<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
TV FILME, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4841 98-0160214
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>
C/O ITSA-INTERCONTINENTAL TELECOMUNICACOES, LTDA.
SCS, QUADRA 07-B1.A
ED. EXECUTIVE TOWER
SALA 601
70.300-911 BRASILIA-DF
BRAZIL
011-55-61-314-9908
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
------------------------------
ALVARO J. AGUIRRE
TV FILME, INC.
C/O ITSA-INTERCONTINENTAL
TELECOMUNICACOES, LTDA.
SCS, QUADRA 07-B1.A
ED. EXECUTIVE TOWER
SALA 601
70.300-911 BRASILIA-DF
BRAZIL
011-55-61-314-9908
(Name, Address, Including Zip Code,
and Telephone
Number, Including Area Code, of Agent
For Service)
COPIES OF ALL COMMUNICATIONS TO:
John T. Capetta, Esq.
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
(203) 324-1400
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the registration statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE (1) OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
12 7/8% Senior Notes due 2004......... $140,000,000 100% $140,000,000 $43,750.00
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
TV FILME, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
S-K CAPTION IN OR
ITEM NUMBER ITEM DESCRIPTION OF ITEM PART OF PROSPECTUS
- ----------- ------------ ---------------------------------------- ----------------------------------------
<C> <C> <S> <C> <C>
1. (Item 501) Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Forepart of Registration Statement;
Outside Front Cover Page of Prospectus
2. (Item 502) Inside Front and Outside Back Cover
Pages of Prospectus..................... Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus;
Additional Information
3. (Item 503) Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information.......... Prospectus Summary; Risk Factors;
Selected Consolidated Financial Data
4. (Item 202) Terms of the Transaction................ Outside Front Cover Page of Prospectus;
Prospectus Summary; Description of
Exchange Notes
5. -- Pro Forma Financial Information......... Inapplicable
6. -- Material Contacts with the Company Being
Acquired................................ Inapplicable
7. (Item 507) Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters...................... Outside Front Cover Page of Prospectus;
Prospectus Summary; Plan of Distribution
8. (Item 509) Interests of Named Experts and
Counsel................................. Inapplicable
9. (Item 510) Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Inapplicable
10. -- Information With Respect to S-3
Registrants............................. Inapplicable
11. -- Incorporation of Certain Information by
Reference............................... Inapplicable
12. (Items 101, Information With Respect to S-2 or S-3
301, 302, Registrants............................. Inapplicable
303 304)
13. (Items 101, Incorporation of Certain Information by
301, 302, Reference............................... Inapplicable
303, 304)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
S-K CAPTION IN OR
ITEM NUMBER ITEM DESCRIPTION OF ITEM PART OF PROSPECTUS
- ----------- ------------ ---------------------------------------- ----------------------------------------
<C> <C> <S> <C> <C>
14. Information With Respect to Registrants
Other Than S-3 or S-2 Registrants
(a) (Item 101) Description of Business................. Prospectus Summary; Risk Factors; The
Company; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business; Certain
Transactions
(b) (Item 102) Description of Property................. Business
(c) (Item 103) Legal Proceedings....................... Business
(d) (Item 201) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters..................... Inapplicable
(f) (Item 301) Selected Financial Data................. Prospectus Summary; Selected
Consolidated Financial Data
(g) (Item 302) Supplementary Financial Information..... Inapplicable
(h) (Item 303) Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
(i) (Item 304) Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure.............................. Inapplicable
15. -- Information With Respect to S-3
Companies............................... Inapplicable
16. -- Information With Respect to S-2 or S-3
Companies............................... Inapplicable
17. (Items 201, Information With Respect to Companies
301, 302, Other Than S-2 or S-3 Companies......... Inapplicable
303, 304)
18. (Items 401, Information if Proxies, Consents or
402, 404) Authorizations Are to be Solicited...... Inapplicable
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited,
or in an Exchange Offer
(a) (Item 401) Directors, Executive Officers,
Promoters, and Control Persons.......... Risk Factors; Management; Certain
Transactions; Principal Stockholders
(b) (Item 402) Executive Compensation.................. Management
(c) (Item 404) Certain Relationships and Related
Transactions............................ Management; Certain Transactions
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 4, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
TV FILME, INC.
OFFER TO EXCHANGE $140,000,000 OF ITS 12 7/8% SENIOR NOTES
DUE 2004 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR $140,000,000
OF ITS OUTSTANDING 12 7/8% SENIOR NOTES DUE 2004
The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on , , 1997 (as such date may be extended, the
"Expiration Date").
TV Filme, Inc. ("TV Filme") hereby offers (the "Exchange Offer"), upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying letter of transmittal (the "Letter of Transmittal"), to exchange
$1,000 principal amount of its 12 7/8% Senior Notes due 2004 (the "Exchange
Notes") for each $1,000 in principal amount of its outstanding 12 7/8% Senior
Notes due 2004 (the "Old Notes") (the Old Notes and the Exchange Notes are
sometimes collectively referred to herein as the "Notes") held by Eligible
Holders. As of the date of this Prospectus, $140.0 million aggregate principal
amount of Old Notes is outstanding. See "The Exchange Offer." For purposes of
the Exchange Offer, "Eligible Holder" shall mean the registered owner of any Old
Notes that remain Transfer Restricted Securities (as defined below) as reflected
on the records of IBJ Schroder Bank & Trust Company, as registrar for the Old
Notes (in such capacity, the "Registrar"), or any person whose Old Notes are
held of record by the Depository (as defined herein) of the Old Notes. For
purposes of the Exchange Offer, "Transfer Restricted Securities" means each Old
Note until (i) the date on which such Old Note has been exchanged by a person
other than a broker-dealer for an Exchange Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of an Old Note
for an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of this Prospectus, (iii) the date on which such Old Note has been
effectively registered under the Securities Act of 1933, as amended (the
"Securities Act") and disposed of in accordance with a Shelf Registration
Statement (as defined herein) or (iv) the dates on which the Old Note is
distributed to the public pursuant to Rule 144 under the Securities Act.
TV Filme will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders
of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being tendered for exchange. However, the
Exchange Offer is subject to certain customary conditions, which may be waived
by TV Filme. TV Filme reserves the right to amend, terminate or extend the
Exchange Offer at any time prior to the Expiration Date upon the occurrence of
any such condition. The Old Notes may be tendered only in multiples of $1,000.
See "The Exchange Offer."
(CONTINUED ON NEXT PAGE)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 18 HEREIN FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY ELIGIBLE HOLDERS IN EVALUATING THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997.
<PAGE>
The Old Notes were issued in a transaction (the "Offering") pursuant to
which TV Filme issued an aggregate of $140.0 million principal amount of the Old
Notes to Bear, Stearns & Co. Inc., BT Securities Corporation, J.P. Morgan
Securities Inc. and Alex. Brown & Sons Incorporated (collectively, the "Initial
Purchasers") on December 20, 1996 (the "Closing Date") pursuant to a Purchase
Agreement, dated December 16, 1996 (the "Purchase Agreement"), between TV Filme
and the Initial Purchasers. The offer and sale of the Old Notes was not required
to be registered under the Securities Act in reliance upon the exemption
provided by Section 4(2) of the Securities Act. The Initial Purchasers
subsequently resold the Old Notes in reliance on Rule 144A under the Securities
Act and certain other available exemptions under the Securities Act. In
connection with the Offering, TV Filme and the Initial Purchasers also entered
into a Registration Rights Agreement, dated as of December 20, 1996 (the
"Registration Rights Agreement"), pursuant to which TV Filme granted certain
registration rights for the benefit of the holders of the Old Notes. The
Exchange Offer is intended to satisfy certain of TV Filme's obligations under
the Registration Rights Agreement with respect to the Old Notes. See "The
Exchange Offer -- Purpose and Effect."
The Old Notes were, and the Exchange Notes will be, issued under the
Indenture, dated as of December 20, 1996 (the "Indenture"), between TV Filme and
IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). The terms of the
Exchange Notes are identical in all material respects (including principal
amount, interest rates and maturity) to the terms of the Old Notes for which
they may be exchanged in the Exchange Offer, except that (i) the Exchange Notes
are fully transferable by the holders thereof (other than as provided herein),
and are not subject to any covenant regarding registration under the Securities
Act, (ii) holders of Exchange Notes will not be entitled to liquidated damages
in an amount equal to $.05 per week per $1,000 principal amount of the Old Notes
(up to a maximum amount of liquidated damages of $.20 per week per $1,000
principal amount of Old Notes) otherwise payable under the terms of the
Registration Rights Agreement in respect of Old Notes constituting Transfer
Restricted Securities held by such holders during any period in which a
Registration Default (as defined herein) is continuing (the "Liquidated
Damages") and (iii) holders of Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement intended for the holders of
unregistered securities, except in limited circumstances. The Exchange Offer
shall be deemed consummated upon the delivery by TV Filme to the Registrar of
Exchange Notes in the same aggregate principal amount as the aggregate principal
amount of Old Notes that are validly tendered by holders thereof pursuant to the
Exchange Offer. See "The Exchange Offer -- Terms of the Exchange Offer," The
"Exchange Offer -- Procedures for Tendering Old Notes" and "Description of
Exchange Notes."
The Exchange Notes will accrue interest at the rate of 12 7/8% per annum and
will be payable semi-annually in arrears on June 15 and December 15 of each
year, commencing on June 15, 1997. At the closing of the Offering, the proceeds
of the Offering were loaned by TV Filme to its wholly-owned subsidiary
ITSA-Intercontinental Telecommunicacoes Ltda. ("ITSA"), which loan is evidenced
by an intercompany note (the "Intercompany Note"). The obligations of ITSA under
the Intercompany Note are jointly and severally guaranteed on an unsecured basis
by current subsidiaries of ITSA and will be jointly and severally guaranteed on
an unsecured basis by certain future subsidiaries of ITSA. The Intercompany Note
has been pledged by TV Filme as security for payment of principal and interest
under the Notes. The Intercompany Note is being held by the Trustee under the
Note Pledge Agreement (as defined herein) pending payment in full of principal
and interest under the Notes. ITSA used a portion of the proceeds loaned to it
to purchase a portfolio of Government Securities (as defined herein) (the
"Pledged Securities"), scheduled interest and principal payments on which is in
an amount sufficient to provide for payment in full when due of the first four
scheduled interest payments on the Notes (approximately $33.5 million). The
Pledged Securities have been pledged as security for repayment of principal and
interest on the Notes. The Pledge Securities are being held by the Trustee under
the Pledge Agreement (as defined herein) pending disbursement. See "Description
of Exchange Notes -- Security."
The Exchange Notes will mature on December 15, 2004. TV Filme will not be
required to make any mandatory redemption or sinking fund payments with respect
to the Exchange Notes. The Exchange Notes
2
<PAGE>
will be redeemable, at the option of TV Filme, in whole or in part, at any time
on or after December 15, 2000, at the redemption prices set forth herein, plus
accrued and unpaid interest, if any, thereon to the applicable redemption date.
Notwithstanding the foregoing, on or prior to December 15, 1999, TV Filme may,
at its option, redeem from time to time up to 35% in aggregate principal amount
of the Notes at a redemption price of 112 7/8% of the principal amount thereof,
plus accrued and unpaid interest thereon to the redemption date, with the net
proceeds of a Public Equity Offering (as defined herein); provided that no less
than 65% of the aggregate principal amount of the Notes initially issued remains
outstanding immediately after the occurrence of such redemption, which
redemption shall occur within 30 days after consummation of such Public Equity
Offering. See "Description of Exchange Notes -- Optional Redemption."
In the event of a Change of Control (as defined herein), TV Filme will be
required to make an offer to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of each holder's Notes, at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the date of repurchase. See "Description of Exchange Notes
- -- Repurchase at the Option of Holders -- Change of Control."
The Exchange Notes will be senior obligations of TV Filme, will rank PARI
PASSU in right of payment with all existing and future senior Indebtedness (as
defined herein) of TV Filme and will rank senior in right of payment to any
subordinated Indebtedness of TV Filme. The Exchange Notes will be effectively
subordinated, however, to all Indebtedness and other liabilities (including
payables) of TV Filme's subsidiaries. As of September 30, 1996, after giving PRO
FORMA effect to the Offering, the aggregate amount of outstanding liabilities
(including payables) of TV Filme's subsidiaries, on a consolidated basis, but
excluding the Intercompany Note and the Subsidiary Guarantees (as defined
herein), would have been approximately $13.5 million. The Indenture limits the
ability of TV Filme and its subsidiaries to incur additional Indebtedness. See
"Description of Exchange Notes -- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Disqualified Stock."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, TV Filme believes that Exchange Notes issued pursuant to the Exchange
Offer to an Eligible Holder in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by such Eligible Holder, other than as set
forth below, without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the Eligible Holder is not an
affiliate of TV Filme within the meaning of Rule 405 under the Securities Act,
is acquiring the Exchange Notes in the ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Eligible Holders wishing
to accept the Exchange Offer must represent to TV Filme, as required by the
Registration Rights Agreement, that such conditions have been met. Each
broker-dealer that acquired Old Notes directly from TV Filme and that receives
Exchange Notes for its own account pursuant to the Exchange Offer must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any secondary resale transaction (unless an exemption from
registration is otherwise available). See "The Exchange Offer -- Resales of the
Exchange Notes." Each broker-dealer that receives Exchange Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making or other trading activities must, in
connection with any resale of such Exchange Notes, comply with the prospectus
delivery requirements of the Securities Act and must acknowledge that it will
deliver a prospectus in connection with any such resale. TV Filme has agreed
that, for a period of twelve months after the date of this Prospectus, it will
make this Prospectus, as amended or supplemented, available for use by any
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making or other trading activities.
There has previously been only a limited secondary market, and no public
market, for the Old Notes. The Old Notes are eligible for trading in the Private
Offering, Resales and Trading through Automatic
3
<PAGE>
Linkages ("PORTAL") market. There is no established trading market for the
Exchange Notes. TV Filme does not currently intend to apply for listing of the
Exchange Notes on any securities exchange or any automated quotation system.
Accordingly, there can be no assurance as to the development of any market for
or the liquidity of any market that may develop for the Exchange Notes, the
ability of the holders of the Exchange Notes to sell their Exchange Notes or the
price at which such holders would be able to sell their Exchange Notes. If such
a trading market were to develop, the Exchange Notes could trade at prices that
may be higher or lower than the initial market values depending on many factors,
including prevailing interest rates, the Company's (as defined herein) results
of operations, the market for similar securities and general macroeconomic and
market conditions in Brazil. Depending on such factors, the Exchange Notes may
trade at a discount from their face value. See "Risk Factors -- Risk Factors
Relating to the Company and the Exchange Offer -- Absence of Public Market for
the Exchange Notes."
TV Filme will not receive any proceeds from this Exchange Offer. Pursuant to
the Registration Rights Agreement, TV Filme will bear all expenses incident to
TV Filme's consummation of the Exchange Offer and compliance with the
Registration Rights Agreement. See "The Exchange Offer -- Solicitation of
Tenders, Fees and Expenses."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TV FILME ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
4
<PAGE>
DISCLOSURE OF FORWARD LOOKING INFORMATION
Certain statements contained in this Prospectus in "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," including statements regarding the
intent, belief or current expectations of TV Filme or its officers with respect
to (i) TV Filme's expansion and financing plans, (ii) trends affecting TV
Filme's financial conditions or results of operations, (iii) the impact of
competition and regulatory reform, (iv) the start-up of certain operations and
(v) other statements contained herein regarding matters that are not historical
facts, are "forward-looking" statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995). Holders of Old Notes are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements include, but are
not limited to, the factors set forth in "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
AVAILABLE INFORMATION
TV Filme has filed with the Commission a Registration Statement on Form S-4
(together with all amendments, exhibits, schedules and supplements thereto, the
"Registration Statement") under the Securities Act with respect to the Exchange
Notes offered by this Prospectus. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Each statement made in this Prospectus referring to a
document filed as an exhibit or schedule to the Registration Statement is not
necessarily complete and is qualified in its entirety by reference to the
exhibit or schedule for a complete statement of its terms and conditions. TV
Filme is subject to the informational and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such reports, statements and other information
filed by TV Filme with the Commission in accordance with the Exchange Act may be
inspected, without charge, at the Public Reference Section of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at 7 World Trade
Center, Suite 1300, New York, New York 10048 and at its Chicago Regional Office
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of all or any portion of such materials may be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the prescribed fees. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the Commission's Web site is http://www.sec.gov. TV
Filme's common stock, $.01 par value per share (the "Common Stock") is traded on
the Nasdaq National Market, and such reports, proxy and information statements
and other information also can be inspected at the office of NASDAQ Operations,
1735 K Street, N.W., Washington, D.C. 20006. For so long as the Old Notes remain
Transfer Restricted Securities, TV Filme has agreed to make available, upon
request, to any holder and any prospective purchaser of Old Notes the
information required pursuant to Rule 144A(d)(4) under the Securities Act during
any period in which TV Filme is not subject to Section 13 or 15(d) of the
Exchange Act.
5
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF THE
COMPANY (AS DEFINED BELOW) (THE "CONSOLIDATED FINANCIAL STATEMENTS") APPEARING
ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED, FINANCIAL INFORMATION
HAS BEEN PRESENTED IN U.S. DOLLARS. THE CONSOLIDATED FINANCIAL STATEMENTS HAVE
BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE
UNITED STATES ("U.S. GAAP") IN U.S. DOLLARS. SEE NOTE 1B TO THE CONSOLIDATED
FINANCIAL STATEMENTS.
UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCE TO (I) "TV FILME" MEANS TV
FILME, INC., (II) "ITSA" MEANS ITSA-INTERCONTINENTAL TELECOMUNICACOES LTDA., AND
(III) THE "COMPANY" MEANS TV FILME, ITS CONSOLIDATED SUBSIDIARIES, WHICH INCLUDE
ITSA, TV FILME GOIANIA SERVICOS DE TELECOMUNICACOES LTDA. ("TV FILME GOIANIA"),
TV FILME BELEM SERVICOS DE TELECOMUNICACOES LTDA. ("TV FILME BELEM"), TV FILME
BRASILIA SERVICOS DE TELECOMUNICACOES LTDA. ("TV FILME BRASILIA") AND THEIR
PREDECESSORS AND SUCCESSORS. REFERENCES TO THE "COMPANY" ALSO INCLUDE TV FILME
SERVICOS DE TELECOMUNICACOES LTDA. ("TV FILME SERVICOS"), A COMPANY IN WHICH THE
COMPANY HAS A 49% VOTING INTEREST AND AN 83% EQUITY INTEREST. SEE "ANNEX
A--GLOSSARY" FOR THE DEFINITION OF CERTAIN TECHNICAL TERMS USED IN THIS
PROSPECTUS.
UNLESS OTHERWISE INDICATED, REFERENCES TO THE NUMBER OF THE COMPANY'S
SUBSCRIBERS ARE BASED ON COMPANY DATA AS OF SEPTEMBER 30, 1996. DATA CONCERNING
TOTAL MULTI-POINT, MULTI-CHANNEL DISTRIBUTION SYSTEMS ("MMDS"), CABLE, C-BAND OR
KU-BAND SUBSCRIBERS AND PENETRATION RATES OF THE COMPANY'S COMPETITORS ARE
COMPILED FROM ESTIMATES MADE BY THE COMPANY AND PUBLIC STATEMENTS OF OTHER
BRAZILIAN PAY TELEVISION PROVIDERS. ALTHOUGH THE COMPANY BELIEVES SUCH ESTIMATES
ARE REASONABLE, NO ASSURANCE CAN BE MADE AS TO THEIR ACCURACY.
THE COMPANY
OVERVIEW
The Company develops, owns and operates pay television systems in mid-sized
markets in Brazil. The Company is the sole provider of MMDS in the cities of
Brasilia, Goiania and Belem. Together, these cities have a total population of
approximately 5.7 million and encompass approximately 1.3 million households, an
estimated 1.1 million of which can be served by the Company's line-of-sight
("LOS") transmission. Since the beginning of 1994, the Company's subscriber base
has grown substantially, increasing from 1,864 subscribers to 70,591 subscribers
as of September 30, 1996. In addition to continuing to grow its existing
systems, the Company is seeking to expand its operations through joint ventures
or acquisitions of both existing pay television systems and new pay television
licenses.
TV Filme is a publicly-traded holding company organized in 1996 under the
laws of the State of Delaware (NNM: "PYTV"). Its largest stockholders include
Tevecap S.A. ("Tevecap"), a leading pay television operator in Brazil and the
country's largest pay television programming distributor; Warburg, Pincus
Investors, L.P. ("Warburg, Pincus"); and certain members of management and their
family. The Company has exclusive rights in its current operating markets to
transmit, via MMDS and hardwire cable, programming offered by Tevecap and its
subsidiaries, which, in turn, are the exclusive providers of certain channels,
including HBO Brazil, ESPN Brazil and MTV Brazil. Tevecap is a subsidiary of
Abril S.A. ("Abril"), one of Brazil's two largest media companies. See
"Business--Programming."
The Company believes that a number of factors, such as the Company's strong
operating model (including high monthly revenue per subscriber), the relatively
undeveloped nature of the pay television industry in Brazil and the attractive
economics of the deployment of MMDS, create favorable opportunities for the
Company to position itself as a leading provider of pay television services in
its markets. Two of the Company's three systems currently generate positive
EBITDA (as defined herein) on a system basis and were able to reach breakeven
system EBITDA relatively soon after full launch. The Brasilia System had its
full launch in February 1994 and generated positive system EBITDA in the third
quarter of 1994, with approximately 6,000 subscribers. Similarly, the Belem
System launched operations in February 1995
6
<PAGE>
and generated positive system EBITDA in the fourth quarter of 1995, with
approximately 5,000 subscribers. For the nine months ended September 30, 1996,
the Company reported total EBITDA of approximately $3.6 million on revenues of
approximately $21.3 million. For the same period, average monthly revenue per
subscriber was $39.76.
Brazil is the largest television market in South America with an estimated
34.5 million television households which, as of December 31, 1995, viewed on
average more than 6.5 hours of television per day, as compared to an average of
6.8 hours per day in the United States. The pay television industry in Brazil
began in 1989 with the commencement of UHF service in Sao Paulo. As of September
30, 1996, there were an estimated 1.6 million pay television subscribers,
representing approximately 4.7% of Brazilian television households. By
comparison, as of December 31, 1995, 51.1% of television households in
Argentina, 12.6% of television households in Mexico and 69.2% of television
households in the United States subscribed to pay television. The Ministry of
Communications of Brazil (the "Ministry of Communications") has estimated that
Brazil will have approximately 16 million pay television subscribers by the year
2003.
The Company targets mid-sized markets with demographics, competitive
environments and topographies that it believes offer the Company the opportunity
to become the leading provider of pay television services in those markets. The
Company believes that mid-sized markets in Brazil are currently underpenetrated
by existing pay television providers. There is only one hardwire cable provider
in each of Brasilia and Goiania and no hardwire cable provider in Belem. Of the
approximately 1.3 million households in Brasilia, Goiania and Belem, the Company
estimates that approximately 72% of such households, are currently unpassed by
hardwire cable. The Company believes that significant portions of the Company's
targeted markets are also underserved by hardwire cable providers due, in part,
to the high costs associated with deploying a hardwire cable plant in these
mid-sized markets. Consequently, the Company believes that competition in these
markets may initially be limited.
The Company has filed applications for licenses to operate wireless cable
systems in an additional 27 markets in Brazil which have an aggregate population
of approximately 12.5 million and encompass approximately 2.7 million
households. An estimated 2.2 million of such households can be served by LOS
transmission. As a result of certain developments concerning the granting of new
concessions and licenses for the rendering of commercial telecommunications
services in Brazil, in the absence of further governmental action, the process
of granting new concessions and licenses for MMDS services is uncertain. There
can be no assurance as to the grant of any such concessions and licenses and the
timing of any such grants generally, or the grant of any such concessions and
licenses and the timing of any grants to the Company. See "Risk Factors--Risk
Factors Relating to the Company and the Exchange Offer--Risks Associated with
New Markets and Growth Strategy," "Risk Factors--Risk Factors Relating to the
Company and the Exchange Offer--Government Regulation" and "Business--Regulatory
Environment--License Procedures."
Until September 9, 1996, licenses were granted for renewable periods of 10
years; under the Revised MMDS Rule (as defined herein), licenses would be
awarded for renewable 15-year periods. However, there can be no assurance as to
the applicability of the Revised MMDS Rule. Under the Revised MMDS Rule, MMDS
licenses have a coverage area of up to a 50 kilometer radius from transmission
sites and permit transmission of up to 31 wireless cable channels. The Company
has requested the right to increase channel transmission in its existing markets
to 31 wireless cable channels from its current 16 wireless cable channels and to
extend the coverage area in these markets beyond the existing 25 kilometer
range, generally up to the maximum coverage area. After giving effect to the
extended coverage area, the Company would reach approximately 70,000 additional
LOS households.
The Company believes that wireless cable technology is well suited to its
current and targeted markets and is an attractive alternative to existing
television choices. Wireless cable service can be deployed more rapidly than
most alternative technologies and provides immediate coverage of entire markets,
enabling service to be delivered to all potential subscribers that are in the
unobstructed path of the transmission tower. Wireless cable service can be
deployed at a significantly lower system capital cost per installed
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<PAGE>
subscriber than hardwire cable because (i) the headend for a wireless cable
system has a relatively low cost, (ii) capital expenditures for wireless cable
systems are only required at the headend facility and in connection with
installation of subscriber reception equipment and (iii) incremental investment
is only undertaken in response to customer demand with the addition of each new
subscriber. The Company believes that subscribers to television services in
Brazil are concerned with such features as programming, service, reliability and
price and are generally indifferent to the method of delivery. See "Business--
Brazilian Pay Television Industry" and "Business--Company Overview."
The table below provides information regarding the Company's markets as of
September 30, 1996:
<TABLE>
<CAPTION>
ESTIMATED
TOTAL
HOUSEHOLDS
ESTIMATED ESTIMATED ESTIMATED NUMBER UNPASSED BY
TOTAL TOTAL LOS OF LAUNCH HARDWIRE
POPULATION HOUSEHOLDS(1) HOUSEHOLDS(2) CHANNELS(3) DATE CABLE
------------ ------------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING MARKETS:
Brasilia............................. 2,000,000 472,000 437,000 22 Feb. 1994 (4) 60%
Belem................................ 1,900,000 398,000 358,000 21 Feb. 1995 100%
Goiania.............................. 1,800,000 444,000 344,000 21 Jan. 1995 60%
------------ ------------- -------------
Total in Operating Markets........... 5,700,000 1,314,000 1,139,000 72%
------------ ------------- -------------
------------ ------------- -------------
APPLICATION MARKETS(5):.............. 12,500,000 2,700,000 2,200,000
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
- ------------------------
(1) Represents the Company's estimate of the number of total households within a
50 kilometer radius in the particular signal coverage area. Estimated Total
Households in the Company's current 25 kilometer coverage territory are
approximately 437,000, 376,000 and 419,000 for each of Brasilia, Belem and
Goiania, respectively. See "Business--Regulatory Environment--License
Procedures." The Company's estimates are based on data from the 1991 Census
conducted by the Brazilian Institute of Geography and Statistics ("IBGE") as
adjusted to reflect total household growth of 3.13% per year in Brasilia,
2.65% per year in Belem and 2.33% per year in Goiania.
(2) Represents the Company's estimate of the number of Estimated Total
Households within a 50 kilometer radius that can receive an adequate signal
from the Company (eliminating those homes that the Company estimates are
unable to receive service due to certain physical characteristics of the
particular signal coverage area, such as terrain and foliage, although some
of these households can be served with the aid of signal repeaters).
Estimated LOS Households in the Company's current 25 kilometer coverage
territory are approximately 407,000, 338,000 and 324,000 for each of
Brasilia, Belem and Goiania, respectively.
(3) Includes six local off-air VHF/UHF channels in Brasilia and five local
off-air VHF/UHF channels in each of Goiania and Belem which are offered to
the Company's subscribers in addition to the subscription channels.
(4) Date when the Brasilia System increased its channel offering from four
channels to eight channels. The Brasilia System began service with one
channel in 1990.
(5) Represents the 27 markets for which the Company has applied for licenses
with the Ministry of Communications. There can be no assurance as to the
grant of any such concessions and licenses and the timing of any such grants
generally, or the grant of any such concessions and licenses and the timing
of any grants to the Company. See "Business--Strategy" and "Business--
Regulatory Environment--License Procedures."
BACKGROUND
The predecessor of TV Filme was founded in 1989 by certain members of the
Company's current senior management team. In September 1989, the Company was
granted a license to operate a wireless cable television system in Brasilia, the
capital of Brazil, and commenced operations in 1990 with a one channel offering.
From 1993 through 1996, the Company raised an aggregate of approximately $16.8
million through a series of private equity placements to Tevecap and Warburg,
Pincus. TV Filme completed an initial public offering of 2.875 million shares of
its Common Stock at an offering price of $10.00 per share, in August 1996 (the
"Initial Public Offering"). With proceeds from these financings, the Company
increased the channel offerings in Brasilia, launched new wireless cable
television systems in Goiania and Belem, and expanded its subscriber base.
Licenses to operate the Goiania and Belem systems were acquired in 1994 from TVA
Sistema de Televisao S.A. ("TVA Sistema"), a subsidiary of Tevecap, and these
systems commenced operations in early 1995. See "The Company."
8
<PAGE>
STRATEGY
The Company's objective is to become a leading provider of pay television
services in mid-sized markets in Brazil and generally to become the largest
provider of pay television services in each of its markets. The Company believes
Brazil offers substantial growth opportunities for pay television providers
because there is significant demand among television viewers for additional
programming choices and the penetration rate for pay television services is
currently less than 5% of Brazil's total television households. As demonstrated
by the rapid growth in the Company's subscriber base, the Company believes it is
well positioned to take advantage of these opportunities. The principal elements
of the Company's operating strategy are: (i) increasing penetration of existing
markets, (ii) targeting mid-sized markets for expansion, (iii) developing TV
Filme brand name recognition through exclusive programming, (iv) providing
superior customer service, (v) providing value-added services and (vi)
implementing a consistent operating model. These elements of the Company's
strategy are discussed below. See "Business--Strategy."
INCREASING PENETRATION OF EXISTING MARKETS. The Company seeks to increase
its penetration of existing markets through (i) extensive marketing tied to
regional events such as soccer matches, (ii) neighborhood promotional events
featuring large screen broadcasts of its channel offerings, (iii) direct
mailings, (iv) telemarketing, (v) television and newspaper advertisements, (vi)
prewiring arrangements with residential housing developers, (vii) other
marketing activities, including referral programs and promotional gifts, and
(viii) adding households to the Company's service area by installing signal
repeaters.
TARGETING MID-SIZED MARKETS FOR EXPANSION. The Company targets markets with
populations from approximately 100,000 to 2.5 million with demographics,
competitive environments and topographies favorable for implementation of the
Company's pay television services. The Company believes that these markets are
currently underpenetrated by pay television service providers. The Company
intends to pursue development of additional markets by (i) obtaining new pay
television licenses offered by the Brazilian government, (ii) acquiring or
investing in existing pay television operations or (iii) acquiring or co-
developing newly issued pay television licenses from or with third parties. The
Company has filed applications for licenses to operate wireless cable systems in
an additional 27 markets in Brazil which have an aggregate population of
approximately 12.5 million and encompass approximately 2.7 million households.
The Brazilian government had recently announced its intention to auction MMDS
licenses in 15 of its state capitals. The Company has filed applications in 14
of these 15 markets. As a result of certain developments concerning the granting
of new concessions and licenses for the rendering of commercial
telecommunications services in Brazil, in the absence of further governmental
action, the process of granting new concessions and licenses for MMDS services
is uncertain. There can be no assurance as to the grant of any such concessions
and licenses and the timing of any such grants generally, or the grant of any
such concessions and licenses and the timing of any grants to the Company. See
"Risk Factors--Risk Factors Relating to the Company and the Exchange
Offer--Risks Associated with New Markets and Growth Strategy," "Risk
Factors--Risk Factors Relating to the Company and the Exchange Offer--
Government Regulation" and "Business--Regulatory Environment--License
Procedures."
In addition, the Company is engaged, on a preliminary basis, in evaluations,
discussions and other activities relating to the possible acquisition of, or
investment in, existing pay television providers or holders of MMDS licenses.
Because of the preliminary nature of such acquisition-related activities, there
can be no assurance as to whether or when any such transaction will be
consummated or as to the terms thereof.
DEVELOPING TV FILME BRAND NAME RECOGNITION THROUGH EXCLUSIVE
PROGRAMMING. The Company believes that the exclusive programming it offers is
superior to that of its hardwire competitors. In its current operating markets,
the Company has the exclusive right to transmit, via MMDS and hardwire cable,
programming offered by Tevecap and its subsidiaries which, in turn, are the
exclusive providers of certain channels, including HBO Brazil, ESPN Brazil and
MTV Brazil. In addition to such programming, the Company seeks to secure
exclusive television rights to important regional events. For example, the
9
<PAGE>
Company owns the right to broadcast annually through 1998 all of the games of
the Goias State Soccer Championship matches, which the Company offers to its
subscribers in the Goiania market. The Company emphasizes its exclusive
programming in attracting new and maintaining existing subscribers and believes
that its programming line-up, including its local content, gives the Company a
competitive advantage in its markets and enhances the TV Filme brand name. The
Company intends to develop additional original programming such as local news
and sports channels, to strengthen further the Company's brand name and appeal.
PROVIDING SUPERIOR CUSTOMER SERVICE. The Company believes that it delivers
high levels of customer service to its subscribers. Customer satisfaction is
emphasized with all employees, including the telemarketing, installation and
customer service teams. The Company's proprietary management information systems
greatly facilitate customer service by providing customer service
representatives immediate access to relevant customer records, including
correspondence history. The Company seeks to install service promptly in a
customer's home or business, and service calls are typically responded to in
less than 36 hours.
PROVIDING VALUE-ADDED SERVICES. The Company intends to provide value-added
services, such as Internet access, other media and/or communications services
and co-branded discount and credit cards. The Company believes that by providing
such services to its existing and potential subscribers, it can generate
additional revenue, attract new subscribers and increase ties to its subscriber
base, thereby increasing customer retention rates.
IMPLEMENTING A CONSISTENT OPERATING MODEL. The Company believes that its
implementation of consistent processes supported by proprietary systems, such as
the Company's automated installation, scheduling and billing systems,
facilitates the effective development of new markets and rapid subscriber
growth. The Company implements targeted marketing plans, conducts employee
training programs and uses a sophisticated intra-company telecommunications
network and proprietary management information systems to maximize the
efficiency of its marketing, customer service, operations and control functions.
See "Business--Strategy."
The Company's principal executive offices are located at c/o
ITSA-Intercontinental Telecomunicacoes Ltda., SCS, Quadra 07-Bl.A, Ed. Executive
Tower, Sala 601, 70.300-911 Brasilia-DF, Brazil, and its telephone number is
011-55-61-314-9908.
ISSUANCE OF THE OLD NOTES
The outstanding $140.0 million principal amount of Old Notes were sold by TV
Filme to the Initial Purchasers, on the Closing Date pursuant to the Purchase
Agreement. The Initial Purchasers subsequently resold the Old Notes in reliance
on Rule 144A under the Securities Act and certain other available exemptions
under the Securities Act. In connection with the Offering, TV Filme also entered
into the Registration Rights Agreement, pursuant to which TV Filme granted
certain registration rights for the benefit of the holders of the Old Notes.
Under the terms of the Registration Rights Agreement, TV Filme agreed, for the
benefit of the holders of the Old Notes, that it would, at its own cost, (i)
file on or prior to February 18, 1997 a registration statement (the "Exchange
Offer Registration Statement") with the Commission with respect to a registered
offer to exchange the Old Notes for Exchange Notes, which Exchange Notes will
have terms substantially identical to the Old Notes, (ii) use its best efforts
to have the Exchange Offer Registration Statement declared effective by the
Commission under the Securities Act on or prior to April 19, 1997, (iii)
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
is declared effective by the Commission, Exchange Notes in exchange for all Old
Notes tendered prior thereto in the Exchange Offer, unless the Exchange Offer
would not be permitted by applicable law or Commission policy. If (i) TV Filme
is not required to file the Exchange Offer Registration Statement or permitted
to commence or accept tenders pursuant to the Exchange Offer because the
Exchange Offer is not permitted by applicable
10
<PAGE>
law or Commission policy or (ii) any holder of Transfer Restricted Securities
notifies TV Filme within 20 business days after the consummation of the Exchange
Offer that (a) it is prohibited by law or Commission policy from participating
in the Exchange Offer or (b) that it may not resell the Exchange Notes acquired
by it in the Exchange Offer to the public without delivering a prospectus and
the prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (c) that it is a broker-dealer and
owns Old Notes acquired directly from TV Filme or an affiliate of TV Filme, TV
Filme has agreed to file, at its cost, with the Commission a shelf registration
statement (the "Shelf Registration Statement"), to cover resales of the Old
Notes who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. If TV Filme defaults with
respect to its obligations under the Registration Rights Agreement, TV Filme
will be obligated to pay Liquidated Damages in an amount equal to $.05 per week
per $1,000 principal amount of Old Notes outstanding (up to a maximum amount of
Liquidated Damages of $.20 per week per $1,000 principal amount of Old Notes).
See "Description of Exchange Notes--Registration Rights; Liquidated Damages."
The Exchange Offer is intended to satisfy certain of TV Filme's obligations
under the Registration Rights Agreement with respect to the Old Notes. See "The
Exchange Offer--Purpose and Effect."
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer.................. TV Filme is offering, upon the terms and subject to
the conditions set forth herein and in the
accompanying Letter of Transmittal, to exchange
$1,000 in principal amount of the Exchange Notes for
each $1,000 in principal amount of the outstanding
Old Notes. The terms of the Exchange Notes are
identical in all material respects (including
principal amount, interest rates and maturity) to the
terms of the Old Notes for which they may be
exchanged in the Exchange Offer, except that (i) the
Exchange Notes are fully transferable by the holders
thereof (other than as provided herein), and are not
subject to any covenant regarding registration under
the Securities Act, (ii) holders of Exchange Notes
will not be entitled to Liquidated Damages and (iii)
holders of the Exchange Notes will not be entitled to
certain rights under the Registration Rights
Agreement intended for the holders of unregistered
securities, except in limited circumstances. As of
the date of this Prospectus, $140.0 million aggregate
principal amount of Old Notes is outstanding, the
maximum amount authorized by the Indenture for all
Notes. See "The Exchange Offer -- Terms of the
Exchange Offer."
Expiration Date..................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , , 1997 unless
extended by TV Filme in its sole discretion (the
"Expiration Date"). See "The Exchange Offer --
Expiration Date; Extensions; Amendments."
Conditions of the Exchange Offer.... The Exchange Offer is subject to certain customary
conditions, which may be waived by TV Filme. TV Filme
reserves the right to amend, terminate or extend the
Exchange Offer at any time prior to the Expiration
Date upon the occurrence of any such condition. See
"The Exchange Offer -- Conditions of the Exchange
Offer."
Interest Payments................... Interest on the Exchange Notes shall accrue from the
last Interest Payment Date (June 15 or December 15)
on which interest was paid on the Old Notes so
surrendered or, if no
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
interest has been paid on the Old Notes, from
December 20, 1996. See "The Exchange Offer--Accrued
Interest on the Old Notes."
Procedures for Tendering Old
Notes............................. Unless a tender of Old Notes is effected pursuant to
the procedures for book-entry transfer as provided
herein, each Eligible Holder desiring to accept the
Exchange Offer must complete and sign the Letter of
Transmittal, have the signature thereon guaranteed if
required by the Letter of Transmittal, and mail or
deliver the Letter of Transmittal, together with the
Old Notes or a Notice of Guaranteed Delivery (as
defined in the Letter of Transmittal) and any other
required documents (such as evidence of authority to
act, if the Letter of Transmittal is signed by
someone acting in a fiduciary or representative
capacity), to the Exchange Agent (as defined below)
at the address set forth under "The Exchange
Offer--The Exchange Agent; Assistance" prior to 5:00
p.m., New York City time, on the Expiration Date. Any
Beneficial Owner (as defined herein) of Old Notes
whose Old Notes are registered in the name of a
nominee, such as a broker, dealer, commercial bank or
trust company and who wishes to tender Old Notes in
the Exchange Offer should contact such registered
holder promptly and instruct such registered holder
to promptly tender on such Beneficial Owner's behalf.
See "The Exchange Offer--Procedures for Tendering Old
Notes." By tendering Old Notes for exchange, each
registered holder will represent to TV Filme that,
among other things, (i) neither the Eligible Holder
nor any Beneficial Owner is an "affiliate" of TV
Filme within the meaning of Rule 405 under the
Securities Act, (ii) any Exchange Notes to be
received by the Eligible Holder or any Beneficial
Owner are being acquired in the ordinary course of
business, (iii) neither the Eligible Holder nor any
Beneficial Owner has an arrangement or understanding
with any person to participate in the distribution of
the Exchange Notes and (iv) if the Eligible Holder or
Beneficial Owner, as applicable, is a broker-dealer
that acquired Old Notes for its own account as a
result of market-making or other trading activities,
such Eligible Holder or Beneficial Owner must comply
with the prospectus delivery requirements of the
Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such
person and must agree that it will deliver a
prospectus in connection with any such resale.
Guaranteed Delivery Procedures...... Eligible Holders of Old Notes who wish to tender
their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver
their Old Notes or any other documents required by
the Letter of Transmittal to the Exchange Agent prior
to the Expiration Date (or complete the procedure for
book-entry transfer on a timely basis), may tender
their Old Notes according to the guaranteed delivery
procedures set forth in the Letter of Transmittal.
See "The Exchange Offer--Procedures for Tendering Old
Notes-- Guaranteed Delivery Procedures."
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Acceptance of Old Notes and Delivery
of Exchange Notes................. Upon satisfaction or waiver of all conditions of the
Exchange Offer, TV Filme will accept any and all Old
Notes that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant
to the Exchange Offer will be delivered promptly
after acceptance of the Old Notes. See "The Exchange
Offer--Acceptance of Old Notes for Exchange; Delivery
of Exchange Notes."
Withdrawal Rights................... Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange Offer--Withdrawal
Rights."
Tax Considerations.................. Generally, the exchange of Old Notes for Exchange
Notes will not be a taxable event for federal income
tax purposes. See "Tax Considerations."
Effect on Holders of Old Notes...... As a result of the making of, and upon acceptance for
exchange of all validly tendered Old Notes pursuant
to the terms of, the Exchange Offer, TV Filme will
have fulfilled certain of its obligations under the
Registration Rights Agreement and, accordingly, there
will be no increase in the interest rate on such Old
Notes pursuant to the terms of the Registration
Rights Agreement, and the holders of such Old Notes
will have no further registration or other rights
under the Registration Rights Agreement, except in
limited circumstances. See "The Exchange Offer."
Holders of Old Notes who do not tender their Old
Notes in the Exchange Offer will continue to hold
such Old Notes and will be entitled to all the rights
and limitations applicable thereto under the
Indenture except for any such rights under the
Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a
result of the making of, and the acceptance for
exchange of all validly tendered Old Notes pursuant
to, the Exchange Offer. All untendered Old Notes will
continue to be subject to the restrictions on
transfer provided for in the Old Notes and in the
Indenture. To the extent that Old Notes are tendered
and accepted in the Exchange Offer, the trading
market for untendered Old Notes could be adversely
affected.
The Exchange Agent.................. IBJ Schroder Bank & Trust Company is serving as
exchange agent (in such capacity, the "Exchange
Agent"). The address and telephone number of the
Exchange Agent are set forth under "The Exchange
Offer--The Exchange Agent; Assistance."
Fees and Expenses................... All expenses incident to TV Filme's consummation of
the Exchange Offer and compliance with the
Registration Rights Agreement will be borne by TV
Filme. TV Filme will also pay certain transfer taxes
applicable to the Exchange Offer. See "The Exchange
Offer--Fees and Expenses."
Use of Proceeds..................... There will be no cash proceeds to TV Filme from the
exchange of Old Notes for Exchange Notes pursuant to
the Exchange Offer. See "Plan of Distribution."
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Resales of the Exchange Notes....... Based on interpretations by the staff of the
Commission set forth in no-action letters issued to
third parties, TV Filme believes that Exchange Notes
issued pursuant to the Exchange Offer to an Eligible
Holder in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by such
Eligible Holder (other than (i) a broker-dealer who
purchased the Old Notes directly from TV Filme for
resale pursuant to Rule 144A under the Securities Act
or any other available exemption under the Securities
Act or (ii) a person that is an affiliate of TV Filme
within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act,
provided that the Eligible Holder is acquiring the
Exchange Notes in the ordinary course of business and
is not participating, and has no arrangement or
understanding with any person to participate, in a
distribution of the Exchange Notes. Each
broker-dealer that receives Exchange Notes for its
own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result
of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
See "The Exchange Offer--Resales of the Exchange
Notes" and "Plan of Distribution."
Consequence of Failure to
Exchange.......................... Holders of Old Notes who do not exchange their Old
Notes for Exchange Notes pursuant to the Exchange
Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the
legend thereon as a consequence of the offer or sale
of the Old Notes pursuant to an exemption from, or in
a transaction not subject to, the registration
requirements of the Securities Act and applicable
state securities laws. In general, the Old Notes may
not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from,
or in a transaction not subject to, the Securities
Act and applicable states securities laws. TV Filme
does not currently anticipate that it will register
the Old Notes under the Securities Act. See "The
Exchange Offer--Consequence of Failure to Exchange."
</TABLE>
For additional information regarding the Exchange Offer, see "The Exchange
Offer."
14
<PAGE>
TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $140.0 million of Old Notes. The terms of the
Exchange Notes are identical in all material respects (including principal
amount, interest rates and maturity) to the terms of the Old Notes for which
they may be exchanged pursuant to the Exchange Offer, except that (i) the
Exchange Notes are fully transferable by the holders thereof (other than as
provided herein), and are not subject to any covenant regarding registration
under the Securities Act, (ii) holders of Exchange Notes will not be entitled to
Liquidated Damages and (iii) holders of the Exchange Notes will not be entitled
to certain rights under the Registration Rights Agreement intended for the
holders of unregistered securities, except in limited circumstances. The
Exchange Notes will evidence the same debt as the Old Notes and, except as set
forth in the immediately preceding sentence, will be entitled to the benefits of
the Indenture, under which both the Old Notes were, and the Exchange Notes will
be, issued. See "Description of Exchange Notes."
<TABLE>
<S> <C>
Securities Offered.................. $140.0 million aggregate principal amount of 12 7/8%
Senior Notes due 2004.
Maturity............................ December 15, 2004.
Interest............................ The Exchange Notes will bear interest at the rate of
12 7/8% per annum, payable semi-annually in arrears
on June 15 and December 15 of each year, commencing
on June 15, 1997.
Ranking............................. The Exchange Notes will be senior obligations of TV
Filme, will rank PARI PASSU in right of payment with
all existing and future senior Indebtedness of TV
Filme and will rank senior in right of payment to any
subordinated Indebtedness of TV Filme. The Exchange
Notes will be effectively subordinated, however, to
all Indebtedness and other liabilities (including
payables) of TV Filme's subsidiaries. As of September
30, 1996, after giving PRO FORMA effect to the
Offering and the application of the net proceeds
therefrom, the aggregate amount of outstanding
liabilities (including payables) of TV Filme's
subsidiaries, on a consolidated basis, but excluding
the Intercompany Note and the Subsidiary Guarantees,
would have been approximately $13.5 million.
Security............................ In accordance with the terms of the Indenture, on the
Closing Date the proceeds of the Offering were loaned
by TV Filme to ITSA, which loan is evidenced by the
Intercompany Note. The obligations of ITSA under the
Intercompany Note are jointly and severally
guaranteed on an unsecured basis by each of TV Filme
Brasilia, TV Filme Goiania, TV Filme Belem, and will
be jointly and severally guaranteed on an unsecured
basis by certain future subsidiaries of ITSA. The
Intercompany Note has been pledged by TV Filme as
security for repayment of principal and interest
under the Notes. The Intercompany Note is being held
by the Trustee under the Note Pledge Agreement (as
defined herein) pending payment in full of principal
and interest under the Notes. See "Description of
Exchange Notes--Security."
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
Of the $140.0 million loaned to ITSA, approximately
$33.5 million was used to purchase the Pledged
Securities, scheduled interest and principal payments
on which is in an amount sufficient to provide for
payment in full when due of the first four scheduled
interest payments on the Notes. The Pledged
Securities have been pledged as security for
repayment of principal and interest on the Notes
under the Pledge Agreement. The Pledged Securities
are being held by the Trustee under the Pledge
Agreement pending disbursement. See "Description of
Exchange Notes-- Security."
Optional Redemption................. The Exchange Notes will be redeemable, at the option
of TV Filme, in whole or in part, at any time on or
after December 15, 2000 at the redemption prices set
forth herein, plus accrued and unpaid interest
thereon to the applicable redemption date.
Notwithstanding the foregoing, on or prior to
December 15, 1999, TV Filme may, at its option,
redeem from time to time up to 35% in aggregate
principal amount of the Notes at a redemption price
of 112 7/8% of the principal amount thereof, plus
accrued and unpaid interest thereon to the redemption
date, with the net proceeds of a Public Equity
Offering; provided that no less than 65% of the
aggregate principal amount of the Notes initially
issued remains outstanding immediately after the
occurrence of such redemption, which redemption shall
occur within 30 days after consummation of such
Public Equity Offering. See "Description of Exchange
Notes--Optional Redemption."
Change of Control................... In the event of a Change of Control, TV Filme will be
required to make an offer to purchase all or any part
(equal to $1,000 or an integral multiple thereof) of
each holder's Notes, at an offer price in cash equal
to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest, thereon, to the
date of repurchase. See "Description of Exchange
Notes--Repurchase at the Option of Holders-- Change
of Control."
Certain Covenants................... The Indenture contains certain covenants that, among
other things, limit the ability of the Company to
incur additional Indebtedness, issue preferred stock,
pay dividends or make other distributions, repurchase
equity interests or subordinated Indebtedness, engage
in sale and leaseback transactions, create certain
liens, enter into certain transactions with
affiliates, sell assets, conduct certain lines of
business, issue or sell equity or enter into certain
mergers and consolidations. See "Description of
Exchange Notes-- Certain Covenants."
For additional information regarding the Exchange Notes, see "Description of Exchange
Notes."
</TABLE>
16
<PAGE>
RISK FACTORS
Holders of Old Notes should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors" before tendering Old Notes in exchange
for the Exchange Notes.
SUMMARY CONSOLIDATED FINANCIAL DATA(1)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OTHER OPERATING DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................................. $287 $ 2,438 $ 11,404 $ 6,735 $ 21,287
Operating costs and expenses:
System operating................................................... 196 773 2,957 1,789 6,092
Selling, general and administrative................................ 558 2,394 8,975 5,815 11,615
Depreciation and amortization...................................... 43 365 2,049 1,196 3,996
--------- --------- --------- --------- ---------
Total operating costs and expenses............................... 797 3,532 13,981 8,800 21,703
--------- --------- --------- --------- ---------
Operating loss....................................................... (510) (1,094) (2,577) (2,065) (416)
Other income (expense)............................................... (6) 1,612 360 258 (431)
--------- --------- --------- --------- ---------
Net income (loss).................................................... $(516) $ 518 $ (2,217) $ (1,807) $ (847)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income (loss) per share(2)....................................... $ (0.10) $ 0.08 $ (0.27) $ (0.22) $ (0.10)
Weighted average number of common stock and common stock equivalents
outstanding(2)..................................................... 5,295 6,885 8,086 8,086 8,680
OTHER FINANCIAL DATA:
EBITDA (3)........................................................... $(467) $(729) $(216) $(556) $3,580
Capital expenditures................................................. 852 3,637 16,621 10,866 17,481
OTHER OPERATING DATA:
Number of subscribers at end of period (4)........................... 1,864 7,641 36,594 27,024 70,591
Average monthly revenue per
subscriber (5)..................................................... $ 30.43 $ 34.13 $ 40.00 $ 39.70 $ 39.76
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(8)
--------- --------------
(UNAUDITED)
BALANCE SHEET DATA:
Working capital (6).................................................................................... $ 13,505 $ 113,355
Restricted cash (7).................................................................................... -- 33,500
Property, plant and equipment, net..................................................................... 32,423 32,423
Total assets........................................................................................... 60,269 185,269
Total long-term debt................................................................................... 200 140,200
Stockholders' equity................................................................................... 38,639 38,639
</TABLE>
- ----------------------------------
(1) The Summary Consolidated Financial Data includes (i) TV Filme Servicos on a
historical basis and (ii) ITSA and its subsidiaries since May 1994 and the
predecessor of ITSA on a historical basis, as though they had been part of
TV Filme for all periods presented. See Note 1a to the Consolidated
Financial Statements.
(2) Net income (loss) per share (after giving effect to the Reorganization (as
defined below) is calculated using the weighted average number of shares of
stock outstanding during this period together with the number of shares
issuable upon the exercise of options and warrants issued during the twelve
months prior to the Offering.
(3) EBITDA is defined as operating income (loss) plus depreciation, amortization
and non-cash charges. EBITDA is a commonly used measure of performance in
the pay television industry. While EBITDA should not be construed as a
substitute for operating income (loss) or a better measure of liquidity than
cash flow from operating activities, each of which is determined in
accordance with U.S. GAAP, it is included herein to provide additional
information regarding the ability of the Company to meet its capital
expenditures, working capital requirements and any future debt service.
EBITDA, however, is not necessarily a measure of the Company's ability to
fund its cash needs, because it does not include capital expenditures, which
the Company expects to continue to be significant. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
(4) See "Business--Operating Systems and the Company's Markets."
(5) Average monthly revenue per subscriber is calculated by dividing
subscription revenue for the month by the average number of subscribers for
the month.
(6) Working capital excludes restricted cash.
(7) A portion of the proceeds of the Intercompany Note was used to purchase the
Pledged Securities, scheduled interest and principal payments on which are
in an amount sufficient to provide for payment in full when due of the first
four scheduled interest payments on the Notes.
(8) As adjusted to give effect to the Offering. See "Use of Proceeds."
17
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, HOLDERS OF OLD
NOTES SHOULD REVIEW CAREFULLY THE FOLLOWING RISK FACTORS BEFORE TENDERING THEIR
OLD NOTES IN THE EXCHANGE OFFER. FOR ADDITIONAL INFORMATION CONCERNING BRAZIL
AND CERTAIN MATTERS DISCUSSED BELOW, SEE "ANNEX B--THE FEDERATIVE REPUBLIC OF
BRAZIL."
RISK FACTORS RELATING TO THE COMPANY AND THE EXCHANGE OFFER
CONSEQUENCE OF FAILURE TO EXCHANGE. Holders of Old Notes who do not
exchange their Old Notes for Exchange Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer of such Old Notes as set
forth in the legend thereon as a consequence of offer and sale of the Old Notes
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. TV Filme
does not currently anticipate that it will register the Old Notes under the
Securities Act. Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold or otherwise transferred by
holders thereof (other than any such holder which is an affiliate of TV Filme
within the meaning of Rule 405 under the Securities Act and other than any
broker-dealer who purchased Old Notes directly from TV Filme for resale pursuant
to Rule 144A under the Securities Act or any other available exemption under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes. Each broker-dealer that acquired Old Notes for its own account as a
result of market making or other trading activities and that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that, by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. TV Filme has
agreed that, for a period of twelve months after the date of this Prospectus, it
will make this Prospectus, as amended and supplemented, available to any
broker-dealer who receives Exchange Notes in the Exchange Offer for use in
connection with any such resale. See "Plan of Distribution." However, to comply
with the securities laws of certain jurisdictions, if applicable, the Exchange
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or an exemption from registration or
qualification is available and is complied with. To the extent that Old Notes
are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes will be adversely affected.
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES. To participate in the
Exchange Offer, and to avoid restrictions on transfer of the Old Notes, holders
of Old Notes must transmit a properly completed Letter of Transmittal, including
all other documents required by such Letter of Transmittal, to the Exchange
Agent at one of the addresses set forth under "The Exchange Offer--the Exchange
Agent; Assistance" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal or (ii) a timely confirmation of a book-entry
transfer of such Old Notes, if such procedure is available, into the Exchange
Agent's account at The Depository Trust Company, New York, New York ("DTC"), who
is acting as depository (the "Depository") for book-entry Notes, pursuant to the
procedures for book-entry transfer described herein, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described herein. See "The Exchange Offer."
18
<PAGE>
SUBSTANTIAL INDEBTEDNESS AND DEBT SERVICE. TV Filme has indebtedness that
is substantial in relation to its stockholders' equity. As of September 30,
1996, after giving effect to the Offering, TV Filme and its subsidiaries would
have had an aggregate of approximately $141.7 million of indebtedness
outstanding (including short-term indebtedness), including the Old Notes, and
stockholders' equity of $38.6 million. After giving effect to the Offering, TV
Filme and its subsidiaries would have had a debt-to-equity ratio of 3.7 to 1.0
as of September 30, 1996. The Indenture permits the Company to incur additional
indebtedness under certain conditions, and the Company expects to incur
additional indebtedness as so permitted. See "Description of Exchange
Notes--Certain Covenants--Incurrence of Indebtedness and Issuance of
Disqualified Stock."
After giving effect to the Offering, the interest expense of TV Filme and
its subsidiaries for the nine months ended September 30, 1996 would have been
$14.6 million. For the nine months ended September 30, 1996, after giving effect
to the Offering, TV Filme and its subsidiaries would have had insufficient
earnings to cover fixed charges of $13.7 million. Accordingly, it will be
necessary for the Company's financial cash flow from operating activities to
improve significantly in order for the debt service obligations under the Notes
to be met. The ability of the Company to improve its financial results will
depend upon economic, financial, competitive, regulatory and other factors
beyond its control. There can be no assurance that the Company will generate
sufficient cash flow from operations in the future to service the Notes, to fund
adequately the Company's operations and to allow the Company to make necessary
capital expenditures.
The Indenture imposes significant operating and financial restrictions on
the Company. Such restrictions affect, and in many respects significantly limit
or prohibit, among other things, the ability of the Company to incur additional
indebtedness and pay dividends, subject to certain qualifications and
exceptions. These restrictions, in combination with the leveraged nature of TV
Filme, could limit the ability of the Company to effect future financings or
otherwise may restrict the Company's activities.
The Company's leverage could have important consequences to the holders of
the Exchange Notes, including the following: (i) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired in the future; (ii)
a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness, thereby
reducing the funds available to the Company for other purposes; (iii) the
Company's leverage may hinder its ability to adjust rapidly to changing market
conditions; and (iv) the leverage could make the Company more vulnerable in the
event of a downturn in general economic conditions or its business. The long
term growth of the Company depends, in part, on its ability to expand by the
development or acquisition of new operating systems and, therefore, an inability
to finance such development or acquisitions through borrowed funds could have a
material adverse effect on the Company's operations.
EXCHANGE CONTROL REGULATIONS. The Brazilian Government currently restricts
the ability of Brazilian or foreign persons or entities to convert Brazilian
currency into U.S. dollars or other currencies other than in connection with
certain authorized transactions. Accordingly, the purchase of U.S. dollars at
the Commercial Market Rate (as defined herein) by ITSA for purposes of
permitting ITSA to make scheduled principal and interest payments to TV Filme on
the Intercompany Note, which in turn will be used by TV Filme to make scheduled
interest and principal payments on the Notes, requires approval of the Brazilian
Central Bank (the "Central Bank"). The Company applied for and has obtained such
approval from the Central Bank. The principal amount, interest rate and interest
payment dates under the Intercompany Note are the same as those under the Notes.
Further approval from the Central Bank will be needed for (i) the payment of
principal of, premium, if any, and interest on the Intercompany Note upon its
acceleration, or for certain late payments on the Intercompany Note (E.G.,
payments made 181 days or more after a scheduled payment date); and (ii)
payments of any judgment obtained against ITSA or any Guarantor (as defined
herein) in a court in Brazil under the Intercompany Note, the Note Pledge
Agreement or any Subsidiary Guarantee (as defined herein). In addition, in order
for TV Filme to exercise its call option,
19
<PAGE>
ITSA must exercise its call option under the Intercompany Note. Any such
exercise by ITSA of its call option must be approved by the Central Bank. See
"Description of Exchange Notes--Security--Pledged Intercompany Note." There can
be no assurance that such consents from the Central Bank for the foregoing
payment will be obtained.
HOLDING COMPANY STRUCTURE; DEPENDENCE ON SUBSIDIARIES FOR REPAYMENT OF
NOTES. The Old Notes are, and the Exchange Notes will be, a direct obligation
of TV Filme. TV Filme conducts its operations through, and substantially all of
TV Filme's assets are owned by, TV Filme's direct and indirect subsidiaries (to
which it expects to loan all of the net proceeds from the Offering). Because TV
Filme is a holding company, its ability to meet its obligations in respect of
the Notes will be primarily dependent upon the ability of ITSA to pay principal
and interest on the Intercompany Note which will in turn depend upon the
performance of ITSA's subsidiaries and distributions, loans or other payments of
funds by such subsidiaries to ITSA. The subsidiaries are separate and distinct
legal entities and, while they have jointly and severally guaranteed ITSA's
obligations under the Intercompany Note, neither ITSA nor its subsidiaries has
any obligations, contingent or otherwise, to pay any amounts due under the
Notes, to meet TV Filme's obligations to other creditors or to make any funds
available therefor, whether by dividends, loans or other payments. In addition,
the payment of dividends from such subsidiaries to ITSA and the payment of any
interest on or the repayment of any principal of any loans or advances made by
TV Filme to ITSA (i) may be subject to statutory or contractual restriction,
(ii) are contingent upon the earnings of such subsidiaries and (iii) are subject
to various business considerations. Although TV Filme believes that
distributions and dividends from ITSA's subsidiaries will be sufficient to pay
interest on the Intercompany Note, which in turn will be used by TV Filme to pay
interest on the Notes, as well as to meet ITSA's other obligations, there can be
no assurance they will be sufficient. In addition, applicable Brazilian law
limits the amount of dividends which may be paid by ITSA's subsidiaries to the
extent they do not have profits available for distribution. Other statutory and
general law obligations affect the ability of ITSA's subsidiaries to declare
dividends or the ability of ITSA and ITSA's subsidiaries to make payments to TV
Filme and ITSA, respectively, on account of intercompany loans.
The Intercompany Note and the Subsidiary Guarantees are unsecured
obligations of ITSA and the Guarantors, respectively. Persons seeking to enforce
payments under the Intercompany Note or the Subsidiary Guarantees will only have
the rights of general unsecured creditors of ITSA and any Guarantor with respect
to the Intercompany Note and the Subsidiary Guarantees, as the case may be, and,
as a result, the benefits which might be realized in connection with the
enforcement of such obligations may be limited.
LIMITED OPERATING HISTORY; LACK OF PROFITABLE OPERATIONS; MANAGEMENT OF
GROWTH. The Company commenced operations in Brasilia in October 1990, in
Goiania in January 1995 and in Belem in February 1995. Prospective investors,
therefore, have limited historical financial information about the Company upon
which to base an evaluation of the Company's performance (and whether to
exchange Old Notes for Exchange Notes). Since inception, the Company has
sustained substantial operating losses, due primarily to start-up costs and
charges for depreciation and amortization of capital expenditures to develop its
wireless cable systems and had a deficit of approximately $3.0 million as of
September 30, 1996. The Company expects to experience net losses as it expands
its existing systems and develops additional systems. There can be no assurance
that the Company will be profitable or will generate positive cash flow in
future years. The Company is experiencing rapid growth, which could place a
significant strain on its operational and personnel resources. The Company's
growth will require it to continue to improve its operational and financial
systems and to train, motivate and manage its employees. If management is unable
to manage the Company's growth effectively, or if the productivity of its
employees falls below expectations, it could have a material adverse effect on
the Company's results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
20
<PAGE>
NEED FOR ADDITIONAL FINANCING FOR GROWTH. The growth of the Company's
business requires substantial investment on a continuing basis to finance (i)
capital expenditures and expenses related to subscriber growth and system
development, (ii) the acquisition of new pay television licenses and operations
and (iii) net losses. There can be no assurance that the Company will be able to
obtain additional debt and equity capital on satisfactory terms, or at all, to
meet its future financing needs. Furthermore, the Indenture restricts the amount
of additional Indebtedness the Company may incur, subject to certain
qualifications and exceptions. Failure to obtain any required additional
financing could adversely affect the growth of the Company and, ultimately,
could have a material adverse effect on the Company.
RISKS ASSOCIATED WITH NEW MARKETS AND GROWTH STRATEGY. Applications have
been made for the Company to operate wireless cable systems in an additional 27
markets in Brazil. As a result of the issuance by the Brazilian Federal Supreme
Court of a preliminary injunction with respect to regulations relating to the
granting of new concessions and licenses for the rendering of commercial
telecommunications services in Brazil and Presidential Decree No. 2087 issued by
the President of Brazil on December 4, 1996 (the "Presidential Decree"), which
decree revokes such regulations, the process of granting new concessions and
licenses for MMDS is uncertain. Until such time as further government action is
taken to provide for the regulation of the granting of new concessions and
licenses for MMDS services, there can be no assurance as to the grant of any
such concessions and licenses and the timing of any such grants generally, or
the grant of any such concessions and licenses and the timing of any grants to
the Company. The Company also may seek to enter into operating agreements with
pay television license holders other than TV Filme Servicos or seek to acquire
licenses granted to others, but there can be no assurance that the Company will
be able to enter into any such operating agreements or consummate any such
license acquisitions. The Company believes that the cost of purchasing or
acquiring licenses has increased substantially in recent years and will continue
to increase, due to increased competition. Similarly, the cost of operating
wireless cable systems has increased due to competition. Based on current market
and operating conditions, the Company estimates that the cost of launching and
deploying any additional wireless cable operating system after the granting of a
new license could be up to approximately $12.0 million, including construction
of a headend facility, subscriber-related capital costs and funding initial
development and marketing costs and operating losses, depending on factors
particular to each market. The Company's ability to expand successfully through
acquisitions depends on many factors, including the successful identification
and acquisition of such systems and management's ability to integrate and
operate the acquired businesses effectively. The Company may compete for new
system opportunities with other companies that have significantly greater
financial and managerial resources. There can be no assurance that the Company
will be successful in obtaining new licenses or launching or acquiring any new
pay television systems or that the Company will be able to integrate
successfully any acquired systems into its current business and operations. The
failure of the Company to obtain new licenses or launch or acquire new pay
television systems could impede its growth. The failure of the Company to
integrate successfully acquired systems could have a material adverse effect on
the Company's results of operations and financial condition. See "--Government
Regulation" and "Business--Regulatory Environment--License Procedures."
In order to finance further subscriber growth, capital expenditures and
related expenses for additional system development and acquisitions, the Company
may require additional funds in the future. The amount and timing of the
Company's future capital requirements will depend upon a number of factors, many
of which are not within the Company's control, including the grant of new
licenses, programming costs, capital costs, competitive conditions and the costs
of any necessary implementation of technological innovations or alternative
technologies. There can be no assurance that the Company's future capital
requirements will be met or will not increase as a result of future
acquisitions, if any. Failure to obtain any required additional financing could
adversely affect the growth of the Company and, ultimately, could have a
material adverse effect on the Company's results of operations and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
21
<PAGE>
COMPETITION. The Company's affiliate, TV Filme Servicos, is the only entity
licensed to operate wireless cable systems in Brasilia, Goiania and Belem. The
Company's principal pay television competitor in the city of Brasilia is NET
Brasilia, and in the city of Goiania is Multicanal, both of which are hardwire
cable operators. There currently is no hardwire or other wireless cable provider
in the city of Belem. In addition to other wireless cable and hardwire cable
operators, wireless cable operators in Brazil face or may face competition from
several other sources, such as direct-to-home satellite ("DTH") systems, direct
broadcasting satellite ("DBS") systems, local off-air VHF/UHF channels, home
videocassette recorders and out-of-home theaters. Legislative, regulatory and
technological developments may result in additional and significant competition.
Competition in the pay television industry is based upon program offerings,
customer service, reliability and pricing. Many actual and potential competitors
have greater financial, marketing and other resources than the Company. No
assurance can be given that the Company will be able to compete successfully.
See "Business--Competition."
GOVERNMENT REGULATION. The Company's business activities are regulated by
the Ministry of Communications. Such regulation relates to, among other things,
licensing, local access to MMDS systems, commercial advertising and foreign
investment in MMDS systems. Changes in the regulation of the Company's business
activities, including decisions by regulators affecting the Company's operations
(such as the granting or renewal of licenses or decisions as to the subscription
rates the Company may charge its customers) or changes in interpretations of
existing regulations by courts or regulators, could adversely affect the
Company. The Company's MMDS licenses may not be transferred without regulatory
approval. On December 4, 1996, in response to a preliminary injunction granted
by the Brazilian Federal Supreme Court suspending the effectiveness of
Presidential Decree No. 1719 relating to the regulation of the granting of new
concessions and licenses for the rendering of commercial telecommunications
services in Brazil, including MMDS services, the President of Brazil signed the
Presidential Decree which revoked Decree No. 1719. The effect of the revocation
is that the process for granting new concessions and licenses for MMDS services
is uncertain. Until such time as further governmental action is taken to provide
for the regulation of the granting of concessions and licenses for MMDS
services, there can be no assurance as to the grant of any such concessions and
licenses and the timing of any such grants generally, or the grant of any such
concessions and licenses and the timing of such grants to the Company. Any new
regulations could have a material adverse effect on the pay television industry,
as a whole, and on the Company, in particular. See "Business--Regulatory
Environment--License Procedures."
MINORITY VOTING POSITION IN LICENSE COMPANY; POTENTIAL CONFLICTS OF
INTEREST. Under applicable provisions of Brazilian law currently in effect, a
license to operate a wireless cable system in Brazil must be controlled by
Brazilian nationals or entities controlled by Brazilian nationals. TV Filme
Servicos owns the licenses pursuant to which the Company currently conducts its
business and has made applications for license grants in 27 additional markets.
A potential conflict of interest may be deemed to exist because certain existing
stockholders of the Company, some of whom are executive officers and directors
of the Company, have an ownership interest in, and voting control of, TV Filme
Servicos.
TV Filme indirectly owns 49% of the voting securities and 83% of the equity
interests in TV Filme Servicos. As a result of the minority voting position in
TV Filme Servicos, TV Filme will not be able to control the operations of TV
Filme Servicos or its relationships with TV Filme and its subsidiaries. However,
TV Filme has a representative on the executive management team of TV Filme
Servicos and may prohibit the sale, transfer or impairment of any license held
by TV Filme Servicos and has entered into operating and other agreements with TV
Filme Servicos which provide TV Filme and its subsidiaries with substantial
protections concerning their ability to operate the licenses held by TV Filme
Servicos, including the exclusive right to operate the licenses currently owned
by TV Filme Servicos as well as any additional licenses that TV Filme Servicos
may obtain. Any breach by TV Filme Servicos of any of its material obligations
to TV Filme and its subsidiaries under any of these agreements could have a
material adverse effect on the Company's results of operations and financial
condition.
22
<PAGE>
WIRELESS CABLE TRANSMISSION ISSUES. Reception of wireless cable programming
generally requires a direct, unobstructed LOS from the Company's headend to the
subscriber's antenna. Wireless cable service can also be received by use of
signal repeaters. If the LOS is obstructed, the Company may not be able to
supply service to certain potential subscribers or may be required to install
additional signal repeaters. In addition to limitations resulting from terrain,
in limited circumstances extremely adverse weather can damage transmission and
receive-site antennas as well as other transmission equipment.
Interference from other wireless cable systems may limit the ability of a
wireless cable system to serve a particular point, just as interference from one
television station limits the ability of a viewer to receive another television
station signal broadcasting on the same frequency. Under current regulations of
the Ministry of Communications, a wireless cable license holder is generally
protected from interference within a range of up to 50 kilometers of the
transmission site, and a prospective operator must demonstrate that its signal
will not interfere with the reception of other licensed channels. If it is not
possible to avoid such interference, it may be necessary to negotiate
interference agreements with the license holders of the stations. There can be
no assurance that the Company will be able to enter into any such interference
agreements on terms acceptable to the Company.
DEPENDENCE ON SUPPLIERS. The Company is dependent on certain suppliers of
its programming and equipment. The Company currently purchases substantially all
of its programming from Tevecap and its subsidiaries pursuant to an exclusive
license to transmit programming available from Tevecap and its subsidiaries via
wireless and hardwire cable in the Company's current operating markets (the
"Programming Agreement"). The terms of the Programming Agreement terminate in
July 2004. Although the Company has no reason to believe that such agreement
will be canceled or will not be renewed upon its expiration, if such agreement
is canceled or not renewed, the Company will have to seek programming from other
sources. In addition, there can be no assurance that other programming will be
available to the Company on acceptable terms or at all or, if so available, that
such programming will be acceptable to the Company's subscribers. Additionally,
there can be no assurance that programming will be available to the Company in
its application markets on acceptable terms, although Tevecap has agreed to
provide programming on a non-exclusive basis in most of such application markets
pursuant to the Programming Agreement. There also can be no assurance that
Tevecap's and its subsidiaries' contracts with their individual program
suppliers are or will remain exclusive, will not be canceled or will be renewed
upon expiration. There can be no assurance that if Tevecap's contracts are
canceled or not renewed, other programming will be available to Tevecap on
acceptable terms or at all. See "Business--Programming."
The Company currently purchases decoders and antennas from a limited number
of sources. The inability to obtain sufficient components as required from such
sources, or to develop alternative sources if and as required in the future,
could result in delays or reductions in customer installations which, in turn,
could have a material adverse effect on the results of operations and financial
condition of the Company.
DEPENDENCE ON KEY PERSONNEL. The success of the Company depends in large
part upon the abilities and continued service of its executive officers and
other key employees and, in particular, of Hermano Studart Lins de Albuquerque,
the Chief Executive Officer and Secretary of TV Filme, and Carlos Andre Studart
Lins de Albuquerque, the President, Chief Operating Officer and Treasurer of TV
Filme. There can be no assurance that the Company will be able to retain the
services of such officers and employees. The failure of the Company to retain
the services of Messrs. Lins and other key personnel could have a material
adverse effect on the Company's results of operations and financial condition.
TV Filme has entered into employment agreements, containing non-competition and
non-solicitation provisions, with Messrs. Lins. The Company believes that its
future success will depend, in part, on its ability to attract and retain highly
talented managerial personnel. There can be no assurance that it will be able to
attract and retain the personnel it requires on acceptable terms. See
"Management--Executive Officers and Directors" and "Management--Employment
Agreements."
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ABSENCE OF A PUBLIC MARKET FOR THE EXCHANGE NOTES. The Old Notes have been
designated eligible for trading in the PORTAL Market. There is no established
trading market for the Exchange Notes. TV Filme does not currently intend to
apply for listing of the Exchange Notes on any securities exchange or on any
automated quotation system. Accordingly, there can be no assurance as to the
development of any market for, or the liquidity of, any market that may develop
for the Exchange Notes, the ability of the holders of the Exchange Notes to sell
their Exchange Notes or the price at which such holders would be able to sell
their Exchange Notes. If such a market were to develop, the Exchange Notes could
trade at prices that may be higher or lower than the initial market values
depending on many factors, including prevailing interest rates, the Company's
operating results, the market for similar securities and general macroeconomic
and market conditions in Brazil. TV Filme has been advised by the Initial
Purchasers that they currently intend to make a market in the Exchange Notes.
However, the Initial Purchasers are not obligated to do so and any market-making
activities with respect to the Exchange Notes may be discontinued at any time
without notice.
FRAUDULENT CONVEYANCE CONSIDERATIONS. The Company has been advised by its
Brazilian counsel, Tozzini, Freire, Teixeira e Silva Advogados, that, to the
extent that the Subsidiary Guarantees of the Intercompany Note given by the
Guarantors are valid and enforceable in accordance with the laws of the State of
New York and the United States, the laws of Brazil do not prevent such
Subsidiary Guarantees from being valid, binding and enforceable against the
Guarantors in accordance with their terms, provided that the Subsidiary
Guarantees do not contain any provisions deemed to be against public policy,
good morals and national sovereignty. In the event U.S. Federal and state
fraudulent conveyance or similar laws were applied to the issuance of a
Subsidiary Guarantee, if any Guarantor, at the time it incurs such Subsidiary
Guarantee, (a)(i) was or is insolvent or rendered insolvent by reason of such
incurrence, (ii) was or is engaged in a business or transaction for which the
assets remaining with such Guarantor constituted unreasonably small capital or
(iii) intended or intends to incur, or believed or believes that it would incur,
debts beyond its ability to pay such debts as they mature and (b) received or
receives less than reasonably equivalent value or fair consideration, the
obligations of such Guarantor under its Subsidiary Guarantee could be avoided,
or claims in respect of such Subsidiary Guarantee could be subordinated to all
other debts of such Guarantor. Among other things, a legal challenge of a
Subsidiary Guarantee on fraudulent conveyance grounds may focus on the benefits,
if any, realized by such Guarantor as a result of the issuance by ITSA of the
Intercompany Note. If any Subsidiary Guarantee were held to be a fraudulent
conveyance or unenforceable for any other reason, the holder of the Intercompany
Note would cease to have any claim in respect of the Guarantor issuing such
Subsidiary Guarantee and would be solely creditors of ITSA and any other
Guarantors whose Subsidiary Guarantees were not avoided or held unenforceable.
There can be no assurance that, after providing for all prior claims, there
would be sufficient assets to satisfy claims of the holder of the Intercompany
Note relating to any avoided portion of a Subsidiary Guarantee.
RISK FACTORS RELATING TO BRAZIL
GENERAL. Social, economic or political instability, among other
developments in Brazil, could adversely affect the financial condition and
results of operations of the Company, the ability of the Company to repay the
Notes and the market value and liquidity of the Notes. In the past, Brazil has
suffered from high levels of inflation, low real growth rates and political
uncertainty. Brazil is generally considered by investors to be an "emerging
market" and thus political, economic, social or other developments in other such
markets may adversely affect the market value and liquidity of the Notes. For
example, in December 1994, the Mexican government sharply devalued the PESO,
resulting in an economic crisis in Mexico. The Mexican PESO crisis adversely
affected the market value and liquidity of securities issued by companies in
many of the "emerging markets," including Brazil. There can be no assurance that
events in other such markets will not adversely affect the market value and
liquidity of the Notes.
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ECONOMIC UNCERTAINTY; EFFECTS OF EXCHANGE RATE FLUCTUATIONS. Brazil has
experienced extremely high rates of inflation for many years. Inflation, as
measured by the Getulio Vargas Foundation's General Index of Market Prices (the
"IGPM Index"), was approximately 458% in 1991, 1,175% in 1992, 2,567% in 1993,
870% in 1994, 15% in 1995 and 8.19% in the first nine months of 1996. Inflation,
government actions to combat inflation and public speculation about future
actions have had significant negative effects on the Brazilian economy in
general and have also contributed materially to economic uncertainty in Brazil.
In periods of inflation, many of the Company's expenses will tend to increase.
Generally, in periods of inflation, a company is able to raise its prices to
offset the rise in its expenses and may set its prices without government
regulation. However, under Brazilian law designed to reduce inflation, the rates
which the Company may charge to a particular subscriber may not be increased
until the next anniversary of the subscriber's initial subscription date. Thus,
the Company is less able to offset expense increases with revenue increases.
Accordingly, inflation may have a material adverse effect on the Company's
results of operations and financial condition.
Beginning in 1994, the Brazilian government commenced the "Real Plan," an
economic stabilization plan designed to reduce inflation by, among other things,
reducing certain public expenditures, collecting debts owed to the Brazilian
government, increasing tax revenues and continuing the privatization of certain
state-owned enterprises. On July 1, 1994, as part of the Real Plan, the
Brazilian government introduced a new currency, the REAL. There can be no
assurance that the Real Plan will continue to be successful in controlling the
level of inflation, that future governmental actions will not trigger an
increase in inflation or that inflation will not have a material adverse effect
on the Company's results of operations and financial condition.
Brazil's rate of inflation and the government's actions to combat inflation
have also affected the relationship of the value of Brazil's currency to the
value of the U.S. dollar. Historically, Brazil's currency frequently had been
devalued in relation to the U.S. dollar. However, after its introduction, the
REAL initially appreciated against the U.S. dollar. In an effort to address
concerns about the possible overvaluation of the REAL relative to the U.S.
dollar, and in light of the economic upheaval in Mexico that resulted from the
rapid devaluation of the Mexican peso, the Brazilian government in March 1995
introduced new exchange rate policies which established a trading band for the
REAL against the U.S. dollar. This band has been adjusted frequently, and, as of
December 13, 1996, was between 1.0360 REAIS and 1.0410 REAIS per U.S. dollar.
From September 30, 1995 to September 30, 1996, the REAL declined in value
relative to the U.S. dollar by approximately 7.1%. There can be no assurance
that the REAL will not again be devalued relative to the U.S. dollar, or that
the REAL will not fluctuate significantly relative to the U.S. dollar.
Substantially all of the Company's revenues are denominated in REAIS. A
substantial portion of the Company's indebtedness, including the Old Notes (and
the Exchange Notes upon their issuance) is and may be expected to continue to
be, denominated in U.S. dollars. In addition, certain of the Company's operating
expenses, including a significant portion of its equipment costs and a portion
of its programming costs, are denominated in U.S. dollars. Any devaluation of
the Brazilian currency relative to any foreign currency in which debt or other
obligations of the Company are denominated could result in a foreign exchange
loss with respect to such indebtedness or obligations, if such devaluation were
in excess of inflation and the rate at which the Company raises prices. Any
devaluation could also force the Company to seek additional financing although
the Company's ability to obtain such financing may be impaired by such event. As
a result, the relationship of Brazil's currency to the value of the U.S. dollar
and other currencies, and the rates of devaluation of Brazil's currency relative
to the prevailing rates of inflation, may adversely affect the Company's
financial condition and reported results of operations, as well as its ability
to meet its debt service obligations (including payment of principal of,
premium, if any, and interest on the Notes) and operating expenses. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Inflation and Exchange Rates." Moreover, if the Company cannot
increase its prices to match the rate of inflation, even if the rate of
inflation matches the rate of devaluation, the Company's ability to meet its
debt service obligations and operating expenses may be impaired.
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The Company does not currently seek to hedge exchange rate risks in the
financial markets or otherwise, as it believes that the costs of such hedging
outweigh the related risks. As a result, the Company may experience economic
loss with respect to its investments and fluctuations in its reported results of
operations solely as a result of currency rate fluctuations, which may have a
material adverse effect on the Company's financial condition.
FOREIGN EXCHANGE CONTROLS AND EXCHANGE RATES. There are two legal foreign
exchange markets in Brazil: the commercial rate exchange market (the "Commercial
Market") and the floating rate exchange market (the "Floating Market"). Prior to
the implementation of the Real Plan, the Commercial Market Rate and the Floating
Market Rate differed significantly. There can be no assurance that there will
not be significant differences between such rates in the future. See "Exchange
Rate Data."
RESTRICTIONS ON CONVERSION AND U.S. REMITTANCES ABROAD. The Brazilian
Government has the authority under current legislation to impose restrictions on
the remittance abroad of capital when a serious deficit in Brazil's balance of
payments is seriously threatened or occurs, as it did for approximately six
months in 1989 and early 1990, and on the conversion of REAIS into foreign
currencies. Such restrictions may hinder or prevent the Company's Brazilian
subsidiaries from purchasing equipment required to be paid for in U.S. dollars
and from converting dividends or distributions or scheduled interest and
principal payments under the Intercompany Note into U.S. dollars and remitting
U.S. dollars to TV Filme and from making payment on judgments obtained in a
court in Brazil. Such restrictions could adversely affect the Company. The
Company could also be adversely affected by delays in, or a refusal to grant,
any required Brazilian governmental approval for conversion of REAL payments and
remittances abroad in respect of such dividends, distributions, interest and
principal payments.
There can be no assurance that the Brazilian Government will not in the
future impose more restrictive foreign exchange regulations that would have the
effect of eliminating or restricting the Company's or any of its subsidiaries
access to foreign currency that would be required to meet its foreign currency
obligations, including its obligations under the Notes, the Intercompany Note or
Subsidiary Guarantee, as the case may be. The likelihood of the imposition of
such restrictions by the Brazilian Government may be affected by, among other
factors, the extent of Brazil's foreign currency reserves, the availability of
foreign currency in the foreign exchange markets on the date a payment is due,
the size of Brazil's debt service burden relative to the economy as a whole, and
Brazil's policy toward the International Monetary Fund and political constraints
to which Brazil may be subject.
POLITICAL UNCERTAINTY. Historically, the Brazilian Government has often
changed monetary, credit, tariff and other policies to influence the course of
Brazil's economy. Such government actions have included wage and price controls
as well as other measures, such as freezing bank accounts, imposing capital
controls and inhibiting imports and exports. A primary objective of the
Brazilian Government in recent years has been to control government spending.
Some progress has been made, but fiscal deficits remain high. Reducing the
deficit is made more difficult by Brazil's Constitution, which requires the
Brazilian Government to make substantial funds available to the state
administrations, while limiting the Brazilian Government's ability to raise
sufficient funds from taxes. Changes in policy involving, among other things,
tariffs, exchange controls, regulatory policy and taxation, as well as events
such as inflation, devaluation, social instability or other political, economic
or diplomatic developments, could adversely affect the Brazilian economy and
have a material adverse effect on the Company's results of operations and
financial condition.
The Brazilian political environment has been marked by high levels of
uncertainty since Brazil returned to civilian rule in 1985 after 20 years of
military government. The death of a President-elect in 1985 and the resignation
of another President in 1992 in the midst of his impeachment trial, as well as
frequent turnover at and immediately below the cabinet level, have contributed
to delays in the adoption of coherent and sustained policies to confront the
country's economic issues. Mr. Fernando Henrique Cardoso, Brazil's Finance
Minister at the time of the implementation of the Real Plan, was elected
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President of Brazil in October 1994 and took office in January 1995. President
Cardoso was elected by a coalition of political parties, and, as a result, his
administration may be required to accept more compromises than if his party
controlled the Brazilian legislature. In addition, the President is ineligible
for re-election when his current term expires in 1998. President Cardoso has
supported the Real Plan, the reduction of inflation, privatization measures and
certain free-market policies. However, many political factions oppose certain of
the administration's policies, and there can be no assurance that any of the
administration's policies, including the Real Plan, will be supported by the
legislature.
POTENTIAL UNENFORCEABILITY OF CIVIL LIABILITIES AND JUDGMENTS. Certain of
the directors and officers of TV Filme and certain experts named herein are
non-residents of the U.S., and all or a substantial portion of the assets of
such persons are located outside of the U.S. TV Filme's subsidiaries and
substantially all of the Company's assets are located in Brazil. As a result, it
may not be possible for investors to effect service of process within the U.S.
upon such persons (unless an agent for service of process is duly appointed by
them, in which case service of process effected under U.S. laws would be deemed
valid by the Brazilian courts in the case of the confirmation of foreign
judgments described below) or enforce in the U.S. against such persons or the
subsidiaries judgments obtained in U.S. courts, including judgments predicated
upon the civil liability provisions of U.S. Federal securities laws. Each of TV
Filme, ITSA and the Subsidiary Guarantors has appointed the Corporation Service
Company, New York, New York, as its agent for service of process with respect to
any action brought against it in any federal or state court in the State of New
York arising from the Intercompany Note or the Subsidiary Guarantees,
respectively. The Company has been advised by its Brazilian counsel, Tozzini,
Freire, Teixeira e Silva Advogados, that a judgment of a U.S. court for civil
liabilities predicated upon U.S. Federal securities laws may be enforced in
Brazil against the Company, its directors, its officers and the experts named
herein without reconsideration of the merits, upon confirmation of that judgment
by the Brazilian Federal Supreme Court. That confirmation will occur if the
foreign judgment (i) fulfills all formalities required for its enforceability
under the laws of the U.S., (ii) is issued by a competent court after service of
process upon the Company, (iii) is not subject to appeal, (iv) is authenticated
by a Brazilian consular office in the U.S. and is accompanied by a sworn
translation and (v) is not contrary to Brazilian national sovereignty, public
policy or good morals (as set forth in Brazilian law). In addition, the Company
has been advised by such Brazilian counsel that original actions in connection
with this Prospectus predicated solely on U.S. Federal securities laws may be
brought in Brazilian courts and that Brazilian courts may enforce liabilities in
such actions against the Company and its officers and directors. Plaintiffs will
be required to post a bond in Brazil prior to commencing any such action to
cover legal fees and court expenses. Furthermore, no assurance can be given that
the confirmation process described above may be conducted in a timely manner or
that a Brazilian court would enforce liabilities for violation of U.S. Federal
securities laws. Any judgment obtained against the Company in a court in Brazil
under the Notes, the Indenture, the Intercompany Note or the Subsidiary
Guarantees will be expressed in the Brazilian currency equivalent of the U.S.
dollar judgment amount.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were originally issued and sold by TV Filme to the Initial
Purchasers on December 20, 1996, pursuant to the Purchase Agreement. The offer
and sale of the Old Notes was not required to be registered under the Securities
Act in reliance upon the exemption provided by Section 4(2) of the Securities
Act. The Initial Purchasers subsequently resold the Old Notes in reliance on
Rule 144A under the Securities Act and certain other available exemptions under
the Securities Act. In connection with the Offering, TV Filme also entered into
the Registration Rights Agreement, pursuant to which TV Filme granted certain
registration rights for the benefit of the holders of the Old Notes. Under the
terms of the Registration Rights Agreement, TV Filme agreed, for the benefit of
the holders of the Old Notes, that it would, at its own cost, file, on or prior
to February 18, 1997, the Exchange Offer Registration Statement with the
Commission with respect to a registered offer to exchange the Old Notes for
Exchange Notes, which Exchange Notes will have terms substantially identical to
the Old Notes, (ii) use its best efforts to have the Exchange Offer Registration
Statement declared effective by the Commission under the Securities Act on or
prior to April 19, 1997, (iii) commence the Exchange Offer and use its best
efforts to issue on or prior to 30 business days after the date on which the
Exchange Offer Registration Statement is declared effective by the Commission,
Exchange Notes in exchange for all Old Notes tendered prior thereto in the
Exchange Offer, unless the Exchange Offer would not be permitted by applicable
law or Commission policy. If (i) TV Filme is not required to file the Exchange
Offer Registration Statement or permitted to commence or accept tenders pursuant
to the Exchange Offer because the Exchange Offer is not permitted by applicable
law or Commission policy or (ii) any holder of Transfer Restricted Securities
notifies TV Filme within 20 business days after the consummation of the Exchange
Offer that (a) it is prohibited by law or Commission policy from participating
in the Exchange Offer or (b) that it may not resell the Exchange Notes acquired
by it in the Exchange Offer to the public without delivering a prospectus and
the prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (c) that it is a broker-dealer and
owns Old Notes acquired directly from TV Filme or an affiliate of TV Filme, TV
Filme has agreed to file the Shelf Registration Statement and use all reasonable
efforts to have the Shelf Registration Statement declared effective and kept
effective until December 20, 1999. The purpose of this Exchange Offer is to
fulfill certain of TV Filme's obligations under the Registration Rights
Agreement.
TERMS OF THE EXCHANGE OFFER
TV Filme is offering, upon the terms and subject to the conditions set forth
herein and in the accompanying Letter of Transmittal, to exchange $1,000 in
principal amount of the Exchange Notes for each $1,000 in principal amount of
the outstanding Old Notes. TV Filme will accept for exchange any and all Old
Notes that are validly tendered on or prior to 5:00 p.m., New York City time, on
the Expiration Date. Tenders of the Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain customary
conditions, which may be waived by TV Filme. TV Filme reserves the right to
amend, terminate or extend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of such conditions. The terms of the
Exchange Notes are identical in all material respects (including principal
amount, interest rate and maturity) to the terms of the Old Notes for which they
may be exchanged in the Exchange Offer, except that (i) the Exchange Notes are
freely transferable by the holders thereof (other than as provided herein), and
are not subject to any covenant regarding registration under the Securities Act,
(ii) holders of Exchange Notes will not be entitled to Liquidated Damages and
(iii) holders of Exchange Notes will not be entitled to certain rights under the
Registration Rights Agreement intended for holders of unregistered securities,
except in limited circumstances. See "--Conditions of the Exchange Offer."
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Old Notes may be tendered only in multiples of $1,000. Subject to the
foregoing, Eligible Holders may tender less than the aggregate principal amount
represented by the Old Notes held by them, provided that they appropriately
indicate this fact on the Letter of Transmittal accompanying the tendered Old
Notes (or so indicate pursuant to the procedures for book-entry transfer).
As of the date of this Prospectus, $140.0 million aggregate principal amount
of Old Notes is outstanding, the maximum amount authorized by the Indenture for
all Notes. Solely for reasons of administration (and for no other purpose), TV
Filme has fixed the close of business on , 1997, as the record date
(the "Record Date") for purposes of determining the persons to whom this
Prospectus and the Letter of Transmittal will be mailed initially. Only an
Eligible Holder of the Old Notes (or such Eligible Holder's legal representative
or attorney-in-fact) may participate in the Exchange Offer. There will be no
fixed record date for determining Eligible Holders of the Old Notes entitled to
participate in the Exchange Offer. TV Filme believes that, as of the date of
this Prospectus, no such Eligible Holder is an affiliate of TV Filme within the
meaning of Rule 405 under the Securities Act.
TV Filme shall be deemed to have accepted validly tendered Old Notes when,
as and if TV Filme has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Eligible Holders
of Old Notes and for the purposes of receiving the Exchange Notes from TV Filme.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering Eligible Holder thereof as promptly as
practicable after the Expiration Date.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date shall be , 1997 at 5:00 p.m., New York City
time, unless TV Filme, in its sole discretion, extends the Exchange Offer, in
which case the Expiration Date shall be the latest date and time to which the
Exchange Offer is extended.
In order to extend the Exchange Offer, TV Filme will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Such notice and
public announcement shall set forth the new Expiration Date of the Exchange
Offer.
TV Filme reserves the right, in its sole discretion, (i) to delay accepting
any Old Notes, (ii) to extend the Exchange Offer, (iii) if any of the conditions
set forth below under "--Conditions of the Exchange Offer" shall not have been
satisfied, to terminate the Exchange Offer by giving oral or written notice of
such delay, extension, or termination to the Exchange Agent and (iv) to amend
the terms of the Exchange Offer in any manner. If the Exchange Offer is amended
in a manner determined by TV Filme to constitute a material change, TV Filme
will, in accordance with applicable law, file a post-effective amendment to the
registration statement (a "Post-effective Amendment") and resolicit the
registered holders of the Old Notes. If TV Filme files a Post-effective
Amendment, it will notify the Exchange Agent of an extension of the Exchange
Offer by oral or written notice, and will make a public announcement thereof,
each prior to 9:00 a.m., New York City time, on the next business day after the
effectiveness of such Post-effective Amendment. Such notice and public
announcement shall set forth the new Expiration Date, which new Expiration Date
shall be no less than five days after the then applicable Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, TV Filme will not be required to issue Exchange Notes in
respect of any properly tendered Old Notes not
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previously accepted and may terminate the Exchange Offer, or, at its option,
modify or otherwise amend the Exchange Offer, if any of the following events
occur:
(a) any law, rule or regulation or applicable interpretations of the
staff of the Commission which, in the good faith determination of TV Filme,
do not permit TV Filme to effect the Exchange Offer; or
(b) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes to be offered for resale,
resold or otherwise transferred by holders thereof (other than any such
holder that is an affiliate of TV Filme within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such Exchange Notes
are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the
distribution of such Exchange Notes; or
(c) there shall have occurred (i) any general suspension of or general
limitation or prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of TV Filme to complete the transactions contemplated by the
Exchange Offer, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects
the extension of credit or (iv) a commencement of war, armed hostilities or
other similar international calamity directly or indirectly involving the
United States, or, in the case of any of the foregoing existing at the time
of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(d) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of TV Filme that is or may be adverse to TV Filme, or TV Filme
shall have become aware of facts that have or may have adverse significance
with respect to the value of the Old Notes or the Exchange Notes;
which, in the reasonable judgment of TV Filme in any case, and regardless of the
circumstances (including any action by TV Filme) giving rise to any such
condition, makes it inadvisable to proceed with the Exchange Offer and/or with
such acceptance for exchange or with such exchange.
TV Filme expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by TV Filme of properly tendered Old Notes). In addition, TV Filme
may amend the Exchange Offer at any time prior to the Expiration Date if any of
the conditions set forth above occur. Moreover, regardless of whether any of
such conditions has occurred, TV Filme may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the Old
Notes.
The foregoing conditions are for the sole benefit of TV Filme and may be
waived by TV Filme, in whole or in part, in the reasonable judgment of TV Filme.
Any determination made by TV Filme concerning an event, development or
circumstance described or referred to above will be final and binding on all
parties.
TV Filme is not aware of the existence of any of the foregoing events.
ACCRUED INTEREST ON THE OLD NOTES
Interest on the Exchange Notes shall accrue from the last Interest Payment
Date (June 15 or December 15) on which interest was paid on the Old Notes so
surrendered or, if no interest has been paid on the Old Notes, from December 20,
1996. See "Description of Exchange Notes--Principal, Maturity and Interest."
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PROCEDURES FOR TENDERING OLD NOTES
The tender of an Eligible Holder's Old Notes as set forth below and the
acceptance thereof by TV Filme will constitute a binding agreement between the
tendering Eligible Holder and TV Filme upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, an Eligible Holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit such Old
Notes, together with a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to the Exchange Agent at the address set forth under "--The
Exchange Agent; Assistance" prior to 5:00 p.m., New York City time, on the
Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE ELIGIBLE HOLDER.
IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY MAIL, IT
IS RECOMMENDED THAT THE ELIGIBLE HOLDER USE AN OVERNIGHT OR HAND DELIVERY
SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal or (ii) by
an Eligible Institution (as defined). In the event that a signature on a Letter
of Transmittal or a notice of withdrawal, as the case may be, is required to be
guaranteed, such guarantee must be by a firm which is a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or otherwise be an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (collectively, "Eligible
Institutions"). If the Letter of Transmittal is signed by a person other than
the registered holder of the Old Notes, the Old Notes surrendered for exchange
must either (i) be endorsed by the registered holder, with the signature thereon
guaranteed by an Eligible Institution or (ii) be accompanied by a bond power, in
satisfactory form as determined by TV Filme in its sole discretion, duly
executed by the registered holder, with the signature thereon guaranteed by an
Eligible Institution. The term "registered holder" as used herein with respect
to the Old Notes means any person in whose name the Old Notes are registered on
the books of the Registrar.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by TV Filme in its sole discretion, which determination shall be
final and binding. TV Filme reserves the absolute right to reject any and all
Old Notes not properly tendered and to reject any Old Notes TV Filme's
acceptance of which might, in the judgment of TV Filme or its counsel, be
unlawful. TV Filme also reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by TV Filme
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as TV Filme shall determine. TV Filme will use
reasonable efforts to give notification of defects or irregularities with
respect to tenders of Old Notes for exchange but shall not incur any liability
for failure to give such notification. Tenders of the Old Notes will not be
deemed to have been made until such irregularities have been cured or waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by
31
<PAGE>
TV Filme, proper evidence satisfactory to TV Filme, in its sole discretion, of
such person's authority to so act must be submitted.
Any beneficial owner of Old Notes (a "Beneficial Owner") whose Old Notes are
registered in the name of a nominee, such as a broker, dealer, commercial bank
or trust company and who wishes to tender Old Notes in the Exchange Offer should
contact such registered holder promptly and instruct such registered holder to
promptly tender on such Beneficial Owner's behalf. If such Beneficial Owner
wishes to tender directly, such Beneficial Owner must, prior to completing and
executing the Letter of Transmittal and tendering Old Notes, make appropriate
arrangements to register ownership of the Old Notes in such Beneficial Owner's
name. Beneficial Owners should be aware that the transfer of registered
ownership may take considerable time.
By tendering Old Notes for exchange, each registered holder will represent
to TV Filme that, among other things (i) the Exchange Notes to be acquired in
connection with the Exchange Offer by the Eligible Holder and each Beneficial
Owner of the Old Notes are being acquired by the Eligible Holder and each
Beneficial Owner in the ordinary course of business of the Eligible Holder and
each Beneficial Owner, (ii) the Eligible Holder and each Beneficial Owner are
not participating, do not intend to participate, and have no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, (iii) the Eligible Holder and each Beneficial Owner acknowledge
and agree that any person participating in the Exchange Offer for the purpose of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot rely
on the position of the staff of the Commission set forth in no-action letters
that are discussed herein under "--Resales of Exchange Notes," (iv) that if the
Eligible Holder is a broker-dealer that acquired Old Notes for its own account
as a result of market-making or other trading activities, such Eligible Holder
will deliver a prospectus in connection with any resale of Exchange Notes
acquired in the Exchange Offer, (v) the Eligible Holder and each Beneficial
Owner understand that a secondary resale transaction described in clause (iii)
above should be covered by an effective registration statement containing the
selling security holder information required by Item 507 of Regulation S-K of
the Commission and (vi) neither the Eligible Holder nor any Beneficial Owner is
an affiliate of TV Filme within the meaning of Rule 405 of the Securities Act,
except as otherwise dislcosed to TV Filme in writing. In connection with a
book-entry transfer, each participant will confirm that it makes the
representations and warranties contained in the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES. Eligible Holders of Old Notes who wish to
tender their Old Notes and (i) whose Old Notes are not immediately available or
(ii) who cannot deliver their Old Notes or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to the Expiration Date (or
complete the procedure for book-entry transfer on a timely basis), may tender
their Old Notes according to the guaranteed delivery procedures set forth in the
Letter of Transmittal. Pursuant to such procedures: (i) such tender must be made
by or through an Eligible Institution and a Notice of Guaranteed Delivery must
be signed by such Eligible Holder, (ii) on or prior to the Expiration Date, the
Exchange Agent must have received from the Eligible Holder and the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Eligible Holder, the certificate number or numbers of the
tendered Old Notes, and the principal amount of tendered Old Notes, stating that
the tender is being made thereby and guaranteeing that, within three (3)
business days after the date of delivery of the Notice of Guaranteed Delivery,
the tendered Old Notes, a duly executed Letter of Transmittal and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent and (iii) such properly completed and executed documents required
by the Letter of Transmittal and the tendered Old Notes in proper form for
transfer (or confirmation of a book-entry transfer of such Old Notes into the
Exchange Agent's account at the Depository) must be received by the Exchange
Agent within three (3) business days after the Expiration Date. Any Eligible
Holder who wishes to tender Old Notes pursuant to the guaranteed delivery
32
<PAGE>
procedures described above must assure that the Exchange Agent receives the
Notice of Guaranteed Delivery and Letter of Transmittal relating to such Old
Notes prior to 5:00 p.m., New York City time, on the Expiration Date.
BOOK-ENTRY DELIVERY. The Exchange Agent will establish an account with
respect to the Old Notes at the Depository ("Book-Entry Transfer Facility") for
purposes of the Exchange Offer promptly after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Old Notes by causing such
facility to transfer Old Notes into the Exchange Agent's account in accordance
with such facility's procedure for such transfer. Even though delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof), with
any required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry transfer, and other documents required by the
Letter of Transmittal, must, in any case, be transmitted to and received by the
Exchange Agent at one of its addresses set forth under "--The Exchange Agent;
Assistance" before the Expiration Date, or the guaranteed delivery procedure set
forth above must be followed. Delivery of the Letter of Transmittal and any
other required documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent. The term "Agent's Message" means a message
transmitted by the Book-Entry Transfer Facility to, and received by, the
Exchange Agent and forming a part of a book-entry confirmation, which states
that such Book-Entry Transfer Facility has received and express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the Old
Notes that such participant has received and agrees to be bound by the terms of
the Letter of Transmittal and that TV Filme may enforce such agreement against
such participant.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all the conditions to the Exchange Offer, TV
Filme will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The Exchange Notes issued pursuant to the Exchange Offer will be delivered
promptly after acceptance of the Old Notes. For purposes of the Exchange Offer,
TV Filme shall be deemed to have accepted validly tendered Old Notes, when, as,
and if TV Filme has given oral or written notice thereof to the Exchange Agent.
In all cases, issuances of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents (or of
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at the Depository); provided, however, that TV Filme reserves
the absolute right to waive any defects or irregularities in the tender or
conditions of the Exchange Offer. If any tendered Old Notes are not accepted for
any reason, such unaccepted Old Notes will be returned without expense to the
tendering Eligible Holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a written notice to
the Exchange Agent, at its address set forth under "--The Exchange Agent;
Assistance" at any time prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes, as applicable), (iii) be signed
by the Eligible Holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by a bond power in the name of
the person withdrawing the tender, in satisfactory
33
<PAGE>
form as determined by TV Filme in its sole discretion, duly executed by the
registered holder, with the signature thereon guaranteed by an Eligible
Institution together with the other documents required upon transfer by the
Indenture, and (iv) specify the name in which such Old Notes are to be
re-registered, if different from the Depositor, pursuant to such documents of
transfer. Any questions as to the validity, form and eligibility (including time
of receipt) of such notices will be determined by TV Filme, in its sole
discretion. The Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are withdrawn will be returned to the
Eligible Holder thereof without cost to such Eligible Holder as soon as
practicable after withdrawal. Properly withdrawn Old Notes may be retendered by
following one of the procedures described under "--Procedures for Tendering
Notes" at any time on or prior to the Expiration Date.
THE EXCHANGE AGENT; ASSISTANCE
IBJ Schroder Bank & Trust Company is the Exchange Agent. All tendered Old
Notes, executed Letters of Transmittal and other related documents should be
directed to the Exchange Agent. Questions and requests for assistance and
requests for additional copies of this Prospectus, the Letter of Transmittal and
other related documents should be addressed to the Exchange Agent as follows:
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND/OVERNIGHT EXPRESS: FACSIMILE TRANSMISSION:
IBJ Schroder Bank & Trust IBJ Schroder Bank & Trust (212) 858-2952
Company Company TO CONFIRM RECEIPT:
One State Street One State Street (212) 858-2815
New York, New York 10004 New York, New York 10004
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
</TABLE>
SOLICITATION OF TENDERS; FEES AND EXPENSES
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by TV Filme. Neither the delivery
of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will offers be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, TV Filme may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction.
All expenses incident to TV Filme's consummation of the Exchange Offer and
compliance with the Registration Rights Agreement will be borne by TV Filme,
including without limitation: (i) all registration and filing fees and expenses,
(ii) all fees and expenses incurred in connection with compliance with federal
securities and state securities or Blue Sky laws, (iii) printing expenses
(including, without limitation, expenses of printing certificates for the
Exchange Notes to be issued in the Exchange Offer and printing of prospectuses),
(iv) messenger, delivery and telephone expenses, (v) all fees and disbursements
of counsel for TV Filme, (vi) fees and disbursements of independent auditors of
TV Filme (including the expenses of any special audit and comfort letters
required by or incident to such performance), (vii) internal expenses of TV
Filme (including, without limitation, all salaries and expenses of officers and
employees of TV Filme performing legal or accounting duties), and (viii) fees
and expenses, if any, incurred in connection with the listing of the Exchange
Notes on any securities exchange.
34
<PAGE>
TV Filme has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or others soliciting
acceptance of the Exchange Offer. TV Filme, however, will pay the Exchange Agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
TV Filme will pay all transfer taxes, if any, applicable to the exchange of
Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed
for any reason other than the exchange of Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption is not submitted
with the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, as reflected in TV Filme's accounting records on the date of the
exchange. Accordingly, no gain or loss will be recognized by TV Filme for
accounting purposes. The expenses of the Exchange Offer and the unamortized
expenses related to the issuance of the Old Notes will be amortized over the
term of the Exchange Notes.
RESALES OF THE EXCHANGE NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, TV Filme believes that the Exchange
Notes issued pursuant to the Exchange Offer to an Eligible Holder in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by
such Eligible Holder (other than (i) a broker-dealer who purchased Old Notes
directly from TV Filme for resale pursuant to Rule 144A under the Securities Act
or any other available exemption under the Securities Act, or (ii) a person that
is an affiliate of TV Filme within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the Eligible Holder is acquiring
the Exchange Notes in the ordinary course of business and is not participating,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes. TV Filme has not requested or obtained an
interpretive letter from the Commission staff with respect to this Exchange
Offer, and TV Filme and the Eligible Holders are not entitled to rely on
interpretive advice provided by the staff to other persons, which advice was
based on the facts and conditions represented in such letters. However, the
Exchange Offer is being conducted in a manner intended to be consistent with the
facts and conditions represented in such letters. If any Eligible Holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such Eligible Holder
cannot rely on the position of the staff of the Commission enunciated in MORGAN
STANLEY & CO., INCORPORATED (available June 5, 1991) and EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), or interpreted in the Commission's letters
to SHEARMAN AND STERLING (available July 2, 1993) and K-III COMMUNICATIONS
CORPORATION (available May 14, 1993), or similar no-action or interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, unless an exemption from registration is otherwise available. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making or other trading activities, must, in connection with any
resale of such Exchange Notes, comply with the prospectus delivery requirements
of the Securities Act and must acknowledge that it will deliver a prospectus in
connection with any such resale. TV Filme has agreed that, for a period of
twelve months after the date of this Prospectus, it will make this Prospectus,
as amended and supplemented, available to any broker-dealer who receives
Exchange Notes in the Exchange Offer for use in connection with any such resale.
See "Plan of Distribution."
35
<PAGE>
CONSEQUENCE OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the offer or sale of the Old Notes pursuant to an exemption from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold, unless registered under the Securities Act, except
pursuant to an exception from, or in a transaction not subject to, the
Securities Act and applicable states securities laws. TV Filme does not
currently anticipate that it will register the Old Notes under the Securities
Act. See "Risk Factors--Risk Factors Relating to the Company and the Exchange
Offer--Consequences of Failure to Exchange."
OTHER
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of the Old Notes are
urged to consult their financial and tax advisers in making their own decisions
on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, TV
Filme will have fulfilled certain covenants contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights, and limitations applicable thereto, under the Indenture, except for
any such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer. See "Description of Exchange Notes." All untendered Old
Notes will continue to be subject to the restrictions on transfer of such Old
Notes as set forth in the legend thereon and in the Indenture. To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered Old Notes could be adversely affected.
TV Filme may in the future seek to acquire untendered Old Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. TV Filme has no present plan to acquire any Old Notes which are
not tendered in the Exchange Offer.
36
<PAGE>
EXCHANGE RATE DATA
There are two legal foreign exchange markets in Brazil: the Commercial
Market and the Floating Market. The Commercial Market is reserved primarily for
foreign trade transactions and transactions that generally require prior
approval from Brazilian monetary authorities, including the purchase and sale of
registered investments by foreign persons and related remittances of funds
abroad, including a purchase by TV Filme of the Intercompany Note. Purchases of
foreign exchange in the Commercial Market may be carried out only through a
financial institution in Brazil authorized to buy and sell currency in that
market. The "Floating Market Rate" generally applies to transactions to which
the "Commercial Market Rate" does not apply. Prior to the implementation of the
Real Plan, the Commercial Market Rate and the Floating Market Rate differed
significantly at times. Since the introduction of the REAL, the two rates have
not differed significantly, although there can be no assurance that there will
not be significant differences between the two rates in the future. Both the
Commercial Market Rate and the Floating Market Rate are reported by the Central
Bank on a daily basis.
Both the Commercial Market Rate and the Floating Market Rate are freely
negotiated but are strongly influenced by the Central Bank, which typically
intervened in the Commercial Market, prior to the implementation of the Real
Plan, in order to control fluctuations and to regulate disparities between the
Commercial Market Rate and the Floating Market Rate. After implementation of the
Real Plan, the Central Bank allowed the REAL to float with minimal intervention.
However, as described below, on March 6, 1995, the Central Bank announced its
intention to intervene in the foreign exchange markets and has subsequently
intervened in the markets and taken other actions affecting such markets.
On August 1, 1993, the CRUZEIRO REAL replaced the CRUZEIRO as the unit of
Brazilian currency, with each CRUZEIRO REAL being equal to 1,000 CRUZEIROS.
Beginning in 1994, the Brazilian Government began implementation of the Real
Plan. On July 1, 1994, the REAL replaced the CRUZEIRO REAL as the unit of
Brazilian currency, with each REAL being equal to 2,750 CRUZEIROS REAIS and
having an exchange rate of R$1.00 to US$1.00. According to Brazilian law, the
issuance of REAIS is controlled by quantitative limits backed by a corresponding
amount of U.S. dollars in reserves, but the Brazilian Government subsequently
expanded those quantitative limits and allowed the REAL to float, with parity
between the REAL and the U.S. dollar (R$1.00 to US$1.00) as a ceiling.
On March 6, 1995, the Central Bank announced that it would intervene in the
market and buy or sell U.S. dollars, establishing a band (FAIXA DE FLUTUACAO) in
which the exchange rate between the REAL and the U.S. dollar could fluctuate.
The Central Bank initially set the band with a floor of R$0.86 per US$1.00 and a
ceiling of R$0.90 per US$1.00 and provided that, from and after May 2, 1995, the
band would fluctuate between R$0.86 and R$0.98 per US$1.00. Shortly thereafter,
the Central Bank issued a new directive providing that the band would be between
R$0.88 and R$0.93 per US$1.00. On June 22, 1995, the Central Bank issued another
directive providing that the band would be between R$0.91 and R$0.99 per US$1.00
and subsequently reset the band on January 30, 1996 to between R$0.97 and R$1.06
per US$1.00. There can be no assurance that the band will not be altered in the
future.
The following table sets forth the Commercial Market Rate for the periods
indicated.
<TABLE>
<CAPTION>
EXCHANGE RATES OF BRAZILIAN CURRENCY PER
US$1.00(1)
--------------------------------------------------
<S> <C> <C> <C> <C>
PERIOD LOW HIGH AVERAGE(2) PERIOD-END
- ------------------------------------------------------- ----------- ----------- ----------- -----------
1990................................................... 0.000004 0.000062 0.000025 0.000062
1991................................................... 0.000062 0.000389 0.000149 0.000389
1992................................................... 0.000393 0.004505 0.001655 0.004505
1993................................................... 0.004557 0.118584 0.032809 0.118584
1994................................................... 0.120444 0.940000 0.645000 0.846000
1995................................................... 0.834000 0.972600 0.917742 0.972500
1996................................................... 0.097260 1.040000 1.006300 1.039400
1997 (through January 13).............................. 1.039500 1.042000 1.040800 1.042000
</TABLE>
- ------------------------------
(1) The information set forth above is based on information published by the
Central Bank. The Federal Reserve Bank of New York does not publish a
noon-buying rate for REAIS.
(2) Weighted average of the exchange rates on business days for the period.
37
<PAGE>
THE COMPANY
The predecessor of TV Filme was founded in 1989 by certain members of the
Company's current senior management team. In September 1989, the Company was
granted a license to operate a wireless cable system in Brasilia, the capital of
Brazil, and commenced operations in 1990 with a one channel offering. Licenses
to operate the Goiania and Belem systems were acquired in 1994 from TVA Sistema.
From 1993 through 1996, the Company raised an aggregate of approximately
$16.8 million through a series of private equity placements to Tevecap and
Warburg, Pincus. TV Filme completed the Initial Public Offering in August 1996
with net proceeds of approximately $24.4 million. With proceeds from these
financings, the Company increased the channel offerings in Brasilia, launched
new wireless cable television systems in Goiania and Belem and expanded its
subscriber base. The Company has exclusive rights in its current operating
markets to transmit, via MMDS and hardwire cable, programming offered by Tevecap
and its subsidiaries.
In connection with the Initial Public Offering, TV Filme was formed in April
1996 to become the holding company of and successor to ITSA. ITSA was formed in
May 1994 as a holding company for and successor to TV Filme Servicos de
Telecomunicacoes S.A. ("TVFSA"), the predecessor of TV Filme Servicos.
In connection with the Initial Public Offering, TV Filme entered into a
reorganization (the "Reorganization") pursuant to which all of the preferred
stock of ITSA was converted into common stock of ITSA and each share of common
stock of ITSA was exchanged for 1,844 shares of Common Stock of TV Filme.
Pursuant to the Reorganization, (i) 51% of the voting stock of TV Filme Servicos
was transferred to TVTEL Ltda., an entity all the stock of which is owned by
certain stockholders of TV Filme who are Brazilian nationals, including certain
directors and executive officers of TV Filme (namely Tevecap, Mrs. Maria Nise
Studart Lins de Albuquerque, Messrs. Hermano Lins and Carlos Andre Lins and Ms.
Maria Veronica Lins) with ITSA retaining 49% of the voting stock and 83% of the
economic interests in TV Filme Servicos; (ii) the operating assets of the
wireless cable system of Brasilia were transferred from TV Filme Servicos to TV
Filme Brasilia; and (iii) TV Filme Servicos entered into various agreements with
ITSA and its subsidiaries pursuant to which, among other things, TV Filme
Servicos has authorized ITSA to operate the existing wireless cable systems
under its current licenses and to operate future cable systems under future
license grants. TV Filme owns 100% of ITSA, which holds 49% of the voting stock
and 83% of the economic interests of TV Filme Servicos, and 100% of TV Filme
Brasilia, TV Filme Goiania and TV Filme Belem.
TV Filme is a publicly-traded Delaware corporation. Its major stockholders
include Tevecap, a leading pay television operator in Brazil and the country's
largest pay television programming distributor, Warburg, Pincus, and certain
members of management and their family.
38
<PAGE>
The Company's organizational structure is as follows:
[Contains a chart describing the organizational structure of the Company. The
Chart explains that TV Filme is 100% owned by existing U.S. stockholders and
certain existing Brazilian stockholders, that ITSA is 100% owned by TV Filme,
that TV Filme Brasilia, TV Filme Goiania and TV Filme Belem are 100% owned by
ITSA. In addition, the Chart indicates that ITSA has a 49% voting interest and
83% equity interest in TV Filme Servicos, and that TVTEL Ltda. has a 51% voting
interest and 17% total equity interest in TV Filme Servicos. The Chart also
shows that TVTEL Ltda. is 100% owned by Brazilian stockholders.]
39
<PAGE>
CAPITALIZATION
The following table sets forth the actual and as adjusted cash and cash
equivalents, restricted cash and capitalization of the Company, on an unaudited
basis, as of September 30, 1996. As adjusted cash and cash equivalents,
restricted cash and capitalization gives effect to the receipt of the estimated
net proceeds from the sale of the Old Notes. This table should be read in
conjunction with the Consolidated Financial Statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
<S> <C> <C>
AS
ACTUAL ADJUSTED
--------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents, excluding restricted cash......................................... $ 19,618 $ 119,468
Restricted cash(1)........................................................................... -- 33,500
--------- -----------
Total cash and cash equivalents, including restricted cash................................. $ 19,618 $ 152,968
--------- -----------
--------- -----------
Long-term debt:
12 7/8% Senior Notes due 2004.............................................................. $ -- $ 140,000
Payables to affiliate...................................................................... 200 200
--------- -----------
Total long-term debt..................................................................... $ 200 $ 140,200
--------- -----------
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued............. 0 0
Common stock, $.01 par value; 50,000,000 shares authorized and 10,166,176 shares issued and
outstanding(2)........................................................................... 102 102
Additional paid-in capital................................................................. 41,553 41,553
Deficit.................................................................................... (3,016) (3,016)
--------- -----------
Total stockholders' equity............................................................... 38,639 38,639
--------- -----------
Total capitalization................................................................... $ 38,839 $ 178,839
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) A portion of the proceeds of the Intercompany Note was used to purchase the
Pledged Securities, scheduled interest and principal payments on which are
in an amount sufficient to provide for payment in full when due of the
first four scheduled interest payments on the Notes.
(2) Excludes (i) 936,432 shares of Common Stock reserved for issuance upon the
exercise of stock options available for grant under TV Filme's 1996 Stock
Option Plan (as defined herein) pursuant to which options to purchase
407,000 shares of Common Stock have been granted, 297,000 of which are
exercisable at $10.00 per share and 110,000 of which are exercisable at
$11.00 per share, and which generally vest and become exercisable at the
rate of 20% per year for five years beginning on August 2, 1997 and (ii)
794,764 shares of Common Stock issuable upon the exercise of certain
warrants, all of which are currently exercisable at an exercise price of
$6.52 per share. See "Management--Stock Options--1996 Stock Option Plan."
40
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA(1)
The selected consolidated balance sheet data as of December 31, 1994 and
December 31, 1995 and the selected consolidated statement of operations data for
each of the years ended December 31, 1993, 1994 and 1995 are derived from, and
are qualified by reference to, the Consolidated Financial Statements, which have
been audited by Ernst & Young Auditores Independentes S.C., independent
auditors, and which are included elsewhere in this Prospectus. The selected
consolidated balance sheet data as of December 31, 1991, 1992 and 1993 and as of
September 30, 1996, and the selected consolidated statement of operations data
as of and for the years ended December 31, 1991 and 1992 and the nine-month
periods ended September 30, 1995 and 1996, are derived from unaudited financial
statements and include all adjustments, consisting of normal recurring accruals,
which the Company considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Results of operations
for the nine months ended September 30, 1996 are not necessarily indicative of
operations for the full year. The Consolidated Financial Statements have been
prepared in accordance with U.S. GAAP in U.S. dollars. For this purpose, amounts
in Brazilian currency for all periods presented have been remeasured into U.S.
dollars in accordance with the methodology set forth in Statement of Financial
Accounting Standards No. 52 ("SFAS No. 52") as it applies to entities operating
in highly inflationary economies. Pursuant to SFAS No. 52, supplies, property,
plant and equipment, intangibles and deferred installation fees and the related
income statement accounts are remeasured at exchange rates in effect when the
assets were acquired or the liabilities were incurred. All other assets and
liabilities are remeasured at fiscal year end exchange rates, and all other
income and expense items are remeasured at average exchange rates prevailing
during the year. Remeasuring adjustments are included in net income (loss) for
the period. The data presented below should be read in conjunction with the
Consolidated Financial Statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- -----------
<CAPTION>
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT RATIO AND
OTHER OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $ 35 $ 69 $ 287 $ 2,438 $ 11,404 $ 6,735 $ 21,287
Operating costs and expenses:
System operating.............................. 9 7 196 773 2,957 1,789 6,092
Selling, general and administrative........... 24 38 558 2,394 8,975 5,815 11,615
Depreciation and amortization................. 8 11 43 365 2,049 1,196 3,996
--------- --------- --------- --------- --------- --------- -----------
Total operating costs and expenses.......... 41 56 797 3,532 13,981 8,800 21,703
--------- --------- --------- --------- --------- --------- -----------
Operating income (loss)......................... (6) 13 (510) (1,094) (2,577) (2,065) (416)
Other income (expense).......................... -- -- (6) 1,612 360 258 (431)
--------- --------- --------- --------- --------- --------- -----------
Net income (loss)............................... $ (6) $ 13 $ (516) $ 518 $ (2,217) $ (1,807) $ (847)
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
Net income (loss) per share (2)................. $ 0.00 $ 0.00 $ (0.10) $ 0.08 $ (0.27) $ (0.22) $ (0.10)
Weighted average number of common stock and
common stock equivalents outstanding (2)...... 4,516 4,516 5,295 6,885 8,086 8,086 8,680
OTHER FINANCIAL DATA:
EBITDA(3)....................................... $ 2 $ 24 $ (467) $ (729) $ (216) $ (556) $ 3,580
Capital expenditures............................ 78 31 852 3,637 16,621 10,866 17,481
Ratio of earnings to fixed charges(4)........... -- 5.3x -- 12.5x -- -- --
OTHER OPERATING DATA:
Number of subscribers at end of period(5)....... 50 135 1,864 7,641 36,594 27,024 70,591
Average monthly revenue per subscriber(6)....... -- -- $ 30.43 $ 34.13 $ 40.00 $ 39.70 $ 39.76
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- -------------
<CAPTION>
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............................... $ 7 $ -- $ 279 $ 3,204 $ (6,230) $ 13,505
Property, plant and equipment, net...................... 67 86 895 4,182 18,870 32,423
Total assets............................................ 74 87 1,795 10,008 23,683 60,269
Total long-term debt.................................... -- -- -- 600 400 200
Stockholders' equity(7)................................. 73 86 982 6,500 7,895 38,639
</TABLE>
- ------------------------
(1) The Selected Consolidated Financial Data includes (i) TV Filme Servicos on a
historical basis and (ii) ITSA and its subsidiaries since May 1994 and the
predecessor of ITSA on a historical basis, as though they had been part of
TV Filme for all periods presented. See Note 1a to the Consolidated
Financial Statements.
(2) Net income (loss) per share (after giving effect to the Reorganization) is
calculated using the weighted average number of shares of stock outstanding
during the period together with the number of shares issuable upon the
exercise of options and warrants issued during the twelve months prior to
the Offering.
(3) EBITDA is defined as operating income (loss) plus depreciation, amortization
and non-cash charges. EBITDA is a commonly used measure of performance in
the pay television industry. While EBITDA should not be construed as a
substitute for operating income (loss) or a better measure of liquidity than
cash flow from operating activities, each of which is determined in
accordance with U.S. GAAP, it is included herein to provide additional
information regarding the ability of the Company to meet its capital
expenditures, working capital requirements and any future debt service.
EBITDA, however, is not necessarily a measure of the Company's ability to
fund its cash needs, because it does not include capital expenditures, which
the Company expects to continue to be significant. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
(4) For the years ended December 31, 1991, 1993 and 1995 and the nine months
ended September 30, 1995 and 1996, earnings were insufficient to cover fixed
charges by $6,000, $516,000, $2,217,000, $1,807,000 and $847,000,
respectively. For purposes of calculating the ratio of earnings to fixed
charges: (i) earnings consist of loss before income taxes, plus fixed
charges and (ii) fixed charges consist of interest, plus one third of rental
payments on operating leases (such amounts having been deemed by the Company
to represent the interest portion of such payments).
(5) See "Business--Operating Systems and the Company's Markets."
(6) Average monthly revenue per subscriber is calculated by dividing
subscription revenue for the month by the average number of subscribers for
the month.
(7) TV Filme has never paid cash dividends on its Common Stock.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS REFLECTS THE HISTORICAL RESULTS OF THE COMPANY. DUE TO THE LIMITED
OPERATING HISTORY, STARTUP NATURE AND RAPID GROWTH OF THE COMPANY AND
TRANSLATIONS OF BRAZILIAN CURRENCY INTO U.S. DOLLARS, PERIOD-TO-PERIOD
COMPARISONS OF FINANCIAL DATA ARE NOT NECESSARILY INDICATIVE, AND SHOULD NOT BE
RELIED UPON AS AN INDICATOR, OF THE FUTURE PERFORMANCE OF THE COMPANY.
OVERVIEW
The Company develops, owns and operates pay television systems in mid-sized
markets in Brazil. The Company is the sole provider of MMDS in the cities of
Brasilia, Goiania and Belem. Since the beginning of 1994, the Company's
subscriber base has grown substantially, increasing from 1,864 subscribers to
70,591 subscribers as of September 30, 1996.
Historically, the Company has generated operating losses, which may increase
to the extent that operations of additional systems are commenced or acquired.
As the Company continues to develop systems, positive EBITDA(1) from more
developed systems is expected to be partially or completely offset by corporate
overhead, negative EBITDA from less developed systems and from development costs
associated with establishing new systems. This trend is expected to continue
until the Company has a sufficiently large subscriber base to absorb operating
and development costs of new systems. There can be no assurance that the Company
will be able to achieve or sustain net income in the future. The Company's
Brasilia System became system EBITDA positive in the third quarter of 1994, with
approximately 6,000 subscribers, and generated system EBITDA of $5.6 million and
operating income of $3.2 million for the nine months ended September 30, 1996.
The Company's Belem System became system EBITDA positive in the fourth quarter
of 1995, with approximately 5,000 subscribers, and generated system EBITDA of
$809,000 and operating loss of $42,000 for the nine months ended September 30,
1996.
Each of the Company's systems has required an initial capital investment of
approximately $1.0 million to $1.5 million to build and install a transmission
tower, headend facilities and other equipment. These costs are generally
depreciated over ten years. In addition, each new subscriber requires an average
incremental investment of approximately $470, which includes the cost of a
decoder box, installation labor and materials, other equipment and supplies,
marketing and selling costs. The Company capitalizes installation costs,
including installation labor, decoders and other direct costs, and depreciates
these costs over five years. The Company charges new subscribers installation
fees which vary from market to market, depending on factors which include the
subscriber's access to other forms of pay television and whether the
installation is the first installation in a building. The Company charges its
subscribers an installation fee ranging from $90-$180. The Company expects to
lower installation charges per subscriber as it expands its subscriber base. The
Company defers installation fees, net of direct selling expenses, and recognizes
these fees as revenues ratably over a five-year period.
The Company's substantial subscriber growth has resulted from the addition
of subscribers in Brasilia and from the launch of operating systems in Goiania
and Belem. Television subscription revenues primarily consist of monthly fees
paid by subscribers for the programming package as well as installation fees
recognized for the period. System operating expenses include programming costs,
a portion of the costs of
- ------------------------
(1) EBITDA is defined as operating income (loss) plus depreciation, amortization
and non-cash charges. EBITDA is a commonly used measure of performance in
the pay television industry. While EBITDA should not be construed as a
substitute for operating income (loss) or a better measure of liquidity than
cash flow from operating activities, each of which is determined in
accordance with U.S. GAAP, it is included herein to provide additional
information regarding the ability of the Company to meet its capital
expenditures, working capital requirements and any future debt service.
EBITDA, however, is not necessarily a measure of the Company's ability to
fund its cash needs, because it does not include capital expenditures, which
the Company expects to continue to be significant.
43
<PAGE>
compensation and benefits for the Company's employees, vehicle rental costs,
transmitter site rentals, repair and maintenance expenditures and service call
costs. Depreciation and amortization expenses consist primarily of depreciation
of decoder boxes, headend facilities and installation costs.
The development of a new system requires significant expenditures, a
substantial portion of which are incurred before the realization of revenues.
These expenditures, together with the associated early operating expenses,
result in negative cash flow until an adequate revenue generating subscriber
base is established. As the subscriber base increases, revenue, as well as
certain costs such as programming costs, generally increase while other costs,
such as tower rental and related maintenance costs, remain constant or increase
at proportionately lower levels. Accordingly, although costs increase in the
aggregate as the subscriber base grows, the average costs per subscriber
generally decrease and operating margins generally increase.
Although the Company's financial statements are presented pursuant to U.S.
GAAP in U.S. dollars, the Company's transactions are consummated in both REAIS
and U.S. dollars. Inflation and devaluation in Brazil have had, and may continue
to have, substantial effects on the Company's results of operations and
financial condition. The Company does not seek to hedge currency risks in the
financial markets or otherwise. See "Risk Factors--Risk Factors Relating to
Brazil" and "Annex B--The Federative Republic of Brazil--Brazilian Economic
Environment--Effects of Inflation."
TV Filme, as a holding company, is dependent on the receipt of dividends and
payment of intercompany obligations from its operating subsidiaries in order to
meet its cash requirements. The payment of dividends from the subsidiaries of TV
Filme to TV Filme and the payment of any interest on or the repayment of any
principal of any loans or advances made by TV Filme to any of its subsidiaries
may be subject to statutory or contractual restrictions, are contingent on the
earnings and performance of such subsidiaries and are subject to various
business considerations.
RESULTS OF OPERATIONS
SELECTED OPERATING DATA. The following table sets forth certain expense and
other data derived from the Consolidated Financial Statements as a percentage of
the Company's revenues for each period presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
Revenues................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
System operating......................................... 68.3 31.7 25.9 26.6 28.6
Selling, general and administrative...................... 194.4 98.2 78.7 86.3 54.6
Depreciation and amortization............................ 15.0 15.0 18.0 17.8 18.8
--------- --------- --------- --------- ---------
Total operating costs and expenses..................... 277.7 144.9 122.6 130.7 102.0
--------- --------- --------- --------- ---------
Operating income (loss).................................... (177.7) (44.9) (22.6) (30.7) (2.0)
Other income (expense)..................................... (2.1) 66.1 3.2 3.9 (2.0)
--------- --------- --------- --------- ---------
Net income (loss).......................................... (179.8)% 21.2% (19.4)% (26.8)% (4.0)%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
REVENUES. The Company's revenues primarily consist of monthly fees paid by
subscribers for the programming package, as well as installation fees recognized
for the period. Revenues increased from approximately $300,000 in 1993 to
approximately $2.4 million in 1994 primarily due to an increase in the average
number of subscribers in the Brasilia System of 4,753. In addition, the average
monthly revenue per subscriber increased from $30.43 in 1993 to $34.13 in 1994.
Revenues increased from approximately
44
<PAGE>
$2.4 million in 1994 to approximately $11.4 million in 1995 primarily due to an
increase in the average number of subscribers in the Brasilia System of 16,513
and the launch of two new operating systems in Goiania and Belem, which had
average subscribers of 5,605. Additionally, installation fees recognized
increased by $1.4 million from 1994 to 1995. The average monthly revenue per
subscriber increased due to an increase in monthly subscription fees implemented
during 1995. Revenues increased from approximately $6.7 million for the nine
months ended September 30, 1995 to approximately $21.0 million for the nine
months ended September 30, 1996, primarily due to an aggregate increase of
36,260 in the average number of subscribers in the Company's operating systems.
Average monthly revenue per subscriber was $39.76 for the nine months ended
September 30, 1996 compared to $39.70 for the nine months ended September 30,
1995.
SYSTEM OPERATING EXPENSES. System operating expenses include programming
costs, a portion of costs of compensation and benefits for the Company's
employees, vehicle rental costs, transmitter site rentals, repair and
maintenance expenditures and service call costs. System operating expenses, net
of capitalized installation costs, increased from approximately $200,000 in 1993
to approximately $800,000 in 1994 primarily due to an increase of approximately
$300,000 in compensation and benefits, primarily to employees in the customer
service and engineering departments and to an increase in programming expenses
of approximately $200,000. System operating expenses, net of capitalized
installation costs, increased from approximately $800,000 in 1994 to
approximately $3.0 million in 1995 due to an increase in programming expenses of
$1.2 million and to an increase in compensation and benefits, primarily to
employees in the customer service and engineering departments, of $500,000.
System operating expenses, net of capitalized installation costs, increased from
approximately $1.8 million for the nine months ended September 30, 1995 to
approximately $6.1 million for the nine months ended September 30, 1996,
primarily due to an increase in programming expenses of approximately $3.9
million and an increase in compensation and benefits of approximately $300,000,
primarily to employees in the customer service and engineering departments. From
1993 through the nine months ended September 30, 1996, programming expenses were
affected by the increase in the number of subscribers over the period, since
programming expenses are charged on a per subscriber basis, but this increase
was mitigated during 1993 through 1995 by decreasing programming costs per
subscriber due to volume discounts. Additionally, the Company received discounts
from list prices on Tevecap programming from July 1993 through October 1995
which amounted to $28,000, $340,000 and $539,000 in 1993, 1994 and 1995,
respectively. Such discounts are not expected to recur.
SELLING, GENERAL AND ADMINISTRATIVE COSTS. Selling, general and
administrative expenses ("SG&A") increased from approximately $600,000 in 1993
to approximately $2.4 million in 1994 primarily due to an increase in
compensation and benefits of $800,000, primarily to employees in the sales
department, and an increase in advertising expenses of approximately $200,000.
However, from 1993 to 1994, SG&A decreased as a percentage of revenues from
194.4% to 98.2%. SG&A increased from approximately $2.4 million in 1994 to
approximately $9.0 million in 1995 but as a percentage of revenues decreased to
approximately 78.7% from approximately 98.2%. During 1995, compensation and
benefits increased by $3.6 million, primarily to employees in the sales
department and senior management, advertising increased by $500,000 and there
was non-cash compensation expense in 1995 of $300,000 in connection with a grant
of stock options. SG&A increased from approximately $5.8 million for the nine
months ended September 30, 1995 to approximately $11.6 million for the nine
months ended September 30, 1996, but as a percentage of revenues decreased to
approximately 54.6% from 86.3%. Compensation and benefits increased by
approximately $2.5 million from the nine months ended September 30, 1995 to the
nine months ended September 30, 1996, primarily due to additions to management,
additional employees in the sales department and more commissions paid to sales
employees. The Company added employees primarily in the sales department to
service the Company's expanded subscriber base and growth, including the
expansion into the Goiania and Belem markets. Advertising expenses increased by
approximately $700,000 from the nine months ended September 30, 1995 to the nine
months ended September 30, 1996.
45
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
consist primarily of depreciation of decoder boxes, headend facilities and
capitalized installation costs. Since inception, the Company's direct costs of
obtaining subscribers generally have exceeded installation revenues. These costs
are capitalized and depreciated over a five year period. Depreciation and
amortization expense increased from approximately $40,000 in 1993 to
approximately $400,000 in 1994 due to an increase in the number of subscribers
in the Brasilia System. Depreciation and amortization expense increased from
approximately $400,000 in 1994 to approximately $2.0 million in 1995 due to an
increase in the number of subscribers in the Brasilia System and the launch of
two new operating systems in Goiania and Belem. Depreciation and amortization
expense increased from approximately $1.2 million for the nine months ended
September 30, 1995 to approximately $4.0 million for the nine months ended
September 30, 1996, primarily due to increases in the number of installed
subscribers in each of the Company's three operating systems.
OPERATING INCOME (LOSS). Operating loss increased from 1993 to 1994 and
from 1994 to 1995 primarily due to increases in expenses in connection with the
development of the Company's business, as explained above. For the nine month
period ended September 30, 1996, the Company generated an operating loss of
approximately $400,000, primarily due to expenses in connection with the
expansion of the Company's business. The Company may continue to generate
operating losses as it further expands its existing systems and develops
additional systems.
OTHER INCOME (EXPENSE). Interest expense for 1993 and 1994 was
insignificant. Interest expense increased in 1995 as a result of short-term
borrowings from Abril and certain of its affiliates of approximately $1.7
million incurred by the Company to finance the development and launch of the
Goiania System and the Belem System and to support an increase in the number of
subscribers. Interest income for 1993 was insignificant. Interest income during
1994 was generated by the short-term investment of the proceeds of a $5.0
million private placement in 1994. In 1995, interest income was generated by
cash on hand at the beginning of 1995 and the short-term investment of the
proceeds of a $3.3 million private placement in 1995. Interest expense increased
by $100,000 from the nine months ended September 30, 1995 to the nine months
ended September 30, 1996 primarily as a result of higher average short-term
borrowings from Abril and certain of its affiliates. Interest income decreased
by $500,000 from the nine months ended September 30, 1995 to the nine months
ended September 30, 1996 primarily as a result of lower average short-term
investments.
Exchange and translation gains have arisen primarily as a result of
short-term investments and borrowings denominated in REAIS, and to a lesser
extent from the translation of financial statements from REAIS to U.S. dollars
in accordance with SFAS No. 52, with the U.S. dollar as the functional currency.
These amounts can fluctuate significantly as a result of changes in the exchange
rate of the REAL relative to the U.S. dollar. See "Risk Factors--Risk Factors
Relating to Brazil."
INCOME TAXES. At December 31, 1995, the Company had $5.2 million of net
operating loss carryforwards, of which approximately $1.3 million were
attributable to TV Filme Servicos. As a result of the restructuring which
occurred in connection with the Initial Public Offering, the net operating loss
carryforwards of TV Filme Servicos, which is no longer a wholly-owned subsidiary
of the Company, are available only to offset its own income and are not
available to offset any profits generated by TV Filme and its consolidated
subsidiaries. Under Brazilian law, the carryforward period for net operating
losses is unlimited. Use of these losses, however, is limited to 30% of taxable
income in a tax period. The Company has not recorded a tax benefit for any
period. The Company's net deferred tax assets have been entirely offset by a
valuation allowance, and the Company expects to generate operating losses for
the foreseeable future. Effective January 1, 1996, Brazilian effective tax rates
declined from approximately 48% to approximately 30.5%.
NET INCOME (LOSS). As explained above, net loss in the periods presented,
other than 1994, is primarily attributable to the significant expenses incurred
in connection with the development of the
46
<PAGE>
Company's business. Net income in 1994 was due to interest income and exchange
gains which were greater than operating losses.
QUARTERLY RESULTS. The following table sets forth summary historical
information on a quarterly basis for the Company as a whole.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/94 9/30/94 12/31/94 3/31/95 6/30/95 9/30/95 12/31/95 3/31/96
----------- ----------- ----------- --------- --------- --------- ----------- ---------
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Subscribers.................... 4,480 5,796 7,641 11,924 19,009 27,024 36,594 47,066
Revenues....................... $ 457 $ 732 $ 1,000 $ 1,364 $ 2,149 $ 3,222 $ 4,669 $ 5,852
Operating income (loss)........ $ (176) $ (217) $ (540) $ (874) $ (668) $ (523) $ (512) $ (139)
EBITDA......................... $ (109) $ (109) $ (404) $ (638) $ (306) $ 388 $ 340 $ 959
Net income (loss).............. $ (131) $ 768 $ 35 $ (656) $ (619) $ (532) $ (411) $ (459)
<CAPTION>
<S> <C> <C>
6/30/96 9/30/96
--------- ---------
<S> <C> <C>
Subscribers.................... 59,036 70,591
Revenues....................... $ 6,781 $ 8,654
Operating income (loss)........ $ (262) $ (15)
EBITDA......................... $ 1,065 $ 1,557
Net income (loss).............. $ (311) $ (77)
</TABLE>
The Company's growth has resulted from expansion of the Brasilia System's
subscriber base, the launch of the Goiania System and Belem System in January
1995 and February 1995, respectively, and the expansion of such systems.
LIQUIDITY AND CAPITAL RESOURCES
The pay television business is a capital intensive business. The Company
made capital expenditures of approximately $3.6 million in 1994, $16.6 million
in 1995 and $17.5 million in the nine months ended September 30, 1996. Such
capital expenditures were financed principally through vendor financing, loans
from affiliates and equity offerings. From 1993 through 1996, the Company raised
an aggregate of approximately $16.8 million through a series of private equity
placements to Tevecap and Warburg, Pincus. In August 1996, TV Filme consummated
the Initial Public Offering with net proceeds to the Company of $24.4 million.
In the past, working capital requirements have been met primarily by (i) vendor
financing which requires payment within 360 days of shipment, some of which has
been supported by irrevocable letters of credit guaranteed by Abril and certain
of its affiliates and (ii) borrowings from Abril and certain of its affiliates.
As of September 30, 1996, the Company had repaid working capital borrowings from
Abril and certain of its affiliates in their entirety with a portion of the net
proceeds from the Initial Public Offering. As a result of the Initial Public
Offering, the Company does not expect to continue borrowing from Abril or its
affiliates. As of September 30, 1996, the Company has a payable to Abril of
$400,000 in connection with the Company's purchase of the Belem and Goiania
licenses from Abril. Such amount is due in two equal installments in February of
1997 and 1998.
As of September 30, 1996, approximately $7.5 million was outstanding under
letters of credit with maturities ranging from 30 days to 360 days, of which
approximately $4.7 million was guaranteed by affiliates of TV Filme. As of
September 30, 1996, the Company had a $5.0 million line of credit with a
commercial bank, of which approximately $2.0 million was available on such date.
The Company currently believes that lines of credit, additional vendor financing
and other credit facilities are available on acceptable terms. As a result of
the Initial Public Offering, the Company had positive working capital at
September 30, 1996 in the amount of $13.6 million. Net cash provided by
operating activities for the nine months ended September 30, 1996 was
approximately $6.0 million.
For the last quarter of 1996, the Company anticipates that its aggregate
capital expenditures in its existing operating markets will be approximately
$9.0 million, comprised primarily of subscriber installation equipment. In
addition to expanding its subscriber base in its existing systems, the Company
is seeking to launch additional systems, and applications have been made for the
Company to operate wireless cable systems in 27 additional markets in Brazil. As
a result of the uncertainty regarding the process for granting new concessions
and licenses for MMDS services following a preliminary injunction issued by the
Brazilian Federal Supreme Court and the Presidential Decree, there can be no
assurance as to the grant of any such concessions and licenses and the timing of
any such grants generally, or the grant of any such concessions
47
<PAGE>
and licenses and the timing of any grants to the Company. See "Risk
Factors--Risk Factors Relating to the Company and the Exchange Offer--Risks
Associated with New Markets and Growth Strategy," "Risk Factors--Risk Factors
Relating to the Company and the Exchange Offer--Government Regulation" and
"Business--Regulatory Environment--License Procedures." Based on current market
and operating conditions, the Company estimates that the cost of launching and
deploying any additional wireless cable operating system after the granting of a
new license in the Company's target markets could be up to approximately $12.0
million, including construction of a headend facility, subscriber-related
capital costs and funding initial development and marketing costs and operating
losses, depending on factors particular to each market. The Company also from
time to time may selectively pursue the acquisition of existing pay television
systems, although it currently has no understanding, commitment or agreement
with respect to any such acquisitions. The Company believes that the net
proceeds from the Offering, together with the Company's current cash and
internally generated funds, will be sufficient to fund its cash requirements for
at least the next twelve months. In the longer term, the Company's funding needs
are subject to a variety of factors, including the number and size of new system
launches or acquisitions, the implementation of alternative transmission
technologies and the offering of additional communications services.
Accordingly, there can be no assurance that the Company will be able to meet its
funding needs in the longer term.
The Company believes it is not likely that the pledge of the Intercompany
Note by TV Filme as security for the Notes and the issuance of the Subsidiary
Guarantees in support of the Intercompany Note will result in U.S. Federal
income tax liability. Although no assurance can be given that the Internal
Revenue Service ("IRS") will not assert that TV Filme is subject to U.S. Federal
income tax as a result of such pledge and guarantees, the Company does not
believe that the amount of any such tax, if imposed, would be material.
INFLATION AND EXCHANGE RATES
Inflation and exchange rate variations have had, and may continue to have,
substantial effects on the Company's results of operations and financial
condition. In periods of inflation, many of the Company's expenses will tend to
increase. Generally, in periods of inflation, a company is able to raise its
prices to offset the rise in its expenses and may set its prices without
government regulation. However, under Brazilian law designed to reduce
inflation, the rates which the Company may charge to a particular subscriber may
not be increased until the next anniversary of the subscribers initial
subscription date. Thus, the Company is less able to offset expense increases
with revenue increases. Accordingly, inflation may have a material adverse
effect on the Company's results of operations and financial condition.
Generally, the effects of inflation in Brazil have been offset in part by
devaluation of the Brazilian currency relative to the U.S. dollar. Devaluation
of the REAL may also have an adverse effect on the Company. The Company collects
substantially all of its revenues in REAIS, but pays certain of its expenses,
including a significant portion of its equipment costs and a portion of its
programming costs, in U.S. dollars. To the extent the REAL depreciates at a rate
greater than the rate at which the Company raises prices, the value of the
Company's revenues (as expressed in U.S. dollars) may be adversely affected.
This effect on the Company's revenues may negatively impact the Company's
ability to fund U.S. dollar-based expenditures. The Company does not currently
seek to hedge exchange rate risks in the financial markets or otherwise, as it
believes that the costs of such hedging outweigh the related risks. Accordingly,
devaluation of the REAL may have a material adverse effect on the Company's
results of operations and financial condition.
48
<PAGE>
BUSINESS
BRAZILIAN PAY TELEVISION INDUSTRY
The pay television industry in Brazil began in 1989 with the commencement of
UHF service in Sao Paulo. In contrast to the U.S., the Brazilian hardwire cable
industry and wireless cable industry began developing concurrently. By September
30, 1996, approximately 100 hardwire cable licenses and 12 wireless cable
licenses had been issued by the Ministry of Communications. The Company believes
that as of September 30, 1996, fewer than 15% of Brazilian homes were passed by
hardwire cable as compared to over 90% in the U.S. Brazil is the largest
television market in South America with an estimated 34.5 million television
households. As of September 30, 1996, there were an estimated 1.6 million pay
television subscribers, representing approximately 4.7% of Brazilian television
households. The Ministry of Communications has estimated that Brazil will have
approximately 16 million pay television subscribers by the year 2003.
As of December 31, 1995, Brazilian television households viewed an average
of more than 6.5 hours of television per day, as compared to an average of 6.8
hours per day in the United States. Viewers prefer Portuguese language
programming, including movies, sports and "novelas" (soap operas). The second
language of many Brazilians is English. U.S. culture generally, and U.S. films,
shows and sports in particular, are popular with Brazilians. The programming
market for pay television is dominated by Brazil's two largest media
conglomerates, Abril and the Globo Organization. Both groups offer programming
packages including a movie channel, a sports channel, a news channel, U.S. prime
time network shows and cartoons. In general, much of the Brazilian programming
transmitted by pay television systems, such as HBO Brazil, ESPN International
and MTV Latino, is based on formats found in the U.S. In addition, there are
programming packages which include channels directly from the U.S., such as
Warner, Sony and Superstation, as well as packages from Europe and other
countries in South America.
COMPANY OVERVIEW
The Company develops, owns and operates pay television systems in mid-sized
markets in Brazil, with populations of between 100,000 and 2.5 million. The
Company is the sole provider of MMDS in the cities of Brasilia, Goiania and
Belem. Together, these cities have a total population of approximately 5.7
million and encompass approximately 1.3 million households, an estimated 1.1
million of which can be served by the Company's LOS transmission. Since the
beginning of 1994, the Company's subscriber base has grown substantially,
increasing from 1,864 subscribers to 70,591 subscribers as of September 30,
1996. For the nine months ended September 30, 1996, average monthly revenue per
subscriber was $39.76. For the same period, the Company generated revenues of
approximately $21.3 million, an operating loss of approximately $416,000, a net
loss of approximately $847,000 and EBITDA of approximately $3.6 million.
The Company has filed applications for licenses to operate wireless cable
systems in an additional 27 markets in Brazil which have an aggregate population
of approximately 12.5 million and encompass approximately 2.7 million
households. An estimated 2.2 million of such households can be served by LOS
transmission. As a result of certain developments concerning the granting of new
concessions and licenses for the rendering of commercial telecommunications
services in Brazil, in the absence of further governmental action, the process
of granting new concessions and licenses for MMDS services is uncertain. There
can be no assurance as to the grant of any such concessions and licenses and the
timing of any such grants generally, or the grant of any such concessions and
licenses and the timing of any grants to the Company. See "Risk Factors--Risk
Factors Relating to the Company and the Exchange Offer--Risks Associated with
New Markets and Growth Strategy," "Risk Factors--Risk Factors Relating to the
Company and the Exchange Offer--Government Regulation" and "Business--Regulatory
Environment--License Procedures."
49
<PAGE>
Until September 9, 1996, licenses were granted for renewable periods of 10
years; under the Revised MMDS Rule licenses would be awarded for renewable
15-year periods. However, there can be no assurance as to the applicability of
the Revised MMDS Rule. Under the Revised MMDS Rule, MMDS licenses have a
coverage area of up to a 50 kilometer radius from transmission sites and permit
transmission of up to 31 wireless cable channels. The Company has requested the
right to increase channel transmission in its existing markets to 31 wireless
cable channels from its current 16 wireless cable channels and to extend the
coverage area in these markets beyond the existing 25 kilometer range, generally
up to the maximum coverage area. After giving effect to the extended coverage
area, the Company would reach approximately 70,000 additional LOS households.
The Company targets mid-sized markets with demographics, competitive
environments and topographies that it believes offer the Company the opportunity
to become the leading provider of pay television services in those markets. The
Company believes that mid-sized markets in Brazil are currently underpenetrated
by existing pay television providers. There is only one hardwire cable provider
in each of Brasilia and Goiania and no hardwire cable provider in Belem. Of the
approximately 1.3 million households in Brasilia, Goiania and Belem, the Company
estimates that approximately 948,000, or approximately 72% of such households,
are currently unpassed by hardwire cable.
The Company believes that wireless cable technology is well suited to its
current and targeted markets and is an attractive alternative to existing
television choices. Wireless cable service can be deployed more rapidly than
most alternative technologies and provides immediate coverage of entire markets,
enabling service to be delivered to all potential subscribers that are in the
unobstructed path of the transmission tower. Wireless cable service can be
deployed at a significantly lower system capital cost per installed subscriber
than hardwire cable because (i) the headend for a wireless cable system has a
relatively low cost, (ii) capital expenditures for wireless cable systems are
only required at the headend facility and in connection with installation of
subscriber reception equipment and (iii) incremental investment is only
undertaken in response to customer demand with the addition of each new
subscriber. The Company believes that subscribers to television services in
Brazil are concerned with such features as programming, service, reliability and
price and are generally indifferent to the method of delivery.
STRATEGY
The Company's objective is to become a leading provider of pay television
services in mid-sized markets in Brazil and generally to become the largest
provider of pay television services in each of its markets. The Company believes
Brazil offers substantial growth opportunities for pay television providers
because there is significant demand among television viewers for additional
programming choices and the penetration rate for pay television services is
currently less than 5% of Brazil's total television households. As demonstrated
by the rapid growth in the Company's subscriber base, the Company believes it is
well positioned to take advantage of these opportunities. The principal elements
of the Company's operating strategy are: (i) increasing penetration of existing
markets, (ii) targeting mid-sized markets for expansion, (iii) developing TV
Filme brand name recognition through exclusive programming, (iv) providing
superior customer service, (v) providing value-added services and (vi)
implementing a consistent operating model. These elements of the Company's
strategy are discussed below:
INCREASING PENETRATION OF EXISTING MARKETS. The Company seeks to increase
its penetration of existing markets through (i) extensive marketing tied to
regional events such as soccer matches, (ii) neighborhood promotional events
featuring large screen broadcasts of its channel offerings, (iii) direct
mailings, (iv) telemarketing, (v) television and newspaper advertisements, (vi)
prewiring arrangements with residential housing developers, (vii) other
marketing activities, including referral programs and promotional gifts, and
(viii) adding households to the Company's service area by installing signal
repeaters.
TARGETING MID-SIZED MARKETS FOR EXPANSION. The Company targets markets with
populations from approximately 100,000 to 2.5 million with demographics,
competitive environments and topographies
50
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favorable for implementation of the Company's pay television services. The
Company believes that these markets are currently underpenetrated by pay
television service providers. The Company intends to pursue development of
additional markets by (i) obtaining new pay television licenses offered by the
Brazilian government, (ii) acquiring or investing in existing pay television
operations or (iii) acquiring or co-developing newly issued pay television
licenses from or with third parties. The Company has filed applications for
licenses to operate wireless cable systems in an additional 27 markets in Brazil
which have an aggregate population of approximately 12.5 million and encompass
approximately 2.7 million households. The Brazilian government had recently
announced its intention to auction MMDS licenses in 15 of its state capitals.
The Company has filed applications in 14 of these 15 markets. As a result of
certain developments concerning the granting of new concessions and licenses for
the rendering of commercial telecommunications services in Brazil, in the
absence of further governmental action, the process for granting new concessions
and licenses for MMDS services is uncertain. There can be no assurance as to the
grant of any such concessions and licenses and the timing of any such grants
generally, or the grant of any such concessions and licenses and the timing of
any grants to the Company. See "Risk Factors--Risk Factors Relating to the
Company and the Exchange Offer--Risks Associated with New Markets and Growth
Strategy" and "Risk Factors--Risk Factors Relating to the Company and the
Exchange Offer-- Government Regulation."
In addition, the Company is engaged, on a preliminary basis, in evaluations,
discussions and other activities relating to the possible acquisition of, or
investment in, existing pay television providers or holders of MMDS licenses.
Because of the preliminary nature of such acquisition-related activities, there
can be no assurance as to whether or when any such transaction will be
consummated or as to the terms thereof.
DEVELOPING TV FILME BRAND NAME RECOGNITION THROUGH EXCLUSIVE
PROGRAMMING. The Company believes that the exclusive programming it offers is
superior to that of its hardwire competitors. In its current operating markets,
the Company has the exclusive right to transmit, via MMDS and hardwire cable,
programming offered by Tevecap and its subsidiaries which, in turn, are the
exclusive providers of certain channels, including HBO Brazil, ESPN Brazil and
MTV Brazil. In addition to such programming, the Company seeks to secure
exclusive television rights to important regional events. For example, the
Company owns the right to broadcast annually through 1998 all of the games of
the Goias State Soccer Championship matches, which the Company offers to its
subscribers in the Goiania market. The Company emphasizes its exclusive
programming in attracting new and maintaining existing subscribers and believes
that its programming line-up, including its local content, gives the Company a
competitive advantage in its markets and enhances the TV Filme brand name. The
Company intends to develop additional original programming such as local news
and sports channels, to strengthen further the Company's brand name and appeal.
PROVIDING SUPERIOR CUSTOMER SERVICE. The Company believes that it delivers
high levels of customer service to its subscribers. Customer satisfaction is
emphasized with all employees, including the telemarketing, installation and
customer service teams. The Company's proprietary management information systems
greatly facilitate customer service by providing customer service
representatives immediate access to relevant customer records, including
correspondence history. The Company seeks to install service promptly in a
customer's home or business, and service calls are typically responded to in
less than 36 hours.
PROVIDING VALUE-ADDED SERVICES. The Company intends to provide value-added
services, such as Internet access, other media and/or communications services
and co-branded discount and credit cards. The Company believes that by providing
such services to its existing and potential subscribers, it can generate
additional revenue, attract new subscribers and increase ties to its subscriber
base, thereby increasing customer retention rates.
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IMPLEMENTING A CONSISTENT OPERATING MODEL. The Company believes that its
implementation of consistent processes supported by proprietary systems, such as
the Company's automated installation, scheduling and billing systems,
facilitates the effective development of new markets and rapid subscriber
growth. The Company implements targeted marketing plans, conducts employee
training programs and uses a sophisticated intra-company telecommunications
network and proprietary management information systems to maximize the
efficiency of its marketing, customer service, operations and control functions.
OPERATING SYSTEMS AND THE COMPANY'S MARKETS
The table below provides information regarding the Company's markets as of
September 30, 1996:
<TABLE>
<CAPTION>
ESTIMATED
TOTAL
HOUSEHOLDS
ESTIMATED ESTIMATED ESTIMATED NUMBER UNPASSED BY
TOTAL TOTAL LOS OF LAUNCH HARDWIRE
POPULATION HOUSEHOLDS(1) HOUSEHOLDS(2) CHANNELS(3) DATE CABLE
------------ ------------- -------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING MARKETS:
Brasilia......................... 2,000,000 472,000 437,000 22 Feb. 1994(4) 60%
Belem............................ 1,900,000 398,000 358,000 21 Feb. 1995 100%
Goiania.......................... 1,800,000 444,000 344,000 21 Jan. 1995 60%
------------ ------------- -------------- ---
Total in Operating Markets....... 5,700,000 1,314,000 1,139,000 72%
------------ ------------- --------------
------------ ------------- --------------
APPLICATION MARKETS:(5).......... 12,500,000 2,700,000 2,200,000
------------ ------------- --------------
------------ ------------- --------------
</TABLE>
- ------------------------
(1) Represents the Company's estimate of the number of total households within a
50 kilometer radius in the particular signal coverage area. Estimated Total
Households in the Company's current 25 kilometer coverage territory are
approximately 437,000, 376,000 and 419,000 for each of Brasilia, Belem and
Goiania, respectively. See "Business--Regulatory Environment--License
Procedures." The Company's estimates are based on data from the 1991 Census
conducted by the IBGE as adjusted to reflect total household growth of 3.13%
per year in Brasilia, 2.65% per year in Belem and 2.33% per year in Goiania.
(2) Represents the Company's estimate of the number of Estimated Total
Households within a 50 kilometer radius that can receive an adequate signal
from the Company (eliminating those homes that the Company estimates are
unable to receive service due to certain physical characteristics of the
particular signal coverage area, such as terrain and foliage, although some
of these households can be served with the aid of signal repeaters).
Estimated LOS Households in the Company's current 25 kilometer coverage
territory are approximately 407,000, 338,000 and 324,000 for each of
Brasilia, Belem and Goiania, respectively.
(3) Includes six local off-air VHF/UHF channels in Brasilia and five local
off-air VHF/UHF channels in each of Goiania and Belem which are offered to
the Company's subscribers in addition to the subscription channels.
(4) Date when the Brasilia System increased its channel offering from four
channels to eight channels. The Brasilia System began service with one
channel in 1990.
(5) Represents the 27 markets for which the Company has applied for licenses
with the Ministry of Communications. There can be no assurance as to the
grant of any such concessions and licenses and the timing of any such grants
generally, or the grant of any such concessions and licenses and the timing
of any grants to the Company. See "Business--Strategy" and "Business--
Regulatory Environment--License Procedures."
Since the beginning of 1994, the Company's subscriber base has grown
substantially, increasing from 1,864 subscribers to 70,591 subscribers as of
September 30, 1996. A description of the Company's current markets follows.
BRASILIA SYSTEM. Brasilia, the capital of Brazil, had an estimated
population of approximately 2.0 million as of September 30, 1996. Brasilia,
which is located in the interior of Brazil, was established in the early 1960's
as a planned city when the capital of Brazil was moved from Rio de Janeiro.
Brasilia's generally flat topography is advantageous for MMDS. In addition,
Brasilia's zoning provisions favor MMDS by requiring that in certain areas
residential buildings be of a similar height and located together. The Company's
current 25 kilometer coverage territory encompasses approximately 437,000
households, of
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<PAGE>
which the Company believes approximately 407,000 households can be served by LOS
transmission. The Company has filed and anticipates approval for an extension of
its license coverage area in Brasilia to 50 kilometers. Upon such approval, the
Brasilia System's signal pattern will encompass approximately 472,000
households, of which the Company believes approximately 437,000 households can
be reached by LOS transmission.
The Brasilia System currently offers a 22 channel package, consisting of 16
wireless cable channels and six local off-air VHF/UHF channels. According to the
new wireless cable regulations, certain MMDS operators are entitled to transmit
up to 31 wireless cable channels and the Company has requested and anticipates
approval for the right to transmit the 15 additional wireless cable channels.
The Brasilia System, launched in 1990 with one channel, increased to three
channels in July 1992, to four channels in September 1992, to eight channels in
February 1994 and to 16 wireless cable channels in November 1994. The Brasilia
System became system EBITDA positive in the third quarter of 1994 with
approximately 6,000 subscribers. In addition to monthly subscriber revenue, the
Brasilia system recently began generating advertising revenues. The Brasilia
System transmits at 50 watts of power per channel from a transmission tower
which is 300 feet above average terrain. The principal pay television competitor
in the city of Brasilia is NET Brasilia, a hardwire cable operator.
BELEM SYSTEM. Belem, with a population of approximately 1.9 million as of
September 30, 1996, lies at the mouth of the Amazon River and is a major trading
port for the rich natural resources of the Amazon rain forest. The Company
launched service in Belem in February 1995. Although the city is relatively
flat, trees block wireless cable transmission in Belem more often than they do
in Brasilia and Goiania and thus, the Belem System requires increased
utilization of signal repeaters. The Belem System reaches the greater Belem
area, including the cities of Mosqueiro, Ananindeua, Icoaraci and Marituba and
the islands of Outeiro and Barcarena. The Company's current 25 kilometer
coverage territory encompasses approximately 376,000 households, of which the
Company believes approximately 338,000 households can be served by LOS
transmission. The Company has filed and anticipates approval for an extension of
its license coverage area in Belem to 50 kilometers. Upon such approval, the
Belem System's signal pattern will encompass approximately 398,000 households,
of which the Company believes approximately 358,000 households can be reached by
LOS transmission.
The Belem System currently offers a 21 channel package, consisting of 16
wireless cable channels and five local off-air VHF/UHF channels. The Belem
System became system EBITDA positive in the fourth quarter of 1995 with
approximately 5,000 subscribers. As with the Brasilia System, the Company has
also requested and anticipates approval for the right to transmit an additional
15 wireless cable channels in the Belem System. The Belem System transmits at 50
watts of power per channel from a transmission tower which is 300 feet above
average terrain. There currently is no hardwire or other wireless cable provider
in the city of Belem.
GOIANIA SYSTEM. Goiania, with a population of approximately 1.8 million as
of September 30, 1996, is located approximately 100 miles southwest of Brasilia.
Goiania is the capital of the state of Goias and, like Brasilia, its topography
is favorable to LOS transmission because the city is relatively flat. The
Company launched service in Goiania in January 1995. The Company's current 25
kilometer coverage territory encompasses approximately 419,000 households, of
which the Company believes approximately 324,000 households can be served by LOS
transmission. The Company has filed and anticipates approval for an extension of
its license coverage area in Goiania to 50 kilometers. Upon such approval, the
Goiania System's signal pattern will encompass approximately 444,000 households,
of which the Company believes approximately 344,000 can be reached by LOS
transmissions.
The Goiania System currently offers a 21 channel package, consisting of 16
wireless cable channels and five local off-air VHF/UHF channels. As with the
Brasilia and Belem Systems, the Company has also requested and anticipates
approval for the right to transmit an additional 15 wireless cable channels in
the Goiania System. The Goiania System transmits at 50 watts of power per
channel from a transmission tower
53
<PAGE>
which is 350 feet above average terrain. The principal pay television competitor
in the city of Goiania is Multicanal, a hardwire cable operator.
SUBSCRIBER ACCOUNTS. The Company's billing system allows subscribers to
select the day of the month on which payment for that month's service is due and
to pay their bills at a bank through direct transfers, the standard payment
method in Brazil, or pay the Company in person. If a customer does not pay his
bill, the customer is contacted and attempts are made to collect payment.
Thereafter, if payment is not received, the customer's service is disconnected,
while the Company continues to attempt to collect payment from the customer and
reactivate the customer's service. Thereafter, the customer's account is
cancelled, the equipment recovered from the customer's premises and the account
receivable is sent to a collection agency.
As of September 30, 1996, the Company's accounts receivable totaled $4.5
million before an allowance for doubtful accounts of $1.1 million. The accounts
receivable included $900,000 of accounts over 90 days past due as of September
30, 1996. The Company currently provides a reserve for substantially all (97%)
of such receivables over 90 days past due as well as providing a reserve of 90%
of receivables over 60 days past due. The Company is in the process of reviewing
its past due accounts and as a result of such review expects to write-off
certain accounts receivable and to terminate certain subscriber accounts at year
end. While the review is currently underway and the extent of such terminations
will not be known until such review is completed, the Company believes that, as
a result of any such termination of subscriber accounts, its average monthly
churn rate could be up to approximately 1.1% to 1.3% for the year ended December
31, 1996 from historic levels of less than 1%. The Company believes that this
process will have no material impact on its financial results for the year ended
December 31, 1996.
APPLICATION MARKETS
The Company has filed applications for licenses to operate wireless cable
systems in an additional 27 markets in Brazil which have an aggregate population
of approximately 12.5 million and encompass approximately 2.7 million
households. The Brazilian government had recently announced its intention to
auction MMDS licenses in 15 of its state capitals. The Company has filed
applications in 14 of these 15 markets. As a result of certain developments
concerning the granting of new concessions and licenses for the rendering of
commercial telecommunications services in Brazil, in the absence of further
governmental action, the process for granting new concessions and licenses for
MMDS services is uncertain. There can be no assurance as to the grant of any
such concessions and licenses and the timing of any such grants generally, or
the grant of any such concessions and licenses and the timing of any grants to
the Company. See "Risk Factors--Risk Factors Relating to the Company and the
Exchange Offer--Risks Associated with New Markets and Growth Strategy" and "Risk
Factors--Risk Factors Relating to the Company and the Exchange Offer--Government
Regulation."
In July 1996, TV Filme, through its wholly-owned subsidiary ITSA, entered
into an agreement with TV Filme Servicos (the "Operating Agreement") whereby TV
Filme Servicos granted exclusive licenses to each of TV Filme Brasilia, TV Filme
Goiania and TV Filme Belem to operate wireless cable systems in Brasilia,
Goiania and Belem, respectively. TV Filme Servicos also granted ITSA an
exclusive license to operate wireless cable systems in any market where the
Company is successful in obtaining a new license. The Operating Agreement is
valid for the term of each license which it governs.
PROGRAMMING
The Company currently purchases programming from Tevecap and its
subsidiaries pursuant to the Programming Agreement. The Company has agreed that
it shall use 50% of its total channel capacity in its operating markets where it
has a programming license from Tevecap or its subsidiaries to broadcast TVA
Sistema programming, with certain exceptions, and the Company has a right of
first refusal to carry any new programming channel that is offered by Tevecap or
its subsidiaries. Tevecap may not charge the
54
<PAGE>
Company an amount greater than the minimum rates charged by Tevecap to other pay
television operators, nor may such charges exceed comparable rates for other
programming of a similar nature. The terms of the Programming Agreement
terminate on July 2004, with certain limited exceptions with respect to the
Company's application markets.
In addition, pursuant to the Programming Agreement, Tevecap has granted the
Company a non-exclusive license to transmit programming in most of the markets
where the Company has applications pending if such applications are successful.
From time to time, in connection with the Programming Agreement, the Company
enters into agreements with Tevecap and its subsidiaries regarding specified
channels. The agreements typically have a two year term and determine the
monthly fees which the Company pays for such channels.
In addition, the Programming Agreement provides that if Tevecap obtains a
license to operate hardwire cable systems in any of the Company's current
operating markets, Tevecap may only develop such hardwire cable systems in a
partnership or joint venture with the Company on mutually agreeable terms. The
Company also has certain rights with respect to marketing satellite television
services in the Company's current operating markets.
The Company also offers selected local programming to supplement its channel
line-up. For example, the Company owns the rights to televise annually through
1998 all of the games of the Goias State Soccer Championship matches, which the
Company offers to its subscribers in the Goiania market. In addition, the
Company offers certain exclusive sports programming, including ESPN Brazil on
which selected games of the Sao Paulo Soccer Championship and the Rio de Janeiro
Soccer Championship matches are offered. The Company is exploring other local
programming, including local news, cultural events, home shopping and other
sporting events, although there can be no assurance that such programming will
be offered.
55
<PAGE>
The Company's channel offerings as of September 30, 1996 are as follows:
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
HBO Brazil............................. Brazilian version of HBO
HBO Brazil 2........................... HBO Brazil with a six hour time delay
ESPN Brazil............................ Brazilian version of ESPN
Eurochannel............................ Package of programming from free TV in Europe
Superstation........................... Package of programming from ABC, CBS and NBC
CMT Brazil............................. Brazilian version of Country Music Television
MTV Brazil............................. Brazilian version of MTV
MTV Latino............................. Spanish language version of MTV
RTPi................................... Radio and Television Portugal, a free broadcast channel from Portugal
CNN International...................... International version of CNN
TNT.................................... Brazilian version of TNT
Cartoon Network........................ Cartoon Network produced in the U.S.
Fox.................................... General entertainment
Discovery Channel...................... Brazilian version of Discovery Channel
ESPN International..................... International version of ESPN
Warner................................. Warner channel produced in the U.S.
Bravo.................................. Brazilian version of Bravo
Sony................................... Sony channel produced in the U.S.
Globo.................................. Local off-air channel
SBT.................................... Local off-air channel
Bandeirantes........................... Local off-air channel
Record................................. Local off-air channel
Nacional............................... Local off-air channel
Manchete............................... Local off-air channel
Cultura................................ Local off-air channel
</TABLE>
The following channels are expected to be offered by Tevecap and its
subsidiaries in the Brazilian pay television marketplace and, therefore, by the
Company to its subscribers, in 1997:
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
CNBC................................... CNBC plus Brazilian business programming
CNA.................................... Brazilian news channel
History................................ Brazilian version of The History Channel
</TABLE>
OPERATIONS
MARKETING. Prior to commencing operations in a potential new market, the
Company conducts pre-marketing surveys to evaluate the demographics and terrain
of such market. The Company then develops a plan designed to manage subscriber
growth by maintaining a manageable backlog of installations. Such backlog is
maintained at a manageable level by adjusting installation capacity to
correspond with sales levels. The amount of time a subscriber waits for the
commencement of service is determined based on several factors, including
whether the subscriber has access to hardwire cable and whether the subscriber
is in a single family home or multiple dwelling unit. This development plan
ensures that the quality of installations and customer service remains high. In
each market, the Company's marketing staff typically applies the following
programs to attract subscribers: (i) extensive marketing tied to regional events
such as soccer matches, (ii) neighborhood promotional events featuring large
screen broadcasts of its channel offerings, (iii) direct mailings, (iv)
telemarketing, (v) television and newspaper advertisements,
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<PAGE>
(vi) prewiring arrangements with residential housing developers and (vii) other
marketing activities, including referral programs and promotional gifts.
INSTALLATION. The Company's installation package features a standard
rooftop mount linked to a small antenna and related equipment, including a
decoder, located at the subscriber's location. Installations at single-family
homes require an entire installation package, while installations at multiple
dwelling units in which drop lines already have been installed require less time
and, accordingly, are less costly. The Company charges its subscribers an
installation fee ranging from $90 to $180. The Company expects to lower
installation charges per subscriber as it expands its subscriber base.
CUSTOMER SERVICE. The Company believes that delivering high levels of
customer service in installation and maintenance enables it to maintain high
levels of customer satisfaction and to minimize churn. To this end, the Company
(i) schedules installations promptly, (ii) provides a customer service hotline,
(iii) provides quick response repair service and (iv) makes follow-up calls to
new subscribers shortly after installation to ensure customer satisfaction. The
Company seeks to instill a customer service focus in all its employees through
ongoing training and has established an intra-company electronic mail system to
provide a forum for employees to exchange ideas concerning means to increase
customer satisfaction. The Company also has various employee bonus programs
linked to measures of customer satisfaction.
MANAGEMENT INFORMATION SYSTEMS. The Company believes that its proprietary
management information systems enable it to deliver superior customer service,
monitor customer payment patterns and facilitate the efficient management of
each of its operating systems. The Company has 11 employees dedicated to the
development, enhancement and integration of the Company's management information
systems.
EMPLOYEES
As of September 30, 1996, the Company had a total of 626 employees,
substantially all of whom are employed by TV Filme's subsidiaries. All of the
Company's employees, except for Messrs. Hermano Lins, Carlos Andre Lins and
Alvaro Aguirre, are subject to collective bargaining agreements which expire
from January 1997 to October 1997. The collective bargaining agreements are with
the Union for the Employees of Radio and TV Broadcasting Companies. The Company
has no reason to believe that the collective bargaining agreement expiring in
January 1997 will not be renewed. The Company has experienced no work stoppages.
The Company provides its employees with health insurance (which is not required
by law in Brazil) and certain other benefits which it believes enable it to
attract and retain qualified and motivated employees. The Company believes that
its relationships with its employees are good.
FACILITIES AND EQUIPMENT
ADMINISTRATIVE FACILITIES. A centralized administrative facility is located
in Brasilia to handle training, engineering, computer systems development,
controller services and strategic planning. In addition, the Company has
established regional offices in Brasilia, Goiania and Belem to coordinate sales,
billing, telemarketing, general marketing, customer service and certain other
administrative functions on a regional level. Each facility is connected to the
Company's computer telecommunications network.
TRANSMISSION FACILITIES. The Company's headend and transmitter facilities
are located in leased buildings at the Company's transmission tower sites in
Brasilia, Goiania and Belem. The transmitting antennas generally are able to
serve the maximum regulatory range for license coverage areas of 50 kilometers.
In certain areas within the Company's markets that are otherwise
terrain-blocked, the Company utilizes signal repeaters to enhance signal
coverage. Subscriber premises equipment is comprised of rooftop antennas,
decoder boxes and related equipment. In multiple dwelling units, the Company
installs a single rooftop antenna and connects many subscriber lines to the
single antenna, thereby substantially reducing the Company's capital cost per
subscriber.
DIGITAL TECHNOLOGY. The Company currently transmits in analog format.
Should competitive conditions require or if the Company deems such technology to
be cost effective and practical to provide, it may implement digital technology.
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COMPETITION
The Company's affiliate, TV Filme Servicos, is the only entity licensed to
operate wireless cable systems in Brasilia, Goiania and Belem. The Company
provides service via 16 wireless cable channels in each such market and has
requested the right to carry an additional 15 wireless cable channels as
provided by the new regulations. The Company is the largest pay television
provider in Brasilia based on total number of subscribers. The Company's
principal competitor in the city of Brasilia is NET Brasilia, a hardwire cable
operator. The Company is the second largest pay television provider in Goiania
based on total number of subscribers. The Company's principal competitor in the
city of Goiania is Multicanal, a hardwire cable operator. There currently is no
hardwire or other wireless cable provider in the city of Belem.
In addition to other wireless cable and hardwire cable operators, wireless
cable television operators in Brazil face or may face competition from several
other sources, such as DTH systems, DBS systems, local off-air VHF/UHF channels,
home videocassette recorders and out-of-home theaters. Competition in the pay
television industry is based upon program offerings, customer service,
reliability and pricing. Many actual and potential competitors have greater
financial, marketing and other resources than the Company. No assurance can be
given that the Company will be able to compete successfully. See "--Brazilian
Pay Television Industry," and "--Operating Systems and the Company's Markets."
REGULATORY ENVIRONMENT
GENERAL. The pay television industry is subject to regulation by the
Ministry of Communications pursuant to the Brazilian Telecommunications Code of
1962, as amended (the "Telecommunications Code"). The Telecommunications Code
empowers the Ministry of Communications, among other things, to issue, revoke,
modify and renew licenses within the spectrum available to MMDS, to approve the
assignments and transfer of control of such licenses, to approve the location of
channels that comprise MMDS systems, to regulate the type, configuration and
operation of equipment used by MMDS systems, and to impose certain other
reporting requirements on MMDS license holders and MMDS operators. On February
10, 1994, the Ministry of Communications issued Administrative Rule No. 43,
which adopted Rule 002/94 (the "MMDS Rule"), which regulated the MMDS service.
On November 28, 1995, Decree No. 1719 was issued providing for specific
procedures for the granting of concessions and licenses for the rendering of
commercial telecommunication services (including MMDS) in Brazil. Based on the
provisions of Decree No. 1719, the Ministry of Communications revised the MMDS
Rule, by means of REV/96, dated September 9, 1996 (the "Revised MMDS Rule").
However, on December 4, 1996, following the issuance of a preliminary injunction
by the Brazilian Federal Supreme Court, Decree No. 1719 was revoked by the
Presidential Decree and, as a result, the applicability of the Revised MMDS Rule
is uncertain.
Wireless cable or MMDS is defined as the special service of
telecommunication which uses microwaves to transmit codified signals to be
received in pre-established points on a contractual basis. Any company in which
nationals of Brazil own at least 51% of the voting capital is eligible to be
granted a license to operate an MMDS service. Until September 9, 1996, licenses
were granted for renewable periods of ten years; under the Revised MMDS Rule,
MMDS licenses were granted for renewable periods of 10 years; under the Revised
MMDS Rule, licenses would be awarded for renewable 15-year periods. However,
there can be no assurance as to the applicability of the Revised MMDS Rule.
Under the terms of the Revised MMDS Rule, each license holder and its
affiliates could have been granted permission to operate MMDS systems in
different areas of Brazil, provided that no holder could be granted licenses for
(i) more than seven municipalities with a population equal to or exceeding
700,000 inhabitants or (ii) more than 12 municipalities with a population
between 300,000 and 700,000 inhabitants. In accordance with the Revised MMDS
Rule, the restrictions would only apply to areas in which the MMDS system
operator (or an affiliate thereof) faces no competition from other pay
television services, excluding services that utilize a satellite to transmit
their signal. Under the Revised MMDS Rule, the Ministry of Communications would
have full discretion to alter or eliminate such restrictions. The term
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affiliate is defined for these purposes as "(i) any legal entity that directly
or indirectly holds at least 20% of the voting capital of another legal entity
or any of two legal entities under common ownership of at least 20% of their
respective voting capital, (ii) any of two legal entities that have at least one
officer or director in common, (iii) any of two legal entities when, due to a
financial relationship between them, one entity is dependent on the other." If
all of the 27 additional markets for which applications have been made for the
Company to operate MMDS systems were to be granted, no more than 7 of the
Company's total markets with a competitor to MMDS would have populations
exceeding 700,000 inhabitants and no more than 12 of the Company's total markets
with a competitor to MMDS would have populations between 300,000 and 700,000
inhabitants. The Company faces competition from other pay television services in
two of its three current operating markets and 26 of the 27 application markets.
Prices for pay television services may be freely established by the system
operator, although the Ministry of Communications may interfere in the event of
abusive pricing. The Ministry of Communications may impose penalties including
fines, suspension or revocation of the license if the license holder fails to
comply with applicable regulations or becomes legally, technically or
financially unable to provide MMDS service. The Ministry of Communications also
may intervene to the extent operators engage in unfair practices intended to
eliminate competition.
CHANNELS AVAILABLE FOR WIRELESS CABLE. The Ministry of Communications
grants licenses and regulates the use of channels by MMDS operators to transmit
video programming, entertainment services and other information. Under the
Revised MMDS Rule, MMDS licensees are permitted to transmit up to 31 analog MMDS
channels (constituting a spectrum bandwidth of 186 MHz). Historically, however,
only 16 analog channels have been available. The Revised MMDS Rule allows for
the utilization of all 31 analog channels in markets with more than 700,000
inhabitants. If a license is for 16 or more channels, at least two channels must
be reserved for educational and cultural programming. If a license involves 15
channels, only one channel must be reserved for educational and cultural
purposes. The Company believes that channels such as Discovery and Bravo qualify
as cultural and educational programming. In each of the Company's operating or
targeted markets, up to 31 MMDS channels are available for MMDS (in addition to
any local off-air VHF/UHF channels which are offered).
LICENSE PROCEDURES. On November 28, 1995, the President of Brazil enacted
Decree No. 1719, which provided that all granting of concessions and licenses
for the rendering of commercial telecommunications services in Brazil, including
MMDS, would be made through bidding procedures. In accordance with Decree No.
1719 and the Revised MMDS Rule, the Ministry of Communications would have been
permitted, in its discretion or by means of applications filed by interested
parties, to publish public notices requesting comments by interested parties to
determine, among other things, the geographic area where the services were to be
provided and the number of concessions to be granted. In both cases, the
interested party would have been required to present to or file with the
Ministry of Communications its comments or application, as the case may be,
containing, among other things, the technical feasibility of a proposed MMDS
system and a demonstration of the market potential for the targeted area. The
Ministry of Communications would have thereafter ascertained the public interest
in granting the concession and could have decided to open the public bid process
for the granting of such concessions. During such public bid, applicants would
have been evaluated based on a number of factors including: (i) participation of
local residents as stockholders of the applicant, (ii) the number of days for
the installation of the MMDS system, (iii) the schedule for the implementation
of the programs (including the number of programs available at the start of
operations, and one and two years thereafter), (iv) the time reserved for local
programs, (v) the number of cultural or educational programs, (vi) the number of
local community establishments that would receive cultural and educational
programs free of charge and (vii) the subscription price. These items would have
been rated according to certain criteria established in the Revised MMDS Rule
and licenses could have been granted: (i) in the case of areas with less than
300,000 inhabitants, to the applicant that offered the highest score, (ii) in
the case of areas with more than 300,000 and less than 700,000 inhabitants, to
the applicant whose score multiplied by a number based on the offered price of
the license was the highest, and (iii) in the case of areas with more than
700,000 inhabitants, to the applicant that offered the
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highest price for the license. Once an MMDS concession was granted by the
Ministry of Communications, the license holder would have been required to
submit, within three months, an installation proposal for its MMDS system's
headend. Subsequent to approval of such proposal, construction would have been
required to be finalized and operations commenced within 12 months, which period
could have been extended by an additional 12 months.
On December 4, 1996, in response to a preliminary injunction granted by the
Brazilian Federal Supreme Court suspending the effectiveness of Decree No. 1719,
the President of Brazil signed the Presidential Decree, which revoked Decree No.
1719. The effect of the revocation is that the process for granting new
concessions and licenses for MMDS services remains uncertain. Until such time as
further governmental action is taken to provide for the granting of concessions
and licenses for MMDS services, there can be no assurance as to the grant of any
such concessions and licenses and the timing of any such grants generally, or
the grant of any such concessions and licenses and the timing of such grants to
the Company. The Company believes, based on discussions with the Ministry of
Communications, that revised MMDS regulations will be issued, although there can
be no assurance when, and if, such regulations will be issued.
In addition to qualifying under the application and bid process ultimately
adopted a license holder may also be required to demonstrate that its proposed
signal does not violate interference standards in the area of another MMDS
channel license holder. The maximum area to be covered by the services is a
radius of up to 50 kilometers around the transmission site. If a license
holder's proposed service would cause interference in the area of another
wireless cable channel license holder, the proposed operator may be required to
obtain the consent of such other license holder.
OTHER REGULATIONS. MMDS license holders are subject to regulation with
respect to the construction, marking and lighting of transmission towers
pursuant to the Brazilian Aviation Code and certain local zoning regulations
affecting construction of towers and other facilities. There may also be
restrictions imposed by local authorities. The pay television industry also is
subject to the Brazilian Consumer Code. The Consumer Code entitles the
purchasers of goods or services to certain rights, including the right to
discontinue a service and obtain a refund if the services are deemed to be of
low quality or not rendered adequately. For instance, in case of a suspension of
the transmission for a given period, the subscriber shall be entitled to a
discount on the monthly fees. The MMDS Rule and the Revised MMDS Rule also
contain certain provisions relating to consumer rights, including a provision
for mandatory discounts in the event of interruption of service.
Due to the regulated nature of the pay television industry, the adoption of
new, or changes to existing, laws or regulations or the interpretations thereof
may impede the Company's growth and may otherwise have a material adverse effect
on the Company's results of operations and financial condition.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings that would have a
material adverse effect on its results of operations and financial condition.
PROPERTIES
The Company leases approximately 32,000 square feet of office space for its
corporate headquarters and the Brasilia System in Brasilia under leases that
expire in April 1997. The Company leases additional office space for the Goiania
System and Belem System of approximately 40,000 and 35,000 square feet,
respectively. In addition to leased office space, the Company also owns less
than 1,500 square feet of office space in Goiania and leases space for
transmission towers located in Brasilia, Goiania and Belem. The Company believes
that office space and space for transmission towers is readily available on
acceptable terms in the markets where the Company operates wireless cable
systems.
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PAY TELEVISION INDUSTRY
INTRODUCTION
The pay television industry began in the late 1940's in the U.S with the
introduction of hardwire cable. The pay television industry did not begin in
Brazil until 1989 when hardwire cable and wireless cable were introduced
concurrently. As of September 30, 1996, the Company estimates that there were
approximately 1.6 million Brazilian pay television customers.
TRADITIONAL HARDWIRE CABLE TECHNOLOGY
Traditional hardwire cable systems use coaxial cable to transmit television
signals. Traditional hardwire cable operators receive, at a headend, signals for
programming services, which have been either broadcast or transmitted to such
operators by satellite. A headend consists of signal reception, encryption,
transmission, decryption and related equipment. The signal is then delivered
from the headend to customers via a cable plant. Traditional hardwire cable
systems are susceptible to signal quality problems because signals can be
transmitted via coaxial cable only a relatively short distance without
amplification; each time a television signal passes through an amplifier, some
measure of noise is added. A series, or "cascade," of amplifiers between the
headend and a customer leads to progressively greater noise and for some
viewers, a degraded picture. Regular system maintenance is required due to water
ingress, temperature changes and other equipment problems, all of which may
affect the quality of a signal. Hardwire cable companies have begun installing
fiber optic networks, which will substantially reduce the transmission and
reception problems currently experienced by traditional hardwire cable systems
and will expand the channel capacity of their systems. However, the installation
of such networks will require a substantial investment by hardwire cable
operators. In the Company's existing markets, the Company estimates that
approximately 72% of homes are unpassed by hardwire cable.
WIRELESS CABLE TECHNOLOGY
Wireless cable can provide subscribers the same or superior video television
signal as that provided by traditional hardwire cable. Like a traditional
hardwire cable system, a wireless cable system receives programming at a
headend. Unlike traditional hardwire cable systems, however, the programming is
then retransmitted via microwave transmission from an antenna located on a tower
associated with the headend to a small antenna located at a subscriber's
premises. At the subscriber's premises, the signals are converted to frequencies
that can pass through conventional coaxial cable into a descrambling converter
located on top of a television set. Wireless cable requires a clear LOS because
the microwave frequencies used will not pass through dense foliage, hills,
buildings or some other obstructions. Some of these obstructions can be bypassed
with the use of signal repeaters which retransmit an otherwise blocked signal
over a limited area. Because wireless cable systems do not require an extensive
cable plant, wireless cable operators can provide subscribers with a high
quality picture with few transmission disruptions at a significantly lower
system capital cost per installed subscriber than traditional hardwire cable
systems.
DIRECT-TO-HOME
DTH satellite television services are available via satellite receivers
which are 7-to-12 foot dishes mounted in the yards of homes to receive
television signals from orbiting satellites. Until the implementation of
encryption, these dishes enabled reception of any and all signals without
payment of fees. The need to purchase decoders and pay for programming has
reduced the popularity of DTH, although the Company competes with DTH systems to
some degree.
DIRECT BROADCASTING SATELLITE
DBS involves the transmission of a compressed encoded signal directly from a
satellite to the customer's home. Because the signal is at a higher power level
and frequency than most satellite-
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transmitted signals, its reception can be accomplished with an 18-inch or larger
dish mounted on a rooftop or in the yard. DBS currently cannot, for practical
reasons, provide local off-air VHF/UHF channels as part of its service, although
many DBS subscribers receive such channels via standard over-the-air antennas.
Both Tevecap and the Globo Group recently began to advertise and market
alternative DBS services in Brazil. In the U.S., the cost to a DBS subscriber
for equipment is generally substantially higher than such cost to wireless cable
subscribers and the Company expects such costs will be higher in Brazil, as
well.
PROGRAMMING
Currently, with the exception of the retransmission of local off-air VHF/UHF
channels, programming is made available to wireless cable operators pursuant to
contracts with program suppliers under which the system operator generally pays
a fee based on the number of subscribers receiving service each month.
Individual program pricing varies from supplier to supplier. Under Brazilian
copyright law, license from the copyright holder generally must be secured
before any video program may be retransmitted.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of the date of this
Prospectus with respect to each person who is an executive officer or director
of the Company and the general managers of the Company's three operating
systems:
<TABLE>
<CAPTION>
NAME POSITION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Douglas M. Karp(1)...................................... Chairman of the Board
Hermano Studart Lins de Albuquerque..................... Chief Executive Officer, Secretary and Director
Carlos Andre Studart Lins de Albuquerque................ President, Chief Operating Officer, Treasurer and
Director
Alvaro J. Aguirre....................................... Chief Financial Officer and Director
Gary D. Nusbaum(1)...................................... Director
Jose Augusto Pinto Moreira(1)........................... Director
Claudio Dascal.......................................... Director
Adriano Nascimento Barbosa.............................. General Manager of the Brasilia System
Ivan Alexandre Barcellos................................ General Manager of the Goiania System
Rafael Augusto Colino................................... General Manager of the Belem System
</TABLE>
- ------------------------
(1) Member of the Compensation Committee and Audit Committee.
DOUGLAS M. KARP has served as Chairman of the Board of TV Filme since its
incorporation. Mr. Karp has been a Managing Director of E.M. Warburg, Pincus &
Co., LLC since May 1991. Prior to joining E. M. Warburg, Pincus & Co., LLC, Mr.
Karp held several positions with Salomon Inc, including Managing Director from
January 1990 to May 1991, Director from January 1989 to December 1989 and Vice
President from October 1986 to December 1988. Mr. Karp is a director of LCI
International, Inc., TresCom International, Inc. and several privately held
companies. Mr. Karp is 41 years old.
HERMANO STUDART LINS DE ALBUQUERQUE, one of the co-founders of the Company,
has served as Chief Executive Officer, Secretary and a director of TV Filme
since its incorporation. Mr. Lins received a Master's degree in Artificial
Intelligence from the University of Sussex, England and a Bachelor of Science
degree in Electronic Engineering from the University of Brasilia. Mr. Lins was a
member of the MMDS Regulation Commission, a Brazilian government advisory board
and is a member of the Technical Advisory Board for National Satellite
Publishing Inc. Mr. Lins is 33 years old.
CARLOS ANDRE STUDART LINS DE ALBUQUERQUE, one of the co-founders of the
Company, has served as President, Chief Operating Officer, Treasurer and a
director of TV Filme since its incorporation. Mr. Lins received a Bachelor of
Science degree in Physics from the University of Brasilia and a Bachelor of
Science degree in Mathematics from the University of Ceub. Mr. Lins is 32 years
old.
ALVARO J. AGUIRRE has served as Chief Financial Officer and a director of TV
Filme since June 1996. Prior to joining TV Filme, Mr. Aguirre was a member of
the Latin America Corporate Finance Group of Morgan Stanley & Co., Incorporated
from 1994 to 1996 and a securities attorney at the law firm of Sullivan &
Cromwell from 1991 to 1994. Mr. Aguirre is 30 years old.
GARY D. NUSBAUM has served as a director of TV Filme since its incorporation
and also served as Vice President of TV Filme from its incorporation until
December 1996. Mr. Nusbaum has been a Managing Director of E.M. Warburg, Pincus
& Co., LLC since January 1997. From January 1995 to December 1996, Mr. Nusbaum
was a Vice President of Warburg, Pincus Ventures, Inc. and from September 1989
to December 1994, was an associate at Warburg, Pincus Ventures, Inc. Mr. Nusbaum
is a director of TresCom International, Inc. and several privately held
companies. Mr. Nusbaum is 30 years old.
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JOSE AUGUSTO PINTO MOREIRA has served as a director of TV Filme since its
incorporation. Mr. Moreira has been the Executive Vice-President of Finance and
Administration of Abril since 1982. Mr. Moreira is a director of several
privately held companies. Mr. Moreira is 53 years old.
CLAUDIO DASCAL has served as a director of TV Filme since July 1996. Mr.
Dascal has been a Vice President of Tevecap since April 1996. Prior to joining
Tevecap, Mr. Dascal held several senior management positions at Alcatel Standard
Electrica, S.A. and its affiliates from 1991 to 1996. Mr. Dascal is 53 years
old.
ADRIANO NASCIMENTO BARBOSA has served as the General Manager of the Brasilia
System since November 1995. Prior to joining the Company, Mr. Barbosa served as
Commercial Director of Down Tec Engenharia Sameamento e Servicos, Ltda., an
engineering company, from 1993 to 1995 and held several positions with Badius
Engenharia Ltda., an engineering company, from 1988 to 1993, including Director,
Head Office Manager and Information Manager. Mr. Barbosa is 32 years old.
IVAN ALEXANDRE BARCELLOS has served as the General Manager of the Goiania
System since its inception in late 1994. Prior to joining the Company, Mr.
Barcellos served as National Commercial Manager for Industrias Reunidas Sao
Jorge, a food manufacturing and processing company, from 1985 to 1994. Mr.
Barcellos is 45 years old.
RAFAEL AUGUSTO COLINO has served as the General Manager of the Belem System
since its inception in late 1994. Prior to joining the Company, Mr. Colino
served as Regional Manager of Listel, a subsidiary of Abril in the telephone
directory printing business, from 1987 to 1994. Mr. Colino is 50 years old.
The Board of Directors of TV Filme (the "Board of Directors") is currently
composed of seven directors. Warburg, Pincus, Tevecap, Mrs. Maria Nise Lins, Mr.
Hermano Lins, Mr. Carlos Andre Lins and Ms. Maria Veronica Lins (with Mrs. Maria
Nise Lins, Mr. Hermano Lins and Mr. Carlos Andre Lins, the "Lins Family") are
parties to a Stockholders Agreement (the "Warburg Stockholders Agreement"),
pursuant to which, among other things, Warburg, Pincus and the Lins Family have
agreed to vote for (i) current designees of Tevecap to the Board of Directors,
as long as Tevecap and its affiliates own at least 13% of the outstanding shares
of Common Stock and (ii) one designee of Tevecap to the Board of Directors, as
long as Tevecap and its affiliates own at least 5% of the outstanding shares of
Common Stock. Jose Augusto Pinto Moreira and Claudio Dascal are Tevecap's
current designees to the Board of Directors. Pursuant to the Warburg
Stockholders Agreement, Warburg, Pincus has also agreed to provide Tevecap with
certain rights of first offer in the event Warburg, Pincus proposes to sell
shares of the Common Stock. See "Principal Stockholders."
The Board of Directors is divided into three classes serving staggered
three-year terms. At each annual meeting of stockholders of TV Filme, successors
to the class of directors whose term expires at such meeting will be elected to
serve for three-year terms and until their successors are elected and qualified.
Messrs. Hermano Lins and Nusbaum are Class I directors and their terms expire at
the Company's annual meeting in 1997; Messrs. Karp, Carlos Andre Lins and Dascal
are Class II directors and their terms expire at the Company's annual meeting in
1998; and Messrs. Moreira and Aguirre are Class III directors and their terms
expire at the Company's annual meeting in 1999. Executive officers hold office
until their successors are chosen and qualified, subject to earlier removal by
the Board of Directors. Mr. Hermano Lins and Mr. Carlos Andre Lins are brothers.
There are no other family relationships among any of the directors or executive
officers of the Company.
The Board of Directors has established two committees, a Compensation
Committee and an Audit Committee. The Compensation Committee reviews general
policy matters relating to compensation and benefits of employees and officers
of the Company and administers the 1996 Stock Option Plan. The Audit Committee
recommends the firm to be appointed as independent accountants to audit the
Company's financial statements, discusses the scope and results of the audit
with the independent accountants, reviews with management and the independent
accountants the Company's interim and year-end operating results,
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considers the adequacy of the internal controls and audit procedures of the
Company and reviews the non-audit services to be performed by the independent
accountants.
Independent directors are eligible to receive an annual fee of $10,000, a
meeting fee of $1,000 for every meeting of the Board of Directors attended and
each committee meeting held separately and a $500 fee for each meeting of the
Board of Directors or committee meeting participated in by telephone. All
directors are reimbursed for out-of-pocket expenses. Under the 1996 Stock Option
Plan, the Company may, from time to time and in the sole discretion of the Board
of Directors, grant options to directors who are not members of the Compensation
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
TV Filme did not have a Compensation Committee during 1995. As a result,
Messrs. Karp, Nusbaum, Hermano Lins, Carlos Andre Lins and Moreira participated
in deliberations concerning executive officer compensation. In connection with
the Initial Public Offering, the Board of Directors established a Compensation
Committee comprised of Messrs. Karp, Nusbaum and Moreira. Mr. Karp is a general
partner of Warburg, Pincus & Co., a New York general partnership ("WP") which is
the sole general partner of Warburg, Pincus. Mr. Moreira is the Executive
Vice-President of Finance and Administration of Abril.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid or accrued
by the Company for services rendered to the Company in all capacities for the
fiscal year ended December 31, 1995 by its Chief Executive Officer and each of
the Company's other executive officers whose total salary and bonus exceeded
$100,000 during the last fiscal year (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)
- ------------------------------------------------------------- --------- --------- ---------- -------------------
<S> <C> <C> <C> <C>
Hermano Studart Lins de Albuquerque,
Chief Executive Officer.................................... 1995 $ 98,463 $ 111,500 49,788
Carlos Andre Studart Lins de Albuquerque,
Chief Financial Officer.................................... 1995 98,463 111,500 49,788
</TABLE>
EMPLOYMENT AGREEMENTS
TV Filme and ITSA have entered into employment agreements with each of
Messrs. Hermano Lins and Carlos Andre Lins, pursuant to which Mr. Hermano Lins
has agreed to serve full time as Chief Executive Officer and Secretary of TV
Filme, Mr. Carlos Andre Lins has agreed to serve full time as President, Chief
Operating Officer and Treasurer of TV Filme, and each has agreed to serve in
comparable executive positions at ITSA. The annual base salary under such
agreements for each of Messrs. Lins is $125,000. Such salaries will be reviewed
at least annually by the Board of Directors and may be increased but not
decreased. In addition, each of Messrs. Lins are eligible to receive an annual
bonus, payable by ITSA, in amounts to be determined by the Board of Directors
taking into consideration, among other things, the financial and operating
performance of the Company. Pursuant to each of Messrs. Lins's employment
agreements, if TV Filme terminates the executive's employment either without
"cause" (as defined therein) or because of the death of the executive, ITSA is
required to pay the executive any unpaid base salary accrued through the date of
termination, plus an amount equal to an additional 12 months' base salary.
Although Brazilian law does not permit employment agreements of this type to be
for a fixed
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term, each agreement does include a non-competition provision and a prohibition
on the solicitation of clients and employees.
TV Filme has entered into an employment agreement with Mr. Aguirre, pursuant
to which Mr. Aguirre has agreed to serve full time as Chief Financial Officer of
TV Filme until December 31, 1998, unless terminated earlier in accordance with
the terms of such agreement. The annual base salary under such agreement is
$125,000. Such salary will be reviewed at least annually by the Board of
Directors of TV Filme and may be increased but not decreased. In addition, Mr.
Aguirre is eligible to receive an annual bonus. Such annual bonus will be
$125,000 for the period ending December 31, 1996, with amounts for subsequent
years to be determined by the Board of Directors of TV Filme, taking into
consideration, among other things, the financial and operating performance of
the Company. Upon executing his employment agreement, Mr. Aguirre received a
one-time bonus of $50,000. Pursuant to Mr. Aguirre's employment agreement, if TV
Filme terminates Mr. Aguirre's employment because of the death or disability of
Mr. Aguirre, TV Filme is required to pay Mr. Aguirre or his estate any unpaid
base salary accrued through the date of termination, plus an amount equal to an
additional 12 months' base salary. If TV Filme terminates Mr. Aguirre without
"cause" (as defined therein), TV Filme is required to pay Mr. Aguirre any unpaid
base salary accrued through the date of termination, plus an amount equal to the
unpaid base salary for the balance of the term and the pro rata portion of any
agreed annual bonus. The agreement includes a non-competition provision and a
prohibition on the solicitation of clients and employees.
STOCK OPTIONS
1996 STOCK OPTION PLAN
On July 18, 1996, the Board of Directors adopted and the stockholders of TV
Filme approved the 1996 Stock Option Plan (the "1996 Stock Option Plan"), which
provides for the grant to officers, key employees and consultants of the Company
of both "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and
stock options that are non-qualified for U.S. Federal income tax purposes. The
total number of shares of Common Stock for which options may be granted pursuant
to the 1996 Stock Option Plan is 936,432, subject to certain adjustments
reflecting changes in the Company's capitalization. In addition, no employee may
receive options for more than 200,000 shares of Common Stock in the aggregate in
any fiscal year. The 1996 Stock Option Plan is administered by the Compensation
Committee. The Compensation Committee determines, among other things, which
officers, employees and consultants receive options under the plan, the time
when options are granted, the type of option (incentive stock options or non-
qualified stock options, or both) to be granted, the number of shares subject to
each option, the time or times when the options become exercisable, and, subject
to certain conditions discussed below, the option price and duration of the
options. Members of the Compensation Committee are not eligible to receive
options under the 1996 Stock Option Plan.
The exercise price of incentive stock options will be determined by the
Compensation Committee, but may not be less than the fair market value on the
date of grant and the term of any such option may not exceed ten years from the
date of grant. With respect to any participant in the 1996 Stock Option Plan who
owns stock representing more than 10% of the voting power of the outstanding
capital stock of the Company, the exercise price of any incentive stock option
may not be less than 110% of the fair market value of such shares on the date of
grant and the term of such option may not exceed five years from the date of
grant.
The exercise price of non-qualified stock options will be determined by the
Compensation Committee on the date of grant, but may not be less than the par
value of the Common Stock on the date of grant, and the term of such option may
not exceed ten years from the date of grant.
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Payment of the option price may be made by certified or bank cashier's
check, by tender of shares of Common Stock then owned by the optionee or by any
other means acceptable to the Company. Options granted pursuant to the 1996
Stock Option Plan are not transferable, except by will or the laws of descent
and distribution in the event of death. During an optionee's lifetime, the
options are exercisable only by the optionee.
The Board of Directors has the right at any time and from time to time to
amend or modify the 1996 Stock Option Plan, without the consent of TV Filme's
stockholders or optionees; provided that no such action may adversely affect
options previously granted without the optionee's consent, and provided further
that no such action, without the approval of the stockholders of TV Filme, may
increase the total number of shares of Common Stock which may be purchased
pursuant to options under the plan, expand the class of persons eligible to
receive grants of options under the plan, decrease the minimum option price,
extend the maximum term of options granted under the plan or extend the term of
the plan. The expiration date of the 1996 Stock Option Plan after which no
option may be granted thereunder is 2006.
Options to purchase 407,000 shares of Common Stock were granted upon the
consummation of the Initial Public Offering, of which 297,000 are exercisable at
$10.00 per share and 110,000 of which are exercisable at $11.00 per share, and
which generally vest and become exercisable at the rate of 20% per year for five
years beginning on August 2, 1997.
TV Filme has filed with the Commission a Registration Statement on Form S-8
covering the shares of Common Stock underlying options granted under the 1996
Stock Option Plan.
OPTION GRANTS
The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1995 by the Company to the Named
Executive Officers, all of which options were exercised immediately upon
issuance.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(1)
--------------------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
% OF TOTAL
SECURITIES OPTIONS MARKET
UNDERLYING GRANTED TO EXERCISE OR PRICE ON
OPTIONS EMPLOYEES IN BASE PRICE DATE OF EXPIRATION
NAME GRANTED(#) FISCAL 1995 ($/SHARE) GRANT DATE 0% 5% 10%
- ------------------------- ----------- ----------------- ----------- ----------- ----------- ---------- ---------- ----------
Hermano Studart Lins de
Albuquerque............ 49,788 50% --(2) $ 3.13 None $ 156,015 $ 254,149 $ 404,706
Carlos Andre Studart Lins
de Albuquerque......... 49,788 50 --(2) 3.13 None 156,015 254,149 404,706
</TABLE>
- ------------------------
(1) Options had no expiration date, but calculations assume a 10-year expiration
date in accordance with the 1996 Stock Option Plan.
(2) Nominal.
The following table sets forth certain information concerning each exercise
of stock options during the fiscal year ended December 31, 1995 by the Named
Executive Officers. There were no unexercised stock options held by the Named
Executive Officers at the end of the fiscal year.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
SHARES AGGREGATE
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED
- -------------------------------------------------------------------- ------------- ----------
<S> <C> <C>
Hermano Studart Lins de Albuquerque................................. 49,788 $ 156,015
Carlos Andre Studart Lins de Albuquerque............................ 49,788 156,015
</TABLE>
CERTAIN TRANSACTIONS
The Company has been a party to the following transactions with its
executive officers, directors and five percent stockholders:
In May 1993, the Company issued and sold 1,169,096 shares of Common Stock to
Tevecap for a purchase price of $1.3 million.
In July 1994, the Company effected a recapitalization pursuant to which Mrs.
Maria Nise Lins, Mr. Hermano Lins, Mr. Carlos Andre Lins and Tevecap exchanged
all of their shares of common stock of TVFSA on a one-for-one basis for shares
of common stock of ITSA (the predecessor company of TV Filme).
In July 1994, the Company issued and sold 2,126,132 shares of Common Stock
(after giving effect to the Reorganization) to Warburg, Pincus for an aggregate
purchase price of $5.0 million.
In August 1995, the Company issued and sold 1,052,924 shares of Common Stock
(after giving effect to the Reorganization) to Warburg, Pincus for an aggregate
purchase price of $3.3 million.
In March 1996, the Company issued and sold 783,700 shares of Common Stock
and warrants to purchase an additional 567,952 shares of Common Stock (after
giving effect to the Reorganization) to Warburg, Pincus for approximately $5.1
million, and issued and sold 287,664 shares of Common Stock and warrants to
purchase an additional 208,372 shares of Common Stock (after giving effect to
the Reorganization) to Tevecap for approximately $1.9 million. Such warrants are
exercisable at $6.52 per share.
Immediately prior to the consummation of the Initial Public Offering, in
connection with the Reorganization TV Filme issued 3,962,756, 1,456,760,
254,472, 254,472 and 1,069,520 shares of Common Stock to Warburg, Pincus,
Tevecap, Mr. Hermano Lins, Mr. Carlos Andre Lins and Mrs. Maria Nise Lins,
respectively, with a value of $39.6 million, $14.6 million, $2.5 million, $2.5
million and $10.7 million, respectively, based on the price of the Common Stock
sold in the Initial Public Offering. Such shares were issued in exchange for all
of their shares of common stock of ITSA, which had the same value as the shares
of Common Stock received in the exchange.
Immediately prior to the consummation of the Initial Public Offering, in
connection with the Reorganization TV Filme issued warrants to purchase 567,952
shares of Common Stock to Warburg, Pincus and warrants to purchase 208,372
shares of Common Stock to Tevecap in exchange for all of their warrants to
purchase shares of common stock of ITSA.
From time to time during January 1994 to March 1996, Tevecap and certain of
its affiliates made short-term loans to the Company for working capital
purposes. During this period, the maximum amount outstanding pursuant to such
loans was approximately $6.4 million. During April 1996, the Company resumed
borrowing from Tevecap and its affiliates for working capital purposes, all of
which borrowings were repaid with the proceeds of the Initial Public Offering
with the exception of $200,000 due February 1997 and $200,000 due February 1998.
From December 1993 to April 2, 1996, certain members of the Lins Family,
including Mr. Hermano Lins, Chief Executive Officer and Secretary of the
Company, Mr. Carlos Andre Lins, the President, Chief
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Operating Officer and Treasurer of the Company, their mother Mrs. Maria Nise
Lins and several of her other children, owned in the aggregate 100% of Prava
Sistemas de Comunicacoes Ltda. ("Prava"), which provides wireless cable
installation services to hotels, hospitals and single-family houses, among other
services. Messrs. Lins each owned approximately 7% of Prava and Mrs. Maria Nise
Lins owned approximately 40% of Prava during such period. In the years ended
December 31, 1995, 1994 and 1993, respectively, Prava's revenues from the
Company were approximately $260,000, $70,000, and $0 representing, respectively,
approximately 65%, 37% and 0% of Prava's total revenues for such year. On April
2, 1996, the Lins Family sold all of their interests in Prava to unrelated third
parties.
In July 1994, the Company, Tevecap and certain other parties thereto entered
into an agreement pursuant to which Tevecap agreed to provide programming
exclusively to the Company in certain areas. In June 1996, the Programming
Agreement was amended and restated effective August 2, 1996. See
"Business--Programming." From time to time, in connection with the Programming
Agreement, the Company enters into agreements with TVA Sistema and certain of
its affiliates regarding specified channels. The agreements typically have a
two-year term and determine the monthly fees which the Company pays for such
channels. In the years ended December 31, 1995, 1994 and 1993, TVA Sistema's and
its affiliates' revenues from the Company aggregated approximately $1.3 million,
$178,000 and $13,000, respectively, net of discounts on programming fees,
compared to list prices. Such discounts received by the Company in 1995, 1994
and 1993 were $539,000, $340,000 and $28,000, respectively. Such discounts are
not expected to continue. In the nine months ended September 30, 1996, TVA
Sistema's and its affiliates' revenues from the Company aggregated approximately
$4.5 million.
In late 1994, TV Filme Servicos purchased licenses to operate the Company's
wireless cable systems in Goiania and Belem from an affiliate of TVA Sistema for
a purchase price of $400,000 each. The Company believes such prices were below
fair market value. Such purchase prices were payable in equal annual
installments of $100,000 per license, due in February of each of the years 1995,
1996, 1997 and 1998. Such installment payments do not bear interest. As of
September 30, 1996, $400,000 remained outstanding.
In connection with the Initial Public Offering, TV Filme entered into the
Reorganization pursuant to which all of the preferred stock of ITSA was
converted into common stock of ITSA and each share of common stock of ITSA was
exchanged for 1,844 shares of Common Stock of TV Filme. Pursuant to the
Reorganization, (i) 51% of the voting stock of TV Filme Servicos was transferred
to TVTEL Ltda., an entity all the stock of which is owned by certain
stockholders of TV Filme who are Brazilian nationals, including certain
directors and executive officers of TV Filme (namely Tevecap, Mrs. Maria Nise
Lins de Albuquerque, Messrs. Hermano Lins and Carlos Andre Lins and Ms. Maria
Veronica Lins), with ITSA retaining 49% of the voting stock and 83% of the
economic interests in TV Filme Servicos; (ii) the operating assets of the
wireless cable system of Brasilia were transferred from TV Filme Servicos to TV
Filme Brasilia; and (iii) TV Filme Servicos entered into various agreements with
ITSA and its subsidiaries pursuant to which, among other things, TV Filme
Servicos has authorized ITSA to operate the existing wireless cable systems
under its current licenses and to operate future cable systems under future
license grants. The Company has a representative on the executive management
team of TV Filme Servicos and any sale or transfer of any current or future
license held by TV Filme Servicos is prohibited. ITSA entered into various
agreements with TV Filme Servicos which authorize ITSA's subsidiaries to operate
the existing wireless cable systems under its current licenses and all other pay
television systems under future licenses. See "The Company."
The Company believes that the above transactions were or are on terms no
less favorable to the Company than could have been obtained in transactions with
independent third parties. All future transactions between the Company and its
officers, directors, principal stockholders or their respective affiliates, will
be on terms no less favorable to the Company than can be obtained from
unaffiliated third parties.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of February 3, 1996, unless otherwise stated with
respect to (i) each person known by TV Filme to be the beneficial owner of more
than 5% of the Common Stock, (ii) each of the Company's directors, (iii) each of
the Named Executive Officers and (iv) all directors and officers as a group.
<TABLE>
<CAPTION>
NUMBER
OF PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES(2) OF TOTAL(2)
- ---------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017(3)(4)......................................................... 4,530,708 42.2%
Tevecap S.A.
Rua do Rocio, 313
Suite 101
Sao Paulo, Brazil(5)................................................................... 1,665,132 16.1
Maria Nise Studart Lins de Albuquerque.................................................. 1,069,520 10.5
Hermano Studart Lins de Albuquerque..................................................... 254,472 2.5
Carlos Andre Studart Lins de Albuquerque................................................ 254,472 2.5
Douglas M. Karp(4)(6)................................................................... 4,530,708 42.2
Jose Augusto Pinto Moreira(5)(7)........................................................ 1,665,132 16.1
Claudio Dascal(5)(7).................................................................... 1,665,132 16.1
Gary D. Nusbaum......................................................................... -- --
Alvaro J. Aguirre....................................................................... -- --
All executive officers and directors as a group (7 persons)............................. 6,704,784 61.3%
</TABLE>
- ------------------------
(1) Unless otherwise indicated above, the address for each stockholder
identified above is TV Filme, Inc. c/o ITSA-Intercontinental
Telecomunicacoes Ltda, SCS, Quadra 07-Bl.A, Ed. Executive Tower, Sala 601,
70.300-911 Brasilia-DF, Brazil.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of Common Stock subject
to options and warrants held by that person that are currently exercisable
or exercisable within 60 days of February 3, 1996 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purposes of
computing the percentage ownership of any other person. Except as indicated
in the footnotes to this table, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name.
(3) The sole general partner of Warburg, Pincus is WP. E.M. Warburg, Pincus &
Co., a New York limited liability company ("E.M. Warburg"), manages Warburg,
Pincus. The members of E.M. Warburg are substantially the same as the
partners of WP. Lionel I. Pincus is the managing partner of WP and the
managing member of E.M. Warburg and may be deemed to control both WP and
E.M. Warburg. WP, as the sole general partner of Warburg, Pincus, has a 20%
interest in the profits of Warburg, Pincus.
(4) Includes 567,952 shares of Common Stock which Warburg, Pincus has the right
to acquire through exercise of a warrant issued by the Company in March
1996.
(5) Includes 208,372 shares of Common Stock which Tevecap has the right to
acquire through exercise of a warrant issued by the Company in March 1996.
(6) All of the shares indicated as owned by Messrs. Karp and Nusbaum are owned
directly by Warburg, Pincus and are included because of Messrs. Karp's and
Nusbaum's affiliation with Warburg, Pincus. Mr. Karp, the Chairman of the
Board of the Company, and Mr. Nusbaum, a director of the Company, are each a
Managing Director and member of E.M. Warburg and a general partner of WP. As
such, Messrs. Karp and Nusbaum may be deemed to have an indirect pecuniary
interest, within the meaning of Rule 16a-1 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), in an indeterminate portion of the
shares of Common Stock beneficially owned by Warburg, Pincus, and WP.
Messrs. Karp and Nusbaum disclaim "beneficial ownership" of these shares
within the meaning of Rule 13d-3 under the Exchange Act.
(7) All of the shares indicated as owned by Mr. Moreira and Mr. Dascal,
respectively, are owned directly by Tevecap and are included because of Mr.
Moreira's and Mr. Dascal's respective affiliations with Tevecap. Mr. Moreira
and Mr. Dascal each disclaim "beneficial ownership" of these shares within
the meaning of Rule 13d-3 under the Exchange Act.
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Pursuant to the Warburg Stockholders Agreement, (i) Warburg, Pincus granted
Tevecap a right of first offer until July 1999 whenever Warburg, Pincus proposes
to sell its shares of Common Stock in a private sale in an amount at least equal
to 20% of the Company's then outstanding shares of Common Stock to a single
purchaser (or group of related purchasers) in one transaction (or a series of
related transactions) and (ii) the Lins Family are entitled to certain
"tag-along" rights. Pursuant to the Warburg Stockholders Agreement, Warburg,
Pincus and the Lins Family also have agreed to vote for up to two Tevecap
designees to the Board of Directors. See "Management--Executive Officers and
Directors."
Pursuant to a stockholders agreement between Tevecap and the Lins Family,
the Lins Family granted Tevecap a right of first offer until July 1999 whenever
the Lins Family proposes to sell its shares of Common Stock in a private sale in
an amount at least equal to 5% of the Company's then outstanding shares of
Common Stock to a single purchaser (or group of related purchasers) in one
transaction (or a series of related transactions).
Under the terms of the Registration Rights Agreement entered into in
connection with the Initial Public Offering, TV Filme granted Tevecap, Warburg,
Pincus, the Lins Family and Messrs. Wallach and Pearson (the "Rights Holders")
registration rights, covering an aggregate of 7,071,740 shares of Common Stock.
If TV Filme proposes to register any of its securities under the Securities Act,
the Rights Holders are entitled to notice of such registration and to include
their Registrable Shares (as defined therein) in such registration, subject to
certain limitations. In addition, Warburg, Pincus, Tevecap or the Lins Family
may require TV Filme to register any or all of their Registrable Shares,
provided that TV Filme is only required to effect the following registrations:
(i) two (2) such registrations requested by Warburg, Pincus, (ii) two (2) such
registrations requested by Tevecap and (iii) two (2) such registrations
requested by the Lins Family, subject to certain limitations. Each of the Rights
Holders is entitled to notice of such request for registration and to have all
or any portion of their Registrable Shares included in such registration,
subject to certain limitations. All expenses relating to the filing of such
registration statements, excluding underwriting discounts and selling
commissions attributable to the Registrable Shares and the fees and expenses of
such Rights Holder's own counsel, will be paid by TV Filme. TV Filme is required
to use its diligent best efforts to effect such registrations, subject to
certain conditions and limitations.
Under the terms of outstanding warrants issued by the Company, if TV Filme
proposes to register any of its securities under the Securities Act, the holders
of such warrants are entitled to notice of such registration and to include the
shares underlying such warrants in such registration, subject to certain
limitations. All expenses relating to the filing of such registration
statements, excluding underwriting discounts and selling commissions
attributable to the underlying shares and the fees and expenses of such warrant
holder's own counsel, will be paid by TV Filme. Prior to the closing of the
Offering, TV Filme will obtain from the Rights Holders and the warrant holders
waivers of any registration rights which they may have with respect to any
registration statement which TV Filme is required to file in connection with the
Notes. See "Description of Exchange Notes--Registration Rights; Liquidated
Damages."
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DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued pursuant to the Indenture, dated December
20, 1996 (the "Indenture"), between TV Filme and IBJ Schroder Bank & Trust
Company, as trustee (the "Trustee"). The terms of the Exchange Notes will
include those stated in the Indenture and the Pledge Agreement and those made
part of the Indenture and the Pledge Agreement by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Exchange
Notes will be subject to all such terms, and holders ("Holders") of Exchange
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture, the
Pledge Agreement, the Note Pledge Agreement and the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Indenture, the Pledge Agreement, the Note Pledge Agreement and
the Registration Rights Agreement, including the definitions therein of certain
terms used below. As used herein the term "Notes" shall mean the Old Notes and
the Exchange Notes, unless otherwise indicated. The definitions of certain terms
used in the following summary are set forth below under "--Certain Definitions."
Currently all of TV Filme's Subsidiaries are Restricted Subsidiaries.
However, under certain circumstances, TV Filme will be able to designate current
or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants set forth in the
Indenture.
The terms of the Exchange Notes are identical in all material respects
(including principal amount, interest rates, and maturity) to the terms of the
Old Notes for which they may be exchanged pursuant to the Exchange Offer, except
that (i) the Exchange Notes are freely transferable by the holders thereof
(other than as provided herein), and are not subject to any covenant regarding
registration under the Securities Act, (ii) holders of the Exchange Notes will
not be entitled to Liquidated Damages and (iii) holders of the Exchange Notes
will not be entitled to certain rights under the Registration Rights Agreement
intended for the holders of unregistered securities, except in limited
circumstances. The Exchange Notes will be issued solely in exchange for an equal
principal amount of Old Notes. As of the date hereof, $140.0 million aggregate
principal amount of Old Notes is outstanding. See "The Exchange Offer."
RANKING
The Exchange Notes will be senior obligations of TV Filme, will rank PARI
PASSU in right of payment with all existing and future senior Indebtedness of TV
Filme and will rank senior in right of payment to any subordinated Indebtedness
of TV Filme. As of September 30, 1996, after giving PRO FORMA effect to the
Offering and the application of the net proceeds therefrom, the aggregate
principal amount of outstanding senior Indebtedness of TV Filme would have been
approximately $140.0 million. The Exchange Notes will be effectively
subordinated, however, to all Indebtedness and other liabilities (including
payables) of TV Filme's Subsidiaries. As of September 30, 1996, after giving PRO
FORMA effect to the Offering, the aggregate amount of outstanding liabilities
(including payables) of TV Filme's Subsidiaries, on a consolidated basis, but
excluding the Intercompany Note and the Subsidiary Guarantees, would have been
approximately $13.5 million.
SECURITY
PLEDGED SECURITIES. In accordance with the terms of the Indenture, on the
date (the "Closing Date") of the closing of the Offering, TV Filme caused ITSA
to purchase and pledge to the Trustee, for the benefit of the Holders of the
Notes, approximately $33.5 milion of Pledged Securities, scheduled interest and
principal payments on which is in an amount, in the opinion of a nationally
recognized firm of independent public accountants selected by TV Filme, to
provide for payment in full when due of the first four scheduled interest
payments on the Notes. The Pledged Securities have been pledged by ITSA to the
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Trustee for the benefit of the Holders of the Notes pursuant to the Pledge
Agreement and are being held by the Trustee in the Pledge Account. Pursuant to
the Pledge Agreement, immediately prior to an interest payment date on the
Notes, TV Filme may either deposit with the Trustee from funds otherwise
available to TV Filme cash sufficient to pay the interest scheduled to be paid
on such date or TV Filme may direct the Trustee to release from the Pledge
Account proceeds sufficient to pay the interest scheduled to be paid on such
date. In the event that TV Filme exercises the former option, the Pledge
Agreement provides that TV Filme may thereafter direct the Trustee to release to
ITSA proceeds or Pledged Securities from the Pledge Account in a like amount. A
failure by TV Filme to pay interest on the Notes in a timely manner through
December 15, 1998 will constitute an immediate Event of Default under the
Indenture, with no grace or cure period. See "--Events of Default and Remedies."
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by TV Filme, to provide for
payment in full of the first four scheduled interest payments due on the Notes
(or, in the event an interest payment or interest payments have been made, an
amount sufficient to provide for payment in full of any interest payments
remaining, up to and including the fourth scheduled interest payment), the
Trustee will be permitted to release to ITSA at TV Filme's request any such
excess amount. The Exchange Notes will be secured by a first priority security
interest in the Pledged Securities and in the Pledge Account and, accordingly,
the Pledged Securities and the Pledge Account will also secure repayment of the
principal amount of the Exchange Notes to the extent of such security.
Under the Pledge Agreement, assuming that TV Filme makes the first four
scheduled interest payments on the Notes in a timely manner, all of the Pledged
Securities will be released from the Pledge Account and thereafter the Notes
will be secured only pursuant to the Note Pledge Agreement.
PLEDGED INTERCOMPANY NOTE. On the Closing Date, the proceeds of the
Offering were loaned by TV Filme to ITSA, which loan is guaranteed by the
Intercompany Note. The Intercompany Note has been pledged by TV Filme to the
Trustee for the benefit of the Holders of the Notes pursuant to the Note Pledge
Agreement as security for repayment of principal and interest under the Notes.
Each of TV Filme Brasilia, TV Filme Goiania, TV Filme Belem have unconditionally
guaranteed, and each other Restricted Subsidiary that may from time to time
exist and that gives such a guarantee under the terms of the Indenture (each, a
"Guarantor") will unconditionally guarantee (the "Subsidiary Guarantees"),
jointly and severally, to the holder of the Intercompany Note, on an unsecured
basis, the full and prompt performance of ITSA's obligations under the
Intercompany Note. Additionally, the current Guarantors have agreed, and future
Guarantors will agree, to pay any and all expenses (including reasonable counsel
fees and expenses) incurred by the holder of the Intercompany Note in enforcing
any rights under the Subsidiary Guarantees.
Each existing Subsidiary Guarantee is, and all future Subsidiary Guarantees
will be, limited to an amount not to exceed the maximum amount that can be
Guaranteed, as it relates to such Guarantor, without such Subsidiary Guarantee
being voidable or unlawful under applicable law, including laws relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally. See "Risk Factors--Risk Factors Relating to the
Company and the Exchange Offer--Fraudulent Conveyance Considerations."
Each existing Subsidiary Guarantee is, and all future Subsidiary Guarantees
will be, a continuing Guarantee and shall (i) remain in full force and effect
until payment in full of all the obligations under the Intercompany Note, (ii)
be binding upon such Guarantor and (iii) inure to the benefit of and be
enforceable by the holder of the Intercompany Note and its successors,
transferees and assigns.
The Indenture provides that, subject to the provisions described in the next
succeeding paragraph, no Guarantor may consolidate or merge with or into
(whether or not such Guarantor is the surviving entity or Person), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, entity or Person unless
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(i) the entity or Person formed by or surviving any such consolidation or merger
(if other than such Guarantor) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of such Guarantor under the Subsidiary
Guarantee, in form satisfactory to the Trustee; (ii) immediately after such
transaction, no Default or Event of Default exists; (iii) TV Filme and its
Restricted Subsidiaries will have Consolidated Net Worth immediately after such
transaction equal to or greater than the Consolidated Net Worth of TV Filme and
its Restricted Subsidiaries immediately preceding such transaction; (iv) TV
Filme and its Restricted Subsidiaries would, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Leverage Ratio test set forth
in the first paragraph of the covenant described under "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock;" (v)
TV Filme shall have delivered to the Trustee an Officers' Certificate, and an
Opinion of Counsel, each stating that such consolidation, merger or transfer
complies with the Indenture; and (vi) such Guarantor shall have delivered a
written instrument in form satisfactory to the Trustee confirming its Subsidiary
Guarantee after giving effect to such consolidation, merger or transfer.
Notwithstanding the foregoing, any Guarantor may merge into, consolidate with or
transfer all or part of its properties or assets to TV Filme, one or more
Guarantors or one or more Restricted Subsidiaries which become Guarantors
concurrently therewith.
Notwithstanding the preceding paragraph, if no Default exists or would exist
under the Indenture, concurrently with any sale or disposition (by merger or
otherwise) of any Guarantor in accordance with the terms of the Indenture (other
than a transaction subject to the provisions of the preceeding paragraph) by TV
Filme or any of its Restricted Subsidiaries to any Person that is not an
Affiliate of TV Filme or any of its Restricted Subsidiaries, such Guarantor will
automatically and unconditionally be released from all obligations under its
Subsidiary Guarantee; PROVIDED, HOWEVER, that any such release shall occur only
to the extent that all obligations of such Guarantor under, and all of its
guarantees of, and all of its pledges of assets or other security interests
which secure, any other Indebtedness of TV Filme or any of its Restricted
Subsidiaries shall also terminate upon such release, sale or transfer.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be limited in aggregate principal amount to $140.0
million and will mature on December 15, 2004. Interest on the Exchange Notes
will accrue at the rate of 12 7/8% per annum and will be payable semi-annually
in arrears on June 15 and December 15 of each year, commencing on June 15, 1997,
to Holders of record on the immediately preceding June 1 and December 1.
Interest on the Exchange Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal of and premium, if any, and
interest on the Exchange Notes will be payable by wire transfer of immediately
available funds to the holder of the Global Exchange Notes (as defined herein)
and with respect to holders of Certificated Exchange Notes (as defined herein),
at the office or agency of TV Filme maintained for such purpose or, at the
option of TV Filme, payment of interest may be made by check mailed to the
Holders of the Exchange Notes at their respective addresses set forth in the
register of Holders of the Exchange Notes; PROVIDED that all payments with
respect to Exchange Notes the Holders of which have given wire transfer
instructions to TV Filme will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by TV Filme, TV Filme's office or agency will be the
office of the Trustee maintained for such purpose. The Exchange Notes will be
issued in denominations of $1,000 and integral multiples thereof.
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OPTIONAL REDEMPTION
The Exchange Notes will not be redeemable at TV Filme's option prior to
December 15, 2000. Thereafter, the Exchange Notes will be subject to redemption
at the option of TV Filme, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on December 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------- ------------
<S> <C>
2000............................................................................ 106.4375%
2001............................................................................ 104.2917%
2002............................................................................ 102.1458%
2003 and thereafter............................................................. 100.0000%
</TABLE>
Notwithstanding the foregoing, on or prior to December 15, 1999, TV Filme
may, at its option, redeem, from time to time, up to 35% in aggregate principal
amount of the Notes at a redemption price of 112 7/8% of the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date with
the net proceeds of a Public Equity Offering; PROVIDED that no less than 65% of
the aggregate principal amount of Notes initially issued remains outstanding
immediately after the occurrence of such redemption; and PROVIDED, FURTHER, that
notice of such redemption shall have been given not later than 30 days, and such
redemption shall occur not later than 90 days, after the date of the closing of
such Public Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a PRO RATA basis, by
lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders" and
"--Merger, Consolidation, or Sale of Assets" TV Filme is not required to make
mandatory redemption or sinking fund payments with respect to the Exchange
Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, TV Filme
will be required to make an offer (a "Change of Control Offer") to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of each
Holder's Notes, at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, to the date
of repurchase (the "Change of Control Payment"). Within 20 days following any
Change of Control, TV Filme will mail a notice to each Holder describing the
transaction that constitutes the Change of Control and offering to repurchase
Notes pursuant to the procedures required by the Indenture and described in such
notice. TV Filme will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations
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thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
On a date that is at least 30 but no more than 60 days from the date on
which TV Filme mails notice of the Change of Control (the "Change of Control
Payment Date"), TV Filme will, to the extent lawful, (i) accept for payment all
Notes or portions thereof properly tendered pursuant to the Change of Control
Offer, (ii) deposit with the Trustee an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the Notes so accepted together
with an Officers' Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by TV Filme. The Trustee will promptly mail to
each Holder of Notes so tendered the Change of Control Payment for such Notes,
and the Trustee will promptly authenticate and mail (or cause to be transferred
by book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; PROVIDED that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. TV Filme will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
Unless TV Filme defaults in the payment for any Notes properly tendered pursuant
to the Change of Control Offer, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable.
The occurrence of a Change of Control, or the exercise by the Holders of
Notes of their right to require TV Filme to repurchase the Notes upon a Change
of Control, could cause a default under other senior indebtedness of TV Filme.
TV Filme's ability to pay cash to the Holders of Notes and to holders of any
such other senior indebtedness upon a Change of Control may be limited by TV
Filme's then existing financial resources.
TV Filme will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by TV Filme and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of TV Filme and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than Warburg, Pincus, TVA Sistema or members of the Lins Family, (ii)
the adoption of a plan relating to the liquidation or dissolution of TV Filme,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation, but excluding any foreclosure on the Pledged Securities
by the Trustee) the result of which is that any "person" (as defined above),
other than Warburg, Pincus, TVA Sistema or members of the Lins Family, becomes
the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly, of (a) more than 35% of the
voting stock of TV Filme and (b) more of the voting stock of TV Filme than is at
the time "beneficially owned" (as defined above) by Warburg, Pincus, TVA Sistema
and members of the Lins Family in the aggregate or (iv) the first day on which a
majority of the members of the Board of Directors of TV Filme are not Continuing
Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of TV Filme and its Subsidiaries taken as a whole. Although there
is a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Exchange Notes to require TV Filme to
repurchase such Exchange Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of TV Filme and
its Subsidiaries taken as a whole to another Person or group may be uncertain.
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"CONTINUING DIRECTOR" means, as of any date of determination, any member of
the Board of Directors of TV Filme who (i) was a member of such Board on the
date of the Indenture, (ii) was nominated for election or elected to such Board
by Warburg, Pincus, TVA Sistema or members of the Lins Family or (iii) was
nominated for election or elected to such Board with the approval of two-thirds
of the following members of such Board: (a) the members of such Board who are
described in clause (i) or (ii) of this definition and (b) members of such Board
previously nominated for election or elected to such Board as described in this
clause (iii).
ASSET SALES. The Indenture provides that TV Filme will not, and will not
permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i)
TV Filme or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value (which, if it exceeds $1.0 million (or the equivalent thereof at the time
of determination), shall be determined by, and set forth in, a resolution of the
Board of Directors of TV Filme and described in an Officers' Certificate of TV
Filme delivered to the Trustee) of the assets or Equity Interests issued or sold
or otherwise disposed of and (ii) at least 75% of the consideration therefor
received by TV Filme or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; PROVIDED that the amount of (a) any liabilities (as shown on
TV Filme's or such Restricted Subsidiary's most recent balance sheet) of TV
Filme or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes) that are
cancelled or assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases TV Filme or such Restricted
Subsidiary from further liability and (b) any notes or other obligations
received by TV Filme or such Restricted Subsidiary from such transferee that are
promptly (but in any event, within 30 days) converted by TV Filme or such
Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash
or Cash Equivalents received) shall be deemed to be cash or Cash Equivalents for
purposes of this provision. For purposes of this covenant, TV Filme Servicos
shall be deemed a Restricted Subsidiary of TV Filme.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale, TV
Filme may apply, directly or indirectly, such Net Proceeds (a) to permanently
reduce Indebtedness under the Bank Credit Agreement (and to correspondingly
reduce commitments with respect thereto) or (b) to the acquisition of a majority
interest in another business, the making of a capital expenditure or the
acquisition of other long-term assets, in each case in the Telecommunications
Business. Pending the final application of any such Net Proceeds, TV Filme may
temporarily reduce Indebtedness under the Bank Credit Agreement or otherwise
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million (or
its equivalent thereof at time of determination), TV Filme will be required to
make an offer to all Holders of Notes and to all other holders of senior
Indebtedness (other than holders of Indebtedness under the Bank Credit
Agreement) (an "Asset Sale Offer") to purchase the maximum principal amount of
Notes and of such other senior Indebtedness, on a pro rata basis, that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to, in the case of the Notes, 100% of the principal amount thereof, plus
accrued and unpaid interest thereon, to the date of purchase, and, in the case
of all other senior Indebtedness, 100% of the principal amount thereof, plus
accrued and unpaid interest, or premium, if any, thereon to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, TV Filme may use any remaining Excess
Proceeds for general corporate purposes (subject to the restrictions of the
Indenture). If the aggregate principal amount of Notes and such other senior
Indebtedness surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased in compliance with
the requirements of the principal national securities exchange, if any, on which
the Notes are listed or, if the Notes are not so listed, on a PRO RATA basis
(with such adjustments as may be deemed appropriate by TV Filme so that only
Notes with denominations of $1,000 or integral multiples thereof shall be
purchased). Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero. Notwithstanding the
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preceding provisions of this paragraph which may be to the contrary, TV Filme
shall not be required to include in any Asset Sale Offer any offer to purchase
any Indebtedness (other than the Notes) which by its terms does not require such
offer.
The Indenture provides that TV Filme will not, and will not permit any of
its Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise
dispose of any Capital Stock of any Restricted Subsidiary of TV Filme to any
Person (other than TV Filme or a Restricted Subsidiary of TV Filme), unless
(i)(a) after giving effect to such transfer, conveyance, sale, lease or other
disposition, the Restricted Subsidiary which is subject to such transaction
remains a Restricted Subsidiary or (b) such transfer, conveyance, sale, lease or
other disposition is of all of the Capital Stock of such Restricted Subsidiary
owned by TV Filme and its Restricted Subsidiaries and (ii) such transaction is
conducted in accordance with the covenant described under "--Repurchase at the
Option of Holders--Asset Sales."
TV Filme will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of Notes
using Excess Proceeds.
CERTAIN COVENANTS
RESTRICTED PAYMENTS. The Indenture provides that TV Filme will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
(i) declare or pay any dividend or make any other payment or distribution on
account of TV Filme's Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving TV Filme) or to
any direct or indirect holder of TV Filme's Equity Interests in its capacity as
such, other than dividends or distributions (a) paid or payable in Equity
Interests (other than Disqualified Stock) of TV Filme or (b) paid or payable to
TV Filme or any Wholly Owned Restricted Subsidiary of TV Filme or (c) paid or
payable in respect of Equity Interests of a Restricted Subsidiary to Persons
other than TV Filme or a Restricted Subsidiary of TV Filme on not more favorable
terms than a PRO RATA basis with dividends or distributions being paid in
respect of Equity Interests held by TV Filme or a Restricted Subsidiary of TV
Filme; (ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of TV Filme or any direct or indirect parent of TV Filme or other
Affiliate of TV Filme or any Restricted Subsidiary of TV Filme (other than any
such Equity Interests owned by TV Filme or any Restricted Subsidiary of TV
Filme); (iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes, except at or following final maturity of such Indebtedness; or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
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(b) TV Filme would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Leverage Ratio test set
forth in the first paragraph of the covenant described under the caption
"--Incurrence of Indebtedness and Issuance of Disqualified Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments declared or made by TV Filme and its Restricted Subsidiaries
after the date of the Indenture shall not exceed, at the date of determination,
the sum of (1) an amount equal to TV Filme's Consolidated Cash Flow from the
first day of TV Filme's first full fiscal quarter following the date of the
Indenture to the end of TV Filme's most recently ended full fiscal quarter for
which internal financial statements are available, taken as a single accounting
period, less the product of 1.5 times TV Filme's Consolidated Interest Expense
from the first day of TV Filme's first full fiscal quarter following the date of
the Indenture to the end of TV Filme's most recently ended full fiscal quarter
for which internal financial statements are available, taken as a single
accounting period, plus (2) 100% of the aggregate amount of cash and marketable
securities contributed to the capital of TV Filme after the date of the
Indenture, plus (3) 100% of the aggregate net cash proceeds received by TV Filme
from the issue or sale after the date of the Indenture of Equity Interests of TV
Filme or of Disqualified Stock or debt securities of TV Filme that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of TV
Filme and other than Disqualified Stock or debt securities that have been
converted into Disqualified Stock), plus (4) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted Investment,
plus (5) the aggregate amount of any cash dividends or distributions on any
Restricted Investment and any repayment in cash of loans constituting Restricted
Investments and the amount of any guarantee that constituted a Restricted
Investment and is or has been released.
The foregoing provisions do not prohibit (i) the payment of any dividend or
other distribution within 60 days after the date of declaration thereof, if at
said date of declaration such payment would have complied with the provisions of
the Indenture; (ii) the redemption, repurchase, retirement or other acquisition
of any Equity Interests of TV Filme in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of TV Filme) of
other Equity Interests of TV Filme (other than any Disqualified Stock); PROVIDED
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c) of the preceding paragraph; (iii) the defeasance, redemption,
retirement or acquisition for value or repurchase of subordinated Indebtedness
with the net cash proceeds from an incurrence of Permitted Refinancing Debt or
the substantially concurrent sale (other than to a Subsidiary of TV Filme) of
Equity Interests of TV Filme (other than Disqualified Stock); PROVIDED that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (c) of
the preceding paragraph; (iv) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of TV Filme from an employee or former
employee of TV Filme or any of its Subsidiaries in connection with such
employee's death, disability or termination of employment; PROVIDED that the
amount expended by TV Filme or any of its Restricted Subsidiaries in connection
with such redemption, repurchase, retirement or other acquisition does not
exceed $500,000 (or the equivalent thereof at time of determination) per year;
PROVIDED, FURTHER, that any amount of such permitted amount which is not
expended may be carried over to any subsequent year; and (v) the redemption,
repurchase, retirement or other acquisition of any Equity Interest of any of TV
Filme's Restricted Subsidiaries.
The Board of Directors of TV Filme may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a Default.
For purposes of making such determination, all outstanding Investments by TV
Filme and its Restricted Subsidiaries (except to the extent repaid in cash)
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in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greater of (i) the net book value of such Investments at the time of such
designation, (ii) the Fair Market Value of such Investments at the time of such
designation and (iii) the original Fair Market Value of such Investments at the
time they were made. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. Upon being so
designated as an Unrestricted Subsidiary, any Subsidiary Guarantee which was
previously executed by such Unrestricted Subsidiary shall be deemed terminated.
The amount of all Restricted Payments not made in cash shall be the Fair
Market Value (which, if it exceeds $1.0 million (or the equivalent thereof at
the time of determination thereof), shall be determined by, and set forth in, a
resolution of the Board of Directors of TV Filme and described in an Officers'
Certificate delivered to the Trustee) on the date of the Restricted Payment of
the asset(s) proposed to be transferred by TV Filme or any Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the fiscal quarter end following the date of making any Restricted Payment,
TV Filme shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payments during such quarter were permitted and setting forth the
basis upon which the calculations required by the covenant described under
"--Restricted Payments" were computed, which calculations may be based upon TV
Filme's latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK. The
Indenture provides that TV Filme will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) or Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
PROVIDED, HOWEVER, that TV Filme may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock if, at the time of incurrence of
such Indebtedness or the issuance of such Disqualified Stock, after giving PRO
FORMA effect to such incurrence or issuance as of such date and to the use of
proceeds therefrom (including the application or the use of the net proceeds
therefrom to repay Indebtedness or make any Restricted Payment) as if the same
had occurred at the beginning of the most recently ended full fiscal quarter of
TV Filme for which internal financial statements are available, TV Filme's
Leverage Ratio would have been no greater than 6.5 to 1.
The foregoing provisions will not apply to:
(i) the incurrence by TV Filme or any of its Restricted Subsidiaries of
Indebtedness pursuant to the Bank Credit Agreement in an amount not to exceed
$40.0 million (or the equivalent thereof at time of determination) at any time
outstanding, less the aggregate amount of all permanent reductions thereto
pursuant to the covenant described under "--Repurchase at the Option of
Holders--Asset Sales;"
(ii) Indebtedness of any Restricted Subsidiary consisting of a guarantee of
Indebtedness under the Bank Credit Agreement;
(iii) Existing Indebtedness;
(iv) the incurrence by TV Filme of Indebtedness represented by the Notes and
the Indenture;
(v) the incurrence of intercompany Indebtedness between or among TV Filme
and any of its Restricted Subsidiaries or TV Filme Servicos; PROVIDED that (a)
if TV Filme is an obligor on such Indebtedness, such Indebtedness is expressly
subordinate to the payment in full of all Obligations with respect to the Notes
and (b) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than TV Filme or a Restricted
Subsidiary of TV Filme, or any sale or other transfer of any such Indebtedness
to a Person that is not either TV Filme or a Restricted
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Subsidiary of TV Filme, shall be deemed to constitute an incurrence of such
Indebtedness by TV Filme or such Restricted Subsidiary, as the case may be;
(vi) the incurrence by TV Filme or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any Indebtedness that is permitted by the
terms of the Indenture to be outstanding or currency exchange rate risk;
(vii) the incurrence by TV Filme or any of its Restricted Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund Indebtedness that
was permitted by the Indenture to be incurred; and
(viii) the incurrence of Indebtedness by TV Filme or any of its Restricted
Subsidiaries having a Weighted Average Life to Maturity in excess of the
Weighted Average Life to Maturity on the Notes lent by one or more Strategic
Investors (or any Subsidiaries thereof and including any refinancing of such
outstanding amount) resulting in up to $50.0 million (or the equivalent thereof
at time of determination) in aggregate Net Proceeds; PROVIDED that (a) such
Indebtedness (and any refinancing thereof) is subordinated in right of payment
to the prior payment in full in cash of all Obligations (including principal,
interest and premium, if any) of TV Filme under the Notes and the Indenture
(including as a consequence of any repurchase, redemption or other repayment of
the Notes, including, without limitation, by way of optional redemption, Asset
Sale Offer or Change of Control Offer to the extent such rights to repayment are
exercised by the Holders) such that (I) TV Filme or such Restricted Subsidiary
shall make no payment or distribution in respect of such Indebtedness and may
not acquire such Indebtedness until the prior payment in full in cash of all
Obligations in respect of the Notes if any Default on the Notes shall occur and
be continuing and (II) the holders of such Indebtedness may not take any action
to enforce or accelerate such Indebtedness until the Holders of the Notes have
taken such action in respect of the Notes, (b) such Indebtedness (and any
refinancing thereof) is not guaranteed by any of TV Filme's Subsidiaries and is
not secured by any Lien on any property or asset of TV Filme or any Subsidiary
(other than an escrow of proceeds of such Indebtedness or similar arrangement
pending use by or disbursement to TV Filme or a Subsidiary), (c) such
Indebtedness (and any refinancing thereof) has no scheduled maturity of
principal earlier than a date at least one year after the final stated maturity
of the Notes, (d) accreted interest on such Indebtedness shall only be payable
on the maturity thereof and cash interest on such Indebtedness shall only be
payable to the extent that immediately prior to and after such payment of
interest TV Filme is permitted to incur $1.00 of Indebtedness under the ratio
described in the first paragraph of this covenant and (e) the holders of such
Indebtedness shall assign any rights to vote, including by way of proxy, in a
bankruptcy, insolvency or similar proceeding to the Trustee;
(ix) issuance of preferred stock by a Restricted Subsidiary of TV Filme to
TV Filme or any of its Restricted Subsidiaries; or
(x) issuance of preferred stock, which is not Disqualified Stock, by a
Restricted Subsidiary of TV Filme which is a Guarantor to any Person.
ASSET SWAPS. The Indenture provides that TV Filme will not, and will not
permit any of its Restricted Subsidiaries to, in one or a series of related
transactions, directly or indirectly, engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement to swap assets and
immediately after giving effect to the proposed Asset Swap, no Default or Event
of Default shall have occurred and be continuing or would occur as a consequence
thereof;
(ii) TV Filme would, at the time of entering into the agreement to swap
assets and after giving PRO FORMA effect to the proposed Asset Swap as if such
Asset Swap had occurred at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Leverage Ratio test set forth in the first paragraph of the covenant
described under "--Limitation on Incurrence of Indebtedness and Issuance of
Disqualified Stock;"
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(iii) the respective Fair Market Values of the assets being purchased and
sold by TV Filme or any of its Restricted Subsidiaries are substantially the
same at the time of entering into the agreement to swap assets; and
(iv) at the time of the consummation of the proposed Asset Swap, the
percentage of any decline in the Fair Market Value of the asset or assets being
acquired by TV Filme and its Restricted Securities shall not be significantly
greater than the percentage of any decline in the Fair Market Value of the
assets being disposed of by TV Filme or its Restricted Subsidiaries, calculated
from the time the agreement to swap assets was entered into.
LIENS. The Indenture provides that TV Filme will not, and will not permit
any of its Restricted Subsidiaries or TV Filme Servicos to, directly or
indirectly, create, incur, affirm, assume or suffer to exist any Lien of any
kind on any property or asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
unless (i) in the case of Liens securing Indebtedness subordinate to the Notes,
the Notes are secured by a valid, perfected Lien on such property or asset that
is senior in priority to such Liens and (ii) in all other cases, the Notes are
equally and ratably secured; PROVIDED, HOWEVER, that the foregoing shall not
prohibit or restrict Permitted Liens.
LIMITATIONS ON ISSUANCE OF GUARANTEES OF INDEBTEDNESS. The Indenture
provides that TV Filme will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee the payment of any other Indebtedness of TV Filme
(other than Indebtedness permitted under the Bank Credit Agreement pursuant to
clause (i) of the second paragraph of the covenant described under "--Incurrence
of Indebtedness and Issuance of Disqualified Stock") unless such Restricted
Subsidiary simultaneously executes and delivers a guarantee providing for the
Guarantee of the payment of the Notes by such Restricted Subsidiary, which
Guarantee shall be senior to or PARI PASSU with such Restricted Subsidiary's
Guarantee of such other Indebtedness, except that (i) such Guarantee need not be
secured unless required pursuant to the provisions of the covenant described
under "--Liens," and (ii) if such Indebtedness is by its terms expressly
subordinated to the Notes, any such assumption, guarantee or other liability of
such Restricted Subsidiary with respect to such Indebtedness shall be
subordinated to such Restricted Subsidiary's assumption, guarantee or other
liability with respect to the Notes to the same extent as such Indebtedness is
subordinated to the Notes. Notwithstanding the foregoing, any such Guarantee by
a Restricted Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon either (i) the
release or discharge of such Guarantee of Indebtedness, except a discharge by or
as a result of payment under such Guarantee or (ii) any sale, exchange or
transfer to any Person not an Affiliate of TV Filme, of all of TV Filme's stock
in, or all or substantially all the assets of, such Restricted Subsidiary, which
sale, exchange or transfer is made in compliance with the applicable provisions
of the Indenture. The form of such Guarantee is attached as an exhibit to the
Indenture.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture provides that TV Filme will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to TV Filme or any of its Restricted Subsidiaries on its
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits or (b) pay any indebtedness owed to TV Filme or any of
its Restricted Subsidiaries, (ii) make loans or advances to TV Filme or any of
its Restricted Subsidiaries, (iii) transfer any of its properties or assets to
TV Filme or any of its Restricted Subsidiaries, (iv) grant any Liens or security
interests in favor of the Holders of the Notes and the Trustee or (v) guarantee
the Notes or any renewals or refinancings thereof, except for such encumbrances
or restrictions existing under or by reason of (A) Existing Indebtedness or the
Bank Credit Agreement, (B) applicable law, (C) any instrument governing
Indebtedness or Capital Stock of a Person acquired by TV Filme or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is
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not applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired, PROVIDED
that in the case of Indebtedness, such Indebtedness was permitted by the terms
of the Indenture to be incurred, (D) by reason of (x) customary non-assignment
provisions in leases, licenses, sales agreements or other contracts entered into
in the ordinary course of business and consistent with past practices or (y)
restrictions imposed pursuant to a binding agreement for the sale or disposition
of all or substantially all of the Equity Interests or assets of any Restricted
Subsidiary, PROVIDED such restrictions apply solely to the Equity Interests or
assets being sold, (E) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (F) restrictions imposed by
Permitted Liens on the transfer of the assets that are subject to such Liens,
(G) Permitted Refinancing Debt, PROVIDED that the restrictions contained in the
agreements governing such Permitted Refinancing Debt are no more restrictive, as
a whole, than those contained in the agreements governing the Indebtedness being
refinanced or (H) provisions in agreements with other persons who own Equity
Interests in a Restricted Subsidiary which have the effect of requiring that
transactions described in clauses (ii) or (iii) above be effected on terms no
more favorable to TV Filme or its Restricted Subsidiaries than a PRO RATA basis
in accordance with Equity Interests owned in such Restricted Subsidiary.
MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Indenture provides that TV
Filme may not consolidate or merge with or into (whether or not TV Filme is the
surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity, unless (i) TV Filme is
the surviving entity or the entity or the Person formed by or surviving any such
consolidation or merger (if other than TV Filme) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than TV Filme) or the
entity or Person to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made assumes all the obligations of TV Filme
under the Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after giving effect to
such transaction, no Default or Event of Default exists or would exist; (iv)
such transaction will not result in the loss or suspension or material
impairment of any Material Telecommunications License; (v) except in the case of
a merger of TV Filme with or into a Wholly Owned Restricted Subsidiary of TV
Filme, TV Filme or the entity or Person formed by or surviving any such
consolidation or merger (if other than TV Filme) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will (treating any Indebtedness not previously an obligation of TV
Filme or any of its Restricted Subsidiaries as a result of such transaction as
having been incurred at the time of such transaction) have Consolidated Net
Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of TV Filme immediately preceding the transaction and (B)
will, at the time of such transaction and after giving PRO FORMA effect thereto
as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Leverage Ratio test set forth in the first
paragraph of the covenant described under "--Incurrence of Indebtedness and
Issuance of Disqualified Stock;" and (vi) TV Filme shall have delivered to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture. For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more of the Subsidiaries of TV Filme, the Capital Stock of which constitutes all
or substantially all of the properties and assets of TV Filme, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
TV Filme. Notwithstanding the foregoing clause (v), (a) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to TV Filme and (b) TV Filme may merge with an Affiliate
incorporated solely for the purpose of reincorporating TV Filme in another State
of the United States so long as the amount of Indebtedness of TV Filme and its
Restricted
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Subsidiaries is not increased thereby. For restrictions on mergers,
consolidations and disposition of assets involving Guarantors, see
"--Security--Pledged Intercompany Note."
TRANSACTIONS WITH AFFILIATES. The Indenture provides that TV Filme will
not, and will not permit any of its Restricted Subsidiaries to, make any payment
to, or sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make or
amend any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any Affiliate (other than TV Filme or a Wholly Owned
Restricted Subsidiary) (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
TV Filme or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction with an unrelated Person and (ii) TV Filme
delivers to the Trustee (a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions after December 20, 1996 involving aggregate
consideration in excess of $2.0 million (or the equivalent thereof at time of
determination), a resolution described in an Officers' Certificate, certifying
that such Affiliate Transaction complies with clause (i) above and such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors of TV Filme and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions after the
Closing Date involving aggregate consideration in excess of $5.0 million (or the
equivalent thereof at time of determination), an opinion as to the fairness to
the Holders of the Notes of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of recognized
national standing; PROVIDED that (1) any transaction with an officer or director
of TV Filme or any Restricted Subsidiary (in connection with such person's
compensation, employee benefit or severance arrangements) entered into by TV
Filme or any of its Restricted Subsidiaries in the ordinary course of business
and customary in the industry of TV Filme or such Restricted Subsidiary, (2)
transactions between or among TV Filme and its Restricted Subsidiaries, (3) the
Programming Agreement, (4) the Operating Agreement and (5) Restricted Payments
and Permitted Investments that are permitted by the provisions of the covenant
described under "--Restricted Payments," in each case, shall not be deemed
Affiliate Transactions.
SALE AND LEASEBACK TRANSACTIONS. The Indenture provides that TV Filme will
not, and will not permit any of its Restricted Subsidiaries or TV Filme Servicos
to, enter into any sale and leaseback transaction; PROVIDED that TV Filme may
enter into a sale and leaseback transaction if TV Filme could have (i) incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale
and leaseback transaction pursuant to the Leverage Ratio test set forth in the
first paragraph of the covenant described under "--Incurrence of Indebtedness
and Issuance of Disqualified Stock" and (ii) incurred a Lien to secure such
Indebtedness pursuant to the covenant described under "--Liens."
BUSINESS ACTIVITIES. The Indenture provides that TV Filme will not, and
will not permit any of its Restricted Subsidiaries to, engage in any business
other than the Telecommunications Business and such business activities as are
incidental or directly related thereto. The Indenture further provides that TV
Filme will not permit (i) TV Filme Servicos to engage in any business other than
the holding of authorizations, licenses or permits issued by the Ministry of
Communications or such other applicable Brazilian governmental authority or
agency in connection with the Telecommunications Business and business
activities incidental or directly related thereto; (ii) TV Filme Servicos to
incur any Indebtedness other than Indebtedness to TV Filme or any of its
Restricted Subsidiaries; (iii) the Operating Agreement to terminate or be
modified in any way which prevents TV Filme and its Restricted Subsidiaries from
operating pay television systems relating to such authorizations, licenses or
permits; and (iv) its ownership interest in TV Filme Servicos to be decreased.
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ADDITIONAL SUBSIDIARY GUARANTEES. The Indenture provides that, if TV Filme
or any of its Restricted Subsidiaries shall acquire or create another Restricted
Subsidiary after December 20, 1996, and such newly acquired or created
Restricted Subsidiary shall be required pursuant to the terms of the Indenture
to execute and deliver a Subsidiary Guarantee, such Subsidiary Guarantee shall
be so executed by such Restricted Subsidiary and delivered to the Trustee,
together with an opinion of counsel, in accordance with the terms of the
Indenture.
PAYMENTS FOR CONSENT. The Indenture provides that TV Filme will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the Indenture, the
Notes, the Pledge Agreement, the Note Pledge Agreement, the Intercompany Note or
the Subsidiary Guarantees unless such consideration is offered to be paid or is
paid to all Holders of the Notes that so consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS. The Indenture provides that, whether or not required by the rules
and regulations of the Commission, so long as any Notes are outstanding, TV
Filme will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if TV Filme was required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of TV Filme and its Subsidiaries and, with respect to the annual
information only, a report thereon by TV Filme's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if TV Filme was required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, following consummation of the Exchange Offer, TV Filme will file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, TV Filme has agreed that, for so long as any Notes remain
outstanding, it will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an "Event of
Default": (i) default in the payment when due of any interest payable on or
prior to December 15, 1998, with respect to the Notes; (ii) default for 30 days
in the payment when due of any interest payable after December 15, 1998; (iii)
default in payment when due of the principal of or premium, if any, on the
Notes; (iv) failure by TV Filme to comply with the provisions described under
"--Security," "--Repurchase at the Option of Holders-- Change of Control,"
"--Repurchase at the Option of Holders--Asset Sales" or "--Certain Covenants--
Merger, Consolidation, or Sale of Assets;" (v) failure by TV Filme for 30 days
after notice from the Trustee or Holders of at least 25% in aggregate principal
amount of the Notes to comply with any of its other agreements in the Indenture
and the Notes; (vi) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by TV Filme or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by TV Filme or any of its
Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists or
is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
following the expiration of the grace period provided in such Indebtedness on
the date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5.0
million (or the equivalent thereof at time of determination) or more; (vii)
failure by TV Filme or any of its Restricted
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Subsidiaries to pay final non-appealable judgments rendered against TV Filme or
any of its Restricted Subsidiaries aggregating in excess of $2.5 million (or the
equivalent thereof at time of determination), which judgments are not paid,
discharged or stayed for a period of 60 days after such judgments become final
and non-appealable; and (viii) certain events of bankruptcy or insolvency with
respect to TV Filme and its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to TV Filme, any Significant Subsidiary of TV Filme or
any group of Restricted Subsidiaries of TV Filme that, taken together, would
constitute a Significant Subsidiary of TV Filme, all outstanding Notes will
become due and payable without further action or notice by the Trustee or any
Holder. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of TV Filme with the
intention of avoiding payment of the premium that TV Filme would have had to pay
if TV Filme then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to December 15,
2000 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of TV Filme with the intention of avoiding the prohibition on redemption
of the Notes prior to such date, then the premium specified in the Indenture
shall also become immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
the principal of or premium, if any, or interest on the Notes.
TV Filme is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and TV Filme is required, upon becoming
aware of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, PARTNERS AND
STOCKHOLDERS
No past, present or future director, officer, employee, incorporator,
partner or stockholder of either of TV Filme or any of its Subsidiaries, as
such, shall have any liability for any obligations of TV Filme or its
Subsidiaries under the Exchange Notes, the Intercompany Note, the Subsidiary
Guarantees or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder of Exchange Notes by
accepting an Exchange Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Exchange Notes and
the Subsidiary Guarantees. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that such
a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
TV Filme may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes, the obligations of
the Guarantors under the Subsidiary Guarantees and the obligations of ITSA under
the Intercompany Note ("Legal Defeasance") except for (i) the rights of
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Holders of outstanding Notes to receive payments in respect of the principal of
and premium, if any, and interest on the Notes when such payments are due from
the trust referred to below, (ii) TV Filme's obligations with respect to the
Notes concerning issuing temporary notes, registration of transfers or exchanges
of Notes, replacement of mutilated, destroyed, lost or stolen Notes as required
by the Indenture and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and TV Filme's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, TV Filme may, at its option and at any time, elect to have its
obligations released with respect to certain covenants that are described in the
Indenture ("Covenant Defeasance") and thereafter any omission to comply with
such obligations shall not constitute a Default or Event of Default with respect
to the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) TV
Filme must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars or non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
without reinvestment, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of and premium, if any, and
interest on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be; (ii) in the case of Legal Defeasance, TV
Filme shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (a) TV Filme has
received from, or there has been published by, the IRS a ruling or (b) since the
date of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, TV Filme shall have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period ending
on the 123rd day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute a
default under any material agreement or instrument (other than the Indenture) to
which TV Filme or any of its Subsidiaries is a party or by which TV Filme or any
of its Subsidiaries is bound; (vi) TV Filme shall have delivered to the Trustee
an opinion of counsel to the effect that after the 123rd day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) TV Filme shall have delivered to the Trustee an
Officer's Certificate stating that the deposit was not made by TV Filme with the
intent of preferring the Holders of Notes over the other creditors of TV Filme
with the intent of defeating, hindering, delaying or defrauding creditors of TV
Filme or others; and (viii) TV Filme shall have delivered to the Trustee an
Officer's Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance, as the case may be, have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and TV Filme
may require a Holder to pay any taxes and fees required by law or
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permitted by the Indenture. TV Filme is not required to transfer or exchange any
Exchange Note selected for redemption. Also, TV Filme is not required to
transfer or exchange any Exchange Note for a period of 15 days before a
selection of Exchange Notes to be redeemed.
The registered Holder of a Exchange Note will be treated as the owner of
such Exchange Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Pledge Agreement, the Note Pledge Agreement, the Notes, the Intercompany Note or
the Subsidiary Guarantees may be amended or supplemented by TV Filme, each
Guarantor, ITSA and the Trustee with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes), and any existing default or non-compliance with
any provision of the Indenture, the Pledge Agreement, the Note Pledge Agreement,
the Notes, the Intercompany Note or the Subsidiary Guarantees may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a purchase of,
or tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the fixed maturity of any Note
or the Intercompany Note or alter the provisions with respect to the redemption
of the Notes (other than provisions relating to the covenants described under
"--Repurchase at the Option of Holders"); (iii) reduce the rate of or change the
time for payment of interest on any Note or the Intercompany Note; (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any or
interest on the Notes (except a rescission of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount of the Notes and a
waiver of the payment default that resulted from such acceleration) or the
Intercompany Note; (v) make any Note or the Intercompany Note payable in money
other than that stated in the Notes or the Intercompany Note; (vi) make any
change in the provisions of the Indenture relating to waivers of past Defaults
or the rights of Holders of Notes to receive payments of principal of or
premium, if any, or interest on the Notes; (vii) waive a redemption payment with
respect to any Note (other than a payment required by one of the covenants
described under "-- Repurchase at the Option of Holders"); (viii) release any
Collateral from the Lien created by the Pledge Agreement or the Note Pledge
Agreement, except in accordance with the terms thereof, or amend such terms; or
(ix) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
TV Filme, the Guarantors and ITSA and the Trustee may amend or supplement the
Indenture, the Pledge Agreement, the Note Pledge Agreement, the Notes, the
Intercompany Note or the Subsidiary Guarantees to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of TV Filme's obligations to
Holders of Notes in the case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of Notes or
that does not adversely affect the legal rights under the Indenture of any such
Holder, to add Guarantors with respect to the Notes or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of Notes)
as to all outstanding Notes when (i) either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes that have
been replaced or
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paid and Notes for whose payment money has theretofore been deposited in trust
with the Trustee and thereafter repaid to TV Filme or discharged from such
trust) have been delivered to the Trustee for cancellation; or (b) all such
Notes not theretofore delivered to the Trustee for cancellation have become due
and payable by their terms and TV Filme has irrevocably deposited or caused to
be deposited with the Trustee funds in an amount of money in U.S. dollars
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for the principal amount,
premium, if any, accrued and unpaid interest to the date of such deposit
together with irrevocable instructions from TV Filme directing the Trustee to
apply such funds to the payment thereof; (ii) TV Filme has paid all other sums
payable by it under the Indenture; and (iii) TV Filme has delivered irrevocable
instructions to the Trustee to apply the deposited money toward the payment of
the Notes at maturity, as the case may be. In addition, TV Filme must deliver an
Officers' Certificate and an opinion of counsel stating that all conditions
precedent under the Indenture to satisfaction and discharge have been complied
with.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of TV Filme, to obtain payment of claims in certain
cases or to realize on certain property received in respect of any such claim as
security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to
continue, or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to TV Filme, Inc., c/o ITSA-Intercontinental
Telecomunicacoes Ltda., SCS, Quadra 07-B1.A, Ed. Executive Tower, Sala 601,
70.300-911 Brasilia-DF, Brazil, Attention: Chief Financial Officer.
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BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Exchange Notes will initially be represented
by one or more permanent global certificates in definitive, fully registered
form (each a "Global Exchange Note"). Each Global Exchange Note will be
deposited with, or on behalf of, the Depository and registered in the name of
Cede, as nominee of the Depository, or will remain in the custody of the Trustee
under the Indenture, pursuant to the FAST Balance Certificate Agreement between
the Depository and the Trustee.
Holders of Exchange Notes who elect to take physical delivery of their
certificates instead of holding their interests through the Global Exchange Note
(collectively referred to herein as the "Non-Global Holders") will be issued in
registered form (a "Certificated Exchange Note"). Upon the transfer of any
Certificated Exchange Note initially issued to a Non-Global Holder, such
Certificated Exchange Note will, unless the transferee requests otherwise or a
Global Exchange Note has previously been exchanged in whole for Certificated
Exchange Notes, be exchanged for an interest in such Global Exchange Note.
The Company understands that the Depository is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" with the meaning of New York Banking Law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. The Depository was created to hold securities
for its participants and facilitates the clearance and settlement of securities
transactions between participants through electronic book-entry changes to the
accounts of its participants, thereby eliminating the need for physical transfer
and delivery of certificates. The participants include securities brokers, and
dealers (including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depository's system
is also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
The Company expects that pursuant to procedures established by the
Depository (i) upon the issuance of the Global Exchange Note, the Depository or
its custodian will credit the accounts of participants designated by the Initial
Purchasers with an interest in the Global Exchange Note and (ii) ownership of
beneficial interests in the Global Exchange Note will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by the Depository or its nominee (with respect to the interests of participants
and the records of participants and the indirect participants (with respect to
interests of persons other than participants). Ownership of beneficial interests
in the Global Exchange Note will be shown on, and the transfer of that ownership
will be effected only through, records maintained by the Depository or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
So long as the Depository, or its nominee, is the registered owner or holder
of a Global Exchange Note, the Depository or such nominee, as the case may be,
will be considered the sole owner or holder of the Exchange Notes represented by
such Global Exchange Note for all purposes under the Indenture and the Exchange
Notes. No beneficial owner of an interest in a Global Exchange Note will be able
to transfer that interest except in accordance with applicable procedures of the
Depository, in addition to those provided for under the Indenture with respect
to the Exchange Notes.
Payments of the principal of, premium, if any, and interest on any Exchange
Notes represented by a Global Exchange Note will be payable by the Trustee to or
at the direction of the Depository or its nominee in its capacity as the
registered holder of the Global Exchange Note. Neither the Company, the Trustee
nor any paying agent will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in a Global Exchange Note or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
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The Company expects that the Depository or its nominee, upon receipt of any
payment of principal, premium, if any, and interest in respect of a Global
Exchange Note, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Exchange Notes as shown on the records of the Depository or its
nominee. The Company also expects that payments by participants and indirect
participants to owners of beneficial interests in such Global Exchange Note will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants and indirect participants, as the case may be.
Transfers between participants will be effected in the ordinary way in
accordance with the Depository's rules and will be settled in same-day funds. If
a holder requires physical delivery of a Certificated Exchange Note for any
reason, including to sell Exchange Notes to persons in states which require such
delivery of such Exchange Notes or to pledge such Exchange Notes, such holder
must transfer its interests in the Global Exchange Note, in accordance with the
normal procedures of the Depository and the procedures set forth in the
Indenture.
The Company expects that the Depository will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the Depository's interests in a Global Exchange
Note is credited and only in respect of such portion of the aggregate principal
amount of Exchange Notes as to which such participant or participants has or
have given such direction. However, if there is an Event of Default under the
Indenture, the Depository will exchange the applicable Global Exchange Note for
Certificated Exchange Notes, which it will distribute to its participants.
Although the Depository is expected to follow the foregoing procedures in
order to facilitate transfers of interests in a Global Exchange Note among
participants of the Depository it is under no obligation to perform or continue
to perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Trustee nor the paying agent will have any
responsibility for the performance by the Depository or its participants or
indirect participants of its obligations under the rules and procedures
governing its operations.
If the Depository is at any time unwilling or unable to continue as a
depository for the Global Exchange Notes and a successor depository is not
appointed by the Company within 90 days, the Company will issue Certificated
Exchange Notes, in exchange for the Global Exchange Notes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Exchange Note (including principal, premium, if any,
and interest) be made by wire transfer of immediately available funds to the
accounts specified by the Holder of the Global Exchange Note. With respect to
Certificated Securities, TV Filme will make all payments of principal, premium,
if any, and interest by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The Exchange Notes
represented by the Global Exchange Note are expected to be eligible to trade in
the PORTAL Market and to trade in the Depository's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Exchange
Notes will, therefore, be required by the Depository to be settled in
immediately available funds. TV Filme expects that secondary trading in the
Certificated Securities will also be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
On December 20, 1996, TV Filme and the Initial Purchasers entered into the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement, TV
Filme agreed to file with the Commission
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the Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the Exchange Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, TV Filme agreed to offer to the Holders
of Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange its Transfer Restricted
Securities for Exchange Notes. If (i) TV Filme is not required to file the
Exchange Offer Registration Statement or permitted to commence or accept tenders
pursuant to the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities notifies TV Filme within 20 business days after the consummation of
the Exchange Offer that (a) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (b) that it may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (c) that it is a
broker-dealer and owns Old Notes acquired directly from TV Filme or an affiliate
of TV Filme, TV Filme has agreed to file with the Commission a Shelf
Registration Statement to cover resales of the Old Notes by the Holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. TV Filme has agreed to use its
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Old Note until (i) the
date on which such Old Note has been exchanged by a person other than a broker-
dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange
by a broker-dealer in the Exchange Offer of an Old Note for an Exchange Note,
the date on which such Exchange Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Old Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the date
on which such Old Note is distributed to the public pursuant to Rule 144 under
the Securities Act.
The Registration Rights Agreement provides that (i) TV Filme will file an
Exchange Offer Registration Statement with the Commission on or prior to
February 18, 1997, (ii) TV Filme will use its best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission under the
Securities Act on or prior to April 19, 1997, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, TV Filme will
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
is declared effective by the Commission, Exchange Notes in exchange for all Old
Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file
the Shelf Registration Statement, TV Filme will use its best efforts to file the
Shelf Registration Statement with the Commission on or prior to 60 days after
such filing obligation arises (and in any event by April 19, 1997) and to cause
the Shelf Registration to be declared effective by the Commission on or prior to
120 days after such obligation arises. If (a) TV Filme fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) TV Filme
fails to commence, accept tenders and, in the case of accepted tenders, issue
registered Exchange Notes in respect of accepted tenders under the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then TV Filme will pay Liquidated Damages to each
Holder of Old Notes, with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Old Notes held by such Holder. The
amount of the Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of Old Notes with respect to each subsequent 90-day
period until all Registration
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Defaults have been cured, up to a maximum amount of Liquidated Damages of $.20
per week per $1,000 principal amount of Old Notes. All accrued Liquidated
Damages will be paid by TV Filme on each Damages Payment Date to the holder of
the Global Note by wire transfer of immediately available funds and to Holders
of Certificated Securities by wire transfer to the accounts specified by them or
by mailing checks to its registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to TV
Filme (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
The Registration Statement of which this Prospectus is a part constitutes
the Exchange Offer Registration Statement.
FOREIGN EXCHANGE RESTRICTIONS; CURRENCY INDEMNITY
As a result of TV Filme being a holding company, TV Filme's operating cash
flow and its ability to service indebtedness, including the Notes, is dependent
upon the operating cash flow of its subsidiaries and the payment of funds by
such subsidiaries to TV Filme in the form of loans, dividends or otherwise. In
the event that on any payment date in respect of the Notes, any restrictions or
prohibition on access to the Brazilian foreign exchange market exists which
impairs the ability of TV Filme's subsidiaries to pay funds to TV Filme, TV
Filme agrees to, and to cause each of its subsidiaries to provide TV Filme with
all funds necessary to, pay all amounts payable under the Notes in the currency
of such Notes by means of any legal procedure existing in Brazil (except
commencing legal proceedings against the Central Bank) on any due date for
payment under the Notes. All costs and taxes payable in connection with the
procedures referred to in this covenant shall be borne by TV Filme.
Payments in respect of the Intercompany Note or any Subsidiary Guarantee
shall be made in U.S. dollars as shall be legal tender at the time of payment
for the payment of public and private debts in that currency. In the event that,
on any payment date in respect of the Intercompany Note or any Subsidiary
Guarantee, any restrictions or prohibition of access to the Brazilian foreign
exchange market exists, ITSA and each Guarantor agree to pay all amounts payable
under the Intercompany Note in the currency of the Intercompany Note by means of
any legal procedure existing in Brazil (except commencing legal proceedings
against the Central Bank) on any due date for payment under Intercompany Note.
All costs and taxes payable in connection with the procedures referred to in
this covenant shall be borne by ITSA and the Guarantors.
U.S. dollars are the sole currency of account and payment for all sums
payable by ITSA and the Guarantors under or in connection with the Intercompany
Note and the Subsidiary Guarantees, including damages. Any amount received or
recovered in a currency other than U.S. dollars (whether as a result of, or of
the enforcement of, a judgment or order of a court of any jurisdiction, in the
winding-up or dissolution of ITSA and the Guarantors or otherwise) by any Holder
of a Note in respect of any sum expressed to be due to it from the ITSA and the
Guarantors shall only constitute a discharge to ITSA and the Guarantors to the
extent of the U.S. dollar amount which the recipient is able to purchase with
the amount so received or recovered in that other currency on the date of that
receipt or recovery (or, if it is not practicable to make that purchase on that
date, on the first date on which it is practicable to do so). If that U.S.
dollar amount is less than the U.S. dollar amount expressed to be due to the
recipient under the Intercompany Note, ITSA and the Guarantors shall, jointly
and severally, indemnify it against any loss sustained by it as a result. In any
event ITSA and the Guarantors shall, jointly and severally, indemnify the
recipient against the cost of making any such purchase. For the purposes of this
paragraph, it will be
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sufficient for the holder of the Intercompany Note to certify in a satisfactory
manner (indicating sources of information used) that it would have suffered a
loss had an actual purchase of dollars been made with the amount so received in
that other currency on the date of receipt or recovery (or, if a purchase of
dollars on such date had not been practicable, on the first date on which it
would have been practicable, it being required that the need for a change of
date be certified in the manner mentioned above). These indemnities constitute a
separate and independent obligation from other obligations of ITSA and the
Guarantors, shall give rise to a separate and independent cause of action, shall
apply irrespective of any indulgence granted by any holder of the Intercompany
Note and shall continue in full force and effect despite any other judgment,
order, claim or proof for a liquidated amount in respect of any sum due under
the Intercompany Note.
ENFORCEABILITY OF JUDGMENTS WITH RESPECT TO THE INTERCOMPANY NOTE AND SUBSIDIARY
GUARANTEES
Service of process upon ITSA or any Guarantor in an action (other than an
insolvency, liquidation or bankruptcy proceeding or any other proceeding in the
nature of an in rem or quasi in rem proceeding) to enforce their obligations
under the Note Pledge Agreement, the Intercompany Note or the Subsidiary
Guarantees may be obtained within the U.S. by service upon Corporation Service
Company. See "Risk Factors--Risk Factors Relating to Brazil--Potential
Unenforceablility of Civil Liabilities and Judgments." Since substantially all
of the assets of ITSA and its subsidiaries are outside the U.S., any judgment
obtained in the United States against ITSA or any Guarantor, including judgments
with respect to the payment of amounts owing with respect to the Note Pledge
Agreement, the Intercompany Note or the Subsidiary Guarantees, may not be
collectible within the United States.
Judgments for monetary claims obtained in U.S. courts arising out of or in
relation to the obligations of ITSA and the Guarantors under the Note Pledge
Agreement and the Intercompany Note and the Subsidiary Guarantees will be
enforceable in Brazil, PROVIDED that such judgment has been previously confirmed
by the Brazilian Federal Supreme Court. In order to be confirmed by the
Brazilian Federal Supreme Court of Brazil, such foreign judgment must meet the
following conditions: (a) it must comply with all formalities required for its
enforceability under the laws of the country where it was issued; (b) it must
have been given by a competent court after the proper service of process on the
parties; (c) it must not be subject to appeal; (d) it must not offend Brazilian
national sovereignty, public policy or good morals; and (e) it must be duly
authenticated by a competent Brazilian consulate and be accompanied by a sworn
translation thereof into Portuguese. Notwithstanding the foregoing, no assurance
can be given that such confirmation will be obtained, that the process described
above can be conducted in a timely manner or that a Brazilian court will enforce
such monetary judgment. See "Risk Factors--Risk Factors Relating to
Brazil--Potential Unenforceability of Civil Liabilities and Judgments."
Any judgment obtained against ITSA or the Guarantors in a court in Brazil
under the Intercompany Note, the Note Pledge Agreement or any Subsidiary
Guarantee will be expressed in the Brazilian currency equivalent to the U.S.
dollar amount. See "Risk Factors--Risk Factors Relating to Brazil--Foreign
Exchange Controls and Exchange Rates," "Risk Factors--Risk Factors Relating to
Brazil--Restrictions on Conversion and U.S. Remittances Abroad" and "Risk
Factors--Risk Factors Relating to Brazil--Potential Unenforceability of Civil
Liabilities and Judgments."
The purchase of U.S. dollars for the payment by ITSA or the Guarantors of
any such judgment requires approval of the Central Bank. See "Risk Factors--Risk
Factors Relating to the Company and the Exchange Offer--Exchange Control
Regulations."
CERTAIN BANKRUPTCY LAW CONSIDERATIONS
Brazilian Bankruptcy Law (Decree-law No. 7661, of June 21, 1945, the
"Brazilian Bankruptcy Law") establishes two different proceedings for the
resolution of debts of commercial companies which are insolvent or do not pay
their obligations when due; the bankruptcy proceeding ("FALENCIA") and the
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reorganization proceeding ("CONCORDATA"). Both proceedings apply to all
unsecured creditors of a company which is declared bankrupt or which is under a
reorganization proceeding. In the event that ITSA or any of the Guarantors is
declared bankrupt or enters into a CONCORDATA, the Intercompany Note will be
considered general unsecured indebtedness of ITSA and the Guarantors and
therefore will be subject to such proceedings.
Under a bankruptcy proceeding (essentially a liquidation proceeding),
payments in respect of the Notes will be subject to an order of priority.
Generally, Brazilian Bankruptcy Law and other applicable rules establish that
claims of employees for wages or indemnity and tax or social security claims
have priority over other claims against the bankrupt estate. Other claims are
subject to the following order of priority: (i) secured credits, (ii) credits
with special privileges over certain assets, (iii) credits with general
privilege, (iv) unsecured credits (including the Intercompany Note) and (v)
subordinated credits. Credits in foreign currency are converted into Brazilian
currency on the date the company is declared bankrupt and are not subject to
adjustment in accordance with the exchange variation. Such amount in Brazilian
currency must be monetarily adjusted to account for inflation (in accordance
with the rules applicable from time to time) and bears no interest.
Under a CONCORDATA proceeding, which is a protection available under the
Brazilian Bankruptcy Law for commercial companies experiencing financial
distress to avoid the declaration of bankruptcy, the company's unsecured credits
existing at the time the CONCORDATA is declared are rescheduled for one of the
periods defined in the law which in virtually all cases is 24 months (in which
event 40.0% of the debt must be paid in the first year). The benefit may be
given by the court without any prior consultation with or manifestation by the
creditors, so long as the beneficiary demonstrates, INTER ALIA, that its assets
are worth at least 50.0% of its unsecured indebtedness. The CONCORDATA
proceeding has the following basic characteristics: (i) it only affects
unsecured creditors; (ii) it does not affect the day-to-day management of the
company, the other commercial obligations of the company and the obligations
assumed after the date on which the CONCORDATA is declared; (iii) amounts due in
foreign currency subject to the CONCORDATA are converted into local currency on
the date on which the CONCORDATA is accepted by the court and are not subject to
adjustment in accordance with the exchange variation; (iv) amounts due under the
CONCORDATA, either in local currency or converted into local currency, must be
monetarily adjusted to account for inflation (in accordance with the rules
applicable from time to time) and bear interest at the rate of 12.0% per annum;
(v) a company under CONCORDATA which fails to meet its rescheduled obligations
will be declared bankrupt; and (vi) a company that benefits from CONCORDATA
protection shall not be eligible for such protection for a period of five years.
CONSENT TO JURISDICTION AND SERVICE
Pursuant to the terms of the Intercompany Note and the Subsidiary Guarantees
ITSA and the Guarantors have appointed Corporation Service Company as their
agent for service of process in any suit, action or proceeding with respect to
the Intercompany Note or the Subsidiary Guarantees and for actions brought under
Federal or state securities laws brought in any Federal or state court located
in the City of New York and have agreed to submit to such jurisdiction. See
"Risk Factors--Risk Factors Relating to Brazil--Potential Unenforceability of
Civil Liabilities and Judgments."
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full description of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of,
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such other Person merging with or into or becoming a Subsidiary of such
specified Person and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control and PROVIDED, FURTHER, that TV Filme Servicos shall not
be deemed to be an Affiliate of TV Filme or any of its other Restricted
Subsidiaries for the purposes of the covenant described under "--Certain
Covenants--Transactions with Affiliates."
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback or similar arrangement) other than sales or dispositions in the
ordinary course of business consistent with past practices; PROVIDED that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of TV Filme and its Restricted Subsidiaries taken as a whole will be
governed by the provisions of the Indenture described under "-- Repurchase at
the Option of Holders--Change of Control" and/or the provisions described under
"-- Certain Covenants--Merger, Consolidation, or Sale of Assets" and not by the
provisions of the covenant described under "--Repurchase at Option of
Holders--Asset Sales," and (ii) the issuance or sale by TV Filme or any of its
Restricted Subsidiaries of Equity Interests of TV Filme's Restricted
Subsidiaries. Notwithstanding the foregoing, none of the following will be
deemed an Asset Sale: (i) a transfer of assets by TV Filme to a Restricted
Subsidiary or by a Restricted Subsidiary to TV Filme or to another Restricted
Subsidiary; (ii) an issuance of Equity Interests by a Restricted Subsidiary to
TV Filme or to another Restricted Subsidiary; (iii) a Restricted Payment that is
permitted by the covenant described under "--Certain Covenants--Restricted
Payments;" (iv) dispositions in any fiscal year with Net Proceeds in the
aggregate of $1.0 million (or the equivalent thereof at time of determination)
or less; (v) an Asset Swap that is permitted by the covenant described under
"--Certain Covenants--Asset Swaps;" (vi) a contribution to an Unrestricted
Subsidiary which complies with the covenant described under "--Certain
Covenants--Restricted Payments;" (vii) a sale and leaseback which complies with
the covenant described under "--Certain Covenants--Sale and Leaseback
Transactions;" (viii) any liquidation of any Cash Equivalent; and (ix) the
issuance or sale of Equity Interests of a Restricted Subsidiary of TV Filme to
TV Filme or one of its other Restricted Subsidiaries.
"ASSET SWAP" means the execution of a definitive agreement, subject only to
approvals of the Ministry of Communications or such other applicable Brazilian
governmental authority or agency and other customary closing conditions, that TV
Filme in good faith believes will be satisfied, for a substantially concurrent
purchase and sale, or exchange, of Telecommunications Assets between TV Filme or
any of its Restricted Subsidiaries and another Person or group of Persons who
are Affiliates of one another; PROVIDED that any amendment to or waiver of any
closing condition which individually or in the aggregate is material to the
Asset Swap shall be deemed to be a new Asset Swap.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"BANK CREDIT AGREEMENT" means loans or advances made by banks, trust
companies or other institutions, which are, principally engaged in the business
of lending money to businesses to TV Filme or a Restricted Subsidiary under
credit facilities, loan agreements or similar agreements.
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"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than twelve months from
the date of acquisition, (ii) certificates of deposit and eurodollar time
deposits with maturities of twelve months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any Brazilian regulated bank or member bank of the
U.S. Federal Reserve System having capital and surplus in excess of $500 million
(or equivalent thereof at the time of determination) (or a branch of any such
bank), (iii) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (i) and (ii) above
entered into with any financial institution meeting the qualifications specified
in clause (ii) above and (iv) commercial paper having the rating of at least P-1
from Moody's Investors Service, Inc., or any successor to its rating business,
or at least A-1 from Standard & Poor's Ratings Group, or any successor to its
rating business, and in each case maturing within 180 days after the date of
acquisition.
"CLOSING PRICE" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such date, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on such automated quotation system but
the issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange
Act) and the principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market (as defined in
Rule 902(a) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange, or, if such shares are
not listed or admitted to trading on any national securities exchange or quoted
on such automated quotation system and the issuer and principal securities
exchange do not meet such requirements, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm that is selected from time to time by TV Filme for that
purpose and is reasonably acceptable to the Trustee.
"COLLATERAL" means the Pledged Securities, the Intercompany Note and the
proceeds thereof.
"COMMON EQUITY INTERESTS" means (i) with respect to a person which is a
corporation, any and all shares, interests or other participations in, and other
equivalents (however designated and whether voting or nonvoting) of such
Person's common stock and includes, without limitation, all series and classes
of such common stock and (ii) with respect to a Person which is not a
corporation, Equity Interests which have characteristics similar in all material
respects to those of common stock of a corporation.
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"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (iii) Consolidated Interest Expense and
(iv) depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Restricted Subsidiaries for such
period, and other non-cash charges (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a prior
period), minus (v) non-cash items increasing consolidated revenues in
determining such Consolidated Net Income for such period (excluding any items
which represent the reversal of any accrual of, or cash reserves for,
anticipated cash charges in any prior period and excluding the recognition of
deferred sign-on or hook-up fee revenue), in each case, on a consolidated basis
and determined in accordance with GAAP and (vi) to the extent included in
computing Consolidated Net Income, an amount equal to any extraordinary gain.
Notwithstanding the foregoing, the amounts referred to in clauses (i) through
(vi) of the preceding sentence with respect to Restricted Subsidiaries shall
only be added to (deducted from) Consolidated Net Income to compute Consolidated
Cash Flow to the extent (and in the same proportion) that the Net Income of such
Restricted Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at the date of
determination to be paid as a dividend to TV Filme by such Restricted Subsidiary
without direct or indirect restriction pursuant to the terms of its charter and
by-laws and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such Restricted Subsidiary or
its stockholders.
"CONSOLIDATED INDEBTEDNESS" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the
aggregate liquidation value of all Disqualified Stock of such Person, in each
case, determined on a consolidated basis in accordance with GAAP, less the Fair
Market Value of the Pledged Securities then held by the Trustee as determined in
good faith by the Board of Directors of TV Filme.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
interest payments in respect of Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (if such
Guarantee or Lien is called upon and to the extent such interest payments are
satisfied under or by means of such Lien), commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, in each case, on a consolidated basis
and in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person as to which Consolidated Net
Income is being calculated or a Restricted Subsidiary thereof, (ii) the Net
Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary of such Net Income would not be permitted at the date
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of determination directly or indirectly, pursuant to the terms of its charter
and by-laws and all agreements, instruments, judgments, decrees, orders,
statutes, rules or governmental regulations applicable to such Restricted
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income of any
Unrestricted Subsidiary shall be excluded, except to the extent of the amount of
dividends or distributions paid in cash by such Unrestricted Subsidiary to TV
Filme or its Restricted Subsidiaries.
"CONSOLIDATED NET WORTH" means, (a) with respect to a partnership as of any
date, the sum of the common and preferred partnership interests of such Person
and its consolidated Restricted Subsidiaries as of such date, as determined on a
consolidated basis in accordance with GAAP, and (b) with respect to any other
Person as of any date, the sum of (i) the consolidated equity of the common
equity holders of such Person and its consolidated Restricted Subsidiaries as of
such date plus (ii) the respective amounts reported on such Person's balance
sheet as of such date with respect to any series of preferred equity; PROVIDED
that the preferred partnership interests or the preferred equity, as the case
may be, is not (A) Disqualified Stock and (B) by its terms entitled to the
payment of dividends or other distributions, unless such dividends or other
distributions may be declared and paid only out of net earnings in respect of
the year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred partnership interests or
preferred equity, less (x) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or a consolidated Restricted Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Restricted Subsidiaries (except, in each case, Permitted Investments),
and (z) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of TV Filme and its Restricted
Subsidiaries in existence on the date of the Indenture listed on Annex I to the
Indenture, until such amounts are repaid.
"FAIR MARKET VALUE" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy; PROVIDED that if such value exceeds $1.0 million (or
the equivalent thereof at the time of determination), such determination shall
be made in good faith by the Board of Directors of TV Filme.
"GAAP" means generally accepted accounting principles in the United States
of America set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on the
date of the Indenture.
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"GOVERNMENT SECURITIES" means direct obligations of, or obligations fully
guaranteed by, or participations in pools consisting solely of obligations of or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest or currency exchange rate swap agreements,
interest or currency exchange rate cap agreements and interest or currency
exchange rate collar agreements and (ii) other agreements or arrangements, in
any case, designed to protect such Person against fluctuations in interest or
currency exchange rates.
"INDEBTEDNESS" means, with respect to any Person, without duplication, (i)
any liability, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), whether as a cash advance, bill, overdraft
or money market facility loan, or (b) evidenced by a note, debenture or similar
instrument or, to the extent drawn upon and not reimbursed, letters of credit or
other similar liability evidenced by book-entry mechanism, or (c) for the
payment of money relating to a Capital Lease Obligation or other obligation
relating to the deferred purchase price of property; PROVIDED, HOWEVER, that
Indebtedness shall not include trade payables arising in the ordinary course of
business consistent with past practice, or (d) in respect of any Hedging
Obligation; (ii) any liability of others of the kind described in the preceding
clause (i) which the Person has Guaranteed or which is otherwise its legal
liability; and (iii) any obligation secured by a Lien to which the property or
assets of such Person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such Person's legal
liability; PROVIDED, HOWEVER, for purposes of this clause (iii), if such
obligation is not assumed by such Person, or not otherwise the legal liability
of such Person, such obligation shall only be included in Indebtedness to the
extent of the Fair Market Value of such property or assets.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business), purchases or other acquisitions (for consideration) of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP; PROVIDED that an acquisition of assets, Equity Interests or other
securities by TV Filme or any of its Restricted Subsidiaries for consideration
consisting of common equity securities of TV Filme shall not be deemed to be an
Investment.
"LEVERAGE RATIO" means, with respect to any Person as of any date of
determination (the "Calculation Date"), the ratio of (i) the Consolidated
Indebtedness of such Person as of the Calculation Date to (ii) the result of the
multiplication of the Consolidated Cash Flow of such Person for the most recent
full fiscal quarter ending immediately prior to the Calculation Date for which
internal financial statements are available times four. In the event that TV
Filme or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings with respect to
which the related commitment remains outstanding) or issues or redeems
Disqualified Stock subsequent to the commencement of the period for which the
Leverage Ratio is being calculated but prior to the Calculation Date then the
Leverage Ratio shall be calculated giving PRO FORMA effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of Disqualified Stock, as if the same had occurred at the beginning
of the applicable period. For purposes of making the computation referred to
above, Investments, acquisitions, dispositions which constitute all or
substantially all of an operating unit of a business and discontinued operations
(as determined in accordance with GAAP) that
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have been made by TV Filme or any of its Restricted Subsidiaries, including all
mergers, consolidations and dispositions, during the quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be calculated on a PRO FORMA basis assuming that all such Investments,
acquisitions, dispositions, discontinued operations, mergers, consolidations
(and the reduction of any associated fixed charge obligations and the change in
Consolidated Cash Flow resulting therefrom) has occurred on the first day of
such reference period and without regard to clause (iii) of the definition of
Consolidated Net Income. If since the beginning of such reference period any
Person (that subsequently became a Restricted Subsidiary or was merged with or
into TV Filme or any Restricted Subsidiary since the beginning of such period)
shall have made any Investment, acquisition, disposition which constitutes all
or substantially all of an operating unit of a business, discontinued operation,
merger or consolidation that would have required adjustment pursuant to this
definition, the Leverage Ratio shall be calculated giving PRO FORMA effect
thereto for such reference period as if such Investment, acquisition,
disposition, discontinued operation, merger or consolidation had occurred at the
beginning of such reference period and without regard to clause (iii) of the
definition of Consolidated Net Income. For purposes of this definition, whenever
PRO FORMA effect is to be given to a transaction, the PRO FORMA calculations
shall be made in good faith by a responsible financial or accounting officer of
TV Filme.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, and any
lease in the nature thereof).
"MATERIAL TELECOMMUNICATIONS LICENSE" means one or more authorizations
issued by the Ministry of Communications or such other applicable Brazilian
governmental authority or agency used or useful in the operation of a
Telecommunications Business that individually or collectively have a Fair Market
Value exceeding $1.0 million (or the equivalent thereof at time of
determination).
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however, (i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any Asset
Sales (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities by such Person
or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary
or nonrecurring gain (but not loss), together with any related provision for
taxes on such extraordinary or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by TV Filme or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), any relocation expenses
incurred as a result thereof, any taxes paid or payable by TV Filme or any of
its Restricted Subsidiaries as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
required to be paid to any Person (other than TV Filme, its Restricted
Subsidiaries or its Affiliates) having a Lien on the assets subject to the Asset
Sale, amounts required to be paid to any Person (other that TV Filme or any
Restricted Subsidiary) owning a beneficial interest in the assets subject to the
Asset Sale, and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP; PROVIDED, HOWEVER, that if
such proceeds are received by any such Restricted Subsidiary, all of the Equity
Interests of which are not owned directly or indirectly by TV Filme, as a result
of an Asset Sale by it, Net Proceeds for purposes of the covenant described
under "--Repurchase at Option of Holder--Asset Sales" shall mean the proportion
of such proceeds (as so adjusted) which is the same as the proportion of such
Equity Interests owned directly or indirectly by TV Filme.
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"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither TV Filme nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or
(c) constitutes the lender, (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Indebtedness of TV Filme or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity and
(iii) as to which the lenders have expressly waived any recourse which they may
have, in law, equity or otherwise, whether based on misrepresentation, control,
ownership or otherwise, to TV Filme or any of its Restricted Subsidiaries,
including, without limitation, a waiver of the benefits of the provisions of
Section 1111(b) of the U.S. Bankruptcy Code (Title 11, United States Code), as
amended.
"NOTE PLEDGE AGREEMENT" means the Note Pledge Agreement, dated as of the
date of the Indenture, by and between the Trustee and TV Filme, governing the
pledge of the Intercompany Note.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER" means, with respect to any Person, the chief executive officer,
the president, the chief operating officer, the chief financial officer, the
chief accounting officer, the treasurer, any assistant treasurer, the
controller, the secretary, any assistant secretary or any vice-president of such
Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of a Person by
two Officers of such Person, one of whom must be the principal executive
officer, the principal financial officer or the principal accounting officer of
such Person, that meets the requirements set forth in the Indenture.
"OPERATING AGREEMENT" means the Master Operating Agreement dated July 24,
1996, between ITSA and TV Filme Servicos.
"PERMITTED INVESTMENTS" means (i) any Investment in TV Filme or in a
Restricted Subsidiary of TV Filme which is a Guarantor; (ii) any Investment in
Cash Equivalents; (iii) any Investment by TV Filme or any of its Restricted
Subsidiaries in a Person engaged in the Telecommunications Business if, as a
result of
such Investment, (a) such Person becomes a Restricted Subsidiary of TV Filme and
a Guarantor or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, TV Filme or a Restricted Subsidiary of TV Filme which is a
Guarantor; (iv) any Investment in TV Filme Servicos; (v) Investments in
Restricted Subsidiaries that are not Guarantors in an aggregate amount not to
exceed $30.0 million (or the equivalent thereof at time of determination),
PROVIDED, HOWEVER, that Investments in such Restricted Subsidiaries shall be
excluded from the calculation of such aggregate amount (A) if concurrently with
such Investment such Restricted Subsidiary becomes a Guarantor or (B) from the
time after such Investment such Restricted Subsidiary becomes a Guarantor; (vi)
any Investment in Government Securities in accordance with the provisions of the
Pledge Agreement; (vii) Investments in Persons engaged in the Telecommunications
Business, taken together with all other Investments made pursuant to this clause
(vii), in an aggregate amount not to exceed $15.0 million (or the equivalent
thereof at time of determination); (viii) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described under "--Repurchase at the Option
of Holders--Asset Sales;" (ix) loans and advances to officers, directors and
employees for business-related travel expenses, moving expenses and other
similar expenses, in each case incurred in the ordinary course of business; (x)
Investments the payment for which consists exclusively of Equity Interests
(excluding Disqualified Stock) of TV Filme; (xi) any Investment acquired by TV
Filme or any of its Restricted Subsidiaries (A) in exchange for any other
Investment or accounts receivable held by TV Filme or any such Restricted
Subsidiary in connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of
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the issuer of such other Investment or accounts receivable or (B) as a result of
the foreclosure by TV Filme or any of its Restricted Subsidiaries with respect
to any secured Investment or default; (xii) Investments in shares of money
market funds having assets in excess of $500 million; and (xiii) Investments
existing on December 20, 1996.
"PERMITTED LIENS" means (i) Liens securing Indebtedness which may be
incurred pursuant to clause (i) of the second paragraph of "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock;" (ii)
Liens in favor of TV Filme or any of its Restricted Subsidiaries; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with TV Filme or any of its Restricted Subsidiaries, PROVIDED that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with TV Filme or any such Restricted Subsidiary;
(iv) Liens on property or securing any Acquired Debt and which exist at the time
of acquisition thereof by TV Filme or any of its Restricted Subsidiaries,
PROVIDED that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens arising under the Indenture in favor of the Trustee; (vi)
Liens existing on the date of the Indenture; (vii) Liens arising by reason of
(1) any judgment, decree or order of any court, so long as enforcement of such
Lien is effectively stayed and any appropriate legal proceedings which may have
been duly initiated for the review of such judgment, decree or order shall not
have been finally terminated or the period within which such proceedings may be
initiated shall not have expired; (2) taxes not yet delinquent or which are
being contested in good faith; (3) security for payment of workers' compensation
or other insurance; (4) good faith deposits in connection with tenders, leases
and contracts (other than contracts for the payment of money), bids, licenses,
performance or similar bonds and other obligations of a like nature, in the
ordinary course of business; (5) zoning restrictions, easements, licenses,
reservations, provisions, covenants, conditions, waivers, restrictions on the
use of property or minor irregularities of title (and with respect to leasehold
interests, mortgages, obligations, liens and other encumbrances incurred,
created, assumed or permitted to exist and arising by, through or under a
landlord or owner of the leased property, with or without consent of the
lessees), none of which materially impairs the use of any parcel of property
material to the operation of the business of TV Filme or any Restricted
Subsidiary or the value of such property for the purpose of such business; (6)
deposits to secure public or statutory obligations or in lieu of surety or
appeal bonds; (7) surveys, exceptions, title defects, encumbrances, easements,
reservations of, or rights of others for, rights of way, sewers, electric lines,
telegraph or telephone lines and other similar purposes or zoning or other
restrictions as to the use of real property not interfering with the ordinary
conduct of the business of TV Filme or any of its Restricted Subsidiaries; or
(8) operation of law or statute and incurred in the ordinary course of business,
including without limitation, those in favor of mechanics, materialman,
suppliers, laborers or employees, and, if securing sums of money, for sums which
are not yet delinquent or are being contested in good faith by negotiations or
by appropriate proceedings which suspend the collection thereof; (viii) Liens
created by the Pledge Agreement and the Note Pledge Agreement; (ix) Liens
securing purchase money Indebtedness, including pursuant to clause (i) under the
second paragraph of the covenant described under "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock;" (x)
Liens incurred in the ordinary course of business of TV Filme or any of its
Restricted Subsidiaries which do not secure obligations of TV Filme or any
Restricted Subsidiary, including, without limitation, licenses and leases
granted or made by TV Filme or any Restricted Subsidiary as licensor or lessor
or which secure obligations that do not exceed $2.0 million (or the equivalent
thereof at time of determination) at any one time outstanding and that (a) are
not incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of business)
and (b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of business by TV
Filme or any such Restricted Subsidiary; and (xi) any extension, renewal or
replacement (or successive extensions, renewals or replacements), in whole or in
part, of any Lien referred to in the foregoing clauses; PROVIDED that the
principal amount of the Indebtedness secured thereby shall not exceed the
principal amount of Indebtedness so secured immediately prior to the time of
such extension, renewal or replacement (or with respect to
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the Bank Credit Agreement, the maximum amount then permitted to be borrowed
thereunder), and that such extension, renewal or replacement Lien shall be
limited to all or a part of the property which secured the Lien so extended,
renewed or replaced (plus improvements on such property).
"PERMITTED REFINANCING DEBT" means any Indebtedness of TV Filme or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of TV Filme or any such Restricted Subsidiary; PROVIDED that: (i)
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Debt does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded, plus accrued interest and the amount of any premiums and
transaction costs and reasonable expenses incurred in connection therewith; (ii)
such Permitted Refinancing Debt has a final maturity date equal to or later than
the final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Debt is subordinated in right of payment to the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred only by TV Filme or
the Restricted Subsidiary that is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PLEDGE ACCOUNT" means an account established with the Trustee pursuant to
the terms of the Pledge Agreement for the deposit of the Pledged Securities
purchased by ITSA with a portion of the proceeds from the sale of the Notes.
"PLEDGE AGREEMENT" means the Collateral Pledge and Security Agreement,
dated as of the date of the Indenture, by and among ITSA, TV Filme and the
Trustee governing the disbursement of funds from the Pledge Account.
"PLEDGED SECURITIES" means the securities purchased by ITSA with a portion
of the proceeds from the sale of the Notes, which shall consist of Government
Securities, deposited in the Pledge Account.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of Common
Equity Interests made on a primary basis by TV Filme pursuant to a registration
statement filed with, and declared effective by, the Commission in accordance
with the Securities Act.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such Person
that is not an Unrestricted Subsidiary.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"STRATEGIC INVESTOR" means any Person (i) engaged in the Telecommunications
Business that as of the date of determination has a Total Equity Market
Capitalization of at least $500 million (or the equivalent thereof at time of
determination) or (ii) any corporation, partnership, joint venture, limited
liability company or similar entity of which a stockholder, general partner,
joint venturer or member with more
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than 50% of the capital accounts, distribution rights, total equity and voting
interests or general or limited partnership interests, as applicable, are owned
or controlled, directly or indirectly, by a Person that satisfies clause (i) of
this definition; PROVIDED that clause (ii) of this definition may be satisfied
by any group of stockholders, general partners, joint venturers or members so
long as (a) each Person included in such group satisfies clause (i), (b) at
least one member in such group owns or controls, directly or indirectly, 35% or
more of the capital accounts, distribution rights, total equity and voting
rights or general or limited partnership interests of such Strategic Investor,
(c) no more than five Persons may be included in such group and (d) the
stockholders, general partners, joint venturers or members to be included in
such group shall act as a group and in concert.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TELECOMMUNICATIONS ASSETS" means assets used or useful in the ownership or
operation of a Telecommunications Business.
"TELECOMMUNICATIONS BUSINESS" means, when used in reference to any Person,
that such Person, directly or indirectly, is engaged primarily in the business
of (i) transmitting video, voice or data, (ii) creating, developing or packaging
entertainment or communications programming, (iii) offering private telephony
services or (iv) evaluating, participating or pursuing any other activity or
opportunity that is related to those identified in (i), (ii) or (iii) above.
"TOTAL EQUITY MARKET CAPITALIZATION" of any Person means, as of any date of
determination, the product of (i) the aggregate number of outstanding shares of
common stock of such Person on such date (which shall not include any options or
warrants on, or securities convertible or exchangeable into, shares of common
stock of such Person) and (ii) the average Closing Price of such common stock
over the 20 consecutive Trading Days immediately preceding such date. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares shall be determined by the Board of Directors of TV Filme in good faith
and evidenced by a resolution of the Board of Directors of TV Filme filed with
the Trustee.
"TRADING DAY" with respect to a securities exchange or automated quotation
system means a day on which such exchange or system is open for a full day of
trading.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the
Board of Directors of TV Filme as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors of TV Filme, but only to the extent that
such Subsidiary (i) has no Indebtedness other than Non-Recourse Debt, (ii) does
not own any Equity Interests of, or own or hold any Lien on, any property of TV
Filme or any Subsidiary of TV Filme (other than any Subsidiary of the Subsidiary
to be so designated), (iii) has not, and the Subsidiaries of such Subsidiary
have not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any of
the assets of TV Filme or any of its Restricted Subsidiaries, (iv) is not party
to any material agreement, contract, arrangement or understanding with TV Filme
or any of its Restricted Subsidiaries unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to TV Filme or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of TV Filme, (v) is a Person with respect to which
neither TV Filme nor any of its Restricted Subsidiaries has any direct or
indirect obligation (a) to subscribe
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for additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results, (vi) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of TV Filme or any of its
Restricted Subsidiaries and (vii) has at least one director on its board of
directors that is not a director or executive officer of TV Filme or any of its
Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of TV Filme or any of its Restricted Subsidiaries.
Any such designation by the Board of Directors of TV Filme shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of TV Filme giving effect to such designation and an
Officers' Certificate certifying that (i) such designation complied with the
foregoing conditions, (ii) was permitted by the covenant described under
"--Certain Covenants--Restricted Payments" and (iii) immediately after giving
effect to such designation, TV Filme could incur at least $1.00 of additional
Indebtedness under the provisions of the first paragraph of the covenant
described under "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Disqualified Stock." If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of TV Filme as of such date (and, if such Indebtedness is
not permitted to be incurred as of such date under the covenant described under
"--Certain Covenants-- Incurrence of Indebtedness and Issuance of Disqualified
Stock," TV Filme shall be in default of such covenant). The Board of Directors
of TV Filme may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary, PROVIDED that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of TV Filme of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the covenant
described under "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Disqualified Stock," and (ii) no Default or Event of Default would be in
existence following such designation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person 95% or more of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
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TAX CONSIDERATIONS
FEDERAL INCOME TAXATION
The following summary sets forth the opinion of Kelley Drye & Warren LLP,
special counsel to the Company, as to the principal U.S. Federal income tax
consequences to holders from the acquisition, ownership and disposition of
Exchange Notes as of the date hereof. This summary does not purport to consider
all the possible U.S. Federal tax consequences of the ownership and disposition
of the Exchange Notes, and is not intended to reflect the particular tax
position of any purchaser. It deals only with Exchange Notes held as capital
assets and does not address investors that may be subject to special tax rules,
such as individual retirement accounts and other tax-deferred accounts,
tax-exempt organizations, banks, insurance companies, dealers in securities or
currencies, purchasers that hold the Exchange Notes as a hedge against currency
risks or as part of a straddle with other investments (including a "conversion
transaction") comprised of an Exchange Note and one or more investments, or
purchasers that have a "functional currency" other than the U.S. dollar.
This summary is based on the Internal Revenue Code, final, temporary and
proposed Treasury regulations thereunder (the "Regulations"), revenue rulings,
court cases, and other legal authorities as now in effect (or proposed) and as
currently interpreted, and does not take into account possible changes in such
tax laws or other legal authorities or such interpretations. No rulings on any
of the issues discussed below will be sought from the the IRS. In addition,
except as otherwise indicated, the following does not consider the effect of any
applicable foreign, state, local or other tax laws or estate or gift tax
considerations.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. THE TAX TREATMENT
OF A HOLDER OF THE EXCHANGE NOTES MAY VARY DEPENDING UPON SUCH HOLDER'S
PARTICULAR SITUATION. EACH HOLDER OF EXCHANGE NOTES SHOULD CONSULT HIS, HER OR
ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF ACQUIRING, HOLDING,
EXCHANGING AND DISPOSING OF THE EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
For purposes of the discussion below, the payment of Liquidated Damages
should be includable in a holder's gross income as ordinary income in accordance
with the holders method of accounting for such purposes.
EXCHANGE OFFER
The exchange of an Old Note for an Exchange Note should not constitute a
taxable exchange because the Exchange Notes should not be considered to differ
materially either in kind or extent from the Old Notes. Moreover, any increase
in the interest rate of the Old Notes through the payment of Liquidated Damages
resulting from a Registration Default would not be treated as a taxable
exchange, as such change in interest rate would occur pursuant to the original
terms of the Old Notes. As a result of the foregoing, there should be no Federal
income tax consequences to a holder who exchanges an Old Note for an Exchange
Note and such holder should have the same tax basis and holding period in the
Exchange Notes as it had in the Old Notes immediately before the exchange.
U.S. HOLDERS
In general, interest on the Exchange Notes will be taxable to a beneficial
owner that is (1) a citizen or resident of the U.S., (2) a corporation that is
organized under the laws of the U. S. or any State thereof (including the
District of Columbia), or (3) a person otherwise subject to U.S. Federal income
taxation on its worldwide income (a "U.S. Holder") as ordinary income at the
time it is received or accrued, depending on the holder's method of accounting
for tax purposes. A U.S. Holder's tax basis in an Exchange Note will, in
general, be the U.S. Holder's cost therefor. A U.S. Holder will recognize a gain
or loss upon a sale or
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other disposition (including redemption) of its Exchange Notes in an amount
equal to the difference between the amount realized from such sale or other
disposition (less any accrued interest upon redemption, which will be taxable as
such) and the U.S. Holder's adjusted tax basis in the Exchange Notes. Such gain
or loss will be a capital gain or loss, provided the holder has held the
Exchange Notes as a capital asset, and will be long-term capital gain or loss if
the holder held the Exchange Notes for more than one year at the time of sale or
other disposition.
If a U.S. Holder purchases an Exchange Note for an amount that is less than
its stated principal amount, the amount of the difference will be treated as
"market discount" for U.S. Federal income tax purposes, unless such difference
is less than a specified de minimis amount. Under the market discount rules, a
U.S. Holder will be required to treat any principal payment on, or any gain on
the sale, exchange, retirement or other disposition of, an Exchange Note as
ordinary income to the extent such principal payment or gain does not exceed the
market discount accrued on such Exchange Note at the time of such payment or
disposition. In addition, the U.S. Holder may be required to defer, until the
maturity of the Exchange Note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Exchange Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Exchange Note, unless
the U.S. Holder elects to accrue on a constant interest rate method. A U.S.
Holder of an Exchange Note may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest rate method),
in which case the rules described in the preceding paragraph will not apply. The
election to include market discount in income currently, once made, applies to
all market discount obligations acquired on or after the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS.
A U.S. Holder that purchases an Exchange Note for an amount in excess of the
sum of all amounts payable on the Exchange Note after the purchase date other
than stated interest will be considered to have purchased the Exchange Note at a
"premium." A U.S. Holder generally may elect to amortize the premium over the
remaining term of the Exchange Note on a constant yield method. The amount
amortized in any year will be treated as a reduction of the U.S. Holder's
interest income from the Exchange Note. Bond premium on an Exchange Note held by
a U.S. Holder that does not make such an election will decrease the gain or
increase the loss otherwise recognized on disposition of the Exchange Note. The
election to amortize premium on a constant yield method once made applies to all
debt obligations held or subsequently acquired by the electing U.S. Holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS.
NON-U.S. HOLDERS
Subject to the discussion below under "INFORMATION REPORTING AND BACKUP
WITHHOLDING":
(a) payments of interest on the Exchange Notes by TV Filme or any agent of
TV Filme to any holder of an Exchange Note that is not a U.S. Holder (a
"Non-U.S. Holder") will not be subject to U.S. Federal withholding tax if
(1) the Non-U.S. Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of TV
Filme entitled to vote within the meaning of section 871(h)(3) of the
Internal Revenue Code and regulations thereunder, (2) the Non-U.S. Holder
is not a "controlled foreign corporation" (within the meaning of the
Internal Revenue Code) that is related to TV Filme (directly or
indirectly) through stock ownership, (3) the beneficial owner is not a
bank whose receipt of interest on an Exchange Note is described in
section 881(c)(3)(A) of the Internal Revenue Code, and (4) the beneficial
owner satisfies the statement requirement (described generally below) set
forth in section 871(h) and section 881(c) of the Internal Revenue Code
and the Regulations thereunder;
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(b) no withholding of U.S. Federal income tax will be required with respect
to any gain or income realized by a Non-U.S. Holder upon the sale,
exchange, retirement or other disposition of an Exchange Note; and
(c) an Exchange Note beneficially owned by an individual who at the time of
death is a Non-U.S. Holder will not be subject to U.S. Federal estate tax
as a result of such individual's death, provided that such individual
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the company entitled to vote
within the meaning of section 871(h)(3) of the Internal Revenue Code and
provided that the interest payments with respect to such Exchange Note
would not have been, if received at the time of such individual's death,
effectively connected with the conduct of a U.S. trade or business by
such individual.
To satisfy the requirement referred to in (a)(4) above, the beneficial owner
of such Exchange Note, or a financial institution holding the Exchange Note on
behalf of such owner, must provide, in accordance with specified procedures, a
paying agent of the Company with a statement to the effect that the beneficial
owner is not a United States person. Pursuant to current temporary Regulations,
these requirements will be met if (1) the beneficial owner provides his name and
address, and certifies, under penalties of perjury, that he is not a United
States person (which certification may be made on Internal Revenue Service Form
W-8 (or successor form)) or (2) a financial institution holding the Exchange
Note on behalf of the beneficial owner certifies, under penalties of perjury,
that such statement has been received by it and furnishes a paying agent with a
copy thereof.
If the conditions set forth in the preceding paragraph are not satisfied,
interest received by a Non-U.S. Holder of the Exchange Notes will be subject to
U.S. withholding tax at a rate of 30% of the gross amount thereof (or such other
rate prescribed by an applicable income tax treaty) unless the beneficial owner
of the Exchange Note provides the Company or its paying agent, as the case may
be, with a properly executed (1) IRS Form 1001 (or successor form) claiming an
exemption from withholding under the benefit of a tax treaty or (2) IRS Form
4224 (or successor form) stating that interest paid on the Exchange Note is not
subject to withholding tax because it is effectively connected with the
beneficial owner's conduct of a trade or business in the United States.
Moreover, if a Non-U.S. Holder is engaged in a trade or business in the U.S.
and the interest on the Exchange Notes is effectively connected with the conduct
of such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed above, will be subject to U.S. Federal income tax at
the same rates and in the same manner as if the income had been received by a
U.S. Holder. In the case of Non-U.S. Holders that are corporations, such
effectively connected income also may be subject to the branch profits tax equal
to 30% of its effectively connected earnings and profits for the taxable year,
subject to adjustments. For this purpose, such payment on an Exchange Note will
be included in such foreign corporation's earnings and profits.
Generally, a Non-U.S. Holder will not be subject to U.S. Federal income tax
on any gain realized upon a sale, exchange, retirement or other disposition of
the Exchange Notes unless (1) such gain is effectively connected with a U.S.
trade or business of the Non-U.S. Holder or, if a tax treaty applies, is
attributable to a permanent establishment (generally an office or other fixed
place of business maintained by the Non-U.S. Holder in the U.S.) or (2) the
Non-U.S. Holder is an individual and is present in the U.S. for 183 days or more
in the taxable year of disposition and certain other conditions are met. Gain
that is effectively connected with the conduct of a trade or business within the
U.S. by a Non-U.S. Holder will be subject to U.S. Federal income tax on net
income that applies to U.S. Holders, but will not be subject to withholding. An
individual described in (2) above generally will be subject to tax at a 30% rate
on any gain recognized on such disposition, but will not be subject to
withholding. Individual Non-U.S. Holders also may be subject to tax pursuant to
provisions of U.S. Federal income tax law applicable to expatriates of the U.S.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Exchange Notes are outstanding, TV Filme
is required to provide the IRS with certain information, including the holder's
name, address and taxpayer identification number, the aggregate amount of
principal and interest paid to that holder during the calendar year and the
amount of tax withheld, if any. This reporting obligation, however, does not
apply with respect to certain U.S. Holders such as corporations. Payment of the
proceeds from the sale of an Exchange Note to or through a foreign office of a
broker will not be subject to information reporting or backup withholding,
except that information reporting may apply to such payments if the broker is a
U.S. person, a "controlled foreign corporation" (within the meaning of the
Internal Revenue Code) or a foreign person 50% or more of whose gross income
from all sources for the three-year period ending with the close of its taxable
year preceding the payment was effectively connected with a U.S. trade or
business, unless (1) such custodian, nominee, agent or broker has documentary
evidence in its records that the beneficial owner is not a U.S. person and
certain other conditions are met or (2) the beneficial owner otherwise
establishes an exemption. Temporary Regulations provide that the Treasury is
considering whether backup withholding will apply with respect to payments of
principal, interest or the proceeds of a sale that are not subject to backup
withholding under the current regulations. Payment of the proceeds from a sale
of an Exchange Note to or through the U.S. office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its taxpayer identification number or otherwise
establishes an exemption from information reporting and backup withholding.
In the event that a U.S. Holder subject to the foregoing reporting
requirements fails to supply its correct taxpayer identification number in the
manner required by applicable law or under reports its tax liability, TV Filme,
its agents or a broker may be required to "backup" withhold a tax equal to 31%
of each payment of interest and principal on the Exchange Notes. Backup
withholding is not an additional tax and may be credited against the U.S.
Holder's U.S. Federal income tax liability, provided that the required
information is furnished to the IRS.
Under current Regulations, information reporting and backup withholding will
not apply to payments made by TV Filme or any agent thereof (in its capacity as
such) to a Non-U.S. Holder of an Exchange Note if such holder has provided the
required certification that it is not a United States person as set forth in
clause (a)(4) under "NON-U.S. HOLDERS," or has otherwise established an
exemption (provided that neither TV Filme nor its agent has actual knowledge
that the holder is a United States person or that the conditions of any
exemption are not in fact satisfied).
The Treasury Department has issued proposed Regulations that would modify
the information reporting and withholding rules as they apply to Non-U.S.
Holders. The Regulations would unify the current certification procedures and
forms and would, in certain circumstances, require additional information from
Non-U.S. Holders claiming treaty benefits. The proposed Regulations are
scheduled to take effect January 1, 1998, and are subject to further changes.
PLAN OF DISTRIBUTION
Each broker-dealer that holds Old Notes that were acquired for its own
account as a result of market-making or other trading activities (other than Old
Notes acquired directly from TV Filme), may exchange Old Notes for Exchange
Notes in the Exchange Offer. However, any such broker-dealer may be deemed to be
an "underwriter" within the meaning of such term under the Securities Act and
must, therefore, acknowledge that it will deliver a prospectus in connection
with any resale of Exchange Notes received in the Exchange Offer. This
prospectus delivery requirement may be satisfied by the delivery by such broker-
dealer of this Prospectus, as amended or supplemented. TV Filme has agreed that,
for a period of twelve months after the date of this Prospectus, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer who
receives Exchange Notes in the Exchange Offer for use in connection with any
such sale.
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TV Filme will not receive any proceeds from any sales of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale of Exchange Notes
by broker-dealers may be made directly to a purchaser or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act.
TV Filme has agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers and will indemnify
Eligible Holders (including any broker-dealer) against certain liabilities,
including liabilities under the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby agrees to notify TV Filme
prior to using this Prospectus in connection with the sale or transfer of
Exchange Notes, and acknowledges and agrees that, upon receipt of notice from TV
Filme of the happening of any event which makes any statement in this Prospectus
untrue in any material respect or which requires the making of any changes in
this Prospectus in order to make the statements herein not misleading (which
notice TV Filme agrees to deliver promptly to such broker-dealer), such
broker-dealer will suspend use of this Prospectus until TV Filme has amended or
supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented prospectus to such
broker-dealer.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Exchange Notes
will be passed upon for the Company by Kelley Drye & Warren LLP, New York, New
York.
EXPERTS
The financial statements of the Company appearing in this Prospectus have
been audited by Ernst & Young Auditores Independentes S.C., independent
auditors, as set forth in their report thereon appearing elsewhere herein.
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TV FILME, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets at December 31, 1994 and 1995.................................................. F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995...................................................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1993, 1994 and
1995..................................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995...................................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
Consolidated Balance Sheet at September 30, 1996 (Unaudited)............................................... F-13
Consolidated Statements of Operations for the nine months ended September 30, 1995 and 1996 (Unaudited).... F-14
Consolidated Statement of Changes in Stockholders' Equity for the nine months ended September 30, 1996
(Unaudited).............................................................................................. F-15
Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1996 (Unaudited).... F-16
Notes to Consolidated Financial Statements (Unaudited)..................................................... F-17
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
TV Filme, Inc.
We have audited the accompanying consolidated balance sheets of TV Filme,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
TV Filme, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of the three
years ended December 31, 1995, in conformity with generally accepted accounting
principles in the United States.
ERNST & YOUNG
AUDITORES INDEPENDENTES S.C.
Sao Paulo, Brazil
January 18, 1996, except as to Note 1, as to
which the date is July 24, 1996
F-2
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1994 1995
--------- ---------
<CAPTION>
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................. $ 1,659 $ 43
Accounts receivable, net.................................................................. 505 2,278
Supplies.................................................................................. 652 1,632
Receivables from affiliates............................................................... 2,111 --
--------- ---------
Total current assets.................................................................. 4,927 3,953
Property, plant and equipment, net.......................................................... 4,182 18,870
Intangible assets, net...................................................................... 899 860
--------- ---------
Total assets.......................................................................... $ 10,008 $ 23,683
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................................................... $ 1,055 $ 7,037
Payroll and other benefits payable........................................................ 468 1,283
Payables to affiliates-current............................................................ 200 1,863
--------- ---------
Total current liabilities............................................................. 1,723 10,183
Payables to affiliates-long term............................................................ 600 400
Deferred installation fees.................................................................. 1,185 5,205
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued............
Common stock, $.01 par value, 50,000,000 shares authorized, 4,997,240 and 6,193,996 shares
issued and outstanding in 1994 and 1995................................................. 50 62
Additional paid-in capital................................................................ 6,470 10,070
Deficit................................................................................... (20) (2,237)
--------- ---------
Total stockholders' equity............................................................ 6,500 7,895
--------- ---------
Total liabilities and stockholders' equity............................................ $ 10,008 $ 23,683
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-3
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1993 1994 1995
--------- --------- ---------
<CAPTION>
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Revenues........................................................................... $ 287 $ 2,438 $ 11,404
--------- --------- ---------
Operating costs and expenses:
System operating-Note 3.......................................................... 196 773 2,957
Selling, general and administrative.............................................. 558 2,394 8,975
Depreciation and amortization.................................................... 43 365 2,049
--------- --------- ---------
Total operating costs and expenses........................................... 797 3,532 13,981
--------- --------- ---------
Operating loss............................................................... (510) (1,094) (2,577)
--------- --------- ---------
--------- --------- ---------
Other income (expense):
Interest expense-Note 3.......................................................... (17) (2) (49)
Interest and other income-Note 3................................................. 11 932 475
Exchange and translation gains (losses).......................................... -- 682 (66)
--------- --------- ---------
Net income (loss).................................................................. $ (516) $ 518 $ (2,217)
--------- --------- ---------
--------- --------- ---------
Net income (loss) per share........................................................ $ (0.10) $ 0.08 $ (0.27)
--------- --------- ---------
--------- --------- ---------
Weighted average number of shares of Common Stock and
common stock equivalents......................................................... 5,295 6,885 8,086
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-4
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------- PAID-IN
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
---------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS, EXCEPT SHARES)
Balance at December 31, 1992............................ 1,427,256 $ 14 $ 94 $ (22) $ 86
Capital contribution.................................... -- -- 112 -- 112
Issuance of Common Stock................................ 1,169,096 12 1,288 -- 1,300
Net loss for the year................................... -- -- -- (516) (516)
---------- --- ----------- --------- ---------
Balance at December 31, 1993............................ 2,596,352 26 1,494 (538) 982
Issuance of Common Stock................................ 2,126,132 21 4,979 -- 5,000
Exercise of stock options............................... 274,756 3 (3) -- --
Net income for the year................................. -- -- -- 518 518
---------- --- ----------- --------- ---------
Balance at December 31, 1994............................ 4,997,240 50 6,470 (20) 6,500
Issuance of Common Stock................................ 1,052,924 11 3,289 -- 3,300
Non-cash compensation................................... -- -- 312 -- 312
Exercise of stock options............................... 143,832 1 (1) -- --
Net loss for the year................................... -- -- -- (2,217) (2,217)
---------- --- ----------- --------- ---------
Balance at December 31, 1995............................ 6,193,996 $ 62 $ 10,070 $ (2,237) $ 7,895
---------- --- ----------- --------- ---------
---------- --- ----------- --------- ---------
</TABLE>
See accompanying notes.
F-5
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1993 1994 1995
--------- --------- ---------
<CAPTION>
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................................................... $ (516) $ 518 $ (2,217)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization...................................................... 43 365 2,049
Non-cash compensation.............................................................. -- -- 312
Increase in deferred installation fees............................................. 191 994 4,020
Changes in operating assets and liabilities
Increase in accounts receivable.................................................... (60) (445) (1,773)
Increase in supplies............................................................... (135) (517) (980)
Increase in accounts payable....................................................... 555 499 5,982
Increase in payroll and other benefits payable..................................... 65 403 815
--------- --------- ---------
Net cash provided by operating activities............................................ 143 1,817 8,208
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions:
Property, plant and equipment...................................................... (852) (3,637) (16,621)
Intangible assets.................................................................. -- (914) (77)
--------- --------- ---------
Net cash used in investing activities................................................ (852) (4,551) (16,698)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock............................................................. 1,300 5,000 3,300
Capital contribution................................................................. 112 -- --
Increase in payables to affiliates................................................... -- 800 1,463
(Increase) decrease in receivables from affiliates................................... (685) (1,426) 2,111
--------- --------- ---------
Net cash provided by financing activities............................................ 727 4,374 6,874
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents................................. 18 1,640 (1,616)
Cash and cash equivalents at beginning of year....................................... 1 19 1,659
--------- --------- ---------
Cash and cash equivalents at end of year............................................. $ 19 $ 1,659 $ 43
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-6
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. COMPANY BACKGROUND
In connection with an initial public offering of its Common Stock (the
"Offering"), TV Filme, Inc. (the "Company") was formed in April 1996 to become
the holding company of and successor to ITSA-Intercontinental Telecomunicacoes
S.A. and its subsidiaries ("ITSA"). The transfer of ITSA to the Company will be
accounted for in a manner similar to a pooling of interests. ITSA was formed in
May 1994 as a holding company for and successor to TV Filme Servicos de
Telecomunicacoes S.A. ("TVFSA"). The transfer of TVFSA to ITSA has been
accounted for in a manner similar to a pooling of interests.
In connection with the Offering, the Company has entered into a
restructuring (the "Restructuring") pursuant to which all of the preferred stock
of ITSA was converted into common stock of ITSA, based on the conversion rates
at the date of issuance of the preferred stock. Each share of common stock of
ITSA was exchanged for 1,844 shares of Common Stock of the Company. As all of
the preferred stock of ITSA has been converted and there were no preferred
dividends paid or due as a result of the conversion, all preferred and common
stock issuances of the predecessor companies have been reflected as issuances of
Common Stock of the Company. Prior to the consummation of the Offering and the
Restructuring, TVFSA operated the Company's wireless cable system in Brasilia,
and held the licenses to operate the Company's wireless cable systems in
Brasilia, Goiania and Belem. ITSA owned substantially all of TVFSA, TV Filme
Goiania Servicos de Telecomunicacoes Ltda. ("TV Filme Goiania") and TV Filme
Belem Servicos de Telecomunicacoes Ltda. ("TV Filme Belem"). Pursuant to the
Restructuring, (i) 51% of the voting stock of TVFSA was transferred to an
entity, all of which is owned by certain existing shareholders of ITSA who are
Brazilian nationals, with ITSA retaining 49% of the voting stock and 83% of the
economic interests in TVFSA; (ii) the operating assets of the wireless cable
system of Brasilia were transferred from TVFSA to TV Filme Brasilia Servicos de
Telecomunicacoes Ltda. ("TV Filme Brasilia"), which is substantially owned by
ITSA; and (iii) TVFSA has entered into various agreements with ITSA and its
subsidiaries pursuant to which, among other things, TVFSA has authorized ITSA to
operate the existing wireless cable systems under its current licenses.
Subsequent to the Restructuring and the Offering, the Company owns 100% of ITSA,
which holds 49% of the voting stock and 83% of the economic interests of TVFSA
and 100% of TV Filme Brasilia, TV Filme Goiania and TV Filme Belem.
Accordingly, the consolidated financial statements of the Company include
(i) TVFSA on a historical basis from inception through May 1994 and (ii) ITSA
and its subsidiaries on a historical basis since May 1994 as though they have
been part of the Company for all periods presented. All significant intercompany
transactions and balances have been eliminated in consolidation.
The Company develops, owns and operates pay television systems in mid-sized
markets in Brazil. The Company has established wireless cable operating systems
in the cities of Brasilia, Goiania and Belem. Applications have been made for
the Company to operate systems in an additional 19 markets in Brazil. Although
the economic situation in Brazil has improved since July 1994, when the
government introduced the Real Plan, a return to high levels of inflation and
currency fluctuations could adversely affect the Company's operations.
B. METHOD OF PRESENTATION
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United States in
U.S. dollars. Amounts in Brazilian
F-7
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
currency have been remeasured into U.S. dollars in accordance with the
methodology set forth in Statement of Financial Accounting Standards No. 52 as
it applies to entities operating in highly inflationary economies. Supplies,
property, plant and equipment, intangibles and deferred installation fees and
the related income statement accounts are remeasured at exchange rates in effect
when the assets were acquired or the liabilities were incurred. All other assets
and liabilities are remeasured at year end exchange rates, and all other income
and expense items are remeasured at average exchange rates prevailing during the
year. Remeasurement adjustments are included in exchange and translation gains
(losses).
C. CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
D. SUPPLIES
Supplies are recorded at the lower of cost or market.
E. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company capitalizes
materials, subcontractor costs, labor and overhead incurred associated with
initial subscriber installations. The Company continues to depreciate the full
installation cost subsequent to any subscriber disconnections.
Depreciation is computed on the straight-line basis using estimated useful
lives ranging from 5 to 10 years for buildings and leasehold improvements, 5
years for machinery and equipment, furniture and fixtures and installation
costs.
F. INTANGIBLE ASSETS
Intangible assets are comprised primarily of pay television licenses, which
are amortized on a straight-line basis over a period of 10 years. Accumulated
amortization at December 31, 1994 and 1995 was $15,000 and $131,000,
respectively.
G. REVENUE RECOGNITION
Revenues from subscribers are recognized in the period service is rendered.
Installation fees are recognized as revenue to the extent of direct selling
costs incurred, with the remainder deferred and amortized to income over a five
year period.
H. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company had an allowance for doubtful accounts of $16,000 and $315,000
at December 31, 1994 and 1995, respectively. There were no charges to the
allowance during 1994 and 1995.
F-8
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
I. STOCK OPTIONS
The Company accounts for stock options granted to employees in accordance
with the provisions of Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees." In 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation." SFAS 123 provides for
an alternative to APB 25 and is effective for fiscal years beginning after
December 15, 1995. The Company expects to continue to account for stock options
granted to employees in accordance with the provisions of APB 25. Accordingly,
SFAS 123 is not expected to have any material impact on the results of
operations or the financial position of the Company.
J. INTEREST EXPENSE
Interest expense approximates the amount of cash interest paid.
K. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is calculated using the weighted average number
of shares of stock outstanding during the period together with the number of
shares issuable upon the exercise of options and warrants issued during the
twelve months prior to the filing of the Offering. The Company has not used the
treasury stock method in computing the dilutive effect of the warrants.
L. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Building and leasehold improvements...................................... $ 152 $ 597
Machinery and equipment.................................................. 2,581 10,288
Furniture and fixtures................................................... 120 308
Installation costs....................................................... 1,667 9,948
--------- ---------
4,520 21,141
Accumulated depreciation................................................. (338) (2,271)
--------- ---------
$ 4,182 $ 18,870
--------- ---------
--------- ---------
</TABLE>
Depreciation expense of $43,000, $350,000, and $1,933,000 is included in the
statements of operations for the years ended December 31, 1993, 1994 and 1995,
respectively.
F-9
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS
Substantially all programming is supplied by a subsidiary of Tevecap S.A.
("Tevecap"), a stockholder of the Company, pursuant to a programming contract.
Amounts paid to such affiliate in 1993, 1994 and 1995 were $13,000, $178,000 and
$1,334,000, respectively, net of discounts on programming fees compared to list
prices. Such discounts were received from August 1993 through October 1995, and
in 1993, 1994 and 1995 were $28,000, $340,000 and $539,000, respectively. Such
discounts are not expected to continue.
Receivables from Tevecap and Abril S.A. ("Abril"), the majority stockholder
of Tevecap, bear interest at the Brazilian interbank rate ("CDI") then in effect
or at CDI plus 0.8%. The rate in effect during the periods ranged from 3.64% to
4.16% per month during 1994 and 3.48% to 4.27% per month during 1995. Interest
income from such affiliates was $599,000 and $433,000 in 1994 and 1995,
respectively.
In 1994, the Company purchased two licenses to operate wireless cable
systems from Abril for $400,000 each, payable in four equal annual installments,
which do not bear interest. Included in payables to affiliates at December 31,
1994 and 1995 is $800,000 and $600,000, respectively, related to this purchase.
Other payables to Abril (and its affiliates) bear interest at the CDI plus 0.8%,
which ranged from 3.33% to 4.66% per month. Interest expense to Abril (and its
affiliates) was $50,000 in 1995.
The Company purchases equipment and supplies from vendors under irrevocable
letters of credit. Total issued and outstanding letters of credit at December
31, 1994 and 1995 were $966,000 and $6,683,000. Abril and a subsidiary of
Tevecap guarantee such obligations from time to time. At December 31, 1994 and
1995, issued and outstanding letters of credit secured by affiliates were
$590,000 and $4,155,000, respectively. The maturity date of such letters of
credit range from 30 days to 360 days.
4. STOCKHOLDERS' EQUITY
At December 31, 1995, 704,408 shares of Common Stock were non-voting. In
connection with the Restructuring, non-voting shares will be converted into
voting shares.
Between January and April 1993, certain shareholders made capital
contributions to the Company in an aggregate amount of $112,000.
In May 1993, the Company issued and sold 1,169,096 shares of Common Stock to
Tevecap for a purchase price of $1,300,000.
In July 1994, the Company issued and sold 2,126,132 shares of Common Stock
to Warburg, Pincus Investors, L.P. for a purchase price of $5,000,000.
In August 1995, the Company issued and sold 1,052,924 shares of Common Stock
to Warburg, Pincus Investors, L.P. for purchase price of $3,300,000.
In 1994 and 1995, the Company issued options to purchase 125,392 and 99,576
shares of Common Stock, respectively, to officers of the Company. All options
were vested at the date of grant. The fair value of the stock at the date of the
1995 grant was deemed to be $312,000 and, therefore, a charge for non-cash
compensation of $312,000 was recorded in 1995 and included in selling, general
and administrative expenses. All options were exercised in the year of grant.
As a finders' fee in connection with the equity offerings in 1994 and 1995,
the Company granted options to purchase 193,620 shares of Common Stock to two
advisers at a nominal exercise price. In 1994 and 1995, such options for 149,364
and 44,256 shares, respectively, were exercised.
F-10
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
The reasons for the difference between total tax expense (benefit) and the
amount computed by applying the effective Brazilian tax rate to income before
income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Income taxes (benefit) at effective
Brazilian rate................................................... $ (248) $ 249 $ (1,064)
Effect of monetary adjustments under
Brazilian tax law................................................ (709) 765
Nondeductible compensation expense................................. 150
Effect of change in tax rate....................................... 267
Other.............................................................. 198
Increase (decrease) in valuation allowance 248 460 (316)
--------- --------- ---------
Tax expense (benefit).............................................. -- -- --
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company has not recognized any future income tax benefit for its net
operating loss carryforwards in excess of net deferred tax liabilities as it is
not assured that it will be able to realize a benefit for such losses in the
future. The net operating loss carryforwards amounted to $5,232,000 at December
31, 1995. Under Brazilian law, net operating losses may be carried forward for
an unlimited period of time. Use of these losses, however, is restricted to 30%
of taxable income of a period.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The approximate effect of
temporary differences as of December 31, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Deferred tax assets
Net operating loss carryforwards............................................ $ 501 $ 1,596
Deferred installation fees.................................................. 538 1,526
Other....................................................................... 343 309
--------- ---------
1,382 3,431
Valuation allowance......................................................... (729) (413)
--------- ---------
$ 653 $ 3,018
--------- ---------
--------- ---------
Deferred tax liabilities
Fixed assets................................................................ $ 653 $ 2,670
Other....................................................................... -- 348
--------- ---------
$ 653 $ 3,018
--------- ---------
--------- ---------
</TABLE>
Effective January 1, 1996, the effective Brazilian tax rate declined from
48% to 30.5%. This has been reflected in the deferred tax assets and liabilities
at December 31, 1995.
F-11
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS
The Company leases office space and vehicles and has entered into various
transmission tower rental agreements. Rent expense amounted to approximately
$19,000, $128,000 and $472,000 for the years ended December 31, 1993, 1994, and
1995, respectively. A substantial number of these rental agreements are renewed
on a continuous basis. The Company also has entered into various contracts to
secure programming. These agreements are readjusted periodically.
Lease commitments at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................................... $1,497,000
1997............................................................... $1,320,000
1998............................................................... $ 362,000
1999............................................................... $ 3,000
</TABLE>
At December 31, 1995, payables to affiliates include $600,000 related to the
purchase by the Company of two licenses to operate wireless cable systems (see
Note 3). Payments for such licenses of $200,000 are required in each of 1996,
1997 and 1998.
F-12
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER
31, 30,
1995 1996
----------- -----------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 43 $ 19,618
Accounts receivable, net............................................................ 1,781 3,378
Supplies............................................................................ 1,632 2,983
Prepaid expenses and other current assets........................................... 497 824
----------- -----------
Total current assets.............................................................. 3,953 26,803
Property, plant and equipment, net.................................................... 18,870 32,423
Other assets.......................................................................... 860 1,043
----------- -----------
Total assets...................................................................... $ 23,683 $ 60,269
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 6,876 $ 8,752
Short-term debt..................................................................... -- 1,322
Payroll and other benefits payable.................................................. 1,283 2,056
Accrued liabilities and other taxes payable......................................... 161 968
Payables to affiliates--current..................................................... 1,863 200
----------- -----------
Total current liabilities......................................................... 10,183 13,298
Payables to affiliates--long term..................................................... 400 200
Deferred installation fees............................................................ 5,205 8,132
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued...... -- --
Common stock, $.01 par value, 50,000,000 shares authorized, 6,193,996 and 10,166,176
shares issued and outstanding..................................................... 62 102
Additional paid-in capital.......................................................... 10,070 41,553
Deficit............................................................................. (2,237) (3,016)
----------- -----------
Total stockholders' equity........................................................ 7,895 38,639
----------- -----------
Total liabilities and stockholders' equity........................................ $ 23,683 $ 60,269
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
F-13
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1995 1996 1995 1996
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues................................................................. $ 3,222 $ 8,654 $ 6,735 $ 21,287
Operating costs and expenses:
System operating--Note 2............................................... 732 2,676 1,789 6,092
Selling, general and administrative.................................... 2,415 4,421 5,815 11,615
Depreciation and amortization.......................................... 598 1,572 1,196 3,996
--------- --------- --------- ---------
Total operating costs and expenses................................... 3,745 8,669 8,800 21,703
--------- --------- --------- ---------
Operating loss....................................................... (523) (15) (2,065) (416)
Other income (expense):
Interest income (expense), net--Note 2................................. 8 115 338 (307)
Other expense--Note 2.................................................. -- (34) -- (23)
Exchange and translation losses........................................ (17) (143) (80) (101)
--------- --------- --------- ---------
Net loss................................................................. $ (532) $ (77) $ (1,807) $ (847)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss per share....................................................... $ (0.07) $ (0.01) $ (0.22) $ (0.10)
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average number of shares of Common Stock and common stock
equivalents............................................................ 8,086 9,868 8,086 8,680
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes
F-14
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
------------ ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
BALANCE AT DECEMBER 31, 1995................................ 6,193,996 $ 62 $ 10,070 $ (2,237) $ 7,895
Issuance of Common Stock and warrants....................... 1,097,180 11 7,140 -- 7,151
Initial public offering of common stock, net of costs....... 2,875,000 29 24,343 -- 24,372
Equity adjustment from restructuring........................ -- -- -- 68 68
Net loss for the period..................................... -- -- -- (847) (847)
------------ ---------- ----------- --------- ---------
BALANCE AT SEPTEMBER 30, 1996............................... 10,166,176 $102 $ 41,553 $ (3,016) $ 38,639
------------ ---------- ----------- --------- ---------
------------ ---------- ----------- --------- ---------
</TABLE>
See accompanying notes.
F-15
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
<S> <C> <C>
1995 1996
---------- ----------
<CAPTION>
(IN THOUSANDS
OF DOLLARS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................................................... $ (1,807) $ (847)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization........................................................ 1,196 3,996
Non-cash compensation................................................................ 312 --
Increase in deferred installation fees............................................... 2,773 2,927
Changes in operating assets and liabilities:
Increase in accounts receivable...................................................... (799) (1,597)
Increase in supplies................................................................. (962) (1,351)
Increase in prepaid expenses and other current assets................................ (89) (327)
Decrease (increase) in other assets.................................................. 9 (183)
Increase in accounts payable......................................................... 3,666 1,876
Increase in payroll and other benefits payable....................................... 920 773
Increase in accrued liabilities and other taxes payable.............................. 213 807
---------- ----------
Net cash provided by operating activities.............................................. 5,432 6,074
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions:
Property, plant and equipment........................................................ (10,866) (17,481)
---------- ----------
Net cash used in investing activities.................................................. (10,866) (17,481)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term debt............................................................ -- 1,322
Proceeds from initial public offering, net of costs.................................... -- 24,372
Issuance of Common Stock and warrants.................................................. 3,300 7,151
Decrease in payables to affiliates..................................................... (200) (1,863)
Decrease in receivables from affiliates................................................ 764 --
---------- ----------
Net cash provided by financing activities.............................................. 3,864 30,982
---------- ----------
Net change in cash and cash equivalents................................................ (1,570) 19,575
Cash and cash equivalents at beginning of period....................................... 1,659 43
---------- ----------
Cash and cash equivalents at end of period............................................. $ 89 $ 19,618
---------- ----------
---------- ----------
</TABLE>
See accompanying notes.
F-16
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. COMPANY BACKGROUND
In connection with an initial public offering of its Common Stock which was
consummated on August 2, 1996 (the "Offering"), TV Filme, Inc. (the "Company")
was formed in April 1996 to become the holding company of and successor to
ITSA-Intercontinental Telecomunicacoes S.A. and its subsidiaries ("ITSA"). The
transfer of ITSA to the Company has been accounted for in a manner similar to a
pooling of interests. ITSA was formed in May 1994 as a holding company for and
successor to TV Filme Servicos de Telecomunicacoes S.A. ("TVFSA"). The transfer
of TVFSA to ITSA has been accounted for in a manner similar to a pooling of
interests.
In connection with the Offering, the Company entered into a Restructuring
(the "Restructuring") pursuant to which, immediately prior to the Offering, all
of the preferred stock of ITSA was converted into common stock of ITSA, based on
the conversion rates at the date of issuance of the preferred stock. Each share
of common stock of ITSA was exchanged for 1,844 shares of Common Stock of the
Company. As all of the preferred stock of ITSA has been converted and there were
no preferred dividends paid or due as a result of the conversion, all preferred
and common stock issuances of the predecessor companies have been reflected as
issuances of Common Stock of the Company. Prior to the consummation of the
Offering and the Restructuring, TVFSA operated the Company's wireless cable
system in Brasilia, and held the licenses to operate the Company's wireless
cable systems in Brasilia, Goiania and Belem. ITSA owned substantially all of
TVFSA, TV Filme Goiania Servicos de Telecomunicacoes Ltda. ("TV Filme Goiania")
and TV Filme Belem Servicos de Telecomunicacoes Ltda. ("TV Filme Belem").
Pursuant to the Restructuring, (i) 51% of the voting stock of TVFSA was
transferred to an entity, all of which is owned by certain existing shareholders
of ITSA who are Brazilian nationals, with ITSA retaining 49% of the voting stock
and 83% of the economic interests in TVFSA; (ii) the operating assets of the
wireless cable system of Brasilia were transferred from TVFSA to TV Filme
Brasilia Servicos de Telecomunicacoes Ltda. ("TV Filme Brasilia"), which is
substantially owned by ITSA; and (iii) TVFSA entered into various agreements
with ITSA and its subsidiaries pursuant to which, among other things, TVFSA has
authorized ITSA to operate the existing wireless cable systems under its current
licenses. As a result of the Restructuring and the Offering, the Company owns
100% of ITSA, which holds 49% of the voting stock and 83% of the economic
interests of TVFSA and 100% of TV Filme Brasilia, TV Filme Goiania and TV Filme
Belem.
Accordingly, the consolidated financial statements of the Company include
ITSA and its subsidiaries on a historical basis since May 1994 as though they
have been part of the Company for all periods presented. All significant
intercompany transactions and balances have been eliminated in consolidation.
The Company develops, owns and operates pay television systems in mid-sized
markets in Brazil. The Company has established wireless cable operating systems
in the cities of Brasilia, Goiania and Belem.
B. METHOD OF PRESENTATION
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United States in
U.S. dollars. Amounts in Brazilian currency have been remeasured into U.S.
dollars in accordance with the methodology set forth in Statement of Financial
Accounting Standards No. 52 as its applies to entities operating in highly
inflationary economies. Supplies, property, plant and equipment, intangibles and
deferred installation fees
F-17
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and the related income statement accounts are remeasured at exchange rates in
effect when the assets were acquired or the liabilities were incurred. All other
assets and liabilities are remeasured at year end exchange rates, and all other
income and expense items are remeasured at average exchange rates prevailing
during the year. Remeasurement adjustments are included in exchange and
translation losses.
In management's opinion, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the first nine months are not necessarily
indicative of the results that may be expected for a full year.
C. NET LOSS PER SHARE
Net loss per share is calculated using the weighted average number of shares
of stock outstanding during the period together with the number of shares
issuable upon the exercise of options and warrants issued during the twelve
months prior to the filing of the Offering. The computation of fully diluted pro
forma net loss per share of common stock was antidilutive; therefore, the
amounts reported for primary and fully diluted loss per share are the same.
2. RELATED PARTY TRANSACTIONS
Substantially all programming is supplied by a subsidiary of Tevecap S.A.
("Tevecap"), a stockholder of the Company, pursuant to a programming contract.
Amounts paid to such affiliate for the three and nine months ended September 30,
1995 and 1996 were $363,000 and $764,000 and $1,922,000 and $4,468,000,
respectively.
Receivables in 1995 from Tevecap and Abril S.A. ("Abril"), the majority
shareholder of Tevecap, bear interest at the Brazilian interbank rate ("CDI")
then in effect plus 0.8%. The rate in effect during the periods ranged from
3.24% to 4.41% per month during 1995. Interest income from such affiliates was
$339,000 for the nine months ended September 30, 1995.
Included in payables to affiliates at September 30, 1996 is a $400,000
payable to Abril which does not bear interest. Payments on this payable are
required at the rate of $200,000 per year. Other payables to Tevecap bear
interest at the CDI plus 0.8%, which ranged from 2.18% to 3.36% per month during
the first nine months of 1996; these payables were paid in full during the three
months ended September 30, 1996. Interest expense paid to Tevecap was $476,000
for the nine months ended September 30, 1996 compared to $23,000 for the nine
months ended September 30, 1995.
The Company purchases equipment and supplies from vendors under irrevocable
letters of credit. Abril and a subsidiary of Tevecap guarantee such obligations
from time to time. Total issued and outstanding letters of credit at September
30, 1996 were $7,524,000. At September 30, 1996, issued and outstanding letters
of credit secured by affiliates were $4,732,000. Of this amount, $1,322,000 is
classified as short-term debt. The maturity date of such letters of credit range
from 30 days to 360 days.
Immediately prior to the consummation of the Offering, in connection with
the Restructuring, the Company issued 3,962,756, 1,456,760, 254,472, 254,472 and
1,069,520 shares of Common Stock to Warburg, Pincus Investors, L.P. ("Warburg,
Pincus"), Tevecap, Mr. Hermano Studart Lins de Albuquerque, Mr. Carlos Andre
Studart Lins de Albuquerque and Mrs. Maria Nise Studart Lins de Albuquerque,
respectively, with a value at the initial public offering price of $10.00 per
share of $39,627,560, $14,567,600, $2,544,720, $2,544,720 and $10,695,200,
respectively. Such shares were issued in exchange for all of their
F-18
<PAGE>
TV FILME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. RELATED PARTY TRANSACTIONS (CONTINUED)
shares of common stock of ITSA, which have the same value as the shares of
Common Stock received in the exchange.
Immediately prior to the consummation of the Offering, in connection with
the Restructuring, the Company issued warrants to purchase 567,952 shares of
Common Stock to Warburg, Pincus, warrants to purchase 208,372 shares of Common
Stock to Tevecap and warrants to purchase 18,440 shares of Common Stock to two
other shareholders of the Company in exchange for all of their warrants to
purchase shares of common stock of ITSA.
3. STOCK OPTION PLAN
In connection with the Offering, the Board of Directors of the Company
adopted and the stockholders of the Company approved the 1996 Stock Option Plan
(the "Plan"). The Plan provides for the grant of stock options to officers, key
employees, consultants and directors of the Company. The Plan is administered by
the Compensation Committee and the total number of shares of Common Stock for
which options may be granted pursuant to the Plan is 936,432, subject to certain
adjustments reflecting changes in the Company's capitalization. The Plan allows
the granting of incentive stock options, which may not have an exercise price
below the greater of par value or the market value on the date of grant, and
non-qualified stock options, which have no restrictions as to exercise price
other than the exercise price cannot be below par value. All options must be
exercised no later than 10 years from the date of grant. Options to purchase
407,000 shares of Common Stock were granted upon the consummation of the
Offering, 297,000 of which are exercisable at $10.00 per share, and 110,000 of
which are exercisable at $11.00 per share, and which generally vest 20% per year
for five years beginning on the first anniversary of consummation of the
Offering.
F-19
<PAGE>
ANNEX A
GLOSSARY
C-BAND: A satellite transmission system which provides a signal on the "c"
bandwidth.
CABLE: A network that employs electromagnetic transmission over coaxial and/or
fiber-optic cable to transmit multiple channels carrying images, sound and data
between a central facility and individual customers' television sets.
CHURN: The rate of subscriber turnover. Churn rate equals the ratio of
disconnected subscribers to average monthly subscribers.
COAXIAL CABLE: Cable consisting of a central conductor surrounded and insulated
from another conductor. It is the standard material used in traditional cable
systems.
DIRECT BROADCAST SATELLITE OR DBS: The transmission of a compressed encoded
signal directly from a satellite to the customer's home.
DIRECT-TO-HOME OR DTH: Satellite television services available via satellite
receivers mounted in the yards of customers' homes.
HARDWIRE CABLE: Cable system that uses coaxial cable to transmit television
signals. Operators receive at a headend, signals for programming services which
have been either broadcast or transmitted to such operators by satellite.
HEADEND: A collection of hardware, typically including satellite dishes,
satellite receivers, modulators, amplifiers and video cassette playback
machines. Signals, when processed, are then combined for distribution.
HOUSEHOLDS PASSED: The expression in common usage as the measurement of the size
of a cabled area, meaning the total number of premises which have the current
ability to be connected to a hardwire cable system.
KU-BAND: A satellite transmission system which provides a signal over the "ku"
bandwidth.
LINE OF SIGHT OR LOS TRANSMISSION: Transmission to antennas that can be "seen"
by the headend transmitter of a wireless cable operator and that is able to
receive a commercially acceptable wireless signal from the transmission point.
LOCAL OFF-AIR VHF/UHF CHANNELS: Over-the-air broadcast television channels that
are available to viewers free of charge.
MHZ: A unit of frequency equal to one million hertz.
MMDS (MULTI-POINT, MULTI-CHANNEL DISTRIBUTION SYSTEM): A one way radio
transmission of television channels over microwave frequencies from a fixed
station transmitting to multiple receiving facilities located at fixed points.
PENETRATION RATE: The measurement of the take-up of pay television services. The
penetration rate as of a given date is calculated by dividing the number of
subscribers connected to a system on such a date by the total number of
households passed in such system.
WIRELESS CABLE: A cable system that receives programming at a headend which is
then retransmitted via microwave transmission from an antenna located on a tower
associated with the headend to a small antenna located at a subscriber's
premises.
A-1
<PAGE>
ANNEX B
THE FEDERATIVE REPUBLIC OF BRAZIL
GENERALLY
The Federative Republic of Brazil, a nation consisting of 26 States and the
Federal District of Brasilia, is the fifth largest country in the world, with an
area of approximately 3.3 million square miles. It is the largest country in
Latin America and occupies nearly 50% of the land mass of South America. Brazil
is located in central and north-eastern South America, and has a long coastline
on the Atlantic Ocean. Brazil is bordered on its north by Colombia, Venezuela,
Guiana, Suriname and French Guiana, on its south by Paraguay, Argentina and
Uruguay, and on its west by Peru and Bolivia. Its climatic conditions vary from
hot and wet in the tropical rain forest of the Amazon basin to temperate in the
savannah grasslands of the central and southern uplands, which have warm summers
and mild winters.
Formerly a Portuguese possession, Brazil became an independent monarchy in
1822, and a republic in 1889. The capital of Brazil is Brasilia and the official
language is Portuguese. With a population estimated at approximately 158 million
at August 31, 1996, Brazil is the sixth most populous country in the world, with
a per capita income estimated to be approximately $4,500 at December 31, 1995.
The population is concentrated in the coastal regions and large cities. Over the
past 60 years there has been a marked migration from rural to urban areas, with
the latter accounting for 74% of the total population in 1991, a significant
increase from 46% in 1960. Brazil has 12 cities with over 1.0 million
inhabitants.
FORM OF GOVERNMENT. Brazil is a federative republic with a representative
form of federal government. A new constitution was enacted in October 1988
confirming a presidential form of government with three independent branches:
executive, legislative and judicial. In addition, on April 21, 1993, a national
referendum was held to decide whether Brazil should continue as a presidential
republic or should become a parliamentary republic or a parliamentary monarchy.
Brazilians voted to continue the current presidential republic form of
government.
The executive power is vested in the President, who is elected by direct
vote for a term of four years (with the next Presidential election to be held in
October 1998) and is not currently eligible for re-election. The President has a
broad range of powers including the right to appoint ministers and key
executives in selected administrative and political posts. The legislative
branch consists of a bicameral National Congress composed of the Senate and the
Chamber of Deputies. The Senate's 81 Senators are each elected for staggered
eight-year terms, while the Chamber of Deputies has 513 deputies, each elected
for concurrent four-year terms. The judicial power is headed by the Federal
Supreme Court composed of 11 Justices who are appointed for life by the
President. The Federal Supreme Court has ultimate jurisdiction over decisions
rendered by lower federal and state courts on constitutional matters.
At the state level, the executive power is exercised by governors who are
elected for four-year terms with no eligibility for re-election. The legislative
power is exercised by state deputies who are also elected for four years.
Judicial power at the state level is vested in state courts, with state Courts
of Appeals as the highest state judicial authority. Appeals of state court
judgments may be taken to the Federal Supreme Court when they involve issues of
constitutional law. Otherwise, they may be appealed to the Superior Court of
Justice.
The Federal government has proposed constitutional reforms in an effort to
reduce public sector involvement in the economy and to allow certain industries,
especially those that require extensive capital investment, to gain access to
foreign capital. On August 15, 1995, the National Congress approved amendments
to the Constitution to allow greater competition in the Brazilian economy,
including an amendment to permit private sector investments in the
telecommunications industry.
RECENT POLITICAL HISTORY. The Brazilian military ruled the country from
1964 to 1985. In 1985, a series of political reforms were enacted, including the
reintroduction of direct elections for the President, and the
B-1
<PAGE>
calling of a Constitutional Assembly to adopt a new Brazilian Constitution. A
new constitution was promulgated in 1988.
In December 1989, Fernando Collor de Mello became the first President to be
elected by popular vote since 1960. In December 1992, following allegations and
a subsequent investigation of charges of corruption involving the President,
President Collor resigned from the Presidency in the midst of his impeachment
trial. Itamar Franco, the Vice President under Collor, then assumed the
Presidency for the balance of the term ending December 31, 1994. In October
1994, Fernando Henrique Cardoso was elected President for a four-year term. He
assumed the Presidency on January 1, 1995. Mr. Cardoso had previously served as
Minister of Foreign Affairs and in May 1993 had been appointed Finance Minister,
in which capacity he proposed a new program of macroeconomic policies designed
to control Brazilian inflation and to stabilize the Brazilian currency. That
program evolved into the Real Plan.
FOREIGN RELATIONS AND INTERNATIONAL ORGANIZATIONS. Brazil maintains
diplomatic relations with almost all countries in the world and trade ties with
many of them. It is a member of the United Nations, the Organization of American
States, the Inter-American Development Bank, the World Bank, the International
Development Association, the International Finance Corporation, the
International Monetary Fund, the General Agreement on Tariffs and Trade, the
World Trade Organization and the Latin American Integration Association. Brazil
is also a member of the South American Common Market ("Mercosul"). Mercosul was
established in March 1991, when Argentina, Brazil, Paraguay and Uruguay signed
the Treaty of Asuncion. Chile recently became a member of Mercosul and Bolivia
is negotiating to become a member of Mercosul. The Treaty and subsequent
agreements provide for the gradual economic integration of the member countries
and the reduction of tariff barriers and non-tariff restrictions on trade. In
June 1991, the countries constituting Mercosul signed an agreement with the U.S.
which laid the foundation for negotiating a trade agreement with the U.S. In
addition, negotiations have begun between Mercosul and the European Union for a
free-trade agreement.
COMMERCE. Services and industries account for approximately 49% and 37%,
respectively, of Brazilian Gross Domestic Product (the "GDP"). Brazil's
manufacturing sector, the largest in Latin America, is well developed, with
industrial goods accounting for more than 60% of exports. Production is focused
on capital goods, construction materials, chemicals and petrochemicals, smelting
(steel and non-ferrous metals), rubber, motor vehicles, sugar and wood
processing. In the automotive sector, Brazil produced over 1.6 million vehicles
in 1995. Recently, technologically-based industries have seen rapid growth,
particularly in the electronics and information processing sectors. Traditional
industries such as textiles and clothing, beverages and food processing remain
important and continue to account for approximately 50% of output.
While Brazil remains the world's leading producer and exporter of coffee and
sugar and has important crops including soya, orange juice, tobacco, cocoa and
cotton, agriculture, which currently employs approximately 30% of the
population, accounts for only 12% of GDP. Brazil has significant mineral
resources. Its iron reserves are believed to be equivalent to one third of the
world's total, while its bauxite reserves are the largest in Latin America.
Brazil accounts for approximately 30% of the world's iron exports. Other major
deposits include manganese, coal, zinc, chrome, gold and tin. In hydrocarbons,
the national petroleum products industry supplies approximately 39% of the
domestic market. The state-owned oil company, Petrobras, maintains control over
exploration and extraction and operates the majority of oil refineries.
The media and communications sector in Brazil has enjoyed rapid growth and
is a focal point of government investment policy. The Ministry of Communications
has indicated that its telecommunications plan for 1996-2003 will require
investment of no less than $75.0 billion across all subsectors including public
telephone service, television, cable and radio operations and satellite and
cellular operations. There are approximately 14.3 million fixed telephone lines
and approximately 1.9 million cellular telephone users
B-2
<PAGE>
in Brazil. In particular, the Brazilian government has set out specific goals to
expand the telecommunications sector and has issued new rules to encourage
significant private capital participation across all subsectors. In the
broadcasting arena there are over 1,000 radio stations and 127 television
stations.
FINANCIAL SYSTEM. The Conselho Monetario Nacional (the "National Monetary
Council"), which is the highest authority for monetary and financial policy in
Brazil, is in charge of the overall supervision of monetary, credit, budgetary,
fiscal and public debt policies. It is authorized to regulate credit
transactions of every kind, to authorize and regulate currency issues, to
supervise the country's gold and foreign exchange reserves, to determine savings
and investment policies and to regulate the securities and capital markets. In
this regard, the National Monetary Council oversees the activities of the
Central Bank.
The Central Bank is responsible for implementing policies adopted by the
National Monetary Council and overseeing the implementation of financial
legislation. It is authorized, among other things, to issue money, to oversee
the circulation of currency, to control the level of credit in the economy, to
control foreign investments and currency movements related to these investments
and to administer Brazil's internal Federal Government debt.
BRAZILIAN ECONOMIC ENVIRONMENT
HISTORICAL BACKGROUND. From the late 1960's through 1982, Brazil
implemented an import-substitution, high growth development strategy financed in
large part by foreign borrowing. Foreign debt grew at an accelerated pace in
response to the oil shocks of the 1970's and, when international interest rates
rose sharply in 1979-80, the resulting accumulated external debt became one of
Brazil's most pressing problems in the decade that followed. The debt crisis of
the 1980's and high inflation substantially depressed real growth in the GDP,
which averaged 2.3% per year from 1981 to 1989. The public sector's role in the
economy also expanded sharply and significant structural distortions were
introduced through high tariffs and the creation of subsidies and tax credit
incentives. Significant pressures in the money supply to finance a large and
growing fiscal deficit further fueled inflationary pressures.
Efforts to address these problems during the late 1980's and early 1990's
were largely unsuccessful. High inflation and the recurrent threat of
hyperinflation during this period prompted the Federal government to pursue a
series of stabilization plans, but these plans were undermined by a variety of
factors, including political difficulty in implementing planned fiscal
adjustments and the slowness of institutional reforms. The practice of inflation
indexation in the economy, which made prices downwardly rigid, also helped to
undermine the stabilization measures. Moreover, these attempts at stabilization
relied on mechanisms, such as price and wage freezes and unilateral
modifications of the terms of financial contracts, that were not supported by
fiscal and monetary reform. A problem during this period was that the public
sector ran operational deficits averaging more than 5% of GDP during the
five-year period from 1985-1989, while monetary policy was compromised by the
short-term refinancing of public sector debt. In addition, the 1988 Constitution
reallocated public resources, in particular tax revenues, from the Federal
government to the states and municipalities without a proportional shift of
responsibilities to them, thereby further constraining the effectiveness of the
Federal government's fiscal policy, and also limiting the ability of the Federal
government to dismiss public sector employees.
RECENT PERFORMANCE. Throughout the 1980s and into the early 1990s, the
Brazilian economy experienced periods of high inflation and recession. Recently,
however, the Brazilian economy has shown improvement in a number of areas. The
GDP grew in constant real terms by 4.2% in 1995, 5.9% in 1994 and 4.2% in 1993,
compared with a decrease of 0.8% in 1992. Industrial production increased by
2.0% in 1995, 7.0% in 1994 and 6.9% in 1993, compared with declines of 3.8%,
1.8% in 1992 and 1991, respectively. In 1995, the service sector experienced an
overall growth rate of 5.7% in real terms as a result of increases in retail
services of 7.4%, transportation of 3.9% and communications of 24.3%.
Exports in 1995 increased by 6.8% over 1994 while imports grew by 50.4% in
the same period. The trade balance presented a deficit of the equivalent of $3.2
billion in 1995 compared to a surplus of the
B-3
<PAGE>
equivalent of US$10.6 billion in 1994. Through July 1996, the trade balance has
shown a modest $600 million (0.1% of GDP) deficit, compared to a $4.3 billion
deficit during the same period in 1995. For the first seven months of the year,
export growth has exceeded that of 1995, while the growth of imports has lagged
behind that of the previous year, thereby narrowing the trade deficit.
Brazil registered significant growth in international currency reserves in
1995, despite the instability which followed the Mexican peso crisis. After a
sharp decline in the first four months of the year, an increase in foreign
capital inflows was registered which replenished reserves to the equivalent of
$51.8 billion at year-end 1995, up from $38.8 billion at year-end 1994 and $32.2
billion ar year-end 1993. By July 31, 1996, reserves totaled more than the
equivalent of $58 billion. After a fine tuning of the management of the foreign
exchange rate regime during 1994, the Central Bank has pursued a policy of
gradually depreciating the currency against the dollar. In 1995, the real fell
in value against the U.S. dollar from R$0.844 to R$0.972 per U.S. dollar and has
since depreciated to 1.015 on August 23, 1996, reflecting this policy of gradual
depreciation.
THE REAL PLAN. In December 1993, the Federal government announced a
stabilization program, known as the Real Plan, aimed at curtailing inflation and
building a foundation for sustained economic growth. The Real Plan was designed
to address persistent deficits in the Federal government's accounts, expansive
credit policies and widespread, backward-looking indexation.
The Real Plan has three stages: the first stage included a fiscal adjustment
proposal for 1994, consisting of a combination of spending cuts and an increase
in tax rates and collections intended to eliminate a budget deficit originally
projected at $22.0 billion. Elements of the proposal included (i) cuts in
current expenditures and investment through the transfer of some activities from
the Federal government to the states and municipalities, (ii) establishment of
the Fundo Social de Emergencia (the Emergency Social Fund or "ESF"), financed by
reductions in constitutionally mandated transfers of Federal government revenues
to the states and municipalities, to ensure financing of social welfare spending
by the Federal government, (iii) a prohibition on sales of public bonds by the
Federal government, except to refinance existing debt and for certain
expenditures and investments, (iv) new taxes, including a new levy on financial
transactions and (v) recovery of mandatory social security contributions, due to
judicial acknowledgment that such contributions were permissible under the 1988
Constitution.
The centerpiece of the first stage of the Real Plan was the creation of the
ESF by constitutional amendment in 1994. The ESF enabled the Federal government
temporarily to break certain of the constitutionally mandated links between
revenue and expenditure. Pursuant to this amendment, 20% of Federal government
revenues otherwise earmarked for specific purposes were released and deposited
into the ESF to ensure financing of social welfare spending by the Federal
government for 1994 and 1995. In adopting this constitutional amendment,
however, the Federal Congress did not modify the existing provisions requiring
the Federal government to share a significant portion of its revenues with
states and municipalities.
The second stage of the Real Plan, initiated March 1, 1994, began the
process of reform of the Brazilian monetary system. Brazil's long history of
high inflation had led to the continuous and systematic deterioration of the
domestic currency, which no longer served as a store of value and had lost its
utility as a unit of account. Because inflation had reduced dramatically the
information content of prices quoted in local currency, economic agents had
included in their contracts a number of mechanisms for indexation and
denomination of obligations in indexed units of accounts. The process of
rehabilitation of the national currency began with the creation and
dissemination of the UNIDAD DE REAL DE VALOR (the "unit of real value" or "URV")
as a unit of account. The second stage of the Real Plan was designed to
eliminate the indexation of prices to prior inflation and link indexation to the
URV, a unit of account.
The introduction of the URV was premised on the theory that a reference unit
with a nominal value corrected frequently and based on the best estimate of
current inflation would express values more realistically than traditional
indexing methods. The URV, therefore, was calculated daily based on estimates
B-4
<PAGE>
drawn from three price indices and was designed to track the loss in the
purchasing power of the cruzeiro REAL, the legal currency at the time.
The third stage of the Real Plan began on July 1, 1994, with the
introduction of the REAL as Brazil's currency. All contracts denominated in URVS
were automatically converted into reais at a conversion rate of one to one, and
the URV, together with the CRUZEIRO REAL, ceased to exist. In the effort to
maintain the initial success of the Real Plan, the Federal government and the
Central Bank have taken several additional measures, including institution of
strict control of monetary aggregates through the regulation of credit and the
flow of capital into Brazil, the implementation of a new exchange rate policy
which permits market participants (including the Central Bank) to set exchange
rates for the REAL and the implementation of certain fiscal measures.
In the beginning of 1995, in an effort to control the burgeoning rate of
economic activity which followed the sharp decline in inflation, the Federal
Government took several measures to control monetary growth, including strict
credit control and a significant increase in real interest rates. In the third
quarter of 1995 the economy returned to a level of sustainable economic growth
and credit control was partially released while interest rates began to fall.
Finally, in order to consolidate the Real Plan the Federal Government has
introduced a series of proposals to reform the Constitution that will provide
the structural changes necessary for long-term economic stability.
The five "economic order" amendments proposed by the government have been
approved by Congress and are now awaiting implementing regulatory legislation.
These amendments eliminate the Federal Government's monopoly in the areas of
telecommunications, distribution of natural gas, oil and coastal and fluvial
shipping and change the definition of what constitutes a Brazilian company to
any company registered in Brazil. The extension of the ESF until June 1997 was
also approved early in 1996. The social security reform and the administrative
reform are presently being considered for approval by Congress.
The Federal Government has stated that it intends to propose several other
amendments to Brazilian legislation to further consolidate the Real Plan.
EFFECTS OF INFLATION. Brazil had for many years experienced high and
generally unpredictable rates of inflation and steady devaluation of its
currency relative to the U.S. dollar. The following table sets forth Brazilian
inflation as measured by the IGPM Index and the devaluation of Brazilian
currency against the U.S. dollar for the periods shown:
<TABLE>
<CAPTION>
NINE MONTHS
TWELVE MONTHS ENDED DECEMBER 31, ENDED
---------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996
--------- --------- ----- ----- -----------------
<S> <C> <C> <C> <C> <C>
Inflation (IGPM).............................................. 1,175% 2,567% 870% 15% 8.19%
Devaluation................................................... 1,059% 2,533% 613% 15% 5.01%
</TABLE>
As a result of the Real Plan, the rate of inflation and the rate of
devaluation have been reduced considerably since July 1, 1994 without the price,
usage or asset freezing mechanisms previously utilized in prior stabilization
programs. As measured by the IGPM Index, the rate of inflation for the second
six months of 1994 was 38%, as compared to 763% for the first six months of
1994. The sharp decline of inflation during the second half of 1994 contributed
to a considerable recovery of domestic demand and coincided with a significant
acceleration of the growth rate of the Brazilian economy. The twelve-month GDP
growth rate increased to 7.7% in the second quarter of 1995 from 4.1% in the
second quarter of 1994. As a result, the trade balance deteriorated and
government was forced to implement deflationary measures which reduced GDP
growth to 4.2% in the fourth quarter of 1995. For the year ended December 31,
1995, the rate of inflation was 15%, and in the first nine months of 1996, the
rate of inflation was 8.19%.
B-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES TO ANY PERSON OR BY
ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information........................... 5
Prospectus Summary.............................. 6
Risk Factors.................................... 18
The Exchange Offer.............................. 28
Exchange Rate Data.............................. 37
The Company..................................... 38
Capitalization.................................. 40
Selected Consolidated Financial Data............ 41
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 43
Business........................................ 49
Pay Television Industry......................... 61
Management...................................... 63
Certain Transactions............................ 68
Principal Stockholders.......................... 70
Description of Exchange Notes................... 72
Tax Considerations.............................. 107
Plan of Distribution............................ 110
Legal Matters................................... 111
Experts......................................... 111
Index to Financial Statements................... F-1
Annex A: Glossary............................... A-1
Annex B: The Federative Republic of Brazil...... B-1
</TABLE>
------------------------
TV FILME, INC.
---------------------
PROSPECTUS
---------------------
OFFER TO EXCHANGE $140,000,000 OF ITS 12 7/8% SENIOR NOTES DUE 2004 WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT FOR $140,000,000 OF ITS OUTSTANDING
12 7/8% SENIOR NOTES DUE 2004
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), Article VII of TV Filme's Certificate of Incorporation eliminates
in certain circumstances the liability of directors of TV Filme for monetary
damages for breach of their fiduciary duty as directors. This provision does not
eliminate the liability of a director (i) for breach of the director's duty of
loyalty to the Company or its stockholders; (ii) for acts or omissions by the
director not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) for willful or negligent declaration of an unlawful
dividend, stock purchase or redemption; or (iv) for transactions from which the
director derived an improper personal benefit. Such limitation of liability does
not affect the availability of equitable remedies such as injunctive relief or
rescission.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation except that no indemnification may be made in
respect of any claim, issue, or matter as to which such person shall have been
adjudged to be liable to the corporation, unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director,
officer, employee, or agent of a corporation has been successful in the defense
of any action, suit, or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145 of
the DGCL shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and empowers the corporation to purchase and
maintain insurance on behalf of any person acting in any of the capacities set
forth in the second preceding paragraph against any liability asserted against
him or incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145 of the DGCL.
TV Filme's By-laws require TV Filme, under certain circumstances, to
indemnify any person who is, was or agreed to become a director or officer
against expenses, liability and loss actually and reasonably incurred by him. TV
Filme's By-laws also provide that expenses incurred in connection with a civil,
criminal, administrative or investigative action, suit or proceeding, or threat
thereof, shall be paid by TV
II-1
<PAGE>
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS (CONTINUED)
Filme in advance of the final disposition of such action, suit or proceeding
upon receipt of any undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by TV Filme as authorized in the By-laws.
TV Filme has also agreed to indemnify its officers and directors pursuant to
indemnification agreements entered into with each such officer and director
against any and all expenses, losses, claims, damages and liabilities incurred
by each such officer and director for or as a result of actions taken or not
taken while each such officer or director was acting in his or her capacity as a
director or officer of TV Filme.
In addition, TV Filme has obtained directors' and officers' reimbursements
and liability insurance which insures against liabilities that directors and
officers of TV Filme may incur in such capacities. The risks covered by such
policies do not exclude liabilities under the Securities Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Certificate of Incorporation of TV Filme (incorporated herein by reference to Exhibit 3.1 to TV Filme's
Registration Statement on Form S-1, dated May 3, 1996, Registration No. 333-4512 ("TV Filme's S-1").
3.2 By-Laws of TV Filme (incorporated herein by reference to Exhibit 3.2 to TV Filme's S-1).
4.1 Indenture, dated as of December 20, 1996, between TV Filme and IBJ Schroder Bank & Trust Company, as
Trustee (including the form of the Notes and certain other exhibits).
4.2 Registration Rights Agreement, dated December 20, 1996, between TV Filme and Bear, Stearns & Co. Inc.,
BT Securities Corporation, J.P. Morgan Securities Inc. and Alex. Brown & Sons Incorporated.
4.3 Purchase Agreement, dated December 16, 1996, between TV Filme and Bear, Stearns & Co. Inc., BT
Securities Corporation, J.P. Morgan Securities Inc. and Alex. Brown & Sons Incorporated, as the Initial
Purchaser (including certain exhibits thereto).
4.4 Note, dated December 20, 1996, of ITSA to TV Filme.
4.5 Note Pledge Agreement, dated as of December 20, 1996, between TV Filme and IBJ Schroder Bank & Trust
Company, as Collateral Agent.
4.6 Collateral Pledge and Security Agreement, dated as of December 20, 1996, among ITSA, TV Filme and IBJ
Schroder Bank & Trust Company, as Collateral Agent.
4.7 Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme Brasilia Servicos de
Telecomunicacoes.
4.8 Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme Belem Servicos de
Telecomunicacoes.
4.9 Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme Goiania Servicos de
Telecomunicacoes.
*5.1 Opinion of Kelley Drye & Warren LLP regarding the legality of the Exchange Notes being registered.
*10.1 1996 Stock Option Plan.
10.2 Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.2 to TV Filme's S-1).
</TABLE>
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
<TABLE>
<C> <S>
*10.3 Stockholders Agreement, dated as of July 26, 1996, entered into by and among Warburg, Pincus, Tevecap,
Mrs. Maria Nise Studart Lins de Albuquerque, Mr. Hermano Studart Lins de Albequerque, Mr. Carlos Andre
Studart Lins de Albuquerque and Ms. Maria Veronica Studart Lins de Albuquerque.
*10.4 Registration Rights Agreement, dated as of July 26, 1996, entered into by and among Warburg, Pincus,
Tevecap, Mrs. Maria Nise Studart Lins de Albuquerque, Mr. Hermano Studart Lins de Albuquerque, Mr.
Carlos Andre Studart Lins de Albuquerque, Ms. Maria Veronica Studart Lins de Albuquerque, Joseph
Wallach, Donald Deely Pearson and TV Filme.
*10.5 Employment Agreement, dated as of July 26, 1996, entered into by and among TV Filme, ITSA and Mr.
Hermano Studart Lins de Albuquerque.
*10.6 Employment Agreement, dated as of July 26, 1996, entered into by and among TV Filme, ITSA and Mr. Carlos
Andre Studart Lins de Albuquerque.
*10.7 Employment Agreement, dated as of July 26, 1996, entered into by and between TV Filme and Mr. Aguirre.
*10.8 Warrant, dated as of July 24, 1996, issued by TV Filme to Warburg, Pincus.
*10.9 Warrant, dated as of July 24, 1996, issued by TV Filme to Tevecap.
*10.10 Warrant, dated as of July 24, 1996, issued by TV Filme to Joseph Wallach.
*10.11 Warrant, dated as of July 24, 1996, issued by TV Filme to Donald Deely Pearson.
*10.12 Programming License Agreement, dated as of June 27, 1996, entered into by and between TV Filme and
Tevecap.
*10.13 Master Operating Agreement, dated as of July 26, 1996, entered into by and among TV Filme, ITSA and TV
Filme Servicos de Telecomunicacoes Ltda.
*10.14 Articles of Association of TV Filme Servicos de Telecomunicacoes Ltda.
10.15 Form of Indemnification Agreement between TV Filme and the directors and officers parties thereto
(incorporated herein by reference to Exhibit 10.12 to TV Filme's S-1).
12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.
*21 Subsidiaries of TV Filme.
*23.1 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1 hereto).
*23.2 Consent of Tozzini, Freire, Teixeira e Silva Advogados.
23.3 Consent of Ernst & Young Auditores Independentes S.C., independent auditors.
24 Powers of Attorney (Appears on Page II-5).
25.1 Statement of Eligibility on Form T-1 of IBJ Schroder Bank & Trust Company, as Trustee.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement to be entered into by and between TV Filme and IBJ Schroder Bank &
Trust Company, as Exchange Agent.
</TABLE>
- ------------------------
* To be filed by amendment.
II-3
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
(b) SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES:
The Supplemental Financial Statement Schedules have been intentionally
omitted because they are either not required or the information has been
included in the Notes to the Consolidated Financial Statements included as part
of this Registration Statement.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on January 30, 1997.
TV FILME, INC.
By: /s/ HERMANO STUDART LINS DE ALBUQUERQUE
-----------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below hereby constitutes and appoints Hermano Studart Lins de Albuquerque and
Alvaro J. Aguirre, and each of them, as his true and lawful attorneys-in-fact
and agents for the undersigned, with full power of substitution and
resubstitution, for and in the name, place and stead of the undersigned (i) to
sign and file with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, any and all pre-effective and post-effective amendments
to this Registration Statement, together with all schedules and exhibits
thereto, (ii) to act on, sign and file any and all applications and other
documents in connection with this Registration Statement or any pre-effective or
post-effective amendments thereto, (iii) to act on and file any supplement to
any prospectus included in the Registration Statement or any pre-effective and
post-effective amendment, and (iv) generally to do all things and perform any
and all acts and things whatsoever requisite and necessary or desirable to
enable the registrant to comply with the provisions of the Securities Act of
1933, as amended, and all requirements of the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ HERMANO STUDART LINS DE Chief Executive Officer,
ALBUQUERQUE Secretary and Director
- ------------------------------ (Principal Executive January 30, 1997
Hermano Studart Lins de Officer)
Albuquerque
/s/ CARLOS ANDRE STUDART LINS President, Chief Operating
DE ALBUQUERQUE Officer, Treasurer and
- ------------------------------ Director January 30, 1997
Carlos Andre Studart Lins de
Albuquerque
/s/ ALVARO J. AGUIRRE Chief Financial Officer
- ------------------------------ (Principal Financial and January 30, 1997
Alvaro J. Aguirre Accounting Officer) and
Director
/s/ DOUGLAS M. KARP
- ------------------------------ Chairman of the Board and January 30, 1997
Douglas M. Karp Director
/s/ GARY D. NUSBAUM
- ------------------------------ Director January 30, 1997
Gary D. Nusbaum
II-5
<PAGE>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ JOSE AUGUSTO PINTO
MOREIRA
- ------------------------------ Director January 30, 1997
Jose Augusto Pinto Moreira
/s/ CLAUDIO DASCAL
- ------------------------------ Director January 30, 1997
Claudio Dascal
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ---------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
3.1 Certificate of Incorporation of TV Filme (incorporated herein by reference to Exhibit 3.1 to TV
Filme's Registration Statement on Form S-1, dated May 3, 1996, Registration No. 333-4512 ("TV
Filme's S-1").
3.2 By-Laws of TV Filme (incorporated herein by reference to Exhibit 3.2 to TV Filme's S-1).
4.1 Indenture, dated as of December 20, 1996, between TV Filme and IBJ Schroder Bank & Trust Company,
as Trustee (including the form of the Notes and certain other exhibits).
4.2 Registration Rights Agreement, dated December 20, 1996, between TV Filme and Bear, Stearns & Co.
Inc., BT Securities Corporation, J.P. Morgan Securities Inc. and Alex. Brown & Sons Incorporated.
4.3 Purchase Agreement, dated December 16, 1996, between TV Filme and Bear, Stearns & Co. Inc., BT
Securities Corporation, J.P. Morgan Securities Inc. and Alex. Brown & Sons Incorporated, as the
Initial Purchaser (including certain exhibits thereto).
4.4 Note, dated December 20, 1996, of ITSA to TV Filme.
4.5 Note Pledge Agreement, dated as of December 20, 1996, between TV Filme and IBJ Schroder Bank &
Trust Company, as Collateral Agent.
4.6 Collateral Pledge and Security Agreement, dated as of December 20, 1996, among ITSA, TV Filme and
IBJ Schroder Bank & Trust Company, as Collateral Agent.
4.7 Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme Brasilia Servicos de
Telecomunicacoes.
4.8 Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme Belem Servicos de
Telecomunicacoes.
4.9 Subsidiary Guarantee, dated as of December 20, 1996, made by TV Filme Goiania Servicos de
Telecomunicacoes.
*5.1 Opinion of Kelley Drye & Warren LLP regarding the legality of the Exchange Notes being
registered.
*10.1 1996 Stock Option Plan.
10.2 Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.2 to TV Filme's
S-1).
*10.3 Stockholders Agreement, dated as of July 26, 1996, entered into by and among Warburg, Pincus,
Tevecap, Mrs. Maria Nise Studart Lins de Albuquerque, Mr. Hermano Studart Lins de Albequerque,
Mr. Carlos Andre Studart Lins de Albuquerque and Ms. Maria Veronica Studart Lins de Albuquerque.
*10.4 Registration Rights Agreement, dated as of July 26, 1996, entered into by and among Warburg,
Pincus, Tevecap, Mrs. Maria Nise Studart Lins de Albuquerque, Mr. Hermano Studart Lins de
Albuquerque, Mr. Carlos Andre Studart Lins de Albuquerque, Ms. Maria Veronica Studart Lins de
Albuquerque, Joseph Wallach, Donald Deely Pearson and TV Filme.
*10.5 Employment Agreement, dated as of July 26, 1996, entered into by and among TV Filme, ITSA and Mr.
Hermano Studart Lins de Albuquerque.
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
*10.6 Employment Agreement, dated as of July 26, 1996, entered into by and among TV Filme, ITSA and Mr.
Carlos Andre Studart Lins de Albuquerque.
*10.7 Employment Agreement, dated as of July 26, 1996, entered into by and between TV Filme and Mr.
Aguirre.
*10.8 Warrant, dated as of July 24, 1996, issued by TV Filme to Warburg, Pincus.
*10.9 Warrant, dated as of July 24, 1996, issued by TV Filme to Tevecap.
*10.10 Warrant, dated as of July 24, 1996, issued by TV Filme to Joseph Wallach.
*10.11 Warrant, dated as of July 24, 1996, issued by TV Filme to Donald Deely Pearson.
*10.12 Programming License Agreement, dated as of June 27, 1996, entered into by and between TV Filme
and Tevecap.
*10.13 Master Operating Agreement, dated as of July 26, 1996, entered into by and among TV Filme, ITSA
and TV Filme Servicos de Telecomunicacoes Ltda.
*10.14 Articles of Association of TV Filme Servicos de Telecomunicacoes Ltda.
10.15 Form of Indemnification Agreement between TV Filme and the directors and officers parties thereto
(incorporated herein by reference to Exhibit 10.12 to TV Filme's S-1).
12.1 Statement re Computation of Ratio of Earnings to Fixed Charges.
*21 Subsidiaries of TV Filme.
*23.1 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1 hereto).
*23.2 Consent of Tozzini, Freire, Teixeira e Silva Advogados.
23.3 Consent of Ernst & Young Auditores Independentes S.C., independent auditors.
24 Powers of Attorney (Appears on Page II-5).
25.1 Statement of Eligibility on Form T-1 of IBJ Schroder Bank & Trust Company, as Trustee.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Exchange Agent Agreement to be entered into by and between TV Filme and IBJ Schroder Bank
& Trust Company, as Exchange Agent.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 4.1
================================================================================
TV FILME, INC.
12 7/8% SENIOR NOTES DUE 2004
-----------------
INDENTURE
Dated as of December 20, 1996
-----------------
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
----------- -----------------
310 (a)(1)....................................................... 7.10
(a)(2)....................................................... 7.10
(a)(3)....................................................... N.A.
(a)(4)....................................................... N.A.
(a)(5)....................................................... 7.10
(b).......................................................... 7.3,7.10
(c).......................................................... N.A.
311 (a).......................................................... 7.11
(b).......................................................... 7.11
(c).......................................................... N.A.
312 (a).......................................................... 2.5
(b).......................................................... 11.3
(c).......................................................... 11.3
313 (a).......................................................... 7.6
(b)(1)....................................................... N.A.
(b)(2)....................................................... 7.6,7.7
(c).......................................................... 7.6,11.2
(d).......................................................... 7.6
314 (a).......................................................... 4.3,11.5
(b).......................................................... N.A.
(c)(1)....................................................... 11.4
(c)(2)....................................................... 11.4
(c)(3)....................................................... N.A.
(d).......................................................... N.A.
(e).......................................................... 11.5
(f).......................................................... N.A.
315 (a).......................................................... 7.1(b)
(b).......................................................... 7.5, 11.2
(c).......................................................... 7.1(a)
(d).......................................................... 7.1(c)
(e).......................................................... 6.11
316 (a)(last sentence)........................................... 2.9
(a)(1)(A).................................................... 6.5
(a)(1)(B).................................................... 6.4
(a)(2)....................................................... N.A.
(b).......................................................... 6.7
(c).......................................................... 9.4
317 (a)(1)....................................................... 6.8
(a)(2)....................................................... 6.9
(b).......................................................... 2.4
318 (a).......................................................... 11.1
(b).......................................................... N.A.
(c).......................................................... 11.1
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE>
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE................................ 1
Section 1.1. Definitions......................................... 1
Section 1.2. Other Definitions................................... 16
Section 1.3. Incorporation by Reference of Trust Indenture Act... 17
Section 1.4. Rules of Construction............................... 17
ARTICLE 2
THE NOTES................................. 18
Section 2.1. Form and Dating..................................... 18
Section 2.2. Execution and Authentication........................ 19
Section 2.3. Trustee, Registrar and Paying Agent................. 20
Section 2.4. Paying Agent to Hold Money in Trust................. 21
Section 2.5. Holder Lists........................................ 21
Section 2.6. Transfer and Exchange............................... 21
Section 2.7. Certificated Notes.................................. 27
Section 2.8. Replacement Notes................................... 28
Section 2.9. Outstanding Notes................................... 28
Section 2.10. Treasury Notes...................................... 29
Section 2.11. Temporary Notes..................................... 29
Section 2.12. Cancellation........................................ 29
Section 2.13. Defaulted Interest.................................. 29
Section 2.14. Persons Deemed Owners............................... 30
Section 2.15. CUSIP, CINS and ISIN Numbers........................ 30
ARTICLE 3
REDEMPTION AND PREPAYMENT......................... 30
Section 3.1. Notices to Trustee.................................. 30
Section 3.2. Selection of Notes to Be Redeemed................... 30
Section 3.3. Notice of Redemption................................ 31
Section 3.4. Effect of Notice of Redemption...................... 31
Section 3.5. Deposit of Redemption Price......................... 32
Section 3.6. Notes Redeemed in Part.............................. 32
Section 3.7. Optional Redemption................................. 32
Section 3.8. Mandatory Redemption................................ 33
ARTICLE 4
COVENANTS................................ 33
Section 4.1. Payment of Notes.................................... 33
Section 4.2. Maintenance of Office or Agency..................... 33
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Section 4.3. Provisions of Reports and Other Information......... 34
Section 4.4. Compliance Certificate.............................. 34
Section 4.5. Taxes............................................... 35
Section 4.6. Stay, Extension and Usury Laws...................... 35
Section 4.7. Limitation on Restricted Payments................... 35
Section 4.8. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries................. 37
Section 4.9. Limitation on Indebtedness And Issuance of
Disqualified Stock ................................. 38
Section 4.10. Limitation on Asset Sales........................... 40
Section 4.11. Limitation on Transactions with Affiliates.......... 42
Section 4.12. Limitation on Liens................................. 42
Section 4.13. Limitations on Issuance of Guarantees of
Indebtedness ....................................... 43
Section 4.14. Offer to Repurchase Upon Change of Control.......... 43
Section 4.15. Corporate Existence................................. 45
Section 4.16. Limitation on Asset Swaps........................... 45
Section 4.17. Limitation on Sale Leaseback Transactions........... 46
Section 4.18. Limitation on Business Activities................... 46
Section 4.19. Pledged Securities.................................. 46
Section 4.20. Pledged Intercompany Note........................... 46
Section 4.21. Subsidiary Guarantees............................... 47
ARTICLE 5
SUCCESSORS............................... 47
Section 5.1. Merger, Consolidation, or Sale of Assets............ 47
Section 5.2. Successor Company Substituted....................... 49
ARTICLE 6
DEFAULTS AND REMEDIES ......................... 49
Section 6.1. Events of Default................................... 49
Section 6.2. Acceleration........................................ 51
Section 6.3. Other Remedies...................................... 51
Section 6.4. Waiver of Past Defaults............................. 51
Section 6.5. Control by Majority................................. 52
Section 6.6. Limitation on Suits................................. 52
Section 6.7. Rights of Holders of Notes to Receive Payment....... 52
Section 6.8. Collection Suit by Trustee.......................... 52
Section 6.9. Trustee May File Proofs of Claim.................... 53
Section 6.10. Priorities.......................................... 53
Section 6.11. Undertaking for Costs............................... 53
ARTICLE 7
TRUSTEE ................................ 54
Section 7.1. Duties of Trustee................................... 54
Section 7.2. Rights of Trustee................................... 55
Section 7.3. Individual Rights of Trustee........................ 55
Section 7.4. Trustee's Disclaimer................................ 56
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Section 7.5. Notice of Defaults.................................. 56
Section 7.6. Reports by Trustee to Holders of the Notes.......... 56
Section 7.7. Compensation and Indemnity.......................... 56
Section 7.8. Replacement of Trustee.............................. 57
Section 7.9. Successor Trustee by Merger, etc. .................. 58
Section 7.10. Eligibility; Disqualification....................... 58
Section 7.11. Preferential Collection of Claims Against Company... 58
ARTICLE 8
DEFEASANCE AND DISCHARGE........................ 59
Section 8.1. Option to Effect Legal Defeasance or Covenant
Defeasance ......................................... 59
Section 8.2. Legal Defeasance.................................... 59
Section 8.3. Covenant Defeasance................................. 59
Section 8.4. Conditions to Legal or Covenant Defeasance.......... 60
Section 8.5. Discharge........................................... 61
Section 8.6. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions....... 61
Section 8.7. Repayment to Company................................ 62
Section 8.8. Reinstatement....................................... 62
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER ................... 62
Section 9.1. Without Consent of Holders of Notes................. 62
Section 9.2. With Consent of Holders of Notes.................... 63
Section 9.3. Compliance with Trust Indenture Act................. 64
Section 9.4. Revocation and Effect of Consents................... 64
Section 9.5. Notation on or Exchange of Notes.................... 65
Section 9.6. Trustee to Sign Amendments, etc. ................... 65
Section 9.7. Payments for Consent................................ 66
ARTICLE 10
COLLATERAL AND SECURITY........................ 66
Section 10.1. Pledge Agreement and Note Pledge Agreement.......... 66
Section 10.2. Recording and Opinions.............................. 66
Section 10.3. Release of Collateral............................... 67
Section 10.4. Certificates of the Company......................... 68
Section 10.5. Authorization of Actions to be Taken by the
Trustee Under the Pledge Agreement and Note
Pledge Agreement.................................... 68
Section 10.6. Authorization of Receipt of Funds by the Trustee
Under the .......................................... 68
Section 10.7. Termination of Security Interest.................... 68
ARTICLE 11
MISCELLANEOUS............................. 69
Section 11.1. Trust Indenture Act Controls........................ 69
Section 11.2. Notices............................................. 69
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Section 11.3. Communication by Holders of Notes with Other
Holders of Notes ................................... 70
Section 11.4. Certificate and Opinion as to Conditions Precedent.. 70
Section 11.5. Statements Required in Certificate or Opinion....... 70
Section 11.6. Rules by Trustee and Agents......................... 71
Section 11.7. No Personal Liability of Directors, Officers,
Employees and Others................................ 71
Section 11.8. Governing Law....................................... 71
Section 11.9. No Adverse Interpretation of Other Agreements....... 71
Section 11.10. Successors.......................................... 71
Section 11.11. Severability........................................ 72
Section 11.12. Originals........................................... 72
Section 11.13. Table of Contents, Headings, etc. .................. 72
Section 11.14. Counterparts........................................ 72
Section 11.15. Agent for Service; Submission to Jurisdiction;
Waiver of Immunities................................ 72
Section 11.16. Currency of Account; Conversion of Currency;
Foreign Exchange Restrictions....................... 73
ANNEX
Annex I EXISTING INDEBTEDNESS....................................... I-1
EXHIBITS
Exhibit A FORM OF NOTE............................................... A-1
Exhibit B CERTIFICATE OF TRANSFEROR.................................. B-1
Exhibit C FORM OF INTERCOMPANY NOTE.................................. C-1
Exhibit D FORM OF SUBSIDIARY GUARANTEE............................... D-1
Exhibit E FORM OF COLLATERAL PLEDGE AND SECURITY AGREEMENT........... E-1
Exhibit F FORM OF NOTE PLEDGE AGREEMENT.............................. F-1
Exhibit G FORM OF GUARANTEE.......................................... G-1
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This INDENTURE, dated as of December 20, 1996, is by and between TV
Filme, Inc., a Delaware corporation (the "Company"), and IBJ Schroder Bank &
Trust Company, as trustee (the "Trustee").
The parties listed above agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 12 7/8% Senior
Notes due 2004 (the "Initial Notes") and the 12 7/8% Senior Notes due 2004 (the
"Exchange Notes" and, together with the Initial Notes, the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, will mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person will be
deemed to be control and provided, further, that TV Filme Servicos will not be
deemed to be an Affiliate of the Company or any of its other Restricted
Subsidiaries for the purposes of Section 4.11.
"Agent" means any Registrar or Paying Agent.
"Applicable Law", except as the context may otherwise require, means all
applicable laws, rules, regulations, ordinances, judgments, decrees,
injunctions, writs and orders of any court or governmental agency or authority
and rules, regulations, orders, licenses and permits of any United States
federal, state, municipal, regional, or other governmental body,
instrumentality, agency or authority.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback or similar arrangement) other than sales or dispositions in the
ordinary course of business consistent with past practices; and (ii) the
issuance or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of the Company's Restricted Subsidiaries. Notwithstanding the
foregoing, none of the following will be deemed an Asset Sale: (i) a transfer of
assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary
to the Company or to another Restricted Subsidiary; (ii) an issuance of Equity
Interests by a Restricted Subsidiary to the Company or to another Restricted
Subsidiary; (iii) a Restricted Payment that is permitted under Section 4.7; (iv)
dispositions in any fiscal year with Net Proceeds in the aggregate of $1,000,000
(or the equivalent thereof at time of determination) or less; (v) an Asset Swap
that is permitted under Section 4.16; (vi) a contribution to an Unrestricted
Subsidiary which complies with Section 4.7; (vii) a sale and leaseback
<PAGE>
which complies with Section 4.17; (viii) any liquidation of any Cash Equivalent;
and (ix) the issuance or sale of Equity Interests of a Restricted Subsidiary of
the Company to the Company or one of its other Restricted Subsidiaries.
"Asset Swap" means the execution of a definitive agreement, subject only
to approvals of the Ministry of Communications or such other applicable
Brazilian governmental authority or agency and other customary closing
conditions, that the Company in good faith believes will be satisfied, for a
substantially concurrent purchase and sale, or exchange, of Telecommunications
Assets between the Company or any of its Restricted Subsidiaries and another
Person or group of Persons who are Affiliates of one another; provided that any
amendment to or waiver of any closing condition which individually or in the
aggregate is material to the Asset Swap will be deemed to be a new Asset Swap.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bank Credit Agreement" means loans or advances made by banks, trust
companies or other institutions, which are principally engaged in the business
of lending money to businesses to the Company or a Restricted Subsidiary under
credit facilities, loan agreements or similar agreements.
"Bankruptcy Law" means Title 11, United States Code, or Decree Law No.
7661 of June 21, 1945 as each may be amended from time to time, or any similar
federal, state or foreign law relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization, "concordata" or relief of debtors.
"Business Day" means any day other than a Saturday, Sunday, public holiday
or day on which banking institutions in New York City (or, with respect to any
payments or transfers to be made by the Trustee or any Agent, as applicable, in
the city where such Trustee or Agent is located) are authorized or obligated by
law to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than twelve months from
the date of acquisition, (ii) certificates of deposit and eurodollar time
deposits with maturities of twelve months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any Brazilian regulated bank or member bank of the
U.S. Federal Reserve System having capital and surplus in excess of $500,000,000
(or equivalent thereof at the time of determination) (or a branch of any such
bank), (iii) repurchase
2
<PAGE>
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (i) and (ii) above entered into with any
financial institution meeting the qualifications specified in clause (ii) above
and (iv) commercial paper having the rating of at least P-1 from Moody's or at
least A-1 from S&P and in each case maturing within 180 days after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d) (3) of the Exchange
Act) other than Warburg, Pincus, TVA Sistema or members of the Lins Family, (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation, but excluding any foreclosure on the
Pledged Securities by the Trustee) the result of which is that any "person" (as
defined above), other than Warburg, Pincus, TVA Sistema or members of the Lins
Family, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of (a) more than
35% of the voting stock of the Company and (b) more of the voting stock of the
Company than is at the time "beneficially owned" (as defined above) by Warburg,
Pincus, TVA Sistema and members of the Lins Family in the aggregate or (iv) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such date, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on such automated quotation system but
the issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange
Act) and the principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market (as defined in
Rule 902(a) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange, or, if such shares are
not listed or admitted to trading on any national securities exchange or quoted
on such automated quotation system and the issuer and principal securities
exchange do not meet such requirements, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm that is selected from time to time by the Company for that
purpose and is reasonably acceptable to the Trustee.
"Collateral" means the Pledged Securities, the Intercompany Note and the
proceeds thereof.
"Commission" or "SEC" means the Securities and Exchange Commission, and
any successor thereto.
"Common Equity Interests" means (i) with respect to a person which is a
corporation, any and all shares, interests or other participations in, and other
equivalents (however designated and whether voting or nonvoting) of such
Person's Common Stock and includes, without limitation, all series and classes
of such Common Stock and (ii) with respect to a Person which is not a
corporation, Equity Interests which have characteristics similar in all material
respects to those of Common Stock of a corporation.
3
<PAGE>
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, (iii) Consolidated Interest Expense and
(iv) depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its Restricted Subsidiaries for such
period, and other non-cash charges (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a prior
period), minus (v) non-cash items increasing consolidated revenues in
determining such Consolidated Net Income for such period (excluding any items
which represent the reversal of any accrual of, or cash reserves for,
anticipated cash charges in any prior period and excluding the recognition of
deferred sign-on or hook-up fee revenue), in each case, on a consolidated basis
and determined in accordance with GAAP and (vi) to the extent included in
computing Consolidated Net Income, an amount equal to any extraordinary gain.
Notwithstanding the foregoing, the amounts referred to in clauses (i) through
(vi) of the preceding sentence with respect to Restricted Subsidiaries will only
be added to (deducted from) Consolidated Net Income to compute Consolidated Cash
Flow to the extent (and in the same proportion) that the Net Income of such
Restricted Subsidiary was included in calculating the Consolidated Net Income of
such Person and only if a corresponding amount would be permitted at the date of
determination to be paid as a dividend to the Company by such Restricted
Subsidiary without direct or indirect restriction pursuant to the terms of its
charter and by-laws and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the
aggregate liquidation value of all Disqualified Stock of such Person, in each
case, determined on a consolidated basis in accordance with GAAP, less the Fair
Market Value of the Pledged Securities then held by the Trustee as determined in
good faith by the Board of Directors of the Company.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
interest payments in respect of Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (if such
Guarantee or Lien is called upon and to the extent such interest payments are
satisfied under or by means of such Lien), commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, in each case, on a consolidated basis
and in accordance with GAAP.
4
<PAGE>
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting will be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person as to which Consolidated Net
Income is being calculated or a Restricted Subsidiary thereof, (ii) the Net
Income of any Restricted Subsidiary will be excluded to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary of such Net Income would not be permitted at the date of
determination directly or indirectly, pursuant to the terms of its charter and
by-laws and all agreements, instruments, judgments, decrees, orders, statutes,
rules or governmental regulations applicable to such Restricted Subsidiary or
its stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition will
be excluded, (iv) the cumulative effect of a change in accounting principles
will be excluded and (v) the Net Income of any Unrestricted Subsidiary will be
excluded, except to the extent of the amount of dividends or distributions paid
in cash by such Unrestricted Subsidiary to the Company or its Restricted
Subsidiaries.
"Consolidated Net Worth" means, (a) with respect to a partnership as of
any date, the sum of the common and preferred partnership interests of such
Person and its consolidated Restricted Subsidiaries as of such date, as
determined on a consolidated basis in accordance with GAAP, and (b) with respect
to any other Person as of any date, the sum of (i) the consolidated equity of
the common equity holders of such Person and its consolidated Restricted
Subsidiaries as of such date plus (ii) the respective amounts reported on such
Person's balance sheet as of such date with respect to any series of preferred
equity; provided that the preferred partnership interests or the preferred
equity, as the case may be, is not (A) Disqualified Stock and (B) by its terms
entitled to the payment of dividends or other distributions, unless such
dividends or other distributions may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
partnership interests or preferred equity, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Restricted Subsidiary of such
Person, (y) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Restricted Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Director" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board on
the date of this Indenture, (ii) was nominated for election or elected to such
Board by Warburg, Pincus, TVA Sistema or members of the Lins Family or (iii) was
nominated for election or elected to such Board with the approval of two-thirds
of the following members of such Board: (a) the members of such Board who are
described in clause (i) or (ii) of this definition and (b) members of such Board
previously nominated for election or elected to such Board as described in this
clause (iii).
"Corporate Trust Office of the Trustee" will be at the address of the
Trustee specified in Section 11.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator, custodian, "sindico," "comissario" or similar official under any
Bankruptcy Law.
5
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"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Initial Note bearing the restricted
securities legend set forth in Section 2.6(f) and which is held by an IAI in
accordance with Section 2.1(c).
"Depository" means, The Depository Trust Company, until a successor will
have been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" will mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Notes" means the Exchange Notes to be issued by the Company,
upon the expiration of the Exchange Offer pursuant to the terms of the
Registration Rights Agreement or (ii) following the registration thereof
pursuant to an effective Shelf Registration Statement pursuant to the terms of
the Registration Rights Agreement, containing terms identical in all material
respects to the Initial Notes (except that (a) the transfer restrictions thereon
will be eliminated (other than as may be imposed by state securities laws) and
(b) there will be no provision for the payment of Liquidated Damages).
"Exchange Offer" means, subject to the terms of the Registration Rights
Agreement, the offer by the Company to the Holders of Initial Notes of the
opportunity to exchange their Initial Notes for Exchange Notes pursuant to a
registration statement filed with the Commission.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the date of this Indenture listed on
Annex I to this Indenture, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy; provided that if such value exceeds $1,000,000 (or
equivalent thereof at the time of determination), such determination will be
made in good faith by the Board of Directors of the Company.
"GAAP" means generally accepted accounting principles in the United States
of America set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on the
date of this Indenture.
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"Government Securities" means direct obligations of, or obligations fully
guaranteed by, or participations in pools consisting solely of obligations of or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means any Restricted Subsidiary of the Company that has
executed and delivered to the Trustee a Subsidiary Guarantee, provided that such
Subsidiary Guarantee remains in full force and effect.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest or currency exchange rate swap agreements,
interest or currency exchange rate cap agreements and interest or currency
exchange rate collar agreements and (ii) other agreements or arrangements, in
any case, designed to protect such Person against fluctuations in interest or
currency exchange rates.
"Holder" or "Securityholder" means a Person in whose name a Note is
registered on the Register.
"IAI" means an institutional "accredited investor" as described in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any liability, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), whether as a cash advance, bill, overdraft
or money market facility loan, or (b) evidenced by a note, debenture or similar
instrument or, to the extent drawn upon and not reimbursed, letters of credit or
other similar liability evidenced by book-entry mechanism, or (c) for the
payment of money relating to a Capital Lease Obligation or other obligation
relating to the deferred purchase price of property; provided, however, that
Indebtedness will not include trade payables arising in the ordinary course of
business consistent with past practice, or (d) in respect of any Hedging
Obligation; (ii) any liability of others of the kind described in the preceding
clause (i) which the Person has Guaranteed or which is otherwise its legal
liability; and (iii) any obligation secured by a Lien to which the property or
assets of such Person are subject, whether or not the obligations secured
thereby will have been assumed by or will otherwise be such Person's legal
liability; provided, however, for purposes of this clause (iii), if such
obligation is not assumed by such Person, or not otherwise the legal liability
of such Person, such obligation will only be included in Indebtedness to the
extent of the Fair Market Value of such property or assets.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Initial Notes" means the 12 7/8% Senior Notes due 2004, issued under this
Indenture on or about the date of this Indenture.
"Initial Purchasers" means Bear, Stearns & Co. Inc., BT Securities
Corporation, J.P. Morgan Securities Inc. and Alex. Brown & Sons Incorporated.
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"Intercompany Note" means the note, dated the date of this Indenture, made
by ITSA in favor of the Company, in the form of Exhibit C hereto.
"Interest Payment Date" means each of June 15 and December 15.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business), purchases or other acquisitions (for consideration) of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP; provided that an acquisition of assets, Equity Interests or other
securities by the Company or any of its Restricted Subsidiaries for
consideration consisting of common equity securities of the Company will not be
deemed to be an Investment.
"ITSA" means ITSA-Intercontinental Telecomunicacoes Ltda., a Brazilian
limited liability company.
"Leverage Ratio" means, with respect to any Person as of any date of
determination (the "Calculation Date"), the ratio of (i) the Consolidated
Indebtedness of such Person as of the Calculation Date to (ii) the result of the
multiplication of the Consolidated Cash Flow of such Person for the most recent
full fiscal quarter ending immediately prior to the Calculation Date for which
internal financial statements are available times four. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings with respect to
which the related commitment remains outstanding) or issues or redeems
Disqualified Stock subsequent to the commencement of the period for which the
Leverage Ratio is being calculated but prior to the Calculation Date then the
Leverage Ratio will be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of Disqualified Stock, as if the same had occurred at the beginning
of the applicable period. For purposes of making the computation referred to
above, Investments, acquisitions, dispositions which constitute all or
substantially all of an operating unit of a business and discontinued operations
(as determined in accordance with GAAP) that have been made by the Company or
any of its Restricted Subsidiaries, including all mergers, consolidations and
dispositions, during the quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date will be calculated on a
pro forma basis assuming that all such Investments, acquisitions, dispositions,
discontinued operations, mergers, consolidations (and the reduction of any
associated fixed charge obligations and the change in Consolidated Cash Flow
resulting therefrom) has occurred on the first day of such reference period and
without regard to clause (iii) of the definition of Consolidated Net Income. If
since the beginning of such reference period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) will have made any
Investment, acquisition, disposition which constitutes all or substantially all
of an operating unit of a business, discontinued operation, merger or
consolidation that would have required adjustment pursuant to this definition,
the Leverage Ratio will be calculated giving pro forma effect thereto for such
reference period as if such Investment, acquisition, disposition, discontinued
operation, merger or consolidation had occurred at the beginning of such
reference period and without regard to clause (iii) of the definition of
Consolidated Net Income. For purposes of this definition, whenever pro forma
effect is to be given to a transaction, the pro forma calculations will be made
in good faith by a responsible financial or accounting officer of the Company.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, and any
lease in the nature thereof).
"Lins Family" means Mrs. Maria Nise Studart Lins de Albuquerque, Mr.
Hermano Studart Lins de Albuquerque, Mr. Carlos Andre Studart Lins de
Albuquerque and Ms. Maria Veronica Studart Lins de Albuquerque and any lineal
descendants of any of them.
"Liquidated Damages" means liquidated damages as defined in Section 5 of
the Registration Rights Agreement.
"Material Telecommunications License" means one or more authorizations
issued by the Ministry of Communications or such other applicable Brazilian
governmental authority or agency used or useful in the operation of a
Telecommunications Business that individually or collectively have a Fair Market
Value exceeding $1,000,000 (or the equivalent thereof at time of determination).
"Moody's" means Moody's Investors Service, Inc., or any successor to its
rating business.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however, (i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any Asset
Sales (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (b) the disposition of any securities by such Person
or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary
or nonrecurring gain (but not loss), together with any related provision for
taxes on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), any relocation expenses
incurred as a result thereof, any taxes paid or payable by the Company or any of
its Restricted Subsidiaries as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
required to be paid to any Person (other than the Company, its Restricted
Subsidiaries or its Affiliates) having a Lien on the assets subject to the Asset
Sale, amounts required to be paid to any Person (other that the Company or any
Restricted Subsidiary) owning a beneficial interest in the assets subject to the
Asset Sale, and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP; provided, however, that if
such proceeds are received by any such Restricted Subsidiary, all of the Equity
Interests of which are not owned directly or indirectly by the Company, as a
result of an Asset Sale by it, Net Proceeds for purposes of Section 4.10 will
mean the proportion of such proceeds (as so adjusted) which is the same as the
proportion of such Equity Interests owned directly or indirectly by the Company.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
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otherwise), or (c) constitutes the lender, (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity
and (iii) as to which the lenders have expressly waived any recourse which they
may have, in law, equity or otherwise, whether based on misrepresentation,
control, ownership or otherwise, to the Company or any of its Restricted
Subsidiaries, including, without limitation, a waiver of the benefits of the
provisions of Section 1111(b) of Title 11, United States Code, as amended.
"Note Custodian" means the custodian with respect to a Regulation S Global
Note or a Restricted Global Note (as appointed by the Depository), or any
successor person thereto and shall initially be the Trustee.
"Note Pledge Agreement" means the Note Pledge Agreement, dated as of the
date of this Indenture, by and between the Trustee and the Company, governing
the pledge of the Intercompany Note, in the form of Exhibit F hereto.
"Notes" means the Initial Notes and the Exchange Notes, treated as a
single class.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offer" means a Change of Control Offer or Net Proceeds Offer, as the case
may be.
"Offer Purchase Date" means a Change of Control Purchase Date or Net
Proceeds Purchase Date, as the case may be.
"Officer" means, with respect to any Person, the chief executive officer,
the president, the chief operating officer, the chief financial officer, the
chief accounting officer, the treasurer, any assistant treasurer, the
controller, the secretary, any assistant secretary or any vice-president of such
Person.
"Officers' Certificate" means a certificate signed on behalf of a Person
by two Officers of such Person, one of whom must be the principal executive
officer, the principal financial officer or the principal accounting officer of
such Person, that meets the requirements set forth in this Indenture.
"Operating Agreement" means the Master Operating Agreement dated July 24,
1996, between ITSA and TV Filme Servicos.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.5 hereof.
The counsel may be counsel to the Company, any Subsidiary of the Company or the
Trustee.
"Permitted Investments" means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company which is a Guarantor; (ii) any Investment
in Cash Equivalents; (iii) any Investment by the Company or any of its
Restricted Subsidiaries in a Person engaged in the Telecommunications Business
if, as a result of such Investment, (a) such Person becomes a Restricted
Subsidiary of the Company and a Guarantor or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
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Subsidiary of the Company which is a Guarantor; (iv) any Investment in TV Filme
Servicos; (v) Investments in Restricted Subsidiaries that are not Guarantors in
an aggregate amount not to exceed $30,000,000 (or the equivalent thereof at time
of determination), provided, however, that Investments in such Restricted
Subsidiaries will be excluded from the calculation of such aggregate amount (A)
if concurrently with such Investment such Restricted Subsidiary becomes a
Guarantor or (B) from the time after such Investment that such Restricted
Subsidiary becomes a Guarantor; (vi) any Investment in Government Securities in
accordance with the provisions of the Pledge Agreement; (vii) Investments in
Persons engaged in the Telecommunications Business, taken together with all
other Investments made pursuant to this clause (vii), in an aggregate amount not
to exceed $15,000,000 (or the equivalent thereof at time of determination);
(viii) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with Section
4.10; (ix) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar expenses, in
each case incurred in the ordinary course of business; (x) Investments the
payment for which consists exclusively of Equity Interests (excluding
Disqualified Stock) of the Company; (xi) any Investment acquired by the Company
or any of its Restricted Subsidiaries (A) in exchange for any other Investment
or accounts receivable held by the Company or any such Restricted Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or accounts receivable
or (B) as a result of the foreclosure by the Company or any of its Restricted
Subsidiaries with respect to any secured Investment or default; (xii)
Investments in shares of money market funds having assets in excess of
$500,000,000; and (xiii) Investments existing on the date of this Indenture.
"Permitted Liens" means (i) Liens securing Indebtedness which may be
incurred pursuant to clause (i) of Section 4.9(b); (ii) Liens in favor of the
Company or any of its Restricted Subsidiaries; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with the
Company or any of its Restricted Subsidiaries, provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company or any such Restricted Subsidiary; (iv) Liens on property or
securing any Acquired Debt and which exist at the time of acquisition thereof by
the Company or any of its Restricted Subsidiaries, provided that such Liens were
in existence prior to the contemplation of such acquisition; (v) Liens arising
under this Indenture in favor of the Trustee; (vi) Liens existing on the date of
this Indenture; (vii) Liens arising by reason of (1) any judgment, decree or
order of any court, so long as enforcement of such Lien is effectively stayed
and any appropriate legal proceedings which may have been duly initiated for the
review of such judgment, decree or order will not have been finally terminated
or the period within which such proceedings may be initiated will not have
expired; (2) taxes not yet delinquent or which are being contested in good
faith; (3) security for payment of workers' compensation or other insurance; (4)
good faith deposits in connection with tenders, leases and contracts (other than
contracts for the payment of money), bids, licenses, performance or similar
bonds and other obligations of a like nature, in the ordinary course of
business; (5) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created, assumed
or permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessees), none of which
materially impairs the use of any parcel of property material to the operation
of the business of the Company or any Restricted Subsidiary or the value of such
property for the purpose of such business; (6) deposits to secure public or
statutory obligations or in lieu of surety or appeal bonds; (7) surveys,
exceptions, title defects, encumbrances, easements, reservations of, or rights
of others for, rights of way, sewers, electric lines, telegraph or telephone
lines and other similar purposes or zoning or other restrictions as to the use
of real property not interfering with the ordinary conduct of the business of
the Company or any of its Restricted
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Subsidiaries; or (8) operation of law or statute and incurred in the ordinary
course of business, including without limitation, those in favor of mechanics,
materialman, suppliers, laborers or employees, and, if securing sums of money,
for sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection thereof;
(viii) Liens created by the Pledge Agreement and the Note Pledge Agreement; (ix)
Liens securing purchase money Indebtedness, including pursuant to clause (i)
under Section 4.9(b); (x) Liens incurred in the ordinary course of business of
the Company or any of its Restricted Subsidiaries which do not secure
obligations of the Company or any Restricted Subsidiary, including, without
limitation, licenses and leases granted or made by the Company or any Restricted
Subsidiary as licensor or lessor or which secure obligations that do not exceed
$2,000,000 (or the equivalent thereof at time of determination) at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or any such Restricted Subsidiary; and (xi)
any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in the foregoing
clauses; provided that the principal amount of the Indebtedness secured thereby
will not exceed the principal amount of Indebtedness so secured immediately
prior to the time of such extension, renewal or replacement (or with respect to
the Bank Credit Agreement, the maximum amount then permitted to be borrowed
thereunder), and that such extension, renewal or replacement Lien will be
limited to all or a part of the property which secured the Lien so extended,
renewed or replaced (plus improvements on such property).
"Permitted Refinancing Debt" means any Indebtedness of the Company or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any such Restricted Subsidiary; provided that:
(i) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Debt does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded, plus accrued interest and the amount of any premiums and
transaction costs and reasonable expenses incurred in connection therewith; (ii)
such Permitted Refinancing Debt has a final maturity date equal to or later than
the final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Debt is subordinated in right of payment to the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred only by the Company
or the Restricted Subsidiary that is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pledge Account" means an account established with the Trustee pursuant to
the terms of the Pledge Agreement for the deposit of the Pledged Securities
purchased by ITSA with a portion of the proceeds from the sale of the Notes.
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"Pledge Agreement" means the Collateral Pledge and Security Agreement,
dated as of the date of this Indenture, by and among ITSA, the Company and the
Trustee, governing the disbursement of funds from the Pledge Account, in the
form of Exhibit E hereto.
"Pledged Securities" means the securities purchased by ITSA with a portion
of the proceeds from the sale of the Notes, which will consist of Government
Securities, to be deposited in the Pledge Account.
"Programming Agreement" means the Programming License Agreement, dated as
of June 27, 1996, between Tevecap S.A. and the Company.
"Public Equity Offering" means an underwritten public offering of Common
Equity Interests made on a primary basis by the Company pursuant to a
registration statement filed with, and declared effective by, the Commission in
accordance with the Securities Act.
"Purchase Agreement" means the Purchase Agreement dated December 16, 1996,
between the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person
that is not an Unrestricted Subsidiary.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of this Indenture, by and among the Company and the other
parties thereto, as such agreement may be amended, modified or supplemented from
time to time.
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Shelf Registration Statement" means a Shelf Registration Statement as
defined in Section 4 of the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc, or any successor to its rating business.
"Strategic Investor" means any Person (i) engaged in the
Telecommunications Business that as of the date of determination has a Total
Equity Market Capitalization of at least $500,000,000 (or the
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equivalent thereof at time of determination) or (ii) any corporation,
partnership, joint venture, limited liability company or similar entity of which
a stockholder, general partner, joint venturer or member with more than 50% of
the capital accounts, distribution rights, total equity and voting interests or
general or limited partnership interests, as applicable, are owned or
controlled, directly or indirectly, by a Person that satisfies clause (i) of
this definition; provided that clause (ii) of this definition may be satisfied
by any group of stockholders, general partners, joint venturers or members so
long as (a) each Person included in such group satisfies clause (i), (b) at
least one member in such group owns or controls, directly or indirectly, 35% or
more of the capital accounts, distribution rights, total equity and voting
rights or general or limited partnership interests of such Strategic Investor,
(c) no more than five Persons may be included in such group and (d) the
shareholders, general partners, joint venturers or members to be included in
such group will act as a group and in concert.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Subsidiary Guarantee to be executed by
certain Restricted Subsidiaries of the Company and delivered to the Trustee
pursuant to this Indenture, in form of Exhibit D hereto.
"Telecommunications Assets" means assets used or useful in the ownership
or operation of a Telecommunications Business.
"Telecommunications Business" means, when used in reference to any Person,
that such Person, directly or indirectly, is engaged primarily in the business
of (i) transmitting video, voice or data, (ii) creating, developing or packaging
entertainment or communications programming, (iii) offering private telephony
services or (iv) evaluating, participating or pursuing any other activity or
opportunity that is related to those identified in (i), (ii) or (iii) above.
"Total Equity Market Capitalization" of any Person means, as of any date
of determination, the product of (i) the aggregate number of outstanding shares
of Common Stock of such Person on such date (which will not include any options
or warrants on, or securities convertible or exchangeable into, shares of Common
Stock of such Person) and (ii) the average Closing Price of such Common Stock
over the 20 consecutive Trading Days immediately preceding such date. If no such
Closing Price exists with respect to shares of any such class, the value of such
shares will be determined by the Board of Directors of the Company in good faith
and evidenced by a resolution of the Board of Directors of the Company filed
with the Trustee.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
Sections 77aaa-77bbbb), and the rules and regulations thereunder, as in effect
on the date on which this Indenture is qualified under the TIA (except as
provided in Sections 9.1(e) and 9.3).
"Trading Day" with respect to a securities exchange or automated quotation
system means a day on which such exchange or system is open for a full day of
trading.
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"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.6.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor or any subsequent successor, serving hereunder in the
capacity as Trustee.
"TVA Sistema" means TVA Sistema de Televisao S.A., a Brazilian
corporation.
"TV Filme Servicos" means TV Filme Servicos de Telecomunicacoes Ltda., a
Brazilian limited liability company.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors of the Company, but only to the extent that
such Subsidiary (i) has no Indebtedness other than Non-Recourse Debt, (ii) does
not own any Equity Interests of, or own or hold any Lien on, any property of the
Company or any Subsidiary of the Company (other than any Subsidiary of the
Subsidiary to be so designated), (iii) has not, and the Subsidiaries of such
Subsidiary have not at the time of designation, and does not thereafter, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable with respect to any Indebtedness pursuant to which the lender has
recourse to any of the assets of the Company or any of its Restricted
Subsidiaries, (iv) is not party to any material agreement, contract, arrangement
or understanding with the Company or any of its Restricted Subsidiaries unless
the terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not Affiliates of the
Company, (v) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results, (vi) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries and (vii) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors of the Company will
be evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that (i) such designation
complied with the foregoing conditions, (ii) was permitted under Section 4.7 and
(iii) immediately after giving effect to such designation, the Company could
incur at least $1.00 of additional Indebtedness under Section 4.9(a). If, at any
time, any Unrestricted Subsidiary would fail to meet the foregoing requirements
as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.9, the Company will be in default of
such covenant). The Board of Directors of the Company may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary, provided that such
designation will be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation will only be permitted if (i) such Indebtedness
is permitted under Section 4.9, and (ii) no Default or Event of Default would be
in existence following such designation.
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"U.S. Dollar Equivalent" means, with respect to any monetary amount in a
currency other than the U.S. dollar at any one time for the determination
thereof, the amount of U.S. dollars obtained by converting such foreign currency
involved in such computation into U.S. dollars at the spot rate for the purchase
of U.S. dollars with the applicable foreign currency as quoted by Reuters at
approximately 11:00 a.m. (New York City time) on the date not more than two
Business Days prior to such determination.
"Warburg, Pincus" means Warburg, Pincus Investors, L.P. a Delaware limited
partnership.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person 95% or more of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) will at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.2. OTHER DEFINITIONS.
Defined in
Term Section
------------------------------------------------------------- ----------
"Affiliate Transaction"...................................... 4.11
"Agent Members" ............................................. 2.1(c)
"Asset Sale Offer"........................................... 4.10(b)
"Base Currency".............................................. 11.16(b)(i)
"Cedel"...................................................... 2.1(b)
"Change of Control Offer".................................... 4.14(a)
"Change of Control Payment".................................. 4.14(a)
"Change of Control Payment Date"............................. 4.14(b)
"Covenant Defeasance"........................................ 8.3
"Discharge".................................................. 8.5
"Euroclear".................................................. 2.1(b)
"Event of Default"........................................... 6.1
"Excess Proceeds"............................................ 4.10(b)
"Global Note"................................................ 2.1(c)
"incur"...................................................... 4.9(a)
"judgment currency".......................................... 11.16(b)(i)
"Legal Defeasance"........................................... 8.2
"Net Proceeds Offer Amount".................................. 4.10(b)
"Net Proceeds Offer Price"................................... 4.10(b)
"Net Proceeds Purchase Date"................................. 4.10(b)
"Paying Agent"............................................... 2.3
"Payment Default"............................................ 6.1(f)
"Register"................................................... 2.3
"Registrar".................................................. 2.3
"Regulation S"............................................... 2.1(b)
"Regulation S Global Note"................................... 2.1(b)
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"Restricted Global Note"..................................... 2.1(b)
"Restricted Payments"........................................ 4.7(b)
"Rule 144A".................................................. 2.1(b)
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions;
(f) references to sections of or rules under the Securities Act or the
Exchange Act will be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time; and
(g) "herein," "hereof" and other words or similar import refer to this
Indenture as a whole (as amended or supplemented from time to time) and not
to any particular Article, Section or other subdivision.
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ARTICLE 2
THE NOTES
SECTION 2.1. FORM AND DATING.
(a) Provisions relating to the Initial Notes and the Exchange Notes are
set forth in this Section 2.1. The Initial Notes and the Exchange Notes shall be
substantially in the form of Exhibit A hereto which is hereby incorporated in
and expressly made a part of this Indenture. The Notes may have notations,
legends or endorsements required by law, exchange rule, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Note shall be dated
the date of its authentication.
(b) Global Notes. Initial Notes offered and sold to a QIB in reliance on
Rule 144A under the Securities Act ("Rule 144A") as provided in the Purchase
Agreement, shall be issued initially in the form of one or more permanent global
Notes in definitive, fully registered form without interest coupons with the
global securities legend and restricted securities legend set forth in Exhibit A
hereto (each, a "Restricted Global Note"), which shall be deposited on behalf of
the purchasers of the Initial Notes represented thereby with the Trustee, at its
office in the Borough of Manhattan, The City of New York, as custodian for the
Depository (or with such other custodian as the Depository may direct), and
registered in the name of the Depository or a nominee of the Depository, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Restricted Global Notes may from
time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depository or its nominee, as the case may be, as hereinafter
provided.
Initial Notes offered and sold in reliance on Regulation S under the
Securities Act ("Regulation S"), as provided in the Purchase Agreement, shall be
issued initially in the form of one or more permanent global Initial Notes in
definitive, fully registered form without interest coupons with the global
securities legend and restricted securities legend set forth in Exhibit A hereto
(the "Regulation S Global Note"), which shall be deposited on behalf of the
purchasers of the Initial Notes represented thereby with the Trustee, as
custodian, for the Depository (or with such other custodian as the Depository
may direct), and registered in the name of the Depository or the nominee of the
Depository, for the accounts of the Euroclear System ("Euroclear") and Cedel
Bank, societe anonyme ("Cedel"), duly executed by the Company and authenticated
by the Trustee as hereinafter provided. On or prior to the end of the "40-day
restricted period" within the meaning of Rule 903(c) of Regulation S, beneficial
interests in the Regulation S Global Note may only be held through Euroclear or
Cedel, unless delivery is made through the Restricted Global Note. Any resale or
transfer of beneficial interests in the Regulation S Global Note shall be made
only pursuant to Rule 144A or Regulation S, after delivery to TV Filme by the
transferor, if required by the Company, of the opinions, certificates or other
information described in Section 2.6. The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depository or its
nominee, as the case may be, as hereinafter provided.
(c) Book-Entry Provisions. This Section 2.1(c) shall apply only to the
Regulation S Global Note and the Restricted Global Note (the "Global Notes")
deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.1(c), authenticate and deliver initially one or more Global Notes that
(a) shall be registered in the name of the Depository for such Global Note or
Global Notes or the nominee of such Depository and (b) shall be delivered by the
Trustee to such Depository or pursuant to such Depository's instructions or held
by the Trustee as custodian for the Depository.
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Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Note, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices of
such Depository governing the exercise of the rights of a holder of a beneficial
interest in any Global Note.
(d) Certificated Notes. Except as provided in this Section 2.1 or Section
2.6 or 2.7, owners of beneficial interests in Global Notes will not be entitled
to receive physical delivery of certificated Notes. Purchasers of Initial Notes
who are IAI's and are not QIBs and did not purchase Initial Notes sold in
reliance on Regulation S will receive Definitive Notes; provided, however, that
upon transfer of such Definitive Notes to a QIB or in accordance with Regulation
S, such Definitive Notes will, unless the relevant Global Note has previously
been exchanged, be exchanged for an interest in a Global Note pursuant to the
provisions of Section 2.6.
(e) Provisions Applicable to Forms of Notes. The Notes may also have such
additional provisions, omissions, variations or substitutions as are not
inconsistent with the provisions of this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with this Indenture, any Applicable Law or
with any rules made pursuant thereto or with the rules of any securities
exchange or governmental agency or as may be determined consistently herewith by
the Officer of the Company executing such Notes, as conclusively evidenced by
their execution of such Notes. All Notes will be otherwise substantially
identical except as provided herein.
Subject to the provisions of this Article 2, a registered Holder of a
beneficial interest in a Global Note may grant proxies and otherwise authorize
any Person to take any action that a Holder is entitled to take under this
Indenture or the Notes.
SECTION 2.2. EXECUTION AND AUTHENTICATION.
An Officer will sign the Notes for the Company by manual or facsimile
signature. The Company's seal may be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note will nevertheless be valid.
A Note will not be valid or obligatory for any purpose or entitled to the
benefits of this Indenture until authenticated by the manual signature of the
Trustee or its authenticating agent. The signature will be conclusive evidence
that the Note has been authenticated under this Indenture.
The Trustee shall authenticate and deliver: (i) Initial Notes for original
issue in an aggregate principal amount of $140,000,000 and (ii) Exchange Notes
for issue only in an Exchange Offer pursuant to the Registration Rights
Agreement, for a like principal amount of Initial Notes, in each case upon a
written order of the Company signed by two Officers. Such order shall specify
the amount of the Notes to be authenticated and the date on which the original
issue of Securities is to be authenticated and
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whether the Notes are to be Initial Notes or Exchange Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed $140,000,000
except as provided in Section 2.8.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
SECTION 2.3. TRUSTEE, REGISTRAR AND PAYING AGENT.
The Company will maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
will keep a register ("Register") of the Notes and of their transfer and
exchange. The Company may also from time to time appoint one or more
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar upon notice
to the Holders. The Company will notify the Trustee in writing of the name and
address of any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
will act, subject to the last paragraph of this Section 2.3, as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar;
provided, however, that none of the Company, its Subsidiaries or the Affiliates
of the foregoing will act (i) as Paying Agent in connection with redemptions,
offers to purchase, discharges and defeasance, as otherwise specified in this
Indenture, and (ii) as Paying Agent or Registrar if a Default or Event of
Default has occurred and is continuing.
The Company hereby appoints IBJ Schroder Bank & Trust Company, at its
Corporate Trust Office, as the Trustee hereunder and IBJ Schroder Bank & Trust
Company hereby accepts such appointment. The Trustee will have the powers and
authority granted to and conferred upon it in the Notes and hereby and such
further powers and authority to act on behalf of the Company as may be mutually
agreed upon by the Company and the Trustee, and the Trustee will keep a copy of
this Indenture available for inspection during normal business hours at its
Corporate Trust Office.
The Company initially appoints The Depository Trust Company to act as
Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
All of the terms and provisions with respect to such powers and authority
contained in the Notes are subject to and governed by the terms and provisions
hereof.
The Trustee may resign as Registrar or Paying Agent upon 30 days prior
written notice to the Company.
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SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company will require each Paying Agent other than the Trustee or the
Company to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal of, or premium, if any, interest or Liquidated Damages, if
any, on, the Notes, and will notify the Trustee of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment of all such money over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) will have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it will
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee will serve as Paying Agent for
the Notes.
SECTION 2.5. HOLDER LISTS.
The Trustee will preserve in as current a form as is reasonably
practicable to it the most recent list available to it of the names and
addresses of all Holders and, after the consummation of the Exchange Offer, will
otherwise strictly comply with TIA Section 312(a). If the Trustee is not the
Registrar, the Company will furnish to the Trustee at least seven Business Days
before each Interest Payment Date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
require of the names and addresses of the Holders of Notes and, after the
consummation of the Exchange Offer, the Company will otherwise strictly comply
with TIA Section 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Notes. If Definitive Notes are
presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount of
Definitive Notes of other authorized denominations,
the Registrar will register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such
Holder or by such Holder's attorney, duly authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.6(b) or pursuant to clause (A), (B) or (C) below, and are
accompanied by the following additional information and documents,
as applicable:
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(A) if such Definitive Notes are being delivered to the Registrar
by a Holder for registration in the name of such Holder,
without transfer, a certification to that effect from such
Holder (in substantially the form of Exhibit B hereto); or
(B) if such Definitive Notes are being transferred to the Company,
a certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
(C) if such Definitive Notes are being transferred (x) pursuant to
an exemption from registration in accordance with Rule 144; or
(y) in reliance on another exemption from the registration
requirements of the Securities Act; or (z) to an IAI that is
acquiring the Note for its own account in each case for
investment purposes and not with a view to, or for offer or
sale in connection with, any distribution in violation of the
Securities Act: (i) a certification to that effect (in
substantially the form of Exhibit B hereto) and such other
certifications as the Trustee may reasonably request and (ii)
in the case of clause (z), an Opinion of Counsel addressed to
the Company as to the compliance with the restrictions set
forth in the legend set forth in Section 2.6(f).
(b) Restrictions on Transfer of a Definitive Note for a Beneficial
Interest in a Global Note. A Definitive Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Trustee, together with:
(i) certification from the Holder thereof (in substantially the form of
Exhibit B hereto) that such Definitive Note is being transferred to
(A) a QIB in accordance with Rule 144A or (B) outside the United
States in an offshore transaction within the meaning of Regulation S
and in compliance with Rule 904 under the Securities Act; and
(ii) written instructions from the Holder thereof directing the Trustee
to make, or to direct the Note Custodian to make, an adjustment on
its books and records with respect to the Regulation S Global Note
or the Restricted Global Note, as the case may be, to reflect an
increase in the aggregate principal amount of the Notes represented
by such Global Note, such instructions to contain information
regarding the Depository account (or in the case of the Registration
S Global Note only, the Euroclear or Cedel account) to be credited
with such increase;
then the Trustee shall cancel such Definitive Note and cause, or direct the Note
Custodian to cause, in accordance with the standing instructions and procedures
existing between the Depository and the Note Custodian (including the rules of
Euroclear and Cedel, if applicable), the aggregate principal amount of Notes
represented by the Regulation S Global Note or the Restricted Global Note, as
the case may be, to be increased by the aggregate principal amount of the
Definitive Note to be exchanged and shall credit or cause to be credited to the
account of the Person specified in such instructions a beneficial interest in
such Global Note equal to the principal amount of the Definitive Note so
cancelled. If no applicable Global Notes are then outstanding, the Company shall
issue and the Trustee shall authenticate, upon written order of the Company in
the form of an Officers' Certificate, a new Regulation S Global Note or
Restricted Global Note, as the case may be, in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. (i) The transfer and exchange
of Global Notes or beneficial interests in Global Notes will be effected through
the Depository, in accordance with this
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Indenture (including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depository therefor, including the rules and
procedures of Euroclear and Cedel, if applicable. A transferor of a beneficial
interest in a Global Note to another Global Note shall deliver to the Registrar:
(A) if applicable, instructions given in accordance with the
Depository's procedures directing the Trustee to credit or
cause to be credited a beneficial interest in the applicable
Global Note in an amount equal to the beneficial interest in
the Global Note to be exchanged; and
(B) a written order given in accordance with the Depository's
procedures containing information regarding the Euroclear,
Cedel or other participant account of the Depository to be
credited with such increase.
The Registrar shall, in accordance with such instructions, instruct the
Depository to increase and reduce, as applicable, the principal amount of each
applicable Global Note to the extent required and to credit to the account of
the Person specified in such instructions a beneficial interest in the
applicable Global Note and to debit the account of the Person making the
transfer the beneficial interest in the Global Note being transferred.
(ii) Notwithstanding any other provisions of this Indenture (other than
the provisions set forth in Section 2.7), a Global Note may not be transferred
as a whole except by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the Depository
or by the Depository or any such nominee to a successor Depository or a nominee
of such successor Depository.
(iii) Notwithstanding any other provisions of this Indenture, prior to the
expiration of the "40-day restricted period", transfers of interest in the
Regulation S Global Note to "U.S. persons" (as defined in Regulation S) shall be
limited to transfers to QIBs pursuant to Rule 144A which Persons shall thereby
acquire a beneficial interest in the Restricted Global Note and in connection
therewith the transferors shall provide a certification (in substantially the
Form of Exhibit B hereto) confirming the character of the transferee in
connection with any transfers prior to the expiration of such period. The
Company will advise the Trustee as to the expiration of the "40-day restricted
period" and the Trustee may rely conclusively thereon.
(iv) In the event that a Global Note is exchanged for Notes in definitive
registered form pursuant to Section 2.7 or Section 2.12, prior to the
consummation of a Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Notes, such Notes may be exchanged only in
accordance with procedures as are substantially consistent with the provisions
of this Section 2.6 (including the certification requirements set forth on
Exhibit B intended to ensure that such transfers comply with Rule 144A or
Regulation S, as the case may be) and such other procedures as may from time to
time be adopted by the Company.
(d) Transfer of a Beneficial Interest in a Global Note for a Definitive
Note.
(i) subject to Section 2.6(c)(iii), any person having a beneficial
interest in a Transfer Restricted Security that is a Global Note may
transfer such beneficial interest to an IAI that is acquiring the
Note for its own account in each case for investment purposes and
not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act; provided, however,
that any written order or such other form of
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instructions as is customary for the Depository, from the Depository
or its nominee on behalf of any Person having a beneficial interest
in such Global Note shall be accompanied by (i) a certification from
the transferee or transferor with respect to the transfer (in
substantially the form of Exhibit B) and such other certifications
as the Trustee may reasonably request and (ii) if the aggregate
principal amount of the applicable Global Note being transferred is
less than $100,000, an Opinion of Counsel addressed to the Company
as to the compliance with the restrictions set forth in the legend
set forth in Section 2.6(f).
Upon receipt by the Trustee of such information and documents, the Trustee
or the Note Custodian, at the direction of the Trustee, will cause, in
accordance with the standing instructions and procedures existing between
the Depository and the Note Custodian, including the rules and procedures
of Euroclear or Cedel, if applicable, the aggregate principal amount of
the Global Note to be reduced on its books and records and, following such
reduction, the Company will execute and the Trustee will authenticate and
deliver to the transferee a Definitive Note.
(ii) Definitive Notes issued in exchange for a beneficial interest in a
Global Note pursuant to this Section 2.6(d) shall be registered in
such names and in such authorized denominations as Euroclear or
Cedel, if applicable, and the Depository, pursuant to instructions
from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Definitive
Notes to the persons in whose names such Notes are so registered in
accordance with the instructions of the Depository.
(e) Authentication of Definitive Notes in Absence of Depository. If at any
time:
(i) the Depository for the Notes notifies the Company that the
Depository is unwilling or unable to continue as Depository for the
Global Notes or, if at any time such Depository ceases to be a
"clearing agency" registered under the Exchange Act, and a successor
Depository for the Global Notes is not appointed by the Company
within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in writing
that it elects to cause the issuance of Definitive Notes under this
Indenture in exchange for all or any part of the Notes represented
by a Global Note or Global Notes,
the Depository or the Note Custodian will surrender such Global Note to the
Trustee, without charge, and then the Company will execute, and the Trustee
will, upon receipt of an authentication order in accordance with Section 2.2
hereof, authenticate and deliver in exchange for such Global Notes, Definitive
Notes in an aggregate principal amount equal to the principal amount of such
Global Notes. Such Definitive Notes will be registered in such names as the
Depository will direct in writing.
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(f) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Note certificate evidencing Global Notes and Definitive
Notes (and all Notes issued in exchange therefor or substitution
thereof) will bear legends in substantially the following form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OF REGULATION S UNDER THE
SECURITIES ACT ("REGULATION S"), (2) AGREES THAT IT WILL NOT PRIOR
TO (X) THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD THAT
MAY THEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES
ACT AS PERMITTING THE RESALE BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE
LAST DAY ON WHICH TV FILME, INC. OR ANY AFFILIATE OF TV FILME, INC.
WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY
AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO TV FILME, INC., (B)
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (D) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT IN A PRINCIPAL AMOUNT OF AT LEAST $100,000 OR (F)
OUTSIDE THE U.S. TO A NON-U.S. PERSON PURSUANT TO RULE 904 OF
REGULATION S, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "U.S." AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS ASSIGNED TO THEM IN REGULATION S.
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Note) pursuant to Rule 144 under the Securities Act:
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(A) in the case of any Transfer Restricted Security that is a
Definitive Note, the Registrar will permit the Holder thereof
to exchange such Transfer Restricted Security for a Definitive
Note that does not bear the legend set forth in (i) above and
rescind any restriction on the transfer of such Transfer
Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security
for a certificated Note that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security, if the Holder certifies in
writing to the Registrar that its request for such exchange
was made following a sale or transfer in reliance on Rule 144
(such certificate to be in the form of Exhibit B hereto).
(iii) After a transfer of any Initial Notes during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Initial Notes, all requirements pertaining to legends on such
Initial Note will cease to apply, the requirements requiring any
such Initial Note issued to certain Holders be issued in global form
will cease to apply, and a certificated Initial Note without legends
will be available to the transferee of the Holder of such Initial
Notes upon exchange of such transferring Holder's certificated
Initial Note or directions to transfer such Holder's interest in the
Global Note, as applicable.
(iv) Upon the consummation of the Exchange Offer with respect to the
Initial Notes pursuant to which Holders of such Initial Notes are
offered Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to the Initial Notes that Initial Notes
issued to certain Holders be issued in global form will cease to
apply and certificated Initial Notes with the restricted securities
legend set forth in Exhibit A hereto will be available to Holders of
such Initial Notes that do not exchange their Initial Notes, and
Exchange Notes in certificated or global form without any
restrictive legends will be available to Holders that exchange such
Initial Note in the Exchange Offer.
(g) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in Global Notes have been exchanged for Definitive Notes,
redeemed, repurchased or cancelled, all Global Notes will be returned to or
retained and cancelled by the Trustee or its agent in accordance with Section
2.12 hereof. At any time prior to such cancellation, if any beneficial interest
in a Global Note is exchanged for Definitive Notes, redeemed, repurchased or
cancelled, the principal amount of Notes represented by such Global Note will be
reduced accordingly and an endorsement will be made on such Global Note, by the
Trustee or the Notes Custodian, at the direction of the Trustee, to reflect such
reduction.
(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company will execute and the Trustee will authenticate
Definitive Notes and Global Notes at the Registrar's request.
(ii) No service charge will be made to a Holder for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith
(other
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than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.2,
2.11, 3.6, 3.7, 4.10, 4.14 and 9.5 hereto).
(iii) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Notes or
Global Notes will be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Definitive Notes or Global Notes
surrendered upon such registration of transfer or exchange.
(iv) Neither the Registrar nor the Company will be required:
(A) to issue, to register the transfer of or to exchange
Notes during a period beginning at the opening of
business 15 Business Days before the day of any
selection of Notes for redemption under Section 3.2
hereof and ending at the close of business on the day of
selection; or
(B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part;
or
(C) to register the transfer of or to exchange a Note
between a record date and the next succeeding Interest
Payment Date.
(v) The Trustee will authenticate Definitive Notes and Global
Notes in accordance with the provisions of Section 2.2 hereof.
(i) Certain Transfers in Connection with and after the Exchange Offer.
Notwithstanding any other provision of this Indenture: (i) no
Exchange Note may be exchanged by the Holder thereof for an Initial
Note; (ii) accrued and unpaid interest on the Initial Notes being
exchanged in the Exchange Offer will be due and payable on the next
Interest Payment Date for the Exchange Notes following the Exchange
Offer; and (iii) interest on the Exchange Notes to be issued in the
Exchange Offer will accrue from the date of the Exchange Offer.
SECTION 2.7. CERTIFICATED NOTES.
(a) A Global Note deposited with the Depository or with the Trustee as
custodian for the Depository pursuant to Section 2.1 shall be transferred to the
beneficial owners thereof in the form of certificated Notes in an aggregate
principal amount equal to the principal amount of such Global Note, in exchange
for such Global Note, only if such transfer complies with Section 2.6 and (i)
the Depository notifies the Company that it is unwilling or unable to continue
as Depository for such Global Note or if at any time such Depository ceases to
be a "clearing agency" registered under the Exchange Act and a successor
depository is not appointed by the Company within 90 days of such notice, or
(ii) an Event of Default has occurred and is continuing or (iii) the Company, in
its sole discretion, notifies the Trustee in writing that it elects to cause the
issuance of certificated Notes under this Indenture.
(b) Any Global Note that is transferable to the beneficial owners thereof
pursuant to this Section 2.7 shall be surrendered by the Depository to the
Trustee located in the Borough of Manhattan, The City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Note, an equal aggregate
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principal amount of certificated Initial Notes of authorized denominations. Any
portion of a Global Note transferred pursuant to this Section 2.7 shall be
executed, authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the Depository shall
direct. Any certificated Initial Note delivered in exchange for an interest in
the Global Note shall, except as otherwise provided by Section 2.6(f), bear the
restricted securities legend set forth in Exhibit A hereto.
(c) In the event of the occurrence of any of the events specified in
Section 2.7(a), the Company will promptly make available to the Trustee a
reasonable supply of certificated Notes in definitive, fully registered form
without interest coupons.
SECTION 2.8. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, the Company will, upon the written request of the Holder
thereof, issue and the Trustee, upon the written order of the Company signed by
two Officers of the Company, will authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company, an
indemnity bond must be supplied by such Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee, any
Agent and any authenticating agent from any loss that any of them may suffer if
a Note is replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and will
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
The provisions of this Section 2.8 are exclusive and will preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.9. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it (or its agent), those delivered to it
(or its agent) for cancellation, those reductions in the interest in a Global
Note effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.10 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.8 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note (other than a mutilated Note surrendered for replacement) is held
by a bona fide purchaser (as such term is defined in Section 8-302 of the
Uniform Commercial Code as in effect in the State of New York).
If the principal amount of any Note is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company or any of its Subsidiaries)
holds, on a redemption date or maturity date, cash or Cash Equivalents
sufficient to pay Notes payable on that date, then on and after that date such
Notes will be deemed to be no longer outstanding and will cease to accrue
interest.
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SECTION 2.10. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, will be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee will be protected in relying on any such direction, waiver or consent,
only Notes that a Responsible Officer of the Trustee has actual knowledge are so
owned will be so disregarded.
SECTION 2.11. TEMPORARY NOTES.
Until Definitive Notes are ready for delivery, the Company may prepare and
the Trustee will authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes will be
substantially in the form of Definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as will be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company will prepare
and the Trustee will authenticate definitive Notes in exchange for temporary
Notes.
Until such exchange, Holders of temporary Notes will be entitled to all of
the benefits of this Indenture.
SECTION 2.12. CANCELLATION.
The Company at any time may deliver Notes to the Trustee or its Agent for
cancellation. The Registrar and Paying Agent will forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee (or its Agent) and no one else will cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
will destroy cancelled Notes (subject to the record retention requirement of the
Exchange Act). Certification of the destruction of all cancelled Notes will be
delivered to the Company from time to time. The Company may not issue new Notes
to replace Notes that it has paid or that have been delivered to the Trustee (or
its Agent) for cancellation. If the Company acquires any of the Notes, such
acquisition will not operate as a redemption or satisfaction of the indebtedness
represented by such Notes unless and until the same are surrendered to the
Trustee (or its Agent) for cancellation pursuant to this Section 2.12.
SECTION 2.13. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it will pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.1 hereof. The Company will notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and the date of
the proposed payment. The Company will fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
will be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) will mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
defaulted interest to be paid.
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SECTION 2.14. PERSONS DEEMED OWNERS.
Prior to due presentment for the registration of a transfer of any Note,
the Trustee, any Agent, the Company and any agent of the foregoing will deem and
treat the Person in whose name any Note is registered as the absolute owner of
such Note for all purposes (including the purpose of receiving payment of
principal of and interest on such Notes; provided that defaulted interest will
be paid as set forth in Section 2.13), and none of the Trustee, any Agent, the
Company or any agent of the foregoing will be affected by notice to the
contrary.
SECTION 2.15. CUSIP, CINS AND ISIN NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will print CUSIP, CINS and ISIN
numbers on the Notes, and the Trustee may use CUSIP, CINS and ISIN numbers in
notices of redemption and purchase as a convenience to Holders; provided,
however, that any such notices may state that no representation is made as to
the correctness of such numbers as printed on the Notes and that reliance may be
placed only on the other identification numbers printed on the Notes, and any
such redemption or purchase will not be affected by any defect or omission in
such numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.7 hereof, it will furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of Section 3.7 pursuant to which the
redemption will occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed, (iv) the redemption price and accrued and unpaid interest
and (v) whether it requests the Trustee to give notice of such redemption. Any
such notice may be cancelled at any time prior to the mailing of notice of such
redemption to any Holder and will thereby be void and of no effect.
SECTION 3.2. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the Trustee
will select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of any applicable Depository and securities
exchange requirements or, if the Notes are not so listed, on a pro rata basis,
by lot or in accordance with any other method the Trustee considers fair and
appropriate and in such manner as complies with any such requirements and any
applicable legal requirements; provided that no Notes of $1,000 principal amount
or less will be redeemed in part. In the event of partial redemption by lot, the
particular Notes to be redeemed will be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee will promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected will be in amounts of $1,000 or whole multiples of $1,000; except
that if all of the Notes of a Holder are to be redeemed, the entire outstanding
amount of Notes held by
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such Holder, even if not a multiple of $1,000, will be redeemed. Except as
provided in the preceding sentence, provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.3. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date, the
Company will mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Notes are to be redeemed at such Holder's
registered address.
The notice will identify the Notes to be redeemed and will state:
(a) the redemption date;
(b) the redemption price and accrued and unpaid interest;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion will be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date and the only remaining right of the Holders of such Notes is
to receive payment of the redemption price upon surrender to the Paying Agent
of the Notes redeemed;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP, CIN and ISIN number, if any, listed in such notice or printed on
the Notes.
At the Company's request, the Trustee will give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
will have delivered to the Trustee, at least 40 days prior to the redemption
date (unless a shorter period is acceptable to the Trustee), an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the preceding paragraph.
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION.
Unless otherwise stated therein, once notice of redemption is mailed in
accordance with Section 3.3 hereof, Notes called for redemption become
irrevocably due and payable on the redemption date at the redemption price.
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SECTION 3.5. DEPOSIT OF REDEMPTION PRICE.
On or prior to the redemption date, the Company will deposit with the
Paying Agent (other than the Company or any of its Subsidiaries) money
sufficient in immediately available funds to pay the redemption price of, and
accrued interest on all, Notes to be redeemed on that date. The Paying Agent
will promptly return to the Company any money deposited with the Paying Agent by
the Company in excess of the amounts necessary to pay the redemption price of,
and accrued interest on, all Notes to be redeemed. If the money is deposited on
the redemption date, such deposit will be made by 11:00 a.m. New York City time.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest will cease to accrue on the Notes or the
portions of Notes called for redemption whether or not such Notes are presented
for payment, and the only remaining right of the Holders of such Notes will be
to receive payment of the redemption price upon surrender to the Paying Agent of
the Notes redeemed. If a Note is redeemed on or after an interest record date
but on or prior to the related interest payment date, then any accrued and
unpaid interest will be paid to the Person in whose name such Note was
registered at the close of business on such record date. If any Note called for
redemption will not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid principal from the redemption date until such principal is
paid and to the extent lawful, on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.1
hereof.
SECTION 3.6. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company will issue
and, upon the Company's written request, the Trustee will authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.7. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.7, the Company
will not have the option to redeem the Notes pursuant to this Section 3.7 prior
to December 15, 2000. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable redemption date, if redeemed during
the twelve month period beginning on December 15 of the years indicated below:
Year Percentage
---- ----------
2000 106.4375%
2001 104.2917%
2002 102.1458%
2003 and thereafter 100.0000%
(b) Notwithstanding the foregoing, on or prior to December 15, 1999,
the Company may redeem up to 35% in the aggregate principal amount of the Notes
originally outstanding at a redemption price of 112 7/8% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date with the net proceeds of a Public Equity
Offering;
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provided that no less than 65% of the aggregate principal amount of the Notes
originally issued remains outstanding immediately after the occurrence of such
redemption; and provided further, that notice of such redemption will be given
not later than 30 days, and such redemption will occur not later than 90 days,
after the date of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.7 will be made pursuant to
the provisions of Sections 3.1 through 3.6 hereof.
SECTION 3.8. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.14 hereof, the Company will
not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
ARTICLE 4
COVENANTS
SECTION 4.1. PAYMENT OF NOTES.
The Company will pay or cause to be paid in the Borough of Manhattan, The
City of New York the principal of, premium, if any, interest and Liquidated
Damages, if any, on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, interest and Liquidated Damages, if any, will
be considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary thereof, holds as of 11:00 a.m. New York City time on
the due date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, interest
and Liquidated Damages, if any, then due. The Paying Agent will return to the
Company, no later than two Business Days following the date of payment, any
money (including accrued interest) in excess of the amounts paid on the Notes.
The Company will pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law to the extent that such interest is an
allowed claim enforceable against the debtor under any Bankruptcy Law) on
overdue principal and premium, if any, at a rate equal to 1% per annum in excess
of the then applicable interest rate on the Notes to the extent lawful; it will
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law to the extent that such interest is an allowed claim against the
debtor under such Bankruptcy Law) on overdue installments of interest (without
regard to any applicable grace period) from time to time on demand at the same
rate to the extent lawful.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
fails to maintain any such required office or agency or fails to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
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The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission will in any manner relieve the Company of
its obligation to maintain an office or agency in the Borough of Manhattan, The
City of New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.3.
SECTION 4.3. PROVISIONS OF REPORTS AND OTHER INFORMATION.
(a) Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company will furnish to
the Trustee and the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the Commission
following consummation of the Exchange Offer, the Company will file a copy of
all such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. The
Company will include an unaudited consolidating balance sheet and related
statements of income and cash flows for the Company and its Subsidiaries,
separately identifying the Company and its Restricted Subsidiaries as one group
and the Company's Unrestricted Subsidiaries as a separate group, in all reports
containing the consolidated financial statements (which in the case of annual
reports will be audited) of the Company and its consolidated Subsidiaries which
are required to be delivered by the Company to the Holders of Notes pursuant to
this Section 4.3, including the Company's Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q. If required by the terms thereof, the Company
will also comply with the provisions of TIA Section 314(a).
(b) So long as any of the Notes remain outstanding, the Company will
furnish to the Holders of the Notes and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
(c) If the Company instructs the Trustee to distribute any of the
documents described in Section 4.3(a) to the Holders, the Company will provide
the Trustee with a sufficient number of copies of all such documents that the
Company may be required to deliver to such Holders.
SECTION 4.4. COMPLIANCE CERTIFICATE.
(a) The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal
quarter has been made under the supervision of the signing Officers with a view
to determining whether the Company has kept, observed, performed and fulfilled
its obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his or her knowledge the
Company has kept, observed, performed and fulfilled each and every covenant
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contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture (or,
if a Default or Event of Default will have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and that
to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of, interest
or Liquidated Damages, if any, on, the Notes are prohibited or, if such event
has occurred, a description of the event and what action the Company is taking
or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3 above will be accompanied by a
written statement of the Company's independent public accountants (who will be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants will not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company will, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
SECTION 4.5. TAXES.
The Company will pay, and will cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except (i) such as are contested in good faith and by appropriate proceedings or
(ii) such as for which reserve or other appropriate provision, if any, as will
be required to be in conformity with GAAP, has been made therefor, or (iii)
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.6. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
SECTION 4.7. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to any direct or indirect holder of the
Company's Equity Interests in its capacity as such, other than dividends or
distributions (A) paid or payable in Equity
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Interests (other than Disqualified Stock) of the Company or (B) paid or payable
to the Company or any Wholly Owned Restricted Subsidiary of the Company or (C)
paid or payable in respect of Equity Interests of a Restricted Subsidiary to
Persons other than the Company or a Restricted Subsidiary of the Company on not
more favorable terms than a pro rata basis with dividends or distributions being
paid in respect of Equity Interests held by the Company or a Restricted
Subsidiary of the Company; (ii) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of the Company or any direct or indirect parent
of the Company or other Affiliate of the Company or any Restricted Subsidiary of
the Company (other than any such Equity Interests owned by the Company or any
Restricted Subsidiary of the Company); (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except at or following final
maturity of such Indebtedness; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(I) no Default or Event of Default will have occurred and be continuing or
would occur as a consequence thereof;
(II) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Leverage Ratio
test set forth in Section 4.9(a); and
(III) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made by the Company and its Restricted
Subsidiaries after the date of this Indenture will not exceed, at the date of
determination, the sum of (A) an amount equal to the Company's Consolidated Cash
Flow from the first day of the Company's first full fiscal quarter following the
date of this Indenture to the end of the Company's most recently ended full
fiscal quarter for which internal financial statements are available, taken as a
single accounting period, less the product of 1.5 times the Company's
Consolidated Interest Expense from the first day of the Company's first full
fiscal quarter following the date of this Indenture to the end of the Company's
most recently ended full fiscal quarter for which internal financial statements
are available, taken as a single accounting period, plus (B) 100% of the
aggregate amount of cash and marketable securities contributed to the capital of
the Company after the date of this Indenture, plus (C) 100% of the aggregate net
cash proceeds received by the Company from the issue or sale after the date of
this Indenture of Equity Interests of the Company or of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or convertible
debt securities) sold to a Subsidiary of the Company and other than Disqualified
Stock or debt securities that have been converted into Disqualified Stock), plus
(D) to the extent that any Restricted Investment that was made after the date of
this Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (1) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (2) the initial amount of
such Restricted Investment, plus (E) the aggregate amount of any cash dividends
or distributions on any Restricted Investment and any repayment in cash of loans
constituting Restricted Investments and the amount of any guarantee that
constituted a Restricted Investment and is or has been released.
(b) The provisions of Section 4.7(a) will not prohibit (i) the payment of
any dividend or other distribution within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of this Indenture; (ii) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company in exchange for, or out
of the proceeds of,
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the substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition will be excluded
from clause (III) of Section 4.7(a); (iii) the defeasance, redemption,
retirement or acquisition for value or repurchase of subordinated Indebtedness
with the net cash proceeds from an incurrence of Permitted Refinancing Debt or
the substantially concurrent sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition will be excluded from
clause (III) of Section 4.7(a); (iv) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company from an employee or
former employee of the Company or any of its Subsidiaries in connection with
such employee's death, disability or termination of employment; provided that
the amount expended by the Company or any of its Restricted Subsidiaries in
connection with such redemption, repurchase, retirement or other acquisition
does not exceed $500,000 (or the equivalent thereof at time of determination)
per year; provided further, that any amount of such permitted amount which is
not expended may be carried over to any subsequent year; and (v) the redemption,
repurchase, retirement or other acquisition of any Equity Interest of any of the
Company's Restricted Subsidiaries.
(c) The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greater of (i) the net book value of such Investments at the time
of such designation, (ii) the Fair Market Value of such Investments at the time
of such designation and (iii) the original Fair Market Value of such Investments
at the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Upon
being so designated as an Unrestricted Subsidiary, any Subsidiary Guarantee
which was previously executed by such Unrestricted Subsidiary will be deemed
terminated.
(d) The amount of all Restricted Payments not made in cash will be the
Fair Market Value (which, if it exceeds $1,000,000 (or the equivalent thereof at
time of determination), will be determined by, and set forth in, a resolution of
the Board of Directors of the Company and described in an Officers' Certificate
delivered to the Trustee) on the date of the Restricted Payment of the asset(s)
proposed to be transferred by the Company or any Restricted Subsidiary, as the
case may be, pursuant to the Restricted Payment. Not later than the fiscal
quarter end following the date of making any Restricted Payment, the Company
will deliver to the Trustee an Officers' Certificate stating that such
Restricted Payments during such quarter were permitted and setting forth the
basis upon which the calculations required by this Section 4.7 were computed,
which calculations may be based upon the Company's latest available financial
statements.
SECTION 4.8. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries on its
Capital Stock or with respect to
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any other interest or participation in, or measured by, its profits or (b) pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries,
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, (iv) grant any Liens or security interests in favor of
the Holders of the Notes and the Trustee or (v) guarantee the Notes or any
renewals or refinancings thereof, except for such encumbrances or restrictions
existing under or by reason of (A) Existing Indebtedness or the Bank Credit
Agreement, (B) applicable law, (C) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (D) by reason of (x) customary non-assignment provisions in leases,
licenses, sales agreements or other contracts entered into in the ordinary
course of business and consistent with past practices or (y) restrictions
imposed pursuant to a binding agreement for the sale or disposition of all or
substantially all of the Equity Interests or assets of any Restricted
Subsidiary, provided such restrictions apply solely to the Equity Interests or
assets being sold, (E) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (F) restrictions imposed by
Permitted Liens on the transfer of the assets that are subject to such Liens,
(G) Permitted Refinancing Debt, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Debt are no more restrictive, as
a whole, than those contained in the agreements governing the Indebtedness being
refinanced or (H) provisions in agreements with other persons who own Equity
Interests in a Restricted Subsidiary which have the effect of requiring that
transactions described in clauses (ii) or (iii) above be effected on terms no
more favorable to the Company or its Restricted Subsidiaries than a pro rata
basis in accordance with Equity Interests owned in such Restricted Subsidiary.
SECTION 4.9. LIMITATION ON INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) or Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if, at the time of incurrence of such Indebtedness or the
issuance of such Disqualified Stock, after giving pro forma effect to such
incurrence or issuance as of such date and to the use of proceeds therefrom
(including the application or the use of the net proceeds therefrom to repay
Indebtedness or make any Restricted Payment) as if the same had occurred at the
beginning of the most recently ended full fiscal quarter of the Company for
which internal financial statements are available, the Company's Leverage Ratio
would have been no greater than 6.5 to 1.
(b) The foregoing provisions will not apply to:
(i) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness pursuant to the Bank Credit Agreement in an amount not to exceed
$40,000,000 (or the equivalent thereof at time of determination) at any time
outstanding, less the aggregate amount of all permanent reductions thereto
pursuant to Section 4.10;
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(ii) Indebtedness of any Restricted Subsidiary consisting of a guarantee
of Indebtedness under the Bank Credit Agreement;
(iii) Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Notes and this Indenture;
(v) the incurrence of intercompany Indebtedness between or among the
Company and any of its Restricted Subsidiaries or TV Filme Servicos; provided
that (a) if the Company is an obligor on such Indebtedness, such Indebtedness is
expressly subordinate to the payment in full of all Obligations with respect to
the Notes and (b) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the Company
or a Restricted Subsidiary of the Company, or any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary of the Company, will be deemed to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the case may be;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any Indebtedness that is permitted by the
terms of this Indenture to be outstanding or currency exchange rate risk;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Debt in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund Indebtedness that
was permitted by this Indenture to be incurred; and
(viii) the incurrence of Indebtedness by the Company or any of its
Restricted Subsidiaries having a Weighted Average Life to Maturity in excess of
the Weighted Average Life to Maturity on the Notes lent by one or more Strategic
Investors (or any Subsidiaries thereof and including any refinancing of such
outstanding amount) resulting in up to $50,000,000 (or the equivalent thereof at
time of determination) in aggregate Net Proceeds; provided that (A) such
Indebtedness (and any refinancing thereof) is subordinated in right of payment
to the prior payment in full in cash of all Obligations (including principal,
interest and premium, if any) of the Company under the Notes and this Indenture
(including as a consequence of any repurchase, redemption or other repayment of
the Notes, including, without limitation, by way of optional redemption, Asset
Sale Offer or Change of Control Offer to the extent such rights to repayment are
exercised by the Holders) such that (I) the Company or such Restricted
Subsidiary will make no payment or distribution in respect of such Indebtedness
and may not acquire such Indebtedness until the prior payment in full in cash of
all Obligations in respect of the Notes if any Default on the Notes will occur
and be continuing and (II) the holders of such Indebtedness may not take any
action to enforce or accelerate such Indebtedness until the Holders of the Notes
have taken such action in respect of the Notes, (B) such Indebtedness (and any
refinancing thereof) is not guaranteed by any of the Company's Subsidiaries and
is not secured by any Lien on any property or asset of the Company or any
Subsidiary (other than an escrow of proceeds of such Indebtedness or similar
arrangement pending use by or disbursement to the Company or a Subsidiary), (C)
such Indebtedness (and any refinancing thereof) has no scheduled maturity of
principal earlier than a date at least one year after the final stated maturity
of the Notes, (D) accreted interest on such Indebtedness will only be payable on
the maturity thereof and cash interest on such Indebtedness will only be payable
to the extent that immediately prior to and after such payment of interest the
Company is permitted to incur $1.00 of Indebtedness under the ratio described in
the first paragraph of this covenant and (E) the holders of such
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Indebtedness will assign any rights to vote, including by way of proxy, in a
bankruptcy, insolvency or similar proceeding to the Trustee;
(ix) issuance of preferred stock by a Restricted Subsidiary of the Company
to the Company or any of its Restricted Subsidiaries; or
(x) issuance of preferred stock, which is not Disqualified Stock, by a
Restricted Subsidiary of the Company which is a Guarantor to any Person.
SECTION 4.10. LIMITATION ON ASSET SALES.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value (which, if it exceeds
$1,000,000 (or the equivalent thereof at time of determination), will be
determined by, and set forth in, a resolution of the Board of Directors of the
Company and described in an Officers' Certificate of the Company delivered to
the Trustee) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (A) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes) that are
cancelled or assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (B) any notes or other obligations
received by the Company or such Restricted Subsidiary from such transferee that
are promptly (but in any event, within 30 days) converted by the Company or such
Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash
or Cash Equivalents received) will be deemed to be cash or Cash Equivalents for
purposes of this provision. For purposes of this Section 4.10, TV Filme Servicos
will be deemed a Restricted Subsidiary of the Company.
(b) Within 270 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply, directly or indirectly, such Net Proceeds (i) to
permanently reduce Indebtedness under the Bank Credit Agreement (and to
correspondingly reduce commitments with respect thereto) or (ii) to the
acquisition of a majority interest in another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case in the
Telecommunications Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Indebtedness under the Bank Credit
Agreement or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this Section 4.10(b)
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $5,000,000 (or its equivalent thereof at time of
determination), the Company will be required to make an offer to all Holders of
Notes and to all other holders of senior Indebtedness (other than holders of
Indebtedness under the Bank Credit Agreement) (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes and of such other senior
Indebtedness, on a pro rata basis, that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to, in the case of the
Notes, 100% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon (the "Net Proceeds Offer Price") to the
date of purchase (the "Net Proceeds Purchase Date"), and, in the case of all
other senior Indebtedness, 100% of the principal amount thereof, plus accrued
and unpaid interest, or premium, if any, thereon to the date of purchase, in
accordance with the procedures, in the case of the Notes, set forth in Section
4.10(e) and (f). To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess
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Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes (subject to the restrictions of this Indenture). If the
aggregate principal amount of Notes and such other senior Indebtedness
surrendered by holders thereof exceeds the amount of Excess Proceeds, the
Trustee will select the Notes to be purchased in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only Notes
with denominations of $1,000 or integral multiples thereof will be purchased).
Upon completion of such offer to purchase, the amount of Excess Proceeds will be
reset at zero. Notwithstanding the preceding provisions of this Section 4.10(b)
which may be to the contrary, the Company will not be required to include in any
Asset Sale Offer any offer to purchase any Indebtedness (other than the Notes)
which by its terms does not require such offer. For purposes of this Section
4.10, the principal amount of Notes for which an Asset Sale Offer shall be made
is referred to as the "Net Proceeds Offer Amount."
(c) The Company will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Restricted Subsidiary of the Company to any Person (other
than the Company or a Restricted Subsidiary of the Company), unless (i)(A) after
giving effect to such transfer, conveyance, sale, lease or other disposition,
the Restricted Subsidiary which is subject to such transaction remains a
Restricted Subsidiary or (B) such transfer, conveyance, sale, lease or other
disposition is of all of the Capital Stock of such Restricted Subsidiary owned
by the Company and its Restricted Subsidiaries and (ii) such transaction is
conducted in accordance with this Section 4.10.
(d) The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes using Excess Proceeds.
(e) Upon notice of an Asset Sale Offer provided to the Trustee by the
Company, notice of such Asset Sale Offer will be mailed by the Trustee (at the
Company's expense) not less than 30 calendar days nor more than 60 calendar days
before the Net Proceeds Purchase Date to each Holder of Notes at such Holder's
last registered address appearing in the Register. The Company will provide the
Trustee with copies of all materials to be delivered with such notice. The
notice will contain all instructions and material necessary to enable such
Holders to tender Notes pursuant to the Asset Sale Offer. In such notice, the
Company will state: (1) that the Asset Sale Offer is being made pursuant to this
Section 4.10 and that it will purchase the principal amount of Notes equal to
the Net Proceeds Offer Amount; (2) the Net Proceeds Offer Price and the Net
Proceeds Purchase Date; (3) that any Note not tendered will continue to accrue
interest; (4) that, unless the Company defaults in the payment of the Net
Proceeds Offer Price, all Notes accepted for payment pursuant to the Asset Sale
Offer will cease to accrue interest after the Net Proceeds Purchase Date; (5)
that Holders electing to have any Notes purchased pursuant to such Asset Sale
Offer will be required to surrender the Notes, and complete the section entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes or transfer
beneficial ownership of such Notes by book-entry transfer, to the Company, the
Depository (if appointed by the Company), or the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Net Proceeds Purchase Date; (6) that Holders will be entitled to
withdraw their election if the Company, the Depository or the Paying Agent, as
the case may be, receives, not later than the close of business on the third
Business Day preceding the Net Proceeds Purchase Date, a telegram, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (7) that Holders whose
Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered (or
transferred by book-
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entry transfer), provided that the principal amount of such unpurchased portion
must be equal to $1,000 or an integral multiple thereof.
(f) On the Net Proceeds Purchase Date, the Company will (i) accept for
payment Notes or portions thereof validly tendered pursuant to the Asset Sale
Offer (on a pro rata basis if required), (ii) deposit with the Paying Agent
money in immediately available funds, sufficient to pay the purchase price of
all Notes or portions thereof so accepted, and (iii) deliver to the Trustee
Notes so accepted together with an Officer's Certificate stating the Notes or
portions thereof accepted for payment by the Company. If the Company complies
with its obligations set forth in the immediately preceding sentence, whether or
not a Default or Event of Default has occurred and is continuing on the Net
Proceeds Purchase Date, the Paying Agent will as promptly as practicable mail to
each Holder of Notes so accepted payment in an amount equal to the purchase
price, and the Company will execute and the Trustee will as promptly as
practicable authenticate and mail or deliver to such Holder a new Note equal in
principal amount to any unpurchased portion of the Note surrendered. Any Notes
not so accepted will be as promptly as practicable mailed or delivered by the
Company to the Holders thereof. The Company will publicly announce the results
of the Asset Sale Offer on or as promptly as practicable after the Net Proceeds
Purchase Date. For purposes of this Section 4.10, the Trustee will act as the
Paying Agent.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (other than the Company or a Wholly Owned Restricted Subsidiary) (each
of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions after the date of this Indenture involving aggregate
consideration in excess of $2,000,000 (or the equivalent thereof at time of
determination), a resolution described in an Officers' Certificate, certifying
that such Affiliate Transaction complies with clause (i) above and such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors of the Company and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions after the date
of this Indenture involving aggregate consideration in excess of $5,000,000 (or
the equivalent thereof at time of determination), an opinion as to the fairness
to the Holders of the Notes of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
recognized national standing; provided that (1) any transaction with an officer
or director of the Company or any Restricted Subsidiary (in connection with such
person's compensation, employee benefit or severance arrangements) entered into
by the Company or any of its Restricted Subsidiaries in the ordinary course of
business and customary in the industry of the Company or such Restricted
Subsidiary, (2) transactions between or among the Company and its Restricted
Subsidiaries, (3) the Programming Agreement, (4) the Operating Agreement and (5)
Restricted Payments and Permitted Investments that are permitted under Section
4.7, in each case, will not be deemed Affiliate Transactions.
SECTION 4.12. LIMITATION ON LIENS.
The Company will not, and will not permit any of its Restricted
Subsidiaries or TV Filme Servicos to, directly or indirectly, create, incur,
affirm, assume or suffer to exist any Lien of any kind on any property or asset
now owned or hereafter acquired, or any income or profits therefrom or assign
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or convey any right to receive income therefrom, unless (i) in the case of Liens
securing Indebtedness subordinate to the Notes, the Notes are secured by a
valid, perfected Lien on such property or asset that is senior in priority to
such Liens and (ii) in all other cases, the Notes are equally and ratably
secured; provided, however, that the foregoing will not prohibit or restrict
Permitted Liens.
SECTION 4.13. LIMITATIONS ON ISSUANCE OF GUARANTEES OF INDEBTEDNESS.
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee the payment of any other Indebtedness of the Company
(other than Indebtedness permitted under the Bank Credit Agreement pursuant to
clause (i) of Section 4.9(b)) unless such Restricted Subsidiary simultaneously
executes and delivers a Guarantee in the form of Exhibit G hereto providing for
the Guarantee of the payment of the Notes by such Restricted Subsidiary, which
Guarantee will be senior to or pari passu with such Restricted Subsidiary's
Guarantee of such other Indebtedness, except that (i) such Guarantee need not be
secured unless required pursuant to the provisions of Section 4.12, and (ii) if
such Indebtedness is by its terms expressly subordinated to the Notes, any such
assumption, guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness will be subordinated to such Restricted
Subsidiary's assumption, guarantee or other liability with respect to the Notes
to the same extent as such Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary of
the Notes will provide by its terms that it will be automatically and
unconditionally released and discharged upon either (i) the release or discharge
of such Guarantee of Indebtedness, except a discharge by or as a result of
payment under such Guarantee or (ii) any sale, exchange or transfer to any
Person not an Affiliate of the Company, of all of the Company's stock in, or all
or substantially all the assets of, such Restricted Subsidiary, which sale,
exchange or transfer is made in compliance with the applicable provisions of
this Indenture.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company will make an
offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at an offer price
in cash equal to 101% of the aggregate principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase (the "Change of Control Payment"). Within 20 days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction that constitutes the Change of Control and offering to repurchase
Notes pursuant to the procedures required by this Indenture and described in
such notice. The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) On a date that is at least 30 but no more than 60 days from the date
on which the Company mails notice of the Change of Control (the "Change of
Control Payment Date"), the Company will, to the extent lawful, (i) accept for
payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (ii) deposit with the Trustee an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered and
(iii) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal amount of
Notes or portions thereof being purchased by the Company. The Trustee will
promptly mail to each Holder of Notes so tendered the Change of Control Payment
for such Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. Unless the
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Company defaults in the payment for any Notes properly tendered pursuant to the
Change of Control Offer, any Notes accepted for payment pursuant to the Change
of Control Offer will cease to accrue interest after the Change of Control
Payment Date.
(c) The Change of Control provisions described in this Section 4.14 will
be applicable whether or not any other provisions of this Indenture are
applicable.
(d) Notice of a Change of Control Offer will be mailed by the Company,
with a copy to the Trustee, or, at the Company's option, by the Trustee (at the
Company's expense) not more than 30 calendar days after the Change of Control to
each Holder of the Notes at such Holder's last registered address appearing in
the Register. In such notice, the Company will describe the transaction that
constitutes the Change of Control and offer to repurchase Notes pursuant to the
procedures required by this Section 4.14 and described in such notice. The
notice will contain all instructions and materials necessary to enable Holders
to tender Notes pursuant to the Change of Control Offer. In addition, the notice
will state: (1) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Notes tendered will be accepted for payment; (2) the
Change of Control Payment and the Change of Control Payment Date, which will be
no sooner than 60 nor later than 90 days after the Change of Control; (3) that
any Note not tendered will continue to accrue interest; (4) that, unless the
Company defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer will cease to
accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to deliver the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Notes completed, or transfer by book-entry
transfer, to the Company, the Depository (if appointed by the Company), or the
Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Purchase
Date; (6) that Holders will be entitled to withdraw their election if the
Company, the Depository or the Paying Agent, as the case may be, receives, not
later than the close of business on the third Business Day preceding the Change
of Control Payment Date, a telegram, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Notes delivered for
purchase, and a statement that such Holder is withdrawing his election to have
the Notes purchased; and (7) that Holders whose Notes are being purchased only
in part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or transferred by book-entry transfer), which
unpurchased portion must be equal to at least $1,000 in principal amount or an
integral multiple thereof.
(e) On the Change of Control Payment Date, the Company will (i) accept for
payment Notes or portions thereof validly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money in immediately available
funds sufficient to pay the purchase price of all Notes or portions thereof so
accepted, and (iii) deliver to the Trustee Notes so accepted together with an
Officer's Certificate stating the Notes or portions thereof accepted for payment
by the Company. If the Company complies with its obligations set forth in the
immediately preceding sentence, whether or not a Default or Event of Default has
occurred and is continuing on the Change of Control Purchase Date, the Paying
Agent will as promptly as practicable mail or deliver to each Holder of Notes so
accepted payment in an amount equal to the purchase price, and the Company will
execute and the Trustee will as promptly as practicable authenticate and mail or
deliver to such Holder a new Note equal in principal amount to any unpurchased
portion of the Note surrendered, if any; provided that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof. Any Notes
not so accepted will be as promptly as practicable mailed or delivered by the
Trustee to the Holders thereof. The Company will publicly announce the results
of the Change of Control Offer on or as promptly as practicable after the Change
of Control Purchase Date. For purposes of this Section 4.14, the Trustee will
act as the Paying Agent.
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(f) Prior to complying with the other provisions of this Section 4.14, but
in any event within 90 days following a Change of Control, the Company will
either repay all outstanding Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Indebtedness to permit the
repurchase of Notes required by this Section 4.14.
(g) The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
SECTION 4.15. CORPORATE EXISTENCE.
Except as otherwise permitted pursuant to the terms hereof, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect (i) its corporate existence, and the corporate, partnership or
other existence of each of its Significant Subsidiaries and TV Filme Servicos,
in accordance with their respective organizational documents (as the same may be
amended from time to time), and (ii) the material rights (charter and
statutory), licenses and franchises of the Company, its Significant Subsidiaries
and TV Filme Servicos; provided, however, that the Company will not be required
to preserve any such right, license or franchise of itself, any of its
Significant Subsidiaries or TV Filme Servicos, or the corporate, partnership or
other existence of any of its Significant Subsidiaries, if the Board of
Directors of the Company determines that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof would not reasonably be expected to
be adverse in any material respect to the Holders of the Notes.
SECTION 4.16. LIMITATION ON ASSET SWAPS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, in one or a series of related transactions, directly or
indirectly, engage in any Asset Swaps, unless:
(i) at the time of entering into the agreement to swap assets and
immediately after giving effect to the proposed Asset Swap, no Default or Event
of Default will have occurred and be continuing or would occur as a consequence
thereof;
(ii) the Company would, at the time of entering into the agreement to swap
assets and after giving pro forma effect to the proposed Asset Swap as if such
Asset Swap had occurred at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Leverage Ratio test set forth in Section 4.9(a);
(iii) the respective Fair Market Values of the assets being purchased and
sold by the Company or any of its Restricted Subsidiaries are substantially the
same at the time of entering into the agreement to swap assets; and
(iv) at the time of the consummation of the proposed Asset Swap, the
percentage of any decline in the Fair Market Value of the asset or assets being
acquired by the Company and its Restricted Securities will not be significantly
greater than the percentage of any decline in the Fair Market Value of the
assets being disposed of by the Company or its Restricted Subsidiaries,
calculated from the time the agreement to swap assets was entered into.
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SECTION 4.17. LIMITATION ON SALE LEASEBACK TRANSACTIONS.
The Company will not, and will not permit any of its Restricted
Subsidiaries or TV Filme Servicos to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if the Company could have (i) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Leverage Ratio test set forth in Section 4.9(a) and (ii)
incurred a Lien to secure such Indebtedness pursuant to Section 4.12.
SECTION 4.18. LIMITATION ON BUSINESS ACTIVITIES.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in any business other than the Telecommunications
Business and such business activities as are incidental or directly related
thereto.
(b) The Company will not permit (i) TV Filme Servicos to engage in any
business other than the holding of authorizations, licenses or permits issued by
the Ministry of Communications or such other applicable Brazilian governmental
authority or agency in connection with the Telecommunications Business and
business activities incidental or directly related thereto; (ii) TV Filme
Servicos to incur any Indebtedness other than Indebtedness to the Company or any
of its Restricted Subsidiaries; (iii) the Operating Agreement to terminate or be
modified in any way which prevents the Company and its Restricted Subsidiaries
from operating pay television systems relating to such authorizations, licenses
or permits; and (iv) its ownership interest in TV Filme Servicos to be
decreased.
SECTION 4.19. PLEDGED SECURITIES.
(a) On the date of this Indenture, the Company will cause ITSA to purchase
and pledge to the Trustee, for the benefit of the Holders of the Notes, the
Pledged Securities in such amount as will be sufficient upon receipt of
scheduled interest and principal payments of such securities, in the opinion of
a nationally recognized firm of independent public accountants selected by the
Company, to provide for payment in full of the first four scheduled interest
payments due on the Notes. The Pledged Securities will be pledged by ITSA to the
Trustee for the benefit of the Holders of the Notes pursuant to the Pledge
Agreement and will be held by the Trustee in the Pledge Account.
(b) Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to provide for
payment in full of the first four scheduled interest payments due on the Notes
(or, in the event an interest payment or interest payments have been made, an
amount sufficient to provide for payment in full of any interest payments
remaining, up to and including the fourth scheduled interest payment), the
Trustee will be permitted to release to ITSA, at the Company's request, any such
excess amount.
SECTION 4.20. PLEDGED INTERCOMPANY NOTE.
On the date of this Indenture, the Company will loan the proceeds from the
sale of the Initial Notes to ITSA, which loan will be evidenced by the
Intercompany Note. On the date of this Indenture, the Company will cause the
Intercompany Note to be pledged by the Company to the Trustee for the benefit of
the Holders of the Notes pursuant to the Note Pledge Agreement as security for
payment of principal and interest under the Notes.
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SECTION 4.21. SUBSIDIARY GUARANTEES.
(a) The Company will cause each of TV Filme Brasilia Servicos de
Telecomunicacoes Ltda., TV Filme Goiania Servicos de Telecomunicacoes Ltda. and
TV Filme Belem Servicos de Telecomunicacoes Ltda. to execute and deliver a
Subsidiary Guarantee to the Trustee on the date of this Indenture.
(b) If the Company or any of its Restricted Subsidiaries acquires or
creates another Restricted Subsidiary after the date of this Indenture, and if
such newly acquired or created Restricted Subsidiary is required pursuant to the
terms of this Indenture to execute and deliver a Subsidiary Guarantee, the
Company will cause such Restricted Subsidiary to execute such Subsidiary
Guarantee and deliver it to the Trustee, together with an Opinion of Counsel in
a form reasonably satisfactory to the Trustee.
ARTICLE 5
SUCCESSORS
SECTION 5.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
(a) The Company may not consolidate or merge with or into (whether or not
the Company is the surviving entity), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity,
unless:
(i) the Company is the surviving entity or the entity or the Person formed
by or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition will have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made assumes all the obligations of the Company under the Notes and this
Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction, no Default or
Event of Default exists or would exist;
(iv) such transaction will not result in the loss or suspension or
material impairment of any Material Telecommunications License;
(v) except in the case of a merger of the Company with or into a Wholly
Owned Restricted Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition will have been made (A) will (treating any Indebtedness
not previously an obligation of the Company or any of its Restricted
Subsidiaries as a result of such transaction as having been incurred at the
time of such transaction) have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Company immediately preceding the transaction and (B) will, at the time of
such transaction and
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after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Leverage Ratio test
set forth in Section 4.9(a); and
(vi) the Company will have delivered to the Trustee an Officers'
Certificate and an opinion of counsel in form reasonably satisfactory to the
Trustee, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture.
(b) Subject to the provisions described in Section 5.1(e), no Guarantor
may consolidate or merge with or into (whether or not such Guarantor is the
surviving entity or Person), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another corporation, entity or Person unless:
(i) the entity or Person formed by or surviving any such consolidation or
merger (if other than such Guarantor) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made assumes all the obligations of such Guarantor under the Subsidiary
Guarantee, in form satisfactory to the Trustee;
(ii) immediately after such transaction, no Default or Event of Default
exists;
(iii) the Company and its Restricted Subsidiaries will have Consolidated
Net Worth immediately after such transaction equal to or greater than the
Consolidated Net Worth of the Company and its Restricted Subsidiaries
immediately preceding such transaction;
(iv) the Company and its Restricted Subsidiaries would, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Leverage Ratio test set forth in Section 4.9(a);
(v) the Company will have delivered to the Trustee an Officers'
Certificate, and an Opinion of Counsel in form reasonably satisfactory to the
Trustee, each stating that such consolidation, merger or transfer complies
with this Indenture; and
(vi) such Guarantor will have delivered a written instrument in form
reasonably satisfactory to the Trustee confirming its Subsidiary Guarantee
after giving effect to such consolidation, merger or transfer.
Notwithstanding the foregoing, any Guarantor may merge into, consolidate with or
transfer all or part of its properties or assets to the Company, one or more
Guarantors or one or more Restricted Subsidiaries which become Guarantors
concurrently therewith.
(c) Notwithstanding Section 5.1(b), if no Default exists or would exist
under this Indenture, concurrently with any sale or disposition (by merger or
otherwise) of any Guarantor in accordance with the terms of this Indenture
(other than a transaction subject to the provisions of Section 5.1(b)) by the
Company or any of its Restricted Subsidiaries to any Person that is not an
Affiliate of the Company or any of its Restricted Subsidiaries, such Guarantor
will automatically and unconditionally be released from all obligations under
its Subsidiary Guarantee; provided, however, that any such release will occur
only to the extent that all obligations of such Guarantor under, and all of its
guarantees of, and all of its
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pledges of assets or other security interests which secure, any other
Indebtedness of the Company or any of its Restricted Subsidiaries will also
terminate upon such release, sale or transfer.
(d) For purposes of this Section 5.1, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more of the Subsidiaries
of the Company, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Company or the applicable Guarantor, as the
case may be, will be deemed to be the transfer of all or substantially all of
the properties and assets of the Company or the applicable Guarantor, as the
case may be.
(e) Notwithstanding clause (v) of Section 5.1(a), (i) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to, the Company and (ii) the Company may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Company in
another State of the United States so long as the amount of Indebtedness of the
Company and its Restricted Subsidiaries is not increased thereby.
SECTION 5.2. SUCCESSOR COMPANY SUBSTITUTED.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole in accordance with Section 5.1, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made, will succeed to, and be substituted for, and may exercise every right and
power of the Company under this Indenture with the same effect as if such
successor corporation had been named as the Company therein; and thereafter, if
the Company is dissolved following a transfer of all or substantially all of its
assets in accordance with this Indenture, the Company will be discharged and
released from all obligations and covenants under this Indenture and the Notes.
The Trustee will enter into a supplemental indenture to evidence the succession
and substitution of such successor Person and such discharge and release of the
Company.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
An "Event of Default" occurs if one of the following will have occurred
and be continuing:
(a) the Company defaults in the payment when due of any interest payable
on or prior to December 15, 1998 with respect to the Notes;
(b) the Company defaults in the payment when due of any interest payable
after December 15, 1998 or Liquidated Damages with respect to the Notes at
any time, which default continues for a period of 30 calendar days;
(c) the Company defaults in payment when due of the principal of or
premium, if any, on the Notes;
(d) the Company fails to comply with the provisions of Sections 4.10,
4.14, 4.19, 4.20, 4.21 or 5.1;
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(e) the Company fails to comply with any of its other agreements in this
Indenture or the Notes and such failure continues for 30 days after notice
from the Trustee or Holders of at least 25% in aggregate principal amount of
the Notes then outstanding;
(f) the Company defaults under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries), whether such Indebtedness or Guarantee now
exists or is created after the date of this Indenture, which default (i) is
caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness following the expiration of the grace period provided in
such Indebtedness on the date of such default (a "Payment Default") or (ii)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5,000,000 (or the equivalent thereof at time of
determination) or more;
(g) the Company or any of its Restricted Subsidiaries fail to pay final
non-appealable judgments rendered against the Company or any of its
Restricted Subsidiaries aggregating in excess of $2,500,000 (or the
equivalent thereof at time of determination), which judgments are not paid,
discharged or stayed for a period of 60 days after such judgments become
final and non-appealable; and
(h) the Company or any Restricted Subsidiary of the Company pursuant to or
within the meaning of any Bankruptcy Law: (i) commences a voluntary case or
proceeding, (ii) consents to the entry of an order for relief against it in
an involuntary case or proceeding, (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (iv) makes a
general assignment for the benefit of its creditors, or (v) admits in writing
its inability to pay its debts generally as they become due; or takes any
comparable action under any foreign laws relating to insolvency;
(i) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (i) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding, (ii) appoints
a Custodian of the Company or any Significant Subsidiary of the Company or
for all or substantially all of its respective properties, or (iii) orders
the liquidation of the Company or any Significant Subsidiary of the Company;
or any similar relief is granted under any foreign laws, and in each case the
order or decree remains unstayed and in effect for 60 calendar days.
Notwithstanding the foregoing, if an Event of Default specified in clause
(f) above occurs and is continuing, such Event of Default and all consequences
thereof (including, without limitation, any acceleration or resulting payment
default) will be annulled and rescinded, automatically and without any action by
the Trustee or the Holders of the Notes, if (i) the Indebtedness that is the
subject of such Event of Default has been repaid, or (ii) the default relating
to such Indebtedness is waived or cured (and if such Indebtedness has been
accelerated, when the holders thereof have rescinded their declaration of
acceleration in respect of such Indebtedness).
In the case of any Event of Default occurring by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to
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the optional redemption provisions of this Indenture, an equivalent premium will
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
December 15, 2000 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then the premium
specified in this Indenture will also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
SECTION 6.2. ACCELERATION.
If any Event of Default specified in clauses (a), (b), (c), (d), (e), (f)
or (g) of Section 6.1 occurs and is continuing, then the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes by written
notice to the Company and the Trustee may declare the unpaid principal of, and
any accrued interest on, all the Notes to be due and payable immediately. If any
Event of Default with respect to the Company specified in clauses (h) or (i) of
Section 6.1 hereof occurs with respect to the Company, any Significant
Subsidiary of the Company or any group of Restricted Subsidiaries of the Company
that, taken together, would constitute a Significant Subsidiary of the Company,
all outstanding principal and interest on the Notes will be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. The Holders of a majority in principal amount of the Notes then
outstanding, by written notice to the Trustee and to the Company, may rescind an
acceleration (except an acceleration due to a default in payment of the
principal of, or premium, interest or Liquidated Damages, if any, on, any of the
Notes) if the rescission would not conflict with any judgment or decree and if
all existing Events of Default (except nonpayment of principal, premium,
interest that have become due solely because of the acceleration) have been
cured or waived.
SECTION 6.3. OTHER REMEDIES.
Subject to Section 6.2, if an Event of Default occurs and is continuing,
the Trustee may pursue any available remedy by proceeding at law or in equity to
collect any payment due on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default will not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.4. WAIVER OF PAST DEFAULTS.
Subject to Section 9.2, Holders of a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may, on behalf of
the Holders of all of the Notes, waive an existing Default or Event of Default
and its consequences hereunder (including without limitation acceleration and
its consequences, including any related payment default that resulted from such
acceleration) except a continuing Default or Event of Default in the payment of
the principal of or premium, interest or Liquidated Damages on the Notes. Upon
any such waiver, such Default will cease to exist, and any Event of Default
arising therefrom will be deemed to have been cured for every purpose of this
Indenture; but no such waiver will extend to any subsequent or other Default or
impair any right consequent thereon.
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SECTION 6.5. CONTROL BY MAJORITY.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture or that the Trustee determines may be
unduly prejudicial to the rights of another Holder or that involves the Trustee
in personal liability. The Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction.
SECTION 6.6. LIMITATION ON SUITS.
Subject to the provisions of Section 6.7 hereof, no Holder of a Note may
pursue any remedy with respect to this Indenture or the Notes (including without
limitation the institution of any proceeding, judicial or otherwise, with
respect to the Notes or this Indenture or for the appointment of a receiver or
trustee for the Company and/or any of its Subsidiaries) unless:
(a) the Holder has given to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the Notes
then outstanding have made a written request to the Trustee to pursue the
remedy;
(c) such Holders have offered to provide to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee has not complied with the request within 60 calendar days
after receipt of the request and the offer of indemnity; and
(e) during such 60-day period, the Holders of a majority in aggregate
principal amount of the Notes then outstanding have not given the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with the
request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
The right of any Holder of a Note to receive payment of principal of, and
premium, if any, interest or Liquidated Damages, if any, on, such Note, on or
after the respective due dates expressed in such Note (including in the case of
a redemption, the applicable redemption price on the applicable redemption
date), or to bring suit for the enforcement of any such payment on or after such
respective dates, will not be impaired or affected without the consent of such
Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(a), (b) or (c) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for principal of, premium, if
any, interest and Liquidated Damages, if any, on, the Notes and interest on
overdue principal and, to the extent lawful, interest, and such further amount
as will be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel and any other
amounts due to the Trustee under Section 7.7.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and will be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee will consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof. To the extent that the payment of any such reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof out
of the estate in any such proceeding, will be denied for any reason, payment of
the same will be secured by a Lien on, and will be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained will be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it will pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, if any, interest and Liquidated Damages, if any, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any, interest and Liquidated
Damages, if any, respectively; and
Third: the remainder to the Company or to such party as a court of
competent jurisdiction will direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
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SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, each party to this Indenture agrees, and each Holder by its
acceptance of its Notes will be deemed to have agreed, that any court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.7
hereof, or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
will exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent Person would
exercise or use under the circumstances in the conduct of its own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee will not be liable hereunder except for such duties
of the Trustee which will be determined solely by the express provisions
of this Indenture and the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants or obligations will be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon Officer's Certificates or Opinions
of Counsel furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee will examine the certificates and
opinions to determine whether or not such documents conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee will not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee will not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section 7.1.
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(e) No provision of this Indenture will require the Trustee to expend or
risk its own funds or incur any liability whatsoever in the performance of any
of its duties hereunder or in the exercise of any of its rights or powers
hereunder. The Trustee will be under no obligation to exercise any of its rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders, unless such Holders will have offered to the Trustee security and
indemnity satisfactory to the Trustee in its sole subjective discretion (which
discretion will be exercised in good faith) against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(f) The Trustee will not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.2. RIGHTS OF TRUSTEE.
(a) Subject to Section 7.1, the Trustee may conclusively rely upon any
document believed by it to be genuine and to have been signed or presented by
the proper Person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may consult with
counsel and require an Officers' Certificate or an Opinion of Counsel or both.
The Trustee will not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and will not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee will not be liable for any action it takes or omits to
take in good faith that it believes in its sole subjective discretion (which
discretion will be exercised in good faith) to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) The permissive right of the Trustee to act hereunder will not be
construed as a duty.
(f) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company will be sufficient if signed by an
authorized Officer of the Company.
(g) The Trustee will be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders, unless such Holders will have offered to the Trustee security or
indemnity satisfactory to the Trustee in its sole subjective discretion (which
discretion will be exercised in good faith) against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(h) The Trustee will not be required to take notice or deemed to have
notice of any Event of Default hereunder, except failure by the Company to make
any of the payments to the Trustee pursuant to Section 6.1(a), (b) or (c),
unless the Trustee will be specifically notified in writing of such Event of
Default by the Company or by one or more of the Holders.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would
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have if it were not Trustee. However, in the event that the Trustee acquires
any conflicting interest (as such term is defined in TIA Section 310(b)), it
must eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee (to the extent permitted under TIA Section 310(b)) or
resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee will not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it will not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it will not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it will not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.5. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee will mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after such event occurs. Except in
the case of a Default or Event of Default under Section 6.1(a), (b) or (c)
(including, without limitation, the payment of the Change of Control Price
Payment on the Change of Control Payment Date, the payment of the applicable
redemption price on the redemption date and the payment of the Net Proceeds
Offer Price on the Net Proceeds Purchase Date), the Trustee may withhold such
notice if it determines that withholding the notice is in the interests of the
Holders of the Notes.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each July 31 beginning with the July 31 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee will mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also will comply
with TIA Section 313(b)(2). The Trustee will also transmit by mail all reports
as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
will be mailed to the Company and filed with the SEC and each stock exchange, if
any, on which the Notes are listed in accordance with and to the extent required
by TIA Section 313(d). The Company will promptly notify the Trustee if the Notes
become listed on any stock exchange or automatic quotation system.
SECTION 7.7. COMPENSATION AND INDEMNITY.
Absent any other agreement to the contrary, the Company will pay to the
Trustee from time to time compensation as will be agreed upon between the
Company and the Trustee for its acceptance of this Indenture and services
hereunder. The Trustee's compensation will not be limited by any law on
compensation of a trustee of an express trust. The Company will reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses will include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
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The Company will indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.7) and defending itself against any claim (whether asserted by
the Company or any Holder or any other Person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its gross
negligence or bad faith. The Trustee will promptly notify the Company of any
claim for which it may seek indemnity. The Company will defend the claim and the
Trustee will cooperate in the defense. The Trustee may have separate counsel and
the Company will pay the reasonable fees and expenses of such counsel; provided
that the Company will not be required to pay such fees and expenses if it
assumes the Trustee's defense with counsel acceptable to and approved by the
Trustee (such approval not to be unreasonably withheld) and there is no conflict
of interest between the Company and the Trustee in connection with such defense.
The Company need not pay for any settlement made without its written consent,
which consent will not be unreasonably withheld. The Company need not reimburse
the Trustee for any expense or indemnity against any liability or loss of the
Trustee to the extent such expense, liability or loss is attributable to the
gross negligence, bad faith or willful misconduct of the Trustee.
The obligations of the Company under this Section 7.7 will survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
will have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien will survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee will comply with the provisions of TIA Section 313(b)(2).
SECTION 7.8. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee will become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing upon 60 days notice and be discharged
from the trust hereby created by so notifying the Company in writing. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing
and may appoint a successor trustee with the consent of the Company. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a receiver, Custodian or public officer takes charge of the Trustee or
its property; or
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(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company will promptly appoint or request the
Trustee to appoint a successor Trustee. Within one year after the successor
Trustee takes office, the Holders of a majority in principal amount of the then
outstanding Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee will deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee will become effective, and the successor Trustee
will have all the rights, powers and duties of the Trustee under this Indenture.
The successor Trustee will mail a notice of its succession to Holders of the
Notes. The retiring Trustee will promptly transfer all property held by it as
Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.7
hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
the Company's obligations under Section 7.7 hereof will continue for the benefit
of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
resulting, surviving or transferee corporation without any further act will, if
the resulting, surviving or transferee corporation is otherwise eligible
hereunder, be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There will at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100,000,000
as set forth in its most recent published annual report of condition.
This Indenture will always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee shall comply with TIA
Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed will be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE 8
DEFEASANCE AND DISCHARGE
SECTION 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.2 or 8.3 hereof applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.2. LEGAL DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company will, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company will be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which will thereafter be deemed to be "outstanding" only for
the purposes of Section 8.6 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, will execute proper instruments acknowledging
the same), except for the following provisions which will survive until
otherwise terminated or discharged pursuant to this Indenture: (a) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.4 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, and premium, if any, interest and Liquidated
Damages, if any, on, such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and, to the extent such
obligations are not satisfied by payment from such trust fund, Section 4.1
hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (d) this
Article 8. Subject to compliance with this Article 8, the Company may exercise
its option under this Section 8.2 notwithstanding the prior exercise of its
option under Section 8.3 hereof.
SECTION 8.3. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, and subject to the satisfaction of the
conditions set forth in Section 8.4 hereof, the Company will be released from
its obligations under the covenants contained in Sections 4.3, 4.4, 4.5, 4.7,
4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 5.1,
and 5.2 with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Notes will thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but will
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes will not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company need not comply with and will have no liability
in respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply will
not constitute a Default or an Event of Default under Section 6.1 hereof, but,
except as specified above, the remainder of this Indenture and such Notes will
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be unaffected thereby. In addition, upon the Company's exercise under 8.1 hereof
of the option applicable to this Section 8.3 hereof, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, Section 6.1(d), (f) and (g)
hereof will not constitute Events of Default.
SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
In order to exercise either Legal Defeasance or Covenant Defeasance, the
Company must irrevocably deposit, or cause to be deposited, with the Trustee (or
another trustee satisfying the requirements of this Indenture), in trust for
such purpose, (1) money in an amount, (2) non-callable Government Securities
which through the scheduled payment of principal, interest and Liquidated
Damages, if any, in respect thereof in accordance with their terms will provide
not later than one day before the due date of any payment money in an amount, or
(3) a combination thereof, sufficient, without reinvestment, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay the principal of,
and premium, if any, and interest and Liquidated Damages, if any, on, the
outstanding Notes at maturity or upon redemption, together with all other
amounts payable by the Company under this Indenture. Such Legal Defeasance or
Covenant Defeasance will become effective 123 days after such deposit if and
only if:
(i) no Default or Event of Default with respect to the Notes will
have occurred and be continuing immediately prior to the time of such
deposit;
(ii) no Default or Event of Default pursuant to Sections 6.1(h) or
6.1(i) will have occurred at any time in the period ending on the 123rd
day after the date of such deposit and will be continuing on such 123rd
day;
(iii) such defeasance does not result in a breach or violation of,
or constitute a default under, any other material agreement or instrument
to which the Company is a party or by which it is bound (and, in
furtherance of such condition, no Default or Event of Default will result
under this Indenture due to the incurrence of Indebtedness to fund such
deposit and the entering into of customary documentation in connection
therewith, even though such documentation may contain provisions that
would otherwise give rise to a Default or Event of Default); and
(iv) the Company has delivered to the Trustee (A)(1) in the case of
Legal Defeasance, an Opinion of Counsel to the effect that (x) there has
been published by the Internal Revenue Service a ruling or (y) since the
date of this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel will confirm that, the Holders of the Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred, or (2) in the case of
Covenant Defeasance, an Opinion of Counsel to the effect that the Holders
of the Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (B) an Opinion of Counsel to the effect that after the 123rd day
after the date of such deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (C) an Officer's Certificate
stating that such deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding
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creditors of the Company or others; and (D) an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent relating
to such Legal Defeasance or Covenant Defeasance have been complied with.
SECTION 8.5. DISCHARGE.
If (i) either (a) all such Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes that have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust with the
Trustee and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation; or (b) all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable by their terms and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount of money in U.S. dollars
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for the principal amount,
premium, if any, accrued and unpaid interest, and Liquidated Damages, if any, to
the date of such deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof; (ii) the
Company has paid all other sums payable by it under this Indenture; and (iii)
the Company has delivered irrevocable instructions to the Trustee to apply the
deposited money toward the payment of the Notes (except lost, stolen or
destroyed Notes that have been replaced or paid and Notes for whose payment
money has been theretofore deposited in trust with the Trustee and thereafter
repaid to the Company or discharged from such trust) at maturity, as the case
may be, then this Indenture will cease to be of further force or effect and, at
the written request of the Company, accompanied by an Officer's Certificate and
Opinion of Counsel, each stating that all conditions precedent provided for
herein relating to the satisfaction and discharge of this Indenture have been
complied with, and upon payment of the costs, charges and expenses incurred or
to be incurred by the Trustee in relation thereto or in carrying out the
provisions of this Indenture, the Trustee will satisfy and discharge this
Indenture ("Discharge"); provided that the Company's obligations with respect to
the payment of principal, premium, if any, interest and Liquidated Damages, if
any, will not terminate until the same shall apply the moneys so deposited to
the payment to the Holders of Notes of all sums due and to become due thereon.
SECTION 8.6. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.7 hereof, all money and Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.6, the "Trustee") pursuant
to Section 8.4 or 8.5 hereof in respect of the outstanding Notes will be held in
trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company or any of its Subsidiaries or Affiliates acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any,
interest and Liquidated Damages, if any, but such money need not be segregated
from other funds except to the extent required by law.
The Company will pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the money or Government Securities
deposited pursuant to this Section 8.6 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
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Anything in this Article 8 to the contrary notwithstanding, the Trustee
will deliver or pay to the Company from time to time upon the request of the
Company any money or Government Securities held by it as provided in this
Section 8.6 which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.4 hereof), are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance, Covenant Defeasance or Discharge.
SECTION 8.7. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company or any of its Subsidiaries or Affiliates, in trust for the payment
of the principal of, or premium, if any, or interest on, any Note and remaining
unclaimed for one year after such principal, premium, if any, interest or
Liquidated Damages, if any, has become due and payable will be paid to the
Company on its request or (if then held by the Company or any of its
Subsidiaries or Affiliates) will be discharged from such trust; and the Holder
of such Note will thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company or any
of its Subsidiaries or Affiliates as trustee thereof, will thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which will not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.8. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or Government Securities in accordance with Section 8.2, 8.3 or 8.5
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
will be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2, 8.3 or 8.5 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such assets in accordance with Section 8.2, 8.3 or 8.5
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, or premium, if any, or interest on, any Note following
the reinstatement of its obligations, the Company will be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.2 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture, the Notes, the Pledge Agreement, the
Note Pledge Agreement, the Intercompany Note or the Subsidiary Guarantees
without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
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(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of Notes in the case of a merger or consolidation pursuant to Article
5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any such Holder; or
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA as then in effect.
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.2 hereof, the Trustee will join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained.
SECTION 9.2. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided in Section 9.1 and in this Section 9.2, this Indenture,
the Notes, the Pledge Agreement, the Note Pledge Agreement, the Intercompany
Note or the Subsidiary Guarantees may be amended or supplemented by the Company,
each Guarantor, ITSA and the Trustee with the consent of the Holders of at least
a majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes), and, subject to Sections 6.4 and 6.7 and the
second to last paragraph of Section 6.1, and any existing default, Default,
Event of Default (other than a Default or Event of Default in the payment of
principal of, premium, if any, interest or Liquidated Damages, if any, on, the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or non-compliance with any provision of this Indenture, the Notes,
the Pledge Agreement, the Note Pledge Agreement, the Intercompany Note or the
Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a purchase of, or a tender offer or exchange offer
for, the Notes).
Upon the request of the Company accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
Indenture (or amendment or supplement to the Pledge Agreement, the Note Pledge
Agreement, the Intercompany Note or the Subsidiary Guarantees, as the case may
be), and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.2 hereof, the Trustee will
join with the Company in the execution of such amended or supplemental Indenture
(or amendment or supplement to the Pledge Agreement, the Note Pledge Agreement,
the Intercompany Note or the Subsidiary Guarantees, as the case may be), and to
make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee will not be obligated to enter into such amended or
supplemental Indenture or any other document in connection with this Indenture
that adversely affects its own rights, duties, liabilities or immunities under
this Indenture or otherwise.
It will not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it will be sufficient if such consent approves the substance
thereof.
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After an amendment, supplement or waiver under this Section 9.2 becomes
effective, the Company will mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, will not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a
majority in principal amount of the Notes then outstanding may waive compliance
in a particular instance by the Company with any provision of this Indenture or
the Notes. However, without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
the Intercompany Note or alter the provisions with respect to the redemption
of the Notes (other than provisions relating to Section 3.7);
(c) reduce the rate of or change the time for payment of interest on any
Note or the Intercompany Note;
(d) waive a Default or Event of Default in the payment of principal of, or
premium, if any, interest or Liquidated Damages, if any, on the Notes (except
a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration) or reduce the Change of
Control Payment, the Net Proceeds Offer Price or the applicable redemption
price or the Intercompany Note;
(e) make any Note or the Intercompany Note payable in money other than
that stated in the Notes or the Intercompany Note;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of, premium, if any, interest or Liquidated Damages, if
any, on, the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 3.7);
(h) release any Collateral from the Lien created by the Pledge Agreement
or the Note Pledge Agreement, except in accordance with the terms thereof, or
amend such terms; or
(i) make any change in the foregoing amendment and waiver provisions.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes will be set
forth in an amended or supplemental Indenture that complies with the TIA as then
in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion
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of a Note that evidences the same debt as the consenting Holder's Note, even if
notation of the consent is not made on any Note. However, any such Holder of a
Note or subsequent Holder of a Note may revoke the consent as to its Note if the
Trustee receives written notice of revocation before the date the waiver,
supplement or amendment has been approved by the requisite Holders. An
amendment, supplement or waiver becomes effective when approved by the requisite
Holders and executed by the Trustee (or, if otherwise provided in such waiver,
supplement or amendment, in accordance with its terms) and thereafter binds
every Holder.
The Company may, but will not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
will be entitled to consent to such amendment or waiver or revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No consent will be valid or effective for more than 90 days after
such record date except to the extent that the requisite number of consents to
the amendment, supplement or waiver have been obtained within such 90-day period
or as set forth in the next paragraph of this Section 9.4.
After an amendment, supplement or waiver becomes effective, it will bind
every Holder, unless it makes a change described in any of clauses (a) through
(i) of Section 9.2, in which case, the amendment, supplement or waiver will bind
only each Holder of a Note who has consented to it and every subsequent Holder
of a Note or portion of a Note that evidences the same indebtedness as the
consenting Holder's Note, provided that any such waiver shall not impair or
affect the right of any other Holder to receive payment of principal, premium,
interest and Liquidated Damages, if any, on a Note, on or after the respective
dates set for such amounts to become due and payable expressed in such Note, or
to bring suit for the enforcement of any such payment on or after such
respective dates.
SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee or
require the Holder to put an appropriate notation on the Note. The Trustee may
place an appropriate notation on the Note about the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note will issue and the Trustee will authenticate a
new Note that reflects the changed terms. Any failure to make the appropriate
notation or to issue a new Note shall not affect the validity of such amendment,
supplement or waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee will sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. In
executing any amended or supplemental indenture, the Trustee will be entitled to
receive and (subject to Section 7.1) will be fully protected in relying upon, an
Officer's Certificate and an Opinion of Counsel to the effect that the execution
of such amended or supplemental indenture is authorized or permitted by this
Indenture.
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SECTION 9.7. PAYMENTS FOR CONSENT.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any terms or provisions of
this Indenture, the Notes, the Pledge Agreement, the Note Pledge Agreement, the
Intercompany Note or the Subsidiary Guarantees unless such consideration is
offered to be paid or is paid to all Holders of the Notes that so consent, waive
or agree to amend in the time frame set forth in solicitation documents relating
to such consent, waiver or agreement.
ARTICLE 10
COLLATERAL AND SECURITY
SECTION 10.1. PLEDGE AGREEMENT AND NOTE PLEDGE AGREEMENT.
The due and punctual payment of the principal of and interest on the Notes
when and as the same shall be due and payable, whether on an interest payment
date, at maturity, by acceleration, repurchase, redemption or otherwise, and
interest on the overdue principal of and interest (to the extent permitted by
law), if any, on the Notes and performance of all other obligations of the
Company to the Holders of Notes or the Trustee under this Indenture with respect
to the Notes and the Notes, according to the terms hereunder or thereunder,
shall be secured as provided in the Pledge Agreement and the Note Pledge
Agreement. Each Holder of Notes, by its acceptance thereof, consents and agrees
to the terms of the Pledge Agreement and the Note Pledge Agreement (including,
without limitation, the provisions providing for foreclosure and disbursement of
Collateral) as the same may be in effect or may be amended from time to time in
accordance with its terms and authorizes and directs the Trustee to enter into
the Pledge Agreement and the Note Pledge Agreement and to perform its
obligations and exercise its rights thereunder in accordance therewith. The
Company shall deliver to the Trustee copies of the Pledge Agreement and the Note
Pledge Agreement, and shall do or cause to be done all such acts and things as
may be necessary or proper, or as may be required by the provisions of the
Pledge Agreement and the Note Pledge Agreement, to assure and confirm to the
Trustee the security interest in the Collateral contemplated by the Pledge
Agreement and the Note Pledge Agreement or any part thereof, as from time to
time constituted, so as to render the same available for the security and
benefit of this Indenture with respect to, and of, the Notes, according to the
intent and purposes expressed in the Pledge Agreement and the Note Pledge
Agreement. The Company shall take any and all actions reasonably required to
cause the Pledge Agreement and the Note Pledge Agreement to create and maintain
(to the extent possible under applicable law), as security for the obligations
of the Company hereunder, a valid and enforceable perfected first priority Lien
in and on all the Collateral, in favor of the Trustee for the benefit of the
Holders of Notes, superior to and prior to the rights of all third Persons.
SECTION 10.2. RECORDING AND OPINIONS.
(a) The Company shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken necessary
to make effective the Lien intended to be created by the Pledge Agreement and
the Note Pledge Agreement, and reciting with respect to the security interests
in the Collateral, the details of such action, or (ii) stating that, in the
opinion of such counsel, no such action is necessary to make such Lien
effective.
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(b) The Company shall furnish to the Trustee on December 20, 1997, and on
each December 20 thereafter, an Opinion of Counsel, dated as of such date,
either (i) stating that (A) in the opinion of such counsel, action has been
taken with respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further assurance as
is necessary to maintain the Lien of the Pledge Agreement and the Note Pledge
Agreement and reciting with respect to the security interests in the Collateral
the details of such action or referring to prior Opinions of Counsel in which
such details are given and (B) based on relevant laws as in effect on the date
of such Opinion of Counsel, all financing statements and continuation statements
have been executed and filed that are necessary as of such date and during the
succeeding 12 months fully to preserve and protect, to the extent such
protection and preservation are possible by filing, the rights of the Holders of
Notes and the Trustee hereunder and under the Pledge Agreement and the Note
Pledge Agreement with respect to the security interests in the Collateral or
(ii) stating that, in the opinion of such counsel, no such action is necessary
to maintain such Lien and assignment.
SECTION 10.3. RELEASE OF COLLATERAL.
(a) Subject to subsections (b), (c) and (d) of this Section 10.3,
Collateral may be released from the Lien and security interest created by the
Pledge Agreement and the Note Pledge Agreement only in accordance with the
provisions of the Pledge Agreement and the Note Pledge Agreement.
(b) Except to the extent that any Lien on proceeds of Collateral is
automatically released by operation of Section 9-306 of the Uniform Commercial
Code or other similar law, no Collateral shall be released from the Lien and
security interest created by the Pledge Agreement and the Note Pledge Agreement
pursuant to the provisions of the Pledge Agreement and the Note Pledge
Agreement, other than pursuant to the terms thereof, unless there shall have
been delivered to the Trustee the certificate required by Section 10.3(d) and
Section 10.4.
(c) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Notes shall have been accelerated (whether by
declaration or otherwise), no Collateral shall be released pursuant to the
provisions of the Pledge Agreement and the Note Pledge Agreement, and no release
of Collateral in contravention of this Section 10.3(c) shall be effective as
against the Holders of Notes.
(d) The release of any Collateral from the Liens and security
interests created by the Pledge Agreement and the Note Pledge Agreement shall
not be deemed to impair the security under this Indenture in contravention of
the provisions hereof if and to the extent the Collateral is released pursuant
to the terms hereof or, subject to complying with the requirements of this
Section 10.3, pursuant to the terms of the Pledge Agreement and the Note Pledge
Agreement. To the extent applicable, the Company shall cause TIA Section 314(d)
relating to the release of property or securities from the Lien and security
interest of the Pledge Agreement and the Note Pledge Agreement to be complied
with. Any certificate or opinion required by TIA Section 314(d) may be made by
an Officer of the Company except in cases where TIA Section 314(d) requires
that such certificate or opinion be made by an independent Person, which Person
shall be an independent engineer, appraiser or other expert selected or
approved by the Trustee in the exercise of reasonable care.
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SECTION 10.4. CERTIFICATES OF THE COMPANY.
The Company shall furnish to the Trustee, prior to any proposed release
of Collateral other than pursuant to the express terms of the Pledge Agreement
and the Note Pledge Agreement, (i) all documents* required by TIA Section
314(d) and (ii) an Opinion of Counsel, which may be rendered by internal
counsel to the Company, to the effect that such accompanying documents
constitute all documents required by TIA Section 314(d). The Trustee may, to
the extent permitted by Sections 7.1 and 7.2, accept as conclusive evidence of
compliance with the foregoing provisions the appropriate statements contained
in such documents and such Opinion of Counsel.
SECTION 10.5. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE
PLEDGE AGREEMENT AND NOTE PLEDGE AGREEMENT.
Subject to the provisions of Section 7.1 and 7.2, the Trustee may, without
the consent of the Holders of Notes, on behalf of the Holders of Notes, take all
actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Pledge Agreement and the Note Pledge Agreement and (ii) collect and
receive any and all amounts payable in respect of the obligations of the Company
hereunder. The Trustee shall have power to institute and maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts that may be unlawful or in violation of the Pledge Agreement and the
Note Pledge Agreement or this Indenture, and such suits and proceedings as the
Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders of Notes in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
interest thereunder or be prejudicial to the interests of the Holders of Notes
or of the Trustee).
SECTION 10.6. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE PLEDGE
AGREEMENT AND NOTE PLEDGE AGREEMENT
The Trustee is authorized to receive any funds for the benefit of the
Holders of Notes disbursed under the Pledge Agreement and the Note Pledge
Agreement, and to make further distributions of such funds to the Holders of
Notes according to the provisions of this Indenture.
SECTION 10.7. TERMINATION OF SECURITY INTEREST.
Upon the earliest to occur of (i) the payment in full of all obligations
of the Company under this Indenture and the Notes, (ii) Legal Defeasance
pursuant to Section 8.2 and (iii) Covenant Defeasance pursuant to Section 8.3,
the Trustee shall, at the written request of the Company, release any Liens
created or existing pursuant to this Indenture, the Pledge Agreement or the Note
Pledge Agreement upon the Company's compliance with the provisions of the TIA
pertaining to release of collateral.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), such TIA-imposed duties will control.
SECTION 11.2. NOTICES.
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
TV Filme, Inc.
c/o ITSA-Intercontinental Telecomunicacoes Ltda.
SCS, Quadra 07-B1.A
Ed. Executive Tower
Sala 601
70.300.911 Brasilia-DF Brazil
Phone No.: 011-55-61-314-9908
Telecopier No.: 011-55-61-323-5660
Attention: Hermano Studart Lins de Albuquerque
With a copy to:
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901-3229
Phone No.: (203) 324-1400
Telecopier No.: (203) 964-3188
Attention: John T. Capetta, Esq.
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
11th Floor
New York, NY 10004
Phone No.: (212) 858-2815
Telecopier No.: (212) 858-2952
Attention: Corporate Trust Administration
The Company or the Trustee, by notice to the other, may designate
additional or different addresses for subsequent notices or communications.
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All notices and communications (other than those sent to Holders) will be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; ten Business Days after being deposited in the mail, postage prepaid,
if mailed; when receipt acknowledged, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery, in each case to the address shown above.
Notwithstanding the foregoing, notices to the Trustee will only be effective
upon actual receipt thereof by the Trustee at the Corporate Trust Office of the
Trustee.
Any notice or communication to a Holder will be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the Register. Any
notice or communication will also be so mailed to any Person described in TIA
Section 313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it will not affect its sufficiency
with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it will mail a
copy to the Trustee and each Agent at the same time.
SECTION 11.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else will have the protection of TIA
Section 312(c).
SECTION 11.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company will furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which will include the statements set forth in Section 11.5
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which will include the statements set forth in Section 11.5
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 11.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) will comply with the provisions of TIA
Section 314(e) and will include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
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(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 11.6. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHERS.
No past, present or future director, officer, employee, incorporator,
partner or stockholder of either of the Company or any of its Subsidiaries, as
such, will have any liability for any obligations of the Company or its
Subsidiaries under the Notes, the Intercompany Note, the Pledge Agreement, the
Note Pledge Agreement, the Subsidiary Guarantees or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes and the Subsidiary Guarantees.
SECTION 11.8. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES.
SECTION 11.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
This Indenture will inure to the benefit of and be binding upon the
parties hereto and each of their respective successors and assigns, except that
the Company may not assign this Indenture or its obligations hereunder except as
expressly permitted by Sections 5.1 and 5.2. Without limiting the generality of
the foregoing, this Indenture will inure to the benefit of all Holders from time
to time. Nothing expressed or mentioned in this Indenture is intended or shall
be construed to give any Person, other than the parties hereto, their respective
successors and assigns, and the Holders, any legal or equitable right, remedy or
claim under or in respect of this Indenture or any provision herein contained.
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SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12. ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy will be an original, but all of them together represent the same agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and will in no way
modify or restrict any of the terms or provisions hereof.
SECTION 11.14. COUNTERPARTS.
This Indenture may be signed in counterparts and by the different parties
hereto in separate counterparts, each of which will constitute an original and
all of which together will constitute one and the same instrument.
SECTION 11.15. AGENT FOR SERVICE; SUBMISSION TO JURISDICTION; WAIVER OF
IMMUNITIES.
By the execution and delivery of this Indenture or any amendment or
supplement hereto, the Company (i) acknowledges that it has, by separate written
instrument, designated and appointed Corporation Service Company currently
located at 375 Hudson Street, New York, New York 10014, as its authorized agent
upon which process may be served in any suit, action or proceeding with respect
to, arising out of, or relating to, the Notes, this Indenture (other than an
insolvency, liquidation or bankruptcy proceeding or any other proceeding in the
nature of an in rem or quasi in rem proceeding), that may be instituted in any
Federal or state court in the State of New York, The City of New York, the
Borough of Manhattan, or brought under Federal or state securities laws or
brought by the Trustee (whether in its individual capacity or in its capacity as
Trustee hereunder), and acknowledges that Corporation Service Company has
accepted such designation, (ii) submits to the jurisdiction of any such court in
any such suit, action or proceeding, and (iii) agrees that service of process
upon Corporation Service Company shall be deemed in every respect effective
service of process upon the Company in any such suit, action or proceeding. The
Company further agrees to take any and all action, including the execution and
filing of any and all such documents and instruments as may be necessary to
continue such designation and appointment of Corporation Service Company in full
force and effect so long as this Indenture shall be in full force and effect;
provided that the Company and each Subsidiary Guarantor may and shall (to the
extent Corporation Service Company ceases to be able to be served on the basis
contemplated herein), by written notice to the Trustee, designate such
additional or alternative agents for service of process under this Section 11.15
that (i) maintains an office located in the Borough of Manhattan, The City of
New York in the State of New York, (ii) are either (a) counsel for the Company
or (b) a corporate service company which acts as agent for service of process
for other persons in the ordinary course of its business and for other persons
in the ordinary course of its business and (iii) agrees to act as agent for
service of process in accordance with this Section 11.15. Such notice shall
identify the name of such agent for process and the address of such agent for
process in the Borough of
72
<PAGE>
Manhattan, The City of New York, State of New York. Upon the request of any
Holder of a Note, the Trustee shall deliver such information to such Holder.
Notwithstanding the foregoing, there shall, at all times, be at least one agent
for service of process for the Company appointed and acting in accordance with
this Section 11.15.
To the extent that the Company has or hereafter may acquire any immunity
from jurisdiction of any court or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property, the Company
hereby irrevocably waives such immunity in respect of its obligations under this
Indenture and the Notes, to the extent permitted by law.
SECTION 11.16. CURRENCY OF ACCOUNT; CONVERSION OF CURRENCY; FOREIGN EXCHANGE
RESTRICTIONS.
(a) U.S. dollars are the sole currency of account and payment for all sums
payable by the Company under or in connection with the Notes or this Indenture,
including damages. Any amount received or recovered in a currency other than
U.S. dollars (whether as a result of, or of the enforcement of, a judgment or
order of a court of any jurisdiction, in the winding-up or dissolution of the
Company or otherwise) by any Holder of a Note in respect of any sum expressed to
be due to it from the Company will only constitute a discharge to the Company to
the extent of the dollar amount which the recipient is able to purchase with the
amount so received or recovered in that other currency on the date of that
receipt or recover (or, if it is not practicable to make that purchase on that
date, on the first date on which it is practicable to do so). If that U.S.
dollar amount is less than the U.S. dollar amount expressed to be due to the
recipient under any Note, the Company will indemnify it against any loss
sustained by it as a result as set forth in Section 11.16(b). In any event, the
Company will indemnify the recipient against the cost of making any such
purchase. For the purposes of this Section 11.16, it will be sufficient for the
Holder of a Note to certify in a satisfactory manner (indicating sources of
information used) that it would have suffered a loss had an actual purchase of
U.S. dollars been made with the amount so received in that other currency on the
date of receipt or recovery (or, if a purchase of U.S. dollars on such date had
not been practicable, on the first date on which it would have been practicable,
it being required that the need for a change of date be certified in the manner
mentioned above). The indemnities set forth in this 11.16 constitute separate
and independent cause of action, shall apply irrespective of any indulgence
granted by any Holder of a Note and shall continue in full force and effect
despite any other judgment, order, claim or proof for a liquidated amount in
respect of any sum due under any Note.
(b) The Company covenants and agrees that the following provisions shall
apply to conversion of currency in the case of the Notes and this Indenture:
(i) If for the purpose of obtaining judgment in, or enforcing the judgment
of, any court in any country, it becomes necessary to convert into a currency
(the "judgment currency") an amount due in any other currency (the "Base
Currency"), then the conversion shall be made at the rate of exchange
prevailing on the Business Day before the day on which the judgment is given
or the order of enforcement is made, as the case may be (unless a court shall
otherwise determine).
(ii) If there is a change in the rate of exchange prevailing between the
Business Day before the day on which the judgment is given or an order of
enforcement is made, as the case may be (or such other date as a court shall
determine), and the date of receipt of the amount due, the Company will pay
such additional (or, as the case may be, such lesser) amount, if any, as may
be necessary so that
73
<PAGE>
the amount paid in the judgment currency when converted at the rate of
exchange prevailing on the date of receipt will produce the amount in the
Base Currency originally due.
(iii) In the event of the winding-up of the Company at any time while any
amount or damages owing under the Notes and this Indenture, or any judgment
or order rendered in respect thereof, shall remain outstanding, the Company
will indemnify and hold the Holders of the Notes and the Trustee harmless
against any deficiency arising or resulting from any variation in rates of
exchange between (1) the date as of which the U.S. Dollar Equivalent of the
amount due or contingently due under the Notes and this Indenture (other than
under this subsection (b)(ii)) is calculated for the purposes of such
winding-up and (2) the final date for the filing of proofs of claim in such
winding-up. For the purpose of this subsection (b)(ii), the final date for
the filing of proofs of claim in the winding-up of the Company will be the
date fixed by the liquidator or otherwise in accordance with the relevant
provisions of applicable law as being the latest practicable date as at which
liabilities of the Company may be ascertained for such winding-up prior to
payment by the liquidator or otherwise in respect thereto.
(iv) The obligations contained in subsections (a), (b)(i)(B), (b)(ii) and
(b)(v) of this Section 11.16 shall constitute separate and independent
obligations from the other Indenture obligations of the Company, shall give
rise to separate and independent causes of action against the Company, shall
apply irrespective of any waiver or extension granted by any Holder of a Note
or the Trustee or either of them from time to time and shall continue in full
force and effect notwithstanding any judgment or order or the filing of any
proof of claim in the winding-up of the Company for a liquidated sum in
respect of amounts due hereunder (other than under subsection (b)(ii) above)
or under any such judgment or order. Any such deficiency as aforesaid shall
be deemed to constitute a loss suffered by the Holders of the Note or the
Trustee, as the case may be, and no proof or evidence of any actual loss
shall be required by the Company or the liquidator or otherwise or any of
them. In the case of subsection (b)(ii) above, the amount of such deficiency
shall not be deemed to be reduced by any variation in rates of exchange
occurring between the said final date and the date of any liquidating
distribution.
(v) The term "rate(s) of exchange" shall mean the rate of exchange quoted
by Reuters at 10:00 a.m. (New York City time) for spot purchases of the Base
Currency with the judgment currency other than the Base Currency referred to
in subsections (b)(i) and (b)(ii) above and includes any premiums and costs
of exchange payable.
(c) In the event that on any payment date in respect of the Notes, any
restrictions or prohibition of access to the Brazilian foreign exchange market
exists, the Company agrees to pay all amounts payable under the Notes in the
currency of the Notes by all reasonable means (which shall not include
commencement of legal proceedings against the Central Bank of Brazil or any
other governmental agency or authority or central bank), on any due date for
payment under the Notes, for the purchase of the currency of such Notes. All
costs and taxes payable in connection with the procedures referred to in this
Section 11.16 shall be borne by the Company.
[Signatures on following page]
74
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Indenture this
December 20, 1996.
TV FILME, INC.
By: /s/ Hermano Studart Lins de Albuquerque
------------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Chief Executive Officer
IBJ SCHRODER BANK & TRUST COMPANY, as
Trustee
By: /s/ Max Volmar
-------------------------------------------
Name: Max Volmar
Title: Vice President
WITNESSES:
/s/ Regina L. Hillman
- ---------------------------
Name: Regina L. Hillman
/s/ Jaime Mercado
- ---------------------------
Name: Jaime Mercado
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 20th day of December, 1996, before me, a notary public within and
for said county, personally appeared Max Volmar, to me personally known who
being duly sworn, did say that he was the Vice President of IBJ Schroder Bank &
Trust Company, one of the persons described in and which executed the foregoing
instrument, and acknowledges said instrument to be the free act and deed of
said corporation.
/s/ Paul V. Coughlin
- -------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary
public within and for said county, personally appeared Hermano Studart Lins de
Albuquerque, to me personally known who being duly sworn, did say that he was
the Chief Executive Officer of TV Filme, Inc., one of the persons described in
and which executed the foregoing instrument, and acknowledges said instrument
to be the free act and deed of said corporation.
/s/ Olivia Savell
- -----------------------
[NOTARIAL SEAL]
<PAGE>
ANNEX I
EXISTING INDEBTEDNESS
TV FILME BELEM
<TABLE>
<CAPTION>
=====================================================================================================
<C> <C> <C> <C> <C> <C>
DUE BANK US$ GARANTORS
- -----------------------------------------------------------------------------------------------------
12/Sep/97 BCN 343,040,00 GENERAL ABRIL REFINANCE
INST.
- -----------------------------------------------------------------------------------------------------
14/Aug/97 BNL 80,400,00 GENERAL ABRIL REFINANCE
INST.
- -----------------------------------------------------------------------------------------------------
14/Nov/97 BNL 101,200,00 GENERAL ABRIL REFINANCE
INST.
- -----------------------------------------------------------------------------------------------------
TOTAL 524,640,00
</TABLE>
TV FILME BRASILIA
<TABLE>
<CAPTION>
=====================================================================================================
<C> <C> <C> <C> <C> <C>
06/Aug/97 BNL 343,040,00 GENERAL ABRIL REFINANCE
INST.
- -----------------------------------------------------------------------------------------------------
24/Sep/97 BCN 804,000,00 GENERAL ABRIL REFINANCE
INST.
- -----------------------------------------------------------------------------------------------------
07/Oct/97 BOZANO 804,000,00 GENERAL ABRIL REFINANCE
INST.
- -----------------------------------------------------------------------------------------------------
Monthly Unibanco 153,328,00 ITSA LEASING
- -----------------------------------------------------------------------------------------------------
TOTAL 1,951,040,00
</TABLE>
TV FILME GOIANIA
<TABLE>
<CAPTION>
=====================================================================================================
<C> <C> <C> <C> <C> <C>
03/Sep/97 BCN 343,040,00 GENERAL ABRIL REFINANCE
INST.
- -----------------------------------------------------------------------------------------------------
13/Aug/97 BIC 107,200,00 GENERAL ABRIL REFINANCE
INST.
- -----------------------------------------------------------------------------------------------------
450,240,00
TV FILME SERVICOS
=====================================================================================================
<C> <C> <C> <C> <C> <C>
Feb/97 & TEVECAP 400,000,00 TEVECAP LICENSE
Feb/98
- -----------------------------------------------------------------------------------------------------
TOTAL 3,325,920,00
</TABLE>
<PAGE>
Exhibit A
(Face of Note)
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depository (as defined below) to a nominee of the Depository or by a nominee of
the Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) (the "Depository"), to the Company or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as may be requested by an authorized
representative of the Depository (and any payment is made to Cede & Co. or such
other entity as may be requested by an authorized representative of the
Depository), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.(1)
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OF
REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2) AGREES THAT IT WILL
NOT PRIOR TO (X) THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD THAT MAY
THEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES ACT AS PERMITTING
THE RESALE BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS
SECURITY) OR THE LAST DAY ON WHICH TV FILME, INC. OR ANY AFFILIATE OF TV FILME,
INC. WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y)
SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO TV FILME, INC., (B) TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IN A PRINCIPAL AMOUNT OF AT
LEAST $100,000 OR (F) OUTSIDE THE U.S. TO A NON-U.S. PERSON PURSUANT TO RULE 904
OF REGULATION S, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THIS LEGEND
- -----------
(1) This paragraph should be included only if the Note is issued in global
form.
A-1
<PAGE>
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "U.S." AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS ASSIGNED TO THEM IN REGULATION S.(2)
- -----------
(2) This legend not required in the case of (1) a Note issued pursuant to
Section 2.6(f)(ii) of the Indenture or (2) an Exchange Note issued
pursuant to Section 2.6(f)(iii) of the Indenture.
A-2
<PAGE>
TV FILME, INC.
12 7/8% Senior Notes due 2004
No. __________ $__________
[CUSIP No. 873071AA2](3)
[CUSIP No. 873071ABO](4)
[CINS No. U87301AA2
ISIN No. USU87301AA20]
TV Filme, Inc., a Delaware corporation (the "Company")
promises to pay to _________________________________
or registered assigns,
the principal sum of _______________________ Dollars on December 15, 2004
Interest Payment Dates: June 15 and December 15, commencing on June 15,
1997.
Record Dates: June 1 and December 1.
- -----------
(3) CUSIP No. for the Restricted Global Note.
(4) CUSIP No. for Definitive Notes.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
Dated: December __, 1996
TV FILME, INC.
By:
---------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the Notes referred to in the within-mentioned Indenture:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:__________________________________
Authorized Signatory
Dated: _______________________________
WITNESSES:
By:_________________________________
Name:
By:_________________________________
Name:
A-4
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of December, 1996, before me, a notary public
within and for said county, personally appeared _____________________________,
to me personally known who being duly sworn, did say that he was the
___________________________ of TV Filme, Inc., one of the persons described in
and which executed the foregoing instrument, and acknowledges said instrument
to be the free act and deed of said corporation.
__________________________________
[NOTARIAL SEAL]
A-5
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 20th day of December, 1996, before me, a notary public
within and for said county, personally appeared Max Volmar, to me personally
known who being duly sworn, did say that he was the Vice President of IBJ
Schroder Bank & Trust Company, one of the persons described in and which
executed the foregoing instrument, and acknowledges said instrument to be the
free act and deed of said corporation.
__________________________________
[NOTARIAL SEAL]
<PAGE>
(Back of Note)
12 7/8% Senior Notes due 2004
Capitalized terms used herein but not defined will have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST.
The Notes will be limited in aggregate principal amount to $140,000,000
and will mature on December 15, 2004. The Company promises to pay interest on
the principal amount of this Note from December 20, 1996 until maturity. The
Company will pay interest semi-annually on June 15 and December 15 of each year,
commencing June 15, 1997, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes
will accrue at the rate of 12 7/8% per annum from the most recent date to which
interest has been paid or, if no interest has been paid, from December 20, 1996.
The Company will pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law to the extent that such interest is an
allowed claim enforceable against the debtor under such Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at the rate
equal to 1% per annum in excess of the then applicable interest rate on this
Note to the extent lawful; it will pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law to the extent that such
interest is an allowed claim against the debtor under such Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Notwithstanding any other provision of the Indenture or this
Note: (i) accrued and unpaid interest on the Initial Notes being exchanged in
the Exchange Offer will be due and payable on the next Interest Payment Date for
the Exchange Notes following the Exchange Offer, (ii) interest on the Exchange
Notes to be issued in the Exchange Offer will accrue from the date the Exchange
Offer is consummated and (iii) the Exchange Notes will have no provisions for
Liquidated Damages.
2. METHOD OF PAYMENT.
The Company will pay the principal of, and premium, interest and
Liquidated Damages, if any, on, the Notes on the dates and in the manner
provided herein and in the Indenture. Principal, premium, if any, interest and
Liquidated Damages, if any, on, Definitive Notes will be payable, and Definitive
Notes may be presented for registration of transfer or exchange, at the office
or agency of the Company maintained for such purpose. Principal of, and premium
and interest on, Global Notes will be payable by the Company through the Trustee
to the Depository in immediately available funds. Holders of Definitive Notes
will be entitled to receive interest payments by wire transfer in immediately
available funds if appropriate wire transfer instructions have been received in
writing by the Trustee not less than 15 days prior to the applicable Interest
Payment Date. Such wire instructions, upon receipt by the Trustee, will remain
in effect until revoked by such Holder. If wire instructions have not been
received by the Trustee with respect to any Holder of a Definitive Note, payment
of interest may be made by check in immediately available funds mailed to such
Holder at the address set forth upon the Register maintained by the Registrar.
A-7
<PAGE>
3. PAYING AGENT AND REGISTRAR.
Initially, IBJ Schroder Bank & Trust Company, the Trustee under the
Indenture, will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company or any of
its Subsidiaries may act in any such capacity, provided, however, that none of
the Company, its Subsidiaries or the Affiliates of the foregoing will act (i) as
Paying Agent in connection with any redemption, offer to purchase, discharge or
defeasance, as otherwise specified in the Indenture, and (ii) as Paying Agent or
Registrar if a Default or Event of Default has occurred and is continuing.
4. INDENTURE.
The Company issued the Notes under an Indenture dated as of December 20,
1996 (as such may be amended, supplemented or restated from time to time, the
"Indenture") between the Company and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. The Notes are
senior obligations of the Company ranking pari passu in right of payment with
all existing and future senior Indebtedness of the Company and ranking senior in
right of payment to any future subordinated Indebtedness of the Company. The
Notes are limited to $140,000,000 in aggregate principal amount.
5. OPTIONAL REDEMPTION.
Except as set forth below, the Company will not have the option to redeem
the Notes prior to December 15, 2000. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve month period beginning on December 15, of
the years indicated below:
Year Percentage
---- ----------
2000 106.4375%
2001 104.2917%
2002 102.1458%
2003 and thereafter 100.0000%
Notwithstanding the foregoing, on and prior to December 15, 1999, the
Company may redeem up to 35% in aggregate principal amount of the Notes
originally outstanding at a redemption price of 112 7/8% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date with the net proceeds of a Public Equity
Offering; provided that no less than 65% of the aggregate principal amount of
the Notes originally issued remains outstanding immediately after the occurrence
of such redemption; and provided further, that notice of such redemption will be
given not later than 30 days, and such redemption will occur not later than 90
days, after the date of the closing of such Public Equity Offering.
A-8
<PAGE>
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company will not be required
to make mandatory redemption or sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon a Change of Control, the Company will be required to make an
offer to Holders to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of each Holder's Notes at an offer price in cash equal to 101%
of the aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of repurchase as provided in,
and subject to the terms of, the Indenture.
(b) If the Company or any Restricted Subsidiary consummates any Asset
Sale, the Company may be required, subject to the terms and conditions of the
Indenture, to utilize a certain portion of the proceeds received from such Asset
Sale to repurchase Notes at a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase.
8. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. The transfer of Notes may be registered
and Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption, except for the unredeemed portion of any Note being
redeemed in part. Also, it need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the next succeeding Interest Payment
Date.
9. PERSONS DEEMED OWNERS.
The registered Holder of a Note may be treated as its owner for all
purposes.
10. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest remains
unclaimed for one year, the Trustee and the Paying Agent will pay the money back
to the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such money will cease.
11. DEFEASANCE PRIOR TO REDEMPTION OR MATURITY.
Subject to certain conditions contained in the Indenture, the Company at
any time may terminate some or all of its obligations under the Notes and the
Indenture if the Company deposits with the Trustee money or Government
Securities sufficient to pay the principal of, premium, interest and Liquidated
Damages, if any, on, the Notes to redemption or maturity, as the case may be.
A-9
<PAGE>
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding, and any existing Default or
Event or Default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes. Without the consent of any Holder of a Note, the
Indenture or the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
obligations to Holders of Notes in case of a merger or consolidation, to make
any change that would provide any additional rights or benefits to the Holders
of the Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, or to comply with the requirements of the SEC in
order to effect or maintain the qualification of the Indenture under the TIA as
then in effect.
13. DEFAULTS AND REMEDIES.
An "Event of Default" occurs if one of the following will have occurred
and be continuing:
(a) the Company defaults in the payment when due of any interest payable
on or prior to December 15, 1998 with respect to the Notes;
(b) the Company defaults in the payment when due of any interest payable
after December 15, 1998 or Liquidated Damages with respect to the Notes at
any time, which default continues for a period of 30 calendar days;
(c) the Company defaults in payment when due of the principal of or
premium, if any, on the Notes;
(d) the Company fails to comply with the provisions of Sections 4.10,
4.14, 4.19, 4.20, 4.21 or 5.1 of the Indenture;
(e) the Company fails to comply with any of its other agreements in this
Indenture or the Notes and such failure continues for 30 days after notice
from the Trustee or Holders of at least 25% in aggregate principal amount of
the Notes then outstanding;
(f) the Company defaults under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries), whether such Indebtedness or Guarantee now
exists or is created after the date of the Indenture, which default (i) is
caused by a failure to pay principal of or premium, if any, or interest on
such Indebtedness following the expiration of the grace period provided in
such Indebtedness on the date of such default (a "Payment Default") or (ii)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5,000,000 (or the equivalent thereof at time of
determination) or more;
A-10
<PAGE>
(g) the Company or any of its Restricted Subsidiaries fail to pay final
non-appealable judgments rendered against the Company or any of its
Restricted Subsidiaries aggregating in excess of $2,500,000 (or the
equivalent thereof at time of determination), which judgments are not paid,
discharged or stayed for a period of 60 days after such judgments become
final and non-appealable; and
(h) the Company or any Restricted Subsidiary of the Company pursuant to or
within the meaning of any Bankruptcy Law: (i) commences a voluntary case or
proceeding, (ii) consents to the entry of an order for relief against it in
an involuntary case or proceeding, (iii) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (iv) makes a
general assignment for the benefit of its creditors, or (v) admits in writing
its inability to pay its debts generally as they become due; or takes any
comparable action under any foreign laws relating to insolvency;
(i) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (i) is for relief against the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding, (ii) appoints
a Custodian of the Company or any Significant Subsidiary of the Company or
for all or substantially all of its respective properties, or (iii) orders
the liquidation of the Company or any Significant Subsidiary of the Company;
or any similar relief is granted under any foreign laws, and in each case the
order or decree remains unstayed and in effect for 60 calendar days.
Notwithstanding the foregoing, if an Event of Default specified in clause
(f) above occurs and is continuing, such Event of Default and all consequences
thereof (including, without limitation, any acceleration or resulting payment
default) will be annulled and rescinded, automatically and without any action by
the Trustee or the Holders of the Notes, if (i) the Indebtedness that is the
subject of such Event of Default has been repaid, or (ii) the default relating
to such Indebtedness is waived or cured (and if such Indebtedness has been
accelerated, when the holders thereof have rescinded their declaration of
acceleration in respect of such Indebtedness).
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium will also
become and be immediately due and payable to the extent permitted by law upon
the acceleration of the Notes. If an Event of Default occurs prior to December
15, 2000 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the premium specified in the
Indenture will also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
If any Event of Default specified in clauses (a), (b), (c), (d), (e), (f)
or (g) above occurs and is continuing, then the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes by written notice to
the Company and the Trustee may declare the unpaid principal of, and any accrued
interest on, all the Notes to be due and payable immediately. If any Event of
Default with respect to the Company specified in clauses (h) or (i) above occurs
with respect to the Company, any Significant Subsidiary of the Company or any
group of Restricted Subsidiaries of the Company that, taken together, would
constitute a Significant Subsidiary of the Company, all outstanding principal
and interest on the Notes will be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the Notes then
A-11
<PAGE>
outstanding, by written notice to the Trustee and to the Company, may rescind an
acceleration (except an acceleration due to a default in payment of the
principal of, or premium, interest or Liquidated Damages, if any, on, any of the
Notes) if the rescission would not conflict with any judgment or decree and if
all existing Events of Default (except nonpayment of principal, premium,
interest that have become due solely because of the acceleration) have been
cured or waived.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect any payment
due, or to enforce the performance of any provision, under the Notes or the
Indenture. The Trustee may refuse to enforce the Indenture or the Notes unless
it receives reasonable indemnity or security. Holders of Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except under clauses (a), (b) or (c) above) if it determines that
withholding notice is in their interest.
14. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or any Affiliate of
the Company with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest (as such term
is defined in TIA Section 310(b)), it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee (to the extent
permitted under TIA Section 310(b)) or resign. Any Agent may do the same with
like rights and duties.
15. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHERS.
No past, present or future director, officer, employee, incorporator,
partner or stockholder of either of the Company or any of its Subsidiaries, as
such, will have any liability for any obligations of the Company or its
Subsidiaries under the Notes, the Intercompany Note, the Pledge Agreement, the
Note Pledge Agreement, the Subsidiary Guarantees or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes and the Subsidiary Guarantees.
16. AUTHENTICATION.
This Note will not be valid until authenticated by the manual signature of
the Trustee or an authenticating agent.
17. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
A-12
<PAGE>
18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES.
In addition to the rights provided to Holders under this Indenture,
Holders of Transfer Restricted Securities will have all the rights set forth in
the Registration Rights Agreement.
19. CUSIP, CINS AND ISIN NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP, CINS and ISIN
numbers to be printed on the Notes and the Trustee may use CUSIP, CINS and ISIN
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO
CONSTRUE THE INDENTURE AND THE NOTES.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
TV Filme, Inc.
c/o ITSA-Intercontinental Telecomunicacoes Ltda.
SCS, Quadra 07-B1.A
Ed. Executive Tower
Sala 601
70.300.911 Brasilia-DF Brazil
Phone No.: 011-55-61-314-9908
Telecopier No.: 011-55-61-323-5660
Attention: Hermano Studart Lins de Albuquerque
A-13
<PAGE>
Assignment Form
To assign this Note, fill in the form below and have your signature
guaranteed: (I) or (we) assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date: _________________________ Your Name:______________________________
(Print your name exactly as it appears
on the face of this Note)
Your Signature:_________________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee*:___________________
- ----------
* Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-14
<PAGE>
Option of Holder to Elect Purchase
If you elect to have this Note purchased by the Company pursuant to
Section 4.10 or Section 4.14 of the Indenture, check the appropriate box below:
|_| Section 4.10 |_| Section 4.14
If you elect to have only part of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount (in
minimum denominations of $1,000 or integral multiples thereof) you elect to have
purchased: $___________
Date: _________________________ Your Name:______________________________
(Print your name exactly as it appears
on the face of this Note)
Your Signature:_________________________
(Sign exactly as your name appears on
the face of this Note)
Social Security or Tax Identification
No.:____________________________________
Signature Guarantee*:___________________
- ----------
* Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-15
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE(5)
The following exchanges of a part of this Global Note for Definitive Notes
have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ---------------- --------------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------
(5) This schedule should be included only if the Note is issued in global form.
A-16
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF NOTES
Re: 12 7/8% Senior Notes due 2004 of TV Filme, Inc.
This Certificate relates to $_____ principal amount of Notes held in *|_|
global or *|_| definitive form by ________________ (the "Transferor").
The Transferor*:
|_| has requested the Trustee by written order to deliver, in exchange for
its beneficial interest in the Global Note held by the Depository or a Note or
Notes in definitive, registered form, for a beneficial interest in the Exchange
Global Note issued pursuant to the Exchange Offer, in both cases in the
authorized denominations in an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof indicated
above); or
|_| has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with any transfer of any of the Notes occurring prior to the
expiration of the period referred to in Rule 144(k) under the Securities Act of
1933, as amended (the "Securities Act"), after the later of the date of original
issuance of such Notes and the last date, if any, on which such Notes were owned
by the Company or any Affiliate of the Company, the undersigned confirms that
such Notes are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under the
Securities Act; or
(3) |_| inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) that purchases for
its own account or for the account of a qualified institutional
buyer to whom notice is given that such transfer is being made in
reliance on Rule 144A, in each case pursuant to and in compliance
with Rule 144A under the Securities Act; or
(4) |_| outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act; or
- -----------
* Check applicable box.
B-1
<PAGE>
(5) |_| inside the United States to an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) that, prior to such transfer, furnishes to the
Trustee a signed letter containing certain representations and
agreements (the form of which letter can be obtained from the
Trustee) and an opinion of counsel acceptable to the Company that
such transfer is in compliance with the restrictions set forth in
the legend on the Notes; or
(6) |_| pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Notes in the name of any person other than the registered holder
thereof; provided, however, that if box (4), (5) or (6) is checked, the
Trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, such as the exemption
provided by Rule 144 under such Act.
Date: _________________________ Your Name:______________________________
(Print your name exactly as it appears
on the face of this Note)
Your Signature:_________________________
(Sign exactly as your name appears on
the face of this Note)
Social Security or Tax Identification
No.:____________________________________
Signature Guarantee**:__________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the Notes
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act,
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ____________________ ________________________________________________
NOTICE: To be executed by an executive officer
- -----------
** Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
B-2
<PAGE>
Exhibit 4.2
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of December 20, 1996
by and among
TV FILME, INC.,
BEAR, STEARNS & CO. INC.,
BT SECURITIES CORPORATION,
J.P. MORGAN SECURITIES INC.
and
ALEX. BROWN & SONS INCORPORATED
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 20, 1996 by and among TV Filme, Inc., a Delaware corporation
("TV Filme"), Bear, Stearns & Co. Inc. ("Bear Stearns"), BT Securities
Corporation ("BT Securities"), J.P. Morgan Securities Inc. ("J.P. Morgan") and
Alex. Brown & Sons Incorporated ("Alex. Brown"). Bear Stearns, BT Securities,
J.P. Morgan and Alex. Brown are hereafter referred to collectively as the
"Initial Purchasers".
Pursuant to the Purchase Agreement, dated December 16, 1996 (the "Purchase
Agreement"), by and among TV Filme and the Initial Purchasers, the Initial
Purchasers have agreed to purchase $140,000,000 aggregate principal amount of TV
Filme's 12 7/8% Senior Notes due 2004 (the "Initial Notes").
In order to induce the Initial Purchasers to enter into the Purchase
Agreement and purchase the Initial Notes, TV Filme has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York on which banks are authorized to close or a federal holiday,
consisting, in each case, of the time period from 12:01 a.m. through 12:00
midnight Eastern time.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (i) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Exchange
Notes to be issued in the Exchange Offer, (ii) the maintenance of such
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the minimum period required pursuant to
Section 3(b) hereof, and (iii) the delivery by TV Filme to the Trustee under the
Indenture of Exchange Notes in the same aggregate principal amount as the
aggregate principal amount of Initial Notes that were validly tendered by
Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Initial Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5 hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: TV Filme's 12 7/8% Senior Notes due 2004 to be issued
pursuant to the Indenture in the Exchange Offer or pursuant to a Shelf
Registration Statement, in each case in exchange for Initial Notes.
Exchange Offer: The registration by TV Filme under the Act of the Exchange
Notes pursuant to the Exchange Offer Registration Statement pursuant to which TV
Filme offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such
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<PAGE>
Holders for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities validly
tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Initial Notes to (i) certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act in reliance upon the exemption
from the registration requirements of the Act provided by Rule 144A under the
Act, (ii) certain institutional "accredited investors," as such term is defined
in Rule 501(a)(1), (2), (3) and (7) under the Act ("Accredited Institutions") in
a private placement exempt from the registration requirements under the Act or
(iii) non-U.S. Persons in reliance upon Regulation S under the Act.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of December 20, 1996, between TV Filme
and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"), pursuant to
which the Securities are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Initial Notes: As defined in the preamble hereto.
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the Securities.
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, corporation, limited liability
company, joint venture, association, joint stock company, trust or other
organization whether or not a legal entity, or a government or agency or
political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective Registration Statement in reliance upon Rule 430A
promulgated under the Act), as amended or supplemented by any prospectus
supplement and by all other amendments thereto, including post-effective
amendments, and all material incorporated by reference into such Prospectus.
Purchase Agreement: As defined in the preamble hereto.
Record Holder: With respect to any Damages Payment Date relating to the
Securities, each Person who is a Holder of the Securities on the record date
with respect to the Interest Payment Date on which such Damages Payment Date
shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of TV Filme relating to
(a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, which is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Securities: The Initial Notes and the Exchange Notes.
2
<PAGE>
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration: A registration effected by the filing of a Shelf
Registration Statement pursuant to Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each of the Securities, upon original
issuance thereof, until the earliest to occur, with respect to a particular
Security, of (a) the date on which such Security is exchanged by a Holder other
than a Broker-Dealer in the Exchange Offer and entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (b) following the exchange by a Broker-Dealer in the
Exchange Offer of an Initial Note for an Exchange Note, the date on which the
Exchange Note is sold to a purchaser who receives from such Broker-Dealer on or
prior to the date of such sale a copy of the Prospectus contained in the
Exchange Offer Registration Statement, (c) the date on which such Security has
been effectively registered under the Act and disposed of in accordance with a
Shelf Registration Statement, (d) the date on which such Security may be
distributed to the public pursuant to Rule 144 under the Act or by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (e) the date on which such Security ceases to be
outstanding.
Underwritten Registration or Underwritten Offering: A registration on a
Shelf Registration Statement in which securities of TV Filme are sold to an
underwriter for re-offering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The Securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (so long as the procedures set forth in Section 6(a)
below are being or have been complied with), TV Filme shall (i) use its best
efforts to cause to be filed with the Commission, as soon as practicable but in
no event later than 60 days after the Closing Date, the Exchange Offer
Registration Statement, (ii) use its best efforts to cause such Exchange Offer
Registration Statement to be declared effective by the Commission at the
earliest practicable time, but not later than 120 days after the Closing Date,
(iii) in connection with the foregoing, file (A) all pre-effective amendments to
such Exchange Offer Registration Statement as may be necessary in order to cause
such Exchange Offer Registration Statement to become effective, (B) if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings in connection with the registration and qualification of the Exchange
Notes to be made under the Blue Sky laws of such jurisdictions as are necessary
to permit Consummation of the Exchange Offer, except as would subject TV Filme
to service of process or general taxation where it is not currently subject, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on an
appropriate form permitting registration of the Exchange Notes to be offered in
exchange for the Initial Notes and to permit resales of Securities held by
Broker-Dealers as contemplated by Section 3(c) below. If, after such Exchange
Offer Registration Statement initially is declared effective by the Commission,
the Exchange Offer or the issuance of Exchange Notes thereunder or the sale of
Transfer Restricted Securities pursuant thereto as contemplated
3
<PAGE>
by Section 3(c) below is interfered with by any stop order, injunction or other
order or requirement of the Commission or any other governmental agency or
court, such Exchange Offer Registration Statement shall be deemed not to have
become effective for purposes of this Agreement during the period that such stop
order, injunction or other similar order or requirement shall remain in effect.
(b) TV Filme shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. TV Filme shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Securities shall
be included in the Exchange Offer Registration Statement. TV Filme shall use its
reasonable best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but not later than 30 days after the Exchange Offer
Registration Statement has become effective.
(c) TV Filme shall indicate in a "Plan of Distribution" section contained
in the Prospectus included in the Exchange Offer Registration Statement that any
Broker-Dealer who holds Initial Notes that are Transfer Restricted Securities
and that were acquired for its own account as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from TV Filme), may exchange such Initial Notes
pursuant to the Exchange Offer; provided, however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with any
resales of the Exchange Notes received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery by
such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such resales by Broker-Dealers that the
Commission may require in order to permit such resales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Securities held by any such Broker-Dealer except to the extent
required by the Commission as a result of a change in policy after the date of
this Agreement.
TV Filme shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Securities acquired by Broker-Dealers
for their own accounts as a result of market-making activities or other trading
activities, and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of twelve months from the date on
which the Exchange Offer Registration Statement is declared effective or such
longer period, if extended pursuant to the provisions of Section 6(d) hereof.
TV Filme shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time during such
period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) TV Filme is not permitted to file an
Exchange Offer Registration Statement or consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or Commission policy
(after the procedures set forth in Section 6(a) below have been complied with)
or (ii) any Holder of Transfer Restricted Securities shall notify TV Filme on or
prior to the 20th Business Day following the consummation of the Exchange Offer
that (A) such Holder is prohibited by a change in applicable law or Commission
policy from participating in the Exchange Offer, or (B) such Holder may not
resell the Exchange Notes to be acquired by it in the Exchange Offer to the
public without delivering a prospectus and that the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder, or (C) that such Holder is a Broker-Dealer and holds
Initial Notes acquired directly from TV Filme or an affiliate of TV Filme, then
TV Filme shall:
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(x) use its best efforts to cause to be filed a shelf registration
statement pursuant to Rule 415 under the Act, which may be an amendment to
the Exchange Offer Registration Statement (in either event, the "Shelf
Registration Statement"), on or prior to the 60th day after the obligation
to file such Shelf Registration Statement arises (and in any event within
120 days after the Closing Date) (the "Shelf Filing Deadline"), which
Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities, the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof; and
(y) use its best efforts to cause such Shelf Registration Statement
to be declared effective by the Commission on or before the 120th day
after the obligation to file such Shelf Registration Statement arises.
TV Filme shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Securities by the Holders of Transfer Restricted
Securities entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of three years following the Closing Date (or such longer period, if
extended pursuant to the provisions of Section 6(d) hereof), or such shorter
period ending when either (1) all Transfer Restricted Securities covered by the
Shelf Registration Statement have been sold in the manner set forth and as
contemplated in the Shelf Registration Statement or (2) there cease to be
outstanding any Transfer Restricted Securities.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
TV Filme in writing, within 10 Business Days after receipt of a written request
therefor, such information specified in Item 507 and Item 508, as applicable, of
Regulation S-K under the Act or any other information required by the Act or
applicable state securities laws for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein.
Each Holder as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to TV Filme all information required to be disclosed
in order to make the information previously furnished to TV Filme by such Holder
not materially misleading. No Holder of Transfer Restricted Securities shall be
entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) TV
Filme fails to commence, accept tenders and, in the case of accepted tenders,
issue Exchange Notes, under the Exchange Offer within 30 Business Days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but thereafter ceases to be effective or fails to be
usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), TV Filme hereby agrees
to pay liquidated damages ("Liquidated Damages") to each Holder of Transfer
Restricted Securities on each Interest Payment Date following the occurrence of
a Registration Default. Liquidated Damages shall accrue from and after the date
of each Registration Default, and continuing thereafter until such Registration
Default has been cured or waived, in an amount equal to $.05 per week per $1,000
principal amount of the Transfer Restricted Securities during the first 90-day
period immediately following the occurrence of the first such Registration
Default, which amount shall increase by an additional $.05 per week per $1,000
principal amount of the Transfer Restricted Securities during each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $.20 per week per $1,000 principal amount of the
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Transfer Restricted Securities. TV Filme shall notify the Trustee within one
Business Day after (i) each and every Registration Default and (ii) the date
such Registration Default has been so cured. All accrued Liquidated Damages
shall be paid to Record Holders by TV Filme in New York, New York by wire
transfer of immediately available funds or by federal funds check on each
Interest Payment Date following the occurrence of a Registration Default as
provided in the Indenture. Following the cure or waiver of all Registration
Defaults relating to any particular Transfer Restricted Securities, the accrual
of Liquidated Damages with respect to such Transfer Restricted Securities will
cease.
All obligations of TV Filme set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, TV Filme shall comply with all of the provisions of Section 6(c) below,
shall use its best efforts to effect such Exchange Offer to permit the sale of
Transfer Restricted Securities being sold in accordance with the intended method
or methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If in the reasonable opinion of counsel to TV Filme there is a
question as to whether the Exchange Offer is permitted by applicable law,
TV Filme hereby agrees to seek a no-action letter or other favorable
decision from the Commission, including oral advice from the staff of the
Commission, allowing TV Filme to Consummate an Exchange Offer for such
Initial Notes. TV Filme hereby agrees to pursue the issuance of such a
decision to the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of Commission policy.
In connection with the foregoing, TV Filme hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to TV Filme setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution of such submission (which need not be favorable) by the
Commission staff.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of TV Filme, prior
to the Consummation thereof, a written representation to TV Filme (which
may be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
affiliate of TV Filme, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any Person to
participate in, a distribution of the Exchange Notes to be issued in the
Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary
course of business. Each Holder hereby acknowledges and agrees that any
Broker-Dealer who acquired Initial Notes directly from TV Filme or any
affiliate of TV Filme and any such Holder intending to use the Exchange
Offer to participate in a distribution of the securities to be acquired in
the Exchange Offer (1) could not under Commission policy as in effect on
the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling, dated July
2, 1993, and similar no-action letters (including any no-action letter
obtained pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection
with a secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K or any other information required by
the Act or applicable state securities laws if the resales are of Exchange
Notes obtained by such Holder in exchange for Initial Notes acquired by
such Holders directly from TV Filme.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, TV Filme shall provide a supplemental letter to the Commission
(A) stating that TV Filme is registering the Exchange Offer in reliance on
the position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988),
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Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable,
any no-action letter obtained pursuant to clause (i) above, (B) including
a representation that TV Filme has not entered into any arrangement or
understanding with any Person to distribute the Exchange Notes to be
received in the Exchange Offer and that, to the best of TV Filme's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Exchange Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, TV Filme shall comply with all the provisions of Section
6(c) below and shall use its best efforts to effect such registration to permit
the sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and pursuant thereto TV
Filme will as expeditiously as practicable prepare and file with the Commission
a Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Securities by Broker-Dealers), TV Filme shall:
(i) prepare and file with the Commission such Registration Statement
and use its best efforts to cause such Registration Statement to become
effective and keep such Registration Statement continuously effective and
provide all requisite financial statements for the period specified in
Section 3 or 4 of this Agreement, as applicable; upon the occurrence of
any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, TV
Filme shall file promptly an appropriate amendment to such Registration
Statement, in the case of clause (A), correcting any such material
misstatement or omission, and, in the case of either clause (A) or (B),
use its best efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable
for their intended purpose(s) as soon as reasonably practicable
thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for
the applicable period set forth in Section 3 or 4 of the Agreement, as
applicable, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been
exchanged or sold or until such Transfer Restricted Securities no longer
constitute Transfer Restricted Securities or are no longer outstanding;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act (or any similar provisions then in force), and to comply fully
with the applicable provisions of Rules 424 and 430A under the Act (or any
similar provisions then in force) in a timely manner; and comply with the
provisions of the Act, the Exchange Act and the rules and regulations of
the Commission promulgated thereunder applicable to it with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) promptly advise the underwriter(s), if any, and selling
Holders and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes or (D) of
the existence of any fact or the
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happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made). If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, TV Filme shall use its reasonable best
efforts to obtain the withdrawal or lifting of such order at the earliest
practicable time;
(iv) furnish to the Initial Purchasers, each selling Holder named in
any Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus if requested by such Person, which documents will be subject to
the review of such Holders and underwriter(s) in connection with such
sale, if any, for a period of at least five Business Days, and TV Filme
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or Prospectus
if requested by such Person to which a selling Holder of Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale, if any, shall reasonably
object within five Business Days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission or fails to comply with the applicable
requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, if
requested by any selling Holder or the underwriter(s), if any, within five
Business Days after receipt of notification thereof from TV Filme, provide
copies of such document to the selling Holders and to the underwriter(s),
if any, make TV Filme's representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling
Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any underwriter, all financial and other records,
pertinent corporate documents and properties of TV Filme and cause TV
Filme' officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney or
accountant in connection with such Registration Statement subsequent to
the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or any underwriter in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and such
underwriter, if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and
any other terms of the offering of the Transfer Restricted Securities to
be sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after TV
Filme is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(viii) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Holders of a majority
in aggregate principal amount of Notes covered thereby or the
underwriter(s), if any;
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(ix) furnish to each selling Holder and each underwriter, if any,
without charge, at least one copy of the Registration Statement, as first
filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits thereto, if
so requested by such Person;
(x) deliver to each selling Holder and each of the underwriter(s) in
connection with such sale, if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; TV Filme hereby
consents to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xi) in the case of the Shelf Registration Statement, enter into
such agreements (including an underwriting agreement), and make such
representations and warranties, and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to such Shelf Registration
Statement contemplated by this Agreement, all to such extent as may be
reasonably acceptable to TV Filme and reasonably requested by the Initial
Purchasers or by any Holder of Transfer Restricted Securities or any
underwriter in connection with any sale or resale pursuant to such Shelf
Registration Statement contemplated by this Agreement; and whether or not
an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, TV Filme shall:
(A) furnish to each selling Holder and each underwriter, if
applicable, in such substance and scope as they may reasonably
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the effectiveness of the Shelf
Registration Statement or, in the case of an Underwritten
Registration, on the closing date of any underwriting (and, in the
case of clause (3) below, on the date of execution of the
underwriting agreement):
(1) certificates, dated the delivery date thereof,
signed by the president, chief operating officer and principal
financial officer of TV Filme, confirming, as the date
thereof, the matters set forth in paragraphs (a), (b), (c) and
(d) of Section 8 of the Purchase Agreement and such other
matters as such parties may reasonably request;
(2) opinions, dated the delivery date thereof, of
counsel for TV Filme, covering such matters as such parties
may reasonably request, and in any event including a statement
to the effect that such counsel has participated in
conferences with officers, directors and representatives of TV
Filme and its independent auditors at which the contents of
the Shelf Registration Statement, the related Prospectus and
related matters were discussed, although such counsel has not
independently verified the accuracy or completeness of
statements in the Shelf Registration Statement and the related
Prospectus; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to a large extent
upon facts provided to such counsel by officers and other
representatives of TV Filme and without independent check or
verification), nothing came to such counsel's attention in the
course of rendering such services that caused such counsel to
believe that the Shelf Registration Statement, at the time the
Shelf Registration Statement or any post-effective amendment
thereto became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus contained in the Shelf
Registration Statement as of its date and, in the case of the
opinion dated the closing date of any underwriting, as of such
closing date, contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances
under which they were made, not misleading. Without limiting
the foregoing, such counsel may state further that such
counsel makes no comment with respect to, assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements
and supporting notes and schedules and other financial and
statistical data contained in the Shelf Registration Statement
or the related Prospectus; and
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(3) a customary comfort letter or letters, dated the
delivery date or dates thereof, from TV Filme's independent
auditors, in the customary form and covering matters of the
type customarily covered in comfort letters by underwriters in
connection with primary underwritten offerings;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section;
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by TV Filme
pursuant to this clause (xi), if any; and
if at any time the representations and warranties of TV Filme contemplated
in clause (A)(1) above cease to be true and correct, TV Filme shall so
advise the underwriter(s), if any, and each Holder promptly and, if
requested by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities
or Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may reasonably request and do any and all other
acts or things necessary or advisable (including, without limitation, the
imposition of such restrictions on offers or sales of the Securities as
are referred to in paragraph 3(b) of this Agreement) to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided, however, that
TV Filme shall not be required to register or qualify as a foreign
corporation in any jurisdiction where it is not now so qualified or to
take any action that would subject it to general consent to service of
process in any jurisdiction where it is not now so subject or to subject
itself to general taxation in any such jurisdiction;
(xiii) upon the request of any Holder of Initial Notes covered by
the Shelf Registration Statement, TV Filme shall issue Exchange Notes
having an aggregate principal amount equal to the aggregate principal
amount of Initial Notes surrendered to TV Filme by such Holder in exchange
therefor or being sold by such Holder; such Exchange Notes to be
registered in the name of such Holder or in the name of the purchaser(s)
of such Exchange Notes, as the case may be; in return, the Initial Notes
held by such Holder shall be surrendered to TV Filme for cancellation;
(xiv) cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities
in such denominations (which denominations shall be in a minimum of $1,000
and integral multiples thereof) and such names as the Holders or the
underwriter(s), if any, may request at least two Business Days prior to
such sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s),
if any, to consummate the disposition of such Transfer Restricted
Securities;
(xvi) if any fact or event contemplated by Section 6(c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
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(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement covering
such Transfer Restricted Securities and provide the Trustee with printed
certificates for the Transfer Restricted Securities which are in a form
eligible for deposit with the Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of
the NASD, and use its best efforts to cause such Registration Statement to
become effective and approved by such governmental agencies or authorities
as may be necessary to enable the Holders selling Transfer Restricted
Securities to consummate the disposition of such Transfer Restricted
Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
Holders, as soon as reasonably practicable, a consolidated earnings
statement meeting the requirements of Rule 158 under the Act (which need
not be audited) covering a twelve-month period beginning after the
effective date of the applicable Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate, with the Trustee
and the Holders of Securities to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance with
the terms of the TIA; and execute, and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(xxi) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15 of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by its acquisition of a
Transfer Restricted Security that, upon receipt of any notice from TV Filme of
the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof,
such Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by TV
Filme that the use of the Prospectus may be resumed, and has received copies of
any additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by TV Filme, each Holder will deliver to TV Filme (at
TV Filme's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
TV Filme shall give any such notice, the time period regarding the effectiveness
of such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 6(c)(iii)(D)
hereof to and including the date when each selling Holder covered by such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to TV Filme's performance of or compliance with
this Agreement will be borne by TV Filme, regardless of whether a Registration
Statement becomes effective, including without limitation: (i) all registration
and filing fees and expenses (including filings made by any Purchaser or Holder
with the NASD (and, if applicable, the reasonable fees and expenses of any
"qualified independent underwriter" and its counsel that may be required by the
rules and regulations of the NASD)); (ii) all fees and expenses incurred in
connection with compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Exchange Notes to be issued in the Exchange Offer and printing of
prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for TV Filme, and in
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accordance with Section 7(b) below, counsel to the Holders of Transfer
Restricted Securities; (v) if applicable, all application and filing fees in
connection with listing Securities on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent auditors of TV Filme (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
TV Filme will bear its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and expenses
of any Person, including special experts, retained by TV Filme.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), TV Filme will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one U.S. counsel, which shall
be Simpson Thacher & Bartlett (a partnership which includes professional
corporations) or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared and one Brazilian counsel,
which shall be Barbosa & Mussnich Advogados or such other Brazilian counsel as
may be chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) TV Filme agrees to indemnify and hold harmless each of the Holders,
each Person, if any, who controls any Holder within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act and the respective officers,
directors, partners, employees, representatives and agents of each Holder or any
controlling Person, against any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to reasonable attorneys' fees and
expenses and all other expenses whatsoever incurred in investigating, preparing
or defending against any investigation or litigation, commenced or threatened,
or any claim whatsoever, and any and all amounts paid in settlement of any claim
or litigation) (collectively, "Losses"), joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or otherwise, insofar
as such Losses (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement or related Prospectus, or in any supplement thereto
or amendment thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that TV Filme
will not be liable in any such case to the extent, but only to the extent, that
any such Loss arises out of or is based upon any (i) untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to TV Filme by or on behalf
of any Holders expressly for use in the Registration Statement and related
Prospectus or in any supplement or amendment thereto or (ii) any untrue
statement or alleged untrue statement or omission or alleged omission from any
related preliminary prospectus if a copy of the related Prospectus (as then
amended or supplemented) was not delivered by or on behalf of any Holder seeking
indemnification to the Person asserting the claim or action, if required by law
to have been so delivered by such Holder and the untrue statement or alleged
omission from such preliminary prospectus was corrected in the related
Prospectus. This indemnity will be in addition to any liability which TV Filme
may otherwise have, including, under this Agreement.
(b) Each of the Holders agrees, severally and not jointly, to indemnify
and hold harmless TV Filme, each Person, if any, who controls TV Filme within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act and the
respective officers, directors, partners, employees, representatives and agents
of TV Filme or any controlling Person, against any and all Losses, joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration
12
<PAGE>
Statement or Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
any such Loss arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to TV Filme by or on behalf
of such Holder expressly for use therein; provided, however, that in no case
shall any Holder be liable or responsible for any amount in excess of the dollar
amount of the proceeds received by such Holder upon the sale of the Securities
giving rise to such indemnification obligation. This indemnity will be in
addition to any liability which any Holder may otherwise have, including under
this Agreement.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve such indemnifying party from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure, or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action and the indemnifying party has
agreed in writing to pay the fees and expenses of such counsel, (ii) the
indemnifying parties shall not have employed counsel to take charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded, upon the advice of counsel, that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
counsel shall be borne by the indemnifying parties; provided, however, that the
indemnifying party under subsection (a) or (b) above, shall only be liable for
the legal expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its written consent; provided, however, that such consent was
not unreasonably withheld. In addition, the indemnifying party will not, without
the prior written consent of the indemnified party, which consent may not be
unreasonably withheld, settle or compromise or consent to entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action, or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in this Section 8 is for any reason held to be
unavailable or is insufficient to hold harmless a party indemnified hereunder,
TV Filme, on the one hand, and each Holder, on the other hand, shall contribute
to the aggregate Losses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of Losses
suffered by TV Filme any contribution received by TV Filme from Persons, other
than the Holders, who may also be liable for contribution, including Persons who
control TV Filme within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) to which TV Filme and such Holder may be subject, in such
proportion as is appropriate to reflect the relative benefits received by TV
Filme, on the one hand, and any such Holder, on the other hand, or, if such
allocation is not permitted by applicable law or if indemnification is not
available as a result of the indemnifying party not having received notice as
provided in this Section 8, in such proportion as is appropriate to reflect not
only the relative benefits referred to above but also the relative fault of TV
Filme, on the one hand, and the Holders, on the other hand, in connection with
the statements or omissions which
13
<PAGE>
resulted in such Losses, as well as any other relevant equitable considerations.
The relative benefits received by TV Filme, on the one hand, and any Holder, on
the other hand, shall be deemed to be in the same proportion as (x) the total
proceeds from the offering of the Securities (net of discounts and commissions
but before deducting expenses) received by TV Filme and (y) the total proceeds
received by such Holder upon its sale of Securities which would otherwise give
rise to the indemnification obligation, respectively. The relative fault of TV
Filme, on the one hand, and of the Holders, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by TV Filme, on the one hand, or
the Holders, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. TV Filme and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if all Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of this Section
8, (i) no Holder shall be required to contribute, in the aggregate, any amount
in excess of the U.S. dollar amount by which the proceeds received by such
Holder with respect to the sale of its Securities exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission and (ii) no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each Person, if any, who controls a Holder within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act and the respective officers,
directors, partners, employees, representatives and agents of a Holder or any
controlling Person shall have the same rights to contribution as such Holder,
and each Person, if any, who controls TV Filme within the meaning of Section 15
of the Act or Section 20 of the Exchange Act and the respective officers,
directors, partners, employees, representatives and agents of TV Filme or any
controlling Person shall have the same rights to contribution as TV Filme,
subject in each case to clauses (i) and (ii) of this Section 8(d). Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this Section
8, notify such party or parties from whom contribution may be sought, but the
failure to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent; provided, however, that such written consent was not
unreasonably withheld.
SECTION 9. RULE 144A
TV Filme hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
14
<PAGE>
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to TV Filme (it being understood that Bear Stearns, BT
Securities, J.P. Morgan and Alex. Brown are reasonably satisfactory); such
investment banker or investment bankers and manager or managers are referred to
herein as the "underwriters".
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Indenture, in the Purchase Agreement or granted
by law, including recovery of Liquidated Damages or other damages, will be
entitled to specific performance of its rights under this Agreement. TV Filme
agrees that monetary damages (including the Liquidated Damages contemplated
hereby) would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agree to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. TV Filme will not, on or after the date of
this Agreement, enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. TV Filme has not previously
entered into any agreement granting any registration rights with respect to the
Securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to
holders of TV Filme's securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Securities. TV Filme will not take any
action, or permit any change to occur, with respect to the Securities that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless TV Filme has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose Securities are being tendered pursuant to the Exchange Offer or
registered pursuant to the Shelf Registration and that does not affect directly
or indirectly the rights of other Holders whose Securities are not being
tendered pursuant to such Exchange Offer or registered pursuant to the Shelf
Registration may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities being tendered or registered,
as applicable.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
15
<PAGE>
(ii) if to TV Filme:
TV Filme, Inc.
c/o ITSA - Intercontinental Telecomunicacoes Ldta.
SCS, Quadra 07-B1. A
Ed. Executive Tower
Sala 601
70.300.911 Brasilia - DF Brazil
Phone No.: 011-55-61-314-9908
Telecopier No.: 011-55-61-323-5660
Attention: Hermano Studart Lins de Albuquerque
With copies to:
Kelley Drye & Warren LLP
Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901-3229
Phone No.: 203-324-1400
Telecopier No.: 203-964-3188
Attention: John T. Capetta, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; ten Business Days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt acknowledged, if telecopied; and on the second
Business Day, if timely delivered to an air courier guaranteeing two day
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Submission to Jurisdiction; Appointment of Agent for Service; Currency
Indemnity. (i) To the fullest extent permitted by applicable law, TV Filme
irrevocably submits to the jurisdiction of any Federal or State court in the
City, County and State of New York, United States of America, in any suit or
proceeding based on or arising under this Agreement (solely in connection with
any such suit or proceeding), and irrevocably agree that all claims in respect
of such suit or proceeding may be determined in any such court. TV Filme
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. TV Filme hereby irrevocably designates
and appoints Corporation Service Company, 375 Hudson Street, New York, New York
10014, U.S.A. (the "Process Agent"), as the authorized agent of TV Filme upon
whom process may be served in any such suit or proceeding, it being understood
that the designation and appointment of the Process Agent as such authorized
agent shall become effective immediately without any further action on the part
of TV Filme. TV Filme represents to the
16
<PAGE>
Holders that it has notified the Process Agent of such designation and
appointment and that the Process Agent has accepted the same in writing. TV
Filme hereby irrevocably authorizes and directs the Process Agent to accept such
service. TV Filme further agrees that service of process upon the Process Agent
and written notice of said service to TV Filme mailed by prepaid registered
first class mail or delivered to the Process Agent at its principal office,
shall be deemed in every respect effective service of process upon TV Filme in
any such suit or proceeding. Nothing herein shall affect the right of any Holder
or any Person controlling such Holder to serve process in any other manner
permitted by law. TV Filme further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments as may be
necessary to continue such designation and appointment of the Process Agent in
full force and effect so long as TV Filme has any outstanding obligations under
this Agreement, the Securities, the Indenture or the Purchase Agreement. To the
extent that TV Filme has or hereafter may acquire any immunity from jurisdiction
of any court or from any legal process (whether through service of note,
attachment prior to judgment, attachment in aid of execution, executor or
otherwise) with respect to itself or its property, TV Filme hereby irrevocably
waives such immunity in respect of its obligations under this Agreement, to the
extent permitted by law.
(ii) The obligation of the parties to make payments hereunder is in U.S.
dollars (the "Obligation Currency") and such obligation shall not be discharged
or satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency or any other
realization in such other currency, whether as proceeds of set-off, security,
guarantee, distributions, or otherwise, except to the extent to which such
tender, recovery or realization shall result in the effective receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder, and the party liable to make such
payment agrees to indemnify the party which is to receive such payment (as an
additional, separate and independent cause of action) for the amount (if any) by
which such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation to
indemnify shall not be affected by judgment being obtained for any other sums
due under this Agreement.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) No Piggyback on Registrations. Neither TV Filme nor any of its
security holders (other than the Holders of Transfer Restricted Securities in
such capacity) has any right (other than a right which has been irrevocably
waived) to include any securities of TV Filme in any Registration Statement
other than Transfer Restricted Securities. TV Filme covenants that it will not
enter into any instrument, agreement or understanding which will grant to any
person piggyback registration rights which are exercisable with respect to any
Registration Statement or otherwise confer a right to include securities in any
Registration Statement other than Transfer Restricted Securities.
(m) Entire Agreement. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties
hereto as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by TV Filme with respect
to the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings among the parties with respect to the subject
matter hereof.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TV FILME, INC.
By: /s/ Hermano Studart Lins de Albuquerque
---------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Chief Executive Officer
BEAR, STEARNS & CO. INC.
By: /s/ Michael L. Yagerman
-------------------------
Name: Michael L. Yagerman
Title: Senior Managing Director
BT SECURITIES CORPORATION
By: /s/ David F. Jacobs
--------------------------
Name: David F. Jacobs
Title: Associate
J.P. MORGAN SECURITIES INC.
By: /s/ Mark Hall
-------------------------
Name: Mark Hall
Title: Vice President
ALEX. BROWN & SONS INCORPORATED
By: /s/ Steven L. Fischer
--------------------------
Name: Steven L. Fischer
Title: Managing Director
WITNESSES:
/s/ Regina L. Hillman
- ------------------------------
Name: Regina L. Hillman
/s/ Jaime Mercado
- ------------------------------
Name: Jaime Mercado
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Hermano Studart Lins de
Albuquerque to me personally known who being duly sworn, did say that she/he is
Chief Executive Officer of TV Filme, Inc., one of the persons described in and
which executed the foregoing instrument, and acknowledges said instrument to be
the free act and deed of said corporation.
/s/ Olivia Savell
--------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Michael Yagerman to me
personally known who being duly sworn, did say that she/he is Senior Managing
Director of Bear, Stearns & Co. Inc., one of the persons described in and which
executed the foregoing instrument, and acknowledges said instrument to be the
free act and deed of said corporation.
/s/ Paul V. Coughlin
---------------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared David F. Jacobs to me
personally known who being duly sworn, did say that she/he is Associate of BT
Securities Corporation, one of the persons described in and which executed the
foregoing instrument, and acknowledges said instrument to be the free act and
deed of said corporation.
/s/ Olivia Savell
---------------------------
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Mark Hall to me personally
known who being duly sworn, did say that she/he is Vice President of J.P.
Morgan Securities Inc., one of the persons described in and which executed the
foregoing instrument, and acknowledges said instrument to be the free act and
deed of said corporation.
/s/ Olivia Savell
--------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Steven K. Fischer to me
personally known who being duly sworn, did say that she/he is Managing Director
of Alex. Brown & Sons Incorporated, one of the persons described in and which
executed the foregoing instrument, and acknowledges said instrument to be the
free act and deed of said corporation.
/s/ Olivia Savell
-------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
Exhibit 4.3
================================================================================
TV FILME, INC.
$140,000,000
12 7/8% Senior Notes due 2004
PURCHASE AGREEMENT
December 16, 1996
BEAR, STEARNS & CO. INC.
BT SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
ALEX. BROWN & SONS INCORPORATED
================================================================================
<PAGE>
TV FILME, INC.
$140,000,000
12 7/8% Senior Notes due 2004
PURCHASE AGREEMENT
December 16, 1996
New York, New York
BEAR, STEARNS & CO. INC.
BT SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
ALEX. BROWN & SONS INCORPORATED
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
TV Filme, Inc., a Delaware corporation ("TV Filme"), proposes to
issue and sell to Bear, Stearns & Co. Inc. ("Bear Stearns"), BT Securities
Corporation ("BT Securities"), J.P. Morgan Securities Inc. ("J.P. Morgan") and
Alex. Brown & Sons Incorporated ("Alex. Brown"; and together with Bear Stearns,
BT Securities and J.P. Morgan, the "Initial Purchasers") an aggregate of
$140,000,000 principal amount of 12 7/8% Senior Notes due 2004 (the "Series A
Notes"), subject to the terms and conditions set forth in this Purchase
Agreement (this "Agreement"). The Series A Notes will be issued pursuant to an
indenture (the "Indenture"), to be dated as of the Closing Date (as defined
below), between TV Filme and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"). Capitalized terms used herein without definition have the respective
meanings specified in the Offering Memorandum (as defined below).
1. Issuance of Securities.
TV Filme proposes, upon the terms and subject to the conditions set
forth herein, to issue and sell to the Initial Purchasers an aggregate of
$140,000,000 principal amount of Series A Notes. The Series A Notes and the
Series B Notes (as defined below) issuable in exchange for the Series A Notes
are collectively referred to herein as the "Securities". The proceeds to TV
Filme from the sale to the Initial Purchasers of the Series A Notes will be used
as described under "Use of Proceeds" in the Offering Memorandum.
Upon original issuance thereof, and until such time as the same is
no longer required under the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Series A Notes (and all securities
issued in exchange therefor or in substitution thereof) shall bear the following
legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
<PAGE>
ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OF REGULATION S UNDER THE
SECURITIES ACT ("REGULATION S"), (2) AGREES THAT IT WILL NOT PRIOR
TO (X) THE DATE WHICH IS THREE YEARS (OR SUCH SHORTER PERIOD THAT
MAY THEREAFTER BE PROVIDED UNDER RULE 144(k) UNDER THE SECURITIES
ACT AS PERMITTING THE RESALE BY NON-AFFILIATES OF RESTRICTED
SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE
LAST DAY ON WHICH TV FILME, INC. OR ANY AFFILIATE OF TV FILME, INC.
WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY
AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE
LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO TV FILME, INC., (B)
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (D) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT IN A PRINCIPAL AMOUNT OF AT LEAST $100,000, OR
(F) OUTSIDE THE U.S. TO A NON-U.S. PERSON PURSUANT TO RULE 904 OF
REGULATION S, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "U.S." AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS ASSIGNED TO THEM IN REGULATION S.
2. Offering.
The Series A Notes will be offered and sold to the Initial
Purchasers without being registered under the Securities Act in reliance upon an
exemption thereunder. TV Filme has prepared
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a preliminary offering memorandum, dated November 22, 1996, and a Supplement to
such preliminary offering memorandum, dated December 6, 1996 (together, the
"Preliminary Offering Memorandum"), and a final offering memorandum, dated
December 16, 1996 (the "Offering Memorandum"), relating to TV Filme and its
Subsidiaries (as defined below) and the issuance of the Series A Notes.
The Initial Purchasers have advised TV Filme that the Initial
Purchasers will offer the Series A Notes on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers," as defined
in Rule 144A under the Securities Act ("QIBs"), to a limited number of
institutional "Accredited Investors" as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act (each an "Institutional Accredited Investor") and
to non-U.S. persons in transactions meeting the requirements of Rule 903 of
Regulation S under the Securities Act (each, a "Reg S Buyer"). The QIBs, the
Institutional Accredited Investors and the Reg S Buyers are referred to herein
as the "Eligible Purchasers". Sales to Eligible Purchasers under this Agreement
are referred to herein as "Exempt Resales". The Initial Purchasers will offer
the Series A Notes to Eligible Purchasers initially at a price equal to 12 7/8%
of the principal amount thereof. Such price may be changed at any time without
notice.
Holders (including subsequent transferees) of the Series A Notes
will have the registration rights set forth in the registration rights agreement
relating thereto (the "Registration Rights Agreement"), to be dated the Closing
Date, in substantially the form of Exhibit A hereto, for so long as such Series
A Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to terms and conditions contained in
the Registration Rights Agreement, TV Filme will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering an issue of 12 7/8% Senior
Notes due 2004 identical in all material respects to the Series A Notes (the
"Series B Notes") to be offered in exchange for the Series A Notes (the
"Exchange Offer") and (ii) under certain circumstances set forth therein, a
shelf registration statement pursuant to Rule 415 under the Securities Act (the
"Shelf Registration Statement"; and together with the Exchange Offer
Registration Statement, the "Registration Statements") relating to the resale of
the Series A Notes under certain circumstances, and to use its best efforts to
cause such Registration Statements to be declared effective and to consummate
the Exchange Offer.
Concurrent with the purchase, sale and delivery of the Series A
Notes contemplated by Section 3 hereof (the "Closing"), TV Filme will loan the
proceeds of the Offering to ITSA-Intercontinental Telecomunicacoes Ltda.
("ITSA"), which loan will be evidenced by an intercompany note, to be dated the
Closing Date, substantially in the form of Exhibit C to the Indenture (the
"Intercompany Note"). In connection with the Intercompany Note, ITSA will enter
into a Paying Agent Agreement, dated as of the Closing Date (the "Paying Agent
Agreement"), with Japan Bankers Trust Company, Ltd. and Bankers Trust Company
(together, the "Paying Agent") under which the Paying Agent will serve as paying
agent under the Intercompany Note. The obligations of ITSA under the
Intercompany Note will be guaranteed on an unsecured basis by certain
subsidiaries of ITSA, including, initially, TV Filme Brasilia Servicos de
Telecomunicacoes Ltda., TV Filme Goiania Servicos de Telecomunicacoes Ltda. and
TV Filme Belem Servicos de Telecomunicacoes Ltda. (collectively, the "Subsidiary
Guarantors"), which guarantees, to be dated as of the Closing Date, will be
substantially in the form of Exhibit D to the Indenture (collectively, the
"Subsidiary Guarantees"). The Intercompany Note will be pledged by TV Filme as
security for the repayment of principal and interest on the Securities pursuant
to the terms of the Note Pledge Agreement, to be dated as of the Closing Date,
substantially in the form of Exhibit F to the Indenture (the "Note Pledge
Agreement").
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In addition, concurrent with the Closing, ITSA will purchase a
portfolio of Government Securities (as defined in the Indenture), scheduled
interest and principal payments on which will be in an amount sufficient to
provide for payment in full when due of the first four scheduled interest
payments on the Securities. Such Government Securities will be pledged as
security for the repayment of principal and interest on the Securities pursuant
to the Collateral Pledge and Security Agreement, to be dated as of the Closing
Date, substantially in the form of Exhibit E to the Indenture (the "Pledge
Agreement").
This Agreement, the Securities, the Indenture, the Registration
Rights Agreement, the Pledge Agreement, the Intercompany Note, the Paying Agent
Agreement, the Subsidiary Guarantees and the Note Pledge Agreement are
hereinafter sometimes referred to collectively as the "Operative Documents."
3. Purchase, Sale and Delivery.
(a) On the basis of the representations, warranties and covenants
contained in this Agreement, and subject to its terms and conditions, TV Filme
agrees to issue and sell to each Initial Purchaser, and each Initial Purchaser
agrees, severally and not jointly, to purchase from TV Filme, the aggregate
principal amount of Series A Notes set forth opposite its name on Schedule I
hereto. The Initial Purchasers shall pay a purchase price equal to 12 7/8% of
the principal amount of the Series A Notes, plus accrued interest, if any, from
the Closing Date (the "Purchase Price").
(b) Delivery of, and payment of the Purchase Price shall be made at
the offices of Simpson Thacher & Bartlett, at 425 Lexington Avenue, New York,
New York 10017, or such other location as may be mutually acceptable. Such
delivery and payment of the Purchase Price shall be made at 9:30 a.m., New York
City time, on December 20, 1996 or at such other date and time as shall be
agreed upon by the Initial Purchasers and TV Filme. The time and date of such
delivery and the payment of the Purchase Price are herein called the "Closing
Date."
(c) On the Closing Date, one or more of the Series A Notes in
definitive form, registered in such names and in such denominations as specified
by the Initial Purchasers at least two business days prior to such date, having
an aggregate principal amount of $140,000,000 shall be delivered by TV Filme to
the Initial Purchasers (or as the Initial Purchasers direct), against payment by
the Initial Purchasers of the Purchase Price therefor by wire transfer of same
day funds to an account or accounts designated by TV Filme, provided that TV
Filme shall give at least two business days' prior written notice to the Initial
Purchasers of the information required to effect such wire transfers. The Series
A Notes sold to QIBs pursuant to Rule 144A and the Series A Notes sold to Reg S
Buyers pursuant to Regulation S shall each be represented by a global note,
registered in the name of The Depository Trust Company (the "Depository") or its
nominee and Series A Notes sold to Institutional Accredited Investors shall be
represented by physical certificates registered in the names requested by the
Initial Purchasers. The Series A Notes shall be made available to the Initial
Purchasers for inspection not later than 9:30 a.m., New York City time, on the
business day immediately preceding the Closing Date.
4. Agreements of TV Filme.
TV Filme covenants and agrees with the Initial Purchasers that:
(a) TV Filme will furnish the Initial Purchasers and those persons
identified by the Initial Purchasers, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers
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may reasonably request. TV Filme will also furnish to Bear Stearns prior
to or on the Closing Date three copies of the Offering Memorandum signed
by two duly authorized officers of TV Filme, including the report of the
independent auditors of TV Filme therein manually signed by such
independent auditors. TV Filme consents to the use of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments and
supplements thereto required pursuant hereto, by the Initial Purchasers in
connection with Exempt Resales.
(b) TV Filme will notify the Initial Purchasers promptly of any
material change affecting any of its representations, warranties,
agreements and indemnities herein at any time prior to payment being made
to TV Filme on the Closing Date and take such steps as may be reasonably
requested by Bear Stearns to remedy and/or publicize the same. Without
limiting the generality of the foregoing, until the distribution of the
Series A Notes is completed, TV Filme agrees to notify the Initial
Purchasers promptly of the occurrence of any event as a result of which
the Preliminary Offering Memorandum or the Offering Memorandum may include
a misstatement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they are made in such document, not misleading.
(c) If at any time prior to completion (in the view of Bear Stearns)
of the distribution of the Series A Notes any event shall have occurred as
a result of which the Preliminary Offering Memorandum or the Offering
Memorandum, as then amended or supplemented, would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they are made, not misleading or if in order to comply with
applicable law or for any other reason it shall be necessary or
appropriate to amend or supplement the Preliminary Offering Memorandum or
the Offering Memorandum, TV Filme will so notify Bear Stearns, on behalf
of the Initial Purchasers, and, upon request from Bear Stearns, will
prepare and furnish, without charge, to the Initial Purchasers as many
copies as they may from time to time reasonably request of, an amended
Preliminary Offering Memorandum or Offering Memorandum or a supplement
thereto which will correct such statement or omission, effect such
compliance or otherwise amend or supplement such Preliminary Offering
Memorandum or Offering Memorandum. TV Filme agrees that it will not amend
or supplement the Preliminary Offering Memorandum or the Offering
Memorandum without Bear Stearns' prior consent, which consent shall not be
unreasonably withheld or delayed.
(d) TV Filme agrees to cooperate with the Initial Purchasers and
counsel for the Initial Purchasers in connection with the qualification or
registration of the Series A Notes under the securities or Blue Sky laws
of such jurisdictions as the Initial Purchasers may reasonably request and
to continue such qualification in effect so long as required by law for
the Exempt Resales; provided, however, that TV Filme shall not be required
in connection therewith to register or qualify as a foreign corporation in
any jurisdiction where it is not now so qualified or to take any action
that would subject it to general consent to service of process in any
jurisdiction where it is not now so subject or to subject itself to
general taxation in any such jurisdiction.
(e) TV Filme will advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, of
the issuance by any state securities commission of any stop order
suspending the qualification or exemption from qualification of any of the
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for such purpose by any state securities commission or
other regulatory authority and TV Filme shall use its best efforts to
prevent the issuance of any stop order or order suspending the
qualification or exemption of any of the Securities under any state
securities or Blue Sky laws and, if at any time
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any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption of any of the
Securities under any state securities or Blue Sky laws, TV Filme shall use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest practicable time.
(f) TV Filme agrees not to sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the Series A
Notes in a manner that would require the registration under the Securities
Act of the sale to the Initial Purchasers, the QIBs, the Institutional
Accredited Investors or the Reg S Buyers of the Series A Notes and agrees
not to take any other action that would result in the Exempt Resales not
being exempt from registration under the Securities Act.
(g) Except in connection with the Exchange Offer or the filing of
the Registration Statements, as the case may be, TV Filme will not, and
will not authorize or permit any Person acting on its behalf to offer or
sell the Securities or any security of the same class or series as the
Securities in the United States by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or engage in any directed selling efforts within
the meaning of Regulation S. TV Filme will not enter into any contractual
arrangement with respect to the distribution of the Securities except for
this Agreement and the Registration Rights Agreement.
(h) As of the date of their issuance, the Series A Notes will not
be, and no securities of the same class (within the meaning of Rule
144A(d)(3)) as the Series A Notes will be, (i) listed on a national
securities exchange in the United States which is registered under Section
6 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or (ii) quoted in any "automated inter-dealer quotation system" (within
the meaning of Rule 144A under the Securities Act) in the United States.
(i) So long as any of the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144 under the
Securities Act, TV Filme will furnish to holders of the Securities and to
prospective purchasers of Securities designated by such holders, upon
request of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities
Act, unless TV Filme is then subject to and in compliance with Section 13
or 15(d) of the Exchange Act.
(j) For so long as the Series A Notes are eligible for resale in
reliance on Rule 144A, TV Filme shall use all reasonable efforts to, and
will use its reasonable efforts to cooperate with the Initial Purchasers
to, have the Series A Notes designated as securities eligible for trading
in the Private Offering, Resales and Trading through Automated Linkages
("PORTAL") market in accordance with the rules and regulations adopted by
the National Association of Securities Dealers, Inc. ("NASD").
(k) TV Filme will not, and will not permit any of its Subsidiaries
to, take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of TV Filme to facilitate the
sale or resale of the Securities. Except as permitted by the Securities
Act, TV Filme will not distribute any (i) preliminary offering memorandum,
including, without limitation, the Preliminary Offering Memorandum, (ii)
offering memorandum, including, without limitation, the Offering
Memorandum or (iii) other offering material, in connection with the
offering and sale of the Securities.
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(l) During the period of three years after the Closing Date, TV
Filme will not, and will not permit any of its affiliates (as defined in
Rule 144 under the Securities Act), to resell any of the Securities that
have been re-acquired by any of them, except for Securities acquired by TV
Filme or any of its affiliates and resold in transactions registered under
the Securities Act.
(m) TV Filme will not be or become at any time prior to the
expiration of three years after the Closing Date, an open-end investment
trust, unit investment trust or face-amount certificate company that is or
is required to be registered under Section 8 of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and will not be or
become a closed-end investment company required to be registered, but not
registered, under the Investment Company Act.
(n) Neither TV Filme, nor any of its subsidiaries or other
affiliates over which it exercises management control, nor any Person
acting on its or their behalf, will issue, offer, sell, contract to sell,
pledge or otherwise dispose of (or publicly announce any such issuance,
offer, sale or disposal), directly or indirectly, debt securities issued
or guaranteed by TV Filme (other than a private loan, credit or financing
agreement with a bank or similar financing institution) or any security
convertible into or exchangeable or exercisable for any such debt
security, for a period of 90 days after the Closing Date, without the
Initial Purchasers' prior written consent which consent may not be
unreasonably withheld, except for (i) sales or transfers between any of TV
Filme's subsidiaries or other affiliates of TV Filme and (ii) the issue
and exchange of Series B Notes for Series A Notes in the Exchange Offer.
(o) TV Filme shall submit an application to Banco Central do Brasil
(the "Central Bank") for the Certificate of Registration (as defined
below) within fifteen days after the Closing Date and shall use its best
efforts to obtain the Certificate of Registration and any other
authorizations or approvals of the Central Bank required for the
performance by TV Filme and its Subsidiaries of their obligations under
the Operative Documents.
(p) TV Filme shall cause ITSA to provide notice to the Central Bank
of the closing of the offering of the Intercompany Note in compliance with
the provisions of Circular No. 2491 of October 19, 1994.
(q) TV Filme shall obtain the consularization of this Agreement, the
Indenture, the Registration Rights Agreement, the Pledge Agreement, the
Intercompany Note and the Note Pledge Agreement from the Brazilian
Consulate in The City of New York on or prior to the Closing Date.
(r) TV Filme agrees to comply in all material respects with all of
the agreements set forth in the Operative Documents and in the
representation letter of TV Filme to the Depository relating to the
approval of the Securities by the Depository for "book-entry" transfer.
Without prejudice to the generality of the foregoing, TV Filme agrees to
make the filings contemplated by the Registration Rights Agreement, to
cause the Exchange Offer to be made and to comply with all applicable U.S.
federal and state securities laws in connection with the Exchange Offer.
(s) During a period of five years following the Closing Date, to
deliver without charge to the Initial Purchasers, as they may reasonably
request, promptly upon their becoming available, copies of (i) all
reports, financial statements and proxy or information statements filed by
TV Filme with the Commission, the NASD or any national securities exchange
and (ii) any
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compliance certificates or notices furnished by TV Filme to the Trustee or
to the holders of the Securities pursuant to the terms of the Indenture.
(t) TV Filme will use the proceeds from the sale of the Series A
Notes in the manner described in the Offering Memorandum under the caption
"Use of Proceeds."
(u) TV Filme agrees not to claim voluntarily, and to resist actively
any attempts to claim, the benefit of any usury laws against the holders
of any Securities.
(v) TV Filme agrees to use its reasonable best efforts to do and
perform all things required to be done and performed under this Agreement
by it prior to the Closing Date and use its reasonable best efforts to
satisfy all conditions precedent on its part to the delivery of the Series
A Notes.
5. Representations and Warranties.
(a) TV Filme represents and warrants to the Initial Purchasers that:
(i) The Preliminary Offering Memorandum as of its date did not, and
the Offering Memorandum does not, and at the Closing Date, as supplemented
as of the Closing Date, will not, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except
that the representations and warranties contained in this paragraph shall
not apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information relating
to the Initial Purchasers furnished to TV Filme in writing by the Initial
Purchasers expressly for use therein. No stop order preventing the use of
the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been issued or, to
the best of TV Filme's knowledge, threatened.
(ii) TV Filme (A) has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with full corporate power and corporate authority to conduct its business
as it is being conducted currently and as described in the Offering
Memorandum and to own, lease and operate its properties, and (B) is duly
qualified to transact business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
to be in good standing would not have a Material Adverse Effect (as
defined below).
(iii) Each of ITSA, the Subsidiary Guarantors, TV Filme Servicos de
Telecomunicacoes Ltda. ("TV Filme Servicos") and each other subsidiary of
TV Filme (collectively, for purposes of this Agreement referred to as the
"Subsidiaries"), (A) has been duly organized or incorporated, as
applicable, and is validly existing and in good standing under the laws of
its jurisdiction of organization or incorporation, (B) has all requisite
corporate power and corporate authority to conduct its business as it is
being conducted currently and as described in the Offering Memorandum and
to own, lease and operate its properties, and (C) is duly qualified to
transact business in each jurisdiction in which the nature of its business
or its ownership or
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leasing of property requires such qualification, except to the extent that
the failure to be so qualified or to be in good standing would not have a
Material Adverse Effect.
(iv) All of the outstanding shares of capital stock, quotas or other
equity interests of TV Filme have been duly authorized, validly issued and
are fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights. The outstanding shares of capital stock,
quotas or other equity interests, as the case may be, of each of the
Subsidiaries have been duly authorized, validly issued and are fully paid
and nonassessable. TV Filme owns, directly or indirectly, equity interests
of each of its Subsidiaries, as listed on Schedule 5(a)(iv). Except as
described in the Offering Memorandum, all such equity interests of its
Subsidiaries are owned, directly or indirectly, by TV Filme free and clear
of any material lien, encumbrance, claim, security interest, restriction
on transfer, stockholders' agreement, voting trust or other restrictions.
TV Filme does not directly or indirectly own any equity interests, shares
of capital stock or any other securities of any corporation or have any
equity interest in any firm, partnership, association or other entity
except as described on Schedule 5(a)(iv). Except as described in the
Offering Memorandum, there currently are no outstanding material
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, capital
stock, quotas or other equity interests of TV Filme or any of its
Subsidiaries.
(v) As of the date hereof, after giving pro forma effect to the
issuance and sale of the Series A Notes pursuant hereto and the other
transactions described in the Offering Memorandum, TV Filme would have had
an authorized and outstanding capitalization as set forth in the "As
Adjusted" column in the table appearing under the caption "Capitalization"
in the Offering Memorandum.
(vi) The auditors who have certified or will certify the financial
statements included or to be included as part of the Offering Memorandum
are independent auditors, within the meaning of the Securities Act and the
rules and regulations promulgated thereunder. The annual historical
financial statements of TV Filme included in the Offering Memorandum
comply as to form in all material respects with the requirements
applicable to registration statements on Form S-1 under the Securities Act
and present fairly in all material respects the financial position and
results of operations of TV Filme and its Subsidiaries at the respective
dates and for the respective periods indicated therein. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles applied on a consistent basis throughout the periods
presented, except as otherwise disclosed therein. The other financial and
statistical information and operating data included in the Offering
Memorandum, historical and as adjusted, are accurately presented on a
basis consistent with the historical financial statements, included in the
Offering Memorandum and the books and records of TV Filme and its
Subsidiaries, as applicable.
(vii) TV Filme has all requisite corporate power and corporate
authority to execute, deliver and perform its obligations under the
Operative Documents (to the extent it is a party thereto) and to
consummate the transactions contemplated hereby and thereby, including,
without limitation, the corporate power and corporate authority to issue,
sell and deliver the Securities as provided herein and therein.
(viii) Each of the Subsidiaries has all requisite corporate power
and corporate authority to execute, deliver and perform its respective
obligations under the Operative Documents (to the
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extent each is a party thereto) and to consummate the transactions
contemplated hereby and thereby.
(ix) This Agreement has been duly authorized, executed and delivered
by TV Filme and constitutes a valid and legally binding agreement of TV
Filme, enforceable against TV Filme in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and subject to general equitable principles
(whether considered in a proceeding in equity or at law) (the
"Enforceability Exceptions"). Without limiting the generality of the
foregoing, the indemnification and contribution provisions set forth in
this Agreement do not contravene Brazilian law or public policy.
(x) The Registration Rights Agreement has been duly authorized by TV
Filme and, when duly executed and delivered by TV Filme in accordance with
its terms, will constitute a valid and legally binding obligation of TV
Filme, enforceable against TV Filme in accordance with its terms, subject
to the Enforceability Exceptions. The Offering Memorandum contains an
accurate summary of the material terms of the Registration Rights
Agreement.
(xi) The Pledge Agreement has been duly authorized by each of ITSA
and TV Filme and, when duly executed and delivered by each of ITSA and TV
Filme, will constitute a valid and legally binding obligation of ITSA and
TV Filme, enforceable against each of ITSA and TV Filme in accordance with
its terms, subject to the Enforceability Exceptions. As of the Closing
Date, the representations and warranties made by ITSA in the Pledge
Agreement will be true and correct in all material respects. The Offering
Memorandum contains an accurate summary of the material terms of the
Pledge Agreement.
(xii) The Intercompany Note has been duly authorized by ITSA and,
when duly executed and delivered by ITSA, will constitute a valid and
legally binding obligation of ITSA, enforceable against ITSA in accordance
with its terms, subject to the Enforceability Exceptions. The Offering
Memorandum contains an accurate summary of the material terms of the
Intercompany Note.
(xiii) The Paying Agent Agreement has been duly authorized by ITSA
and, when duly executed and delivered by ITSA, will constitute a valid and
legally binding obligation of ITSA, enforceable against ITSA in accordance
with its terms, subject to the Enforceability Exceptions.
(xiv) The Subsidiary Guarantee of each Subsidiary Guarantor has been
duly authorized by such Subsidiary Guarantor and, when duly executed and
delivered by such Subsidiary Guarantor, will constitute a valid and
legally binding obligation of such Subsidiary Guarantor, enforceable
against such Subsidiary Guarantor in accordance with its terms, subject to
the Enforceability Exceptions. The Offering Memorandum contains an
accurate summary of the material terms of each Subsidiary Guarantees.
(xv) The Note Pledge Agreement has been duly authorized by TV Filme
and, when duly executed and delivered by TV Filme, will constitute a valid
and legally binding obligation of TV Filme, enforceable against TV Filme
in accordance with its terms, subject to the Enforceability Exceptions. As
of the Closing Date, the representations and warranties made by TV Filme
in the Note Pledge Agreement will be true and correct. The Offering
Memorandum contains an accurate summary of the material terms of the Note
Pledge Agreement.
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(xvi) The Indenture has been duly authorized by TV Filme and, when
duly executed and delivered by TV Filme, will constitute a valid and
legally binding obligation of TV Filme, enforceable against TV Filme in
accordance with its terms, subject to the Enforceability Exceptions. The
Offering Memorandum contains an accurate summary of the material terms of
the Indenture. At the Closing Date, the Indenture will comply in all
material respects with the requirements of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act") and the rules and regulations
of the Commission applicable to an indenture which is qualified
thereunder.
(xvii) The Series A Notes have been duly authorized by TV Filme for
issuance and sale to the Initial Purchasers pursuant to this Agreement
and, when issued and authenticated in accordance with the terms of the
Indenture and delivered against payment therefor in accordance with the
terms hereof and thereof, will constitute valid and legally binding
obligations of TV Filme, enforceable against TV Filme in accordance with
their terms and entitled to the benefits of the Indenture, subject to the
Enforceability Exceptions. The Offering Memorandum contains an accurate
summary of the material terms of the Series A Notes.
(xviii) The Series B Notes have been duly authorized for issuance by
TV Filme and, when issued and authenticated in accordance with the terms
of the Exchange Offer and the Indenture, the Series B Notes will
constitute a valid and legally binding obligations of TV Filme,
enforceable against TV Filme in accordance with their terms and entitled
to the benefits of the Indenture, subject to the Enforceability
Exceptions.
(xix) Each of the Operative Documents is in proper form under
Brazilian law for the enforcement thereof against the parties thereto and
it is not necessary to ensure the legality, validity, enforceability or
admissibility in evidence in Brazil of any of the Operative Documents that
any of them be filed or recorded or enrolled with any court or authority
in Brazil or that any stamp, registration or similar tax be paid in
Brazil, other than court costs, including filing fees and deposits to
guarantee judgment required by Brazilian law and regulations, except that
(A) the signatures of the parties to Operative Documents signed outside
Brazil shall have been notarized by a notary public licensed as such under
the law of the place of signing and the signature of such notary public
shall have been authenticated by the Brazilian consular office and (B)
each of the Operative Documents shall have been translated into Portuguese
by a sworn translator and the translation thereof shall have been
registered with the appropriate Registry of Deeds and Documents in Brazil.
(xx) None of TV Filme and its Subsidiaries is (A) in violation of
its respective organizational documents, (B) in default in the performance
of any bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which it is a party or by which it is bound or
to which any of its properties is subject, or (C) in violation of any
local, state, federal or foreign law, statute, ordinance, rule,
regulation, judgment, order or decree applicable to it or any of its
assets or properties (whether owned or leased), except, in the case of
clauses (B) and (C), for such violations or defaults which would not (x)
result, individually or in the aggregate, in a material adverse effect on
the properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of TV Filme and its Subsidiaries, taken
as a whole, (y) interfere with or adversely affect the issuance or
marketability of the Securities or (z) in any manner draw into question
the validity of this Agreement or any other Operative Document or the
transactions described in the Offering Memorandum under the caption "Use
of Proceeds" (any of the events set forth in clauses (x), (y) or (z), a
"Material Adverse Effect"). To the best knowledge of TV Filme, there
exists no condition that would constitute a default (or
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an event which with the giving of notice or the lapse of time, or both,
would constitute a default) under any of the Operative Documents.
(xxi) Neither the execution, delivery or performance by TV Filme and
its Subsidiaries of this Agreement or any of the other Operative
Documents, as the case may be (including the issuance and sale of the
Securities) nor the consummation of the transactions described in the
Offering Memorandum under the caption "Use of Proceeds", violates,
conflicts with or constitutes a breach of any of the terms or provisions
of, or a default under (or an event that with the giving of notice or the
lapse of time, or both, would constitute a default), or requires consent
under, or results in the imposition of a lien or encumbrance on any
properties of TV Filme or its Subsidiaries (other than the liens created
by the Pledge Agreement and the Note Pledge Agreement), or an acceleration
of any indebtedness of TV Filme or its Subsidiaries pursuant to, (A) the
organizational documents of TV Filme or any of its Subsidiaries, (B) any
bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which TV Filme or any of its Subsidiaries is a
party or by which TV Filme or any of its Subsidiaries is bound or to which
any of its or their assets or properties is subject, or (C) any local,
state, federal or foreign law, statute, ordinance, rule, regulation,
judgment, order or decree applicable to TV Filme or any of its
Subsidiaries or any of its or their respective assets or properties
(whether owned or leased), except in the case of clauses (B) and (C), for
such violations or defaults which would not have a Material Adverse
Effect.
(xxii) Except as may be required under applicable state securities
or Blue Sky laws, and except for any NASD filings and the filing of a
registration statement under the Securities Act and qualification of the
Indenture under the Trust Indenture Act in connection with the
Registration Rights Agreement, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of or
with, any court or governmental agency, body or administrative agency or
any other Person is required for the execution, delivery and performance
by TV Filme and its Subsidiaries of this Agreement and the other Operative
Documents, as the case may be, or the consummation of the transactions
described in the Offering Memorandum under the caption "Use of Proceeds",
except (A) such as have been obtained and made and remain in full force
and effect, (B) the issuance by the Central Bank of a certificate of
registration (the "Certificate of Registration") permitting ITSA to make
remittances from Brazil in U.S. dollars of payments of principal, interest
and other amounts in respect of the Intercompany Note, (C) the approval of
the Central Bank permitting ITSA to make any payment in U.S. dollars not
set forth in the Certificate of Registration, to make any payment provided
for therein earlier than the due date therefor, to make certain late
payments or permitting ITSA to exercise its call option under the
Intercompany Note and (D) for consents, approvals, authorizations, or
orders of, or filings, registrations, qualifications, licenses or permits
of or with any court or governmental agency, body or administrative agency
or any other Person, which would not have a Material Adverse Effect.
(xxiii) Subject to obtaining the Certificate of Registration or, in
the case of payments not covered by the Certificate of Registration, under
current laws and regulations of Brazil and any political subdivision
thereof, all interest, principal, premium, if any, and other payments due
or made on the Intercompany Note may be paid by ITSA to the holder thereof
in U.S. dollars or Brazilian reais that may be converted into foreign
currency and freely transferred out of Brazil and all such payments made
to holders thereof who are non-residents of Brazil; and, except as
disclosed in the Offering Memorandum, will not be subject to income,
withholding or other taxes under laws and regulations of Brazil or any
political subdivision or taxing authority thereof or
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therein and will otherwise be free and clear of any other tax, duty,
withholding or deduction in Brazil or any political subdivision or taxing
authority thereof or therein and without the necessity of obtaining any
governmental authorization in Brazil or any political subdivision or
taxing authority thereof or therein; provided, however, that if the
Intercompany Note is redeemed prior to its final maturity, then payments
of interest made by ITSA on the Intercompany Note will be subject to
withholding tax under Brazilian income tax law, plus interest calculated
in accordance with the tax laws (item II of article 155 and 2nd. paragraph
of article 179 of the Brazilian Tax Code), as from the dates such tax
would have otherwise been due. In such event, ITSA would also be obliged
to pay additional amounts as provided in the Intercompany Note. There are
grounds to sustain that such withholding tax will be levied at a rate of
12.5% in reliance on a current interpretation of the treaty to avoid
double taxation entered into between Brazil and Japan on January 24, 1967
and enacted in Brazil by Decree No. 61,899 dated December 14, 1967, as
amended by Decree No. 81,194 dated January 9, 1978 (the "Treaty"); in the
event that ITSA is at any time unable to rely on the Treaty, such
withholding will be at a rate of 15%; furthermore, if the early redemption
of the Intercompany Note occurs before the fifth anniversary of its date
of issue, ITSA would have to pay the foreign exchange transaction tax
("IOF") on the amount of Brazilian currency resulting from the conversion
of the proceeds of the issue of the Intercompany Note as such tax should
have been paid at the time of such conversion of proceeds, plus indexation
and interest calculated in accordance with the aforementioned tax laws.
Pursuant to Portaria No. 241, dated October 31, 1996, issued by the
Minister of Finance of Brazil, the IOF rate on transactions with an
average repayment term in excess of 5 years is 0% and increases as
follows: (a) 1% for transactions with an average repayment term of 4 years
but less than 5 years; (b) 2% for transactions with an average repayment
term of 3 years but less than 4 years; (c) 3% for transactions with an
average repayment term of less than 3 years.
(xxiv) Subsequent to the respective dates as of which information is
given in the Offering Memorandum and through and including the Closing
Date, except as set forth in the Offering Memorandum, (A) neither TV Filme
nor any of its Subsidiaries has incurred any liabilities or obligations,
direct or contingent, which are or, after giving effect to the
transactions described in the Offering Memorandum, will be material,
individually or in the aggregate, to TV Filme and its Subsidiaries, taken
as a whole, nor entered into any material transaction not in the ordinary
course of business, (B) there has not been, individually or in the
aggregate, any change or development of which TV Filme is aware which
could reasonably be expected to result in a Material Adverse Effect and
(C) there has been no dividend or distribution of any kind declared, paid
or made by TV Filme or any of its Subsidiaries on any class of their
capital stock, quotas or other equity interests.
(xxv) There is (A) no action, suit, investigation or proceeding
before or by any court, arbitrator or governmental agency, body,
administrative agency, official or any other Person, domestic or foreign,
now pending or, to the knowledge of TV Filme, threatened or contemplated
to which TV Filme or any of its Subsidiaries is or may be a party or to
which the business or property of TV Filme or any of its Subsidiaries is
or may be subject, (B) no statute, rule, regulation, decree or order that
(1) has been enacted, adopted or issued by any governmental agency or that
has been proposed by any governmental body or (2) has been rescinded,
revoked or enjoined by any court or other governmental body, and (C) no
injunction, restraining order or order of any nature by a federal or state
court or foreign court of competent jurisdiction to which TV Filme or any
of its Subsidiaries is or may be subject or to which the business, assets,
or property of TV Filme or any of its Subsidiaries is or may be subject,
that, in the case of clauses (A), (B) and (C) above, (1) is required to be
disclosed in the Preliminary Offering Memorandum and the Offering
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Memorandum and that is not so disclosed or (2) could, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(xxvi) There is no significant strike, labor dispute, slowdown or
work stoppage pending, or to the knowledge of TV Filme, threatened,
against TV Filme or any of its Subsidiaries. Neither TV Filme nor any of
its Subsidiaries has violated (A) any federal, state or local law or
foreign law relating to discrimination in hiring, promotion or pay of
employees, (B) any applicable wage or hour laws or (C) any provision of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or the rules and regulations thereunder, except such as would not have a
Material Adverse Effect.
(xxvii) Neither TV Filme nor any of its Subsidiaries has violated or
is alleged to have violated any foreign, federal, state or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws") which might have a Material Adverse
Effect. There is no alleged liability, or to the best knowledge of TV
Filme, potential liability, of TV Filme or any of its Subsidiaries arising
out of, based on or resulting from Environmental Laws.
(xxviii) Each of TV Filme and its Subsidiaries has (A) good and
marketable title to all of the properties and assets reflected in the
financial statements or as described in the Offering Memorandum as owned
by it, free and clear of all liens, charges, encumbrances and
restrictions, except those reflected in the financial statements or as
described in the Offering Memorandum, (B) peaceful and undisturbed
possession under all material leases to which any of them is a party as
lessee and each of which lease is valid and binding, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and general principles of equity, and no
default exists thereunder, (C) ownership or valid rights to use all
intellectual property utilized in connection with the businesses of TV
Filme and its Subsidiaries, (D) all material licenses (including, without
limitation, the wireless cable licenses described in the Offering
Memorandum as having been granted to the Subsidiaries), certificates,
permits, authorizations, approvals, franchises and other rights from, and
has made all declarations and filings with, all federal, state, local and
foreign authorities, all self-regulatory authorities and all courts and
other tribunals (each, an "Authorization") necessary to engage in the
business conducted by any of them in the manner described in the Offering
Memorandum and (E) no reason to believe that any governmental body or
agency is considering limiting, suspending or revoking any such
Authorization. Each of TV Filme and its Subsidiaries has fulfilled and
performed, in all material respects, all of its obligations with respect
to such Authorizations and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of
any such Authorization and, except as described in the Offering
Memorandum, such Authorizations contain no restrictions that are
materially burdensome to TV Filme or such Subsidiary, taken as whole.
(xxix) Each of TV Filme and its Subsidiaries and their respective
officers, directors, employees and agents is in compliance in all material
respects with all applicable provisions of the Foreign Corrupt Practices
Act, as amended.
(xxx) All federal, state, local, foreign and other Tax Returns (as
defined below) required to be filed by TV Filme or any of its Subsidiaries
in all jurisdictions have been so filed, other than those which the
failure to have filed would not be reasonably expected to have a
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Material Adverse Effect. All federal, state, local, foreign and other
Taxes (as defined below) due or claimed to be due from such entities or
that are due and payable have been paid, other than those being contested
in good faith and for which adequate reserves have been provided, except
where the failure to pay would not have a Material Adverse Effect. There
are no material proposed additional Tax assessments against TV Filme or
any of its Subsidiaries, or the assets or property of TV Filme or any of
its Subsidiaries. For purposes of this Agreement, the terms "Tax" and
"Taxes" shall mean all federal, state, local or foreign income, payroll,
employee withholding, unemployment insurance, social security, sales, use,
service use, leasing use, excise, franchise, gross receipts, value added,
alternative or add-on minimum, estimated, occupation, real and personal
property, stamp, transfer, workers' compensation, severance, windfall
profits, environmental or other tax of the same or of a similar nature,
including any interest, penalty, or addition thereto, whether disputed or
not. The term "Tax Return" means any return, declaration, report, form,
claim for refund, or information return or statement relating to Taxes or
income subject to taxation, or any amendment thereto, and including any
schedule or attachment thereto.
(xxxi) None of (A) the Operative Documents, (B) the authorization,
issuance, sale and delivery of the Series A Notes to the Initial
Purchasers upon payment therefor as contemplated in the Indenture and this
Agreement or (C) the authorization, issuance, sale and delivery of the
Series B Notes, in each case as contemplated in this Agreement, the
Indenture and the Registration Rights Agreement, are subject to any
registration tax, stamp duty or similar tax, duty, impost or levy or other
Tax imposed by Brazil or the United States or any political subdivision
thereof.
(xxxii) TV Filme believes that it and each of its Subsidiaries
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that: (A) transactions are executed in accordance
with management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with U.S. generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted only
in accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxxiii) TV Filme and each Subsidiary carries, or is covered by,
insurance covering its or their material properties, operations, personnel
and businesses. Such insurance insures against such losses and risks and
is in such amounts as are adequate for the conduct of the respective
businesses of TV Filme and its Subsidiaries and the value of their
respective properties. Neither TV Filme nor any of its Subsidiaries has
received notice from any insurer or agent of such insurer that substantial
capital improvements or other material expenditures will have to be made
in order to continue such insurance.
(xxxiv) Neither TV Filme nor any of its Subsidiaries has (A) taken,
directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the
price of any security of TV Filme or any of its Subsidiaries to facilitate
the sale or resale of the Series A Notes or (B) since the date of the
Preliminary Offering Memorandum sold, bid for, purchased or paid any
Person any compensation for soliciting purchases of the Series A Notes or
paid or agreed to pay to any Person any compensation for soliciting
another to purchase any other securities of TV Filme or any of its
Subsidiaries.
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(xxxv) Assuming the accuracy of the Initial Purchasers'
representations contained herein and the Initial Purchasers' compliance
with their agreements hereunder, no registration under the Securities Act
of the Series A Notes is required for the offer and sale of the Series A
Notes to the Initial Purchasers as contemplated hereby or for the offer
and sale of the Series A Notes by the Initial Purchasers as contemplated
hereby and in the Offering Memorandum and it is not necessary to qualify
the Indenture under the Trust Indenture Act in connection with the offer
and sale of the Series A Notes. No form of general solicitation or general
advertising was used by TV Filme or any of its Subsidiaries or any of
their representatives in connection with the offer and sale of any of the
Series A Notes or in connection with Exempt Resales, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. Neither TV Filme nor its
Subsidiaries or agents has engaged in any directed selling efforts in
connection with the offering of the Series A Notes. There is no
"substantial U.S. market interest" in the debt securities of TV Filme (as
such term is defined in Regulation S). No securities of the same class as
the Series A Notes have been offered or sold by TV Filme or any of its
Subsidiaries within the six-month period immediately prior to the date of
this Agreement.
(xxxvi) When the Series A Notes are issued and delivered pursuant to
this Agreement, no Series A Note will be of the same class (within the
meaning of Rule 144A(d)(3) under the Securities Act) as securities that
are listed on a national securities exchange under Section 6 of the
Exchange Act or that are quoted in any "automated inter-dealer quotation
system" (within the meaning of Rule 144A under the Securities Act).
(xxxvii) Neither TV Filme nor any of its Subsidiaries is, or upon
the consummation of the transactions contemplated by this Agreement and
the transactions described in the Offering Memorandum under the caption
"Use of Proceeds" will be, an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act.
(xxxviii) None of the execution, delivery and performance of the
Operative Documents, the issuance and sale of the Securities, the
application of the proceeds from the issuance and sale of the Series A
Notes and the consummation of the transactions contemplated thereby as set
forth in the Offering Memorandum, will violate Regulations G, T, U or X
promulgated by the Board of Governors of the Federal Reserve System or
analogous foreign laws and regulations.
TV Filme acknowledges that each certificate signed by any officer of
TV Filme and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by TV Filme to
the Initial Purchasers as to the matters covered hereby.
TV Filme acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 8
hereof, counsel to TV Filme and counsel to the Initial Purchasers will rely upon
the accuracy and truth of the foregoing representations and hereby consents to
such reliance.
(b) Each of the Initial Purchasers represents, warrants and
covenants to TV Filme and agrees with respect to itself that:
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(i) Such Initial Purchaser is an "accredited investor" within the
meaning of Regulation D under the Securities Act, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(ii) Such Initial Purchaser (A) is not acquiring the Series A Notes
with a view to any distribution thereof that would violate the provisions
of the Securities Act or the securities laws of any state of the United
States or any other applicable jurisdiction and (B) will be reoffering and
reselling the Series A Notes only to QIBs in reliance on the exemption
from the registration requirements of the Securities Act provided by Rule
144A, to Institutional Accredited Investors in a private placement exempt
from the registration requirements of the Securities Act and to non-U.S.
persons in reliance on, and in conformity with, Regulation S under the
Securities Act.
(iii) No form of general solicitation or general advertising has
been or will be used by such Initial Purchaser or any of its
representatives in connection with the Exempt Resales, including, but not
limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
(iv) Such Initial Purchaser agrees that, in connection with the
Exempt Resales, it will solicit offers to buy the Series A Notes only
from, and will offer to sell the Series A Notes only to, QIBs,
Institutional Accredited Investors and Reg S Buyers. Such Initial
Purchaser further agrees that it will offer to sell the Series A Notes
only to, and will solicit offers to buy the Series A Notes only from (1)
QIBs who in purchasing such Series A Notes will be deemed to have
represented and agreed that they are purchasing the Series A Notes for
their own accounts or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are QIBs, (2)
Institutional Accredited Investors who make the representations contained
in, and execute and return to such Initial Purchaser, a certificate in the
form of Annex C attached to the Offering Memorandum and (3) Reg S Buyers
in reliance on Regulation S under the Securities Act.
(v) it is not a pension or welfare plan (as defined in Section 3 of
the ERISA or the rules and regulations promulgated thereunder) or is
subject to one of the exceptions enumerated in clause 9 under "Notice to
Investors" in the Offering Memorandum.
Such Initial Purchaser understands that TV Filme and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel to TV Filme and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
(a) TV Filme agrees to indemnify and hold harmless the Initial
Purchasers, each person, if any, who controls any of the Initial Purchasers
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act and the respective officers, directors, partners, employees,
representatives and agents of each of the Initial Purchasers or any controlling
persons, against any and all losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to reasonable attorneys' fees and expenses
and any and all other expenses whatsoever incurred in investigating,
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preparing or defending against any investigation or litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation) (collectively, "Losses"), joint or several, to which
they or any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such Losses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any supplement thereto or amendment thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that TV Filme will not be liable in any such case to the
extent, but only to the extent, that any such Loss arises out of or is based
upon (i) any untrue statement or alleged untrue statement or omission or alleged
omission made in the Preliminary Offering Memorandum or the Offering Memorandum
in reliance upon and in conformity with written information furnished to TV
Filme by or on behalf of the Initial Purchasers expressly for use in the
Offering Memorandum, or in any supplement or amendment thereto, or (ii) any
untrue or alleged untrue statement contained in or omission or alleged omission
from the Preliminary Offering Memorandum if a copy of the Offering Memorandum
(as then amended or supplemented) was not delivered by or on behalf of the
Initial Purchasers to the Person asserting the claim or action, if required by
law to have been so delivered by the Initial Purchasers seeking indemnification
and the untrue statement or alleged omission from such Preliminary Offering
Memorandum was corrected in the Offering Memorandum. This indemnity agreement
will be in addition to any liability which TV Filme may otherwise have,
including under this Agreement.
(b) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless TV Filme and each person, if any, who controls TV
Filme within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any and all Losses, joint or several, to which the
Initial Purchasers or any of them may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum or
the Offering Memorandum, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
any such Loss arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to TV Filme by or on behalf
of the Initial Purchasers expressly for use therein; provided, however, that in
no case shall the Initial Purchasers be liable or responsible for any amount in
excess of the discounts and commissions received by the Initial Purchasers, as
set forth on the cover page of the Offering Memorandum. This indemnity will be
in addition to any liability which the Initial Purchasers may otherwise have,
including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6, except to the extent that it
has been prejudiced in any material respect by such failure, or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party
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promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action and the indemnifying party has agreed in writing to
pay the fees and expenses of such counsel, (ii) the indemnifying parties shall
not have employed counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded, upon the advise of
counsel, that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses of counsel shall be borne by the
indemnifying parties; provided, however, that the indemnifying party under
subsection (a) or (b) above shall only be liable for the legal expenses of one
counsel (in addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action is brought. Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement of any claim or action effected without its prior
written consent; provided, however, that such consent was not unreasonably
withheld. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party, which consent may not be unreasonably
withheld, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding of which indemnification may
be sought hereunder (whether or not any indemnified party is an actual or
potential party to such claim, action or proceeding) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action or proceeding.
7. Contribution.
In order to provide for contribution in circumstances in which the
indemnification provided for in Section 6 is for any reason held to be
unavailable or is insufficient to hold harmless a party indemnified thereunder,
TV Filme, on the one hand, and the Initial Purchasers, on the other hand, shall
contribute to the aggregate Losses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
Losses suffered by TV Filme, any contribution received by TV Filme from persons,
other than the Initial Purchasers, who may also be liable for contribution,
including persons who control TV Filme within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to which TV Filme and the
Initial Purchasers may be subject, in such proportion as is appropriate to
reflect the relative benefits received by TV Filme, on the one hand, and the
Initial Purchasers, on the other hand, from the offering of the Series A Notes
or, if such allocation is not permitted by applicable law or indemnification is
not available as a result of the indemnifying party not having received notice
as provided in Section 6, in such proportion as is appropriate to reflect not
only the relative benefits referred to above but also the relative fault of TV
Filme, on the one hand, and the Initial Purchasers, on the other hand, in
connection with the statements or omissions which resulted in such Losses, as
well as any other relevant equitable considerations. The relative benefits
received by TV Filme, on the one hand, and the Initial Purchasers, on the other
hand, shall be deemed to be in the same proportion as (i) the total proceeds
from the offering of Series A Notes (net of discounts and commissions but before
deducting expenses) received by TV Filme and (ii) the discounts and commissions
received by the Initial Purchasers, respectively, in each case as set forth in
the table on the cover page of the Offering Memorandum. The relative fault of TV
Filme, on the one hand, and of the Initial Purchasers, on the other hand, shall
be determined by reference to,
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<PAGE>
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by TV Filme, on the one hand, or the Initial Purchasers, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. TV
Filme and the Initial Purchasers agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 7, (A) in no case shall the Initial Purchasers be required to
contribute any amount in excess of the amount by which the discounts and
commissions applicable to the Series A Notes purchased by the Initial Purchasers
pursuant to this Agreement exceeds the amount of any damages which the Initial
Purchasers have otherwise been required to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission and (B) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section 7,
each person, if any, who controls the Initial Purchasers within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and the
respective officers, directors, partners, employees, representatives and agents
of the Initial Purchasers or any controlling persons shall have the same rights
to contribution as the Initial Purchasers, and each person, if any, who controls
TV Filme, within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and the respective officers, directors, partners, employees,
representatives and agents of TV Filme or any controlling persons shall have the
same rights to contribution as TV Filme, subject in each case to clauses (A) and
(B) of this Section 7. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 7, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 7 or otherwise.
8. Conditions of Initial Purchasers' Obligations.
The obligations of the Initial Purchasers to purchase and pay for
the Series A Notes, as provided herein, shall be subject to the following
conditions:
(a) All of the representations and warranties of TV Filme contained
in this Agreement shall be true and correct in all material respects on
the date hereof and on the Closing Date with the same force and effect as
if made on and as of the date hereof and the Closing Date, respectively.
TV Filme shall have performed or complied with all of the agreements
herein contained and required to be performed or complied in all material
respects with by it at or prior to the Closing Date.
(b) (i) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers in New York as soon as practicable
after the date of this Agreement but not later than 9:30 a.m., New York
City time, on the day following the date of this Agreement or at such
later date and time as to which the Initial Purchasers may agree, and (ii)
no stop order suspending the qualification or exemption from qualification
of the Series A Notes in any jurisdiction referred to in Section 4(e)
shall have been issued and no proceeding for that purpose shall have been
commenced or shall be pending or, to the best knowledge of TV Filme,
threatened.
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(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted, issued or revoked by any
governmental agency which would, as of the Closing Date, reasonably be
expected to have a Material Adverse Effect; no action, suit or proceeding
shall have been commenced and be pending against or affecting or
threatened against, TV Filme or any of its Subsidiaries before any court
or arbitrator or any governmental body, agency or official that, if
adversely determined, could reasonably be expected to result in a Material
Adverse Effect; and no stop order shall have been issued preventing the
use of the Offering Memorandum, or any amendment or supplement thereto, or
which could reasonably be expected to have a Material Adverse Effect.
(d) Since the dates as of which information is given in the Offering
Memorandum and other than as set forth in the Offering Memorandum, (i)
there shall not have been any material adverse change or any development
that is reasonably likely to result in a material adverse change in the
long-term debt, or material increase in the short-term debt, of TV Filme
or any of its Subsidiaries from that set forth in the Offering Memorandum
or to otherwise result in a Material Adverse Effect, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by TV
Filme or any of its Subsidiaries on any class of its capital stock, and
(iii) neither TV Filme nor any of its Subsidiaries shall have incurred any
liabilities or obligations other than contracts entered into in the
ordinary course of business, direct or contingent, that are or, after
giving effect to the Offering and the transactions contemplated thereby,
will be material, individually or in the aggregate to TV Filme and its
Subsidiaries, taken as a whole, and that are required to be disclosed on a
balance sheet or notes thereto in accordance with U.S. generally accepted
accounting principles and are not disclosed on the latest balance sheet or
notes thereto included in the Offering Memorandum. Since the date hereof
and since the dates as of which information is given in the Offering
Memorandum, there shall not have occurred any material adverse change in
the properties, business, results of operations, condition (financial or
otherwise), affairs or prospects of TV Filme and its Subsidiaries taken as
a whole.
(e) The Initial Purchasers shall have received a certificate, dated
the Closing Date, signed on behalf of TV Filme by its president, chief
operating officer and chief financial officer, in form and substance
satisfactory to the Initial Purchasers, (i) confirming as of the Closing
Date, the matters set forth in paragraphs (a), (b)(ii), (c) and (d) of
this Section 8, (ii) confirming as of the Closing Date, that the
obligations of TV Filme to be performed hereunder on or prior thereto have
been duly performed in all material respects and (iii) stating that as of
the Closing Date, no facts have come to such officers' attention that
would cause such officers to believe that the Offering Memorandum, as of
its date or the Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(f) The Initial Purchasers shall have received on the Closing Date
(i) the opinion, dated the Closing Date, of Kelley Drye & Warren LLP, New
York, New York, U.S. counsel to TV Filme, substantially to the effect set
forth in Exhibit B hereto and (ii) the opinion of Tozzini, Freire,
Teixeira e Silva Advogados, Sao Paulo, Brazil, Brazilian counsel to TV
Filme, substantially to the effect set forth in Exhibit C hereto.
(g) The Initial Purchasers shall have received on the Closing Date
(i) the opinion, dated the Closing Date, of Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York,
U.S. counsel to the Initial Purchasers, covering such
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matters as are customarily covered in such opinions and (ii) the opinion,
dated the Closing Date, of Barbosa & Mussnich Advogados, Rio de Janeiro,
Brazil, Brazilian counsel to the Initial Purchasers, covering such matters
as are customarily covered in such opinions.
(h) At the time this Agreement is executed and at the Closing Date
the Initial Purchasers shall have received from Ernst & Young, independent
auditors for TV Filme, dated as of the date of this Agreement and as of
the Closing Date, customary comfort letters addressed to the Initial
Purchasers and in form and substance previously agreed upon by the Initial
Purchasers and counsel to the Initial Purchasers with respect to the
financial statements and certain financial information of TV Filme and its
Subsidiaries contained in the Offering Memorandum.
(i) The Initial Purchasers shall have received evidence reasonably
satisfactory to them that the appointment of Corporate Service Company,
New York, New York, as agent for service of process of TV Filme pursuant
to Section 18 hereof and pursuant to the Indenture has been accepted by
such agent.
(j) TV Filme and the other parties to the Operative Documents shall
have entered into such Operative Documents and the Initial Purchasers
shall have received counterparts, conformed as executed, thereof.
(k) The Initial Purchasers shall have received evidence reasonably
satisfactory to them of the receipt by the Company of effective waivers of
any and all registration rights which might otherwise be exercisable in
connection with the registrations contemplated by the Registration Rights
Agreement.
(l) Simpson Thacher & Bartlett and Barbosa & Mussnich Advogados
shall have been furnished with such documents, in addition to those set
forth above, as they may reasonably require for the purpose of enabling
them to review or pass upon the matters referred to in this Section 8 and
in order to evidence the accuracy, completeness or satisfaction in all
material respects of any of the representations, warranties or conditions
herein contained.
(m) Prior to or on the Closing Date, there shall have been delivered
to the Initial Purchasers such resolutions, consents, authorizations
(including the authorization of the Central Bank) and documents relating
to the issue of the Series A Notes and the Intercompany Note (including
English translations and notarized or consularized counterparts thereof)
and such further information, certificates and documents as the Initial
Purchasers may reasonably request.
All opinions, certificates, letters and other documents required by
this Section 8 to be delivered by TV Filme will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchasers and their counsel. TV Filme will furnish the Initial
Purchasers with such conformed copies of such opinions, certificates, letters
and other documents as they shall reasonably request.
9. Initial Purchasers' Information.
TV Filme and the Initial Purchasers severally acknowledge that the
statements with respect to the offering of the Series A Notes set forth in (i)
the last paragraph on the bottom of the front cover page concerning certain
terms of the Offering by the Initial Purchasers, (ii) the legend covering
over-allotment and trading activities on the inside cover page and (iii) the
third paragraph, the second and
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third sentences of the fifth paragraph and the sixth paragraph under the caption
"Plan of Distribution" constitute the only information furnished in writing by
the Initial Purchasers expressly for use in the Offering Memorandum.
10. Survival of Representations and Agreements.
All representations and warranties, covenants and agreements of the
Initial Purchasers and TV Filme contained in this Agreement, including without
limitation, the agreements contained in Sections 11(d) and 13, the indemnity
agreements contained in Section 6 and the contribution agreements contained in
Section 7, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Initial Purchasers, any controlling
person of any of the Initial Purchasers or by or on behalf of TV Filme or any
controlling person thereof, and shall survive delivery of and payment for the
Series A Notes to and by the Initial Purchasers. The representations contained
in Section 5 and the agreements contained in Sections 6, 7 and 11(d) and 13
shall survive the termination of this Agreement, including any termination
pursuant to Section 11.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to TV Filme from the
Initial Purchasers, without liability (other than with respect to Sections 6 and
7) on the Initial Purchasers' part to TV Filme if, on or prior to such date, (i)
TV Filme shall have failed, refused or been unable to perform in any material
respect any agreement on its part to be performed hereunder, (ii) any other
condition to the obligations of the Initial Purchasers hereunder as provided in
Section 8 is not fulfilled when and as required in any material respect, (iii)
in the reasonable judgment of the Initial Purchasers, any material adverse
change shall have occurred since the respective dates as of which information is
given in the Offering Memorandum in the condition (financial or otherwise),
business, properties, assets, liabilities, prospects, net worth, results of
operations or cash flows of TV Filme and its Subsidiaries, taken as a whole,
other than as set forth in the Offering Memorandum, or (iv) (A) any domestic or
international event or act or occurrence has materially disrupted, or in the
reasonable opinion of the Initial Purchasers will in the immediate future
materially disrupt, the market for TV Filme's securities or for securities in
general; or (B) trading in securities generally on either of the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National Market System, the
Sao Paolo Stock Exchange or the Rio de Janeiro Stock Exchange shall have been
suspended or materially limited, or minimum or maximum prices for trading shall
have been established, or maximum ranges for prices for securities shall have
been required, on such exchange, or by such exchange or other regulatory body or
governmental authority having jurisdiction; or (C) a banking moratorium shall
have been declared by federal or state authorities, or a moratorium in foreign
exchange trading by major international banks or persons shall have been
declared; or (D) there is an outbreak or escalation of armed hostilities
involving the United States or Brazil on or after the date hereof, or if there
has been a declaration by the United States or Brazil of a national emergency or
war, the effect of which shall be, in the Initial Purchasers' judgment, to make
it inadvisable or impracticable to proceed with the offering or delivery of the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum; or (E) there shall have been such a material adverse change in
general economic, political or financial conditions or if the effect of
international conditions on the financial markets in the United States or Brazil
shall be such as, in the Initial Purchasers' judgment, makes it inadvisable or
impracticable to proceed with the offering or delivery of the Series A Notes as
contemplated thereby; or (F) (1) there
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<PAGE>
shall have occurred a downgrading in the rating accorded the Series A Notes by
any "nationally recognized statistical rating organization" as that term is
defined by the Commission for purposes of Rule 436(g)(2) of the rules and
regulations of the Commission under the Securities Act or (2) any such
organization shall have publicly announced that it has under surveillance or
review (other than an announcement with positive implications of a possible
upgrading), its rating of the Series A Notes.
(c) Any notice of termination pursuant to this Section 11 shall be
by telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by
letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (other than a termination pursuant to Section 11(b)(iv), in
which case each party will be responsible for its own
expenses) or if the sale of the Series A Notes provided for herein is not
consummated because any condition to the obligations of the Initial Purchasers
set forth herein is not satisfied or because of any refusal, inability or
failure on the part of TV Filme to perform any agreement herein or comply with
any provision hereof, TV Filme will, subject to demand by the Initial
Purchasers, reimburse the Initial Purchasers for all reasonable out-of-pocket
expenses (including the reasonable fees and expenses of Initial Purchasers'
counsel), incurred by the Initial Purchasers in connection herewith.
12. Defaulting Initial Purchasers.
(a) If, on the Closing Date, any Initial Purchaser defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Initial Purchasers may make arrangements for the purchase of the
Series A Notes by other persons satisfactory to TV Filme and the non-defaulting
Initial Purchasers, but if no such arrangements are made within 36 hours after
such default, this Agreement shall terminate without liability on the part of
the non-defaulting Initial Purchasers or TV Filme, except that TV Filme will
continue to be liable for the payment of expenses only to the extent set forth
in Sections 11(d) and 13(a) and except that the provisions of Sections 6 and 7
shall not terminate and shall remain in effect. As used in this Agreement, the
term "Initial Purchaser" includes, for all purposes of this Agreement unless the
context otherwise requires, any party not listed in Schedule I hereto who,
pursuant to this Section 12, purchases Series A Notes which a defaulting Initial
Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to TV Filme or the non-defaulting Initial
Purchasers for damages caused by its default. If other persons are obligated or
agree to purchase the Series A Notes of a defaulting Initial Purchaser, either
the non-defaulting Initial Purchasers or TV Filme may postpone the Closing Date
for up to seven full business days in order to effect any changes that in the
opinion of counsel for TV Filme or counsel for the Initial Purchasers may be
necessary in the Offering Memorandum or in any other document or arrangement and
TV Filme agrees to promptly make any amendment or supplement to the Offering
Memorandum that effects any such changes.
13. Fees and Expenses.
(a) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, TV Filme
agrees to pay all costs, expenses, fees and taxes in connection with this
Agreement and the transactions contemplated hereby and by the other Operative
Documents, including without limitation all costs, expenses, fees and taxes
relating to: (i) the preparation, printing, filing and distribution of the
Preliminary Offering Memorandum and the Offering Memorandum (including, without
limitation, financial statements) and all amendments and supplements
24
<PAGE>
thereto required pursuant hereto, (ii) the preparation (including, without
limitation, duplication costs) and delivery of this Agreement, the other
Operative Documents and all other agreements, memoranda, correspondence and
other documents prepared and delivered in connection herewith and with the
Exempt Resales, (iii) the issuance, transfer and delivery by TV Filme of the
Securities to the Initial Purchasers, (iv) the qualification or registration of
the Securities for offer and sale under the securities or Blue Sky laws of the
jurisdictions referred to in Section 4(e) above (including, without limitation,
the cost of printing and mailing a preliminary and final Blue Sky Memorandum and
the reasonable fees and disbursements of counsel to the Initial Purchasers
relating thereto), (v) furnishing such copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and all amendments and supplements
thereto, as may be reasonably requested for use in connection with Exempt
Resales, (vi) the preparation of certificates for the Securities (including,
without limitation, printing and engraving thereof), (vii) the fees,
disbursements and expenses of counsel to TV Filme and its independent auditors,
(viii) all expenses and listing fees in connection with the application for
quotation of the Series A Notes in the PORTAL market, (ix) all fees and expenses
(including fees and expenses of counsel to TV Filme) of TV Filme in connection
with the approval of the Securities by the Depository for "book-entry" transfer,
(x) all fees and expenses in connection with the rating the Securities by rating
agencies, (xi) all fees and expenses of the Trustee and its counsel in
connection with the Indenture and the Securities, (xii) the performance by TV
Filme of its other obligations under this Agreement and the other Operative
Documents and (xiii) "roadshow" travel and other expenses incurred by TV Filme
in connection with the marketing and sale of the Securities.
(b) TV Filme agrees to indemnify and hold the Initial Purchasers
harmless against any stamp, issue, registration, documentary or other taxes and
duties, including any interest and penalties, payable in Brazil or otherwise, on
or in connection with the creation, issue, offering or sale of the Series A
Notes or the execution and delivery of any of the Operative Documents which are
or may be required to be paid under the laws of Brazil, the United States or any
political subdivision or taxing authority of or in any such jurisdiction.
(c) All payments by TV Filme or its Subsidiaries under any of the
Operative Documents shall be paid without set-off or counterclaim, and free and
clear of and without deduction or withholding for or on account of, any present
or future Brazilian or other taxes, levies, imposts, duties, fees, assessments
or other charges of whatever nature, and all interest, penalties or similar
liabilities with respect thereto (collectively, "Levies"). If any Levies are
required by any applicable law to be deducted or withheld in connection with
such payments, TV Filme or its Subsidiaries will increase the amount paid so
that the full amount of such payment is received.
14. Notices.
All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied and
confirmed in writing to Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New
York 10167, Attention: Corporate Finance Department, telecopy number: (212)
272-3092, with a copy to Simpson Thacher & Bartlett, 425 Lexington Avenue, New
York, NY 10017, Attention: John D. Lobrano, Esq., telecopy: 212-455-2502; and if
sent to TV Filme, shall be mailed, delivered or telexed, telegraphed or
telecopied and confirmed in writing to TV Filme, Inc., c/o ITSA-Intercontinental
Telecomunicacoes Ltda., SCS, Quadra 07-B1.A, Ed. Executive Tower, Sala 601,
70.300.911, Brasilia-DF, Brazil, Attention: Hermano Studart Lins de Albuquerque;
telecopy number: 011-55-61-323-5660, with a copy to Kelley Drye & Warren LLP,
Two Stamford Plaza, 281 Tresser Boulevard, Stamford, CT 06901, Attention: John
T. Capetta, Esq., telecopy: 203-327-2669; provided, however, that any notice
25
<PAGE>
pursuant to Sections 6 or 7 shall be mailed, delivered or telexed, telegraphed
or telecopied and confirmed in writing.
15. Parties.
This Agreement shall inure solely to the benefit of, and shall be
binding upon, the Initial Purchasers, TV Filme and the controlling persons and
agents referred to in Sections 6 and 7, and their respective successors and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained. The term "successors and assigns"
shall not include a purchaser, in its capacity as such, of Series A Notes from
the Initial Purchasers.
16. Construction.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW RULES
THEREOF. Time is of the essence in this Agreement.
17. Captions.
The captions included in this Agreement are included solely for
convenience of reference and are not to be considered a part of this Agreement.
18. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE.
To the fullest extent permitted by applicable law, TV Filme
irrevocably submits to the jurisdiction of any federal or state court in the
City, County and State of New York, United States of America, in any suit or
proceeding based on or arising under this Agreement (solely in connection with
any such suit or proceeding), and irrevocably agree that all claims in respect
of such suit or proceeding may be determined in any such court. TV Filme
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. TV Filme hereby irrevocably designates
and appoints Corporation Service Company, 375 Hudson Street, New York, New York
10014, U.S.A. (the "Process Agent"), as the authorized agent of TV Filme upon
whom process may be served in any such suit or proceeding, it being understood
that the designation and appointment of Corporation Service Company as such
authorized agent shall become effective immediately without any further action
on the part of TV Filme. TV Filme represents to the Initial Purchasers that it
has notified the Process Agent of such designation and appointment and that the
Process Agent has accepted the same in writing. TV Filme hereby irrevocably
authorizes and directs the Process Agent to accept such service. TV Filme
further agree that service of process upon the Process Agent and written notice
of said service to TV Filme mailed by prepaid registered first class mail or
delivered to the Process Agent at its principal office, shall be deemed in every
respect effective service of process upon TV Filme in any such suit or
proceeding. Nothing herein shall affect the right of any Initial Purchaser or
any person controlling such Initial Purchaser to serve process in any other
manner permitted by law. TV Filme further agrees to take any and all action,
including the execution and filing of any and all such documents and instruments
as may be necessary to continue such designation and appointment of the Process
Agent in full force and effect so long as TV Filme has any outstanding
obligations under this Agreement, the Notes, the Indenture, or any other
Operative Document. To the extent that TV Filme has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of note,
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attachment prior to judgment, attachment in aid of execution, executor or
otherwise) with respect to itself or its property, TV Filme hereby irrevocably
waives such immunity in respect of their obligations under this Agreement, to
the extent permitted by law.
19. Obligation Currency.
The obligation of the parties to make payments hereunder is in U.S.
dollars (the "Obligation Currency") and such obligation shall not be discharged
or satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency or any other
realization in such other currency, whether as proceeds of set-off, security,
guarantee, distributions, or otherwise, except to the extent to which such
tender, recovery or realization shall result in the effective receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder, and the party liable to make such
payment agrees to indemnify the party which is to receive such payment (as an
additional, separate and independent cause of action) for the amount (if any) by
which such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation to
indemnify shall not be affected by judgment being obtained for any other sums
due under this Agreement.
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20. Counterparts.
This Agreement may be executed in various counterparts which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth the understanding among the
Initial Purchasers and TV Filme please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
TV FILME, INC.
By: /s/ Hermano Studart Lins de Albuquerque
----------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Chief Executive Officer
BEAR, STEARNS & CO. INC.
By: /s/ Michael L. Yagerman
-----------------------------
Name: Michael L. Yagerman
Title: Senior Managing Director
BT SECURITIES CORPORATION
By: /s/ David F. Jacobs
-----------------------------
Name: David F. Jacobs
Title: Associate
J.P. MORGAN SECURITIES INC.
By: /s/ Mark Hall
------------------------------
Name: Mark Hall
Title: Vice President
ALEX. BROWN & SONS INCORPORATED
By: /s/ Steven K. Fischer
-----------------------------
Name: Steven K. Fischer
Title: Managing Director
WITNESSES:
/s/ Regina L. Hillman
- ----------------------------------
Name: Regina L. Hillman
/s/ Jaime Mercado
- ---------------------------------
Name: Jaime Mercado
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Hermano Studart Lins de
Albuquerque to me personally known who being duly sworn, did say that he is
Chief Executive Officer of TV Filme, Inc., one of the persons described in and
which executed the foregoing instrument, and acknowledges said instrument to be
the free act and deed of said corporation.
/s/ Olivia Savell
-------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Michael Yagerman to me
personally known who being duly sworn, did say that he is Senior Managing
Director of Bear, Stearns & Co. Inc., one of the persons described in and
which executed the foregoing instrument, and acknowledges said instrument to be
the free act and deed of said corporation.
/s/ Paul V. Coughlin
-------------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared David F. Jacobs to me
personally known who being duly sworn, did say that he is Associate of BT
Securities Corporation, one of the persons described in and which executed the
foregoing instrument, and acknowledges said instrument to be the free act and
deed of said corporation.
/s/ Olivia Savell
-------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Mark Hall to me personally
known who being duly sworn, did say that he is Vice President of J.P. Morgan
Securities Inc., one of the persons described in and which executed the
foregoing instrument, and acknowledges said instrument to be the free act and
deed of said corporation.
/s/ Olivia Savell
-------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Steven K. Fischer to me
personally known who being duly sworn, did say that he is Managing Director of
Alex. Brown & Sons Incorporated, one of the persons described in and which
executed the foregoing instrument, and acknowledges said instrument to be the
free act and deed of said corporation.
/s/ Olivia Savell
-------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
SCHEDULE I
Aggregate Principal
Initial Purchaser Amount of Series A Notes
- ----------------- ------------------------
Bear, Stearns & Co. Inc. $ 70,000,000
BT Securities Corporation $ 35,000,000
J.P. Morgan Securities Inc. $ 21,000,000
Alex. Brown & Sons Incorporated $ 14,000,000
------------
Total $140,000,000
<PAGE>
Schedule 5(A)(IV)
Subsidiaries
================================================================================
%
NAME OF COMPANY OF
OWNERSHIP
BY TV
FILME, INC.
- --------------------------------------------------------------------------------
ITSA-Intercontinental Telecomunicacoes Ltda., a Brazilian 99(1)
limited liability company
- --------------------------------------------------------------------------------
Filme Sub, Inc., a Delaware corporation 100
- --------------------------------------------------------------------------------
TV Filme Servicos de Telecomunicacoes Ltda., a Brazilian 49(2)
limited liability company
- --------------------------------------------------------------------------------
TV Filme Brasilia de Telecomunicacoes Ltda., a Brazilian 99(1)
limited liability company
- --------------------------------------------------------------------------------
TV Filme Goiania de Telecomunicacoes Ltda., a Brazilian 99(1)
limited liability company
- --------------------------------------------------------------------------------
TV Filme Belem de Telecomunicacoes Ltda., a Brazilian 99(1)
limited liability company
- --------------------------------------------------------------------------------
TV Filme of Cayman, Ltd., a Cayman Island limited partnership (3)
- --------------------------------------------------------------------------------
ITSA of Cayman, Ltd., a Cayman Island limited partnership (4)
================================================================================
- ----------
(1) The remaining 1% interest is held by Filme Sub, Inc.
(2) The remaining 51% is owned by TVTEL Ltda.
(3) Owned 99% by TV Filme, Inc. and 1% by Filme Sub, Inc.
(4) Owned 99% by ITSA-Intercontinental Telecomunicacoes Ltda. and 1% by TV
Filme Brasilia de Telecomunicacoes Ltda.
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
[EXHIBIT NOT INCLUDED]
<PAGE>
EXHIBIT B
Form of Opinion of Kelley Drye & Warren LLP
1. TV Filme has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
full corporate power and corporate authority to conduct its business as it
is being conducted currently and as described in the Offering Memorandum
and to own, lease and operate its properties and is duly qualified to
transact business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or to be in good standing
would not have a Material Adverse Effect.
2. All of the outstanding shares of capital stock of TV Filme have
been duly authorized, validly issued and are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights.
3. TV Filme has all requisite corporate power and corporate
authority to execute, deliver and perform its obligations under the
Operative Documents (to the extent it is a party thereto) and to
consummate the transactions contemplated hereby and thereby, including,
without limitation, the corporate power and corporate authority to issue,
sell and deliver the Series A Notes as provided in this Agreement and the
Indenture.
4. This Agreement has been duly authorized, executed and delivered
by TV Filme.
5. The Registration Rights Agreement has been duly authorized,
executed and delivered by TV Filme in accordance with its terms and,
assuming due authorization, execution and delivered by the other parties
thereto, constitutes a valid and legally binding obligation of TV Filme,
enforceable against TV Filme in accordance with its terms.
6. The Pledge Agreement has been duly authorized, executed and
delivered by TV Filme and, assuming due authorization, execution and
delivery by ITSA under the laws of Brazil and due authorization, execution
and delivery by the Trustee under the laws of the State of New York, the
Pledge Agreement constitutes a valid and legally binding obligation of TV
Filme, enforceable against TV Filme in accordance with its terms. Assuming
that the Pledge Agreement has been duly authorized, executed and delivered
by ITSA under the laws of Brazil and due authorization, execution and
delivery by the Trustee under laws of the State of New York, the Pledge
Agreement has been duly executed and delivered by ITSA under the laws of
the State of New York and constitutes a valid and legally binding
obligation of ITSA, enforceable against ITSA in accordance with its terms.
7. Assuming that the Intercompany Note has been duly authorized,
executed and delivered by ITSA under the laws of Brazil, the Intercompany
Note has been duly executed and delivered by ITSA under the laws of the
State of New York and constitutes a valid and legally binding obligation
of ITSA, enforceable against ITSA in accordance with its terms.
8. Assuming that each of the Subsidiary Guarantees has been duly
authorized, executed and delivered by the respective Subsidiary Guarantors
under the laws of Brazil, each of the Subsidiary Guarantees has been duly
executed and delivered by the respective Subsidiary
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Guarantor under the laws of the State of New York and constitute a valid
and legally binding obligations of such Subsidiary Guarantor, enforceable
against such Subsidiary Guarantor in accordance with its terms.
9. Assuming the Paying Agent Agreement has been duly authorized,
executed and delivered by ITSA under the laws of Brazil and the Paying
Agent under the laws of Japan, the Paying Agent Agreement has been duly
executed and delivered by ITSA under the laws of the State of New York and
constitutes a valid and legally binding obligation of ITSA, enforceable
against ITSA in accordance with its terms.
10. The Note Pledge Agreement has been duly authorized, executed and
delivered by TV Filme and, assuming due authorization, execution and
delivery by the Trustee, constitutes a valid and legally binding
obligation of TV Filme, enforceable against TV Filme in accordance with
its terms.
11. The Indenture has been duly authorized, executed and delivered
by TV Filme and, assuming due authorization, execution and delivery by the
Trustee, constitutes a valid and legally binding obligation of TV Filme,
enforceable against TV Filme in accordance with its terms. The Indenture
complies in all material respects with the requirements of the Trust
Indenture Act and the rules and regulations of the Commission applicable
to an indenture which is qualified thereunder.
12. The Series A Notes have been duly authorized, executed and
issued by TV Filme and, assuming due authentication thereof in accordance
with the terms of the Indenture by the Trustee and upon payment and
delivery in accordance with this Agreement, will constitute valid and
legally binding obligations of TV Filme, enforceable against TV Filme in
accordance with their terms and entitled to the benefits of the Indenture.
13. The Series B Notes have been duly authorized for issuance by TV
Filme and, when duly executed, issued and authenticated in accordance with
the terms of the Indenture and the Registration Rights Agreement, the
Series B Notes will constitute valid and legally binding obligations of TV
Filme, enforceable against TV Filme in accordance with their terms and
entitled to the benefits of the Indenture.
14. Each of the Operative Documents conforms in all material
respects with the description thereof contained in the Offering
Memorandum.
15. To the best knowledge of such counsel, TV Filme is not (A) in
violation of its certificate of incorporation or by-laws, (B) in default
in the performance of any bond, debenture, note, indenture, mortgage, deed
of trust or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties is subject, or (C) in
violation of any U.S. federal or New York state law, statute, ordinance,
rule, regulation, judgment, order or decree applicable to it or any of its
assets or properties (whether owned or leased), except in the case of
clauses (B) and (C), for such violations or defaults which would not have
a Material Adverse Effect. To the best knowledge of such counsel, there
exist no conditions that would constitute a default (or an event which
with the giving of notice or the lapse of time, or both, would constitute
a default) under any of the Operative Documents.
B-2
<PAGE>
16. To the best knowledge of such counsel, neither the execution,
delivery or performance by TV Filme and its Subsidiaries of this Agreement
or any of the other Operative Documents (to the extent it is a party
thereto) (including the issuance of the Securities and the sale of the
Series A Notes) nor the consummation by TV Filme of the transactions
described in the Offering Memorandum under the caption "Use of Proceeds",
violates, conflicts with or constitutes a breach of any of the terms or
provisions of, or a default under (or an event that with the giving of
notice or the lapse of time, or both, would constitute a default), or
requires consent under, or results in the imposition of a lien or
encumbrance on any properties of TV Filme or its Subsidiaries (other than
the liens created by the Pledge Agreement and the Note Pledge Agreement),
or an acceleration of any indebtedness of TV Filme or its Subsidiaries
pursuant to, (1) the certificate of incorporation and by-laws of TV Filme,
(2) any bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which TV Filme or any of its Subsidiaries is a
party or by which TV Filme or any of its Subsidiaries is bound or to which
any of its or their assets or properties is subject, or (3) any U.S.
federal or New York state law, statute, ordinance, rule, regulation,
judgment, order or decree applicable to TV Filme or any of its
Subsidiaries or any of its or their assets or properties (whether owned or
leased), except in the case of clauses (2) and (3), for such violations or
defaults which would not have a Material Adverse Effect.
17. Except as may be required under applicable state securities or
Blue Sky laws, and except for any NASD filings and the filing of a
registration statement under the Securities Act and qualification of the
Indenture under the Trust Indenture Act in connection with the
Registration Rights Agreement, no consent, approval, authorization or
order of, or filing, registration, qualification, license or permit of or
with, any U.S. federal or New York State court or governmental agency,
body or administrative agency or any other person is required for the
execution, delivery and performance by TV Filme and its Subsidiaries of
this Agreement and the other Operative Documents (to the extent a party
thereto) or the issuance and sale of the Securities and the transactions
contemplated by this Agreement, except as those which have been made and
are in full force and effect.
18. To the best knowledge of such counsel, there is (A) no action,
suit, investigation or proceeding before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, now pending
or, to the best knowledge of such counsel, threatened or contemplated to
which TV Filme or any of its Subsidiaries is or may be a party or to which
the business or property of TV Filme or any of its Subsidiaries is or may
be subject, (B) no statute, rule, regulation, decree or order that (1) has
been enacted, adopted or issued by any governmental agency or that has
been proposed by any governmental body or (2) has been rescinded, revoked
or enjoined by any court or other governmental body, and (C) no
injunction, restraining order or order of any nature by a federal or state
court or foreign court of competent jurisdiction to which TV Filme or any
of its Subsidiaries is or may be subject or to which the business, assets,
or property of TV Filme or any of its Subsidiaries is or may be subject,
that, in the case of clauses (A), (B) and (C) above, (1) is required to be
disclosed in the Offering Memorandum and that is not so disclosed or (2)
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
19. No registration of the Series A Notes under the Securities Act,
and no qualification of the Indenture under the Trust Indenture Act, is
required in connection with the offer and sale of the Series A Notes by TV
Filme to the Initial Purchasers or the offer and resale
B-3
<PAGE>
of the Series A Notes by the Initial Purchasers to the initial purchasers
therefrom solely in the manner contemplated by the Purchase Agreement, the
Indenture and the Offering Memorandum.
20. Neither TV Filme nor any of its Subsidiaries is, or upon the
consummation of the transactions contemplated by this Agreement and the
transactions described in the Offering Memorandum under the caption "Use
of Proceeds" will be, an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act.
21. The statements made in the Offering Memorandum under the
headings "Management--Employment Agreements", "Management--Stock
Options--1996 Stock Option Plan", "Certain Transactions", "Principal
Stockholders" and "Description of Notes" insofar as they purport to
constitute summaries of certain contracts, agreements or documents,
constitute accurate summaries of such contracts, agreements and documents
in all material respects.
22. The statements made in the Offering Memorandum under the heading
"Tax Considerations", insofar as they purport to constitute summaries of
matters of certain U.S. Federal income tax laws and regulations,
constitute accurate summaries of the matters described therein in all
material respects.
23. None of (a) the Operative Documents, (b) the authorization,
issuance, sale and delivery of the Series A Notes to the Initial
Purchasers upon payment therefor as contemplated in this Agreement or (c)
the authorization, issuance, sale and delivery of the Series B Notes, in
each case as contemplated in this Agreement and the Registration Rights
Agreement, are subject to any registration tax, stamp duty or similar tax,
duty, impost or levy or other tax imposed by the United States or any
political subdivision thereof.
24. Assuming that (a) the Trustee received the Intercompany Note
from ITSA or its agent and has, at the date of the opinion, possession of
the certificate representing the Intercompany Note and maintains
continuous possession thereof and (b) the Trustee is entering into the
Note Pledge Agreement in good faith without notice of any adverse claim to
the Intercompany Note, the Trustee has a valid and perfected,
first-priority security interest in all right, title and interest of the
Company in and to the Collateral (as defined in the Note Pledge Agreement)
in favor of the Trustee as security for the Obligations (as defined in the
Note Pledge Agreement).
25. The Collateral (as defined in the Pledge Agreement) consists
solely of securities maintained in the form of entries in the records of
the Federal Reserve Bank of New York (the "FRBNY") (the "Book-Entry
Securities"). Such Book-Entry Securities will be transferred by the
Pledgor (as defined in the Pledge Agreement) to the Trustee upon (A) the
making by the FRBNY of an appropriate entry in its records of the transfer
of the Book-Entry Securities to a customer securities account of [NAME OF
TRUSTEE'S DEPOSITARY] maintained by it in its commercial banking capacity
(in such capacity, the "Depositary"), (B) the sending of a confirmation by
the Depositary, in its capacity as a "financial intermediary" (as defined
in Section 8-313(4) of the Uniform Commercial Code as in effect in the
State of New York (the "UCC")) (the "Financial Intermediary"), to the
Trustee of the "purchase" (as such term is defined in Section 1-201(32) of
the UCC) of such Book-Entry Securities by the Trustee, and (C) the
identification by book-entry by the Depositary of such Book-Entry
Securities as belonging to, or otherwise subject to a security interest in
favor of, the Trustee; and the Pledge Agreement, together with such
transfer, will
B-4
<PAGE>
create, in the case of each such Book-Entry Security, a valid and
perfected, first-priority security interest therein in favor of the
Trustee as security for the Obligations (as defined in the Pledge
Agreement).
In addition, such counsel shall also have furnished to the Initial
Purchasers a written statement, in form and substance satisfactory to the
Initial Purchasers, to the effect that it has participated in conferences with
officers, directors and representatives of TV Filme, its independent auditors
and Tozzini, Freire, Teixeira e Silva Advogados at which conferences the
contents of the Offering Memorandum and related matters were discussed. Although
it has not independently verified the accuracy or completeness of, or otherwise
verified the statements made in, the Offering Memorandum (other than as
expressly provided), such counsel advises the Initial Purchasers that, on the
basis of the foregoing, nothing has come to its attention that has led such
counsel to believe that the Offering Memorandum, as of its date or the Closing
Date, contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading (except as to
financial statements and supporting notes and schedules and other financial and
statistical data contained therein, as to which no opinion need be expressed).
In rendering such opinion, such counsel shall opine as to the federal laws
of the United States and, to the extent set forth therein, the laws of the
States of Delaware and New York. Such counsel will be permitted to except from
its opinions with respect to enforceability: (A) the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, (B) general equitable
principles (whether considered in a proceeding in equity or at law), (C) an
implied covenant of good faith and fair dealing, (D) the possible judicial
application of foreign laws or foreign governmental or judicial action affecting
creditors' rights and (E) the enforceability of any indemnification or
contribution provisions or obligations.
B-5
<PAGE>
EXHIBIT C
Form of Opinion of Tozzini, Freire, Teixeira e Silva Advogados
1. Each of ITSA, the Subsidiary Guarantors and TV Filme Servicos de
Telecomunicacoes Ltda. (collectively, the "Subsidiaries") (A) has been
duly organized as a limited liability company (sociedade por quotas de
responsabilidade limitada) and is validly existing under the laws of
Brazil, with all requisite corporate power and corporate authority to
carry on its business as it is currently being conducted and as described
in the Offering Memorandum and to own, lease and operate its properties,
and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification.
2. All of the outstanding shares of capital stock, quotas or other
equity interests of the Subsidiaries have been duly authorized, validly
issued and are fully paid and nonassessable and, to the best of such
counsel's knowledge; after due inquiry, were not issued in violation of
any preemptive or similar rights. TV Filme owns, directly or indirectly,
shares of capital stock quotas or other equity interests of each of the
Subsidiaries, as listed on Schedule 5(a)(iv) to this Agreement. To the
best of such counsel's knowledge, after due inquiry, all such shares of
capital stock quotas or other equity interests of the Subsidiaries are
owned, directly or indirectly, by TV Filme free and clear of any material
lien, encumbrance, claim, security interest, restriction on transfer,
stockholders' agreement, voting trust or other restrictions. To the best
of such counsel's knowledge, after due inquiry, except as set forth in the
Offering Memorandum, there are not currently any outstanding material
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exchangeable for, capital
stock, quotas or other equity interests of any of the Subsidiaries.
3. Each of the Subsidiaries has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Operative Documents to which each of them is a party and to consummate the
transactions contemplated thereby.
4. The Pledge Agreement has been duly authorized, executed and
delivered by ITSA under the laws of Brazil and, assuming due
authorization, execution and delivery by TV Filme and the Trustee under
the laws of the State of New York and assuming that the Pledge Agreement
constitutes a valid and legally binding agreement under the laws of the
State of New York, the Pledge Agreement constitutes a valid and legally
binding obligation of ITSA under the laws of Brazil, enforceable against
ITSA in accordance with its terms.
5. The Intercompany Note has been duly authorized, executed and
delivered by ITSA under the laws of Brazil and, assuming that the
Intercompany Note constitutes a valid and legally binding obligation under
the laws of the State of New York, the Intercompany Note constitutes a
valid and legally binding obligation of ITSA under the laws of Brazil,
enforceable against ITSA in accordance with its terms.
6. The Paying Agent Agreement has been duly authorized, executed and
delivered by ITSA under the laws of Brazil and, assuming that the Paying
Agent Agreement constitutes a valid and legally binding agreement under
the laws of the State of New York, the Paying Agent
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<PAGE>
Agreement constitutes a valid and legally binding obligation of ITSA under
the laws of Brazil, enforceable against ITSA in accordance with its terms.
7. Each Subsidiary Guarantee has been duly authorized, executed and
delivered by each respective Subsidiary Guarantor under the laws of Brazil
and, assuming that each such Subsidiary Guarantee constitutes a valid and
legally binding obligation under the laws of the State of New York, each
Subsidiary Guarantee constitutes a valid and legally binding obligation of
each respective Subsidiary Guarantor under the laws of Brazil, enforceable
against such Subsidiary Guarantor in accordance with its terms.
8. The choice of law provisions set forth in the Operative Documents
will be recognized by the courts of Brazil. Any judgment obtained in such
court arising out of or relating to the obligations of TV Filme, ITSA or
the Subsidiary Guarantors any of the Operative Documents or the
transactions contemplated hereby will be recognized in Brazil without
reconsideration of the merits, upon confirmation of that judgment by the
Brazilian Federal Supreme Court; and such confirmation should be provided
if the foreign judgment (a) fulfills all formalities required for its
enforceability under the laws of the country where the foreign judgment is
granted, (b) is issued by a competent court after proper service of
process, (c) is not subject to appeal, as duly certified by the foreign
judiciary branch, (d) is authenticated by a Brazilian consular office in
the country where the foreign judgment is issued and is accompanied by a
sworn translation into Portuguese, (e) is not contrary to Brazilian
national sovereignty, public policy or morality and (f) is enforced in
compliance with the applicable procedure under the law of Brazil with
respect to the enforcement of foreign judgments (and such counsel has no
reason to believe that any of the provisions of the Operative Documents to
which any of the Subsidiaries is a party is against Brazilian national
sovereignty, public policy or good morals).
9. The Operative Documents are in proper form under Brazilian law
for the enforcement thereof against the parties thereto and it is not
necessary that any of them be filed or recorded or enrolled with any court
or authority in Brazil to ensure the legality, validity, enforceability or
admissibility in evidence of any of the Operative Documents in Brazil or
that any stamp, registration or similar tax be paid in Brazil, other than
court costs, including filing fees and deposits to guarantee judgment
required by Brazilian law and regulations, except that (a) the signatures
of the parties to the Operative Documents signed outside Brazil shall have
been notarized by a notary public licensed as such under the law of the
place of signing and the signature of such notary public shall have been
authenticated by the Brazilian consular office and (b) each of the
Operative Documents shall have been translated into Portuguese by a sworn
translator and the translation thereof shall have been registered with the
appropriate Registry of Deeds and Documents in Brazil.
10. TV Filme and its Subsidiaries, and their respective obligations
under the Operative Documents, are subject to civil and commercial law and
to suit and neither any of them nor any of their respective properties or
material assets has any right of immunity, on any grounds, from any legal
or other action, suit or proceeding, from the giving of any relief in any
such legal or other action, suit or proceeding, from set-off or
counterclaim, from the jurisdiction of any court, from service of process,
attachment upon or prior to judgment, or attachment in aid of execution of
judgment, or from execution of a judgment, or from other legal process or
proceeding for the giving of any relief or for the enforcement of a
judgment, in any such court, with respect to its obligations, liabilities
or any other matter arising out of or relating to the Operative Documents.
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<PAGE>
11. None of (A) the Subsidiaries is (1) in violation of its charter
or bylaws or equivalent documents or (2) to the best of our knowledge,
after due inquiry, in default in the performance of any bond, debenture,
note, indenture, mortgage, deed of trust or other agreement or instrument
to which it is a party or by which it is bound or to which any of its
properties is subject, and (B) to the best of our knowledge, after due
inquiry, none of TV Filme nor any Subsidiary is in violation of any
Brazilian federal, state or local law, statute, ordinance, rule,
regulation, judgment, order or decree applicable to it or any of its
assets or properties (whether owned or leased), except in the case of
clauses (A)(2) and (B), for such violations or defaults which would not
have a Material Adverse Effect. To the best knowledge of such counsel,
after due inquiry, there exists no condition that, with notice or the
passage of time or both, would constitute such a violation or default
under any such document or instrument. To the best knowledge of such
counsel, after due inquiry, there exists no condition that would
constitute a default (or an event which with the giving of notice or the
lapse of time, or both, would constitute a default) under any of the
Operative Documents.
12. Neither the execution, delivery or performance by TV Filme or
any of its Subsidiaries of this Agreement or any of the other Operative
Documents, as the case may be (including the issuance and sale of the
Securities), nor the consummation by TV Filme and its Subsidiaries of the
transactions described in the Offering Memorandum under the caption "Use
of Proceeds", violates, conflicts with or constitutes a breach of any of
the terms or provisions of, or a default under (or an event that with the
giving of notice or the lapse of time, or both, would constitute a
default), or requires consent under, or results in the imposition of a
lien or encumbrance on any properties of TV Filme or its Subsidiaries, or
an acceleration of any indebtedness of TV Filme or its Subsidiaries
pursuant to, (1) the charter or bylaws or equivalent documents of any of
the Subsidiaries, (2) to the best of our knowledge, after due inquiry, any
bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which TV Filme or any of its Subsidiaries is a
party or by which TV Filme or any of its Subsidiaries is bound or to which
any of its or their assets or properties is subject, or (3) any Brazilian
federal, state or local law, statute, ordinance, rule, regulation or
decree and, to the best knowledge of such counsel, after due inquiry,
judgment or order applicable to TV Filme or any of its Subsidiaries or any
of its or their assets or properties (whether owned or leased), except in
the case of clauses (2) and (3), for such violations or defaults which
would not have a Material Adverse Effect.
13. No consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court or
governmental agency, body or administrative agency or any other person is
required for the execution, delivery and performance by TV Filme and its
Subsidiaries of this Agreement and the other Operative Documents, as the
case may be, or the consummation of the transactions described in the
Offering Memorandum under the caption "Use of Proceeds", except (A) such
as have been obtained and made and remain in full force and effect, (B)
the issuance by the Central Bank of a certificate of registration (the
"Certificate of Registration") permitting ITSA to make remittances from
Brazil in U.S. dollars of payments of principal, interest and other
amounts in respect of the Intercompany Note and (C) the approval of the
Central Bank permitting ITSA to make any payment in U.S. dollars not set
forth in the Certificate of Registration or to make any payment provided
for therein earlier than the due date therefor.
14. Subject to obtaining the Certificate of Registration or, in the
case of payments not covered by the Certificate of Registration, under
current laws and regulations of Brazil and any
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political subdivision thereof, all interest, principal, premium, if any,
and other payments due or made on the Intercompany Note may be paid by
ITSA to the holder thereof in U.S. dollars or Brazilian reais that may be
converted into foreign currency and freely transferred out of Brazil and
all such payments made to holders thereof who are non-residents of Brazil;
and, except as disclosed in the Offering Memorandum, will not be subject
to income, withholding or other taxes under laws and regulations of Brazil
or any political subdivision or taxing authority thereof or therein and
will otherwise be free and clear of any other tax, duty, withholding or
deduction in Brazil or any political subdivision or taxing authority
thereof or therein and without the necessity of obtaining any governmental
authorization in Brazil or any political subdivision or taxing authority
thereof or therein; provided, however, that if the Intercompany Note is
redeemed prior to its final maturity then payments of interest made by
ITSA on the Intercompany Note will be subject to withholding tax under
Brazilian income tax law, plus interest calculated in accordance with the
tax laws, as from the dates such tax would have otherwise been due. In
such event, ITSA would also be obliged to pay additional amounts as
provided in the Intercompany Note. There are grounds to sustain that such
withholding tax will be levied at a rate of 12.5% in reliance on a current
interpretation of the treaty to avoid double taxation entered into between
Brazil and Japan on January 24, 1967 and enacted in Brazil by Decree No.
61,899 dated December 14, 1967, as amended by Decree No. 81,194 dated
January 9, 1978 (the "Treaty"); in the event that ITSA is at any time
unable to rely on the Treaty, such withholding will be at a rate of 15%;
furthermore, if the early redemption of the Intercompany Note occurs
before the fifth anniversary of its date of issue, ITSA would have to pay
the foreign exchange transaction tax ("IOF") on the amount of Brazilian
currency resulting from the conversion of the proceeds of the issue of the
Intercompany Note as such tax should have been paid at the time such
conversion of proceeds, plus indexation and interest calculated in
accordance with the aforementioned tax laws. Pursuant to Portaria No. 241,
dated October 31, 1996, issued by the Minister of Finance of Brazil, the
IOF rate on transactions with an average repayment term in excess of 5
years is 0% and increases as follows: (a) 1% for transactions with an
average repayment term of 4 years but less than 5 years; (b) 2% for
transactions with an average repayment term of 3 years but less than 4
years; and (c) 3% for transactions with an average repayment term of less
than 3 years.
15. There is (A) no action, suit, investigation or proceeding before
or by any court, arbitrator or governmental agency, body, administrative
agency, official or any other person, domestic or foreign, now pending or,
to such counsel's best knowledge, after due inquiry, threatened or
contemplated to which TV Filme or any of its Subsidiaries is or may be a
party or to which the business or property of TV Filme or any of its
Subsidiaries is or may be subject, (B) no statute, rule, regulation,
decree or to the best of such counsel's knowledge, after due inquiry,
order that (1) has been enacted, adopted or issued by any governmental
agency or that has been proposed by any governmental body or (2) except as
disclosed in the Offering Memorandum, has been rescinded, revoked or
enjoined by any court or other governmental body, and (C) except as
disclosed in the Offering Memorandum, no injunction, restraining order or
order of any nature by a federal or state court or foreign court of
competent jurisdiction to which TV Filme or any of its Subsidiaries is or
may be subject or to which the business, assets, or property of TV Filme
or any of its Subsidiaries is or may be subject, that, in the case of
clauses (A), (B) and (C) above, (1) is required to be disclosed in the
Offering Memorandum and that is not so disclosed or (2) could,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
16. Each of TV Filme and each Subsidiary has (A) good and marketable
title to all of the properties and assets described in the Offering
Memorandum as owned by it, free and clear
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of all liens, charges, encumbrances and restrictions, (B) peaceful and
undisturbed possession under all material leases to which any of them is a
party as lessee and each of which lease is valid and binding and no
default exists thereunder, (C) ownership or valid rights to use all
intellectual property utilized in connection with the businesses of TV
Filme and its Subsidiaries, and (D) all material Authorizations necessary
to engage in the business conducted by any of them in the manner described
in the Offering Memorandum and such counsel has no reason to believe that
any governmental body or agency is considering limiting, suspending or
revoking any such Authorization. To the best knowledge of such counsel,
after due inquiry, each of TV Filme and its Subsidiaries has fulfilled and
performed all of its obligations with respect to such Authorizations and
no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Authorization and,
except as described in the Offering Memorandum, such Authorizations
contain no restrictions that are materially burdensome to TV Filme or such
Subsidiary, as the case may be.
17. The statements under the captions "Risk Factors--Factors
Relating to the Company and the Offering--Government Regulation", "Risk
Factors--Factors Relating to the Company and the Offering--Minority Voting
Position in License Company; Potential Conflicts of Interest", "Risk
Factors--Factors Relating to the Company and the Offering--Fraudulent
Conveyance Considerations", "Risk Factors--Risk Factors Relating to
Brazil--Economic Uncertainty; Effects of Exchange Rate Fluctuations",
"Risk Factors--Factors Relating to Brazil--Foreign Exchange Controls and
Exchange Rates", "Risk Factors--Factors Relating to Brazil--Restrictions
on Conversion and Remittances Abroad", "Risk Factors--Factors Relating to
Brazil--Political Uncertainty", "Risk Factors--Factors Relating to
Brazil--Potential Unenforceability of Civil Liabilities and Judgments",
"Exchange Rate Data", "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Income Taxes", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Inflation and Exchange Rates", and "Business--Regulatory
Environment" in the Offering Memorandum, insofar as such statements
constitute matters of Brazilian law or legal conclusions, fairly present
the information disclosed therein in all material respects.
18. None of (a) the Operative Documents, (b) the authorization,
issuance, sale and delivery of the Series A Notes to the Initial
Purchasers upon payment therefor as contemplated in this Agreement or (c)
the authorization, issuance, sale and delivery of the Series B Notes, in
each case as contemplated in this Agreement, in the Indenture and in the
Registration Rights Agreement, are subject to any registration tax, stamp
duty or similar tax, duty, impost or levy or other tax imposed by Brazil
or any political subdivision thereof.
In addition, such counsel shall also have furnished to the Initial
Purchasers a written statement, in form and substance satisfactory to the
Initial Purchasers, to the effect that it has participated in conferences with
officers, directors and representatives of TV Filme, its independent auditors
and Kelley Drye & Warren LLP at which conferences the contents of the Offering
Memorandum and related matters were discussed. Although it has not independently
verified the accuracy or completeness of or otherwise verified the statements
made in, the Offering Memorandum (other than as expressly provided), such
counsel advises the Initial Purchasers that, on the basis of the foregoing,
nothing has come to its attention that has led such counsel to believe that the
Offering Memorandum, as of its date or the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not
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misleading (except as to financial statements and supporting notes and schedules
and other financial and statistical data contained therein, as to which no
opinion need be expressed).
In rendering such opinion, such counsel shall opine as to the laws of
Brazil. Such counsel will be permitted to except from its opinions with respect
to enforceability: (A) the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, (B) general equitable principles (whether
considered in a proceeding in equity or at law), (C) an implied covenant of good
faith and fair dealing, (D) the possible judicial application of foreign laws or
foreign governmental or judicial action affecting creditors' rights and (E) the
enforceability of any indemnification or contribution provisions or obligations.
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Exhibit 4.4
NOTE
No. 1 December 20, 1996
$140,000,000 New York, New York
FOR VALUE RECEIVED, the undersigned, ITSA - INTERCONTINENTAL
TELECOMUNICACOES LTDA., a limited liability company incorporated in the
Federative Republic of Brazil and domiciled in the City of Brasilia (the
"Company"), hereby unconditionally promises to pay to the order of TV FILME,
INC., a Delaware corporation ("TV Filme") and the parent of the Company, on the
Maturity Date (as defined below), the principal amount of ONE HUNDRED FORTY
MILLION DOLLARS ($140,000,000).
The Company further promises to pay interest on the unpaid principal
amount hereof from time to time outstanding as provided in Section 2.3 hereof.
Except as permitted pursuant to subsection 5.2(b) hereof, all
payments to be made by the Company hereunder shall be made in lawful money of
the United States of America and in immediately available funds at the office of
Japan Bankers Trust Company, Ltd. (the "Paying Agent", which term shall include
any successor to Japan Bankers Trust Company, Ltd. which acts in the capacity of
Paying Agent hereunder) located at Ogawamachi-Mitsui Bldg., 10th Floor, 3
Kanda-Ogawamachi, I-Chome, Chiyoda-Ku, Tokyo, Japan, or at such other office of
the Paying Agent as the Paying Agent may specify in a written notice to the
Company, for the account of the holders of this Note. All such payments shall be
free and clear of any Lien (as defined below), encumbrance, set-off or
counterclaim whatsoever.
All payments to be made hereunder shall be made free and clear of,
and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imports, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any country (or any political subdivision or taxing authority
thereof or therein), excluding, however, all such taxes, levies, imports,
duties, charges, fees, deductions or withholdings, (i) at any time imposed,
levied, collected, withheld or assessed by the United States of America or (ii)
that would not be imposed but for a connection between the holder of this Note
and the jurisdiction imposing such tax, levy, import, duty, charge, fee,
deduction or withholding other than a connection arising solely by virtue of the
activities of such holder pursuant to or in respect of this Note, the Indenture
(as defined below) or the Note Pledge Agreement (as defined in the Indenture)
(such non-excluded taxes are herein referred to as "Foreign Taxes"). If any
Foreign Taxes are imposed or required to be withheld from any payment, the
Company shall (a) increase the amount of such payment so that the holder of this
Note will receive a net amount (after deduction of all Foreign Taxes) equal to
the amount due hereunder, (b) pay such Foreign Taxes to the appropriate taxing
authority for the account of the holder of this Note and (c) as promptly as
possible thereafter, send the holder of this Note an
<PAGE>
2
original receipt showing payment thereof, together with such additional
documentary evidence available to the Company as the holder of this Note may
from time to time reasonably require. If the Company fails to perform its
obligations under clause (b) or (c) of the preceding sentence, the Company shall
indemnify the holder of this Note for any incremental taxes, interest or
penalties that may become payable by the holder of this Note as a consequence of
such failure. This covenant shall survive payment of this Note and all other
amounts payable hereunder.
The Company agrees to indemnify the holder of this Note for, and
hold the holder of this Note harmless from, any present or future claim or
liability for any registration charge or any stamp, excise or other similar
taxes, including any interest equalization tax, and any penalties or interest
with respect thereto, which may be imposed by any jurisdiction in connection
with this Note or enforcement hereof.
Any holder of this Note invoking or seeking to invoke any provisions
set forth in the two immediately preceding paragraphs hereof shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document, if such filing would avoid or reduce the amount of
any liability the Company might incur pursuant to such paragraphs, so long as,
in the reasonable judgment of such holder, such filing would not be
disadvantageous to such holder in any material respect. To the extent such
holder may obtain a refund of any such tax, levy, import, duty, charge, fee,
deduction or withholding for which the Company has incurred or will incur
liability pursuant to the two immediately preceding paragraphs, such holder will
take reasonable steps to obtain such refund. Should any refund be obtained, the
holder will promptly remit the same to the Company.
SECTION 1. DEFINED TERMS.
As referred to in this Note, all terms defined in this Note shall
have the meanings ascribed thereto and the following terms shall have the
meanings specified with respect thereto:
"Bankruptcy Law" means Title 11, United States Code, or Decree Law
No. 7661 of June 21, 1945, as each may be amended from time to time, or
any similar federal, state of foreign law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization,
"concordata" or relief of debtors.
"Business Day" means any day other than a Saturday, Sunday, public
holiday or day on which banking institutions in New York City are
authorized or obligated by law to close.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Event of Default" shall mean any "Event of Default" as such term is
defined in the Indenture.
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3
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"indemnified liabilities" shall have the meaning assigned to such
term in Section 5.6 hereof.
"Indenture" shall mean the Indenture, dated as of December 20, 1996,
between TV Filme and IBJ Schroder Bank & Trust Company, as trustee.
"Interest Payment Date" shall have the meaning assigned to such term
in Section 2.1 hereof.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, and any lease in the nature thereof).
"Liquidated Damages" shall have the meaning assigned to such term in
the Indenture.
"Maturity Date" shall mean December 15, 2004.
"Maximum Rate" shall have the meaning assigned to such term in
Section 5.8 hereof.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Requirement of Law" as to any Person, shall mean the certificate of
incorporation and by-laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"TV Filme Notes" shall have the meaning assigned to the term "Notes"
in the Indenture.
SECTION 2. INTEREST AND PAYMENT.
2.1. Interest. The Company hereby promises to pay interest on the
principal amount of this Note from December 20, 1996 until maturity of this
Note. The Company will pay interest semi-annually on June 15 and December 15 of
each year, commencing June 15, 1997, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest
<PAGE>
4
Payment Date"). Interest on this Note will accrue at the rate of 12 7/8% per
annum from the most recent date to which interest has been paid or, if no
interest has been paid, from December 20, 1996. The Company will pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law to
the extent that such interest is an allowed claim enforceable against the debtor
under such Bankruptcy Law) on overdue principal and premium, if any, from time
to time on demand at the rate equal to 1% per annum in excess of the then
applicable interest rate on this Note to the extent lawful; it will pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law to
the extent that such interest is an allowed claim against the debtor under such
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Company will pay as additional interest
the amount equal to the aggregate amount of Liquidated Damages owing to the
holders of TV Filme Notes; the amount owing by the Company pursuant to this
sentence shall be payable on the date such Liquidated Damages are owing under
the Indenture.
2.2. Optional Prepayments. The Company will have the option to
prepay the principal amount of this Note on any day in which the TV Filme
redeems the TV Filme Notes pursuant to Section 3.7 of the Indenture; provided
that the principal amount of this Note so prepaid shall not exceed the aggregate
principal amount of the TV Film Notes redeemed on such date (without giving
effect to any premium provided in Section 3.7 of the Indenture). Any accrued and
unpaid interest on any principal amount prepaid pursuant to this Section 2.2
shall be paid at time of such prepayment. In addition, the Company shall pay an
amount equal to the aggregate premium payable by TV Filme under Section 3.7 of
the Indenture; the amount owing by the Company pursuant to this sentence shall
be payable on the date that such premium is owing under the Indenture.
2.3. Mandatory Prepayments. The Company will be required to prepay
the principal amount of this Note on any day in which TV Filme redeems the TV
Filme Notes pursuant to Sections 4.10 or 4.14 of the Indenture; provided that
the principal amount of this Note so prepaid shall not exceed the aggregate
principal amount of the TV Filme Notes redeemed on such date (without giving
effect to any premium provided in Sections 4.10 and 4.14 of the Indenture). Any
accrued and unpaid interest on any principal amount prepaid pursuant to this
Section 2.3 shall be paid at time of such prepayment. In addition, the Company
shall pay an amount equal to the aggregate premium payable by TV Filme under
Sections 4.10 and 4.14 of the Indenture; the amount owing by the Company
pursuant to this sentence shall be payable on the date that such premium is
owing under the Indenture.
2.4. Requirements of Law. (a) In the event that any existing
applicable law, regulation or directive or future applicable law, regulation or
directive, or any change therein or in the interpretation thereof, or compliance
by the holder of this Note with any request (whether or not having the force of
law) of any relevant central bank or other comparable agency: (i) shall subject
the holder of this Note to any tax of any kind whatsoever with respect to this
Note, or acquisition of debt of obligors outside the United States of America or
change the basis of taxation of payment to the holder of this Note of principal,
interest or any other amount payable hereunder (except for changes in the rate
of tax on the overall net income of the holder of this Note imposed in the
United States of America or any jurisdiction in which the holder of this Note
<PAGE>
5
books the credit evidenced hereby), (ii) shall impose, modify or hold applicable
any reserve, special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other acquisition of
funds by, any office of the holder of this Note or (iii) shall impose on the
holder of this Note any other condition with respect to this Note or the loan
evidenced by this Note, and the result of any of the foregoing is to increase
the cost of the holder of this Note of maintaining the loan evidenced by this
Note or to reduce any amount receivable hereunder in respect thereof, then the
Company agrees to pay to the holder of this Note, within 10 days following the
later to occur of (A) demand, or (B) the Company being furnished with the
certificate described below, additional amounts which will compensate the holder
of this Note for such increased cost or reduced amount receivable, as reasonably
determined by the holder of this Note with respect thereto. The certificate of
the holder of this Note shall demonstrate in reasonable detail any additional
amounts payable pursuant to the preceding sentence and, in the absence of
manifest error, shall be conclusive as to the amounts due.
(b) Notwithstanding any provision of Section 2.4(a) hereof to the
contrary, the Company shall not be liable for any such increased cost or reduced
amount resulting from a tax or reserve, special deposit, compulsory loan or
similar requirement or any other condition (all such taxes, reserves, loans,
requirements and conditions are collectively referred to herein as "Conditions")
that would not be imposed or otherwise apply but for a connection between the
holder of this Note and the jurisdiction imposing such Condition, other than a
connection arising solely by virtue of the activities of such holder pursuant to
or in respect of this Note, the Indenture or the Note Pledge Agreement (as
defined in the Indenture). Any holder of this Note invoking or seeking to invoke
the provisions set forth in Section 2.4(a) hereof shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document or change the office where payments under this Note are to be made or
where the loan evidenced by this Note is booked or take other action, if such
filing or change or other action would avoid or reduce the amount of any
liability the Company might incur pursuant to Section 2.4(a) hereof, so long as,
in the reasonable judgment of such holder, such filings, change or other action
would not be disadvantageous to such holder in any material respect. To the
extent such holder may obtain a refund with respect to any liability resulting
from a Condition, such holder will take reasonable steps to obtain such refund.
Should any such refund be obtained, the holder will promptly remit the same to
the Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the holder of this Note to accept this Note, the Company
hereby represents and warrants to such holder that:
(a) The Company (i) is a limited liability company organized and
existing under the laws of the Federative Republic of Brazil; and (ii) is
duly qualified to carry on its present business and to own or lease its
properties.
(b) The Company has the corporate power and authority to execute,
deliver and carry out the terms and provisions of this Note and has taken
all necessary corporate
<PAGE>
6
action to authorize its execution, delivery and performance. The Company
has duly executed and delivered this Note, and this Note constitutes a
legal, valid and binding obligation of the Company enforceable in
accordance with its terms, except as such enforceability may be subject to
(i) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditors' rights generally and (ii)
general principles of equity, regardless of whether considered in a
proceeding in equity or at law.
(c) This Note is in proper legal form under the laws of the Republic
of Brazil for the enforcement thereof in accordance with its terms against
the Company under such laws. Neither the filing nor the recording of this
Note or any other document with any court or any other Brazilian authority
nor the payment of any stamp or similar tax in respect of this Note is
necessary to ensure the legality, validity, enforceability or
admissibility in evidence in the Federative Republic of Brazil of this
Note.
(d) Except for the certificate of registration to be issued by the
Central Bank of Brazil which will enable it to make the payments of
principal and interest under this Note, no order, consent, approval,
license, authorization, or validation of, or filing, recording or
registration with (except as have been obtained or made), or exemption by,
any governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of this Note or (ii) the legality,
validity, binding effect or enforceability of this Note.
(e) The execution, delivery and performance of this Note and the
consummation of the transactions contemplated hereby will not result in
the breach of any terms or provisions of, or constitute a default under
any judgment, decree or other agreement or instrument to which the Company
is a party or by which it is bound, nor will it conflict with the
Company's organizational documents (contrato social).
(f) The Company has complied with all laws, regulations or orders
applicable to its business, except for such failures to comply which would
not reasonably be expected to have a material adverse effect on the
Company's ability to perform its obligations under this Note.
SECTION 4. EVENTS OF DEFAULT
If any Event of Default specified in clauses (a), (b), (c), (d),
(e), (f) or (g) of Section 6.1 of the Indenture occurs and is continuing, then
the holder of this Note may, by written notice to the Company, declare the
unpaid principal of, and any accrued interest on, this Note to be due and
payable immediately. If any Event of Default with respect to TV Filme specified
in clauses (h) or (i) of Section 6.1 of the Indenture occurs with respect to TV
Filme, any Significant Subsidiary (as defined in the Indenture) of TV Filme or
any group of Restricted Subsidiaries (as defined in the Indenture) of TV Filme
that, taken together, would constitute a Significant Subsidiary of TV Filme, all
outstanding principal and interest on this Note will be
<PAGE>
7
immediately due and payable without any declaration or other act on the part of
the holder of this Note.
Subject to the preceding paragraph, if an Event of Default occurs
and is continuing, the holder of this Note may pursue any available remedy by
proceeding at law or in equity to collect any payment due on this Note or to
enforce the performance of any provision of this Note.
SECTION 5. MISCELLANEOUS
Section 5.1. Agent for Service; Submission to Jurisdiction; Waiver
of Immunities. By the execution and delivery of this Note or any amendment or
supplement hereto, the Company (i) acknowledges that it has, by separate written
instrument, designated and appointed Corporation Service Company, currently
located at 375 Hudson Street, New York, New York 10014, as its authorized agent
upon which process may be served in any suit, action or proceeding with respect
to, arising out of, or relating to, this Note (other than an insolvency,
liquidation or bankruptcy proceeding or any other proceeding in the nature of an
in rem or quasi in rem proceeding), that may be instituted in any Federal or
state court in the State of New York, The City of New York, the Borough of
Manhattan, or brought under Federal or state securities laws or brought by the
holder of this Note, and acknowledges that Corporation Service Company has
accepted such designation, (ii) submits to the jurisdiction of any such court in
any such suit, action or proceeding, and (iii) agrees that service of process
upon Corporation Service Company shall be deemed in every respect effective
service of process upon the Company in any such suit, action or proceeding. The
Company further agrees to take any and all action, including the execution and
filing of any and all such documents and instruments as may be necessary to
continue such designation and appointment of Corporation Service Company in full
force and effect so long as this Note shall be in full force and effect;
provided that the Company may and shall (to the extent Corporation Service
Company ceases to be able to be served on the basis contemplated herein), by
written notice to the holder of this Note, designate such additional or
alternative agents for service of process under this Section 5.1 that (i)
maintains an office located in the Borough of Manhattan, The City of New York in
the State of New York, (ii) are either (a) counsel for the Company or (b) a
corporate service company which acts as agent for service of process for other
persons in the ordinary course of its business and for other persons in the
ordinary course of its business and (iii) agrees to act as agent for service of
process in accordance with this Section 5.1. Such notice shall identify the name
of such agent for process and the address of such agent for process in the
Borough of Manhattan, The City of New York, State of New York. Notwithstanding
the foregoing, there shall, at all times, be at least one agent for service of
process for the Company appointed and acting in accordance with this Section
5.1.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
under this Note, to the extent permitted by law.
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8
Section 5.2. Currency of Account; Conversion of Currency; Foreign
Exchange Restrictions. (a) U.S. dollars are the sole currency of account and
payment for all sums payable by the Company under or in connection with this
Note, including damages. Any amount received or recovered in a currency other
than U.S. dollars (whether as a result of, or of the enforcement of, a judgment
or order of a court of any jurisdiction, in the winding-up or dissolution of the
Company or otherwise) by the Paying Agent or the holder of this Note in respect
of any sum expressed to be due to it from the Company will only constitute a
discharge to the Company to the extent of the dollar amount which the recipient
is able to purchase with the amount so received or recovered in that other
currency on the date of that receipt or recovery (or, if it is not practicable
to make that purchase on that date, on the first date on which it is practicable
to do so). If that U.S. dollar amount is less than the U.S. dollar amount
expressed to be due to the recipient under this Note, the Company will indemnify
it against any resulting loss as set forth in Section 5.2(b). In any event, the
Company will indemnify the recipient against the cost of making any such
purchase. For the purposes of this Section 5.2, it will be sufficient for the
Paying Agent or the holder of this Note to certify in a satisfactory manner
(indicating sources of information used) that it would have suffered a loss had
an actual purchase of U.S. dollars been made with the amount so received in that
other currency on the date of receipt or recovery (or, if a purchase of U.S.
dollars on such date had not been practicable, on the first date on which it
would have been practicable, it being required that the need for a change of
date be certified in the manner mentioned above). The indemnities set forth in
this Section 5.2 constitute separate and independent cause of action, shall
apply irrespective of any indulgence granted by the holder of this Note and
shall continue in full force and effect despite any other judgment, order, claim
or proof for a liquidated amount in respect of any sum due under this Note.
(b) The Company covenants and agrees that the following provisions
shall apply to conversion of currency:
(i) If for the purpose of obtaining judgment in, or enforcing the
judgment of, any court in any country, it becomes necessary to convert
into a currency (the "judgment currency") an amount due in any other
currency (the "Base Currency"), then the conversion shall be made at the
rate of exchange prevailing on the Business Day before the day on which
the judgment is given or the order of enforcement is made, as the case may
be (unless a court shall otherwise determine).
(ii) If there is a change in the rate of exchange prevailing between
the Business Day before the day on which the judgment is given or an order
of enforcement is made, as the case may be (or such other date as a court
shall determine), and the date of receipt of the amount due, the Company
will pay such additional (or, as the case may be, such lesser) amount, if
any, as may be necessary so that the amount paid in the judgment currency
when converted at the rate of exchange prevailing on the date of receipt
will produce the amount in the Base Currency originally due.
(iii) The obligations contained in subsections (a), (b)(i)(B),
(b)(ii) and (b)(iv) of this Section 5.2 shall constitute separate and
independent obligations from the other obligations of the Company under
this Note, shall give rise to separate and independent causes of action
against the Company, shall apply irrespective of any waiver or extension
<PAGE>
9
granted by the holder of this Note from time to time and shall continue in
full force and effect notwithstanding any judgment or order or the filing
of any proof of claim in the winding-up of the Company for a liquidated
sum in respect of amounts due hereunder (other than under subsection
(b)(ii) above) or under any such judgment or order. Any such deficiency as
aforesaid shall be deemed to constitute a loss suffered by the holder of
this Note and no proof or evidence of any actual loss shall be required by
the Company or the liquidator or otherwise or any of them. In the case of
subsection (b)(ii) above, the amount of such deficiency shall not be
deemed to be reduced by any variation in rates of exchange occurring
between the said final date and the date of any liquidating distribution.
(iv) The term "rate(s) of exchange" shall mean the rate of exchange
quoted by Reuters at 10:00 a.m. (New York City time) for spot purchases of
the Base Currency with the judgment currency other than the Base Currency
referred to in subsections (b)(i) and (b)(ii) above and includes any
premiums and costs of exchange payable.
(c) In the event that on any payment date in respect of this Note,
any restrictions or prohibition of access to the Brazilian foreign exchange
market exists, the Company agrees to pay all amounts payable under this Note in
the currency of this Note by all reasonable means (which shall not include
commencement of legal proceedings against the Central Bank of Brazil or any
other governmental agency or authority or central bank), on any due date for
payment under this Note, for the purchase of the currency of this Note. All
costs and taxes payable in connection with the procedures referred to in this
Section 5.2 shall be borne by the Company.
5.3. Notices. All notices, requests and demands to or upon the
Company and the holder of this Note to be effective shall be in writing or by
telex or telecopy and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or in the case of
telex with appropriate answerback received, or in the case of telecopy notice,
with written confirmation of receipt, which confirmation may be by telex or
telecopy notice. All such notices, requests and demands shall be addressed, in
the case of the holder of this Note, to such address and transmission number for
notices provided to the Company from time to time by such holder, and in the
case of the Company, as follows or to such other address as may be hereafter
notified by the Company:
The Company: ITSA - Intercontinental Telecomunicacoes Ltda.
SCS, Quadra 07-B1-A
Ed. Executive Tower
Sala 601
70.300.911 Brasilia - DF
Brazil
Phone No.: 011-55-61-314-9908
Telecopier No.: 011-55-61-323-5660
Attention: Hermano Studart Lins de Albuquerque
5.4. No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising on the part of the holder of this Note, any right, remedy,
power or privilege hereunder
<PAGE>
10
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
5.5. Survival of Representations and Warranties. All representations
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Note.
5.6. Payment of Expenses and Taxes. The Company agrees (a) to pay or
reimburse the holder of this Note for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this Note
and any such other documents, including, without limitation, fees and
disbursements of counsel to the holder of this Note, (b) to pay, indemnify, and
hold the holder of this Note harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying any tax (including, without limitation, any registration, stamp,
documentary, court, excise or other tax, fee or charge and any penalty or
interest with respect thereto which may be assessed, levied or collected by the
Federative Republic of Brazil or any Governmental Authority thereof) which may
be payable or determined to be payable in connection with the execution,
delivery, filing registration or enforcement of, or consummation of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Note and any such other
documents and (c) to pay, indemnify, and hold the holder of this Note harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, reasonable costs, reasonable expenses or
disbursements of any kind or nature whatsoever (other than those resulting from
the gross negligence or wilful misconduct of such holder) with respect to the
execution, delivery, enforcement, performance and administration of this Note
and any such other documents (all the foregoing, collectively, the "indemnified
liabilities"). The agreements in this subsection shall survive payment of this
Note and all other amounts payable hereunder.
5.7. Set-off. In addition to any rights and remedies of the holder
of this Note provided by law, the holder of this Note shall have the right,
without prior notice to the Company, any such notice being expressly waived by
the Company to the extent permitted by applicable law, upon any amount becoming
due and payable by the Company hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the holder of this Note to or
for the credit or the account of the Company. The holder of this Note agrees
promptly to notify the Company after any such set-off and application, provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
5.8. Usury Law. (a) Usury Limitation. It is the intention of the
Company and the holder of this Note to conform strictly to applicable usury laws
as presently in effect. If the transactions contemplated hereby would be
usurious under applicable law (including the laws of
<PAGE>
11
the United States of America, the State of New York, the Federative Republic of
Brazil or any other jurisdiction whose laws may be mandatorily applicable),
then, in that event, notwithstanding anything to the contrary hereunder, it is
agreed as follows: (i) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, charged, or received under
this Note or otherwise in connection with this Note shall under no circumstances
exceed the maximum amount of interest allowed by applicable law (the "Maximum
Rate"), and any excess shall be applied to the outstanding principal amount
hereof (or, if this Note shall have been repaid in full, refunded to the
Company) and (ii) in the event that the maturity of this Note is accelerated,
then such consideration that constitutes interest may never include more than
the maximum amount allowed by applicable law, and excess interest, if any,
provided for hereunder shall be canceled automatically as of the date of such
acceleration.
(b) Recapture. If at any time the rate of interest on this Note
would exceed the Maximum Rate but for the foregoing limitation, the interest
rate on this Note shall remain at the Maximum Rate, notwithstanding subsequent
reduction of the rate of interest on this Note, until the total amount of
interest accrued hereon equals the amount of interest which would have accrued
if the rate of interest on this Note had not been limited to the Maximum Rate,
but nothing in this paragraph shall affect or extend the maturity of this Note.
If at maturity or final payment of this Note the total amount of
interest accrued hereon is less than the total amount of interest which would
have accrued had the rate of interest on this Note not been limited to the
Maximum Rate, the Company agrees, to the full extent permitted by law, to pay to
the holder of this Note an amount equal to the positive difference, if any,
derived by subtracting (i) the amount of interest which accrued hereon pursuant
to the provisions of paragraphs (a) and (b) of this subsection from (ii) the
lesser of (A) the amount of interest which would have accrued hereon if the
Maximum Rate had at all times been in effect and (B) the amount of interest
which would have accrued if the rate of interest hereon, not limited to the
Maximum Rate, had at all times been in effect.
5.9. Severability. Any provision of this Note which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
5.10. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
5.11. Use of the English Language. This Note has been negotiated and
executed in the English language. If this Note is translated into the Portuguese
language, the English language version of this Note and comments delivered
hereunder shall control and be conclusive as to the meaning of any terms and
provisions hereof or thereof. All certificates, reports, notices and other
documents and communications given or delivered pursuant to this Note shall be
in the English language, or accompanied by a certified English translation
thereof.
<PAGE>
12
5.12. No Personal Liability of Directors, Officers, Employees and
Others. No past, present or future director, officer, employee, incorporator,
partner or stockholder of the Company will have any liability for any
obligations of the Company under this Note or for any claim based on, in respect
of or by reason of such obligations or its creation. The holder of this Note by
accepting this Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of this Note.
5.13. WAIVERS OF JURY TRIAL. THE COMPANY AND TV FILME (BY
ITS ACCEPTANCE OF THIS NOTE) HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL
BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS NOTE AND FOR ANY
COUNTERCLAIM THEREIN.
<PAGE>
13
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
ITSA - INTERCONTINENTAL
TELECOMUNICACOES LTDA.
By: /s/ Hermano Studart Lins de Albuquerque
----------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Delegate-Manager
WITNESSES:
By: /s/ Regina L. Hillman
------------------------
Name: Regina L. Hillman
By: /s/ Jaime Mercado
-------------------------
Name: Jaime Mercado
ENDORSEMENT
Pay to the order of Bearer
TV FILME, INC.
By: /s/ Hermano Studart Lins de Albuquerque
-----------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Chief Executive Officer
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public within and for
said county, personally appeared Hermano Studart Lins de Albuquerque to me
personally known who being duly sworn, did say that he is Delegate-Manager of
ITSA-Intercontinental Telecomunicacoes Ltda., one of the persons described in
and which executed the foregoing instrument, and acknowledges said instrument
to be the free act and deed of said corporation.
/s/ Olivia Savell
-------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
Exhibit 4.5
NOTE PLEDGE AGREEMENT
NOTE PLEDGE AGREEMENT, dated as of December 20, 1996 (this "Pledge
Agreement"), between TV Filme, Inc., a Delaware corporation (the "Company"), and
IBJ Schroder Bank & Trust Company, as collateral agent (the "Trustee"), for the
holders ("Holders") of the Notes (as defined herein).
W I T N E S S E T H :
WHEREAS, the Company and IBJ Schroder Bank & Trust Company, as
trustee, have entered into that certain indenture, dated as of December 20, 1996
(as amended, restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Company is issuing on the date hereof
$140,000,000 in aggregate principal amount of 12 7/8% Senior Notes due 2004
(together with the Exchange Notes (as defined in the Indenture), the "Notes");
WHEREAS, pursuant to the Indenture, the Company will on the date
hereof loan $140,000,000 to its subsidiary, ITSA - Intercontinental
Telecomunicacoes Ltda., a Brazilian corporation ("ITSA"), which loan will be
evidenced by the Note, dated the date hereof (the "Intercompany Note"), made by
ITSA to the order of the Company;
WHEREAS, the Company is the legal and beneficial owner of the
Intercompany Note; and
WHEREAS, to secure its obligations under the Indenture and the
Notes, the Pledgor has agreed to (i) pledge to the Trustee, and grant to the
Trustee, for its benefit and the ratable benefit of the Holders of Notes, a
security interest in, the Intercompany Note and (ii) execute and deliver this
Pledge Agreement in order to secure the payment and performance by the Pledgor
of all such obligations;
NOW, THEREFORE, the parties hereto agree as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, terms defined in the Indenture
and used herein shall have the meanings given to them in the Indenture.
(b) As used herein, the following terms shall have the following
meanings:
<PAGE>
2
"Collateral Account" means any account established to hold money
Proceeds, maintained under the sole dominion and control of the Trustee,
subject to withdrawal by the Trustee for the account of the, collectively,
Holders only as provided in paragraph 12(c) hereof.
"Obligations" means, collectively, the unpaid principal of, premium,
if any, interest and Liquidated Damages, if any, on the Notes and all
other obligations and liabilities of the Company to the Holders
(including, without limitation, interest accruing at the then applicable
rate provided in the Notes and the Indenture after the maturity of the
Notes and interest accruing at the then applicable rate provided in the
Notes after the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding, relating to the
Company, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Notes, the
Indenture, the Registration Rights Agreement or any other document made,
delivered or given in connection therewith, whether on account of
principal, premium, interest, Liquidated Damages, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee that are required to be paid by
the Company pursuant to the terms of the Indenture).
"Proceeds" means all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, including, without limitation,
principal, interest and other income from the Note and all collections
thereon.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Pledge Agreement shall refer to this
Pledge Agreement as a whole and not to any particular provision of this
Pledge Agreement, and section and paragraph references are to this Pledge
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge and Grant of Security Interest.
The Company hereby delivers and pledges to the Trustee the
Intercompany Note, for its benefit and for the ratable benefit of the Holders of
Notes, and grants to the Trustee for its benefit and for the ratable benefit of
the Holders of Notes, a continuing first priority security interest in and to
(i) all of the Company's right, title and interest in the Intercompany Note,
(ii) the interest any holder of the Intercompany Note under any and all
documents and instruments that from time to time secure or guarantee payment of
the Intercompany Note, (iii) in any and all collateral, if any, from time to
time subject to any such documents or instruments and (iv) all Proceeds
(collectively, the "Collateral") as collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of the Obligations.
<PAGE>
3
3. Indorsement; Acknowledgement and Consent.
Concurrently with the delivery of the Intercompany Note to the
Trustee pursuant to Section 2 hereof:
(a) the Intercompany Note shall be indorsed by the Company as
follows:
"Pay to the order of Bearer
TV FILME, INC.
By:________________________
Name:"; and
(b) the Company shall deliver to the Trustee an Acknowledgment and
Consent, substantially in the form of Exhibit A hereto, duly executed by
ITSA.
4. Payments Under the Intercompany Note.
(a) Unless an Event of Default shall have occurred and be
continuing, the Company shall be permitted to receive all regularly
scheduled payments of principal and interest under the Intercompany Note,
as such payments become due. If an Event of Default shall occur and be
continuing, and the Trustee shall have given notice to the Company of the
Trustee's intent to exercise its rights pursuant to Section 7 hereof, all
payments of principal and interest under the Intercompany Note shall be
paid to the Trustee, which shall hold the same as Collateral hereunder. If
the Company shall receive any such payments, the Company shall hold the
same in trust for the Trustee and the Holders, segregated from other funds
of the Company, and deliver the same forthwith to the Trustee in the exact
form received, duly indorsed by the Company to the Trustee, if required.
(b) All Proceeds realized by the Company in connection with a
default under the Intercompany Note and acceleration of the maturity
thereof shall be paid to the Trustee, which shall hold such payments as
Collateral hereunder. If the Company shall receive any such payments, the
Company shall hold the same in trust for the Trustee and the Holders,
segregated from other funds of the Company, and deliver the same forthwith
to the Trustee in the exact form received, duly indorsed by the Company to
the Trustee, if required.
(c) All money Proceeds received by the Trustee hereunder shall be
held by the Trustee for the benefit of the Holders in a Collateral
Account. All Proceeds while held by the Trustee in a Collateral Account
(or by the Company in trust for the Trustee and the Holders) shall
continue to be held as collateral security for all the Obligations and
shall not constitute payment thereof until applied as provided in
paragraph 12(c).
<PAGE>
4
5. Representations and Warranties.
The Company hereby represents and warrants that:
(a) The execution, delivery and performance by the Company of this
Pledge Agreement does not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of
formation of the Company or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or result in the
creation or imposition of any Lien on any assets of the Company, except
for the security interests granted under this Pledge Agreement.
(b) No financing statement covering the Collateral is on file in any
public office (other than the financing statements filed pursuant to this
Pledge Agreement).
(c) Upon the delivery to the Trustee of the Intercompany Note, the
pledge of the Collateral pursuant to this Pledge Agreement creates a valid
and perfected first priority security interest in and to the Collateral,
securing the payment of the Obligations for the benefit of the Trustee and
the ratable benefit of the Holders of Notes, enforceable as such against
all creditors of the Pledgor and any persons purporting to purchase any of
the Collateral from the Pledgor, other than as permitted by the Indenture,
except as such enforcement may be limited by (i) the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditor's rights generally and (ii) general principles of
equity, regardless of whether considered in a proceeding of equity or at
law.
(d) No consent of any other person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (i) for the
pledge by the Pledgor of the Collateral pursuant to this Pledge Agreement
or for the execution, delivery or performance of this Pledge Agreement by
the Company and the Pledgor (except for any notices, filings and notations
necessary to perfect Liens on the Collateral) or (ii) for the exercise by
the Trustee of the rights provided for in this Pledge Agreement or the
remedies in respect of the Collateral pursuant to this Pledge Agreement
(except for the usual and customary types of notices, filings and
notations which may be required in connection with any foreclosure or
other sale or transfer of the Collateral).
(e) The Company is the legal and beneficial owner of, and has good
and marketable title to, the Intercompany Note, free of any and all Liens
or options in favor of, or claims of, any other Person, except the
security interest created by this Pledge Agreement and any nonconsensual
Permitted Lien which may arise by operation of law or statute, provided
that such Lien is junior in priority to that created under this Pledge
Agreement and is not being enforced in any respect against the Collateral.
(f) The Intercompany Note is the legal, valid and enforceable
obligation of ITSA, except as enforceability may be affected by
bankruptcy, insolvency, fraudulent
<PAGE>
5
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing. The Intercompany Note is not
subject to any right of counterclaim or offset whatsoever.
(g) There exists no default under the Intercompany Note. There
exists no security interest or guarantee (other than the Subsidiary
Guarantees) that secures or supports payment of the indebtedness evidenced
by the Intercompany Note.
6. Further Assurances.
The Company agrees to promptly take such actions and to execute and
deliver or cause to be executed and delivered, or use its best efforts to
procure, such stock or bond powers, proxies, assignments, instruments and such
other or different writings as the Trustee may reasonably request, all in form
and substance satisfactory to the Trustee, deliver any instruments to the
Trustee and take any other actions that are necessary or, in the reasonable
opinion of the Trustee, desirable, to perfect, continue the perfection of,
confirm and assure the first priority of the Trustee's security interest in the
Collateral, to protect the Collateral against the rights, claims or interests of
third persons, to otherwise effect the purpose of this Pledge Agreement.
7. Covenants.
The Company covenants and agrees with the Trustee and the Holders of
Notes from and after the date of this Pledge Agreement until the earlier to
occur of (i) payment in full in cash of all Obligations due and owing under the
Indenture and the Notes and (ii) the occurrence of Legal Defeasance or Covenant
Defeasance under the Indenture that:
(a) The Company will not assign, transfer, or encumber any of its
right, title or interest under, in or to the Collateral.
(b) The Company will not take or omit to take any action, the taking
or the omission of which would result in an alteration or impairment of
the Collateral or the security of this Agreement.
(c) The Company will not enter into any agreement amending or
supplementing the Collateral.
(d) The Company will not waive or release any obligation of any
party to the Collateral.
(e) The Company will not permit or accept any payment of interest
more than 30 days in advance of the scheduled due date of such payment or
permit or accept any prepayment of principal under the Intercompany Note
without the consent of the Trustee.
<PAGE>
6
(f) Unless directed otherwise by the Trustee, the Company will
exercise promptly and diligently each and every right which it may have
under the Collateral (except the right to release or cancel).
(g) The Company will not take or omit to take any action or suffer
or permit any action to be omitted or taken, the taking or omission of
which would result in any right of offset against sums payable under the
Collateral.
(h) The Company will give the Trustee copies of all notices
(including notices of default) given or received with respect to the
Collateral, promptly after giving or receiving such notices.
(i) The Company shall maintain the security interest created by this
Pledge Agreement as a first, perfected security interest and shall defend
such security interest against claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of
the Trustee, and at the sole expense of the Company, the Company will
promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Trustee reasonably may
request for the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted. If any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument, such note or
instrument shall be immediately delivered to the Trustee, duly indorsed in
a manner satisfactory to the Trustee, to be held as Collateral under this
Pledge Agreement.
(j) The Company shall pay, and save the Trustee and the Holders
harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all stamp, excise, sales or other similar
taxes and any and all recording and filing fees which may be payable or
determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Pledge
Agreement.
8. Power of Attorney.
In addition to all of the powers granted to the Trustee pursuant to
Article 6 of the Indenture, the Company hereby appoints and constitutes the
Trustee as the Company's attorney-in-fact to exercise to the fullest extent
permitted by law all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default: (i) collection of
proceeds of any Collateral; (ii) conveyance of any item of Collateral to any
purchaser thereof; (iii) giving of any notices or recording of any Liens under
Section 6 hereof; (iv) making of any payments or taking any acts under Section 9
hereof and (v) paying or discharging taxes or Liens levied or placed upon the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Trustee in its reasonable discretion,
and such payments made by the Trustee to become the Obligations of the Company
to the Trustee, due and payable immediately upon demand. The Trustee's authority
hereunder shall include, without limitation, the authority to endorse and
negotiate
<PAGE>
7
any checks or instruments representing proceeds of Collateral in the name of the
Company, execute and give receipt for any certificate of ownership or any
document constituting Collateral, transfer title to any item of Collateral, sign
the Company's or the Company's name on all financing statements (to the extent
permitted by applicable law) or any other documents reasonably deemed necessary
or appropriate by the Trustee to preserve, process or perfect the security
interest in the Collateral and to file the same, prepare, file and sign the
Company's name on any notice of Lien, and to take any other actions arising from
or incident to the powers granted to the Trustee in this Pledge Agreement. This
power of attorney is coupled with an interest and is irrevocable by the Company.
9. Trustee May Perform.
If the Company fails to perform any agreement contained herein, the
Trustee may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Trustee incurred in connection therewith shall be
payable by the Company under Section 13 hereof.
10. No Assumption of Duties; Reasonable Care.
The rights and powers granted to the Trustee hereunder are being
granted in order to preserve and protect the Trustee's and the Holders' of Notes
security interest in and to the Collateral granted hereby and shall not be
interpreted to, and shall not, impose any duties on the Trustee in connection
therewith other than those imposed under applicable law.
11. Indemnity.
The Company shall indemnify, defend and hold harmless the Trustee
and its directors, officers, agents and employees from and against all claims,
actions, obligations, losses, liabilities and expenses, including costs, fees
and disbursements of counsel (including, without limitation, the reasonable cost
to the Trustee of legal counsel), the costs of investigations, and claims for
damages, arising from or in connection with the Trustee's performance or duties
under this Pledge Agreement (other than such claims, actions, obligations,
losses, liabilities and expenses which result from the gross negligence or
willful misconduct of the Trustee or any such other Person).
12. Remedies Upon Event of Default.
If an Event of Default shall have occurred:
(a) The Trustee shall have and may exercise with reference to the
Collateral any or all of the rights and remedies of a secured party under
the Uniform Commercial Code in effect in the State of New York (the
"UCC"), and as otherwise granted herein or under any other applicable law
or under any other agreement now or hereafter in effect executed by the
Company, including, without limitation, the right and power to sell, at
public or private sale or sales, or otherwise dispose of, or otherwise
utilize the Collateral and any part or parts thereof in any manner
authorized or permitted under
<PAGE>
8
said UCC after default by a debtor, and to apply the proceeds thereof
toward payment of any costs and expenses and attorneys' fees and expenses
thereby incurred by the Trustee and toward payment of the Obligations in
such order or manner as the Trustee may elect. Specifically and without
limiting the foregoing, the Trustee shall have the right to take
possession of all or any part of the Collateral or any security therefor
and of all books, records, papers and documents of the Company or in the
Company's possession or control relating to the Collateral which are not
already in the Trustee's possession, and for such purpose may enter upon
any premises upon which any of the Collateral or any security therefor or
any of said books, records, papers and documents are situated and remove
the same therefrom without any liability for trespass or damages thereby
occasioned. To the extent permitted by law, the Company expressly waives
any notice of sale or other disposition of the Collateral and all other
rights or remedies of the Company or formalities prescribed by law
relative to sale or disposition of the Collateral or exercise of any other
right or remedy of the Trustee existing after default hereunder; and to
the extent any such notice is required and cannot be waived, each of the
Company and the Pledgor agrees that if such notice is given in the manner
provided in Section 17 hereof at least five (5) days before the time of
the sale or disposition, such notice shall be deemed reasonable and shall
fully satisfy any requirement for giving of said notice. The Trustee shall
not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Trustee may adjourn any public or private
sale. The Company further agrees to use its best efforts to do or cause to
be done all such other acts as may be necessary.
(b) All rights to marshalling of assets of the Company, including
any such right with respect to the Collateral, are hereby waived by the
Company.
(c) If an Event of Default shall have occurred and be continuing, at
any time at the Trustee's election, the Trustee may apply all or any part
of Proceeds held in any Collateral Account in payment of the Obligations
in such order as the Trustee may elect.
13. Expenses.
The Company agrees upon demand (i) to pay or reimburse the Trustee
for all of its reasonable out-of-pocket costs and reasonable expenses
(including, without limitation, the reasonable fees, expenses and disbursements
of counsel, experts and agents retained by the Trustee) that the Trustee may
incur in connection with (A) the administration of this Pledge Agreement and (B)
the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral and (ii) to pay or reimburse the Trustee
for all of its out-of-pocket costs and expenses (including, without limitation,
the fees, expenses and disbursements of counsel, experts and agents retained by
the Trustee) that the Trustee may incur in connection with (A) the exercise or
enforcement of any of the rights of the Trustee and the Holders of Notes
hereunder or (B) the failure by the Company to perform or observe any of the
provisions hereof.
<PAGE>
9
14. Security Interest Absolute.
All rights of the Trustee and the Holders of Notes and security
interests hereunder, and all obligations of the Company hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens
on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company in respect of the Obligations or of this Pledge
Agreement.
15. Continuing Security Interest; Termination.
(a) This Pledge Agreement shall create a continuing security
interest in and to the Collateral and shall, unless otherwise provided in
the Indenture or in this Pledge Agreement, remain in full force and effect
until the earlier to occur of (i) payment in full in cash of all
Obligations due and owing under the Indenture and the Notes and (ii) the
occurrence of Legal Defeasance or Covenant Defeasance under the Indenture.
This Pledge Agreement shall be binding upon the Company, their respective
successors and assigns, and shall inure, together with the rights and
remedies of the Trustee hereunder, to the benefit of the Trustee, the
Holders of Notes and their respective successors, transferees and assigns.
(b) This Pledge Agreement shall terminate upon the earlier to occur
of (i) the payment in full in cash of all Obligations due and owing under
the Indenture and the Notes and (ii) the occurrence of Legal Defeasance or
Covenant Defeasance under the Indenture. At such time, the Trustee shall,
at the written request of the Company, reassign and redeliver to the
Company all of the Collateral hereunder that has not been sold, disposed
of, retained or applied by the Trustee in accordance with the terms of
this Pledge Agreement and the Indenture. Such reassignment and redelivery
shall be without warranty (either express or implied) by or recourse to
the Trustee, except as to the absence of any prior assignments by the
Trustee of its interest in the Collateral, and shall be at the expense of
the Company.
(c) Notwithstanding any provision in this Pledge Agreement, if any
of the events described in Section 8.8 of the Indenture occurs, the
Company shall use its best
<PAGE>
10
efforts to immediately cause the Trustee, for its benefit and for the
ratable benefit of the Holders of Notes, to have a perfected first
priority security interest in the Collateral. This paragraph shall survive
the termination of this Pledge Agreement.
16. Authority of the Trustee.
(a) The Trustee shall have and be entitled to exercise all powers
hereunder that are specifically granted to the Trustee by the terms
hereof, together with such powers as are reasonably incident thereto. The
Trustee may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Neither the Trustee, any director, officer,
employee, attorney or agent of the Trustee nor the Holders of Notes shall
be liable to the Company for any action taken or omitted to be taken by it
or them hereunder, except for its or their own bad faith, gross negligence
or willful misconduct, nor shall the Trustee be responsible for the
validity, effectiveness or sufficiency hereof, or of any document or
security furnished pursuant hereto. The Trustee and its directors,
officers, employees, attorneys and agents shall be entitled to rely on any
communication, instrument or document believed by it or them to be genuine
and correct and to have been signed or sent by the proper person or
persons.
(b) The Company acknowledges that the rights and responsibilities of
the Trustee under this Pledge Agreement with respect to any action taken
by the Trustee or the exercise or non-exercise by the Trustee of any
option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as
between the Trustee and the Holders of Notes, be governed by the Indenture
and by such other agreements with respect thereto as may exist from time
to time among them, but, as between the Trustee and the Company, the
Trustee shall be conclusively presumed to be acting as agent for the
Holders of Notes with full and valid authority so to act or refrain from
acting, and the Company shall not be obligated or entitled to make any
inquiry respecting such authority.
17. Notices.
Any communication, notice or demand to be given hereunder shall be
duly given hereunder if given in the form and manner, and delivered to their
address set forth in the Indenture, or in such other form and manner or to such
other address as shall be designated by any party hereto to each other party
hereto in a written notice delivered in accordance with the terms of the
Indenture.
18. No Waiver; Cumulative Rights.
No failure on the part of the Trustee to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Trustee of any right,
remedy or power hereunder preclude any other or future exercise of any other
right, remedy or power. Each and every right, remedy and
<PAGE>
11
power hereby granted to the Trustee or allowed it by law or other agreement
shall be cumulative and not exclusive the one of any other, and may be exercised
by the Trustee from time to time.
19. Benefits of Pledge Agreement.
Nothing in this Pledge Agreement, express or implied shall give to
any person, other than the parties hereto and their successors hereunder, and
the Holders of the Notes, any benefit or any legal or equitable right, remedy or
claim under this Pledge Agreement.
20. Submission to Jurisdiction; Appointment of Agent for Service;
Currency Indemnity.
(a) To the fullest extent permitted by applicable law, the Company
irrevocably submits to the jurisdiction of any Federal or State court in
the City, County and State of New York, United States of America, in any
suit or proceeding based on or arising under this Pledge Agreement (solely
in connection with any such suit or proceeding), and irrevocably agrees
that all claims in respect of such suit or proceeding may be determined in
any such court. The Company irrevocably and fully waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The
Company hereby irrevocably designates and appoints Corporation Service
Company, 375 Hudson Street, New York, New York 10014, U.S.A. (the "Process
Agent"), as the authorized agent of the Company upon whom process may be
served in any such suit or proceeding, it being understood that the
designation and appointment of Corporation Service Company as such
authorized agent shall become effective immediately without any further
action on the part of the Company. The Company represents to the Holders
that it has notified the Process Agent of such designation and appointment
and that the Process Agent has accepted the same in writing. The Company
hereby irrevocably authorizes and directs the Process Agent to accept such
service. The Company further agrees that service of process upon the
Process Agent and written notice of said service to the Company mailed by
prepaid registered first class mail or delivered to the Process Agent at
its principal office, shall be deemed in every respect effective service
of process upon the Company in any such suit or proceeding. Nothing herein
shall affect the right of any Holder or any person controlling such Holder
to serve process in any other manner permitted by law. The Company further
agrees to take any and all action, including the execution and filing of
any and all such documents and instruments as may be necessary to continue
such designation and appointment of the Process Agent in full force and
effect so long as the Company has any outstanding obligations under this
Pledge Agreement. To the extent that the Company has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of note, attachment prior to judgment,
attachment in aid of execution, executor or otherwise) with respect to
itself or its property, the Company hereby irrevocably waives such
immunity in respect of its obligations under this Pledge Agreement, to the
extent permitted by law.
<PAGE>
12
(b) The obligation of the parties to make payments hereunder is in
U.S. dollars (the "Obligation Currency") and such obligation shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation
Currency or any other realization in such other currency, whether as
proceeds of set-off, security, guarantee, distributions, or otherwise,
except to the extent to which such tender, recovery or realization shall
result in the effective receipt by the party which is to receive such
payment of the full amount of the Obligation Currency expressed to be
payable hereunder, and the party liable to make such payment agrees to
indemnify the party which is to receive such payment (as an additional,
separate and independent cause of action) for the amount (if any) by which
such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation
to indemnify shall not be affected by judgment being obtained for any
other sums due under this Pledge Agreement.
21. Governing Law.
THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
22. Waiver of Jury Trial.
EACH OF THE COMPANY AND THE TRUSTEE HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
WHICH IN ANY MANNER ARISES OUT OF OR IN CONNECTION WITH OR IS IN ANY WAY RELATED
TO THIS PLEDGE AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.
23. Execution in Counterparts.
This Pledge Agreement may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
24. No Personal Liability of Directors, Officers, Employees and
Others.
No past, present or future director, officer, employee,
incorporator, partner or stockholder of the Company will have any liability for
any obligations of the Company under this Pledge Agreement or for any claim
based on, in respect of or by reason of such obligations or their creation.
<PAGE>
13
IN WITNESS WHEREOF, the parties have caused his Pledge Agreement to
be duly executed as of the date first above written.
TV FILME, INC.
By /s/ Hermano Studart Lins de Albuquerque
------------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Chief Executive Officer
IBJ SCHRODER BANK & TRUST COMPANY
By /s/ Max Volmar
------------------------------------------
Name: Max Volmar
Title: Vice President
WITNESSES:
By /s/ Regina L. Hillman
---------------------------
Name: Regina L. Hillman
By /s/ Jaime Mercado
Name: Jaime Mercado
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Hermano Studart Lins de
Albuquerque to me personally known who being duly sworn, did say that he is
Vice President of TV Filme, Inc., one of the persons described in and which
executed the foregoing instrument, and acknowledges said instrument to be the
free act and deed of said corporation.
/s/ Olivia Savell
----------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 20th day of December, 1996, before me, a notary public
within and for said county, personally appeared Max Volmar to me personally
known who being duly sworn, did say that he is Vice President of IBJ Schroder
Bank & Trust Company, one of the persons described in and which executed the
foregoing instrument, and acknowledges said instrument to be the free act and
deed of said corporation.
/s/ Paul V. Coughlin
--------------------------
[NOTARIAL SEAL] Notary Public
<PAGE>
EXHIBIT A
to Note Pledge Agreement
December 20, 1996
TO: ITSA - Intercontinental Telecomunicacoes Ltda.,
Reference is hereby made to the Note, dated December 20, 1996 (the
"Intercompany Note"), between you and TV Filme, Inc. (the "Company") in the
original principal amount of $140,000,000. By Note Pledge Agreement, dated as of
December 20, 1996 (the "Pledge Agreement"), the Company has pledged the
Intercompany Note and all collateral security therefor and all guarantees
thereof to IBJ Schroder Bank & Trust Company, as trustee (the "Trustee") for the
Holders of Notes referred to in the Pledge Agreement, to secure payment and
performance of obligations of the Company to the Trustee and such Holders.
You are hereby irrevocably directed, upon receipt of notice from the
Trustee that an Event of Default has occurred and is continuing under the
Indenture as defined in the Pledge Agreement, to make any and all payments
becoming due under the Intercompany Note directly to the Trustee, without
set-off or counterclaim, as provided in the Intercompany Note at the Trustee's
office located at One State Street, New York, New York 10004.
The instructions contained herein are irrevocable and may not be amended,
revoked or otherwise modified without the prior written consent of the Trustee.
TV FILME, INC. IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:_______________________________ By:___________________________________
Name: Name:
Title: Title:
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Pledge
Agreement described in the foregoing letter and agrees for the benefit of the
Trustee and the Holders to be bound by the terms of the Pledge Agreement and to
comply with the terms of the foregoing letter. To the best knowledge of the
undersigned, no representation or warranty of the Company in the Pledge
Agreement is incomplete or incorrect.
ITSA - INTERCONTINENTAL
TELECOMUNICACOES LTDA.
By:____________________________
Name:
Title:
<PAGE>
Exhibit 4.6
COLLATERAL PLEDGE AND SECURITY AGREEMENT
COLLATERAL PLEDGE AND SECURITY AGREEMENT, dated as of December 20,
1996 (this "Pledge Agreement"), among ITSA - Intercontinental Telecomunicacoes
Ltda., a Brazilian corporation (the "Pledgor"), TV Filme, Inc., a Delaware
corporation (the "Company"), and IBJ Schroder Bank & Trust Company, as
collateral agent (the "Trustee"), for the holders ("Holders") of the Notes (as
defined herein).
W I T N E S S E T H :
WHEREAS, the Company and IBJ Schroder Bank & Trust Company, as
trustee, have entered into that certain indenture, dated as of December 20, 1996
(as amended, restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Company is issuing on the date hereof
$140,000,000 in aggregate principal amount of 12 7/8% Senior Notes due 2004
(together with the Exchange Notes (as defined in the Indenture), the "Notes");
WHEREAS, the proceeds of the Notes are being loaned by the Company
to the Pledgor and the Pledgor is deriving substantial economic benefit from the
issuance of the Notes;
WHEREAS, the Company agrees, pursuant to the Indenture, to cause the
Pledgor to (i) purchase Government Securities (together with any replacement or
substitute securities, the "Pledged Securities") in an amount sufficient upon
receipt of scheduled interest and principal payments in respect of Pledged
Securities, in the opinion of a nationally recognized firm of independent
accountants selected by the Company, to provide for payment of the first four
scheduled interest payments due on the Notes and (ii) place such Pledged
Securities in an account held by the Trustee for the benefit of Holders of the
Notes;
WHEREAS, the Pledgor is the legal and beneficial owner of the
Pledged Securities; and
WHEREAS, to secure its obligations under the Indenture and the
Notes, the Pledgor has agreed to (i) pledge to the Trustee, and grant to the
Trustee, for its benefit and the ratable benefit of the Holders of Notes, a
security interest in, the Pledged Securities and the Pledge Account (as defined
below) and (ii) execute and deliver this Pledge Agreement in order to secure the
payment and performance by the Pledgor of all such obligations;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
2
1. Defined Terms.
(a) Unless otherwise defined herein, terms defined in the Indenture
and used herein shall have the meanings given to them in the Indenture.
(b) As used herein, "Obligations" means, collectively, the unpaid
principal of, premium, if any, interest and Liquidated Damages, if any, on
the Notes and all other obligations and liabilities of the Company to the
Holders (including, without limitation, interest accruing at the then
applicable rate provided in the Notes and the Indenture after the maturity
of the Notes and interest accruing at the then applicable rate provided in
the Notes after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding,
relating to the Company, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Notes, the Indenture, the Registration Rights Agreement or any other
document made, delivered or given in connection therewith, whether on
account of principal, premium, interest, Liquidated Damages, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Trustee that are required to
be paid by the Company pursuant to the terms of the Indenture).
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Pledge Agreement shall refer to this
Pledge Agreement as a whole and not to any particular provision of this
Pledge Agreement, and section and paragraph references are to this Pledge
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge and Grant of Security Interest.
The Pledgor hereby pledges to the Trustee for its benefit and for
the ratable benefit of the Holders of Notes, and grants to the Trustee for its
benefit and for the ratable benefit of the Holders of Notes a continuing first
priority security interest in and to all of the Pledgor's right, title and
interest in (i) the Pledged Securities and the Pledge Account, (ii) the
certificates or other evidence of ownership representing the Pledged Securities
and the Pledge Account and (iii) all products and proceeds of any of the Pledged
Securities, including, without limitation, all dividends, interest, principal
payments, cash, options, warrants, rights, instruments, subscriptions and other
property or proceeds from time to time received, receivable or otherwise
distributed or distributable in respect of or in exchange for any or all of the
Pledged Securities (collectively, the "Collateral") as collateral security for
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations.
<PAGE>
3
3. Delivery of Collateral; Pledge Account; Interest.
(a) All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of the Trustee
pursuant thereto and shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the
Trustee.
(b) Concurrently with the execution and delivery hereof, the Trustee
shall establish an account entitled the "TV FILME PLEDGE ACCOUNT" for the
deposit of the Pledged Securities (the "Pledge Account") at its office at
One State Street, New York, New York 10004. Subject to the other terms and
conditions of this Pledge Agreement, all funds or other property accepted
by the Trustee pursuant to this Pledge Agreement shall be held in the
Pledge Account for the benefit of the Trustee and the ratable benefit of
the Holders of Notes.
(c) On the date hereof, the Pledgor shall take all actions necessary
in order to transfer each item of the Collateral to the Trustee in a
manner sufficient to create in favor of the Trustee, for the benefit of
the Holders of the Notes, a perfected first priority security interest in
the Collateral. Without limiting the generality of the foregoing, with
respect to that portion of the Collateral that consists of securities
maintained in the form of entries in the records of the Federal Reserve
Bank of New York (the "FRBNY") (the "Book-Entry Securities"), such
Book-Entry Securities will be transferred by the Pledgor to the Trustee
upon (A) the making by the FRBNY of an appropriate entry in its records of
the transfer of the Book-Entry Securities to a customer securities account
of IBJ Schroder Bank & Trust Company maintained by it in its commercial
banking capacity (in such capacity, the "Depositary"), (B) the sending of
a confirmation by the Depositary, in its capacity as a "financial
intermediary" (as defined in Section 8-313(4) of the Uniform Commercial
Code as in effect in the State of New York (the "UCC")) (the "Financial
Intermediary"), to the Trustee of the "purchase" (as such term is defined
in Section 1-201(32) of the UCC) of such Book-Entry Securities by the
Trustee, and (C) the identification by book-entry by the Depositary of
such Book-Entry Securities as belonging to, or otherwise subject to a
security interest in favor of, the Trustee. In the event of any change in
applicable law, the Pledgor and the Trustee will promptly take such action
as may be required in order to continue the Trustee's security interest in
the Collateral as a perfected first priority security interest.
(d) On the date hereof, the Pledgor shall take all actions necessary
in order to transfer each item of the Collateral to the Trustee in a
manner sufficient to create in favor of the Trustee, for the benefit of
the Holders of the Notes, a perfected first priority security interest in
the Collateral. Without limiting the generality of the foregoing, with
respect to that portion of the Collateral that consists of securities
maintained in the form of entries in the records of the Federal Reserve
Bank of New York (the "FRBNY") (the "Book-Entry Securities"), such
Book-Entry Securities will be transferred by the Pledgor to the Trustee
upon (A) the making by the FRBNY of an
<PAGE>
4
appropriate entry in its records of the transfer of the Book-Entry
Securities to an account of The First National Bank of Boston maintained
by it in its commercial banking capacity (in such capacity, the
"Depositary"), (B) the sending of a confirmation by the Depositary, in its
capacity as a "financial intermediary" (as defined in Section 8-313(4) of
the Uniform Commercial Code as in effect in the State of New York (the
"UCC")) (the "Financial Intermediary"), to the Trustee of the "purchase"
(as such term is defined in Section 1-201(32) of the UCC) of such
Book-Entry Securities by the Trustee, and (C) the identification by
book-entry of such Book-Entry Securities as belonging to, or otherwise
subject to a security interest in favor of, the Trustee. In the event of
any change in applicable law, the Pledgor and the Trustee will promptly
take such action as may be required in order to continue the Trustee's
security interest in the Collateral as a perfected first priority security
interest.
(e) All interest earned on any Collateral shall be retained in the
Pledge Account (or reinvested, as the case may be), pending disbursement
pursuant to the terms hereof.
(f) Pending disbursement of funds from the Pledge Account as
contemplated hereby, the Trustee may and shall, at the direction of the
Company, reinvest any interest payments received in respect of the Pledged
Securities in money market deposit accounts and/or certificates of deposit
(so long as such certificates of deposit mature prior to the next
scheduled interest payment date with respect to the Notes) issued or
offered by an Eligible Institution (as defined below), provided that any
monies so reinvested and the securities acquired thereby must be (i) held
as Collateral in the Pledge Account, (ii) subject to the security interest
created hereby and (iii) otherwise subject to the terms hereof. "Eligible
Institution" shall mean a commercial banking institution that has combined
capital and surplus of not less than $500 million, whose (or whose holding
company's) debt is rated "A" or higher according to S&P or Moody's at the
time as of which any investment or rollover therein is made.
4. Disbursements.
(a) Not less than five (5) Business Days prior to the date of any of
the first four scheduled interest payments due on the Notes, the Company
may, in writing, direct the Trustee to transfer from the Pledge Account to
the Trustee in its capacity as Paying Agent funds necessary to provide for
payment in full or any portion of the next scheduled interest payment on
the Notes. Upon receipt of such written request, the Trustee will take any
action necessary to provide for the payment of such interest payment on
the Notes directly to the Holders of Notes from proceeds of the Pledged
Securities in the Pledge Account.
(b) If the Company makes any interest payment or portion of an
interest payment for which the Pledged Securities are collateral from a
source of funds other than the Pledge Account ("Pledgor Funds"), the
Company may, after payment in full for such interest payment, direct the
Trustee in writing to release to the Company or at
<PAGE>
5
the direction of the Company an amount of funds from the Pledge Account
less than or equal to the amount of Pledgor Funds so expended. Upon
receipt of a direction from the Company and any other documentation
reasonably satisfactory to the Trustee to substantiate such use of Pledgor
Funds by the Company (including the certificate described in the following
sentence), the Trustee will take any action necessary to enable it to pay
over to the Company the requested amount. Concurrently with any release of
funds to the Company pursuant to this Section 4(b), the Company will
deliver to the Trustee a certificate signed by an executive officer of the
Company stating that such use of Pledgor Funds has been duly authorized by
all necessary corporate action, and does not contravene, or constitute a
default under, any provisions of applicable law or regulation or of the
certificate of incorporation of the Company or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon the
Company or result in the creation or imposition of any Lien on any assets
of the Company.
(c) If at any time the amount of Pledged Securities, taking into
consideration scheduled interest and principal payments in respect
thereof, exceeds 100% of the amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants selected by
the Company, to provide for payment in full of the first four scheduled
interest payments due on the Notes (or, in the event an interest payment
or payments have been made, an amount sufficient to provide for payment in
full of any interest payments then remaining, up to and including the
fourth scheduled interest payment), the Company may direct the Trustee in
writing to release any such overfunding to it. Upon receipt of a request
from the Company and any other documentation reasonably requested by the
Trustee to substantiate such excess (which may consist of the
aforementioned opinion), the Trustee will pay over to the Company any such
overfunded amount.
(d) Upon payment in full of the first four scheduled interest
payments on the Notes, the security interest in the Collateral evidenced
by this Pledge Agreement will terminate and be of no further force and
effect. Furthermore, upon the release of any Collateral from the Pledge
Account in accordance with the terms of this Pledge Agreement, whether
upon release of Collateral to Holders as payment of interest, to the
Company or otherwise, the security interest evidenced by this Pledge
Agreement in the Collateral so released will terminate and be of no
further force and effect.
5. Representations and Warranties.
Each of the Company and the Pledgor hereby represents and warrants
that:
(a) The execution, delivery and performance by the Company and the
Pledgor of this Pledge Agreement do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of formation of the Company or the Pledgor or of any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Company or the Pledgor or result in the creation or
<PAGE>
6
imposition of any Lien on any assets of the Company or the Pledgor, except
for the security interests granted under this Pledge Agreement.
(b) No financing statement covering the Pledged Securities is on
file in any public office (other than the financing statements filed
pursuant to this Pledge Agreement).
(c) Upon the delivery to the Trustee of the certificates, if any,
representing the Pledged Securities, and the taking of the actions
described in Section 3(c) above, the pledge of the Collateral pursuant to
this Pledge Agreement creates a valid and perfected first priority
security interest in and to the Collateral, securing the payment of the
Obligations for the benefit of the Trustee and the ratable benefit of the
Holders of Notes, enforceable as such against all creditors of the Pledgor
and any persons purporting to purchase any of the Collateral from the
Pledgor, other than as permitted by the Indenture, except as such
enforcement may be limited by (i) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditor's rights generally and (ii) general principles of equity,
regardless of whether considered in a proceeding of equity or at law.
(d) No consent of any other person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required either (i) for the
pledge by the Pledgor of the Collateral pursuant to this Pledge Agreement
or for the execution, delivery or performance of this Pledge Agreement by
the Company and the Pledgor (except for any notices, filings and notations
necessary to perfect Liens on the Collateral) or (ii) for the exercise by
the Trustee of the rights provided for in this Pledge Agreement or the
remedies in respect of the Collateral pursuant to this Pledge Agreement
(except for the usual and customary types of notices, filings and
notations which may be required in connection with any foreclosure or
other sale or transfer of the Collateral).
(e) The pledge of the Collateral pursuant to this Pledge Agreement
is not prohibited by any applicable law or government regulation, release
interpretation or opinion of the Board of Governors of the Federal Reserve
System or other regulatory agency (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System).
6. Further Assurances.
Each of the Company and the Pledgor agrees to promptly take such
actions and to execute and deliver or cause to be executed and delivered, or use
its best efforts to procure, such stock or bond powers, proxies, assignments,
instruments and such other or different writings as the Trustee may reasonably
request, all in form and substance reasonably satisfactory to the Trustee,
deliver any instruments to the Trustee and take any other actions that are
necessary or, in the reasonable opinion of the Trustee, desirable, to perfect,
continue the perfection of, confirm and assure the first priority of the
Trustee's security interest in the
<PAGE>
7
Collateral, to protect the Collateral against the rights, claims or interests of
third persons, and to otherwise effect the purpose of this Pledge Agreement.
7. Covenants.
Each of the Company and the Pledgor covenants and agrees with the
Trustee and the Holders of Notes from and after the date of this Pledge
Agreement until the earliest to occur of (i) the earlier of payment in full in
cash of (A) each of the first four scheduled interest payments due on the Notes
under the terms of the Indenture or (B) all Obligations due and owing under the
Indenture and the Notes in the event such Obligations become due and payable
prior to the payment of the first four scheduled interest payments on the Notes
and (ii) the occurrence of Legal Defeasance or Covenant Defeasance under the
Indenture that it will not:
(a) (i) sell or otherwise dispose of, or grant any option or warrant
with respect to, any of the Collateral or (ii) create or permit to exist
any Lien upon or with respect to any of the Collateral (except for the
lien created pursuant to this Pledge Agreement and any nonconsensual
Permitted Lien which may arise by operation of law or statute, provided
that such Lien is junior in priority to that created under this Pledge
Agreement and is not being enforced in any respect against the Collateral)
and at all times will be the sole beneficial owner of the Collateral; and
(b) (i) enter into any agreement or understanding that purports to
or may restrict or inhibit the Trustee's rights or remedies hereunder,
including, without limitation, the Trustee's right to sell or otherwise
dispose of the Collateral or (ii) fail to pay or discharge any tax
assessment or levy of any nature not later than five days prior to the
date of any proposed sale under any judgment, writ or warrant of
attachment with regard to the Collateral.
8. Power of Attorney.
In addition to all of the powers granted to the Trustee pursuant to
Article 6 of the Indenture, each of the Company and the Pledgor hereby appoints
and constitutes the Trustee as the Company's and the Pledgor's attorney-in-fact
to exercise to the fullest extent permitted by law all of the following powers
upon and at any time after the occurrence and during the continuance of an Event
of Default: (i) collection of proceeds of any Collateral; (ii) conveyance of any
item of Collateral to any purchaser thereof; (iii) giving of any notices or
recording of any Liens under Section 6 hereof; (iv) making of any payments or
taking any acts under Section 9 hereof and (v) paying or discharging taxes or
Liens levied or placed upon the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by the Trustee in
its reasonable discretion, and such payments made by the Trustee to become the
Obligations of the Company to the Trustee, due and payable immediately upon
demand. The Trustee's authority hereunder shall include, without limitation, the
authority to endorse and negotiate any checks or instruments representing
proceeds of Collateral in the name of the Company or the Pledgor, execute and
give receipt for any certificate of ownership or any document constituting
Collateral, transfer title to any
<PAGE>
8
item of Collateral, sign the Company's or the Pledgor's name on all financing
statements (to the extent permitted by applicable law) or any other documents
reasonably deemed necessary or appropriate by the Trustee to preserve, process
or perfect the security interest in the Collateral and to file the same,
prepare, file and sign the Company's or the Pledgor's name on any notice of
Lien, and to take any other actions arising from or incident to the powers
granted to the Trustee in this Pledge Agreement. This power of attorney is
coupled with an interest and is irrevocable by each of the Company and the
Pledgor.
9. Trustee May Perform.
If either the Company or the Pledgor fails to perform any agreement
contained herein, the Trustee may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Trustee incurred in connection
therewith shall be payable by the Company and the Pledgor under Section 13
hereof.
10. No Assumption of Duties; Reasonable Care.
The rights and powers granted to the Trustee hereunder are being
granted in order to preserve and protect the Trustee's and the Holders' of Notes
security interest in and to the Collateral granted hereby and shall not be
interpreted to, and shall not, impose any duties on the Trustee in connection
therewith other than those imposed under applicable law.
11. Indemnity.
Each of the Company and the Pledgor shall indemnify, defend and hold
harmless the Trustee and its directors, officers, agents and employees from and
against all claims, actions, obligations, losses, liabilities and expenses,
including costs, fees and disbursements of counsel (including, without
limitation, the reasonable cost to the Trustee of legal counsel), the costs of
investigations, and claims for damages, arising from or in connection with the
Trustee's performance or duties under this Pledge Agreement (other than such
claims, actions, obligations, losses, liabilities and expenses which result from
the gross negligence or willful misconduct of the Trustee or any such other
Person).
12. Remedies Upon Event of Default.
If an Event of Default shall have occurred:
(a) The Trustee shall have and may exercise with reference to the
Collateral any or all of the rights and remedies of a secured party under
the UCC, and as otherwise granted herein or under any other applicable law
or under any other agreement now or hereafter in effect executed by the
Company or the Pledgor, including, without limitation, the right and power
to sell, at public or private sale or sales, or otherwise dispose of, or
otherwise utilize the Collateral and any part or parts thereof in any
manner authorized or permitted under the UCC after default by a debtor,
and to apply the proceeds thereof toward payment of any costs and expenses
and attorneys' fees and expenses thereby incurred by the Trustee and
toward payment
<PAGE>
9
of the Obligations in such order or manner as the Trustee may elect.
Specifically and without limiting the foregoing, the Trustee shall have
the right to take possession of all or any part of the Collateral or any
security therefor and of all books, records, papers and documents of the
Company and the Pledgor or in the Company's or the Pledgor's possession or
control relating to the Collateral which are not already in the Trustee's
possession, and for such purpose may enter upon any premises upon which
any of the Collateral or any security therefor or any of said books,
records, papers and documents are situated and remove the same therefrom
without any liability for trespass or damages thereby occasioned. To the
extent permitted by law, each of the Company and the Pledgor expressly
waives any notice of sale or other disposition of the Collateral and all
other rights or remedies of each of the Company and the Pledgor or
formalities prescribed by law relative to sale or disposition of the
Collateral or exercise of any other right or remedy of the Trustee
existing after default hereunder; and to the extent any such notice is
required and cannot be waived, each of the Company and the Pledgor agrees
that if such notice is given in the manner provided in Section 17 hereof
at least five (5) days before the time of the sale or disposition, such
notice shall be deemed reasonable and shall fully satisfy any requirement
for giving of said notice. The Trustee shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The
Trustee may adjourn any public or private sale. The Pledgor further agrees
to use its best efforts to do or cause to be done all such other acts as
may be necessary.
(b) All rights to marshalling of assets of Pledgor, including any
such right with respect to the Collateral, are hereby waived by Pledgor.
13. Expenses.
Each of the Company and the Pledgor agrees upon demand (i) to pay or
reimburse the Trustee for all of its reasonable out-of-pocket costs and
reasonable expenses (including, without limitation, the reasonable fees,
expenses and disbursements of counsel, experts and agents retained by the
Trustee) that the Trustee may incur in connection with (A) the administration of
this Pledge Agreement and (B) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral and (ii) to
pay or reimburse the Trustee for all of its out-of-pocket costs and expenses
(including, without limitation, the fees, expenses and disbursements of counsel,
experts and agents retained by the Trustee) that the Trustee may incur in
connection with (A) the exercise or enforcement of any of the rights of the
Trustee and the Holders of Notices hereunder or (B) the failure by the Company
or the Pledgor to perform or observe any of the provisions hereof.
14. Security Interest Absolute.
All rights of the Trustee and the Holders of Notes and security
interests hereunder, and all obligations of the Company and the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
<PAGE>
10
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens
on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company or the Pledgor in respect of the Obligations or
of this Pledge Agreement.
15. Continuing Security Interest; Termination.
(a) This Pledge Agreement shall create a continuing security
interest in and to the Collateral and shall, unless otherwise provided in
the Indenture or in this Pledge Agreement, remain in full force and effect
until the earliest to occur of (i) the earlier of payment in full in cash
of (A) each of the first four scheduled interest payments due on the Notes
under the terms of the Indenture and (B) all Obligations due and owing
under the Indenture and the Notes in the event such Obligations become
payable prior to the payment of the first four scheduled interest payments
on the Notes and (ii) the occurrence of Legal Defeasance or Covenant
Defeasance under the Indenture. This Pledge Agreement shall be binding
upon the Company and the Pledgor, their respective successors and assigns,
and shall inure, together with the rights and remedies of the Trustee
hereunder, to the benefit of the Trustee, the Holders of Notes and their
respective successors, transferees and assigns.
(b) This Pledge Agreement shall terminate upon the earlier of
payment in full in cash of (A) each of the first four scheduled interest
payments due on the Notes under the terms of the Indenture and (B) all
Obligations due and owing under the Indenture and the Notes in the event
such Obligations become payable prior to the payment of the first four
scheduled interest payments on the Notes and (ii) the occurrence of Legal
Defeasance or Covenant Defeasance under the Indenture. At such time, the
Trustee shall, at the written request of the Company, reassign and
redeliver to the Company all of the Collateral hereunder that has not been
sold, disposed of, retained or applied by the Trustee in accordance with
the terms of this Pledge Agreement and the Indenture. Such reassignment
and redelivery shall be without warranty (either express or implied) by or
recourse to the Trustee, except as to the absence of any prior assignments
by the Trustee of its interest in the Collateral, and shall be at the
expense of the Company and the Pledgor.
(c) Notwithstanding any provision in this Pledge Agreement, if any
of the events described in Section 8.8 of the Indenture occurs, the
Company and the Pledgor shall use their best efforts to immediately cause
the Trustee, for its benefit and for the
<PAGE>
11
ratable benefit of the Holders of Notes, to have a perfected first
priority security interest in the Collateral. This paragraph shall survive
the termination of this Pledge Agreement.
16. Authority of the Trustee.
(a) The Trustee shall have and be entitled to exercise all powers
hereunder that are specifically granted to the Trustee by the terms
hereof, together with such powers as are reasonably incident thereto. The
Trustee may perform any of its duties hereunder or in connection with the
Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Neither the Trustee, any director, officer,
employee, attorney or agent of the Trustee nor the Holders of Notes shall
be liable to the Company or the Pledgor for any action taken or omitted to
be taken by it or them hereunder, except for its or their own bad faith,
gross negligence or willful misconduct, nor shall the Trustee be
responsible for the validity, effectiveness or sufficiency hereof, or of
any document or security furnished pursuant hereto. The Trustee and its
directors, officers, employees, attorneys and agents shall be entitled to
rely on any communication, instrument or document believed by it or them
to be genuine and correct and to have been signed or sent by the proper
person or persons.
(b) Each of the Company and the Pledgor acknowledges that the rights
and responsibilities of the Trustee under this Pledge Agreement with
respect to any action taken by the Trustee or the exercise or non-exercise
by the Trustee of any option, right, request, judgment or other right or
remedy provided for herein or resulting or arising out of this Pledge
Agreement shall, as between the Trustee and the Holders of Notes, be
governed by the Indenture and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Trustee and the Company or the Pledgor, the Trustee shall be conclusively
presumed to be acting as agent for the Holders of Notes with full and
valid authority so to act or refrain from acting, and the Company and the
Pledgor shall not be obligated or entitled to make any inquiry respecting
such authority.
17. Notices.
Any communication, notice or demand to be given hereunder shall be
duly given hereunder if given in the form and manner, and delivered to their
address set forth in the Indenture, or in such other form and manner or to such
other address as shall be designated by any party hereto to each other party
hereto in a written notice delivered in accordance with the terms of the
Indenture. Any notices or demands to be given to the Pledgor hereunder shall be
given to the Pledgor at the address of the Company.
<PAGE>
12
18. No Waiver; Cumulative Rights.
No failure on the part of the Trustee to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Trustee of any right,
remedy or power hereunder preclude any other or future exercise of any other
right, remedy or power. Each and every right, remedy and power hereby granted to
the Trustee or allowed it by law or other agreement shall be cumulative and not
exclusive the one of any other, and may be exercised by the Trustee from time to
time.
19. Benefits of Pledge Agreement.
Nothing in this Pledge Agreement, express or implied shall give to
any person, other than the parties hereto and their successors hereunder, and
the Holders of the Notes, any benefit or any legal or equitable right, remedy or
claim under this Pledge Agreement.
20. Submission to Jurisdiction; Appointment of Agent for Service;
Currency Indemnity.
(a) To the fullest extent permitted by applicable law, each of the
Company and the Pledgor irrevocably submits to the jurisdiction of any
Federal or State court in the City, County and State of New York, United
States of America, in any suit or proceeding based on or arising under
this Pledge Agreement (solely in connection with any such suit or
proceeding), and irrevocably agrees that all claims in respect of such
suit or proceeding may be determined in any such court. Each of the
Company and the Pledgor irrevocably and fully waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. Each of
the Company and the Pledgor hereby irrevocably designates and appoints
Corporation Service Company, 375 Hudson Street, New York, New York 10014,
U.S.A. (the "Process Agent"), as the authorized agent of the Company and
the Pledgor upon whom process may be served in any such suit or
proceeding, it being understood that the designation and appointment of
Corporation Service Company as such authorized agent shall become
effective immediately without any further action on the part of the
Company or the Pledgor. Each of the Company and the Pledgor represents to
the Holders that it has notified the Process Agent of such designation and
appointment and that the Process Agent has accepted the same in writing.
Each of the Company and the Pledgor hereby irrevocably authorizes and
directs the Process Agent to accept such service. Each of the Company and
the Pledgor further agrees that service of process upon the Process Agent
and written notice of said service to the Company and the Pledgor mailed
by prepaid registered first class mail or delivered to the Process Agent
at its principal office, shall be deemed in every respect effective
service of process upon the Company and the Pledgor in any such suit or
proceeding. Nothing herein shall affect the right of any Holder or any
person controlling such Holder to serve process in any other manner
permitted by law. Each of the Company and the Pledgor further agrees to
take any and all action, including the execution and filing of any and all
such documents and instruments as may be necessary to continue such
designation and appointment of the
<PAGE>
13
Process Agent in full force and effect so long as the Company and the
Pledgor has any outstanding obligations under this Pledge Agreement. To
the extent that the Company or the Pledgor has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process
(whether through service of note, attachment prior to judgment, attachment
in aid of execution, executor or otherwise) with respect to itself or its
property, the Company and the Pledgor hereby irrevocably waives such
immunity in respect of its obligations under this Pledge Agreement, to the
extent permitted by law.
(b) The obligation of the parties to make payments hereunder is in
U.S. dollars (the "Obligation Currency") and such obligation shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation
Currency or any other realization in such other currency, whether as
proceeds of set-off, security, guarantee, distributions, or otherwise,
except to the extent to which such tender, recovery or realization shall
result in the effective receipt by the party which is to receive such
payment of the full amount of the Obligation Currency expressed to be
payable hereunder, and the party liable to make such payment agrees to
indemnify the party which is to receive such payment (as an additional,
separate and independent cause of action) for the amount (if any) by which
such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation
to indemnify shall not be affected by judgment being obtained for any
other sums due under this Pledge Agreement.
21. Governing Law.
THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
22. Waiver of Jury Trial.
EACH OF THE COMPANY, THE PLEDGOR AND THE TRUSTEE HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH IN ANY MANNER ARISES OUT OF OR IN CONNECTION WITH OR IS IN ANY
WAY RELATED TO THIS PLEDGE AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN.
23. Execution in Counterparts.
This Pledge Agreement may be executed in any number of counterparts,
each of which shall be an original, but such counterparts shall together
constitute but one and the same instrument.
24. No Personal Liability of Directors, Officers, Employees and
Others.
<PAGE>
14
No past, present or future director, officer, employee,
incorporator, partner or stockholder of either the Company or the Pledgor will
have any liability for any obligations of the Company or the Pledgor under this
Pledge Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation.
<PAGE>
15
IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to
be duly executed as of the date first above written.
ITSA - INTERCONTINENTAL
TELECOMUNICACOES LTDA.
By /s/ Hermano Studart Lins de Albuquerque
------------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Delegate-Manager
TV FILME, INC.
By /s/ Hermano Studart Lins de Albuquerque
------------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Chief Executive Officer
IBJ SCHRODER BANK & TRUST COMPANY
By /s/ Max Volmar
--------------------------------
Name: Max Volmar
Title: Vice President
WITNESSES:
By /s/ Regina L. Hillman
-------------------------------
Name: Regina L. Hillman
By /s/ Jaime Mercado
--------------------------
Name: Jaime Mercado
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Hermano Studart Lins de
Albuquerque to me personally known who being duly sworn, did say that he is
Delegate-Manager of ITSA-Intercontinental Telecomunicacoes Ltda., one of the
persons described in and which executed the foregoing instrument, and
acknowledges said instrument to be the free act and deed of said corporation.
/s/ Olivia Savell
-----------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Hermano Studart Lins de
Albuquerque to me personally known who being duly sworn, did say that she/he
is Chief Executive Officer of TV Filme, Inc., one of the persons described in
and which executed the foregoing instrument, and acknowledges said instrument
to be the free act and deed of said corporation.
/s/ Olivia Savell
----------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 20th day of December, 1996, before me, a notary public
within and for said county, personally appeared Max Volmar to me personally
known who being duly sworn, did say that he is Vice President of IBJ Schroder
Bank & Trust Company, one of the persons described in and which executed the
foregoing instrument, and acknowledges said instrument to be the free act and
deed of said corporation.
/s/ Paul V. Coughlin
--------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
Exhibit 4.7
SUBSIDIARY GUARANTEE (BRASILIA)
SUBSIDIARY GUARANTEE, dated as of December 20, 1996 (this
"Guarantee"), made by TV FILME BRASILIA SERVICOS DE TELECOMUNICACOES, a
Brazilian corporation (the "Guarantor"), in favor of the holder (the "Holder")
of the Intercompany Note (as defined below).
W I T N E S S E T H :
WHEREAS, TV Filme, Inc., a Delaware corporation ("TV Filme") has
agreed to make a $140,000,000 loan to its subsidiary, ITSA-Intercontinental
Telecomunicacoes Ltda., a Brazilian corporation ("ITSA"), which loan is
evidenced by the Note, dated December 20, 1996 (the "Intercompany Note"), made
by ITSA to the order of TV Filme;
WHEREAS, ITSA owns directly or indirectly all of the issued and
outstanding stock of the Guarantor;
WHEREAS, the proceeds of the Intercompany Note will be used in part
to enable ITSA to make loans or advances to, or other investments in, the
Guarantor in connection with the operation of its business; and
WHEREAS, ITSA and the Guarantor are engaged in related businesses,
and the Guarantor will derive substantial direct and indirect benefit from the
making of the loan evidenced by the Intercompany Note;
NOW, THEREFORE, in consideration of the premises the Guarantor
hereby agrees with the Holder, as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, terms defined in the
Intercompany Note and used herein shall have the meanings given to them in the
Intercompany Note.
(b) As used herein, the following terms shall have the following
meanings:
"Contractual Obligation" of any Person means any provision of any
material debt security or of any material preferred stock or other equity
interest issued by such Person or of any material indenture, mortgage,
agreement, instrument or undertaking to which such Person is a party or by
which it or any of its material property is bound.
<PAGE>
2
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Lien" means any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other
title retention agreement, and any lease in the nature thereof).
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Obligations" means, collectively, the unpaid principal of, premium,
if any, and interest on the Intercompany Note and all other obligations
and liabilities of ITSA to the Holder (including, without limitation,
interest accruing at the then applicable rate provided in the Intercompany
Note after the maturity of the Intercompany Note and interest accruing at
the then applicable rate provided in the Intercompany Note after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to ITSA, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Intercompany Note or any other
document made, delivered or given in connection therewith, whether on
account of principal, premium, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel that are required to be paid by ITSA
or the Guarantor pursuant to the terms of the Intercompany Note or this
Guarantee).
"Requirement of Law" for any Person means the charter and by-laws or
other organizational or governing documents of such Person, and any law,
treaty, rule or regulation, or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its material property or to which such Person
or any of its material property or to which such Person or any of its
material property is subject.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee as a
whole and not to any particular provision of this Guarantee, and Section and
paragraph references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE>
3
2. Guarantee.
(a) Subject to the provisions of paragraph 2(b), the Guarantor
hereby unconditionally and irrevocably guarantees to the Holder and its
respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by ITSA when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
(b) Anything herein or in the Intercompany Note to the contrary
notwithstanding, the maximum liability of the Guarantor hereunder and under the
Intercompany Note shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable federal and state laws relating to the insolvency
of debtors.
(c) The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by the Holder in enforcing, or obtaining advice of counsel
in respect of, any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantor under this Guarantee.
(d) The Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of the Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Holder hereunder.
3. Right of Set-off.
Upon the occurrence and continuance of any Event of Default, the
Guarantor hereby irrevocably authorizes the Holder at any time and from time to
time without notice to the Guarantor, any such notice being expressly waived by
the Guarantor, to set-off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Holder to or for the credit or the account of the
Guarantor, or any part thereof in such amounts as the Holder may elect, against
and on account of the obligations and liabilities of the Guarantor to the Holder
hereunder and claims of every nature and description of the Holder against the
Guarantor, in any currency, whether arising hereunder or otherwise, as the
Holder may elect, whether or not the Holder has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Holder shall notify the Guarantor promptly of any such set-off
and the application made by the Holder, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Holder under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Holder may
have.
4. No Subrogation.
Notwithstanding any payment or payments made by the Guarantor
hereunder or any set-off or application of funds of the Guarantor by the Holder,
the Guarantor shall not be
<PAGE>
4
entitled to be subrogated to any of the rights of the Holder against ITSA or any
other guarantor or any collateral security or guarantee or right of offset held
by ITSA for the payment of the Obligations, nor shall the Guarantor seek or be
entitled to seek any contribution or reimbursement from ITSA or any other
guarantor in respect of payments made by the Guarantor hereunder, until all
amounts owing to the Holder by ITSA on account of the Obligations are paid in
full. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by the Guarantor in trust for the
Holder, segregated from other funds of the Guarantor, and shall, forthwith upon
receipt by the Guarantor, be turned over to the Holder in the exact form
received by the Guarantor (duly indorsed by the Guarantor to the Holder, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Holder may determine.
5. Amendments, etc. with respect to the Obligations; Waiver of
Rights.
The Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against the Guarantor and without notice to or
further assent by the Guarantor, any demand for payment of any of the
Obligations made by the Holder may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Holder, and the Intercompany Note and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Holder may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Holder for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The Holder
shall not have any obligation to protect, secure, perfect or insure any Lien at
any time held by it as security for the Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against the
Guarantor, the Holder may, but shall be under no obligation to, make a similar
demand on ITSA or any other guarantor, and any failure by the Holder to make any
such demand or to collect any payments from ITSA or any such other guarantor or
any release of ITSA or such other guarantor shall not relieve the Guarantor in
respect of which a demand or collection is not made, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
the Holder against the Guarantor. For the purposes hereof "demand" shall include
the commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional.
The Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by the Holder upon this Guarantee or acceptance of this Guarantee, the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guarantee; and all dealings between ITSA and the Guarantor, on the one
hand, and the Holder, on the other hand, likewise shall be conclusively presumed
to have been had or consummated in reliance upon this Guarantee. The Guarantor
<PAGE>
5
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon ITSA with respect to the Obligations. The Guarantor
understands and agrees that this Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity, regularity or enforceability of the Intercompany Note, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the Holder,
(b) any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by ITSA
against the Holder, or (c) any other circumstance whatsoever (with or without
notice to or knowledge of ITSA or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of ITSA for the
Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against the
Guarantor, the Holder may, but shall be under no obligation to, pursue such
rights and remedies as it may have against ITSA or any other Person or against
any collateral security or guarantee for the Obligations or any right of offset
with respect thereto, and any failure by the Holder to pursue such other rights
or remedies or to collect any payments from ITSA or any such other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of ITSA or any such other Person or any such
collateral security, guarantee or right of offset, shall not relieve the
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Holder against the Guarantor. This Guarantee shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall inure to the benefit
of the Holder, and its respective successors, indorsees, transferees and
assigns, until the earlier to occur of (i) all the Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
payment in full and (ii) the occurrence of "Legal Defeasance" or "Covenant
Defeasance" under the Indenture. Notwithstanding any provision in this
Guarantee, if any of the events described in Section 8.8 of the Indenture
occurs, this Guarantee shall continue to be effective, or be reinstated, as the
case may be, at such time.
This Section shall survive the termination of this Guarantee.
7. Reinstatement.
This Guarantee shall continue to be effective, or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any of the
Obligations is rescinded or must otherwise be restored or returned by the Holder
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
ITSA or the Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, ITSA or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
8. Payments.
The Guarantor hereby guarantees that payments hereunder will be paid
to the Holder without set-off or counterclaim in U.S. dollars and in immediately
available funds at the office of the Holder notified by the Holder to the
Guarantor from time to time.
<PAGE>
6
9. Representations and Warranties.
The Guarantor hereby represents and warrants that:
(a) it is a limited liability company duly organized, validly
existing and in good standing under the laws of Brazil and has the corporate
power and authority to own and operate its property, to lease the property it
operates and to conduct the business in which it is currently engaged;
(b) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding obligation
of the Guarantor enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles regardless of whether considered in a
proceeding in equity or at law and an implied covenant of good faith and fair
dealing;
(d) the execution, delivery and performance of this Guarantee will
not violate any provision of any Requirement of Law or Contractual Obligation of
the Guarantor and will not result in or require the creation or imposition of
any Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor other than those
violations which would not reasonably be expected to have a material adverse
effect on the ability of the Guarantor to perform its obligations under this
Guarantee;
(e) no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder or creditor of the
Guarantor) (other than those which are in full force and effect) is required in
connection with the execution, delivery, performance, validity or enforceability
of this Guarantee; and
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending against the Guarantor or, to the
knowledge of the Guarantor, threatened by or against the Guarantor or against
any of its properties or revenues (i) with respect to this Guarantee or any of
the transactions contemplated hereby, (ii) which would reasonably be expected to
have a material adverse effect on the ability of the Guarantor to perform its
obligations under this Guarantee.
10. Notices.
All notices, requests and demands to or upon the Holder, or the
Guarantor to be effective shall be in writing (or by telex, fax or similar
electronic transfer confirmed in writing) and shall be deemed to have been duly
given or made (a) when delivered by hand or (b) if given by mail, ten (10) days
after deposited in the mails by first class mail, or (c) if by
<PAGE>
7
telex, fax or similar electronic transfer, when sent and receipt has been
confirmed, addressed as follows:
(i) if to the Holder, at its address or transmission number for
notices provided to the Guarantor from time to time; and
(ii) if to the Guarantor, at its address or transmission number for
notices set forth under its signature below.
The Holder and the Guarantor may change its address and transmission
numbers for notices by notice in the manner provided in this Section.
11. Severability.
Any provision of this Guarantee which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12. Integration.
This Guarantee represents the agreement of the Guarantor with
respect to the subject matter hereof and there are no promises or
representations by the Holder relative to the subject matter hereof not
reflected herein.
13. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Guarantee may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Guarantor and the Holder, provided that any provision of this
Guarantee may be waived by the Holder in a letter or agreement executed by the
Holder or by facsimile transmission from the Holder.
(b) The Holder shall not by any act (except by a written instrument
pursuant to paragraph 13(a) hereof), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of the
Holder, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Holder of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Holder would otherwise have on any future occasion.
<PAGE>
8
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
14. Section Headings.
The Section headings used in this Guarantee are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
15. Successors and Assigns.
This Guarantee shall be binding upon the successors and assigns of
the Guarantor and shall inure to the benefit of the Holder and its successors
and assigns.
16. Governing Law.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
17. Waiver of Brazilian Law Benefits.
The Guarantor hereby expressly waives all benefits set forth in the
following provisions of Brazilian law: articles 1491, 1494, 1498, 1499, 1500,
1502 and 1503 of the Brazilian Civil Code, articles 261 and 262 of the Brazilian
Commercial Code and articles 595 and 1493 of the Brazilian Civil Procedure Code.
18. Submission to Jurisdiction; Appointment of Agent for Service;
Currency Indemnity.
(a) To the fullest extent permitted by applicable law, the Guarantor
irrevocably submits to the jurisdiction of any Federal or State court in
the City, County and State of New York, United States of America, in any
suit or proceeding based on or arising under this Guarantee (solely in
connection with any such suit or proceeding), and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in any
such court. The Guarantor irrevocably and fully waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The
Guarantor hereby irrevocably designates and appoints Corporation Service
Company, 375 Hudson Street, New York, New York 10014, U.S.A. (the "Process
Agent"), as the authorized agent of the Guarantor upon whom process may be
served in any such suit or proceeding, it being understood that the
designation and appointment of Corporation Service Company as such
authorized agent shall become effective immediately without any further
action on the part of the Guarantor. The Guarantor represents to the
Holders that it has notified the Process Agent of such designation and
appointment and that the Process Agent has accepted the same in writing.
The Guarantor hereby irrevocably authorizes and directs the Process Agent
to accept such service. The Guarantor further agrees that service of
process upon the
<PAGE>
9
Process Agent and written notice of said service to the Guarantor mailed
by prepaid registered first class mail or delivered to the Process Agent
at its principal office, shall be deemed in every respect effective
service of process upon the Guarantor in any such suit or proceeding.
Nothing herein shall affect the right of the Holder or any person
controlling the Holder to serve process in any other manner permitted by
law. The Guarantor further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments as
may be necessary to continue such designation and appointment of the
Process Agent in full force and effect so long as the Guarantor has any
outstanding obligations under this Guarantee. To the extent that the
Guarantor has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service of note,
attachment prior to judgment, attachment in aid of execution, executor or
otherwise) with respect to itself or its property, the Guarantor hereby
irrevocably waives such immunity in respect of its obligations under this
Guarantee, to the extent permitted by law.
(b) The obligation of the Guarantor to make payments hereunder is in
U.S. dollars (the "Obligation Currency") and such obligation shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation
Currency or any other realization in such other currency, whether as
proceeds of set-off, security, guarantee, distributions, or otherwise,
except to the extent to which such tender, recovery or realization shall
result in the effective receipt by the party which is to receive such
payment of the full amount of the Obligation Currency expressed to be
payable hereunder, and the party liable to make such payment agrees to
indemnify the party which is to receive such payment (as an additional,
separate and independent cause of action) for the amount (if any) by which
such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation
to indemnify shall not be affected by judgment being obtained for any
other sums due under this Guarantee.
19. No Personal Liability of Directors, Officers, Employees and
Others.
No past, present or future director, officer, employee,
incorporator, partner or stockholder of the Guarantor will have any liability
for any obligations of the Guarantor under this Guarantee or for any claim based
on, in respect of or by reason of such obligations or their creation.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.
TV FILME BRASILIA SERVICOS DE
TELECOMUNICACOES
By /s/ Hermano Studart Lins de Albuquerque
-----------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Delegate-Manager
Address for Notices:
c/o ITSA-Intercontinental Telecomunicacoes Ltda.
SCS, Quadra 07-B1.A
Ed. Executive Tower
Sala 601
70.300.911 Brasilia-DF Brazil
Phone No.: 011-55-61-314-9908
Telecopier No.: 011-55-61-323-5660
Attention: Hermano Studart Lins de Albuquerque
WITNESSES:
By /s/ Jaime Mercado
-----------------------
Name: Jaime Mercado
By /s/ Regina L. Hillman
-----------------------
Name: Regina L. Hillman
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Hermano Studart Lins de
Albuquerque, to me personally known who being duly sworn, did say that she/he
was the Delegate-Manager of TV FILME BRASILIA SERVICOS DE TELECOMUNICACOES, one
of the persons described in and which executed the foregoing instrument, and
acknowledges said instrument to be the free act and deed of said corporation.
/s/ Olivia Savell
--------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
Exhibit 4.8
SUBSIDIARY GUARANTEE (BELEM)
SUBSIDIARY GUARANTEE, dated as of December 20, 1996 (this
"Guarantee"), made by TV FILME BELEM SERVICOS DE TELECOMUNICACOES, a Brazilian
corporation (the "Guarantor"), in favor of the holder (the "Holder") of the
Intercompany Note (as defined below).
W I T N E S S E T H :
WHEREAS, TV Filme, Inc., a Delaware corporation ("TV Filme") has
agreed to make a $140,000,000 loan to its subsidiary, ITSA-Intercontinental
Telecomunicacoes Ltda., a Brazilian corporation ("ITSA"), which loan is
evidenced by the Note, dated December 20, 1996 (the "Intercompany Note"), made
by ITSA to the order of TV Filme;
WHEREAS, ITSA owns directly or indirectly all of the issued and
outstanding stock of the Guarantor;
WHEREAS, the proceeds of the Intercompany Note will be used in part
to enable ITSA to make loans or advances to, or other investments in, the
Guarantor in connection with the operation of its business; and
WHEREAS, ITSA and the Guarantor are engaged in related businesses,
and the Guarantor will derive substantial direct and indirect benefit from the
making of the loan evidenced by the Intercompany Note;
NOW, THEREFORE, in consideration of the premises the Guarantor
hereby agrees with the Holder, as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, terms defined in the
Intercompany Note and used herein shall have the meanings given to them in the
Intercompany Note.
(b) As used herein, the following terms shall have the following
meanings:
"Contractual Obligation" of any Person means any provision of any
material debt security or of any material preferred stock or other equity
interest issued by such Person or of any material indenture, mortgage,
agreement, instrument or undertaking to which such Person is a party or by
which it or any of its material property is bound.
<PAGE>
2
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Lien" means any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other
title retention agreement, and any lease in the nature thereof).
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Obligations" means, collectively, the unpaid principal of, premium,
if any, and interest on the Intercompany Note and all other obligations
and liabilities of ITSA to the Holder (including, without limitation,
interest accruing at the then applicable rate provided in the Intercompany
Note after the maturity of the Intercompany Note and interest accruing at
the then applicable rate provided in the Intercompany Note after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to ITSA, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Intercompany Note or any other
document made, delivered or given in connection therewith, whether on
account of principal, premium, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel that are required to be paid by ITSA
or the Guarantor pursuant to the terms of the Intercompany Note or this
Guarantee).
"Requirement of Law" for any Person means the charter and by-laws or
other organizational or governing documents of such Person, and any law,
treaty, rule or regulation, or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its material property or to which such Person
or any of its material property or to which such Person or any of its
material property is subject.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee as a
whole and not to any particular provision of this Guarantee, and Section and
paragraph references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE>
3
2. Guarantee.
(a) Subject to the provisions of paragraph 2(b), the Guarantor
hereby unconditionally and irrevocably guarantees to the Holder and its
respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by ITSA when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
(b) Anything herein or in the Intercompany Note to the contrary
notwithstanding, the maximum liability of the Guarantor hereunder and under the
Intercompany Note shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable federal and state laws relating to the insolvency
of debtors.
(c) The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by the Holder in enforcing, or obtaining advice of counsel
in respect of, any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantor under this Guarantee.
(d) The Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of the Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Holder hereunder.
3. Right of Set-off.
Upon the occurrence and continuance of any Event of Default, the
Guarantor hereby irrevocably authorizes the Holder at any time and from time to
time without notice to the Guarantor, any such notice being expressly waived by
the Guarantor, to set-off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Holder to or for the credit or the account of the
Guarantor, or any part thereof in such amounts as the Holder may elect, against
and on account of the obligations and liabilities of the Guarantor to the Holder
hereunder and claims of every nature and description of the Holder against the
Guarantor, in any currency, whether arising hereunder or otherwise, as the
Holder may elect, whether or not the Holder has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Holder shall notify the Guarantor promptly of any such set-off
and the application made by the Holder, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Holder under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Holder may
have.
4. No Subrogation.
Notwithstanding any payment or payments made by the Guarantor
hereunder or any set-off or application of funds of the Guarantor by the Holder,
the Guarantor shall not be
<PAGE>
4
entitled to be subrogated to any of the rights of the Holder against ITSA or any
other guarantor or any collateral security or guarantee or right of offset held
by ITSA for the payment of the Obligations, nor shall the Guarantor seek or be
entitled to seek any contribution or reimbursement from ITSA or any other
guarantor in respect of payments made by the Guarantor hereunder, until all
amounts owing to the Holder by ITSA on account of the Obligations are paid in
full. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by the Guarantor in trust for the
Holder, segregated from other funds of the Guarantor, and shall, forthwith upon
receipt by the Guarantor, be turned over to the Holder in the exact form
received by the Guarantor (duly indorsed by the Guarantor to the Holder, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Holder may determine.
5. Amendments, etc. with respect to the Obligations; Waiver of
Rights.
The Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against the Guarantor and without notice to or
further assent by the Guarantor, any demand for payment of any of the
Obligations made by the Holder may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Holder, and the Intercompany Note and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Holder may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Holder for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The Holder
shall not have any obligation to protect, secure, perfect or insure any Lien at
any time held by it as security for the Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against the
Guarantor, the Holder may, but shall be under no obligation to, make a similar
demand on ITSA or any other guarantor, and any failure by the Holder to make any
such demand or to collect any payments from ITSA or any such other guarantor or
any release of ITSA or such other guarantor shall not relieve the Guarantor in
respect of which a demand or collection is not made, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
the Holder against the Guarantor. For the purposes hereof "demand" shall include
the commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional.
The Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by the Holder upon this Guarantee or acceptance of this Guarantee, the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guarantee; and all dealings between ITSA and the Guarantor, on the one
hand, and the Holder, on the other hand, likewise shall be conclusively presumed
to have been had or consummated in reliance upon this Guarantee. The Guarantor
<PAGE>
5
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon ITSA with respect to the Obligations. The Guarantor
understands and agrees that this Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity, regularity or enforceability of the Intercompany Note, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the Holder,
(b) any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by ITSA
against the Holder, or (c) any other circumstance whatsoever (with or without
notice to or knowledge of ITSA or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of ITSA for the
Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against the
Guarantor, the Holder may, but shall be under no obligation to, pursue such
rights and remedies as it may have against ITSA or any other Person or against
any collateral security or guarantee for the Obligations or any right of offset
with respect thereto, and any failure by the Holder to pursue such other rights
or remedies or to collect any payments from ITSA or any such other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of ITSA or any such other Person or any such
collateral security, guarantee or right of offset, shall not relieve the
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Holder against the Guarantor. This Guarantee shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall inure to the benefit
of the Holder, and its respective successors, indorsees, transferees and
assigns, until the earlier to occur of (i) all the Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
payment in full and (ii) the occurrence of "Legal Defeasance" or "Covenant
Defeasance" under the Indenture. Notwithstanding any provision in this
Guarantee, if any of the events described in Section 8.8 of the Indenture
occurs, this Guarantee shall continue to be effective, or be reinstated, as the
case may be, at such time. This Section shall survive the termination of this
Guarantee.
7. Reinstatement.
This Guarantee shall continue to be effective, or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any of the
Obligations is rescinded or must otherwise be restored or returned by the Holder
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
ITSA or the Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, ITSA or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
8. Payments.
The Guarantor hereby guarantees that payments hereunder will be paid
to the Holder without set-off or counterclaim in U.S. dollars and in immediately
available funds at the office of the Holder notified by the Holder to the
Guarantor from time to time.
<PAGE>
6
9. Representations and Warranties.
The Guarantor hereby represents and warrants that:
(a) it is a limited liability company duly organized, validly
existing and in good standing under the laws of Brazil and has the corporate
power and authority to own and operate its property, to lease the property it
operates and to conduct the business in which it is currently engaged;
(b) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding obligation
of the Guarantor enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles regardless of whether considered in a
proceeding in equity or at law and an implied covenant of good faith and fair
dealing;
(d) the execution, delivery and performance of this Guarantee will
not violate any provision of any Requirement of Law or Contractual Obligation of
the Guarantor and will not result in or require the creation or imposition of
any Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor other than those
violations which would not reasonably be expected to have a material adverse
effect on the ability of the Guarantor to perform its obligations under this
Guarantee;
(e) no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder or creditor of the
Guarantor) (other than those which are in full force and effect) is required in
connection with the execution, delivery, performance, validity or enforceability
of this Guarantee; and
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending against the Guarantor or, to the
knowledge of the Guarantor, threatened by or against the Guarantor or against
any of its properties or revenues (i) with respect to this Guarantee or any of
the transactions contemplated hereby, (ii) which would reasonably be expected to
have a material adverse effect on the ability of the Guarantor to perform its
obligations under this Guarantee.
10. Notices.
All notices, requests and demands to or upon the Holder, or the
Guarantor to be effective shall be in writing (or by telex, fax or similar
electronic transfer confirmed in writing) and shall be deemed to have been duly
given or made (a) when delivered by hand or (b) if given by mail, ten (10) days
after deposited in the mails by first class mail, or (c) if by
<PAGE>
7
telex, fax or similar electronic transfer, when sent and receipt has been
confirmed, addressed as follows:
(i) if to the Holder, at its address or transmission number for
notices provided to the Guarantor from time to time; and
(ii) if to the Guarantor, at its address or transmission number for
notices set forth under its signature below.
The Holder and the Guarantor may change its address and transmission
numbers for notices by notice in the manner provided in this Section.
11. Severability.
Any provision of this Guarantee which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12. Integration.
This Guarantee represents the agreement of the Guarantor with
respect to the subject matter hereof and there are no promises or
representations by the Holder relative to the subject matter hereof not
reflected herein.
13. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Guarantee may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Guarantor and the Holder, provided that any provision of this
Guarantee may be waived by the Holder in a letter or agreement executed by the
Holder or by facsimile transmission from the Holder.
(b) The Holder shall not by any act (except by a written instrument
pursuant to paragraph 13(a) hereof), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of the
Holder, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Holder of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Holder would otherwise have on any future occasion.
<PAGE>
8
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
14. Section Headings.
The Section headings used in this Guarantee are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
15. Successors and Assigns.
This Guarantee shall be binding upon the successors and assigns of
the Guarantor and shall inure to the benefit of the Holder and its successors
and assigns.
16. Governing Law.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
17. Waiver of Brazilian Law Benefits.
The Guarantor hereby expressly waives all benefits set forth in the
following provisions of Brazilian law: articles 1491, 1494, 1498, 1499, 1500,
1502 and 1503 of the Brazilian Civil Code, articles 261 and 262 of the Brazilian
Commercial Code and articles 595 and 1493 of the Brazilian Civil Procedure Code.
18. Submission to Jurisdiction; Appointment of Agent for Service;
Currency Indemnity.
(a) To the fullest extent permitted by applicable law, the Guarantor
irrevocably submits to the jurisdiction of any Federal or State court in
the City, County and State of New York, United States of America, in any
suit or proceeding based on or arising under this Guarantee (solely in
connection with any such suit or proceeding), and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in any
such court. The Guarantor irrevocably and fully waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The
Guarantor hereby irrevocably designates and appoints Corporation Service
Company, 375 Hudson Street, New York, New York 10014, U.S.A. (the "Process
Agent"), as the authorized agent of the Guarantor upon whom process may be
served in any such suit or proceeding, it being understood that the
designation and appointment of Corporation Service Company as such
authorized agent shall become effective immediately without any further
action on the part of the Guarantor. The Guarantor represents to the
Holders that it has notified the Process Agent of such designation and
appointment and that the Process Agent has accepted the same in writing.
The Guarantor hereby irrevocably authorizes and directs the Process Agent
to
<PAGE>
9
accept such service. The Guarantor further agrees that service of process
upon the Process Agent and written notice of said service to the Guarantor
mailed by prepaid registered first class mail or delivered to the Process
Agent at its principal office, shall be deemed in every respect effective
service of process upon the Guarantor in any such suit or proceeding.
Nothing herein shall affect the right of the Holder or any person
controlling the Holder to serve process in any other manner permitted by
law. The Guarantor further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments as
may be necessary to continue such designation and appointment of the
Process Agent in full force and effect so long as the Guarantor has any
outstanding obligations under this Guarantee. To the extent that the
Guarantor has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service of note,
attachment prior to judgment, attachment in aid of execution, executor or
otherwise) with respect to itself or its property, the Guarantor hereby
irrevocably waives such immunity in respect of its obligations under this
Guarantee, to the extent permitted by law.
(b) The obligation of the Guarantor to make payments hereunder is in
U.S. dollars (the "Obligation Currency") and such obligation shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation
Currency or any other realization in such other currency, whether as
proceeds of set-off, security, guarantee, distributions, or otherwise,
except to the extent to which such tender, recovery or realization shall
result in the effective receipt by the party which is to receive such
payment of the full amount of the Obligation Currency expressed to be
payable hereunder, and the party liable to make such payment agrees to
indemnify the party which is to receive such payment (as an additional,
separate and independent cause of action) for the amount (if any) by which
such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation
to indemnify shall not be affected by judgment being obtained for any
other sums due under this Guarantee.
19. No Personal Liability of Directors, Officers, Employees and
Others.
No past, present or future director, officer, employee,
incorporator, partner or stockholder of the Guarantor will have any liability
for any obligations of the Guarantor under this Guarantee or for any claim based
on, in respect of or by reason of such obligations or their creation.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.
TV FILME BELEM SERVICOS DE
TELECOMUNICACOES
By /s/ Hermano Studart Lins de Albuquerque
-----------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Delegate-Manager
Address for Notices:
c/o ITSA-Intercontinental Telecomunicacoes Ltda.
SCS, Quadra 07-B1.A
Ed. Executive Tower
Sala 601
70.300.911 Brasilia-DF Brazil
Phone No.: 011-55-61-314-9908
Telecopier No.: 011-55-61-323-5660
Attention: Hermano Studart Lins de Albuquerque
WITNESSES:
By /s/ Jaime Mercado
-----------------------
Name: Jaime Mercado
By /s/ Regina L. Hillman
-----------------------
Name: Regina L. Hillman
<PAGE>
11
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Hermano Studart Lins de
Albuquerque, to me personally known who being duly sworn, did say that she/he
was the Delegate-Manager of TV FILME BELEM SERVICOS DE TELECOMUNICACOES, one of
the persons described in and which executed the foregoing instrument, and
acknowledges said instrument to be the free act and deed of said corporation.
/s/ Olivia Savell
-----------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
Exhibit 4.9
SUBSIDIARY GUARANTEE (GOIANIA)
SUBSIDIARY GUARANTEE, dated as of December 20, 1996 (this
"Guarantee"), made by TV FILME GOIANIA SERVICOS DE TELECOMUNICACOES, a Brazilian
corporation (the "Guarantor"), in favor of the holder (the "Holder") of the
Intercompany Note (as defined below).
W I T N E S S E T H :
WHEREAS, TV Filme, Inc., a Delaware corporation ("TV Filme") has
agreed to make a $140,000,000 loan to its subsidiary, ITSA-Intercontinental
Telecomunicacoes Ltda., a Brazilian corporation ("ITSA"), which loan is
evidenced by the Note, dated December 20, 1996 (the "Intercompany Note"), made
by ITSA to the order of TV Filme;
WHEREAS, ITSA owns directly or indirectly all of the issued and
outstanding stock of the Guarantor;
WHEREAS, the proceeds of the Intercompany Note will be used in part
to enable ITSA to make loans or advances to, or other investments in, the
Guarantor in connection with the operation of its business; and
WHEREAS, ITSA and the Guarantor are engaged in related businesses,
and the Guarantor will derive substantial direct and indirect benefit from the
making of the loan evidenced by the Intercompany Note;
NOW, THEREFORE, in consideration of the premises the Guarantor
hereby agrees with the Holder, as follows:
1. Defined Terms.
(a) Unless otherwise defined herein, terms defined in the
Intercompany Note and used herein shall have the meanings given to them in the
Intercompany Note.
(b) As used herein, the following terms shall have the following
meanings:
"Contractual Obligation" of any Person means any provision of any
material debt security or of any material preferred stock or other equity
interest issued by such Person or of any material indenture, mortgage,
agreement, instrument or undertaking to which such Person is a party or by
which it or any of its material property is bound.
<PAGE>
2
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Lien" means any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other
title retention agreement, and any lease in the nature thereof).
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Obligations" means, collectively, the unpaid principal of, premium,
if any, and interest on the Intercompany Note and all other obligations
and liabilities of ITSA to the Holder (including, without limitation,
interest accruing at the then applicable rate provided in the Intercompany
Note after the maturity of the Intercompany Note and interest accruing at
the then applicable rate provided in the Intercompany Note after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to ITSA, whether
or not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Intercompany Note or any other
document made, delivered or given in connection therewith, whether on
account of principal, premium, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel that are required to be paid by ITSA
or the Guarantor pursuant to the terms of the Intercompany Note or this
Guarantee).
"Requirement of Law" for any Person means the charter and by-laws or
other organizational or governing documents of such Person, and any law,
treaty, rule or regulation, or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its material property or to which such Person
or any of its material property or to which such Person or any of its
material property is subject.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee as a
whole and not to any particular provision of this Guarantee, and Section and
paragraph references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE>
3
2. Guarantee.
(a) Subject to the provisions of paragraph 2(b), the Guarantor
hereby unconditionally and irrevocably guarantees to the Holder and its
respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by ITSA when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
(b) Anything herein or in the Intercompany Note to the contrary
notwithstanding, the maximum liability of the Guarantor hereunder and under the
Intercompany Note shall in no event exceed the amount which can be guaranteed by
the Guarantor under applicable federal and state laws relating to the insolvency
of debtors.
(c) The Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by the Holder in enforcing, or obtaining advice of counsel
in respect of, any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantor under this Guarantee.
(d) The Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of the Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Holder hereunder.
3. Right of Set-off.
Upon the occurrence and continuance of any Event of Default, the
Guarantor hereby irrevocably authorizes the Holder at any time and from time to
time without notice to the Guarantor, any such notice being expressly waived by
the Guarantor, to set-off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Holder to or for the credit or the account of the
Guarantor, or any part thereof in such amounts as the Holder may elect, against
and on account of the obligations and liabilities of the Guarantor to the Holder
hereunder and claims of every nature and description of the Holder against the
Guarantor, in any currency, whether arising hereunder or otherwise, as the
Holder may elect, whether or not the Holder has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Holder shall notify the Guarantor promptly of any such set-off
and the application made by the Holder, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Holder under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Holder may
have.
4. No Subrogation.
Notwithstanding any payment or payments made by the Guarantor
hereunder or any set-off or application of funds of the Guarantor by the Holder,
the Guarantor shall not be
<PAGE>
4
entitled to be subrogated to any of the rights of the Holder against ITSA or any
other guarantor or any collateral security or guarantee or right of offset held
by ITSA for the payment of the Obligations, nor shall the Guarantor seek or be
entitled to seek any contribution or reimbursement from ITSA or any other
guarantor in respect of payments made by the Guarantor hereunder, until all
amounts owing to the Holder by ITSA on account of the Obligations are paid in
full. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by the Guarantor in trust for the
Holder, segregated from other funds of the Guarantor, and shall, forthwith upon
receipt by the Guarantor, be turned over to the Holder in the exact form
received by the Guarantor (duly indorsed by the Guarantor to the Holder, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Holder may determine.
5. Amendments, etc. with respect to the Obligations; Waiver of
Rights.
The Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against the Guarantor and without notice to or
further assent by the Guarantor, any demand for payment of any of the
Obligations made by the Holder may be rescinded by such party and any of the
Obligations continued, and the Obligations, or the liability of any other party
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Holder, and the Intercompany Note and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Holder may
deem advisable from time to time, and any collateral security, guarantee or
right of offset at any time held by the Holder for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. The Holder
shall not have any obligation to protect, secure, perfect or insure any Lien at
any time held by it as security for the Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against the
Guarantor, the Holder may, but shall be under no obligation to, make a similar
demand on ITSA or any other guarantor, and any failure by the Holder to make any
such demand or to collect any payments from ITSA or any such other guarantor or
any release of ITSA or such other guarantor shall not relieve the Guarantor in
respect of which a demand or collection is not made, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
the Holder against the Guarantor. For the purposes hereof "demand" shall include
the commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional.
The Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Obligations and notice of or proof of
reliance by the Holder upon this Guarantee or acceptance of this Guarantee, the
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived, in reliance
upon this Guarantee; and all dealings between ITSA and the Guarantor, on the one
hand, and the Holder, on the other hand, likewise shall be conclusively presumed
to have been had or consummated in reliance upon this Guarantee. The Guarantor
<PAGE>
5
waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon ITSA with respect to the Obligations. The Guarantor
understands and agrees that this Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity, regularity or enforceability of the Intercompany Note, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the Holder,
(b) any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by ITSA
against the Holder, or (c) any other circumstance whatsoever (with or without
notice to or knowledge of ITSA or the Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of ITSA for the
Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against the
Guarantor, the Holder may, but shall be under no obligation to, pursue such
rights and remedies as it may have against ITSA or any other Person or against
any collateral security or guarantee for the Obligations or any right of offset
with respect thereto, and any failure by the Holder to pursue such other rights
or remedies or to collect any payments from ITSA or any such other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of ITSA or any such other Person or any such
collateral security, guarantee or right of offset, shall not relieve the
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Holder against the Guarantor. This Guarantee shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall inure to the benefit
of the Holder, and its respective successors, indorsees, transferees and
assigns, until the earlier to occur of (i) all the Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
payment in full and (ii) the occurrence of "Legal Defeasance" or "Covenant
Defeasance" under the Indenture. Notwithstanding any provision in this
Guarantee, if any of the events described in Section 8.8 of the Indenture
occurs, this Guarantee shall continue to be effective, or be reinstated, as the
case may be, at such time. This Section shall survive the termination of this
Guarantee.
7. Reinstatement.
This Guarantee shall continue to be effective, or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any of the
Obligations is rescinded or must otherwise be restored or returned by the Holder
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
ITSA or the Guarantor, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, ITSA or the
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
8. Payments.
The Guarantor hereby guarantees that payments hereunder will be paid
to the Holder without set-off or counterclaim in U.S. dollars and in immediately
available funds at the office of the Holder notified by the Holder to the
Guarantor from time to time.
<PAGE>
6
9. Representations and Warranties.
The Guarantor hereby represents and warrants that:
(a) it is a limited liability company duly organized, validly
existing and in good standing under the laws of Brazil and has the corporate
power and authority to own and operate its property, to lease the property it
operates and to conduct the business in which it is currently engaged;
(b) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding obligation
of the Guarantor enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles regardless of whether considered in a
proceeding in equity or at law and an implied covenant of good faith and fair
dealing;
(d) the execution, delivery and performance of this Guarantee will
not violate any provision of any Requirement of Law or Contractual Obligation of
the Guarantor and will not result in or require the creation or imposition of
any Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor other than those
violations which would not reasonably be expected to have a material adverse
effect on the ability of the Guarantor to perform its obligations under this
Guarantee;
(e) no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder or creditor of the
Guarantor) (other than those which are in full force and effect) is required in
connection with the execution, delivery, performance, validity or enforceability
of this Guarantee; and
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending against the Guarantor or, to the
knowledge of the Guarantor, threatened by or against the Guarantor or against
any of its properties or revenues (i) with respect to this Guarantee or any of
the transactions contemplated hereby, (ii) which would reasonably be expected to
have a material adverse effect on the ability of the Guarantor to perform its
obligations under this Guarantee.
10. Notices.
All notices, requests and demands to or upon the Holder, or the
Guarantor to be effective shall be in writing (or by telex, fax or similar
electronic transfer confirmed in writing) and shall be deemed to have been duly
given or made (a) when delivered by hand or (b) if given by mail, ten (10) days
after deposited in the mails by first class mail, or (c) if by
<PAGE>
7
telex, fax or similar electronic transfer, when sent and receipt has been
confirmed, addressed as follows:
(i) if to the Holder, at its address or transmission number for
notices provided to the Guarantor from time to time; and
(ii) if to the Guarantor, at its address or transmission number for
notices set forth under its signature below.
The Holder and the Guarantor may change its address and transmission
numbers for notices by notice in the manner provided in this Section.
11. Severability.
Any provision of this Guarantee which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12. Integration.
This Guarantee represents the agreement of the Guarantor with
respect to the subject matter hereof and there are no promises or
representations by the Holder relative to the subject matter hereof not
reflected herein.
13. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Guarantee may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Guarantor and the Holder, provided that any provision of this
Guarantee may be waived by the Holder in a letter or agreement executed by the
Holder or by facsimile transmission from the Holder.
(b) The Holder shall not by any act (except by a written instrument
pursuant to paragraph 13(a) hereof), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of the
Holder, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Holder of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Holder would otherwise have on any future occasion.
<PAGE>
8
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
14. Section Headings.
The Section headings used in this Guarantee are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
15. Successors and Assigns.
This Guarantee shall be binding upon the successors and assigns of
the Guarantor and shall inure to the benefit of the Holder and its successors
and assigns.
16. Governing Law.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
17. Waiver of Brazilian Law Benefits.
The Guarantor hereby expressly waives all benefits set forth in the
following provisions of Brazilian law: articles 1491, 1494, 1498, 1499, 1500,
1502 and 1503 of the Brazilian Civil Code, articles 261 and 262 of the Brazilian
Commercial Code and articles 595 and 1493 of the Brazilian Civil Procedure Code.
18. Submission to Jurisdiction; Appointment of Agent for Service;
Currency Indemnity.
(a) To the fullest extent permitted by applicable law, the Guarantor
irrevocably submits to the jurisdiction of any Federal or State court in
the City, County and State of New York, United States of America, in any
suit or proceeding based on or arising under this Guarantee (solely in
connection with any such suit or proceeding), and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in any
such court. The Guarantor irrevocably and fully waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The
Guarantor hereby irrevocably designates and appoints Corporation Service
Company, 375 Hudson Street, New York, New York 10014, U.S.A. (the "Process
Agent"), as the authorized agent of the Guarantor upon whom process may be
served in any such suit or proceeding, it being understood that the
designation and appointment of Corporation Service Company as such
authorized agent shall become effective immediately without any further
action on the part of the Guarantor. The Guarantor represents to the
Holders that it has notified the Process Agent of such designation and
appointment and that the Process Agent has accepted the same in writing.
The Guarantor hereby irrevocably authorizes and directs the Process Agent
to
<PAGE>
9
accept such service. The Guarantor further agrees that service of process
upon the Process Agent and written notice of said service to the Guarantor
mailed by prepaid registered first class mail or delivered to the Process
Agent at its principal office, shall be deemed in every respect effective
service of process upon the Guarantor in any such suit or proceeding.
Nothing herein shall affect the right of the Holder or any person
controlling the Holder to serve process in any other manner permitted by
law. The Guarantor further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments as
may be necessary to continue such designation and appointment of the
Process Agent in full force and effect so long as the Guarantor has any
outstanding obligations under this Guarantee. To the extent that the
Guarantor has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service of note,
attachment prior to judgment, attachment in aid of execution, executor or
otherwise) with respect to itself or its property, the Guarantor hereby
irrevocably waives such immunity in respect of its obligations under this
Guarantee, to the extent permitted by law.
(b) The obligation of the Guarantor to make payments hereunder is in
U.S. dollars (the "Obligation Currency") and such obligation shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation
Currency or any other realization in such other currency, whether as
proceeds of set-off, security, guarantee, distributions, or otherwise,
except to the extent to which such tender, recovery or realization shall
result in the effective receipt by the party which is to receive such
payment of the full amount of the Obligation Currency expressed to be
payable hereunder, and the party liable to make such payment agrees to
indemnify the party which is to receive such payment (as an additional,
separate and independent cause of action) for the amount (if any) by which
such effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and such obligation
to indemnify shall not be affected by judgment being obtained for any
other sums due under this Guarantee.
19. No Personal Liability of Directors, Officers, Employees and
Others.
No past, present or future director, officer, employee,
incorporator, partner or stockholder of the Guarantor will have any liability
for any obligations of the Guarantor under this Guarantee or for any claim based
on, in respect of or by reason of such obligations or their creation.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.
TV FILME GOIANIA SERVICOS DE
TELECOMUNICACOES
By /s/ Hermano Studart Lins de Albuquerque
-----------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Delegate-Manager
Address for Notices:
c/o ITSA-Intercontinental Telecomunicacoes Ltda.
SCS, Quadra 07-B1.A
Ed. Executive Tower
Sala 601
70.300.911 Brasilia-DF Brazil
Phone No.: 011-55-61-314-9908
Telecopier No.: 011-55-61-323-5660
Attention: Hermano Studart Lins de Albuquerque
WITNESSES:
By /s/ Jaime Mercado
----------------------
Name: Jaime Mercado
By /s/ Regina L. Hillman
----------------------
Name: Regina L. Hillman
<PAGE>
11
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 16th day of December, 1996, before me, a notary public
within and for said county, personally appeared Hermano Studart Lins de
Albuquerque, to me personally known who being duly sworn, did say that she/he
was the Delegate-Manager of TV FILME GOIANIA SERVICOS DE TELECOMUNICACOES, one
of the persons described in and which executed the foregoing instrument, and
acknowledges said instrument to be the free act and deed of said corporation.
/s/ Olivia Savell
----------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
EXHIBIT 12.1
TV FILME, INC.
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 13,
---------------------------------
1991 1992 1993 1994 1995
---- ---- ----- ---- -------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net Income (Loss).................................................. (A) $(6) $ 13 $(516) $518 $(2,217)
Fixed Charges:
Interest expense................................................. * 0 * 2 *
One-third of rent expense........................................ * 3 * 43 *
---- ----
Total Fixed Charges.......................................... (B) 3 45
---- ----
Net Income (Loss) Plus Fixed Charges............................... (A)+(B)=(C) * $ 16 * $563 *
---- ----
Ratio of Earnings to Fixed Charges................................. (C)/(B) * 5.3 * 12.5 *
---- ----
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
1995 1996
------- -----
<S> <C> <C>
Net Income (Loss).................................................. $(1,807) $(847)
Fixed Charges:
Interest expense................................................. * *
One-third of rent expense........................................ * *
Total Fixed Charges..........................................
Net Income (Loss) Plus Fixed Charges............................... * *
Ratio of Earnings to Fixed Charges................................. * *
</TABLE>
- ------------------------
*For the years ended December 31, 1991, 1993, 1995 and the nine months ended
September 30, 1995 and 1996, earnings were insufficient to cover fixed charges
by $6, $516, $2,217, $1,807, and $847, respectively.
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Experts" and
under the caption "Selected Consolidated Financial Data" and to the use of our
report dated January 18, 1996, except as to Note 1, as to which the date is July
24, 1996, in the Registration Statement (Form S-4 No. 333- ) and related
Prospectus of TV Filme, Inc. for the registration of $140,000,000 of 12 7/8%
Senior Notes due 2004.
Ernst & Young
Auditores Independentes S.C.
Sao Paulo, Brazil
February 3, 1997
<PAGE>
Exhibit 25.1
-----------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (b) (2)
--------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Barbara McCluskey, Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
TV Filme, Inc.
(Exact name of obligor as specified in its charter)
Delaware 98-0160214
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o ITSA - Intercontinental, Telecomunicacoes, Ltda.
SCS, Quadra 07-B1-A, Ed. Executive Tower, Sala 601
70.300-911 Brazilia-DF, Brazil
(Address of principal executive office) (Zip code)
----------
$140,000,000 12 7/8% Senior Notes due 2004
(Title of Indenture Securities)
-----------------------------
<PAGE>
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting
securities of the trustee:
As of January 13, 1997
Col. A Col. B
Title of class Amount Outstanding
Not Applicable
2
<PAGE>
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in
any other securities, of the obligor are outstanding, furnish the
following information:
(a) Title of the securities outstanding under each such other
indenture.
Not Applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of
Section 310 (b) (1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other
indenture.
Not Applicable
Item 5. Interlocking directorates and similar relationships with the obligor
or underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director,
partner, and executive officer of the obligor:
As of January 13, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities represented by
amount given in Col. C
_______________ _______________ _______________ _______________________
Not Applicable
3
<PAGE>
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and
each director, partner and executive officer of each such
underwriter:
As of January 13, 1997
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities represented by
amount given in Col. C
_______________ _______________ _______________ _______________________
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee
Furnish the following information as to securities of the obligor
owned beneficially or held as collateral security for obligations in
default by the trustee:
As of January 13, 1997
<TABLE>
<CAPTION>
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
<S> <C> <C> <C>
_____________ _______________ _________________________ _______________________
</TABLE>
Not Applicable
4
<PAGE>
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter any of which are so owned or held by
the trustee:
As of January 13, 1997
<TABLE>
<CAPTION>
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
<S> <C> <C> <C>
_____________ _______________ _________________________ _______________________
</TABLE>
Not Applicable
Item 10. Ownership or holdings by the trustee of voting securities of
certain affiliates or securityholders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to
the voting securities of such person:
As of January 13, 1997
<TABLE>
<CAPTION>
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
<S> <C> <C> <C>
_____________ _______________ _________________________ _______________________
</TABLE>
Not Applicable
5
<PAGE>
Item 11. Ownership or holdings by the trustee of any securities of a
person owning 50 percent or more of the voting securities of the
obligor.
If the trustee owns beneficially or holds as collateral security
security for obligations in default any securities of a person who,
to the knowledge of the trustee, owns 50 percent or more of the
voting securities of the obligor, furnish the following information
as to each class of securities of such any of which are so owned or
held by the trustee:
As of January 13, 1997
Col. A Col. B Col. C
Nature of Indebtedness Amount Outstanding Date Due
______________________ __________________ ________
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to
the trustee, furnish the following information:
As of January 13, 1997
<TABLE>
<CAPTION>
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially or held as securities represented by
collateral security for amount given in Col. C
obligations in default
<S> <C> <C> <C>
_____________ _______________ _________________________ _______________________
</TABLE>
Not Applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any
such default.
Not Applicable
6
<PAGE>
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding
series of securities under the indenture, state whether there
has been a default under any such indenture or series,
identify the indenture or series affected, and explain the
nature of any such default.
Not Applicable
Item 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe each
such affiliation.
Not Applicable
Item 15. Foreign Trustees.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to
be qualified under the Act.
Not Applicable
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the Trustee to
Commence Business (Included in Exhibit I above).
*3. A copy of the Authorization of the Trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
*4. A copy of the existing By-Laws of the Trustee, as amended to
date (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
7
<PAGE>
5. A copy of each Indenture referred to in Item 4, if the Obligor
is in default. Not Applicable.
6. The consent of the United States institutional trustee
required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors
or officers, the trustee has relied upon information furnished to it by
the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as
indicated in Item 13, the obligor is not in default under any indenture
under which the applicant is trustee.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, IBJ Schroder Bank & Trust Company, a
corporation organized and existing under the laws of the State of
New York, has duly caused this statement of eligibility &
qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of
New York, on the 13th day of January, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /S/ BARBARA MCCLUSKEY
-------------------------------
Barbara McCluskey
Vice President
<PAGE>
Exhibit 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust
Indenture Act of 1939, as amended, in connection with the issue by,
TV Filme, Inc. of its 12 7/8% Senior Notes due 2004 we hereby
consent that reports of examinations by Federal, State, Territorial,
or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /S/ BARBARA MCCLUSKEY
-----------------------------
Barbara McCluskey
Vice President
Dated: January 13, 1997
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of September 30, 1996
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
--------------
ASSETS
<S> <C> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin .................... $ 34,228
Interest-bearing balances................................................ $ 229,175
Securities: Held-to-maturity securities................................... $ 174,707
Available-for-sale securities................................. $ 36,168
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries and in IBFs:
Federal Funds sold....................................................... $ 15,062
Securities purchased under agreements to resell.......................... $ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income..................... $ 1,780,278
LESS: Allowance for loan and lease losses.................... $ 56,976
LESS: Allocated transfer risk reserve........................ $ -0-
Loans and leases, net of unearned income, allowance, and reserve......... $1,723,302
Trading assets held in trading accounts...................................... $ 622
Premises and fixed assets (including capitalized leases)..................... $ 4,264
Other real estate owned...................................................... $ 397
Investments in unconsolidated subsidiaries and associated companies.......... $ -0-
Customers' liability to this bank on acceptances outstanding................. $ 105
Intangible assets............................................................ $ -0-
Other assets................................................................. $ 153,290
TOTAL ASSETS................................................................. $2,371,320
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices...................................................... $ 671,747
Noninterest-bearing ..................................... $ 224,231
Interest-bearing ........................................ $ 447,516
In foreign offices, Edge and Agreement subsidiaries, and IBFs............ $ 856,540
Noninterest-bearing ..................................... $ 17,313
Interest-bearing ........................................ $ 839,227
Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
Federal Funds purchased.................................................. $ 430,500
Securities sold under agreements to repurchase........................... $ -0-
Demand notes issued to the U.S. Treasury..................................... $ 50,000
Trading Liabilities.......................................................... $ 539
Other borrowed money:
a) With a remaining maturity of one year or less......................... $ 61,090
b) With a remaining maturity of more than one year....................... $ 7,647
Mortgage indebtedness and obligations under capitalized leases............... $ -0-
Bank's liability on acceptances executed and outstanding..................... $ 105
Subordinated notes and debentures............................................ $ -0-
Other liabilities............................................................ $ 77,289
TOTAL LIABILITIES............................................................ $2,155,457
Limited-life preferred stock and related surplus............................. $ -0-
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................ $ -0-
Common stock................................................................. $ 29,649
Surplus (exclude all surplus related to preferred stock)..................... $ 217,008
Undivided profits and capital reserves....................................... $ (30,795)
Net unrealized gains (losses) on available-for-sale securities............... $ 1
Cumulative foreign currency translation adjustments.......................... $ -0-
TOTAL EQUITY CAPITAL......................................................... $ 215,863
TOTAL LIABILITIES AND EQUITY CAPITAL......................................... $2,371,320
</TABLE>
