
(f) Since June 30, 1991, there have been no substantial changes in
the business, assets or financial condition of CANTV.
<PAGE> 31
27
5.15 Documents for the Negotiation:
5.15.1 The Concession Contract included as Attachment A is in full
force and effect, and there has been no breach of same by CANTV. The present
tariffs and any decision or resolution issued with respect to future tariffs
applicable to the services rendered under the Concession Contract which may be
in effect or have been approved on or before November 26, 1991, have not been
decreased or annulled since said date.
5.15.2 The Regulations regarding the Operation of the Basic
Communications Network, the Operation of the Cellular Mobile Telephone System,
the Operation of the Private Telecommunications Networks and the Operation of
Public Terminal Equipment for telecommunications, adopted under the Law of
Telecommunications of 1940, which were in force on October 16, 1991, are in
full force and effect, without any modifications since said date.
5.15.3 The By-laws of CANTV are in full force and effect,
substantially in the form contained in Attachment B ("The By laws in Force").
5.15.4 The Seller has executed the Trust Fund Contracts substantially
under the terms provided in Attachment C, and all of the Class "C" shares of
the CANTV capital stock, representing 11% of the capital stock of CANTV, have
been transferred to the trustees in accordance with the terms of said
contracts.
5.15.5 The Collective Contract is in full force and effect, and
excepting as stated in Attachment 5.B, it has not been modified since October
4, 1991.
<PAGE> 32
28
CLAUSE 6: DECLARATIONS AND GUARANTEES MADE BY
THE BUYER AND THE PARENT COMPANY
The Buyer and the Parent Company hereby guarantee and certify the
following to the Seller, at the date of Closing:
6.1 Constitution and Validity: The Buyer is a stock company duly
incorporated and validly existing in accordance with the laws of the Republic
of Venezuela. GTE Corporation is a stock company duly incorporated and validly
existing in accordance with the laws of the State of New York, United States of
America. Both the Buyer as well as the Parent Company and the Holders are duly
authorized and capable of assuming their obligations for carrying out
mercantile activities in all of the jurisdictions wherein said authorization is
required due to the nature of the activities or due to ownership, lease or
operation of its properties, excepting in those jurisdictions where the lack of
said authorization would not have a substantial adverse effect on the
activities or operations of the Parent Company and its Affiliates, considered
as a whole, or the Buyer or the Holders. Both the Buyer, the Parent Company
and the Holders are validly incorporated as mercantile companies and hold all
franchises, licenses, permits, authorizations, consents and approvals which are
required for carrying out its activities, as conducted at present, excepting
for any franchise, license, permit, authorization, consent and approvals which
would not substantially affect the activities or operations of the Parent
Company and its Affiliates, considered as a whole, or the Buyer, or the
Holders, if not obtained. Both the Buyer as well as the Parent Company and the
Holders have delivered to the Seller, on or before October 25, 1991, true and
exact copies
<PAGE> 33
29
of their incorporation documents, as well as of all of the modifications made
to same, which are in force and have not been modified after said date.
6.2 Authorization, Signing and Effect: The signing, delivery and
fulfillment of the present Contract by the Buyer and the Parent Company, as
well as the consummation of the operations covered in this Contract by the
Parent Company and the Buyer, in accordance with the terms stated herein, have
been duly authorized by the Board of Directors or other directing organizations
of the Buyer, the Parent Company and the Holders, and by the shareholders of
the Buyer and each of the Holders. No other action or procedure shall be
required of the Buyer, the Parent Company or any other Participant in the
Consortium or Holder, to authorize the present Contract or to carry out the
operations covered in same. The present Contract has been duly executed and
delivered by the Buyer and the Parent Company, and with the authorization,
signing and delivery of same by the Seller, is a valid and binding obligation
of the Buyer and the Parent Company, enforceable against same, excepting that
said enforcement may be limited by any legal disposition applicable and related
to bankruptcy, insolvency, restructuring, suspension of payment or other
similar dispositions, which are now in force or to be in force in the future,
affecting the rights of the creditors in general.
6.3 Consents: There are no requisites, (i) imposed by the laws,
regulations or norms of any country wherein the Buyer, the Parent Company or
any of the Participants in the Consortium or Holders are incorporated or have
their main offices, or any regulating authority of any country ("Regulating
Authority"), or (ii) applicable as a result of the identity or legal
personality of the Buyer, the Parent Company or any of the Participants in the
<PAGE> 34
30
Consortium or the Holders, or any other facts specifically related with the
business or activities developed by the Buyer, the Parent Company or any of the
Participants in the Consortium or Holders, or any other person having the
intention of developing said activities (including the purchase of the Shares),
or as a result of financing of the operations covered in this Contract by the
Buyer, the Parent Company or any of the Participants in the Consortion or the
Holders, which would lead the Seller or CANTV to incur in any obligation with
the government of any country or Regulating Authority having jurisdiction over
the Buyer, the Parent Company or any of the Participants in the Consortium or
Holders or any of their respective Affiliates, or that they would have to
obtain any consents (in addition to the consents obtained before the Closing),
in order to be able to execute this Contract or to carry out the operations
covered in same.
6.4 Non-infringement: Neither the signing or delivery of the
present Contract by the Buyer or the Parent Company, nor the consummation of
the operations covered in the contract by the Buyer or the Parent Company, in
accordance with the terms of same, shall (a) constitute a breach of any
disposition contained in the incorporation documents or by-laws (or other
incorporation documents), of the Buyer, the Parent Company or any Participant
in the Consortium or Holder, (b) enter in conflict or result in a breach or
infringement (or a happening which by notice or in the course or time, or in
both cases, may result in a breach), or cause the termination or cancellation,
or anticipate the required fulfillment, or result in the creation or imposition
of any Lien on the Shares, the capital stock of the Buyer or any Holder, or on
the assets of the Buyer, the Parent Company or any of their Affiliates, due to
<PAGE> 35
31
any writ, mortgage, financial lease, loan or credit contract, trust fund,
obligation, loan plan or title to shares for workers, collective or any other
type of contract, compromise, agreement, arrangement or restriction of any kind
or nature, wherein the Buyer or the Parent Company or their respective
Affiliates are a party or to which the assets of any of them are subject, (c)
constitute an infringement of any law, norm, regulation or other decree, or any
verdict, order, disposition or legal requirement issued by any court or
Administrative Organization, which may be applicable to the Buyer, the Parent
Company or any Holder, or any of their Affiliates, or to any of their assets,
or (ch) require any Consent from any third party, including any Administrative
Organization, which has not been obtained up to that moment, excepting with
respect to the matters stated in the above Clauses (b), (c) and (ch), for such
breaches, infringements, terminations, accelerations, Liens and violations, and
Consents which a failure to obtain same, on a whole, (i) would not have a
substantial adverse effect on the activities or operations of the Parent
Company and its Affiliates, considered as a whole, the Buyer, or CANTV, nor on
the capacity of the Buyer or the Parent Company to comply with their
obligations under this Contract, or (ii) shall not delay or impede the
consummation of the operations covered in this Contract, or require or result
in the disposal of any interests in the Shares by the Buyer or any Holder, or
the disposal by the Parent Company, of any interest held in the Buyer, or the
disposal by any Participant in the Consortium, of any interest held in any
Holder.
6.5 Capital: The capital stock of the Buyer is formed by one
thousand (1,000) ordinary shares, of which one thousand (1,000) shares have
been completely subscribed and
<PAGE> 36
32
paid for. The names of the owners of the shares of the capital stock of the
Buyer, including any affiliate, subsidiary, holding company or other agency
through which any Participant in the Consortium directly or indirectly
possesses any share of the capital stock of the Holder (collectively called the
"Holders"), are determined in Attachment 6.5.1, which was delivered by the
Parent Company to the Seller on or before October 24, 1991. Each Holder is an
affiliate totally controlled and owned directly or indirectly by the Parent
Company or the Participant or Participants in the Consortium indicated in
Attachment 6.5.1 (the "Participants in the Consortium"). Attachment 6.5.1 also
establishes the projected margin of ownership for (i) the Participants in the
Consortium of each Holder and of the Buyer, and (ii) each Holder by each other
Holder. Attachment 6.5.2, which was delivered by the Parent Company to the
Seller on or before December 2, 1991, states the number of shares held, and the
percentages held by (i) the Participants in the Consortium of each Holder, and
(ii) each Holder of any other Holders, the percentage which in each case is
within the margin of percentages of ownership established in Attachment 6.5.1.
On or before October 25, 1991, the Buyer has delivered to the Seller, true and
exact copies of all agreements, arrangements and understandings between the
Parent Company, the Participants in the Consortium and/or the Holders, related
with the formation, ownership, administration or operation of the Buyer or of
CANTV (the "Agreement for Consortium"). The Agreements for Consortium are in
full force and effect and have not been modified since October 25, 1991. The
Agreements for Consortium do not contain any term or condition which is
contrary to this Contract and the By-laws in Force. Excepting for the
Agreements for Consortium, there are no other rights for
<PAGE> 37
33
subscription, options, agreements, convertible or exchangeable values or any
other rights or undertakings of any other nature, in virtue of which the Buyer,
the Parent Company or any Holder or Participant in the Consortium may become
obligated to issue, sell, purchase or recover shares of the capital stock or
other values of the Buyer or any Holder, or related in any form with the vote,
transfer or ownership of any of the values owned by the Buyer or any Holder.
6.6 Investigation of CANTV: The Buyer and the Parent Company,
each recognizes for himself, the Participants in the Consortium and the Holders
and each of their respective officers, directors, consultants, legal
representative, affiliates and attorneys (collectively called the
"Representative of the Consortium"), declare (a) that they have revised the
books, records, assets, installations, equipment, properties, contracts and tax
returns of CANTV to the extent considered necessary by the Buyer and the Parent
Company, to determine the situation of CANTV and its assets, installations,
equipment, properties, liabilities and obligations, and are completely
satisfied in said respect, and that (b) the Buyer purchases the Shares based
solely on his own investigations and examinations of said books, records,
assets, installations, equipment, properties, contracts and tax returns, and
the declarations and the specific declarations and guarantees of the Seller
stated in Clause 5. Both the Buyer as well as the Parent Company acknowledge
for themselves as well as for the Representatives of the Consortium, that
despite the fact that they have had the opportunity of interviewing the
directors, officers, employees, representatives and advisors (including the
legal and financial advisors) of the Seller and of CANTV (collectively called
the "Representatives of the Seller"),
<PAGE> 38
34
the Buyer and the Parent Company have not decided to purchase the Shares or
become involved in the obligations covered in the present Contract, on the
basis of any affirmation, guarantee or declaration, explicit or implicit, made
to the Buyer, the Parent Company or any other person, by the Seller, CANTV or
any Representative of the Seller, excepting for the declarations and guarantees
expressly stated in Clause 5, and that all of the declarations and guarantees
of any type or nature, expressly or implicitly stated, which are not the
express declarations and guarantees stated in Clause 5, are hereby expressly
rejected to the maximum point permitted by the law. Without limitations to the
above statement, the Seller and the Parent Company both recognize that,
excepting as specifically established otherwise in the declarations and
guarantees expressly stated in Clause 5, (i) neither the Seller nor CANTV or
any Representative of the Seller, or any person acting in the name of, or on
behalf of any of them, has made or is making any express or implicit
declaration or guarantee with respect to all of, or the exactness of, or in any
other form related with, any information or material furnished to the Buyer or
the Parent Company or their representatives, in the name or on behalf of the
Seller or CANTV, including without limitations, the Confidential Descriptive
Memorandum (collectively called the "Evaluation Material"); (ii) neither the
Seller nor CANTV, or any Representative of the Seller, or any other person
acting in the name or on behalf of any of them, has given or shall give any
declaration or guarantee with respect to the business or expectations of CANTV;
(iii) neither the Seller nor CANTV, or any Representative of the Seller or any
of their respective officers, directors, employees, shareholders, affiliates or
representatives, has or shall have any responsibility whatsoever,
<PAGE> 39
35
towards the Buyer or the Parent Company, or any other person related with the
use of the Evaluation Material itself; (iv) neither the disposition of the
Evaluation Material, nor the participation of the Seller in this Contract,
implies any declaration, guarantee or obligation (express or implicit), related
with the Evaluation Material, including without limitations, that the
Evaluation Material was or is correct, or that there have been no changes in
the business, concerns, financial condition or expectations of CANTV, either
before or after: (A) the date on which the Evaluation Material was furnished
to the Buyer or the Parent Company or their respective representatives or
advisors, or (B) the date of any examination made by the Buyer or the Parent
Company or their respective representatives or advisors, of the business or
expectations of CANTV; and (v) both the Buyer as well as the Parent Company
have carried out their own investigations and are satisfied (after having
considered all of the independent opinions, as deemed necessary or convenient),
with respect to all of the pertinent matters (important or not), with the
purpose of making their own decisions to initiate and carry out their
obligations under this Contract.
6.7 Fees for the Success of the Transaction: Neither the Parent
Company, nor the Buyer or any Participant in the Consortium of Holders, have
subscribed any contract obligating them to the payment of any amount to CANTV,
for the success of the sale of shares covered herein.
<PAGE> 40
36
CLAUSE 7: OBLIGATIONS OF THE SELLER
7.1 The Board of Directors of CANTV: The Seller shall have all of
the shareholders of CANTV, which are not the Buyer, to be present immediately
after the Closing, to validly hold an Extraordinary Assembly of Shareholders of
CANTV, with the purpose of facilitating the election of the Board of Directors
of CANTV, the President and the four (4) Principal Directors and their
respective Alternates, which are to represent the Buyer as the holder of the
Class "A" shares of CANTV.
7.2 Concession of Cellular Service: On or before the due date for
the payment mentioned in this clause, the Seller shall contribute to, or make a
payment in the name of CANTV or its Affiliate incorporated with the purpose of
furnishing the cellular mobile telephone service, of sixty percent (60%) of the
necessary funds to pay for the concession rights which are to be paid in
accordance with Clause (ch) of the Concession Contract. It will be considered
that the responsibility of the Seller under this Clause 7.2 has been satisfied
if the holders of the Class "B" and Class "C" shares have paid a part of the
payments required of the Seller, providing that in total sixty per cent (60%)
of the necessary funds for the payment of the rights for the cellular
concession are paid by the Seller and such other shareholders.
7.3 Real Estate: The Seller shall not question, and shall
exercise his best reasonable efforts to see that the Republic of Venezuela
should not question, the rights of CANTV to use any real estate (including any
buildings and other structures located on them), which are important for the
business of CANTV as conducted at the date of Closing, and are
<PAGE> 41
37
occupied or used by CANTV at said date, and with respect to which the Seller has
reasonable determined that CANTV should have the right to use, and the Seller
shall cooperate with CANTV in the defense of any claim presented against CANTV
during the period of three (3) years after the date of the Closing, which may
question the rights of CANTV to use any such real estate (including any building
and other structures located on them). In addition, during the three (3) years
following the date of Closing, the Seller shall cooperate with CANTV to perfect
the title to any important real estate property (including any buildings and
other structures located on them) required for the business of CANTV as
conducted at the date of the Closing, and occupied or used by CANTV at said
date, the title of which has been reasonably determined by the Seller to be
required by CANTV. Nothing contained in this Clause 7.3 shall require the
Seller to make any payment to, or in the name of, CANTV, the Buyer, the Parent
Company or the Participants in the Consortium or their affiliates, or any third
party (including without limitations, any payment in respect to taxes).
CLAUSE 8: MISCELLANEOUS
8.1 Maintenance of the Declarations and Guarantees: The
declarations and guarantees made in the present Contract shall remain in force
during one (1) year after the date of the Closing, excepting for the
declarations stated in Clause 5.11, with respect to the payment of taxes, which
shall be maintained in force in the case of taxes for each year mentioned in
said clause, during a period of five (5) years after the date on which the
taxes were due. Any of the parties may initiate a legal action based on the
breach of any declaration or guarantee made in the present Contract within a
period of one (1) year after the
<PAGE> 42
38
date of Closing (or in the case of the declaration regarding the payment of
taxes in Clause 5.11, within a period of five (5) years mentioned before).
Each of the parties herein irrevocably and completely waives any and all rights
and resources which they may have under this Contract or in any other form,
with respect to any alleged breach or infringement, of a declaration or
guarantee, for which any action has not been initiated during the applicable
period mentioned above.
8.2 Successors and Assignees: This Contract and all of the
obligations contained in same are obligatory and shall have effect for the
benefit of the parties and their respective successors or legal assignees.
Neither this Contract nor any of the rights, interests or obligations according
to same, may be assigned by any of the parties, without the prior written
consent of the other parties.
8.3 Non-existence of Benefits for Third Parties: None of the
facts expressly or implicitly stated in this Contract has the intention, or
should be interpreted as assigning or granting to any natural or juridical
person, aside from the parties, any rights or recourses in virtue of, or by
reason of this Contract or any obligation covered in same, excepting as stated
in Clauses 4.5.1 and 4.8.
8.4 Notices: All notices, summons, petitions, demands and other
communications requested or permitted in accordance with this Contract, shall
be made in writing, and shall be considered to have been validly made when
delivered by hand or when sent by private mail, telex or fax, once the
reception of same is verified, to the following addresses:
<PAGE> 43
39
For the Seller:
Fondo de Inversiones de Venezuela
Edificio del Banco Central
Torre Financiera
Caracas, Venezuela
Atencion: Ministro de Estado-Presidente
Fax No. (58) 2-835-490
If addressed to the Buyer or the Parent Company:
GTE CORPORATION
600 Hyden Ridge
Irving, Texas 75015-2092, U.S.A.
Attention: Vice President - International
Fax No.
With copy to:
Mendoza, Palacios, Acedo, Borjas, Paez, Pumar & Cia
Urbanizacion Las Mercedes
Calle Veracruz con Cali
Edif. ABA, ler. Piso, Caracas
Atencion: Luis Esteban Palacios/Arminio Borjas, hijo
Fax (58) (2) 911595
or to any other person designated in writing by the Seller, the Buyer or the
Parent Company, as the case may be, which is to be delivered in the form
indicated in this Clause 8.4.
8.5 Complete Contract: This Contract, together with its
Attachments, contains the complete agreement between the parties with respect
to the matters contained in same. There are no other restrictions, promises,
declarations, guarantees, stipulations or obligations aside from those
expressly stated herein. This Contract replaces all of the previous covenants
and
<PAGE> 44
40
agreements, both verbal or written, between the parties with respect to the
operations covered in this Contract.
8.6 Amendments: This Contract may not be amended, modified or
complemented, excepting by written agreement between the parties.
8.7 Resignation: Resignation of any of the rights derived from
the present Contract shall only be effective if made in writing and with a due
notice to the other parties.
8.8 Expenses: Each party shall pay for all of the costs and
expenses incurred on their part with respect to the negotiation, signing and
execution of this Contract, including the respective fees of their brokers and
advisors.
8.9 Partial Invalidity: If any term or disposition of this
Contract is considered as not being valid or not executable by any competent
court or by the action of any future legislation, said legal decision or act
shall be strictly interpreted, with respect to said invalidity, and shall not
affect the validity or effect of any other disposition contained in the present
Contract.
8.10 Applicable Law: This Contract shall be governed and executed
in accordance with the laws of the Republic of Venezuela.
8.11 Submittal to Jurisdiction: The parties agree that any doubts
or controversies arising with respect to this Contract, which may not be solved
on friendly terms by the parties, shall be settled by judicial Action (a
"Procedure"), entered at the courts of the Republic of Venezuela and according
to its laws, without giving rise in any form to claims by
<PAGE> 45
41
foreign governments. The courts of the Republic of Venezuela shall have the
exclusive jurisdiction to settle any controversy over, or in respect to this
Contract.
The Buyer and the Parent Company irrevocably and unconditionally agree
to be subject to the exclusive jurisdiction of the courts of the Republic of
Venezuela for any Procedure which may arise, or which may be related with this
Contract or the operations covered in same, and also agree to not initiate any
Procedure related with this Contract or the operations covered in same,
excepting in said courts. In addition, the Buyer and the Parent Company
irrevocably and unconditionally waive their right to enter any resource for
regulation of jurisdiction, before any court, irrevocably and unconditionally
agree to not present any claim that said Procedures are carried out in an
unsuitable court, and in addition agree that the verdict issued with respect to
any Procedure may be executed in the courts of any other jurisdiction.
8.12 Representative in Processes: The Parent Company irrevocably
designates Luis Esteban Palacios (or any other person of full age and capable,
designated by the Parent Company in his replacement, by written notice
delivered to the Seller in accordance with Clause 8.4), as its legal
representative to act in any Procedure. The representative of the Buyer shall
be the Person designated in its by-laws or designated in accordance with same.
8.13 Interpretation: Unless otherwise expressly stated, a
reference to law or regulation shall also include any modifications to same,
and any law or regulation substituting
<PAGE> 46
42
them. An Affiliate of a person means a company with more than fifty percent
(50%) of its shares owned by said person. The headings of the clauses and
articles used in this Contract are solely for reference and shall have no
effect on the interpretation of this Contract.
8.14 Domicile: For all of the effects of this Contract, each party
elects the city of Caracas as the special domicile. The Buyer and the Parent
Company have signed and delivered four (4) identical copies of this Contract,
on October 25, 1991. The Seller has signed and delivered said copies on
December 3, 1991.
FONDO DE INVERSIONES DE VENEZUELA
By: (signature)
-------------------------------
Name: Gerber Torres
Title: (illegible).
VENWORLD TELECOM, C.A.
By: (signature)
-------------------------------
Name:
Title:
GTE CORPORATION
By: (signature)
-------------------------------
Name: Kent B. Foster
Title: Attorney-in-fact
-------------------------------
(Signed) Andrew T. Jones,
Attorney-in-fact
<PAGE> 47
43
Compania Anonima Nacional Telefonos de Venezuela signs four (4) copies of this
Contract on December 3, 1991, solely for the purposes of being obligated by
Clauses 4.6.1, 4.7 and 4.8.
Compania Anonima Nacional Telefonos de Venezuela (CANTV)
By: (Signature)
----------------------------
Name: Fernando Martinez Mottola
Title: President of CANTV
I, Bruce Haddad, President of CANTV, declare that the above document is a true
and exact copy of the original signed on December 03, 1991.
(Signed) Bruce Haddad - President. Caracas, January 21, 1992
- -------------------------------------------------------------
I declare this to be a true translation of the foregoing document, which I sign
and seal in Caracas, Venezuela, on this eighteenth day of February, nineteen
hundred and ninety-two.
IDA E. ANDERSON M.
Public Translator
I.C. V-480.824
<PAGE> 1
Exhibit 3(b)
ASSOCIATION AGREEMENT
among
GTE CORPORATION
T.I. TELEFONICA INTERNACIONAL DE ESPANA, S.A.
AT&T INTERNATIONAL INC.
C.A. LA ELECTRICIDAD DE
CARACAS, S.A.I.C.A.-S.A.C.A.
and
CONSORCIO INVERSIONISTA MERCANTIL CIMA, C.A.,
S.A.C.A., S.A.I.C.A.
<PAGE> 2
2
7. Operation of VENTEL and CANTV. (a) Except as specifically stated herein,
all decisions relating to the operations of VENTEL and CANTV shall be decided
by consensus of the Investors, it being understood that in the absence of
consensus, the views of Investors holding a majority of the Ownership Interests
shall prevail. Notwithstanding the foregoing, resolutions on the following
matters shall require the affirmative vote (i) of GTE-VEN and two other
Investors, for such time as VENTEL is owned by the original Investors and in
the percentages set forth in Section 3 above, and (ii) thereafter, of Investors
holding Ownership Interests of not less than 66 2/3%:
(i) dissolution or liquidation of VENTEL or the decision of
VENTEL to support the dissolution or liquidation of CANTV;
(ii) change in the corporate purpose of VENTEL or the decision
of VENTEL to support a change in the corporate purpose of CANTV;
(iii) any merger or consolidation involving VENTEL or the
decision of VENTEL to support any merger or consolidation involving CANTV;
(iv) sale or transfer of all or substantially all the assets of
VENTEL or the decision of VENTEL to support the transfer of all or
substantially all of the assets of CANTV;
(v) increase or decrease in the capital of VENTEL, or the
decision of VENTEL to support an increase or decrease in the capital of
CANTV or to subscribe to any such increase;
(vi) fixing of the general dividend policy of VENTEL, or the
decision of VENTEL to support a particular general dividend policy of
CANTV;
(vii) the incurrence by VENTEL of any indebtedness outside the
ordinary course of business, or the decision of VENTEL to support the
incurrence by CANTV of indebtedness outside the ordinary course of
business;
(viii) any amendment to the Charter and By-laws (estatutos) or
VENTEL;
(ix) investment of VENTEL's funds in another entity or business
or the decision of VENTEL to support the investment of CANTV's funds in
another entity or business;
(x) authorizing any issuance, sale, purchase or redemption of
VENTEL's equity securities or a decision of VENTEL to support CANTV's
authorizing any issuance, sale, purchase or redemption of CANTV's equity
securities;
<PAGE> 3
3
(xi) entry into any new line or field of business, other than
related to telecommunications, or the discontinuance of any line or field
of business, or a decision of VENTEL to support CANTV's entry into any new
line or field of business, other than related to telecommunications, or the
discontinuance of any line or field of business; and
(xii) appointment of auditors or VENTEL's decision to support a
CANTV proposal to appoint auditors.
(b) In the initial phase, and in order to receive input from all the
Investors, transition advisory committees shall be established to advise on the
functional areas related to the operation of VENTEL and CANTV. The transition
advisory committees will be recommended by the Vice Presidents of CANTV and
approved by the President of CANTV and will operate under the direction of the
functional Vice Presidents of CANTV. The committees will be formed by members
appointed by the Investors, according to their areas of interest and expertise.
Examples of transition advisory committees are the following:
- Planning and Engineering
- Construction
- Service Improvement
- International
- Finance
- Marketing and Customer Service
- Government Relations
- Human Resources
- Complementary and Value Added Services
- Logistics and Administration.
The CANTV President and the Vice Presidents as a group will approve
the need to maintain, create, or terminate the transition advisory committees
depending on the final organizational structure given to CANTV. The CANTV
President will submit to the Boards of CANTV and VENTEL his recommendations on
the functions being addressed.
(c) The VENTEL Board of Directors (junta directiva) shall be composed
of nine directors (directores). Notwithstanding any other provisions of this
Agreement or the Charter and By-laws (estatutos) of VENTEL, (i) if any Investor
has an Ownership Interest of more than 50%, such Investor shall be entitled to
elect not less than a majority of the Directors of VENTEL, and (ii) an Investor
(or group of Investors) shall be entitled to elect one director of VENTEL for
each 10% Ownership Interest that the Investor (or group of Investors) holds.
Should the foregoing not result in the election of all the directors of VENTEL
by particular
<PAGE> 4
4
Investors, the selection of remaining directors shall be allocated to the
Investors in an equitable manner, taking into account (i) over a period of
years the relative Ownership Interests of the Investors from time to time, and
(ii) the policy of promoting representation on the Board of Directors for each
Investor with an Ownership Interest of at least 5%. Each Investor shall vote
its shares in VENTEL in order to achieve the result contemplated in this
Section 7(c). Alternate and replacement directors will be appointed by the
Investors that had the right to appoint the corresponding directors.
(d) Should the shareholding of VENTEL in CANTV permit VENTEL to elect
one or more directors of CANTV, and should any Investor hold a majority of the
Ownership Interests, the board of directors of VENTEL shall cause VENTEL to
cast its votes in order that a majority of the CANTV directors to be elected by
VENTEL are persons nominated by the directors of VENTEL who are selected by
such Investor. Subject to the foregoing, the board of directors of VENTEL
shall cause VENTEL to cast its votes for the selection of such CANTV directors
in order that such directors are allocated over a period of years in a manner
so as to reflect the respective Ownership Interests of the Investors and to
maintain at least one CANTV director who is nominated by VENTEL directors who
are elected by one of the Venezuelan Investors and at least one CANTV director
who is nominated by the Foreign Investors (in each case other than any Investor
that owns a majority of VENTEL), if possible. Alternate and replacement CANTV
directors will be appointed by VENTEL directors that had the right to appoint
the corresponding CANTV directors.
