8 VIOLATIONS, TERMINATIONS AND ANNULMENT OF THE AGREEMENT

8.1 Violations

If the CONCESSION HOLDER either through negligence or intentionally breaches any of the listed items below, the consequences arising from this Agreement and the Law shall follow.

8.1.1 Assignation or transfer of CONCESSION

The assignation or transfer, for any reason, totally or partially, of the CONCESSION; or the entering into any type of association with third parties that transfers the obligation of performing the CONCESSION or of the CONCESSION HOLDER'S control over performing the obligations of the CONCESSION, without the prior authorization of the GOVERNMENT, or otherwise contrary to Section 4.13 Assignment of the CONCESSION;

8.1.2 Breach of prohibition on unfair competition

The breach of the provisions of Section Prohibition on Unfair Competition;

8.1.3 Breach of equal treatment

The breach of the principle of equal treatment, provided in Section 9.1 Mediation;

8.1.4 Interruption of the Basic Services.

The interruption or suspension of the rendering of the Basic Services, except for cases provided in Section 4.2 Intentional Service Suspension or Interruption.

8.1.5 Breach of assets assignation/transfer

The assignation or transfer of assets allocated to the rendering of Basic Services in violation of Section 4.14 Restrictions on Disposal of Assets of the CONCESSION HOLDER;

8.1.6 Obstruction of inspection

The obstruction, or impeding of inspections ordered by the GOVERNMENT;

8.1.7 Bankruptcy

The declaration by the CONCESSION HOLDER of bankruptcy, or the declaration of bankruptcy by the court or another competent organ that the CONCESSION HOLDER is insolvent, or bankrupt. In this case the intention or negligence of the CONCESSION HOLDER shall be irrelevant;

8.1.8 Serious or material breach of this Agreement

Any serious or material breach of this Agreement;

8.2 Notice of a Violation

If any of the events referred to in the preceding Section 8.1 Violations have occurred, the GOVERNMENT shall notify the CONCESSION HOLDER of the violation in writing, indicating the circumstances and reasons for its decision. Within forty-five (45) days following the date of receipt of such notification, the CONCESSION HOLDER shall reply to the GOVERNMENT in writing, setting forth its defense arguments. The failure by the CONCESSION HOLDER to provide a timely response shall be deemed as agreement with the conclusion of the GOVERNMENT.

Starting from the date of receipt of the CONCESSION HOLDER'S reply, or the expiration of the abovementioned forty-five (45) day term, the GOVERNMENT shall adopt its final decision within forty-five (45) days at the latest and notify the CONCESSION HOLDER accordingly.

8.3 Premature Termination and Revocation

The grounds for terminating the Agreement prematurely and thus revoking the CONCESSION granted in this Agreement are;

a) the circumstances envisaged in Subparagraph 8.1.1 Assignation or transfer of CONCESSION or 8.1.7 Bankruptcy;

b) the repeated and willful violation of Section 4.5 Prohibition on Unfair Competition;

c) the interruption described in Section Intentional Service Suspension or Interruption, provided the CONCESSION HOLDER is the cause of the interruption, and the interruption is not corrected within a reasonable period, as established by the GOVERNMENT in writing.

8.4 Other Effects of Violation

In case of other violations contemplated in Section 8.1 Violations, the consequences of which are not designated in Section 8.3 Premature Termination and Revocation, the GOVERNMENT shall decide upon exercising other sanctions as provided in Section 8.2 Notice of a Violation.

8.5 Normal Termination

This Agreement shall terminate naturally upon the expiration of the period set forth in Sections Term and Extension.

8.6 Annulment

This Agreement may also be prematurely terminated if declared null and void by court

, as well as in the event that the CONCESSION is absolutely nullified by the GOVERNMENT in accordance with the law. In case the CONCESSION is nullified by the GOVERNMENT, the CONCESSION HOLDER shall have the right to dispute the decision in court. In the event of partial annulment, the rest of the Agreement shall continue to be in effect in accordance with the terms set forth in the Agreement, whereas the GOVERNMENT and the CONCESSION HOLDER shall, by mutual agreement, exert their efforts to revise this Agreement.

8.7 Effects of Termination and Annulment of the Agreement

Upon the termination or annulment of this Agreement, the parties shall fulfill obligations towards each other as provided in Section 8.7 Effects of Termination and Annulment of the Agreement, Section 8.8 Damage, and Section 8.9 Indemnification for Termination/Annulment , as well as other obligations under this Agreement and the Law.

Dispute resolution proceedings, whether in court or otherwise, initiated before annulment or termination, and rights and obligations arising before such annulment or termination will not be prejudiced by such annulment or termination.

8.8 Damages

If the Agreement is terminated pursuant to the terms set forth in Section 8.3 Premature Termination and Revocation (except as based on 8.1.7 Bankruptcy), the CONCESSION HOLDER shall be required by the GOVERNMENT to indemnify it fully for the resulting damages and injuries.

The amount of this indemnification shall be no greater than ten (10) per cent of the revenue of the CONCESSION HOLDER for the fiscal year corresponding to the latest audited financial statement of the operator.

The CONCESSION HOLDER shall pay such indemnification within three (3) months of notification thereof by the GOVERNMENT.

8.9 Indemnification for Termination/Annulment by the GOVERNMENT

If the termination or annulment occurs due to a cause ascribable to the GOVERNMENT, the GOVERNMENT shall guarantee the CONCESSION HOLDER compensation in an amount that indemnifies it for all damage, and injuries that the CONCESSION HOLDER has suffered as a consequence of such termination or annulment.

However, if such termination or annulment should occur later than fifteen (12) years from the Effective Date, the indemnification shall be limited to cover the direct damage and injuries resulting there from.

8.1 Refurbishment of assets after transfer

A problem can arise towards the end of the CONCESSION period in that the operator may become indifferent to the actual operating condition of the telecommunications infrastructure since the investment, and therefore revenues , are to be transferred soon.

If maintenance in the few years preceding transfer is neglected to reduce operating costs to a minimum and to increase the profit, the facilities transferred may be in sub-optimal condition.

It is therefore necessary to make provision in advance for) adequate funds to be used for possible rehabilitation of the investment after the transfer to the GOVERNMENT, to cover the possibility that the infrastructure may need to be rehabilitated.

8.10.1 Option: Escrow account for rehabilitation

Note that all indicated years and terms are illustrative only.

The average Operation and Maintenance (O&M) costs over the term from year 5 to year 10 (for example) of the CONCESSION will form the benchmark for the computation of annual O&M costs. In the last 5 (for example) years of the CONCESSION, every year in which O&M costs fall below the benchmark, the difference will be deposited in to escrow account.

At the end of the CONCESSION period, on transfer of the facilities to the GOVERNMENT, the escrow account shall be used for rehabilitation and refurbishment of the plant.

8.11 Assurance of continued capital upgrade of telecommunications plant

Telecommunications infrastructure typically requires continuous and significant capital investments . However, Build-Operate-Transfer (BOT) projects are based essentially on the concepts of a once-only investment, making the Installed First Cost (IFC) of the project the principal capital cost, with the investor amortizing the IFC and earning profits over the remaining years of the CONCESSION.

To help ensure an ongoing infrastructure development and modernization during the CONCESSION period the following options A and B are available, if so desired.

8.11.1 Option A: Shared investment between Operator and Transferee

The investments during the last 10 (for example) years of the CONCESSION shall be shared pro rata, based on the remaining number of years of the CONCESSION, between the investor/operator and the party that will take over the investment.

If there are 'x' years remaining in a last investment period of 10 years, the CONCESSION_HOLDER would pay x/10 of the amount, and the GOVERNMENT transferee would pay the remainder.

The CONCESSION_HOLDER retains all the proceeds/revenues from the services, however the CONCESSION_HOLDER may, or may not pay interest (to be negotiated) until the transfer of the portion of the investment made by the future transferee, who will take over the entire investment at the end of the CONCESSION.

8.11.2 Option B: Linear depreciation

If linear depreciation is mandated in the contract, the CONCESSION_HOLDER pays for the entire investment until the end of the contracted period, at which time the transferee pays the book value in cash, with an inflation adjustment factor included.

8.12 Sale of the CONCESSION

The CONCESSION HOLDER may sell the remaining portion of the CONCESSION license period. The GOVERNMENT must approve the terms of the sale, and the qualifications of the new operator.

8.13 Staff transfer

At the end of the CONCESSION period the key staff of the CONCESSION HOLDER will be transferred.

Conditions of employment of the transferee must be agreed one year before the end of the CONCESSION.