<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1997
REGISTRATION NO. [333- ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TEVECAP S.A.
(Exact Name of Registrant as Specified in its Charter)
TEVECAP INC.
(Translation of Registrant's name into English)
<TABLE>
<S> <C> <C>
THE FEDERATIVE REPUBLIC OF BRAZIL 4841 NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
RUA DO ROCIO, 313 CT CORPORATION SYSTEM
SAO PAULO, SP BRAZIL 1633 BROADWAY
04552-904 NEW YORK, NY 10019
(TELEPHONE: 55-11-821-8550) (TELEPHONE: 212-664-1666)
(ADDRESS AND TELEPHONE NUMBER OF (NAME, ADDRESS AND TELEPHONE NUMBER
REGISTRANT'S PRINCIPAL EXECUTIVE OF AGENT FOR SERVICE)
OFFICES)
</TABLE>
------------------------
COPY TO:
PETER V. DARROW, ESQ.
MAYER, BROWN & PLATT
1675 BROADWAY
NEW YORK, NY 10019
------------------------
<TABLE>
<CAPTION>
NAME, ADDRESS AND
TELEPHONE NUMBER TRANSLATION OF JURISDICTION OF
OF ADDITIONAL REGISTRANTS ADDITIONAL REGISTRANTS' NAMES ORGANIZATION
- --------------------------------------------------- --------------------------------------------------- ----------------------
<S> <C> <C>
TVA Sistema de Televisao S.A....................... TVA Television Systems Inc. The Federative
Rua do Rocio, 313 Republic of Brazil
Sao Paulo SP 04552-904
(Telephone: 55-11-821-8550)
TVA Communications, Ltd............................ TVA Communications, Ltd. The British Virgin
P.O. Box 71 Islands
Craigmuir Chambers
Road Town, British Virgin Islands
(Telephone: 55-11-821-8550)
Galaxy Brasil S.A.................................. Galaxy Brazil Inc. The Federative
Rua do Rocio, 313 Republic of Brazil
Sao Paulo SP 04552-904
(Telephone: 55-11-821-8550)
TVA Sul Participacoes S.A.......................... TVA South Holdings Inc. The Federative
Rua Martha Kateiva de Oliveira, 319 Republic of Brazil
Curitiba PR
(Telephone: 55-11-821-8550)
Comercial Cabo TV Sao Paulo Ltda................... Commercial Cable TV Sao Paulo Ltd. The Federative
Rua do Rocio, 313 Republic of Brazil
Sao Paulo SP 04552-904
(Telephone: 55-11-821-8550)
TVA Parana Ltda.................................... TVA Parana Ltd. The Federative
Rua Martha Kateiva de Oliveira, 319 Republic of Brazil
Curitiba PR
(Telephone: 55-11-821-8550)
TVA Alfa Cabo Ltda................................. TVA Alpha Cable Ltd. The Federative
Rua Martha Kateiva de Oliveira, 319 Republic of Brazil
Curitiba PR
(Telephone: 55-11-821-8550)
CCS Camboriu Cable System de....................... CCS Camboriu Cable The Federative
Telecomunicacoes Ltda. Telecommunications Systems Republic of Brazil
Avenida Brasil, 802 Ltd.
Balneario de Camboriu SC
(Telephone: 55-11-821-8550)
TCC TV a Cabo Ltda................................. TCC Cable TV Ltd. The Federative
Rua Martha Kateiva de Oliveira, 319 Republic of Brazil
Curitiba PR
(Telephone: 55-11-821-8550)
TVA Sul Foz do Iguacu Ltda......................... TVA South Iguacu Falls Ltd. The Federative
Rua Carlos Sbaraini, 410 Republic of Brazil
Foz do Iguacu PR
(Telephone: 55-11-821-8550)
<CAPTION>
STANDARD
NAME, ADDRESS AND INDUSTRIAL I.R.S. EMPLOYER
TELEPHONE NUMBER CLASSIFICATION IDENTIFICATION
OF ADDITIONAL REGISTRANTS CODE NUMBER NO.
- --------------------------------------------------- -------------- -----------------
<S> <C> <C>
TVA Sistema de Televisao S.A....................... 4841 Not Applicable
Rua do Rocio, 313
Sao Paulo SP 04552-904
(Telephone: 55-11-821-8550)
TVA Communications, Ltd............................ 4841 Not Applicable
P.O. Box 71
Craigmuir Chambers
Road Town, British Virgin Islands
(Telephone: 55-11-821-8550)
Galaxy Brasil S.A.................................. 4841 Not Applicable
Rua do Rocio, 313
Sao Paulo SP 04552-904
(Telephone: 55-11-821-8550)
TVA Sul Participacoes S.A.......................... 4841 Not Applicable
Rua Martha Kateiva de Oliveira, 319
Curitiba PR
(Telephone: 55-11-821-8550)
Comercial Cabo TV Sao Paulo Ltda................... 4841 Not Applicable
Rua do Rocio, 313
Sao Paulo SP 04552-904
(Telephone: 55-11-821-8550)
TVA Parana Ltda.................................... 4841 Not Applicable
Rua Martha Kateiva de Oliveira, 319
Curitiba PR
(Telephone: 55-11-821-8550)
TVA Alfa Cabo Ltda................................. 4841 Not Applicable
Rua Martha Kateiva de Oliveira, 319
Curitiba PR
(Telephone: 55-11-821-8550)
CCS Camboriu Cable System de....................... 4841 Not Applicable
Telecomunicacoes Ltda.
Avenida Brasil, 802 Ltd.
Balneario de Camboriu SC
(Telephone: 55-11-821-8550)
TCC TV a Cabo Ltda................................. 4841 Not Applicable
Rua Martha Kateiva de Oliveira, 319
Curitiba PR
(Telephone: 55-11-821-8550)
TVA Sul Foz do Iguacu Ltda......................... 4841 Not Applicable
Rua Carlos Sbaraini, 410
Foz do Iguacu PR
(Telephone: 55-11-821-8550)
</TABLE>
<PAGE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER
OF SECURITIES TO BE REGISTERED REGISTERED UNIT(2)(3)
<S> <C> <C>
12 5/8% Senior Guaranteed Notes due 2004(1)........................ US$250,000,000 100%
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED PRICE(2)(3) REGISTRATION FEE(4)
<S> <C> <C>
12 5/8% Senior Guaranteed Notes due 2004(1)........................ US$250,000,000 US$75,757.57
</TABLE>
(1) The Guarantees by TVA Sistema de Televisao S.A., TVA Communications, Ltd.,
Galaxy Brasil S.A., TVA Sul Participacoes S.A., Comercial Cabo TV Sao Paulo
Ltda, TVA Parana Ltda., TVA Alfa Cabo Ltda., CCS Camboriu Cable System de
Telecomunicacoes Ltda., TCC TV a Cabo Ltda. and TVA Sul Foz do Iguacu Ltda.
of the payment of principal, premium, if any, and interest on the Notes are
also being registered hereby. Pursuant to Rule 457(a), no registration fee
is required with respect to such Guarantees.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Exclusive of accrued interest, if any.
(4) Calculated pursuant to Rule 457.
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPELTION, FEBRUARY 24, 1997
PROSPECTUS
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>
US$250,000,000
Offer for all Outstanding
12 5/8% Senior Notes due 2004
in Exchange for
[LOGO]
up to US$250,000,000 principal amount of
12 5/8% Senior Notes due 2004
of
TEVECAP S.A.
The Exchange Offer
will expire at 5:00 P.M., New York City time,
on , 1997, unless extended.
------------------------
Tevecap S.A., a Brazilian corporation ("Tevecap" and, together with its
consolidated subsidiaries and affiliates, "TVA" or the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the "Registered Exchange Offer"), to exchange an aggregate principal amount of
up to US$250,000,000 of its 12 5/8% Senior Notes due 2004 (the "Exchange Notes")
together with the Subsidiary Guarantees (as defined and together with the
Exchange Notes, the "Exchange Securities"), which have been registered under the
Securities Act of 1933 (the "Securities Act"), pursuant to a Registration
Statement of which this Prospectus constitutes a part, for a like principal
amount of its outstanding 12 5/8% Senior Notes due 2004 (the "Old Notes"), of
which US$250,000,000 aggregate principal amount is outstanding, together with
the Subsidiary Guarantees of the Old Notes (such Subsidiary Guarantees together
with the Old Notes the ("Old Securities").
The terms of the Exchange Notes are identical in all material respects to
the terms of the Old Securities, except for certain transfer restrictions and
registration rights relating to the Old Securities and except that, if the
Registered Exchange Offer is not consummated by May 23, 1997, Tevecap will be
obligated to pay each holder of the Old Notes an amount equal to $0.192 per week
per $1,000 of the Old Notes until the Registered Exchange Offer is consummated.
The Exchange Securities are being offered hereunder in order to satisfy certain
obligations of Tevecap under the Purchase Agreement dated as of November 21,
1996 (the "Purchase Agreement") between Tevecap, the Guarantors (as defined) and
the initial purchasers of the Old Notes (the "Initial Purchasers") and the
Exchange and Registration Rights Agreement dated November 26, 1996 (the
"Exchange and Registration Rights Agreement") among Tevecap, the Guarantors and
the Initial Purchasers. The Exchange Notes will evidence the same debt as the
Old Notes and will be issued under and be entitled to the same benefits under
the Indenture (as defined) as the Old Notes. In addition, the Exchange Notes and
the Old Notes will be treated as one series of securities under the Indenture.
The Exchange Notes and the Old Notes are collectively referred to herein as the
"Notes." See "Description of the Notes."
Interest on the Notes will be payable in cash in US dollars semi-annually on
May 26 and November 26 of each year, commencing on May 26, 1997. The Notes will
mature on November 26, 2004. Except as described below, Tevecap may not redeem
the Notes prior to November 26, 2004. In the event Tevecap receives Net Cash
Proceeds (as defined) at any time on or prior to November 26, 2000 from one or
more specified sales of equity, it may redeem up to $75.0 million of the
aggregate principal amount of the Notes at a price equal to 112.625% of the
principal amount to be redeemed, together with accrued and unpaid interest, if
any, to the date of redemption. In addition, Tevecap may redeem the Notes at any
time, in whole but not in part, at a price equal to 100% of their principal
amount, together with accrued and unpaid interest, if any, to the date of
redemption, in the event of certain changes affecting the withholding tax
treatment of the Notes. The Notes will not be subject to any sinking fund
requirement. Upon the occurrence of a Change of Control (as defined), each
holder will have the right to require Tevecap to make an offer to repurchase the
Notes held by such holder at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
repurchase. See "Description of Notes."
(CONTINUED ON NEXT PAGE)
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF THE OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND THAT PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES SHOULD CONSIDER IN
CONNECTION WITH SUCH INVESTMENT.
---------------------
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 Notes will be unsecured, senior obligations of Tevecap ranking PARI
PASSU in right of payment with all other existing and future unsecured, senior
Indebtedness (as defined) of Tevecap and senior in right of payment to all other
existing and future subordinated Indebtedness of Tevecap. The Notes will be
jointly and severally guaranteed (the "Subsidiary Guarantees") by each
Restricted Subsidiary (as defined) of Tevecap (the "Guarantors"). The Subsidiary
Guarantees will be unsecured, senior obligations of the Guarantors ranking PARI
PASSU in right of payment with all other existing and future unsecured, senior
Indebtedness of the Guarantors and senior in right of payment to all other
existing and future subordinated Indebtedness of the Guarantors. However,
subject to certain limitations set forth in the Indenture, Tevecap and its
Subsidiaries may incur other senior Indebtedness, including Indebtedness that is
secured by the assets of Tevecap and its Subsidiaries. At September 30, 1996,
after giving effect to the sale of the Old Securities and the application of the
net proceeds therefrom, the aggregate principal amount of outstanding senior
Indebtedness of the Company, other than the Notes, would have been $4.6 million
(exclusive of unused commitments). Although the Notes are titled "senior"
securities, Tevecap has not issued any Indebtedness to which the Notes would
rank senior. See "Description of Notes--Ranking."
Tevecap is making the Registered Exchange Offer in reliance on the position
of the staff of the Securities and Exchange Commission (the "Commission") as set
forth in certain no-action letters addressed to other parties in other
transactions. However, Tevecap has not sought its own no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Registered Exchange Offer as in such other
circumstances. Based upon these interpretations by the staff of the Commission,
Tevecap believes that Exchange Securities issued pursuant to this Registered
Exchange Offer in exchange for Old Securities may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who acquired the Old Securities as a result of market making activities or other
trading activities, (ii) an Initial Purchaser who acquired the Old Securities
directly from the Company solely in order to resell pursuant to Rule 144A of the
Securities Act or any other available exemption under the Securities Act, or
(iii) a person that is an "affiliate" (as defined in Rule 405 of the Securities
Act) of Tevecap) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in the distribution of such Exchange Securities.
Holders of Old Securities accepting the Registered Exchange Offer will represent
to Tevecap in the Letter of Transmittal that such conditions have been met. Any
holder who participates in the Registered Exchange Offer for the purpose of
participating in a distribution of the Exchange Securities may not rely on the
position of the staff of the Commission as set forth in these no-action letters
and would have to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction.
Each broker-dealer who receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it acquired the
Old Securities as a result of market-making activities or other trading
activities and will deliver a prospectus in connection with any resale of such
Exchange Securities. 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 Securities received in
exchange for Old Securities where such Old Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Each of Tevecap and the Subsidiary Guarantors has agreed that, for a
period of 90 days after the date of this Prospectus, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Exchange Offer," and "Plan of Distribution."
The Exchange Securities are new securities for which there is currently no
market. Tevecap presently does not intend to apply for listing of the Exchange
Securities on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation (Nasdaq) system. Tevecap
has been advised by the Initial Purchasers, Chase Securities Inc., Donaldson
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co. Inc. and Bozano,
Simonsen Securities, Inc., that, following completion of the Exchange Offer,
they presently intend to make a market in the Exchange Securities and any Old
Securities remaining outstanding; however, the Initial Purchasers are not
obligated to do so and any market-making activities with respect to the Exchange
Securities may be discontinued at any time without notice. There can be no
assurance that an active public market for the Exchange Securities will develop.
Any Old Securities not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the rights and preferences and
will be subject to the limitations applicable thereto under the Indenture.
Following consummation of the Registered Exchange Offer, the holders of Old
Securities will continue to be subject to the existing restrictions upon
transfer thereof. Except for certain limited shelf registration rights of the
holders of Old Securities, Tevecap will have no further obligation to such
holders to provide for the registration under the Securities Act of the Old
Securities held by them. To the extent that Old Securities are tendered and
accepted in the Registered Exchange Offer, a holder's ability to sell untendered
Old Securities could be adversely affected. It is not expected that an active
market for the Old Securities will develop while they are subject to
restrictions on transfer.
Tevecap will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on the
date the Registered Exchange Offer expires, which will be , 1997
(the "Expiration Date"), unless the Registered Exchange Offer is extended by the
Company in its sole discretion, in which case the term "Expiration Date" shall
mean the latest date and time to which the Registered Exchange Offer is
extended. 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 Registered Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Registered Exchange Offer is subject to certain
conditions which may be waived by Tevecap and to the terms and provisions of the
Exchange and Registration Rights Agreement. Tevecap has agreed to pay the
expenses of the Registered Exchange Offer. See "The Registered Exchange Offer."
The Exchange Notes will bear interest from the last interest payment date of the
Old Notes to occur prior to the issue date of the Exchange Notes or, if no such
interest has been paid, from November 26, 1996. Holders of the Old Notes whose
Old Notes are accepted for exchange will not receive interest on such Old Notes
for any period subsequent to the last interest payment date to occur prior to
the issue date of the Exchange Notes, if any, and will be deemed to have waived
the right to receive any interest payment on the Old Notes accrued from and
after such interest payment date or, if not such interest has been paid, from
November 26, 1996.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Securities as of , 1997.
Tevecap will not receive any proceeds from this Registered Exchange Offer.
No dealer-manager is being used in connection with this Registered Exchange
Offer. See "Use of Proceeds" and "Plan of Distribution."
2
<PAGE>
THE EXCHANGE SECURITIES MAY NOT BE OFFERED OR SOLD IN BRAZIL, EXCEPT UNDER
CIRCUMSTANCES WHICH DO NOT CONSTITUTE A PUBLIC OFFERING OR DISTRIBUTION OF
SECURITIES UNDER BRAZILIAN LAWS AND REGULATIONS. THE EXCHANGE SECURITIES HAVE
NOT BEEN, AND WILL NOT BE, REGISTERED WITH THE COMISSAO DE VALORES MOBILIARIOS
("CVM"), THE SECURITIES COMMISSION OF BRAZIL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Enforceability of Civil Liabilities........................................................................ 4
Presentation of Certain Information........................................................................ 4
Summary.................................................................................................... 6
Summary Historical Financial and Other Data................................................................ 18
Risk Factors............................................................................................... 20
Use of Proceeds............................................................................................ 32
Exchange Rate Data......................................................................................... 32
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 37
The Registered Exchange Offer.............................................................................. 50
Management................................................................................................. 84
Principal Shareholders..................................................................................... 89
Certain Transactions With Related Parties.................................................................. 92
Description of Certain Indebtedness........................................................................ 95
Description of Notes....................................................................................... 97
Income Tax Considerations.................................................................................. 130
Plan Of Distribution....................................................................................... 134
Experts.................................................................................................... 134
Legal Matters.............................................................................................. 135
Available Information...................................................................................... 135
Public Documents........................................................................................... 136
Report on Financial Statements............................................................................. F-1
The Federative Republic of Brazil.......................................................................... A-1
The Brazilian Economy...................................................................................... B-1
Glossary................................................................................................... C-1
</TABLE>
Until , 1997, broker-dealers effecting transactions in the Exchange
Notes, whether or not participating in the Registered Exchange Offer, may be
required to deliver a Prospectus. This is in addition to the obligation of
broker-dealers to deliver a Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
No broker-dealer, salesperson or other individual has been authorized to
give any information or to make any representations in connection with the
Registered Exchange Offer other than those contained in this Prospectus and
Letter of Transmittal and, if given or made, such information or representation
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 an offer to
buy the Exchange Notes in any jurisdiction to any person to whom it is unlawful
to make such offer or solicitation in such jurisdiction. The delivery of this
Prospectus shall not, under any circumstances, create any implication that the
information herein is correct at any time subsequent to its date.
3
<PAGE>
ENFORCEABILITY OF CIVIL LIABILITIES
Tevecap and each of the Guarantors are Brazilian corporations (other than
TVA Communications Ltd., which is a corporation organized under the laws of the
British Virgin Islands) with substantially all of their assets and operations
located, and substantially all of their revenues derived, outside the United
States. Each of Tevecap and the Guarantors has appointed CT Corporation System,
New York, New York, as its agent to receive service of process with respect to
any action brought against it in any federal or state court in the State of New
York arising from the Registered Exchange Offer. However, it may not be possible
for investors to enforce outside the United States judgments against Tevecap and
the Guarantors obtained in the United States in any such actions, including
actions predicated upon the civil liability provisions of the US federal and
state securities laws. In addition, certain of the directors and officers of
Tevecap and the Guarantors, and certain of their advisors named herein, are
residents of Brazil, and all or substantially all of the assets of such persons
may be located outside the United States. As a result, it may not be possible
for investors to effect service of process within the United States upon such
persons, or to enforce against them judgments obtained in United States courts,
including judgments predicated upon the civil liability provisions of the US
federal and state securities laws.
Tevecap has been advised by its Brazilian counsel, Basch & Rameh--Advogados
e Consultores, that judgments of US courts for civil liabilities predicated upon
the federal securities laws of the United States, subject to certain
requirements described below, may be enforced in Brazil. A judgment against the
directors and officers of Tevecap and the Guarantors or the advisors named
herein who are residents of Brazil or against Tevecap or the Guarantors obtained
outside of Brazil would be enforceable in Brazil against such persons or Tevecap
or the Guarantors without reconsideration of the merits upon confirmation of
that judgment by the Brazilian Supreme Court. That confirmation, generally, will
occur if the foreign judgment (i) fulfills all formalities required for its
enforceability under the laws of the country where the foreign judgment is
granted, (ii) is issued by a competent court after proper service of process,
(iii) is not subject to appeal, (iv) is authenticated by a Brazilian consular
office in the country where the foreign judgment is issued and is accompanied by
a certified Portuguese translation and (v) is not contrary to Brazilian national
sovereignty or public policy or "good morals" (as set forth in Brazilian law).
Notwithstanding the foregoing, no assurance can be given that confirmation would
be obtained, that the process described above can be conducted in a timely
manner or that a Brazilian court would enforce a monetary judgment for violation
of the US securities laws with respect to the Notes or the Subsidiary
Guarantees. Tevecap has been further advised by its Brazilian counsel that
original actions predicated on the federal securities laws of the United States
may be brought in Brazilian courts and that Brazilian courts may enforce civil
liabilities in such actions against Tevecap or the Guarantors, their respective
directors, certain of their respective officers and the advisors named herein. A
plaintiff (whether Brazilian or non-Brazilian) who resides outside Brazil during
the course of litigation in Brazil must provide a bond to guarantee court costs
and legal fees if the plaintiff owns no real property in Brazil.
PRESENTATION OF CERTAIN INFORMATION
The accounts of the Company, which are maintained in Brazilian REAIS, were
prepared in accordance with the accounting principles generally accepted in the
United States of America and translated into United States dollars on the basis
set forth in Note 2.3 of the Financial Statements of Tevecap and Subsidiaries
(the "Tevecap Financial Statements" and together with the Financial Statements
of TVA Sistema de Televisao S.A., TVA Sul Participacoes S.A., and the Unaudited
Financial Information included elsewhere in this Prospectus, the "Financial
Statements") of the Company. Certain amounts stated herein in U.S. dollars
(other than as set forth in the Financial Statements and financial information
derived therefrom) have been translated, for the convenience of the reader, from
REAIS at the rate in effect on September 30, 1996 of R$1.0272 = US$1.00. Such
translations should not be construed as a representation that REAIS could have
been converted at such rate on such date or at any other date. See "Exchange
Rate Data." All references in this Prospectus to (i) "US dollars," "$" or "US$"
are to United
4
<PAGE>
States dollars and (ii) "REAIS," "REAL" or "R$" are to Brazilian REAIS.
Capitalized terms used in this Prospectus are defined, unless the context
otherwise requires, in the Glossary attached hereto as Appendix C. Unless
otherwise specified, data regarding population or homes in a licensed area are
projections based on 1991 population census figures compiled by the Instituto
Brasileiro de Geografia e Estastica ("IBGE"). There can be no assurance that the
number of people or the number of households in a specified area has not
increased or decreased by a higher or lower rate than those estimated by the
IBGE since the 1991 census. Unless otherwise indicated, references to the number
of the Company's subscribers are based on Company data as of September 30, 1996.
The term DIRECTV-Registered Trademark- ("DIRECTV")
(DIRECTV-Registered Trademark- is a registered trademark of Hughes Electronics
Corporation ("Hughes Electronics")) refers to the Ku-Band service provided by
Galaxy Brasil in conjunction with Galaxy Latin America. Data concerning total
MMDS, Cable, C-Band or Ku-Band subscribers and penetration rates represent
estimates made by the Company based on the January 1996 data of Kagan World
Media, Inc., the Company's knowledge of the pay television systems of the
Company and the Operating Ventures, 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.
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION INCLUDING THE FINANCIAL
STATEMENTS OF TVA INCLUDED ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
TVA is a leading pay television operator in Brazil and is the country's
largest pay television programming distributor. In 1989, TVA was the first to
provide pay television services in Brazil and, in July 1996, the Company
launched DIRECTV, Brazil's first digital Ku-Band service. With over 335,000
subscribers, TVA is the only operator in Brazil to offer pay television services
utilizing five distribution technologies: MMDS, Cable, digital Ku-Band, digital
C-Band and UHF. TVA believes that its ability to strategically deploy
alternative technologies provides it with significant competitive advantages,
including the ability to rapidly enter new markets, maximize penetration of
existing markets and deliver service in the most cost effective manner.
Additionally, TVA has interests in HBO Brasil Partners and ESPN Brasil Ltda.,
two programming joint ventures (the "Programming Ventures"). Through owned,
affiliated and independent pay television operators, TVA programming reaches
over 955,000 pay television households. TVA is a majority owned subsidiary of
Abril, S.A. ("Abril"), Latin America's leading magazine publishing, printing and
distribution company. TVA's other shareholders are Falcon International
Communications (Bermuda) L.P. ("Falcon International"), The Hearst Corporation
("Hearst"), ABC, Inc. ("ABC") and Chase Manhattan International Finance Ltd.
("CMIF").
The Company conducts its pay television operations through three owned
operating systems (the "Owned Systems"): TVA Sistema, TVA Sul and Galaxy Brasil.
Through the MMDS and Cable systems of TVA Sistema and TVA Sul, the Company
serves six cities with a combined population of approximately 18 million,
including three of the seven largest cities in Brazil: Sao Paulo (population of
10.2 million), Rio de Janeiro (population of 5.7 million) and Curitiba
(population of 1.5 million). The Company also holds minority interests in
Canbras TVA and TV Filme (the "Operating Ventures"), which together provide pay
television services to an additional seven cities with a total population of 6.5
million. In addition, the Company sells programming to, and receives a per
subscriber fee from, unaffiliated pay television operators ("Independent
Operators").
The Company, through Galaxy Brasil, is Brazil's exclusive provider of the
premium programming service, DIRECTV. Galaxy Brasil receives programming,
scheduling and related services for DIRECTV from Galaxy Latin America ("GLA"),
in which TVA holds a 10.0% equity interest. The other owners of GLA are a unit
of Hughes Electronics, a member of the Cisneros Group and a subsidiary of Grupo
MVS. Through local operating companies such as Galaxy Brasil, GLA plans to
provide DIRECTV service throughout much of Latin America and the Caribbean. The
Company, through TVA Sistema, also currently provides Brazil's only digital
C-Band television service (together with Galaxy Brasil, the "DBS Systems"). The
DBS Systems enable the Company to deliver a greater number of channels than any
other television operator in Brazil and provide TVA with access to substantially
all of Brazil's 33.9 million TV Homes.
6
<PAGE>
ORGANIZATIONAL STRUCTURE
The organizational structure of the Company, including the Owned Systems,
the Operating Ventures, the Programming Ventures and the License Subsidiaries,
is summarized in the following chart. Percentages represent Tevecap's ownership
interest in each entity.
Organizational Chart
- ------------------------
(a) License subsidiaries hold pay television licenses for the operation of
certain of the Owned Systems.
(b) TV Filme is publicly traded under the symbol "PYTV." TV Filme's market
capitalization, as of September 30, 1996, was $139.8 million. Upon exercise
of a warrant with a nominal exercise price, Tevecap's ownership interest
will increase to 16.7%.
(c) Equity interest held through TVA Communications Ltd., a wholly owned
subsidiary of Tevecap ("TVA Communications"), and TVA Communications Aruba
N.V., a wholly-owned subsidiary of TVA Communications.
(d) An executive officer of Abril holds .01% of the capital stock of Galaxy
Brasil and has agreed to transfer such interest to TVA at nominal cost.
Hughes Electronics and the Cisneros Group have a right to purchase, and have
expressed an interest in purchasing, 25.0% of Galaxy Brasil.
(e) Equity interest held through TVA Communications.
(f) The capital stock of each of these companies is currently held by
affiliates of TVA. Each company has agreed to transfer the licenses held by
it to TVA at nominal cost.
7
<PAGE>
OWNERSHIP
Tevecap is a majority owned subsidiary of Abril, the leading magazine
publishing, printing and distribution company in Latin America. Abril publishes
over 266 weekly, bi-weekly and monthly titles. During 1995, the combined monthly
paid circulation of Abril and its affiliates averaged 15.6 million copies. TVA
benefits from Abril's extensive experience in the business of subscriptions and
distribution, advertising synergies, common research resources and financial
analysis and support. Certain of Tevecap's other shareholders provide the
Company with access to additional international programming and certain
technical and financial expertise. The Company's shareholders have invested, in
aggregate, approximately $288 million in the Company. Tevecap's current
ownership is as follows: Abril, 56.5%; Falcon International, 14.2%; Hearst,
10.0%; ABC, 10.0%; and CMIF, 9.3%. See "Principal Shareholders."
THE BRAZILIAN PAY TELEVISION MARKET
Brazil is the largest television and video market in Latin America with an
estimated 33.9 million TV Homes which, as of December 31, 1995, watched on
average more than 4.0 hours of television per day, as compared to an average of
4.5 hours in the United States. Approximately 6.2 million television sets and
1.9 million VCR units were sold in Brazil during 1995. The pay television
industry in Brazil began in 1989 with the commencement by the Company 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
TV Homes. By comparison, as of December 31, 1995, 51.1% of TV Homes in
Argentina, 12.6% of TV Homes in Mexico, 21.7% of TV Homes in the United Kingdom
and 69.2% of TV Homes in the United States subscribed to pay television.
Management believes that the number of pay television subscribers in Brazil will
continue to grow as pay television reaches more households both through the
expansion of existing and new MMDS and Cable systems and through development of
nationwide DBS systems. The Ministry of Communications estimates that Brazil
will have 16.5 million pay television subscribers by 2003.
COMPANY OPERATIONS
MMDS AND CABLE SYSTEMS. TVA's strategy of rapidly deploying an extensive
MMDS network has allowed it to enter new markets quickly and develop broad
geographic coverage which the Company may expand utilizing signal repeaters. TVA
has developed Brazil's largest MMDS network and, with the Operating Ventures,
serves the country's major metropolitan areas. MMDS systems are typically easier
to deploy and require relatively little capital investment for construction and
maintenance as compared to Cable systems. The MMDS systems of the Company and
the Operating Ventures currently provide 15 to 18 channels of programming.
Management expects this number to increase to 31 soon after the Ministry of
Communications grants additional channel rights as allowed under recently passed
regulations. See "Business--Regulatory Framework."
TVA has recently emphasized the strategic deployment of Cable service and
currently operates Cable systems in Sao Paulo, Curitiba and three other cities.
As of September 30, 1996, TVA had deployed approximately 900 kilometers of
cable, including 80 kilometers of fiber optic cable, that passed approximately
270,000 homes. By the end of 1996, the Company added an additional 890
kilometers to its Cable systems. As part of this buildout plan, the Company
constructed a 281 kilometer fiber optic network, including a 57 kilometer fiber
optic loop in Sao Paulo and a 28 kilometer fiber optic network in Curitiba and
began upgrading or constructing four recently acquired Cable systems. As a
result, management believes that TVA Cable systems, as of the end of 1996,
passed more than 494,000 homes. Additionally, Canbras TVA is constructing Cable
networks in ten cities within the greater Sao Paulo area with a combined
population of over 2.8 million. All of these Cable systems have been designed
for or are being upgraded to either 750 or 550 MHz bandwidth capacity, the
latter of which is readily upgradeable
8
<PAGE>
to 750 MHz bandwidth capacity. The Cable systems of TVA and Canbras TVA
currently offer between 31 and 44 analog channels of programming (including
off-air channels).
DBS SYSTEMS. In July 1996, the Company, through Galaxy Brasil, launched
DIRECTV, Brazil's first Ku-Band service. GLA provides Galaxy Brasil with
programming, scheduling and related services for Galaxy Brasil's DIRECTV service
and Galaxy Brasil exclusively markets and sells the DIRECTV service in Brazil.
With DIRECTV service, TVA provided 49 channels of video programming (including
19 pay-per-view channels) as of September 30, 1996, with the intention to
provide up to 70 channels of video programming and 30 channels of audio
programming. Since September 30, 1996, the number of channels offered by the
Company with DIRECTV service has increased to 56. In addition, since September
30, 1996, a competitor has entered the Ku-Band market, but currently offers only
26 channels of programming (including four pay-per-view channels). As of
September 30, 1996, the Company had commenced only a limited regional roll-out
in the Sao Paulo area. The Company began a nationwide rollout of DIRECTV in
November 1996, at which time TVA initiated a publicity campaign supported by a
nationwide network of trained installers. By comparison, DIRECTV, Inc., a unit
of Hughes Electronics, started its DIRECTV service in the United States in June
1994 and, as of September 30, 1996, had approximately 1.9 million subscribers.
TVA has offered a C-Band service since 1993, and is the only pay television
operator to deliver a digital C-Band signal in Brazil. Currently, TVA's C-Band
service delivers 26 channels (including nine Second Audio Programming ("SAP")
channels) and, with further digital compression, TVA expects to increase the
number of channels to 38 (including SAP channels). By comparison, TVA's only
significant C-Band competitor offers six analog channels. As of September 30,
1996, there were over 3.7 million C-Band dish antennae in Brazil, most of which
were used to receive only off-air channels. This installed base represents the
Company's target market for its digital C-Band service and the Company expects
to attract these viewers through marketing and promotional initiatives.
PROGRAMMING. Management believes its programming provides a significant
competitive advantage by attracting and retaining subscribers. TVA holds equity
interests in two Programming Ventures, ESPN Brasil Ltda. and HBO Brasil
Partners, both of which provide programming to TVA. ESPN Brasil Ltda. produces
and packages Brazilian sporting events and holds exclusive rights, as of January
1997, to many major Brazilian soccer championships. ESPN Brasil Ltda. also
packages international sporting events and ESPN2 programming specifically for
the Brazilian market. HBO Brasil Partners packages and distributes HBO Brasil,
which airs popular first-run movies 24 hours a day, either dubbed or subtitled
in Portuguese. TVA has exclusive distribution rights to ESPN Brasil in Sao
Paulo, Rio de Janeiro, Curitiba, Brasilia, Belem and Goiania and is currently
the sole distributor of HBO Brasil and has exclusive distribution rights to this
channel in TVA's served markets.
TVA, in addition to its interests in the Programming Ventures, has entered
into agreements with international programmers such as ABC, Hearst, Time Warner
and Sony to gain the rights to sports, movies, news, arts and entertainment
programming for distribution in Brazil. Management expects TVA to soon offer
Cinemax as part of its DIRECTV service and to introduce CNA, a Brazilian news
channel to be produced by Abril. TVA also generates revenue by selling its
programming to the Operating Ventures and the Independent Operators as well as
to GLA (to be packaged as part of GLA's DIRECTV service) and by selling
advertising spots to be aired on its programming.
9
<PAGE>
SUBSCRIBERS AND HOUSEHOLDS RECEIVING TVA PROGRAMMING
Through the Owned Systems, TVA directly serves over 335,000 subscribers.
Together, these subscribers represent approximately 21.0% of all Brazilian pay
television subscribers.
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER
31, 30, %
SUBSCRIBERS--OWNED SYSTEMS 1995 1996 CHANGE
----------- ------------ -----------
<S> <C> <C> <C>
MMDS(a).................................................. 188,893 229,656 21.6%
Cable(b)................................................. 15,129 39,253 159.5
DIRECTV and Digital C-Band............................... 15,126 47,436 213.6
----------- ------------
219,148 316,345 44.4
Paid Subscribers Awaiting Installation(c)................ 18,343 19,691 7.3
----------- ------------
Total Subscribers--Owned Systems......................... 237,491 336,036 41.5
----------- ------------
----------- ------------
</TABLE>
- ------------------------
(a) Includes UHF subscribers which, as of September 30, 1996, totaled 11,453.
(b) Reflects the purchase by the Company of existing cable systems in Curitiba,
Foz do Iguacu and Camboriu, during 1996.
(c) Subscribers who have paid an installation fee but are awaiting the
installation of service.
Through the Operating Ventures, TVA has minority interests in two pay
television operators which, together, serve over 66,000 subscribers.
<TABLE>
<CAPTION>
SEPTEMBER 30,
SUBSCRIBERS--OPERATING VENTURES DECEMBER 31, 1995 1996 % CHANGE
----------------- ----------------- -----------
<S> <C> <C> <C>
MMDS........................................... 35,572 62,774 76.5%
Cable.......................................... -- 3,614 --
------- -------
Total Subscribers--Operating Ventures.......... 35,572 66,388 86.6
------- -------
------- -------
</TABLE>
Through the Owned Systems and the Operating Ventures, and through sales of
programming to the Independent Operators, TVA's programming reaches over 955,000
pay television households, which represent approximately 60.0% of all Brazilian
pay television households.
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER
31, 30,
HOUSEHOLDS RECEIVING TVA PROGRAMMING 1995 1996 % CHANGE
----------- ------------ -----------
<S> <C> <C> <C>
Owned Systems.......................................... 237,491 336,036 41.5%
Operating Ventures..................................... 35,572 66,388 86.6
Independent Operators.................................. 341,699 555,049 62.4
----------- ------------
Total.................................................. 614,762 957,473 55.7
----------- ------------
----------- ------------
</TABLE>
10
<PAGE>
COMPETITIVE ADVANTAGES
Management believes that the Company has the following competitive
advantages:
SUPERIOR QUALITY PROGRAMMING LINEUP. TVA's programming line-up includes
exclusive rights to ESPN Brasil in the Company's major markets, with exclusive
coverage, as of January 1997, of many of Brazil's most important soccer
championships, including the Brasil Cup, the Brazilian Championship and the Sao
Paulo and Rio de Janeiro State Championships. The Company exclusively offers CMT
Brasil and Bravo Brasil and is also the only pay television provider offering
HBO programming in TVA's served markets. Management believes that as the pay
television industry grows, programming will become the critical factor driving
consumer selection of a pay television provider, and that with TVA's
relationships with strong international partners and its exclusive soccer
coverage, TVA will continue to offer superior quality programming.
STRATEGIC DEPLOYMENT OF ALTERNATIVE DISTRIBUTION TECHNOLOGIES. The Company
is the only pay television operator utilizing five distribution technologies:
MMDS, Cable, Ku-Band, C-Band and UHF. The availability of multiple distribution
technologies enables the Company to capitalize on the population and income
characteristics, topography and competitive dynamics of each of its targeted
markets. The Company has the ability to penetrate new markets quickly and
efficiently and to offer tiered programming at low cost with MMDS. The Company
is expanding its Cable systems, where warranted by economic and competitive
conditions, to build its subscriber base and to prepare for future opportunities
in interactive services and telecommunications. Additionally, management
believes the Company can rapidly penetrate virtually any market through the
continued deployment of its DBS Systems.
DBS SYSTEMS: NATIONWIDE COVERAGE AND DIGITAL SERVICE. Through its DBS
Systems, TVA is capable of offering programming to nearly all of Brazil's 33.9
million TV Homes, including those households in markets where Cable or MMDS
systems are either not developed or not economically viable. Through its DIRECTV
service, TVA was the first provider of Ku-Band pay television services in Brazil
and expects to enroll as subscribers a significant share of those who are
interested in broader, digital quality programming and pay-per-view services.
Through its digital C-Band system, the Company provides 26 channels of
programming (including nine SAP channels) and is capable of providing up to 38
channels of programming (including SAP channels). The Company's only significant
competitor in C-Band pay television service provides six analog channels of
programming in addition to off-air channels. The Company currently targets its
C-Band service to the over 3.7 million C-Band satellite dish owners in Brazil,
most of whom currently receive only the off-air channels.
MODERN CABLE INFRASTRUCTURE. The Company's Cable systems are constructed
with, or are being upgraded to, either 750 MHz or 550 MHz bandwidth capacity,
the latter of which is readily upgradeable to 750 Mhz bandwidth capacity with
only moderate investment. This Cable technology will enable the Company to
provide data transmission and interactive services, including
telecommunications, in the future. Management believes that the Company's major
competitors for Cable service use narrower bandwidths over portions of their
Cable systems and have installed certain types of Cable in households which
currently may prevent them from providing telecommunications or high speed data
delivery through these portions of their systems until substantial additional
investments have been made for system reconstruction or upgrade.
STRONG STRATEGIC PARTNERS. The Company's strategic equity partners continue
to offer valuable expertise. TVA benefits from Abril's extensive experience in
the business of subscriptions and distribution and from the collective
experience of Falcon International, Hearst and ABC with regard to pay television
operations and from access to programming.
11
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer.................. Tevecap is offering to exchange pursuant to the
Exchange Offer an aggregate principal amount of up to
US$250,000,000 principal amount of its 12 5/8% Senior
Notes due 2004 (the "Exchange Notes") together with
the Subsidiary Guarantees of the Exchange Notes (such
Subsidiary Guarantees and the Exchange Notes
together, the "Exchange Securities"), for a like
principal amount of its 12 5/8% Senior Notes due 2004
(the "Old Notes") together with the Subsidiary
Guarantees of the Old Notes (such Subsidiary
Guarantees and Old Notes together, the "Old
Securities"). Tevecap will issue the Exchange
Securities on or promptly after the Expiration Date.
As of the date of this Prospectus, US$250,000,000
aggregate principal amount of Old Notes is
outstanding. The terms of the Exchange Securities are
identical in all material respects to the terms of
the Old Securities for which they may be exchanged
pursuant to this offer, except that the Exchange
Securities have been registered under the Securities
Act and are issued free from any covenant regarding
registration, and except that if the Registered
Exchange Offer is not consummated by May 23, 1997,
Tevecap will be obligated to pay each holder of the
Old Notes an amount equal to $0.192 per week per
$1000 of the Old Notes until the Registered Exchange
Offer is consummated. The Exchange Securities will
evidence the same debt as the Old Securities and will
be issued under and be entitled to the same benefits
under the Indenture as the Old Securities. The
Issuance of the Exchange Securities and the
Registered Exchange Offer is intended to satisfy
certain obligations of Tevecap and the Subsidiary
Guarantors under the Purchase Agreement and pursuant
to certain registration rights granted under the
Exchange and Registration Rights Agreement. See "The
Registered Exchange Offer" and "Description of the
Notes."
Interest Payments................... Interest on the Exchange Notes shall accrue from the
last Interest Payment Date (May 26 or November 26) on
which interest was paid on the Old Notes surrendered
or, if no interest has been paid on such Old Notes,
from November 26, 1996. See "The Exchange
Offer--Interest on the Exchange Notes."
Expiration Date..................... The Registered Exchange Offer will expire at 5:00
p.m., New York City time, on , 1997, unless
extended by Tevecap in its sole discretion. See "The
Registered Exchange Offer--Expiration Date;
Extensions."
Exchange Date....................... The date of acceptance for exchange of the Old Notes
and the consummation of the Registered Exchange Offer
will be the first business day following the
Expiration Date unless
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
extended. See "The Registered Exchange Offer--Terms
of the Exchange."
Withdrawal Rights................... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date;
otherwise, all tenders will be irrevocable. See "The
Registered Exchange Offer--Withdrawal of Tenders."
Procedures for Tendering Notes...... See "The Registered Exchange Offer--Exchange Offer
Procedures."
Federal Income Tax Consequences..... The exchange of Old Securities for the Exchange
Securities pursuant to the Registered Exchange Offer
will not result in any income, gain or loss to
holders who participate in the Registered Exchange
Offer or to Tevecap for U.S. income tax purposes. See
"Income Tax Considerations."
Resale.............................. Tevecap is making the Registered Exchange Offer in
reliance on the position of the staff of the
Commission as set forth in certain no-action letters
addressed to other parties in other transactions.
However, Tevecap has not sought its own no-action
letter and there can be no assurance that the staff
of the Commission would make a similar determination
with respect to the Registered Exchange Offer as in
such other circumstances. Based on these
interpretations by the staff of the Commission,
Tevecap believes that Exchange Securities issued
pursuant to this Registered Exchange Offer in
exchange for Old Securities may be offered for
resale, resold and otherwise transferred by a holder
thereof (other than (i) a broker-dealer who acquired
the Old Securities as a result of market making
activities or other trading activities, (ii) an
Initial Purchaser who acquired the Old Securities
directly from the Company solely in order to resell
pursuant to Rule 144A of the Securities Act or any
other available exemption under the Securities Act,
or (iii) a person that is an "affiliate" (as defined
in Rule 405 of the Securities Act) of Tevecap)
without compliance with the registration and
prospectus delivery provisions of the Securities Act,
provided that such Exchange Securities are acquired
in the ordinary course of such holder's business and
that such holder is not participating, and has no
arrangement or understanding with any person to
participate, in the distribution of such Exchange
Securities. Holders of Old Securities accepting the
Registered Exchange Offer will represent to Tevecap
in the Letter of Transmittal that such conditions
have been met. Any holder who participates in the
Registered Exchange Offer for the purpose of
participating in a distribution of the Exchange
Securities may not rely on the position of the staff
of the Commission as set forth in these no-action
letters and would have to comply with the
registration and prospectus delivery requirements of
the Securities Act in connection with any secondary
resale transaction. Each broker-dealer who
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must
acknowledge that it acquired the Old Securities as
the result of market-making activities or other
trading activities and will deliver a prospectus in
connection with any resale of such Exchange
Securities. 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
Securities received in exchange for Old Securities
where such Old Securities were acquired by such
broker-dealer as a result of market-making activities
or other trading activities. In addition, pursuant to
Section 4(3) under the Securities Act, until ,
1997, all dealers effecting transactions in the
Exchange Securities, whether or not participating in
the Registered Exchange Offer, may be required to
deliver a Prospectus. Each of Tevecap and the
Subsidiary Guarantors has agreed that, for a period
of 90 days after the date of this Prospectus, it will
make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "The
Registered Exchange Offer" and "Plan of
Distribution."
Remaining Old Notes................. Holders of Old Securities who do not tender their Old
Securities in the Registered Exchange Offer or whose
Old Securities are not accepted for exchange will
continue to hold such Old Securities and will be
entitled to all the rights and preferences, and will
be subject to the limitations, applicable thereto
under the Indenture. All untendered and tendered but
unaccepted Old Securities (collectively, the
"Remaining Old Securities") will continue to bear
legends restricting their transfer. In general, the
Old Securities 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. To the extent that the Registered
Exchange Offer is effected, the trading market, if
any, for Remaining Old Securities could be adversely
affected. See "Risk Factors--Factors Relating to the
Company and the Exchange Securities--Consequences of
Failure to Properly Tender Old Securities Pursuant to
the Registered Exchange Offer." See "The Registered
Exchange Offer--Terms of the Exchange."
Exchange Agent...................... The exchange agent with respect to the Exchange Offer
is The Chase Manhattan Bank (the "Exchange Agent").
The address and telephone number of the Exchange
Agent are set forth in "The Exchange Offer--Exchange
Agent."
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Use of Proceeds..................... There will be no proceeds to Tevecap from the
exchange pursuant to the Exchange Offer. See "Use of
Proceeds."
</TABLE>
THE EXCHANGE NOTES
<TABLE>
<S> <C>
Issuer.............................. Tevecap S.A.
Notes Offered....................... $250,000,000 aggregate principal amount of 12 5/8%
Senior Notes due 2004 (the "Exchange Notes" and,
together with the Old Notes, the "Notes").
Maturity............................ November 26, 2004.
Interest Payment Dates.............. May 26 and November 26 of each year, commencing on
May 26, 1997.
Withholding Taxes; Additional
Amounts........................... Payments in respect of the Notes are not subject to
withholding taxes imposed by Brazil, provided that
the Notes are not redeemed prior to November 26,
2004. If the Notes are redeemed for any reason prior
to November 26, 2004, then Brazilian withholding
taxes will be imposed retroactively on interest, fees
and commissions paid by Tevecap in connection with
the Notes from the date of issuance through the date
of such redemption. Tevecap and the Guarantors have
agreed to pay such Additional Amounts (as defined) in
respect of such Brazilian withholding taxes as will
result in receipt by the holders of Notes of such
amounts as would have been received by them had no
such withholding or deduction been required, except
to the extent set forth under "Description of Notes--
Additional Amounts." See also "Income Tax
Considerations--Brazil."
Sinking Fund........................ None.
Optional Redemption................. Except as described below, Tevecap may not redeem the
Notes prior to November 26, 2004. In the event
Tevecap receives Net Cash Proceeds (as defined) at
any time, on or prior to November 26, 2000, from one
or more (i) Significant Equity Offerings (as defined)
or (ii) sales of Tevecap's Capital Stock to a
Strategic Investor (as defined), Tevecap may redeem
up to $75.0 million of the aggregate principal amount
of the Notes at a price equal to 112.625% of the
principal amount to be redeemed, together with
accrued and unpaid interest, if any, to the date of
redemption, provided that at least $175.0 million of
the aggregate principal amount of the Notes remains
outstanding after each such redemption. In addition,
Tevecap may redeem the Notes at any time, in whole
but not in part, at a price equal to 100% of their
principal amount, together with accrued and unpaid
interest, if any, to the date of redemption, in the
event of certain changes affecting the withholding
tax treatment of the Notes. See "Description of
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
Notes--Optional Redemption" and "--Redemption for
Changes in Withholding Taxes."
Change of Control................... Upon the occurrence of a Change of Control (as
defined), each holder will have the right to require
Tevecap to make an offer to repurchase the Notes held
by such holder at a price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest, if any, to the date of repurchase.
See "Description of Notes--Change of Control."
Subsidiary Guarantees............... The Notes are jointly and severally guaranteed (the
"Subsidiary Guarantees"), on a senior basis, by all
of Tevecap's Restricted Subsidiaries (as defined)
existing on the date the Notes were issued and each
Restricted Subsidiary acquired thereafter (the
"Guarantors"). See "Description of Notes--Subsidiary
Guarantees."
Ranking............................. The Notes are unsecured, senior obligations of
Tevecap ranking PARI PASSU in right of payment with
all other existing and future unsecured, senior
Indebtedness (as defined) of Tevecap and senior in
right of payment to all other existing and future
subordinated Indebtedness of Tevecap. The Subsidiary
Guarantees are unsecured, senior obligations of the
Guarantors ranking PARI PASSU in right of payment
with all other existing and future unsecured, senior
Indebtedness of the Guarantors and senior in right of
payment to all other existing and future subordinated
Indebtedness of the Guarantors. However, subject to
certain limitations set forth in the Indenture,
Tevecap and its Subsidiaries may incur other senior
Indebtedness, including Indebtedness that is secured
by the assets of Tevecap and its Subsidiaries. At
September 30, 1996, after giving effect to the
issuance of the Old Notes and the application of the
net proceeds therefrom, the aggregate principal
amount of outstanding senior Indebtedness of the
Company, other than the Notes, would have been $4.6
million (exclusive of unused commitments). Although
the Notes are titled "senior" securities, Tevecap has
not issued any Indebtedness to which the Notes would
rank senior.
Restrictive Covenants............... The Indenture under which the Notes are issued (the
"Indenture") contains certain covenants which will
limit (i) the incurrence of additional indebtedness
and the issuance of Disqualified Stock by Tevecap and
its Restricted Subsidiaries, (ii) the payment of
dividends on, and the redemption of, capital stock of
Tevecap and the redemption of certain subordinated
obligations of Tevecap, (iii) investments, (iv) sales
of assets and stock of Restricted Subsidiaries, (v)
transactions with affiliates, (vi) the creation and
existence of liens, (vii) investments in Unrestricted
Subsidiaries (as defined), (viii) the types of
businesses Tevecap and its Restricted Subsidiaries
may conduct and
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
(ix) consolidations, mergers and transfers of all or
substantially all of Tevecap's assets. The Indenture
also prohibits certain restrictions on distributions
from Restricted Subsidiaries. However, all of these
limitations and prohibitions are subject to a number
of important qualifications and exceptions. See
"Descriptions of Notes-- Certain Covenants."
</TABLE>
RISK FACTORS
Prospective investors in the 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."
17
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OTHER DATA
The historical data as of December 31, 1995 and 1994, and for the three
years in the period ended December 31, 1995 have been derived from, and should
be read in conjunction with, the audited Financial Statements of the Company
included elsewhere in this Prospectus. The unaudited financial data set forth
below as of and for the nine month period ended September 30, 1996 and for the
nine month period ended September 30, 1995 have been derived from the unaudited
Financial Statements of the Company. The historical data as of December 31, 1992
and 1993 and for the year ended December 31, 1992 are derived from the audited
Financial Statements of the Company that are not included elsewhere in this
Prospectus. The historical data as of September 30, 1995 are derived from the
unaudited Financial Statements of the Company that are not included elsewhere in
this Prospectus.
As required by Brazilian law, and in accordance with local accounting
practices, the financial records of Tevecap and its subsidiaries are maintained
in the applicable Brazilian currency (the REAL). However, the Financial
Statements are presented in US dollars. In order to prepare the Financial
Statements, the Company's accounts have been translated from the applicable
Brazilian currency, on the basis described in Note 2.3 to the Financial
Statements. Because of the differences between the evolution of the rates of
inflation in Brazil and the changes in the rates of devaluation, amounts
presented in US dollars may show distortions when compared on a period-to-period
basis.
The results of operations for the nine month period ended September 30, 1996
are not necessarily indicative of the results expected for the year ending
December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SELECTED OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATING DATA:
Gross revenues
Monthly subscriptions.................................... $ 7,070 $ 12,544 $ 27,976 $ 62,496 $ 41,296 $ 85,301
Installation............................................. 1,857 4,350 6,997 26,045 17,995 39,396
Indirect programming(a).................................. 512 530 1,626 2,866 2,114 5,278
Other(b)................................................. 1,322 2,468 7,173 10,603 7,699 10,657
Revenue taxes(c)........................................... (305) (371) (872) (7,506) (5,171) (8,881)
--------- --------- --------- --------- --------- ---------
Total net revenue.......................................... 10,456 19,521 42,900 94,504 63,933 131,751
--------- --------- --------- --------- --------- ---------
Direct operating expenses(d)............................... 32,905 29,779 28,659 62,026 42,279 75,557
Selling, general and administrative expenses............... 17,834 19,957 24,370 46,902 30,787 53,710
Depreciation and amortization.............................. 2,704 4,813 6,177 13,268 8,865 18,547
--------- --------- --------- --------- --------- ---------
Total operating expenses................................... 53,443 54,549 59,206 122,196 81,931 147,814
--------- --------- --------- --------- --------- ---------
Operating loss............................................. (42,987) (35,028) (16,306) (27,692) (17,998) (16,063
Nonoperating expenses
Interest expense......................................... (13,538) (8,492) (16,413) (17,745) (12,493) (10,125)
Equity in income (losses) of affiliates(e)............... -- -- 383 (3,672) (2,084) (6,642)
Other nonoperating (expenses) income, net(f)............. 2,232 5,892 20,339 8,039 5,158 (4,085)
Income tax exense........................................ -- -- -- -- -- (105)
--------- --------- --------- --------- --------- ---------
Net loss................................................... $ (54,293) $ (37,628) $ (11,997) $ (41,070) $ (27,417) $ (37,020)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
OTHER DATA:
EBITDA--TV Group(g)........................................ $ (40,283) $ (30,215) $ (10,129) $ (13,318) $ (8,462) $ 8,533
EBITDA--Galaxy Brasil(g)................................... -- -- -- (1,106) (671) (6,049)
--------- --------- --------- --------- --------- ---------
EBITDA(g).................................................. (40,283) (30,215) (10,129) (14,424) (9,133) 2,484
Pro forma interest expense(h).............................. 38,623 29,940
Purchase of fixed assets................................... 7,627 11,379 22,369 93,029 52,987 72,538
Ratio of earnings to fixed charges(i)...................... -- -- -- -- -- --
SELECTED OPERATING DATA:
Number of Subscribers to Owned Systems(j).................. 42,924 82,985 114,853 219,148 198,157 316,345
Average monthly revenue per Subscriber(k).................. $ 18.64 $ 21.30 $ 27.80 $ 33.24 $ 33.48 $ 37.66
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................................ $ 41 $ 19 $ 4,644 $ 24,201 $ 39 $ 619
Property, plant and equipment............................ 29,561 35,859 51,426 131,266 95,756 188,063
Total assets............................................. 40,779 45,529 80,441 218,848 148,473 291,154
Loans from affiliated companies.......................... 42,577 89,769 -- 586 22,301 91,926
Long-term liabilities.................................... 67,736 97,105 4,523 9,604 29,816 105,330
Redeemable common shares................................. -- -- 19,754 149,534 69,754 163,225
Total shareholders' equity............................... (54,483) (92,111) 27,590 (18,260) 173 (68,971)
</TABLE>
See accompanying Notes to Summary Historical Financial And Other Data
18
<PAGE>
NOTES TO SUMMARY HISTORICAL FINANCIAL AND OTHER DATA
(a) Represents revenues received by the Company for selling programming to the
Independent Operators.
(b) Includes Advertising and Other revenues.
(c) Represents various non-income based taxes paid on certain of the Company's
gross revenue items with rates ranging from 2.65% to 7.65%.
(d) Represents costs directly related to Monthly subscriptions, and a portion of
Installation, Indirect programming and Other revenues.
(e) Represents the Company's pro rata share of the Net loss or income of its
equity investments.
(f) Includes Interest income, Translation gain or loss, Other nonoperating
(expenses) income, net, and Minority interest. The amount included for the
year ended December 31, 1994 includes Interest income totaling $21,806.
During that year, the Company received capital contributions from
stockholders which resulted in a surplus of cash invested during such
period.
(g) EBITDA represents the sum of (i) net income (loss), plus, without
duplication, (ii) income tax expense, (iii) interest expense (income), net,
(iv) other nonoperating (expenses) income, net (v) depreciation,
amortization and all other non-cash charges, less (vi) non-cash items
increasing net income (loss) (with the exception of amortized deferred
sign-on and hookup fee revenue), in each case determined in accordance with
GAAP. EBITDA is a financial measure commonly used in the Company's industry
and should not be considered as an alternative to cash flow from operating
activities (as determined in accordance with GAAP), as an indicator of
operating performance or as a measure of liquidity. EBITDA-TV Group and
EBITDA-Galaxy Brasil represent operating loss plus depreciation and
amortization. The term "TV Group" refers to the operations of TVA, excluding
the operations of Galaxy Brasil.
(h) Represents interest expense on a pro forma basis, resulting from the
offering of Old Securities and the application of the net proceeds therefrom
as follows:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
--------------- ---------------
<S> <C> <C>
Historical interest expense...................................... $ 17,745 $ 10,125
Elimination of interest expense related to certain related
indebtedness................................................... (11,788) (4,684)
Interest resulting from the Notes based on an interest rate of
12.625%........................................................ 31,563 23,672
Amortization of deferred financing costs relating to the Notes... 1,103 827
--------------- ---------------
$ 38,623 $ 29,940
--------------- ---------------
--------------- ---------------
</TABLE>
(i) For the four years ended December 31, 1995 and the nine months ended
September 30, 1995 and 1996, earnings were
insufficient to cover fixed charges by $54,487, $37,920, $13,100, $38,269,
$25,905 and $31,911, respectively. In calculating the Ratio of earnings to
fixed charges, earnings represents Net loss before minority interest, Equity
in (losses) income of affiliates, less fixed charges. Fixed charges consist
of the sum of Interest expense paid or accrued on indebtedness of the
Company and its subsidiaries and affiliates and one third of operating
rental expenses (such amount having been deemed by the Company to represent
the interest portion of such payments).
(j) Represents the number of Owned Systems' Subscribers as of the last day of
each period.
(k) Average monthly revenue per subscriber refers to the average monthly
subscription fee as of the last day of each period.
19
<PAGE>
RISK FACTORS
BEFORE TENDERING OLD SECURITIES FOR EXCHANGE SECURITIES, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY ALL THE INFORMATION SET FORTH HEREIN AND, IN
PARTICULAR, THE SPECIAL FACTORS APPLICABLE TO AN INVESTMENT IN BRAZIL AND
APPLICABLE TO AN INVESTMENT IN THE COMPANY, INCLUDING THOSE SET FORTH BELOW. IN
GENERAL, INVESTING IN THE SECURITIES OF ISSUERS IN DEVELOPING COUNTRIES, SUCH AS
BRAZIL, INVOLVES A HIGHER DEGREE OF RISK THAN INVESTING IN THE SECURITIES OF
ISSUERS IN THE UNITED STATES AND OTHER JURISDICTIONS. FOR ADDITIONAL INFORMATION
CONCERNING BRAZIL AND CERTAIN MATTERS DISCUSSED BELOW, SEE "ANNEX A--THE
FEDERATIVE REPUBLIC OF BRAZIL."
RISKS RELATING TO THE COMPANY
LIMITED OPERATING HISTORY; EARLY STAGE COMPANY
The Company, which began operating in 1989, has a limited operating history.
Accordingly, prospective investors have limited historical financial information
about the Company upon which to base an evaluation of the Company's performance
and an investment in the Notes. Since inception, the Company has sustained
substantial losses, due primarily to start-up costs, interest expense and
charges for depreciation and amortization arising from the development of its
pay television systems. Prospective investors should be aware of the
difficulties encountered by enterprises in the early stages of development,
particularly in light of the competitive nature of the Brazilian pay television
industry.
The Company derives most of its revenue from subscription revenue and
installation revenue. Subscriber penetration rates and subscriber sensitivity to
the price of installation and subscription fees will materially affect the
Company's results of operations. As TVA's networks mature, installation fees
will represent a declining portion of the Company's total revenues. The ability
of the Company to generate subscription revenue will depend on the acceptance of
its programming, which in turn will depend on the availability of programming at
a competitive cost and the relative appeal to subscribers of such programming.
There can be no assurance that the Company will be successful in establishing
and maintaining a substantial subscriber base or that it will generate revenues
which, when taken together with its sources of financing, will be sufficient to
meet its operating needs or capital requirements or to service its indebtedness,
including the Notes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
OPERATING LOSSES AND NEGATIVE CASH FLOW
As of September 30, 1996, the Company had incurred cumulative net losses of
approximately $193 million since 1991. Further, the Company may continue to
generate net losses and negative cash flow during the period in which the
Company develops and expands its pay television distribution systems and builds
its subscriber base. The Company's future operating profitability will depend
upon many factors, including, among others, its ability to market its products
and services successfully, achieve its projected market penetration, manage
subscriber turnover rates effectively and price its pay television services
competitively. There can be no assurance that the Company will achieve or
sustain operating profitability or positive cash flow in the future. If the
Company does not achieve and maintain operating profitability and positive cash
flow from operating activities on a timely basis, it may not be able to meet its
debt service requirements, including its obligations with respect to the Notes.
To date, the Company has relied on contributions and loans from Abril and
investments made by its other shareholders to fund its operations.
The Company has net operating loss carryforwards ("NOLs") totaling
approximately $118.6 million which are unexpirable. Although management believes
the Company will be profitable in the future and will be able to realize the
benefits from a portion of the NOLs, in accordance with Statement of Financial
Accounting Standards No. 109 (Accounting for Income Taxes), the Company has
established a valuation allowance for all of these net deferred tax assets due
to its cumulative losses. See Note 12 to the Tevecap
20
<PAGE>
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
ADDITIONAL FINANCING
If the Company fails to meet its projected operating results or its capital
needs exceed its projected requirements, the Company may require substantial
investment on a continuing basis to finance its corresponding capital
expenditures. The Company may also require substantial additional capital for
any new pay television license acquisitions or investments or acquisitions of
entities holding such licenses, or for any investments in or acquisitions of
other existing pay television operations in order to further expand the
Company's operations. 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 subscriber growth and retention, programming
costs, capital costs, marketing expenses, staffing levels, and competitive
conditions. There can be no assurance that the Company's future cash
requirements will not increase as a result of unexpected developments in the
Brazilian pay television industry. Due to its highly leveraged capital
structure, there can be no assurance that the Company will be able to arrange
additional financing to fund capital or other requirements until the Company
maintains positive operating cash flow or that any such financing will be on
terms acceptable to the Company. Following the receipt of any additional
financing, there can be no assurance that the Company will be able to generate
sufficient funds to meet its fixed charges and other obligations. 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.
COMPETITIVE INDUSTRY
The pay television industry in Brazil is, and is expected to continue to be,
highly competitive. The Company competes with providers of pay television
services utilizing Cable, MMDS, C-Band technology and, in the near future,
Ku-Band delivery systems and any new delivery systems which may be introduced,
as well as existing off-air broadcast television networks, movie theaters, video
rental stores and other entertainment and leisure activities generally. A number
of the Company's current and potential competitors have greater experience in
the television industry and greater resources, including financial resources,
than the Company.
TVA's principal competitors in Cable service are operations owned or
controlled by Multicanal, Net Brasil, Globo Cabo and RBS. Multicanal and Net
Brasil operate Cable service systems throughout much of Brazil, including Sao
Paulo Rio de Janeiro, Curitiba and several other large metropolitan areas. Globo
Cabo and RBS operate Cable systems in numerous smaller cities, including
Brasilia. RBS also provides MMDS service in Porto Alegre. Net Brasil also
provides MMDS service in Recife and has a license to provide MMDS service in
Curitiba. Globo Par and TV Globo, the owners of Brazil's most popular off-air
channels, control, or have significant interests, in each of Multicanal, Net
Brasil and Globo Cabo. RBS also holds an interest in Multicanal. Management
believes that the Company's only competitor in DBS service is Net Sat, which has
a C-Band and has recently begun a Ku-Band service. TVA's C-Band service offers a
greater number of channels of programming than Net Sat's C-Band service.
However, while monthly charges are comparable and TVA's digital C-Band service
offers more channels, often with better picture quality, the analog decoder
necessary for Net Sat's service is significantly less expensive than the digital
decoder necessary for TVA's service. With respect to Ku-Band service, Net Sat
uses a satellite which provides broader coverage of Brazil. The orbital location
of the Galaxy III-R satellite enables GLA to offer DIRECTV service to
substantially all of the TV Homes in Brazil. However, in the less populated
northern and western regions of Brazil, reception of DIRECTV programming
requires a dish antenna 1.1 meters in diameter and in the western third of
Brazil (a sparsely populated area when compared to the southern and eastern
regions) reception may not be practical due to the size of the
21
<PAGE>
antenna necessary for reception. Globo Par has a controlling interest in Net Sat
while News Corporation plc, a subsidiary of The News Corporation Limited, and
Grupo Televisa, S.A. of Mexico, also hold equity interests in Net Sat. Hughes
Electronics, the majority owner of GLA and possible future shareholder of GLB,
agreed in August 1996 to acquire a majority equity interest in PanAmSat
Corporation ("PanAmSat") from its shareholders, pending regulatory approval.
PanAmSat is the current owner and operator of the PAS-3 satellite. Net Sat has
leased transponder space on PAS-3 from PanAmSat in order to provide a competing
Ku-Band service in Brazil. No assurance can be given as to the effect, if any,
that the acquisition of a majority interest in PanAmSat by Hughes Electronics
may have on the operations of the Company.
The Company expects that a number of new MMDS and Cable licenses will be
granted by the Brazilian Ministry of Communications beginning in the first half
of 1997. It is possible that new licenses will be granted to competitors in
areas in which the Company operates. Such awarding of competing licenses could
result in further competition which, in turn, may materially adversely affect
the Company's subscriber base, results of operations and financial condition.
New competitors are likely to emerge in markets in which the Company operates or
intends to operate and may include additional Cable, MMDS, C-Band service and
other competitors. For additional information regarding the competitive
environment in which the Company conducts its business, see
"Business--Competition."
The success of the Company's operating strategies is subject to factors that
are beyond the control of the Company and difficult to predict due, in part, to
the limited history of pay television services in Brazil. Consequently, the size
of the Brazilian market for pay television, the rates of penetration of that
market, the acceptance of pay television by subscribers and commercial
advertisers, the sensitivity of potential subscribers to the price of
installation and subscription fees, the extent and nature of the competitive
environment and the long-term viability of pay television services in Brazil are
uncertain.
CURRENCY RISK
The Company expects substantially all of its long term debt obligations
(including the Notes) to be denominated in US dollars while the Company
generates revenues only in Brazilian reais. The Company also expects to incur a
significant portion of its equipment costs, and most of its programming costs,
in US dollars. Consequently, the devaluation of the REAL against the US dollar
could significantly affect the Company's ability to meet its obligations and
fund its capital expenditures, and could adversely affect its results of
operations. While the Company may consider entering into transactions to hedge
the risk of exchange rate fluctuations, it may not be possible for the Company
to obtain hedging arrangements on commercially satisfactory terms. In addition,
shifts in currency exchange rates may have a material adverse effect on the
Company and may force the Company to seek additional capital, which may not be
available to it. Similarly, the Company expects that those entities in which it
does not have a majority interest may incur a significant portion of their debt
obligations and equipment and programming costs in US dollars and generate
revenues only in Brazilian reais. Shifts in currency exchange rates may have a
material adverse effect on those entities or make it necessary for those
entities to request additional equity or debt contributions from the Company.
CHANGE IN TECHNOLOGY
The pay television industry as a whole is, and is likely to continue to be,
subject to rapid and significant changes in technology. Although the Company
believes that, for the foreseeable future, these existing and developing
alternative technologies will not materially adversely affect the viability or
competitiveness of its pay television business, there can be no assurance as to
the effect of such technological changes on the Company or that the Company will
not be required to expend substantial financial resources in the development or
implementation of new competitive technologies.
22
<PAGE>
MMDS TRANSMISSION ISSUES
Reception of MMDS programming generally requires a direct, unobstructed
line-of-sight ("LOS") from the Company's headend to the subscriber's antenna.
MMDS service can also be provided 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, extremely adverse weather can,
in limited circumstances, damage transmission and receive-site antennas as well
as other transmission equipment.
Interference from other transmission systems can limit the ability of an
MMDS system to serve any 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 in Brazil, an MMDS license holder is generally
protected from interference within a radius of up to 50 kilometers of the
transmission site, depending on the technical capability of the operator. A
prospective operator must demonstrate that its signal will not cause
interference with the reception of other permitted channels. In the event that
the Company acquires any new MMDS licenses, there can be no assurance that the
Company will be allowed to transmit such MMDS signals up to the full 50
kilometer radius.
DEPENDENCE UPON SATELLITES
The Company's C-Band and Ku-Band service and the delivery of programming to
the MMDS and Cable systems of the Owned Systems and the Operating Ventures
outside Sao Paulo are dependent upon the operation of satellites by third
parties. To deliver programming to the Owned Systems and the Operating Ventures
and provide its C-Band service, the Company utilizes transponders on Brasilsat,
a satellite owned and operated by Embratel, a Brazilian Government owned
company. The Company uses the Galaxy III-R satellite, which is leased and
operated by a unit of Hughes Electronics, to provide its Ku-Band service.
Although the Company has not experienced any significant disruption of its
transmissions to date, satellites are subject to significant risks that may
prevent or impair proper commercial operations, including satellite defects,
destruction and damage and incorrect orbital placement. On occasion, satellite
launches have resulted in a total or constructive total loss due to launch
failure, failure to achieve proper orbit or failure to operate upon reaching
orbit. For example, the original PAS-3 satellite, which Net Sat originally
planned to use for its Ku-Band service, was destroyed upon launch as a result of
a malfunction of the Ariane space launch vehicle. Disruption of the transmission
of the Galaxy III-R satellite or the failure of the launch of any replacement
satellite could have a material adverse effect on the Company. The ability of
the Company to transmit its programming following the expected useful life of
the Galaxy III-R satellite, which currently is approximately nine years, and to
broadcast additional channels, will depend upon the ability of the Company to
obtain rights to utilize transponders on other satellites.
RISK OF SIGNAL THEFT
The delivery of pay television programming requires the use of encryption
technology to prevent signal theft. Historically, piracy in the cable television
and DBS industries has been widely reported. With each of its services, the
Company uses an access control system to prevent unauthorized reception of its
programming. The Company's MMDS and Cable systems use various decoder
technologies, and the Company's Ku-Band receiver employs Smart Card technology,
allowing the Company to change the access control system in the event of a
security breach. There can be no assurance, however, that the access control
technology used in connection with each of the Company's delivery services will
be, or remain, effective. If the access control technology is compromised and
not promptly corrected, the Company's revenues and the Company's ability to
market its pay television services would be adversely affected.
23
<PAGE>
REGULATION
Substantially all of the Company's business activities are regulated by the
Brazilian Ministry of Communications. Such regulation relates to, among other
things, licensing, local access to Cable and MMDS systems, commercial
advertising, and foreign investment in Cable and 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 Cable and MMDS
licenses may not be transferred without regulatory approval. Under current
regulations, the Brazilian Ministry of Communications will grant Cable and MMDS
licenses pursuant to a public bidding process. The Company is unable to predict
what impact, if any, such public bidding will have on its ability to launch and
operate new systems. Any new regulations could have a material adverse effect on
the subscription television industry as a whole and on the Company in
particular. See "Business--Regulatory Framework."
The construction and launch of broadcasting satellites and the operation of
satellite broadcasting systems are subject to substantial regulation by the
Brazilian Ministry of Communications. Ministry of Communications rules are
subject to change in response to industry developments, new technology and
political considerations. Certain aspects of television and telecommunications
operations and ownership are governed by the Brazilian Constitution. It is
expected that a new law enacting constitutional amendments, along with possible
regulations thereunder, will be passed in 1996 or 1997. The Brazilian Government
may enact additional or new regulations applicable to the activities of the
Company's C-Band and Ku-Band satellite services. The Company's business and
business prospects could be adversely affected by the adoption of new
constitutional amendments, laws, policies or regulations or changes in the
interpretation or application of existing laws, policies and regulations. There
can be no assurance that the Company will succeed in obtaining all requisite
regulatory approvals for its operations without the imposition of restrictions
on, or adverse consequences to, the Company. There can also be no assurance that
material adverse changes in regulations affecting the Company's C-Band and
Ku-Band satellite services will not occur in the future. See
"Business--Regulatory Framework."
AVAILABILITY OF PROGRAMMING AND EQUIPMENT
The success of the Company's business will be dependent on its ability to
obtain programming that is appealing to subscribers at commercially reasonable
costs. The Company is dependent on third party suppliers for a significant
amount of its programming. Most of the Company's programming is purchased from
programming providers in the United States and Europe pursuant to contracts some
of which will begin expiring within one year. Although the Company has no reason
to believe that such contracts will be cancelled or will not be renewed upon
expiration, in the event such contracts are cancelled or not renewed, the
Company will have to seek programming from other sources. 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. See "Business--Programming."
The Company currently purchases decoders and antennas from a limited number
of sources. The inability to obtain sufficient components as required, or to
develop alternative sources if and when 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.
MANAGEMENT OF GROWTH
The Company is growing rapidly, which could place a significant strain on
its operational and personnel resources. As the Company's business develops and
expands, the Company will need to
24
<PAGE>
implement enhanced operational and financial systems and will require additional
employees and management, operational and financial resources. There can be no
assurance that the Company will successfully implement and maintain such
operational and financial systems or successfully obtain, integrate and utilize
the required employees and management or operational and financial resources in
order to manage a developing and expanding business in a new industry. Failure
to implement such systems successfully and use resources effectively could have
a material adverse effect on the Company's results of operations and financial
condition.
TRANSACTIONS WITH RELATED PARTIES; RIGHTS TO PUT THE COMPANY'S STOCK
Tevecap currently engages in, and expects from time to time to engage in,
financial and commercial transactions with its shareholders, subsidiaries and
other affiliates. Although transactions with affiliated persons are subject to
the terms of the Indenture, the Company may continue to enter into certain
transactions with affiliates in the future. While the Company believes that such
transactions in the past have generally had a beneficial effect on the Company,
no assurance can be given that any such transaction, or combination of
transactions, will not have a material adverse effect on the Company in the
future. See "Certain Transactions with Related Parties."
Pursuant to a Stockholders Agreement among Tevecap and its stockholders,
upon the occurrence of certain defined "triggering events," each of the
Stockholders, other than Abril, may demand that Tevecap buy all or a portion of
the shares of capital stock of Tevecap held by such Stockholder, unless the
shares of capital stock held by such Stockholder are publicly registered, listed
or traded (collectively referred to as an "Event Put"). The Indenture, however,
contains restrictions on the ability of Tevecap to purchase shares of its
capital stock. See "Description of Notes--Certain Covenants--Limitation on
Restricted Payments." Accordingly, the parties to the Stockholders Agreement
have agreed to amend the Stockholders Agreement prior to the Offering to provide
that if the terms of the Indenture prohibit Tevecap from purchasing shares that
are subject to an Event Put ("Event Put Shares"), in whole or in part, the
Company shall not be obligated to purchase such shares to the extent it is so
restricted. However, in such event, the Company shall, subject to the terms of
the Indenture, have the obligation to issue shares of preferred stock of the
Company ("Special Preferred Shares") should the Tevecap stockholder elect to
convert Event Put Shares to Special Preferred Shares. The holders of Special
Preferred Shares will be entitled to dividends required by law and a cumulative
dividend equal to LIBOR plus a 4.0% margin, provided that if the terms of the
Indenture prohibit the payment of dividends on the Special Preferred Shares, the
Company shall not be obligated to make such dividend payments to the extent so
restricted. After the payment of all dividends on the Special Preferred Shares,
the Company must use any remaining profit or reserve to purchase the largest
number of Event Put Shares and Special Preferred Shares, provided that, if the
terms of the Indenture prohibit the purchasing of such shares, the Company shall
not be obligated to make such purchases until permitted by the terms of the
Indenture.
In addition, pursuant to the Stockholders Agreement, Falcon International
may demand that Tevecap buy all or any portion of the shares of capital stock of
Tevecap held by Falcon International if such shares are not publicly registered,
listed or traded by September 22, 2002 (the "Falcon Time Put"). If the terms of
the Indenture prohibit it from purchasing such shares, Tevecap may, subject to
the terms of the Indenture, delay the payment of such purchase price with three
annual payments ("Put Annual Payments") or issue promissory notes denominated in
US dollars for the amount of such price ("Put Promissory Notes"). The Put
Promissory Notes would mature three years after issuance with interest payments
due quarterly in arrears. The interest rate on the Put Promissory Notes would be
equal to the rate applicable to US Treasury obligations of similar maturity plus
a margin to be negotiated. While the Put Promissory Notes are outstanding,
Tevecap may not pay any dividends or make distributions with respect to its
capital stock, including the Special Preferred Shares should they exist. If the
terms of the Indenture prohibit the Company from making the Put Annual Payments,
the Company shall not be
25
<PAGE>
required to make such payment, but shall be required to deliver Put Promissory
Notes in the principal amount of the affected Put Annual Payments. If the terms
of the Indenture prohibit the Company from making an interest payment required
under any Put Promissory Note, the Company shall not be required to make such
payment at such time, provided that any accrued and unpaid interest shall
accumulate and interest on such unpaid amount shall compound quarterly and the
Company shall make payments of interest as soon as such payment is no longer
restricted under the Indenture. Pursuant to the terms of the proposed amendment
to the Stockholders Agreement, payment of the principal and interest on the Put
Promissory Notes would be subordinated to the prior payment in full of the
Notes. See "Description of Notes--Certain Covenants--Limitation on Restricted
Payments," "--Limitation on Indebtedness" and "Principal Shareholders."
OWNERSHIP OF FUTURE CABLE TELEVISION LICENSES
The Company holds a 36.0% equity interest in Canbras TVA Cabo and TV Cabo
Santa Branca (the "Canbras TVA Companies"), two Cable operators holding Cable
licenses for a number of smaller cities within the greater Sao Paulo
metropolitan area. Canbras, a publicly-traded Canadian company and Canbras-Par,
a Brazilian company, own the remaining interest in Canbras TVA Cabo, and
Canbras-Par owns the remaining interest in TV Cabo Santa Branca. BCI, an
affiliate of BCE, Inc., Canada's largest telecommunications group, holds a $27.0
million convertible debenture that, upon conversion, would permit BCI to become,
INTER ALIA, a majority shareholder of Canbras-Par. Pursuant to the Canbras
Association Agreement, dated June 14, 1995, among TVA, the Canbras TVA
Companies, Canbras and Canbras-Par, the Company agreed to grant to Canbras-Par a
"right of first refusal" to participate in other Cable licenses that the Company
may obtain, directly or indirectly, and Canbras-Par granted to the Company a
similar "right of first refusal" to participate in Cable licenses acquired by
Canbras-Par. The term of the Canbras Association Agreement is for so long as
Canbras-Par or its assignee owns shares "in companies which have the objective
of engaging in the cable TV business." The Canbras Association Agreement does
not specify the terms and conditions on which any co-investments in Cable
licenses are to be made, and the Company expects that such terms and conditions
will be negotiated in good faith, on a case-by-case basis, in connection with
any future Cable license investments. The Company does not believe that the
implementation of the Canbras Association Agreement will have a material adverse
effect on the Company and its on-going operations.
Subsequent to the date of the Canbras Association Agreement, the Company,
through TVA Sul, acquired two new Cable systems in Camboriu and Foz do Iguacu.
Under the terms of the Canbras Association Agreement, the Company is required to
offer to Canbras-Par the right to participate in these Cable systems. Although
Canbras-Par has indicated a preliminary interest in participating in these two
Cable systems, the Company has not yet made a formal offer to Canbras and,
therefore, Canbras' precise level of participation is uncertain at this time.
Additionally, Canbras-Par and the Company are contemplating Canbras-Par
investing directly in TVA Sul, on terms to be agreed upon.
The Canbras Association Agreement provides that to the extent programming is
owned exclusively by TVA, programming will be supplied to the Canbras TVA
Companies on an exclusive basis, and that TVA will not supply such programming
to any other party within the geographic territories covered by the licenses
held by the Canbras TVA Companies. The Canbras Association Agreement does not,
by its terms, refer to Ku-Band or C-Band service. Canbras has taken exception to
the Company's view that the programming provisions do not limit the Company's
ability to offer such services in such geographic territories. The Company
believes its on-going discussions with Canbras will lead to a clarification of
these provisions in a manner which will have no material adverse effect on the
Company or its on-going operations. However, there can be no assurance of such
an outcome.
26
<PAGE>
DIVIDENDS TO SHAREHOLDERS
Brazilian corporation law and the Stockholders Agreement among Tevecap and
its stockholders require Tevecap to distribute to its shareholders a mandatory
dividend equal to 25.0% of its net profits. Net profits are defined under the
Brazilian corporation law as the income remaining after the deduction of
payments due to employees, managers and individual shareholders in the service
of the applicable company. In addition, a Brazilian company is allowed to
distribute dividends only if, after a given fiscal year, its net profits exceed
its accumulated losses. However, in accordance with Brazilian corporation law,
Tevecap may suspend the mandatory dividend upon a unanimous decision of its
shareholders. Pursuant to the terms of an amendment to the Stockholders
Agreement, Tevecap's stockholders have agreed not to exercise their right to
receive such mandatory dividends (without limiting their right to receive
dividends payable in compliance with the "Limitation on Restricted Payments"
covenant in the Indenture) until the first to occur of (x) the date that shares
of Capital Stock of the Company are issued and listed on a Brazilian or United
States securities exchange in connection with a bona fide public offering of
such shares or the date that any shares of the Capital Stock of the Company are
otherwise effectively listed and traded on any Brazilian or United States
securities exchange, (y) the date that none of the Notes remain outstanding or
(z) the date that such commitment is no longer effective, enforceable or legal
under applicable Brazilian laws and regulations (including without limitation
any construction or interpretation thereof by CVM, any court or any other
governmental authority). See "Description of Notes--Certain
Covenants--Limitation on Restricted Payments."
RIGHTS TO DIRECTV PROGRAMMING
Upon the occurrence of certain stipulated events, GLA, in which TVA has a
10.0% equity interest, has the right to terminate the Local Operating Agreement,
dated March 3, 1995, between GLA and Galaxy Brasil (the "Local Operating
Agreement"). Such termination would result in a cessation of the supply of
programming from GLA to Galaxy Brasil. The events that would entitle GLA to
terminate the Local Operating Agreement include breach of any material
obligation of Galaxy Brasil under the Local Operating Agreement, failure to meet
certain annual subscriber goals beginning August 1, 2000, and revocation of any
required governmental licenses. In addition, GLA has the right to terminate
Galaxy Brasil's exclusive rights to DIRECTV programming if Galaxy Brasil were to
fail to reach certain annual subscriber goals beginning August 1, 1998. The loss
of DIRECTV programming could have a material adverse effect on the revenues and
business of the Company.
RISKS RELATING TO THE NOTES
LIMITED ASSETS OF TEVECAP AND DEPENDENCE ON SUBSIDIARIES FOR REPAYMENT OF
NOTES
Tevecap's operations are conducted through, and substantially all of
Tevecap's assets are owned by, Tevecap's direct and indirect subsidiaries. The
ability of Tevecap to meet its obligations in respect of the Notes and any
future indebtedness of Tevecap will depend on, among other things, the future
performance of such subsidiaries (including the Guarantors) and the ability of
Tevecap to refinance the Notes at their maturity (or upon early redemption or
otherwise). In addition, the ability of Tevecap's subsidiaries to pay dividends
and make other payments to Tevecap may be restricted by, among other things,
applicable corporate and other laws and regulations and by the terms of
agreements to which such subsidiaries become subject. Also, the property and
assets of certain of such subsidiaries have had, or in the future may have,
liens placed upon them pursuant to existing and future financings of such
subsidiaries. Although the Indenture limits the ability of such subsidiaries to
enter into consensual restrictions on their ability to pay dividends and make
other payments to Tevecap and to permit liens to exist on their property and
assets, such limitations are subject to a number of significant qualifications.
A portion of the Company's total assets (13.4% at September 30, 1996)
represents interests in entities that are not majority-owned subsidiaries of
Tevecap. The ability of Tevecap to receive funds from
27
<PAGE>
these entities may be limited by, among other things, shareholder agreements
with the other investors in those entities, credit arrangements at those
entities and the need of those entities to reinvest their cash flow in their own
operations. In addition, applicable Brazilian law limits the amount of dividends
which may be paid by Tevecap's minority-owned subsidiaries to the extent they do
not have profits available for distribution. Other statutory and general law
obligations may also affect the ability of those entities to declare dividends
or the ability of those entities to make payments to Tevecap on account of
intercompany loans.
FRAUDULENT CONVEYANCE CONSIDERATIONS
The Company has been advised by its Brazilian counsel, Basch & Rameh
Advogados e Consultores, that, to the extent that the Subsidiary Guarantees
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. In the event US 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 Tevecap of the
Notes. To the extent that any Subsidiary Guarantee were held to be a fraudulent
conveyance or unenforceable for any other reason, the holders of the Notes would
cease to have any claim in respect of the Guarantor issuing such Subsidiary
Guarantee and would be solely creditors of Tevecap 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 holders of the Notes relating to any
avoided portion of a Subsidiary Guarantee.
ENFORCEABILITY OF JUDGMENTS
The Company has been advised by its Brazilian counsel, Basch & Rameh
Advogados e Consultores, that judgments for monetary claims obtained in US
courts arising out of or in relation to the obligations of Tevecap and the
Guarantors under the Indenture, the Notes or 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, 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. 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.
Any judgment obtained against Tevecap or the Guarantors in a court in Brazil
under the Notes, the Subsidiary Guarantees or under the Indenture will be
expressed in the Brazilian currency equivalent of the US dollar judgment amount
at the commercial exchange rate on the date on which such judgment is
28
<PAGE>
obtained, and such Brazilian currency amount will be adjusted in accordance with
the exchange variation until the judgment holder receives effective payment.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE SECURITIES; RESTRICTIONS ON RESALE
The Exchange Securities will be new securities for which there currently is
no market. The Initial Purchasers have informed Tevecap that they currently
intend to make a market in the Old Securities and, if issued, the Exchange
Securities, but they are not obligated to do so, and any such market making may
be discontinued at any time without notice. There can be no assurance as to the
development or liquidity of any market for the Exchange Securities. Tevecap does
not intend to apply for listing of the Notes or, if issued, the Exchange Notes
on any securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation (Nasdaq) system.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES IN THE EXCHANGE
Issuance of the Exchange Securities in exchange for the Old Securities
pursuant to the Registered Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Securities, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of the Old Securities desiring to tender such Old Securities in exchange
for Exchange Securities should allow sufficient time to ensure timely delivery.
Tevecap is under no duty to give notification of defects or irregularities with
respect to tenders of Old Securities for exchange. Old Securities that are not
tendered or that are tendered but not accepted by Tevecap for exchange, will,
following consummation of the Registered Exchange Offer, continue to be subject
to the existing restrictions upon transfer thereof under the Securities Act and,
upon consummation of the Registered Exchange Offer, certain registration rights
under the Exchange and Registration Rights Agreement will terminate.
In the event the Registered Exchange Offer is consummated, Tevecap will not
be required to register the Remaining Old Securities. Remaining Old Securities
will continue to be subject to the following restrictions on transfer: (i) the
Remaining Old Securities may be resold only if registered pursuant to the
Securities Act, if any exemption from registration is available thereunder, or
if neither such registration nor such exemption is required by law, and (ii) the
Remaining Old Securities will bear a legend restricting transfer in the absence
of registration or an exemption therefrom. Tevecap does not currently anticipate
that it will register the Old Securities under the Securities Act. To the extent
that Old Securities are tendered and accepted in connection with the Registered
Exchange Offer, any trading market for Remaining Old Securities could be
adversely affected.
RISKS 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.
29
<PAGE>
POLITICAL AND ECONOMIC CONDITIONS
During the past several years, the Brazilian economy has been affected by
significant intervention by the Brazilian Government. The Brazilian Government
has changed monetary, credit, tariff and other policies to influence the course
of Brazil's economy. The Brazilian Government's actions to control inflation and
effect other policies have often involved wage and price controls (including
controls on the price of food and general merchandise) as well as other
interventionist measures, such as freezing bank accounts and imposing capital
controls. The stated policy of the present Government is to reduce gradually
governmental control of the economy. However, Government policies involving
tariffs, exchange controls, regulations and taxation may adversely affect the
Company's business and financial condition, as could the Brazilian Government's
response to inflation, devaluation, social instability and other political,
economic or diplomatic developments. Brazilian politics have been marked by
uncertainty since the country 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,
and frequent turnovers at and below the cabinet level, particularly in the
economic area, historically have resulted in the absence of a coherent and
sustained policy to confront Brazil's economic problems. The election of
Fernando Henrique Cardoso to the presidency of Brazil in 1994 and the reduction
of the level of inflation in Brazil following the introduction of the Real Plan
in 1994 have resulted in a more stable political and economic environment.
However, there can be no assurance that future developments in Brazil will not
result in a recurrence of political and economic instability.
IMPACT OF EXTREME INFLATION
Brazil in the past 20 years has experienced extremely high rates of
inflation. In 1993, the annual rate of inflation in Brazil exceeded 2,700%.
Inflation and certain governmental measures to fight inflation have in the past
significantly and negatively affected the Brazilian economy. See "Annex A--The
Federative Republic of Brazil." Actions taken to combat inflation and public
speculation about possible future actions have contributed significantly to
economic uncertainty in Brazil and the heightened volatility in the Brazilian
securities markets. Future measures to combat inflation could materially and
adversely affect the Brazilian economy and the Company. Prior to 1994, none of
the numerous economic stabilization plans enacted by the Brazilian Government
successfully reduced inflation over the long term. In 1994, the Brazilian
Government introduced the Real Plan. The Real Plan has resulted in a sustained
reduction in the level of Brazilian inflation. The annual rate of inflation for
1995 and 1996 was 14.8% and 9.34%, respectively. There can be no assurance,
however, that inflation will not increase as a result of future Brazilian
governmental actions or for other reasons.
EFFECTS OF EXCHANGE RATE FLUCTUATIONS
Primarily as a result of inflationary pressures, the Brazilian currency has
been devalued repeatedly during the last four decades. Throughout this period,
the Brazilian Government has implemented various economic plans and utilized a
number of exchange rate policies, including sudden devaluations, periodic
mini-devaluations (with the frequency of adjustments ranging from daily to
monthly), floating exchange rate systems, exchange controls and dual exchange
rate markets. Although over long periods of time devaluations of the Brazilian
currency generally have correlated with the rate of inflation in Brazil, such
governmental actions over shorter periods have resulted in significant
fluctuations in the real exchange rate between the Brazilian currency and the US
dollar.
Substantially all of the Company's revenues are denominated in Brazilian
reais. A substantial portion of the Company's indebtedness is, and may be
expected to continue to be, denominated in US dollars (including the Notes). In
addition, a portion of the Company's operating expenses, including those
relating to programming commitments and cable television equipment costs, are
denominated in or indexed to US dollars. Any devaluation of the Brazilian
currency relative to any foreign currency in which debt or other obligations of
the Company are denominated, if such devaluation were in excess of
30
<PAGE>
inflation, would result in a foreign exchange loss with respect to such
indebtedness and obligations. As a result, the relationship of Brazil's currency
to the value of the US 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 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 costs.
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 costs may be impaired.
In addition, the financial records of Tevecap and its subsidiaries have been
maintained in Brazilian reais. However, the Financial Statements are presented
in US dollars. In order to prepare the Financial Statements, Tevecap's accounts
have been translated from the applicable Brazilian currency on the basis
described in Note 2.3 to the Tevecap Financial Statements. Because of
differences between the evolution of the rates of inflation in Brazil and
changes in the rates of devaluation, amounts presented in US dollars will show
distortions when compared on a period-to-period basis.
CONTROLS AND RESTRICTIONS ON US DOLLAR REMITTANCES
Brazilian law provides that whenever there is, or is a serious risk of, a
material imbalance in Brazil's balance of payments, the Brazilian Government
may, for a limited period of time, impose restrictions on the remittance to
foreign investors of the proceeds of their investments in Brazil. For
approximately six months in 1989 and early 1990, for example, the Brazilian
Government froze all dividend and capital repatriations that were owed to
foreign equity investors and held by the Central Bank of Brazil (the "Central
Bank") in order to conserve Brazil's foreign currency reserves. These amounts
were subsequently released in accordance with Brazilian Government directives.
There can be no assurance that similar measures will not be taken by the
Brazilian Government in the future.
The Brazilian Government currently restricts the ability of Brazilian or
foreign persons or entities to convert Brazilian currency into US dollars or
other currencies other than in connection with certain authorized transactions.
The issuance of the Notes has been approved by the Central Bank. After the Notes
are issued, the Central Bank is expected in due course to issue a certificate of
registration authorizing each of the scheduled payments of principal at maturity
and interest on the Notes. In addition, consent from the Central Bank will be
needed for the payment of principal of and interest on the Notes upon
acceleration of the Notes following an Event of Default (as defined) and for
certain late payments of the Notes (I.E., payments made 181 days or more after a
scheduled payment date). In addition, consent from the Central Bank will be
needed for redemption of the Notes upon certain optional redemption events. See
"Description of Notes." There can be no assurance that the Company will obtain
the necessary consents and certificates from the Central Bank for the foregoing
payments or redemptions.
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 access to foreign currency
that it would require to meet its foreign currency obligations, including its
obligations under the Notes. 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,
Brazil's policy towards the International Monetary Fund and political
constraints to which Brazil may be subject.
31
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Securities offered hereby. In consideration for issuing the Exchange
Securities as described in this Prospectus, the Company will receive in exchange
Old Securities in like principal amount, the terms of which are identical in all
material respects to those of the Exchange Securities, except that the Exchange
Securities have been registered under the Securities Act and are issued free of
any covenant regarding transfer restrictions. The Old Securities surrendered in
exchange for the Exchange Securities will be retired and cancelled and cannot be
reissued. Accordingly, the issuance of the Exchange Securities will not result
in any change in the indebtedness of the Company.
The net proceeds to the Company from the offering of the Old Securities was
approximately $241.2 million after deducting discounts, commissions and
estimated expenses of the Offering payable by the Company. The Company used the
net proceeds of the offering of the Old Securities as follows:
<TABLE>
<CAPTION>
(IN
MILLIONS)
------------
<S> <C>
Repayment of Short-term bank loans(a)........................................... $ 5.4
Repayment of Loans from affiliated companies(b)................................. 107.9
Capital expenditures, investments and general corporate purposes(c)............. 127.9
------------
$ 241.2
------------
------------
</TABLE>
- ------------------------
(a) The Company repaid all of its Short-term bank loans which it incurred in
connection with the refinancing of certain deferred obligations for the
purchase of property. The annual interest rate on such short-term debt is
LIBOR plus a 1.5% margin.
(b) Includes repayment of all outstanding indebtedness under the Abril Credit
Facility ($105.8 million outstanding as of October 31, 1996). During the
period from September 30, 1996 through October 31, 1996, the Company paid
$16.8 million in connection with its capital spending program. As of ,
1997, the Company had not redrawn any amounts under the Abril Credit
Facility. See "Description of Certain Indebtedness." The interest rate
payable by the Company to Abril has ranged from 1.79% to 3.01% per month.
(c) The Company used this portion of the net proceeds to fund its capital
spending needs in connection with its ongoing operations, including
subscriber additions, subscriber equipment purchases, system construction,
installation labor and other expansion activities and, pending such
application, invested such amounts in short-term instruments. Additionally,
based on its business plans and plans supplied by the Operating Ventures and
Programming Ventures, management expects that an aggregate of approximately
$13.2 million of this amount will be invested in HBO Brasil Partners,
Canbras TVA and CNBC for the purpose of funding the Company's PRO RATA share
of these entities' capital spending needs and operating losses, as well as
in the California Broadcast Center (in the form of debt). See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
EXCHANGE RATE DATA
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"). The Commercial Market is reserved primarily for foreign
trade transactions and transactions that generally require prior approval from
Brazilian monetary authorities, such as the purchase and sale of registered
investments by foreign persons and related remittances of funds abroad, such as
a repurchase by the Company of the Notes. 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 "Commercial
Market Rate" is the commercial selling rate for Brazilian currency into US
dollars, as reported by the Central Bank. 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.
32
<PAGE>
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 December 1993, the Brazilian Government began implementation of the
Real Plan, which was intended to reduce inflation. 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 US 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 US 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 US dollars, establishing a band (FAIXA DE FLUTUACAO) in
which the exchange rate between the REAL and the US 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(A)
------------------------------------------------------
<S> <C> <C> <C> <C>
PERIOD(B) LOW HIGH AVERAGE PERIOD END
- ---------------------------------------------- ------------ ------------ ------------ ------------
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......................................... 0.972600 1.040700 1.005000 1.039400
</TABLE>
- ------------------------
(a) The information set forth in this table is based on information published by
the Central Bank.
(b) The historical information from 1991 through 1994 represents the nominal
Brazilian currency expressed in current REAIS adjusted for depreciation and
currency substitution. The exchange rates have been translated at the rates
of exchange at the time the successor currencies took effect.
33
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual cash balance and
capitalization of the Company at September 30, 1996 and (ii) the cash balance
and capitalization of the Company at September 30, 1996 as adjusted to give
effect to the offering of the Old Securities and the application of the net
proceeds therefrom. This table should be read in conjunction with the Financial
Statements of the Company appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- ------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash & cash equivalents............................................ $ 619 $ 128,432(a)
---------- ------------
---------- ------------
Short-term bank loans.............................................. $ 5,441 $ --
---------- ------------
---------- ------------
Long-term liabilities
Loans from affiliated companies.................................. $ 91,926 $ --(b)
Loans from shareholders.......................................... 4,607 4,607
Senior Notes due 2004............................................ -- 250,000
---------- ------------
Total long-term liabilities........................................ 96,533 254,607(c)
Redeemable common shares........................................... 163,225 163,225
Shareholders' equity
Paid-in capital.................................................. 142,495 142,495
Accumulated deficit.............................................. (211,466) (211,466)
---------- ------------
Total shareholders' equity......................................... (68,971) (68,371)
---------- ------------
Total capitalization............................................... $ 190,787 $ 348,861
---------- ------------
---------- ------------
</TABLE>
- ------------------------
(a) A portion of the net proceeds from the offering of the Old Securities was
invested in short-term instruments pending application as described under
"Use of Proceeds."
(b) Represents the repayment of all outstanding indebtedness under the Abril
Credit Facility ($105,800 outstanding as of October 31, 1996) and the
repayment of $2,121 of other related party indebtedness. During the period
from September 30, 1996 through October 31, 1996, the Company paid $16,844
in connection with its capital spending program. The Abril Credit Facility
will remain in place, with availability of up to $60,000, until December
1998. As of , 1997, the Company had not redrawn any amounts under the
Abril Credit Facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of Certain Indebtedness."
(c) Does not reflect the Company's unused availability under either (i) the
pending Galaxy Brasil Leasing Facility, under which a maximum of $49,900 may
be drawn, or (ii) the EximBank Facility, under which a maximum of
approximately $29,350 may be drawn. The Company expects to draw during 1997
approximately $11,400 under the EximBank Facility and $19,599 under the
Galaxy Brasil Leasing Facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of Certain Indebtedness."
34
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
The historical data as of December 31, 1995 and 1994 and for the three years
in the period ended December 31, 1995 have been derived from, and should be read
in conjunction with, the audited Financial Statements of the Company included
elsewhere in this Prospectus. The unaudited financial data set forth below as of
and for the nine month period ended September 30, 1996 and for the nine month
period ended September 30, 1995 have been derived from the unaudited Financial
Statements of the Company. The historical data as of December 31, 1992 and 1993
and for the year ended December 31, 1992 are derived from the audited Financial
Statements of the Company that are not included elsewhere in this Prospectus.
The historical data as of September 30, 1995 are derived from the unaudited
Financial Statements of the Company that are not included elsewhere in this
Prospectus.
As required by Brazilian law, and in accordance with local accounting
practices, the financial records of Tevecap and its subsidiaries are maintained
in the applicable Brazilian currency (the REAL). However, the Financial
Statements are presented in US dollars. In order to prepare the Financial
Statements, the Company's accounts have been translated from the applicable
Brazilian currency, on the basis described in Note 2.3 to the audited Financial
Statements. Because of the differences between the evolution of the rates of
inflation in Brazil and the changes in the rates of devaluation, amounts
presented in US dollars may show distortions when compared on a period-to-period
basis.
The results of operations for the nine month period ended September 30, 1996
are not necessarily indicative of the results expected for the year ending
December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SELECTED OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATING DATA:
Gross revenues
Monthly subscriptions.................................. $ 7,070 $ 12,544 $ 27,976 $ 62,496 $ 41,296 $ 85,301
Installation........................................... 1,857 4,350 6,997 26,045 17,995 39,396
Indirect programming(a)................................ 512 530 1,626 2,866 2,114 5,278
Other(b)............................................... 1,322 2,468 7,173 10,603 7,699 10,657
Revenue taxes(c)....................................... (305) (371) (872) (7,506) (5,171) (8,881)
--------- --------- --------- --------- --------- ---------
Total net revenue........................................ 10,456 19,521 42,900 94,504 63,933 131,751
--------- --------- --------- --------- --------- ---------
Direct operating expenses(d)............................. 32,905 29,779 28,659 62,026 42,279 75,557
Selling, general and administrative expenses............. 17,834 19,957 24,370 46,902 30,787 53,710
Depreciation and Amortization............................ 2,704 4,813 6,177 13,268 8,865 18,547
--------- --------- --------- --------- --------- ---------
Total operating expenses................................. 53,443 54,549 59,206 122,196 81,931 147,814
--------- --------- --------- --------- --------- ---------
Operating loss........................................... (42,987) (35,028) (16,306) (27,692) (17,998) (16,063)
Nonoperating expenses....................................
Interest expense....................................... (13,538) (8,492) (16,413) (17,745) (12,493) (10,125)
Equity in (losses) income of affiliates(e)............. -- -- 383 (3,672) (2,084) (6,642)
Other nonoperating (expenses) income, net(f)........... 2,232 5,892 20,339 8,039 5,158 (4,085)
Income tax expense..................................... -- -- -- -- -- (105)
--------- --------- --------- --------- --------- ---------
Net loss................................................. $ 54,293 $ (37,628) $ (11,997) $ (41,070) $ (27,417) $ (37,020)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
OTHER DATA:
EBITDA--TV Group(g)...................................... $ (40,283) $ (30,215) $ (10,129) $ (13,318) $ (8,462) $ 8,533
EBITDA--Galaxy Brasil(g)................................. -- -- -- (1,106) (671) (6,049)
--------- --------- --------- --------- --------- ---------
EBITDA(g)................................................ (40,283) (30,215) (10,129) (14,424) (9,133) 2,484
Pro forma interest expense(h)............................ 38,623 29,940
Purchase of fixed assets................................. 7,627 11,379 22,369 38,629 52,987 72,538
Ratio of earnings to fixed charges(i).................... -- -- -- -- -- --
SELECTED OPERATING DATA:
Number of Subscribers to Owned Systems(j)................ 42,924 82,985 114,853 219,148 198,157 316,345
Average monthly revenue per Subscriber(k)................ $ 18.64 $ 21.30 $ 27.80 $ 33.24 $ 33.48 $ 37.66
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................................ $ 41 $ 19 $ 4,644 $ 24,201 $ 39 $ 619
Property, plant and equipment............................ 29,561 35,859 51,426 131,266 95,756 188,063
Total assets............................................. 40,779 45,529 80,441 218,848 148,473 291,154
Loans from affiliated companies.......................... 42,577 89,769 -- 586 22,301 91,926
Long-term liabilities.................................... 67,736 97,105 4,523 9,604 29,816 105,330
Redeemable common shares................................. -- -- 19,754 149,534 69,754 163,225
Total shareholders' equity............................... (54,483) (92,111) 27,590 (18,260) 173 (68,971)
<CAPTION>
<S> <C>
<S> <C>
STATEMENT OF OPERATING DATA:
Gross revenues
Monthly subscriptions..................................
Installation...........................................
Indirect programming(a)................................
Other(b)...............................................
Revenue taxes(c).......................................
-
Total net revenue........................................
-
Direct operating expenses(d).............................
Selling, general and administrative expenses.............
Depreciation and Amortization............................
-
Total operating expenses.................................
-
Operating loss...........................................
Nonoperating expenses....................................
Interest expense.......................................
Equity in (losses) income of affiliates(e).............
Other nonoperating (expenses) income, net(f)...........
Income tax expense.....................................
-
Net loss.................................................
-
-
OTHER DATA:
EBITDA--TV Group(g)......................................
EBITDA--Galaxy Brasil(g).................................
-
EBITDA(g)................................................
Pro forma interest expense(h)............................
Purchase of fixed assets.................................
Ratio of earnings to fixed charges(i)....................
SELECTED OPERATING DATA:
Number of Subscribers to Owned Systems(j)................
Average monthly revenue per Subscriber(k)................
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................................
Property, plant and equipment............................
Total assets.............................................
Loans from affiliated companies..........................
Long-term liabilities....................................
Redeemable common shares.................................
Total shareholders' equity...............................
</TABLE>
See accompanying Notes to Selected Historical Financial And Other Data
35
<PAGE>
NOTES TO SELECTED HISTORICAL FINANCIAL AND OTHER DATA
(a) Represents revenues received by the Company for selling programming to the
Independent Operators.
(b) Includes Advertising and Other revenues.
(c) Represents various non-income based taxes paid on certain of the Company's
gross revenue items with rates ranging from 2.65% to 7.65%.
(d) Represents costs directly related to Monthly subscriptions, and a portion of
Installation, Indirect programming and Other revenues.
(e) Represents the Company's pro rata share of the Net loss or income of its
equity investments.
(f) Includes Interest income, Translation gain or loss, Other nonoperating
(expenses) income, net, and Minority interest. The amount included for the
year ended December 31, 1994 includes Interest income totaling $21,806.
During that year, the Company received capital contributions from
stockholders which resulted in a surplus of cash invested during such
period.
(g) EBITDA represents the sum of (i) net income (loss), plus, without
duplication (ii) income tax expense, (iii) interest expense (income), net,
(iv) other nonoperating (expenses) income, net (v) depreciation,
amortization and all other non-cash charges, less (vi) non-cash items
increasing net income (loss) with the exception of amortized deferred
sign-on and hookup fee revenue, in each case determined in accordance with
GAAP. EBITDA is a financial measure commonly used in the Company's industry
and should not be considered as an alternative to cash flow from operating
activities (as determined in accordance with GAAP), as an indicator of
operating performance or as a measure of liquidity. EBITDA-TV Group and
EBITDA-Galaxy Brasil represent operating loss plus depreciation and
amortization. The term "TV Group" refers to the operations of TVA, excluding
the operations of Galaxy Brasil.
(h) Represents interest expense on a pro forma basis, resulting from the
offering of Old Securities and the application of the net proceeds therefrom
as follows:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
--------------- ---------------
<S> <C> <C>
Historical interest expense...................................... $ 17,745 $ 10,125
Elimination of interest expense related to certain affiliated
indebtedness................................................... (11,788) (4,684)
Interest resulting from the Notes based on an interest rate of
12.625%........................................................ 31,563 23,672
Amortization of deferred financing costs relating to the Notes... 1,103 827
--------------- ---------------
$ 38,623 $ 29,940
--------------- ---------------
--------------- ---------------
</TABLE>
(i) For the four years ended December 31, 1995 and the nine months ended
September 30, 1995 and 1996, earnings were insufficient to cover fixed
charges by $54,487, $37,920, $13,100, $38,269, $25,905 and $31,911,
respectively. In calculating the Ratio of earnings to fixed charges,
earnings represents Net loss before minority interest, Equity in (losses)
income of affiliates, less fixed charges. Fixed charges consist of the sum
of Interest expense paid or accrued on indebtedness of the Company and its
subsidiaries and affiliates and one third of operating rental expenses (such
amount having been deemed by the Company to represent the interest portion
of such payments).
(j) Represents the number of Owned Systems' Subscribers as of the last day of
each period.
(k) Average monthly revenue per subscriber refers to the average monthly
subscription fee as of the last day of each period.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements (including the notes thereto) included elsewhere in this Prospectus.
For the purposes of the following discussion, all dollar amounts are set forth
in thousands of US dollars.
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, translations of Brazilian currency into US
dollars, and rapid growth of the Company, 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
Since its inception in 1989, the Company has been in a developmental or
buildout stage. The TV Group, representing the more mature operations of the
Company, has experienced, and continues to experience, rapid growth. In
addition, the Company, through Galaxy Brasil, initiated Ku-Band DIRECTV service
on a limited basis in July 1996. Despite its growth, the Company has sustained
substantial net losses due primarily to insufficient revenue with which to fund
startup costs, interest expense and charges for depreciation and amortization.
However, the TV Group has been generating positive operating cash flow beginning
with the three month period ended June 30, 1996, while Galaxy Brasil,
representing the Company's less mature operations, remains in a start-up phase
and has not yet collected material revenues to offset the costs of initiating
the Ku-Band service. Net losses incurred by the Company since inception have
been funded principally by (i) net contributions of approximately $288,000 from
the Company's shareholders, (ii) borrowings from Abril under the Abril Credit
Facility and (iii) short term borrowings made from time to time. Management
expects the financial results of the Company to improve as the operation of the
Ku-Band service matures and the number of subscribers for the Company's Ku-Band
service and TV Group services continues to grow. There can be no assurance,
however, that the number of the Company's subscribers will grow, or that the
Company's financial performance will improve.
37
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain statements
of operations data expressed in US dollar amounts and as a percentage of net
revenue:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------------------- ------------------------
1993 1994 1995 1995
---------------------- ---------------------- ---------------------- ------------------------
(DOLLARS IN THOUSANDS)
% OF NET % OF NET % OF NET UNAUDITED % OF NET
AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE AMOUNT REVENUE
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues
Monthly subscriptions......... $ 12,544 64.3% $ 27,976 65.2% $ 62,496 66.1% $ 41,296 64.6%
Installation.................. 4,350 22.3 6,997 16.3 26,045 27.6 17,995 28.1
Indirect programming.......... 530 2.7 1,626 3.8 2,866 3.0 2,114 3.3
Other......................... 2,468 12.6 7,173 16.7 10,603 11.2 7,699 12.0
Revenue taxes................. (371) (1.9) (872) (2.0) (7,506) (7.9) (5,171) (8.0)
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
Net revenue................... 19,521 100.0 42,900 100.0 94,504 100.0 63,933 100.0
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
Direct operating expenses..... 29,779 152.5 28,659 66.8 62,026 65.6 42,279 66.1
Selling, general and
administrative expenses..... 19,957 102.2 24,370 56.8 46,902 49.6 30,787 48.2
Depreciation and
Amortization................ 4,813 24.7 6,177 14.4 13,268 14.0 8,865 13.9
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
Total operating expenses...... 54,549 279.4 59,206 138.0 122,196 129.2 81,931 128.2
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
Operating loss................ (35,028) (179.4) (16,306) (38.0) (27,692) (29.2) (17,998) (28.2)
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
Interest income............... 5,369 27.5 21,806 50.8 3,118 3.3 1,360 2.1
Interest expense.............. (8,492) (43.5) (16,413) (38.3) (17,745) (18.8) (12,493) (19.5)
Translation (loss) gain....... 788 4.0 (914) (2.1) (339) (0.4) (41) (0.1)
Equity in (losses) income of
affiliates.................. -- -- 383 0.9 (3,672) (3.9) (2,084) (3.3)
Other nonoperating (expenses)
income, net................. (557) (2.9) (1,273) (3.0) 4,389 4.6 3,267 5.1
Minority interest............. 292 1.5 720 1.7 871 0.9 572 0.9
Income tax expense............ -- -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
Net loss...................... $ (37,628) (192.8)% $ (11,997) (28.0 )% $ (41,070) (43.5 )% $ (27,417 ) (42.8)%
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
--------- ----------- --------- ----------- --------- ----------- ----------- -----------
<CAPTION>
1996
------------------------
UNAUDITED % OF NET
AMOUNT REVENUE
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues
Monthly subscriptions......... $ 85,301 64.7%
Installation.................. 39,396 29.9
Indirect programming.......... 5,278 4.0
Other......................... 10,657 8.1
Revenue taxes................. (8,881) (6.7)
----------- -----
Net revenue................... 131,751 100.0
----------- -----
Direct operating expenses..... 75,557 57.3
Selling, general and
administrative expenses..... 53,710 40.8
Depreciation and
Amortization................ 18,547 14.1
----------- -----
Total operating expenses...... 147,814 112.2
----------- -----
Operating loss................ (16,063) (12.2)
----------- -----
Interest income............... 3,650 2.8
Interest expense.............. (10,125) (7.7)
Translation (loss) gain....... 243 0.2
Equity in (losses) income of
affiliates.................. (6,642) (5.0)
Other nonoperating (expenses)
income, net................. (9,511) (7.2)
Minority interest............. 1,533 1.2
Income tax expense............ (105) (0.1)
----------- -----
Net loss...................... $ (37,020) (28 )%
----------- -----
----------- -----
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
The table below sets forth the number of subscribers at September 30, 1995
and September 30, 1996 for the Owned Systems.
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
OWNED SYSTEMS SUBSCRIBERS 1995 1996
- ------------------------------------------------------------- -------------- --------------
<S> <C> <C>
MMDS(a)...................................................... 177,089 229,656
Cable........................................................ 11,087 39,253
DIRECTV and Digital C-Band................................... 9,981 47,436
-------------- --------------
198,157 316,345
Paid Subscribers Awaiting Installation(b).................... 18,460 19,691
-------------- --------------
Total Owned Systems.......................................... 216,617 336,036
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
(a) Includes UHF subscribers.
(b) Subscribers who have paid an installation fee but are awaiting the
installation of service.
38
<PAGE>
The table below sets forth at September 30, 1995 and September 30, 1996 the
approximate number of television households which received TVA's programming
through the Owned Systems and the Operating Ventures and through sales of
programming to the Independent Operators.
HOUSEHOLDS RECEIVING TVA PROGRAMMING
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
-------------- --------------
<S> <C> <C>
Total Owned Systems.......................................... 216,617 336,036
Operating Ventures........................................... 27,027 66,388
Independent Operators........................................ 252,000 555,049
-------------- --------------
Total........................................................ 495,644 957,473
-------------- --------------
-------------- --------------
</TABLE>
REVENUES. Revenues consist primarily of Monthly subscriptions revenue
(which principally consists of monthly fees paid by subscribers to the Company
for programming services, including equipment use), Installation revenue,
Indirect programming revenue (which consists of payments made to the Company for
the sale of its programming to the Independent Operators) and Other revenue
(which consists of Advertising revenues and Other revenues). Revenue taxes
consist of a 2.65% tax on Advertising revenue and a 7.65% tax on the balance of
revenues, in each case charged by the Brazilian Government.
Monthly subscriptions revenue for the nine months ended September 30, 1996
was $85,301, as compared to $41,296 for the comparable period in 1995, an
increase of $44,005. This increase was principally attributable to an increase
in subscriber base and an increase in the amount of average monthly fees from
$33.48 to $37.66 per subscriber. Galaxy Brasil contributed $502 to monthly
subscription revenue for the nine months ended September 30, 1996, as compared
to $0 for the comparable period in 1996.
Installation revenue for the nine months ended September 30, 1996 was
$39,396, as compared to $17,995 for the comparable period in 1995, an increase
of $21,401. This increase was principally attributable to the increase in the
number of new subscribers and also to an increase in the average installation
fee for C-Band service from $500.00 to $707.24. The net number of subscribers
added to the Company's Owned Systems during the nine months ended September 30,
1996 was 97,197, as compared to 83,304 added during the same period of 1995.
Galaxy Brasil contributed $3,200 to Installation revenue for the nine months
ended September 30, 1996, as compared to $0 for the comparable period in 1995.
After an initial rollout in July 1996 Galaxy Brasil began enrolling subscribers.
Indirect programming revenue for the nine months ended September 30, 1996
was $5,278, as compared to $2,114 for the comparable period of 1995, an increase
of $3,164. This increase was principally attributable to the increase in the
number of Independent Operators' subscribers for the period. The number of
Independent Operators' subscribers increased by 213,350 during the nine month
period ended September 30, 1996, as compared to an increase of 162,327 during
the same period of the prior year. Independent Operators pay a fee to the
Company based on the number of subscribers to such Independent Operator's system
and the number of channels purchased from the Company. The average monthly fee
paid to the Company by an Independent Operator during the nine months ended
September 30, 1996 was $1.64 per subscriber.
Other revenue for the nine months ended September 30, 1996 was $10,657, as
compared to $7,699 for the comparable period of 1995, an increase of $2,958.
This change included a decrease in Advertising revenue to $5,362 from $5,505, a
decrease of $143, and an increase in Other to $5,295 from $2,194, an increase of
$3,101. The decrease in Advertising revenue was attributable to a shift in
advertising sales from advertising on ESPN International programming (the
Advertising revenues from which were
39
<PAGE>
reported as Advertising revenues in the Company's consolidated financial
statements), to advertising sales on ESPN Brasil Ltda. programming (the
Advertising revenues from which were not reported in the Advertising revenues
line of the Company's consolidated financial statements but as part of the
Company's Equity in (losses) income of affiliates).
Revenue taxes for the nine months ended September 30, 1996 were $8,881, as
compared to $5,171 for the same period of the prior year, an increase of $3,710.
Galaxy Brazil contributed $508 to revenue taxes for the nine months ended
September 30, 1996, as compared to $0 for the comparable period of 1995. Galaxy
Brazil began enrolling subscribers and collecting revenue in July 1996.
For the reasons noted above, Net revenue for the nine months ended September
30, 1996 was $131,751, as compared to $63,933 for the comparable period in the
previous year, an increase of $67,818. Galaxy Brasil contributed $3,194 to Net
revenue for the nine months ended September 30, 1996, as compared to $0 for the
comparable period in the previous year.
DIRECT OPERATING EXPENSES. Direct operating expenses include Payroll and
benefits, Programming, Transponder lease cost, Technical assistance expense,
Vehicle rentals expense, TVA Magazine and Other expenses. These expenses, with
the exception of Transponder lease costs, are variable expenses which increase
as the number of subscribers increases and the Company's systems grow, and are
also dependent on the type of service subscribers select. Direct operating
expenses for the nine months ended September 30, 1996 were $75,557, as compared
to $42,279 for the same period in 1995, an increase of $33,278. This increase
was primarily attributable to expenses incurred to service the increase in the
number of subscribers for such period in 1996 compared to the same period in
1995. Payroll and benefits expense increased to $19,467 from $8,868, an increase
of $10,599, as a result of the hiring of more than 537 new employees.
Programming costs increased to $25,477 from $14,105, an increase of $11,372, as
a result of changes implemented in the programming purchased by the Company.
Transponder lease cost increased to $6,575 from $5,357, an increase of $1,218,
as a result of leasing a third transponder in 1996. Technical assistance costs
increased to $4,923 from $3,913, an increase of $1,010; Vehicle rentals expense
increased to $1,252 from $1,114, an increase of $138; and the expense of
publishing TVA Magazine increased to $4,680 from $2,164, an increase of $2,516.
Other costs include third party services, maintenance and other miscellaneous
expenses. For the nine months ended September 30, 1996, Other costs were
$13,183, as compared to $6,758 for the same period the prior year, an increase
of $6,425. Galaxy Brasil contributed $5,111 to Direct operating expenses, as
compared to $665 for the comparable period in 1995, an increase of $4,446 as
Galaxy Brasil incurred Payroll and benefits, Vehicle rentals and other costs
consistent with starting this operation.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses include Payroll and benefits expense for selling,
administrative, financial, legal and human resources, Advertising and promotion,
Rent expense, Other administrative expenses, and Other general expenses.
Selling, general and administrative expenses for the nine months ended September
30, 1996 were $53,710, as compared to $30,787 for the same period of 1995, an
increase of $22,923. The Company has experienced increasing Selling, general and
administrative expenses as a result of its increased pay television activities
and the associated administrative costs, including costs related to opening and
maintaining additional facilities and an overall increase in Payroll and
benefits expense resulting from an increase in the number of employees.
Advertising and promotion expense increased to $12,794 from $5,882, an increase
of $6,912, as a result of an increase in the number of subscribers and
promotional activity. Galaxy Brasil contributed $4,132 to Selling, general and
administrative expenses for the nine months ended September 30, 1996, as
compared to $6 for the comparable period in 1995, an increase of $4,126. Such
increase at Galaxy Brasil was due to increases in Payroll and benefits expense
and Other administrative expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and Amortization includes
depreciation of systems, equipment, installation materials, installation
personnel and organizational costs and amortization of
40
<PAGE>
concessions. Depreciation and Amortization for the nine months ended September
30, 1996 was $18,547, as compared to $8,865 for the same period of 1995, an
increase of $9,682. Galaxy Brasil contributed $1,059 to Depreciation and
Amortization for the nine months ended September 30, 1996, as compared to $0 for
the comparable period in 1995, an increase of $1,059. Such increase was due to
depreciation expenses associated with the Tambore Facility.
For the reasons noted above, Operating loss for the nine months ended
September 30, 1996 was $16,063, as compared to $17,998 for the comparable period
in 1995, a decrease of $1,935. Galaxy Brasil contributed $7,108 of this loss for
the nine months ended September 30, 1996, as compared to $671 for the comparable
period in 1995, an increase of $6,437.
INTEREST INCOME. Interest income for the nine months ended September 30,
1996 was $3,650, as compared to $1,360 for the same period in 1995, an increase
of $2,290.
INTEREST EXPENSE. Interest expense for the nine months ended September 30,
1996 was $10,125, as compared to $12,493 for the same period of 1995, a decrease
of $2,368. This decrease was due primarily to the utilization of capital
contributed to the Company by Falcon, Hearst and ABC, which occurred in the
second half of 1995, to repay outstanding debt.
EQUITY IN LOSSES (INCOME) OF AFFILIATES. For the nine months ended
September 30, 1996, Equity in losses (income) of affiliates amounted to a loss
of $6,642, as compared to a loss of $2,084 in the same period of 1995, an
increase in loss of $4,558. The primary reason for this increase in loss was
sustained losses at ESPN Brasil, which was formed on June 15, 1995.
OTHER NON-OPERATING (EXPENSES) INCOME. Other non-operating (expenses)
income for the nine months ended September 30, 1996 was an expense of $9,511, as
compared to income of $3,267 in the same period in 1995, an increase in expense
of $12,778. The Other non-operating expenses for the nine months ended September
30, 1996, consisted primarily of fees paid in connection with the investment of
Falcon International and Hearst/ABC Parties in the Company and charges for
allowances for obsolescence of certain equipment and material. The Other
non-operating income for the comparable period of 1995 consisted primarily of
income from the sale of movie inventory and other assets.
MINORITY INTEREST. The Minority interest of $1,533 for the nine months
ended September 30, 1996 represents Mr. Leonardo Petrelli's 13.0% share of the
$11,792 in aggregate losses of TVA Sul.
NET LOSS. For the reasons noted above, Net loss for the nine months ended
September 30, 1996 was $37,020, as compared to $27,417 for the comparable period
in 1995, an increase of $9,603.
41
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The table below sets forth the number of subscribers at December 31, 1995
and December 31, 1994 for the Owned Systems.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
OWNED SYSTEM SUBSCRIBERS 1994 1995
- -------------------------------------------------------------- -------------- --------------
<S> <C> <C>
MMDS(a)....................................................... 111,771 188,893
Cable......................................................... 1,007 15,129
Digital C-Band................................................ 2,075 15,126
-------------- --------------
114,853 219,148
Paid Subscribers Awaiting Installation(b)..................... 13,956 18,343
-------------- --------------
Total Owned Systems........................................... 128,809 237,491
-------------- --------------
-------------- --------------
</TABLE>
- ------------------------
(a) Includes UHF subscribers.
(b) Subscribers who have paid an installation fee but are awaiting the
installation of service.
The table below sets forth at December 31, 1995 and December 31, 1994 the
approximate number of television households which received TVA's programming
through the Owned Systems and the Operating Ventures and through sales of
programming to the Independent Operators.
HOUSEHOLDS RECEIVING TVA PROGRAMMING
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------- --------------
<S> <C> <C>
Total Owned Systems........................................... 128,809 237,491
Operating Ventures............................................ 7,640 35,572
Independent Operators......................................... 89,673 341,699
-------------- --------------
Total................................................... 226,122 614,762
-------------- --------------
-------------- --------------
</TABLE>
REVENUES. Monthly subscriptions revenue for the year ended December 31,
1995 was $62,496, as compared to $27,976 for the comparable period in 1994, an
increase of $34,520. This increase was attributable to the net addition of
104,295 subscribers to the Company's Owned Systems, and the increase in the
average monthly fee for existing subscribers to $33.24 from $27.80, an increase
of $5.44, and for new subscribers to $39.48 from $31.87, an increase of $7.61.
The Company was able to increase the monthly fee as the market price for pay
television increased. The increase in the number of subscribers was due to (i)
the continued expansion and penetration of the Company's MMDS service, including
the introduction of signal repeaters in Sao Paulo and Rio de Janeiro, (ii) the
full year benefit of Cable system construction in Sao Paulo and (iii) the net
addition of 13,051 C-Band subscribers through an aggressive national marketing
campaign timed to coincide with the Company's main competitor focusing on its
Cable systems. During each year, all revenues came from the operation of the TV
Group as the operations of Galaxy Brasil were in development.
Installation revenue for the year ended December 31, 1995 was $26,045, as
compared to $6,997 for the comparable period in 1994, an increase of $19,048.
This increase was principally attributable to the increase in the number of
installations and to the increase in the average fees for installations. The
average fee for MMDS service installation increased to $169.70 from $119.75, an
increase of $49.95, and the average fee for Cable service installation increased
to $81.87 from $44.69, an increase of $37.18. The C-Band average installation
fee increased to $586.79 from $500.00, an increase of $86.79. The growth in
42
<PAGE>
installations was aided by the continued growing awareness of pay television in
Brazil and the Company's start-up of live broadcasts of the Brazilian National
Soccer Championship, the Sao Paulo State Championship and other soccer events
through ESPN Brasil. As with Monthly subscriptions revenue, all Installation
revenue during each year came from the operations of the TV Group.
Indirect programming revenue for the year ended December 31, 1995 was
$2,866, as compared to $1,626 for the comparable period of 1994, an increase of
$1,240. This increase was principally attributable to the increase in the number
of Independent Operators' subscribers for the period, as compared to the same
period in 1994. Such Independent Operators' subscribers increased to 341,699 at
December 31, 1995, as compared to 89,673 at December 31, 1994, an increase of
252,026. The average fee paid during both 1995 and 1994 was $1.50 per subscriber
per month.
Other revenue for the year ended December 31, 1995 was $10,603, as compared
to $7,173 for the comparable period of 1994, an increase of $3,430. This
increase included an increase in Advertising revenue to $8,377 from $5,727, an
increase of $2,650. The growth in Advertising revenue was due to the increase in
the subscriber base, an increase in the amount of advertising time sold by the
Company per hour of programming and an increase in the rate charged for
advertising time.
Revenue taxes for 1995 were $7,506, as compared to $872 for the prior year,
an increase of $6,634. This increase was primarily attributable to a Government
imposed 5.0% increase in the tax rate, which increased Revenue taxes to 7.65%
from 2.65%, imposed on the Company's Gross revenues (excluding Advertising
revenue, which is taxed at 2.65%).
For the reasons noted above, Net revenue for the year ended December 31,
1995 was $94,504, as compared to $42,900 for the comparable period the previous
year, an increase of $51,604.
DIRECT OPERATING EXPENSES. Direct operating expenses for the year ended
December 31, 1995 were $62,026, as compared to $28,659 for the same period of
1994, an increase of $33,367. This increase was attributable primarily to the
increase in the number of subscribers to the Company's systems which led to
increases in Payroll and benefits expense, Programming expense, Transponder
lease cost, Technical assistance expense, Vehicle rentals expense, TVA Magazine
expense and Other costs. Payroll and benefits expense increased to $12,520 from
$8,022, an increase of $4,498, as the Company added approximately 450 employees.
Programming costs increased to $21,609 from $12,133, an increase of $9,476, as
the Company's subscriber base grew and the Company added four new channels to
each of its distribution systems. Transponder lease cost increased to $7,568
from $1,555, an increase of $6,013, due to an increase in the cost of satellite
transponder leases and the application of a 25.0% tax charged by the Brazilian
Government on transponder lease payments beginning in June 1995. Technical
assistance expense increased to $5,152 from $1,622, an increase of $3,530, due
to an increase in the subscriber base and the upgrade of existing systems for
the receipt of additional channels by subscribers, Vehicle rentals expense
increased to $1,732 from $788, an increase of $944, and TVA Magazine expense
increased to $3,318 from $1,430, an increase of $1,888. These expenses are
variable and increased due to the costs associated with servicing the larger
subscriber base and installing new subscribers. For the year ended December 31,
1995, Other costs were $10,127, as compared to $3,109 for the same period the
prior year, an increase of $7,018. The Company experienced increased expenses as
a result of its increased television activities and associated costs, including
costs related to opening and maintaining additional facilities. Galaxy Brasil
contributed $1,027 to Direct operating expenses for the year ended December 31,
1995, as compared to $0 for the same period of 1994. Galaxy Brasil incurred
Payroll and benefits expense, Vehicle rentals expense and Other costs consistent
with starting its DIRECTV service.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the year ended December 31, 1995 were $46,902, as
compared to $24,370 for the same period of 1994, an increase of $22,532. The
Company experienced increased Selling, general and administrative expenses as a
result of its increased pay television activities and associated administrative
costs, including costs
43
<PAGE>
related to opening and maintaining additional facilities and an overall increase
in payroll expenses resulting from an increase in the number of employees.
Advertising and promotion expense increased to $11,122 from $3,540, an increase
of $7,582, largely due to the Company's increased promotional activity,
including nationwide C-Band promotion. Galaxy Brasil contributed $79 to Selling,
general and administrative expenses for the year ended December 31, 1995, all of
which constituted Advertising and rent expenses, as compared to $0 for the same
period of 1994.
DEPRECIATION AND AMORTIZATION. Depreciation and Amortization expense for
the year ended December 31, 1995 was $13,268, as compared to $6,177 for the same
period of 1994, an increase of $7,091. The increase was due primarily to
increased capitalization of the costs associated with building the MMDS, Cable
and C-Band systems and with the installation of new subscribers. Galaxy Brasil
contributed $127 to Depreciation and Amortization expense (all of which
constituted Depreciation expense) for the year ended December 31, 1995, as
compared to $0 for the comparable period in 1994.
For the reasons noted above, Operating loss for the year ended December 31,
1995 was $27,692, as compared to $16,306 for the comparable period in 1994, an
increase in loss of $11,386. Galaxy Brasil contributed $1,233 to this loss for
the year ended December 31, 1995, as compared to $0 for the comparable period in
1994.
INTEREST INCOME. For the year ended December 31, 1995, Interest income
totaled $3,118, as compared to $21,806 in the similar period in 1994, a decrease
of $18,688. This reduction in Interest income was a result of the shorter period
in which a capital contribution of $125,000 in 1995 earned interest relative to
the length of time a capital contribution of $151,452 earned interest in 1994,
as well as due to the sharp appreciation of the Brazilian real versus the US
dollar upon introduction of the real in late 1994.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1995 was
$17,745, as compared to $16,413 for the year ended December 31, 1994, an
increase of $1,332.
EQUITY IN LOSSES (INCOME) OF AFFILIATES. For the year ended December 31,
1995, Equity in losses (income) of affiliates was a loss of $3,672, as compared
to income of $383 for the same period in 1994, a decrease of $4,055. The
principal reasons for this reduction were the losses sustained by ESPN Brasil
Ltda. which came into existence during June 1995, and HBO Brasil Partners, which
came into existence in 1994.
OTHER NON-OPERATING (EXPENSES) INCOME. For the year ended December 31,
1995, Other non-operating (expenses) income was income of $4,389, as compared to
an expense of $1,273 for the same period of 1994, an increase of $5,662. The
primary reasons for this increase were equipment rental income, sales of assets
and a release of certain obligations, among others.
MINORITY INTEREST. The Minority interest of $871 for the twelve months
ended December 31, 1995 represents Mr. Leonardo Petrelli's 20.0% share of the
$4,355 in aggregate losses of TVA Curitiba.
NET LOSS. For the reasons noted above, Net loss for the year ended December
31, 1995 was $41,070, as compared to $11,997 for the comparable period in 1994,
an increase of $29,073.
44
<PAGE>
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
The table below sets forth the number of subscribers at December 31, 1994
and December 31, 1993 for the Owned Systems.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
OWNED SYSTEM SUBSCRIBERS 1993 1994
- -------------------------------------------------------------- -------------- --------------
<S> <C> <C>
MMDS(a)....................................................... 82,474 111,771
Cable......................................................... 0 1,007
Digital C-Band................................................ 511 2,075
------- --------------
82,985 114,853
Paid Subscribers Awaiting Installation(b)..................... 7,438 13,956
------- --------------
Total Owned Systems........................................... 90,423 128,809
------- --------------
------- --------------
</TABLE>
- ------------------------
(a) Includes UHF subscribers.
(b) Subscribers who have paid an installation fee but are awaiting the
installation of service.
The table below sets forth at December 31, 1994 and December 31, 1993 the
approximate number of television households which received TVA's programming
through the Owned Systems and the Operating Ventures and through sales of
programming to the Independent Operators.
HOUSEHOLDS RECEIVING TVA PROGRAMMING
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1994
-------------- --------------
<S> <C> <C>
Total Owned Systems........................................... 90,423 128,809
Operating Ventures............................................ 1,505 7,640
Independent Operators......................................... 36,659 89,673
-------------- --------------
Total................................................... 128,587 226,122
-------------- --------------
-------------- --------------
</TABLE>
REVENUES. Monthly subscriptions revenue for the year ended December 31,
1994 was $27,976, as compared to $12,544 for the comparable period of 1993, an
increase of $15,432. This increase was attributable to the net addition of
31,868 subscribers to the Company's Owned Systems and the increase in the
average monthly fee for existing subscribers to $27.80 from $21.30, an increase
of $6.50, and for new subscribers to $31.87 from $23.63 over the same period, an
increase of $8.24. The Company added three premium channels, including HBO
Brasil, and suspended its "a la carte" channel offerings. The increase in the
number of subscribers was due to the continued expansion and penetration of the
Company's MMDS service, principally in Sao Paulo, Rio de Janeiro and Curitiba,
the launch of a Cable system in Sao Paulo, and the net addition (after the
December 1993 launch) of 1,564 C-Band subscribers.
Installation revenue for the year ended December 31, 1994 was $6,997, as
compared to $4,350 for the comparable period of 1993, an increase of $2,647.
This increase was principally attributable to the growing number of subscriber
installations and to the increase in the average revenue for installation of
MMDS service, which increased to $119.75 from $91.33, an increase of $28.42. The
growth in installations was aided by the growing awareness of pay television in
Brazil, the Company's larger sales force and increased promotional activities,
especially with respect to single family homes.
Indirect programming revenue for the year ended December 31, 1994 was
$1,626, as compared to $530 for the previous year, an increase of $1,096. This
increase was principally attributable to the increase in the number of
Independent Operators' subscribers for the period, as compared to the same
45
<PAGE>
period in 1994. Such subscribers increased to 89,673 at December 31, 1994, as
compared to 36,659 at December 31, 1993, an increase of 53,014. The average fee
paid by the Independent Operators during both 1993 and 1994 was $1.50 per
Independent Operator subscriber per month.
Other revenue for the year ended December 31, 1994 was $7,173, as compared
to $2,468 for the comparable period of 1993, an increase of $4,705. This
increase included an increase in Advertising and promotion revenue to $5,727
from $2,099, an increase of $3,628. The growth in Advertising and promotion
revenue was due to the increase in the subscriber base, an increase in the
amount of advertising time sold by the Company per hour of programming and an
increase in the rate charged for advertising time.
Revenue taxes were $872 for the period ending December 31, 1994, as compared
to $371 for the comparable period of 1993, an increase of $501. This increase
was based on the growth of the subscriber base and an increase in revenue.
For the reasons noted above, Net revenue for the year ended December 31,
1994 was $42,900, as compared to $19,521 for the previous year, an increase of
$23,379.
DIRECT OPERATING EXPENSES. Direct operating expenses for the year ended
December 31, 1994 were $28,659, as compared to $29,779 for the same period of
1993, a decrease of $1,120. This decrease was attributable primarily to a
decrease in Programming expense which was partially offset by the increase in
the number of subscribers to the Company's systems, including the increase in
Payroll and benefits expense. Payroll and benefits expense increased to $8,022
from $6,079, an increase of $1,943 as the Company added approximately 200
employees. Programming costs decreased to $12,133, from $18,156, a decrease of
$6,023. This decrease was attributable to the termination of the production of
the Showtime channel (a 24 hour per day movie channel), which was expensive
relative to other channels, and the renegotiation of several other programming
contracts. Transponder lease cost increased to $1,555 from $1,262, an increase
of $293. Technical assistance expense decreased to $1,622 from $1,773, a
decrease of $151. Vehicle rentals expense increased to $788 from $597, an
increase of $191 and TVA Magazine expense increased to $1,430 from $725, an
increase of $705. Other costs were $3,109, as compared to $1,187 for the same
period the prior year, an increase of $1,922. The Company experienced increased
expenses as a result of its increased television activities and associated
costs, including costs related to opening and maintaining additional facilities.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the year ended December 31, 1994 were $24,370, as
compared to $19,957 for 1993, an increase of $4,413. Selling, general and
administrative expenses, excluding Advertising and promotion expenses, remained
essentially unchanged due to the ability of the Company to increase its
subscriber base without increasing Selling, general and administrative expenses,
including human resource expense. Advertising and promotion expense increased to
$3,540 from $2,205, an increase of $1,335. The increase was due to the Company's
increase in promotional activity.
DEPRECIATION AND AMORTIZATION. Depreciation and Amortization expense for
the year ended December 31, 1994 was $6,177, as compared to $4,813 for the same
period of 1993, an increase of $1,364 due primarily to increased capitalization
of the costs associated with building the MMDS and Cable systems and installing
new subscribers.
For the reasons noted above, Operating loss for the year ended December 31,
1994 was $16,306, as compared to $35,028 for the year ended December 31, 1993, a
decrease of $18,722.
INTEREST INCOME. Interest income for the year ended December 31, 1994 was
$21,806, as compared to $5,369 for the previous year, an increase of $16,437.
This increase was due primarily to the contribution to the capital of the
Company by Abril and CMIF of $151,452 in the aggregate and the investment of
surplus funds from such contribution.
46
<PAGE>
INTEREST EXPENSE. Interest expense for the year ended December 31, 1994 was
$16,413, as compared to $8,492 for the previous year, an increase of $7,921.
This increase was primarily due to increased borrowing from Abril to fund
ongoing operations.
EQUITY IN LOSSES (INCOME) OF AFFILIATES. For the year ended December 31,
1994, Equity in losses (income) of affiliates was income of $383, as compared to
$0 in the same period in 1993. This increase was the result of the formation of
Tevecap as the holding company of its various operating subsidiaries which
became effective on June 30, 1994 and Equity in losses in HBO Brasil Partners,
which came into existence in 1994.
OTHER NON-OPERATING (EXPENSES) INCOME. For the year ended December 31,
1994, Other non-operating income and expenses was an expense of $1,273, as
compared to an expense of $557 for the same period in 1993, an increase in
expense of $716. The reasons for this increase in expense were the negative
results of TVA Sistema prior to its acquisition by Tevecap.
MINORITY INTEREST. The Minority interest of $720 for the twelve months
ended December 31, 1994 represents Mr. Leonardo Petrelli's 20.0% share of the
$3,601 in aggregate losses of TVA Parana.
NET LOSS. For the reasons noted above, Net loss for the year ended December
31, 1994 was $11,997, as compared to $37,628 for the comparable period in 1993,
a decrease of $25,631.
SEASONALITY
The Company's revenues are seasonal. Generally, during the Brazilian summer
months of December and January the Company experiences lower demand for
installation for each of its services and lower rates of retention of existing
subscribers for each of its services.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has sustained losses primarily due to
insufficient revenue to fund start-up costs, interest expense and charges for
depreciation and amortization arising from the development of its pay television
systems. As of September 30, 1996, the Company had incurred cumulative net
losses of approximately $193,000. During the periods under review, the Company
required external funds to finance its capital expenditures, operating
activities and make payments of principal and interest on its indebtedness. The
sources of such funds have been as follows: (i) borrowings from Abril under the
Abril Credit Facility ($90,205 outstanding as of September 30, 1996 which was
repaid with the proceeds of the sale of the Old Securities and none of which has
been redrawn), (ii) short-term borrowings under short-term lines of credit
($5,441 outstanding as of September 30, 1996 and $ outstanding as of
, 1997), (iii) net capital contributions of approximately $288,000 from
shareholders and (iv) borrowings from shareholders (approximately $4,607
outstanding as of September 30, 1996 and $0 outstanding as of December 31,
1996). Although the Company had negative working capital of $45,773 at September
30, 1996, management believes that the Company has the ability to function on a
going concern basis. See Note 23 to the Tevecap Financial Statements.
The Company's liquidity needs will arise primarily from capital
expenditures, debt service requirements and, in certain periods, the funding of
its working capital requirements. As of September 30, 1996, on a pro forma basis
after giving effect to the sale of the Old Securities and the application of the
net proceeds therefrom, the Company would have had approximately $255,000 of
indebtedness outstanding, primarily consisting of $250,000 principal amount of
the Notes.
In addition to debt service, the Company will require substantial amounts of
capital for (i) the construction of cable networks and the installation of
equipment at subscribers' locations, (ii) the construction of additional
transmission and headend facilities and related equipment purchases, (iii) the
continued funding of losses and working capital requirements and (iv)
investments in, and maintenance
47
<PAGE>
of, vehicles and administrative offices. In addition, the Company continually
evaluates opportunities to acquire, either directly or indirectly, pay
television licenses and programming rights.
The Company made purchases of fixed assets of $11,379, $22,639, $93,029 and
$72,538 in 1993, 1994, 1995 and in the nine month period ended September 30,
1996, respectively. The Company estimates that for the remaining three months of
1996, approximately $93,230 of capital expenditures will be required, primarily
for subscriber installations, system construction and development and other
expansion activities. Management also estimates that $292,708 and $239,202 of
capital expenditures will be required in 1997 and 1998, respectively.
The Company also has certain commitments that must be, or have been, funded,
including capital contributions of approximately $26,992 prior to December 1997
to GLA, TV Filme, ESPN Brasil Ltda., HBO Brasil Partners, Canbras TVA and CNBC,
and programming payments of approximately $12,895 for the two-year period
beginning January 1, 1997 and ending December 31, 1998. Actual amounts of funds
required may vary materially from these estimates and additional funds could be
required in the event of cost overruns, unanticipated expenses, regulatory
changes, engineering design changes and other technological-driven changes. In
connection therewith, the Company invested $13,273 in the Operating Ventures,
the Programming Ventures and in other minority investments in the last quarter
of 1996, and management expects to invest $13,719 and $0 in the Operating
Ventures, the Programming Ventures and in other minority investments in 1997 and
1998, respectively.
After application of the proceeds from the sale of the Old Securities the
Company's principal sources of liquidity will be the Abril Credit Facility, the
EximBank Facility, the Galaxy Brasil Leasing Facility and the Company's
short-term line of credit (each as described below), together with net cash
provided by operating activities. However, until sufficient cash flow is
generated from operations, the Company will be required to utilize its current
sources of debt funding to satisfy its liquidity needs. The Company would have
had approximately $153,000 of cash and cash equivalents as of September 30, 1996
after consummation of the sale of the Old Securities and application of the
proceeds therefrom. See "Use of Proceeds" and "Capitalization."
For the nine months ended September 30, 1996, net cash used by operating
activities was $5,385, primarily as the result of an increase in accounts
receivable of $13,432, an increase in payments to suppliers of $1,177 and an
increase in inventories of $5,257. The increase was partially offset by $17,436
of depreciation, a non-cash item. For the nine months ended September 30, 1996,
cash used in investing activities was $111,800, primarily as the result of
capital expenditures of $72,538 for the purchase of fixed assets and investments
in equity and cost investments of $30,201. The purchases of fixed assets were
principally related to the purchase of decoders, equipment, hardware and
materials and labor used for new subscriber installations and the investments
related to TVA Sul. For the nine month period ended September 30, 1996, net cash
provided by financing activities was $93,603, consisting principally of $86,656
in net proceeds from loans under the Abril Credit Facility.
The Abril Credit Facility allows the Company to borrow up to $60,000 on a
revolving basis until December 1998. Since June 1996, the Company has from time
to time requested, and Abril has provided, funds in excess of $60,000. The loans
are generally denominated in reais and bear interest at a rate equal to 99.5% of
the CDI rate, the Brazilian interbank lending rate, adjusted at the beginning of
each month. During September 1996, the applicable interest rate was 1.79% per
month. Since the application of the proceeds from the sale of the Old Securities
the Company has not had any amounts outstanding under the Abril Credit Facility.
However, the Company will be able to re-borrow the full amount of such facility,
as required. See "Description of Certain Indebtedness."
On December 9, 1996, TVA Sistema, as Borrower, and Tevecap, as Guarantor,
entered into a credit agreement with The Chase Manhattan Bank for the financing
of C-Band decoders and other related equipment (the "EximBank Facility"). The
Export-Import Bank of the United States of America ("EximBank") will guarantee
85.0% of the amount of the loan. The loan is to be made on terms
48
<PAGE>
customary for credits supported by EximBank to Brazilian borrowers. The interest
rate will be LIBOR plus a specified margin. The principal amount of the loan
will be $29,350, which will be dispersed in two tranches, the first in the
principal amount of $11,400 with a term of five years and the second in the
principal amount of $17,950 with a term of 4.5 years. Neither tranche has been
dispersed.
In addition, Galaxy Brasil expects to enter into the Galaxy Brasil Leasing
Facility, a five-year $49,900 sale leaseback facility, during the fourth quarter
of 1996. Under the Galaxy Brasil Leasing Facility, Galaxy Brasil will have
access to financing for the purpose of acquiring dish antennae, decoder boxes
and other equipment for its Ku-Band service. This facility will be available
until 2002 and will bear interest at a margin over LIBOR. See "Description of
Certain Indebtedness."
The Company has also from time to time received contributions and loans from
its shareholders to fund liquidity needs and may continue to receive such
contributions and loans in the future. See "Description of Certain Indebtedness"
and "Certain Transactions with Related Parties." In addition, as is standard
business practice in Brazil, the Company frequently finances a portion of its
working capital through the deferment of payment terms for the purchase price of
property (typically up to 360 days). These amounts have often subsequently been
refinanced by the Company with short-term bank indebtedness. The Company
currently has lines of credit with terms of 360 days which will continue to be
available after the Offering.
The Company believes that the aggregate net proceeds from the Offering,
together with the EximBank Facility and the Galaxy Brasil Leasing Facility, will
be sufficient to meet its foreseeable capital expenditure needs and that the
Abril Credit Facility and internally generated funds, will be sufficient to meet
its debt service, working capital and other needs for the foreseeable future.
However, there can be no assurance that the Company's cash needs will not
increase as a result of the operation of and developments in its business or
that the Company will be able to obtain additional financing or that such
financing will be on terms acceptable to the Company. In addition, the Company
may require additional financing in the event it chooses to acquire new licenses
or entities owning licenses. See "Risk Factors-- Additional Financing" and "Risk
Factors--Transactions with Related Parties; Rights to Put the Company's Stock."
In addition, the Company's liquidity may also be adversely affected by
statutory minimum dividend requirements under applicable Brazilian law. See
"Risk Factors--Dividends to Shareholders" and "Description of Notes."
ACCOUNTING FOR INCOME TAXES
The Company has approximately $118,600 of net operating losses ("NOLs") to
offset against regular taxes. These NOLs are unexpirable. Statement of Financial
Accounting Standards No. 109 (Accounting for Income Taxes) ("SFAS 109") requires
that the Company determine whether it is "more-likely-than-not" that the Company
will realize the benefits associated with such losses and provides that in
making such a determination, all negative and positive evidence should be
considered (with more weight given to evidence that is "objective and
verifiable"). SFAS No. 109 indicates that "forming a conclusion that a valuation
allowance is not needed is difficult when there is negative evidence such as
cumulative losses in recent years". The Company has a limited operating history
and has generated losses since its inception. In view of this, the Company has
established a full valuation allowance for the amount of NOL carryforwards in
excess of net taxable temporary differences. This determination was based
primarily on historical losses. Management does, however, believe that the
Company will be profitable in the future and, as such, will be able to utilize
at least a portion of these NOLs.
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THE REGISTERED EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Securities, Tevecap and the
Subsidiary Guarantors entered into the Exchange and Registration Rights
Agreement with the Initial Purchasers, pursuant to which Tevecap and each of the
Subsidiary Guarantors agreed to use its best efforts to file with the Commission
a registration statement with respect to the exchange of the Old Securities for
a series of registered debt securities with terms identical in all material
respects to the terms of the Old Securities, except that the Exchange Securities
are issued free from any covenant regarding transfer restrictions, and except
that if the Registered Exchange Offer is not consummated by May 23, 1997,
Tevecap will be obligated to pay each holder of Old Notes an amount equal to
$0.192 per week per $1,000 of the Old Notes until the Registered Exchange Offer
is consummated.
Tevecap together with the Subsidiary Guarantors is making the Registered
Exchange Offer in reliance on the position of the staff of the Commission as set
forth in certain no-action letters addressed to other parties in other
transactions. However, Tevecap has not sought its own no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Registered Exchange Offer as in such other
circumstances. Based upon these interpretations by the staff of the Commission,
Tevecap believes that the Exchange Securities issued pursuant to this Registered
Exchange Offer in exchange for Old Securities may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who acquired the Old Securities as a result of market making activities or other
trading activities, (ii) an Initial Purchaser who acquired the Old Securities
directly from the Company solely in order to resell pursuant to Rule 144A of the
Securities Act or any other available exemption under the Securities Act, or
(iii) a person that is an "affiliate" (as defined in Rule 405 of the Securities
Act) of Tevecap) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in the distribution of such Exchange Securities.
Holders of Old Securities accepting the Registered Exchange Offer will represent
to Tevecap in the Letter of Transmittal that such conditions have been met. Any
holder who participates in the Registered Exchange Offer for the purpose of
participating in a distribution of the Exchange Securities may not rely on the
position of the staff of the Commission as set forth in these no-action letters
and would have to comply with the registration and prospectus delivery
requirements of the Securities Act in connection any secondary resale
transaction.
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Old Securities, where such Old Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Securities. See "Plan of Distribution." 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 Securities received in
exchange for Old Securities where such Old Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Letter of Transmittal states that by acknowledging and
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. Tevecap has agreed
that for a period of 90 days after the Expiration Date, it will make this
Prospectus available to broker-dealers for use in connection with any such
resale. See "Plan of Distribution."
Except as aforesaid, this Prospectus may not be used for an offer to resell,
resale or other retransfer of Exchange Securities.
The Registered Exchange Offer is not being made to, nor will Tevecap accept
tenders for exchange from, holders of Old Securities in any jurisdiction in
which the Registered Exchange Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such jurisdiction.
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The Exchange and Registration Rights Agreement also provides that, if (i)
because of any change in law or applicable interpretations thereof by the
Commission's staff, the Company and the Subsidiary Guarantors determine that
they are not permitted to effect the Registered Exchange Offer or (ii) any
holder (including any Initial Purchaser but excluding a broker-dealer who
acquired the Old Securities as a result of market making activities or other
trading activities) either (A) is not eligible to participate in the Registered
Exchange Offer or (B) participates in the Registered Exchange Offer and does not
receive freely transferable Exchange Securities in exchange for tendered
Securities (in each case under this clause (ii) other than as a result of
applicable interpretations of the Commission's staff or applicable law in effect
as of November 26, 1996 or (iii) if the Company so elects, then the following
provisions shall apply: The Company and the Subsidiary Guarantors shall use all
reasonable efforts to as promptly as practicable file with the Commission and
thereafter shall use their best efforts to cause to be declared effective a
shelf registration statement on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Securities (as defined
below) by the holders from time to time in accordance with the methods of
distribution set forth in such registration statement (hereafter, a "Shelf
Registration Statement"); PROVIDED, HOWEVER, that no holder of Old Securities or
Exchange Securities (other than the Initial Purchasers) shall be entitled to
have Securities or Exchange Securities held by it covered by such Shelf
Registration Statement unless such holder agrees in writing to be bound by all
the provisions of the Exchange and Registration Rights Agreement applicable to
such holder. The Company and the Subsidiary Guarantors shall use their best
efforts to keep the Shelf Registration Statement continuously effective in order
to permit the prospectus forming part thereof to be usable by holders for a
period of three years from November 26, 1996, or such shorter period that will
terminate when all the Old Securities and Exchange Securities covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement or pursuant to Rule 144 under the Securities Act (in any such case,
such period being called the "Shelf Registration Period"). The Company and the
Subsidiary Guarantors shall be deemed not to have used their best efforts to
keep the Shelf Registration Statement effective during the requisite period if
any of them voluntarily takes any action that would result in holders of Old
Securities or Exchange Securities covered thereby not being able to offer and
sell such Old Securities or Exchange Securities during that period, unless such
action is required by applicable law. Notwithstanding any other provisions
hereof, the Company and the Subsidiary Guarantors will ensure that (i) any Shelf
Registration Statement and any amendment thereto and any prospectus forming part
thereof and any supplement thereto complies in all material respects with the
Securities Act and the rules and regulations thereunder, (ii) any Shelf
Registration Statement and any amendment thereto (in either case, other than
with respect to information included therein in reliance upon or in conformity
with written information furnished to the Company by or on behalf of any holder
specifically for use therein (the "Holders' Information")) does not, when it
become effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any prospectus forming part of any
Shelf Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions of the Registered Exchange
Offer, Tevecap will, unless such Old Securities are withdrawn in accordance with
the withdrawal rights specified in "--Withdrawal of Tenders" below, accept any
and all Old Securities validly tendered prior to 5:00 p.m., New York City time,
on the Expiration Date. Tevecap will issue, on or promptly after the Expiration
Date, an aggregate principal amount of up to US$250,000,000 of Exchange Notes in
exchange for a like principal amount of outstanding Old Notes tendered and
accepted in connection with the Registered Exchange Offer. The Exchange Notes
issued in connection with the Registered Exchange Offer will be delivered on the
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earliest practicable date on or following the Expiration Date. Holders may
tender some or all of their Old Notes in connection with the Registered Exchange
Offer.
The terms of the Exchange Securities are identical in all material respects
to the terms of the Old Securities, except that the Exchange Securities have
been registered under the Securities Act and are issued free from any covenant
regarding transfer restrictions, and except that if the Registered Exchange
Offer is not consummated by , 1997, Tevecap will be obligated to pay each
holder of the Old Notes an amount equal to $0.192 per week per $1,000 of the Old
Notes until the Registered Exchange Offer is consummated. The Exchange Notes
will evidence the same debt as the Old Notes and will be issued under and be
entitled to the same benefits under the Indenture as the Old Notes. As of the
date of this Prospectus, US$250,000,000 aggregate principal amount of the Old
Notes is outstanding.
In connection with the issuance of the Old Notes, Tevecap arranged for the
Old Notes originally purchased by qualified institutional buyers to be issued
and transferable in book-entry form through the facilities of The Depository
Trust Company ("DTC"), acting as depositary. Except as described in "Description
of the Notes--Book-Entry; Delivery and Form," the Exchange Notes will be issued
in the form of a global note registered in the name of DTC or its nominee and
each holder's interest therein will be transferable in book-entry form through
DTC. See "Description of the Notes--Book-Entry; Delivery and Form."
Holders of Old Securities do not have any appraisal or dissenters' rights in
connection with the Registered Exchange Offer. Old Securities which are not
tendered for exchange or are tendered but not accepted in connection with the
Registered Exchange Offer will remain outstanding and be entitled to the
benefits of the Indenture, but will not be entitled to any registration rights
under the Exchange and Registration Rights Agreement.
Tevecap shall be deemed to have accepted validly tendered Old Securities
when, as and if Tevecap has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purposes of receiving the Exchange Securities from Tevecap.
If any tendered Old Securities 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 Securities will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Securities in connection with the Registered Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Securities in connection with the Registered Exchange Offer.
Tevecap and the Guarantors will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the Registered Exchange
Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless extended by the Company in its sole discretion, in which
case the term "Expiration Date" shall mean the latest date and time to which the
Registered Exchange Offer is extended.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at the rate of 12 5/8% per annum.
Interest on the Exchange Notes shall accrue from the last Interest Payment Date
on which interest was paid on the Old Notes surrendered or, if no interest has
been paid on the Old Notes, from November 26, 1996.
Interest on the Exchange Notes will be payable semiannually on May 26 or
November 26 of each year, commencing on the first Interest Payment Date
following the issuance thereof.
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Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest on such Old Notes for any period subsequent to the last
interest payment date to occur prior to the issue date of the Exchange Notes,
and will be deemed to have waived the right to receive any interest payment on
the Old Notes accrued from and after such interest payment date.
EXCHANGE OFFER PROCEDURES
Only a holder of record of Old Securities on , 1997, may tender such
Old Securities in connection with the Registered Exchange Offer. The tender to
the Company of Old Securities by a holder thereof as set forth below and the
acceptance thereof by the Company will constitute a binding agreement between
the tendering holder and the Company upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a holder who wishes to tender Old
Securities for exchange pursuant to the Registered Exchange Offer must transmit
a properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal, to the Exchange Agent at
one of the addresses set forth below under "Exchange Agent" prior to 5:00 p.m.
New York City time on the Expiration Date. In addition, either (i) certificates
for such Old Securities must be received by the Exchange Agent along, with the
Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Securities, if such procedure is
available, into the Exchange Agent's account at DTC pursuant to the procedure
for book-entry transfer described below, must be received by the Exchange Agent
prior to 5:00 p.m. New York City time on the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below. THE
METHOD OF DELIVERY OF OLD SECURITIES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD SECURITIES
SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Securities surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Securities
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Securities are registered in the name of a person other
than the signer of a Letter of Transmittal, the Old Securities surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Securities tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Old Securities not properly tendered or to not accept
any particular Old Securities which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Registered
Exchange Offer as to any particular Old Securities either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Old Securities in the Registered Exchange Offer). The
interpretation of the terms and conditions of the Registered Exchange Offer as
to any particular Old Securities either before or after the Expiration Date
(including the Letter of
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Transmittal and the instructions thereto) by the Company shall be final and
binding on all parties. Unless waived, all defects or irregularities in
connection with tenders of Old Securities for exchange must be cured within such
reasonable period of time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Securities for exchange, nor shall any of them incur any liability for failure
to give such notification. The Exchange Agent intends to use reasonable efforts
to give notification of such defects or irregularities.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Securities, such Old Securities must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name of names of the registered holder or holders that appear on
the Old Securities.
If the Letter of Transmittal or any Old Securities or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Securities acquired pursuant to the Registered Exchange
Offer are being obtained in the ordinary course of business of the person
receiving such Exchange Securities, whether or not such person is the holder and
such person has no arrangement with any person to participate in the
distribution of the Exchange Securities. If any holder or any such other person
is an "affiliate," as defined under Rule 405 of the Securities Act, of the
Company, is engaged in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution of such Exchange
Securities to be acquired pursuant to the Registered Exchange Offer, or acquired
the Old Securities as a result of market making or other trading activities,
such holder or any such other person (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Securities for its own account in exchange for Old Securities, where
such Old Securities were acquired as a result of market making activities or
other trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities. 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.
ACCEPTANCE OF OLD SECURITIES FOR EXCHANGE; DELIVERY OF EXCHANGE SECURITIES
The Company will accept, promptly after the Expiration Date, all Old
Securities properly tendered and will issue the Exchange Securities promptly
after acceptance of the Old Securities. For purposes of the Registered Exchange
Offer, the Company shall be deemed to have accepted properly tendered Old
Securities for exchange when, as and if the Company has given oral or written
notice thereof to the Exchange Agent, with written confirmation of any oral
notice to be given promptly thereafter.
In all cases, issuance of Exchange Securities for Old Securities that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) certificates for such Old Securities
or a timely confirmation of such Old Securities into the Exchange Agent's
account at DTC, (ii) a properly completed and duly executed Letter of
Transmittal and (iii) all other required documents. If any tendered Old
Securities are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer, or if Old Securities are submitted for a greater amount
than the holder desires to exchange, such unaccepted or unexchanged Old
Securities will be returned without expense to the tendering holder thereof (or,
in the case of Old Securities tendered by book-entry
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transfer into the Exchange Agent's account at DTC pursuant to the book-entry
procedures described below, such nonexchanged Old Securities will be credited to
an account maintained with DTC) designated by the tendering holder as promptly
as practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Securities at DTC for purposes of the Registered Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the DTC systems may make book-entry
delivery of Old Securities by causing DTC to transfer such Old Securities into
the Exchange Agent's account at DTC in accordance with such DTC's procedures for
transfer. However, although delivery of Old Securities may be effected through
book-entry transfer at DTC, the Letter of Transmittal or facsimile thereof, with
any required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Securities desires to tender such Old
Securities and the Old Securities are not immediately available, or time will
not permit such holder's Old Securities or other required documents to reach the
Exchange Agent before the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if (i)
the tender is made through an Eligible Institution, (ii) prior to the Expiration
Date, the Exchange Agent has received from such Eligible Institution a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) and
Notice of Guaranteed Delivery, substantially in the form of the corresponding
exhibit to the Registration Statement of which this Prospectus constitutes a
part (by telegram, telex, facsimile transmission, mail or hand delivery),
setting forth the name and address of the holder of Old Securities and the
amount of Old Securities tendered, stating that the tender is being made thereby
and guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Securities, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Securities, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Securities may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Securities to be withdrawn, identify the Old
Securities to be withdrawn (including the amount of such Old Securities), and
(where certificates for Old Securities have been transmitted) specify the name
in which such Old Securities are registered, if different from that of the
withdrawing holder. If certificates for Old Securities have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Securities have been tendered pursuant to the
procedure for book-entry
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transfer described above, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn Old Securities
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Securities so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the Exchange Offer. Any
Old Securities which have been tendered for exchange but which are not exchanged
for any reason will be returned to the holder thereof without cost to such
holder (or, in the case of Old Securities tendered by book-entry transfer into
the Exchange Agent's account at DTC pursuant to the book-entry transfer
procedures described above, such Old Securities will be credited to an account
with DTC specified by the Holder) as soon as practicable after withdrawal,
rejection of tender or termination of the Registered Exchange Offer. Properly
withdrawn Old Securities may be retendered by following one of the procedures
described under "--Exchange Offer Procedures" above at any time on or prior to
the Expiration Date.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent in connection
with the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent, at its offices at 450 West 33rd Street, 15th
Floor, New York, New York 10001. The Exchange Agent's telephone number is (212)
946-3014 and facsimile number is (212) 946-8177.
FEES AND EXPENSES
Tevecap will not make any payment to brokers, dealers or others soliciting
acceptances of the Registered Exchange Offer.
Tevecap will pay certain other expenses to be incurred in connection with
the Registered Exchange Offer, including the fees and expenses of the Trustee,
accounting and certain legal fees.
Holders who tender their Old Securities for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, Exchange
Securities are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the Old Securities tendered, or if
tendered Old Securities are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Securities in connection with the
Registered 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
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendered holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes as reflected in Tevecap's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by
Tevecap upon the consummation of the Exchange Offer. Any expenses of the
Registered Exchange Offer that are paid by Tevecap will be amortized by Tevecap
over the term of the Exchange Notes under generally accepted accounting
principles.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES IN THE EXCHANGE
Issuance of the Exchange Securities in exchange for the Old Securities
pursuant to the Registered Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Securities, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of the Old Securities desiring to tender such Old Securities in exchange
for Exchange Securities
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should allow sufficient time to ensure timely delivery. Tevecap is under no duty
to give notification of defects or irregularities with respect to tenders of Old
Securities for exchange. Old Securities that are not tendered or that are
tendered but not accepted by Tevecap for exchange, will, following consummation
of the Registered Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof under the Securities Act and, upon
consummation of the Registered Exchange Offer, certain registration rights under
the Exchange and Registration Rights Agreement will terminate.
In the event the Registered Exchange Offer is consummated, Tevecap will not
be required to register the Remaining Old Securities. Remaining Old Securities
will continue to be subject to the following restrictions on transfer: (i) the
Remaining Old Securities may be resold only if registered pursuant to the
Securities Act, if any exemption from registration is available thereunder, or
if neither such registration nor such exemption is required by law, and (ii) the
Remaining Old Securities will bear a legend restricting transfer in the absence
of registration or an exemption therefrom. Tevecap does not currently anticipate
that it will register the Old Securities under the Securities Act. To the extent
that Old Securities are tendered and accepted in connection with the Registered
Exchange Offer, any trading market for Remaining Old Securities could be
adversely affected.
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BUSINESS
TVA is a leading pay television operator in Brazil and is the country's
largest pay television programming distributor. In 1989, TVA was the first to
provide pay television services in Brazil and, in July 1996, the Company
launched DIRECTV, Brazil's first digital Ku-Band service. With over 335,000
subscribers, TVA is the only operator in Brazil to offer pay television services
utilizing five distribution technologies: MMDS, Cable, digital Ku-Band, digital
C-Band and UHF. TVA believes that its ability to strategically deploy
alternative technologies provides it with significant competitive advantages,
including the ability to rapidly enter new markets, maximize penetration of
existing markets and deliver service in the most cost effective manner.
Additionally, TVA has interests in HBO Brasil Partners and ESPN Brasil Ltda.,
two programming joint ventures (the "Programming Ventures"). Through owned,
affiliated and independent pay television operators, TVA programming reaches
over 955,000 pay television households. TVA is a majority owned subsidiary of
Abril, S.A. ("Abril"), Latin America's leading magazine publishing, printing and
distribution company. TVA's other shareholders are Falcon International
Communications (Bermuda) L.P. ("Falcon International"), The Hearst Corporation
("Hearst"), ABC, Inc. ("ABC") and Chase Manhattan International Finance Ltd.
("CMIF").
The Company conducts its pay television operations through three owned
operating systems (the "Owned Systems"): TVA Sistema, TVA Sul and Galaxy Brasil.
Through the MMDS and Cable systems of TVA Sistema and TVA Sul, the Company
serves six cities with a combined population of approximately 18 million,
including three of the seven largest cities in Brazil: Sao Paulo (population of
10.2 million), Rio de Janeiro (population of 5.7 million) and Curitiba
(population of 1.5 million). The Company also holds minority interests in
Canbras TVA and TV Filme (the "Operating Ventures"), which together provide pay
television services to an additional seven cities with a total population of 6.5
million. In addition, the Company sells programming to, and receives a per
subscriber fee from, unaffiliated pay television operators ("Independent
Operators").
The Company, through Galaxy Brasil, is Brazil's exclusive provider of the
premium programming service, DIRECTV, Brazil's first digital direct broadcast
satellite Ku-Band service. Galaxy Brasil receives programming, scheduling and
related services for DIRECTV from Galaxy Latin America ("GLA"), in which TVA
holds a 10.0% equity interest. The other owners of GLA are a unit of Hughes
Electronics, a member of the Cisneros Group and a subsidiary of Grupo MVS.
Through local operating companies such as Galaxy Brasil, GLA plans to provide
DIRECTV service throughout much of Latin America and the Caribbean. The Company,
through TVA Sistema, also currently provides Brazil's only digital C-Band
television service (together with Galaxy Brasil, the "DBS Systems"). The DBS
Systems enable the Company to deliver a greater number of channels than any
other television operator in Brazil and provide TVA with access to substantially
all of Brazil's 33.9 million TV Homes.
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PROGRAMMING DISTRIBUTION AND MARKETS
The following table sets forth information regarding the markets in which
TVA operates systems and distributes programming:
<TABLE>
<CAPTION>
PAY TELEVISION
AVERAGE REVENUE PROGRAMMING
SERVICE LAUNCH CLASS ABC PER MONTH PER CHANNELS
DATE TV HOMES HOUSEHOLDS(A) SUBSCRIBERS SUBSCRIBER(B) OFFERED
--------------- ---------- --------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
OWNED SYSTEMS
MMDS
TVA Sistema
Sao Paulo(c)........... September 1991 3,978,096 2,732,686 133,005 $ 39.98 18
Rio de Janeiro......... March 1992 2,659,472 1,694,193 75,921 38.61 15
TVA Sul Curitiba......... March 1992 502,512 364,707 20,730 32.90 15
CABLE(D)
TVA Sistema
Sao Paulo.............. October 1994 3,978,096 2,732,686 19,575 35.66 44
TVA Sul Curitiba......... January 1995 502,512 364,707 9,545 27.93 44
Camboriu............... June 1996 37,618 22,686 3,949 38.27 31
Foz do Iguacu.......... June 1996 46,669 28,145 6,184 29.17 34
Florianopolis.......... September 1996 155,382 93,706 -- -- --
-------------
TOTAL MMDS AND CABLE
SUBSCRIBERS............ -- -- -- 268,909 -- --
-------------
DBS
TVA Sistema/Galaxy
Brasil(e)................ March 1995 33,900,000 19,568,310 47,436 $ 32.62 26(f)
SUBSCRIBERS AWAITING
INSTALLATION........... -- -- -- 19,691 -- --
-------------
TOTAL SUBSCRIBERS-OWNED
SYSTEMS................ -- -- -- 336,036 -- --
-------------
-------------
HOUSEHOLDS RECEIVING TVA
PROGRAMMING
OWNED SYSTEMS............ -- -- -- 336,036 -- --
-------------
OPERATING VENTURES
MMDS
TV Filme, Inc.
Brasilia............... July 1993 412,996 308,677 41,668 $ 44.49 16
Goiania................ December 1994 319,434 179,542 8,107 43.41 16
Belem.................. December 1994 221,370 135,020 12,999 46.49 15
CABLE
Canbras TVA
Four cities(g)......... April 1996 222,358 152,773 3,614 -- 38
-------------
TOTAL-OPERATING
VENTURES............... -- -- -- 66,388 -- --
-------------
-------------
INDEPENDENT OPERATORS (53
Independent
Operators)............. -- -- -- 555,049 -- --
-------------
TOTAL.................... -- -- -- 957,473 -- --
-------------
-------------
</TABLE>
- ------------------------
(a) The number of Class ABC Households is based on information provided by Grupo
Midia, IBGE and IBOPE.
(b) As of September 30, 1996. Amount does not include installation fees paid.
(c) The number of MMDS subscribers includes 11,453 UHF subscribers in the Sao
Paulo metropolitan area. UHF subscribers are provided two channels of
programming, HBO Brasil and ESPN Brasil. The average revenue per month per
UHF subscriber, as of September 30, 1996, was approximately $22.80.
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<PAGE>
(d) The Company's Cable Systems in Sao Paulo, Curitiba, Camboriu, Foz do Iguacu
and Florianopolis had approximately 126,877, 92,550, 25,722, 20,404 and
6,069 Homes Passed, respectively, as of September 30, 1996.
(e) This data principally reflects the Company's digital C-Band operations. TVA
launched DIRECTV service, on a limited basis, in July 1996. As of September
30, 1996, the DIRECTV service offered 49 channels of programming at an
average per month subscriber fee of $56.00. Since that date the number of
channels offered through the DIRECTV service has increased to 56. TV Homes
and Class ABC Households information is national information for all of
Brazil.
(f) The number includes nine SAP channels.
(g) The four cities served by Canbras TVA are Santo Andre, Sao Bernardo, Guaruja
and Sao Vicente.
BRAZILIAN PAY TELEVISION MARKET
Brazil is the largest television and video market in Latin America with an
estimated 33.9 million TV Homes which, as of December 31, 1995, watched on
average more than 4.0 hours of television per day, as compared to an average of
4.5 hours in the United States. Approximately 6.2 million television sets and
1.9 million VCR units were sold in Brazil during 1995. The pay television
industry in Brazil began in 1989 with the commencement by the Company 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
TV Homes. By comparison, as of December 31, 1995, 51.1% of TV Homes in
Argentina, 12.6% of TV Homes in Mexico, 21.7% of TV Homes in the United Kingdom
and 69.2% of TV Homes in the United States subscribed to pay television.
Management believes that the number of pay television subscribers in Brazil will
continue to grow as pay television reaches more households both through the
expansion of existing and new MMDS and Cable systems and through development of
nationwide DBS systems. The Ministry of Communications estimates that Brazil
will have 16.5 million pay television subscribers by 2003.
The following table sets forth, as of December 31, 1995, TV Homes, Cable
subscribers, MMDS subscribers, C-Band subscribers, Ku-Band subscribers, total
subscribers and the ratio of total subscribers to TV Homes in Brazil, Argentina,
Mexico, the United Kingdom and the United States.
<TABLE>
<CAPTION>
UNITED UNITED
BRAZIL(A) ARGENTINA(B) MEXICO(B) KINGDOM(B) STATES(C)
----------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
(NUMBERS IN THOUSANDS, EXCEPT PERCENTAGES)
TV Homes....................................... 33,900 9,000 13,200 22,347 95,000
----------- ----- ----------- ------------ -----------
Cable Subscribers............................ 560 4,410 1,257 1,400 62,500
MMDS Subscribers............................. 295(d) 189 406 -- 800
C-Band Subscribers........................... 125 -- -- 3,447 2,460(e)
Ku-Band Subscribers.......................... -- -- -- -- 2,460(e)
----------- ----- ----------- ------------ -----------
Total Subscribers.............................. 980 4,599 1,663 4,847 65,760
----------- ----- ----------- ------------ -----------
----------- ----- ----------- ------------ -----------
Total Subscribers/TV Homes (%)................. 2.9% 51.1% 12.6% 21.7% 69.2%
</TABLE>
- ------------------------
(a) The information set forth for Brazil represents estimates made by the
Company based upon figures compiled and published by the IBGE, management's
knowledge of the Company's pay television systems and those of the Operating
Ventures, and public statements of other pay television providers.
Management believes such estimates are reasonable, but neither management
nor any other party can provide assurances as to their accuracy. Kagan World
Media, Inc. reports that there were, as of December 31, 1995, 464 MMDS
subscribers, and 654 Cable subscribers and 100 C-Band subscribers in Brazil.
(b) The information set forth for Argentina, Mexico and the United Kingdom is
based on December 1995 data of Kagan World Media, Inc. and 1996 data of Paul
Kagan Associates, Inc.
(c) Source: National Cable Television Association.
60
<PAGE>
(d) The number of MMDS subscribers includes UHF subscribers.
(e) The number represents C-Band and Ku-Band subscribers collectively.
COMPETITIVE ADVANTAGES
Management believes that the Company has the following competitive
advantages:
SUPERIOR QUALITY PROGRAMMING LINEUP. TVA's programming line-up includes
exclusive rights to ESPN Brasil in the Company's major markets, with exclusive
coverage, as of January 1997, of many of Brazil's most important soccer
championships, including the Brasil Cup, the Brazilian Championship and the Sao
Paulo and Rio de Janeiro State Championships. The Company exclusively offers CMT
Brasil and Bravo Brasil and is also the only pay television provider offering
HBO programming in TVA's served markets. Management believes that as the pay
television industry grows, programming will become the critical factor driving
consumer selection of a pay television provider, and that with TVA's
relationships with strong international partners and its exclusive soccer
coverage, TVA will continue to offer superior quality programming.
STRATEGIC DEPLOYMENT OF ALTERNATIVE DISTRIBUTION TECHNOLOGIES. The Company
is the only pay television operator utilizing five distribution technologies:
MMDS, Cable, Ku-Band, C-Band and UHF. The availability of multiple distribution
technologies enables the Company to capitalize on the population and income
characteristics, topography and competitive dynamics of each of its targeted
markets. The Company has the ability to penetrate new markets quickly and
efficiently and to offer tiered programming at low cost with MMDS. The Company
is expanding its Cable systems, where warranted by economic and competitive
conditions, to build its subscriber base and to prepare for future opportunities
in interactive services and telecommunications. Additionally, management
believes the Company can rapidly penetrate virtually any market through the
continued deployment of its DBS Systems.
DBS SYSTEMS: NATIONWIDE COVERAGE AND DIGITAL SERVICE. Through its DBS
Systems, TVA is capable of offering programming to nearly all of Brazil's 33.9
million TV Homes, including those households in markets where Cable or MMDS
systems are either not developed or not economically viable. Through its DIRECTV
service, TVA is the first provider of Ku-Band pay television services in Brazil
and expects to enroll as subscribers a significant share of those who are
interested in broader, digital quality programming and pay-per-view services.
Through its digital C-Band system, the Company provides 26 channels of
programming (including nine SAP channels) and is capable of providing up to 38
channels of programming (including SAP channels). The Company's only significant
competitor in C-Band pay television service provides six analog channels of
programming in addition to off-air channels. The Company currently targets its
C-Band service to the estimated 3.7 million C-Band satellite dish owners in
Brazil, most of whom currently receive only the off-air channels.
MODERN CABLE INFRASTRUCTURE. The Company's Cable systems are constructed
with, or are being upgraded to, either 750 MHz or 550 MHz bandwidth capacity,
the latter of which is readily upgradeable to 750 MHz bandwidth capacity with
only moderate investment. This Cable technology will enable the Company to
provide data transmission and interactive services, including
telecommunications, in the future. Management believes that the Company's major
competitors for Cable service use narrower bandwidths over portions of their
Cable systems and have installed certain types of Cable in households which
currently may prevent them from providing telecommunications or high speed data
delivery through these portions of their systems until substantial additional
investments have been made for system reconstruction or upgrade.
STRONG STRATEGIC PARTNERS. The Company's strategic equity partners continue
to offer valuable expertise. TVA benefits from Abril's extensive experience in
the business of subscriptions and distribution and from the collective
experience of Falcon International, Hearst and ABC with regard to pay television
operations and from access to programming.
61
<PAGE>
BUSINESS STRATEGY
TVA seeks to be Brazil's largest and most profitable pay television operator
and programming distributor and intends to capitalize on the convergence and
development of voice, video and telecommunications services. The Company intends
to achieve these goals through the following strategies:
MAXIMIZE PENETRATION IN EXISTING MARKETS. The Company seeks to increase its
penetration of existing markets by: (i) expanding the range of TVA's Cable
systems by extending its fiber optic and coaxial cable network and by seeking
pre-wiring arrangements with residential housing developers, (ii) improving the
signal quality and coverage of TVA's MMDS systems by using signal repeater
technology, (iii) maximizing penetration by offering tiered subscription options
and developing programming packages to appeal to more households and (iv)
expanding its penetration in ABC Class households through its scheduled
nationwide rollout of DIRECTV service and the continued development of C-Band
service.
MAXIMIZE CUSTOMER RETENTION THROUGH SUPERIOR CUSTOMER SERVICE. In order to
maximize customer retention, the Company aims to provide a consistently high
level of customer service. The Company has developed or has acquired the right
to use proprietary management information systems which, among other things,
provide Company representatives immediate access to customer records and
correspondence history. This enables TVA to provide high quality service to its
clients while monitoring subscriber payment patterns. The Company's Churn rate,
which reflects the ability of the Company to retain subscribers, averaged
approximately 2.0% per month during the nine month period ended September 30,
1996.
ENHANCE TVA'S PROGRAMMING PACKAGE. In order to maintain and enhance its
position as a provider of superior programming in Brazil, TVA is developing new
programming through the Programming Ventures, as well as through Abril and other
partners. TVA frequently evaluates the demographics of its subscribers and
potential subscribers and seeks to provide programming most in demand. The
Company also takes advantage of opportunities to enter into exclusive
distribution agreements for popular television programming in Brazil. Management
believes that its DIRECTV service, which includes both basic and premium
channels, as well as pay-per-view movies and events from Brazil, other Latin
American countries, Europe, Asia and the United States, further enhances TVA's
programming offerings and positions the Company to be the provider of the widest
selection of popular programming in Brazil.
ENTER NEW MARKETS. The Company intends to enter new markets by: (i)
acquiring existing MMDS and Cable operations, (ii) applying either
independently, or in conjunction with the Operating Ventures, independent pay
television providers or other appropriate third parties, for new MMDS and Cable
licenses offered by the Brazilian Government, (iii) initiating the nationwide
rollout of DIRECTV service and (iv) investing in new operating ventures with
other MMDS and Cable operators. The Brazilian Government has recently announced
its intention to auction MMDS licenses in 15 state capitals. Although no date
has been set for these auctions, management expects them to occur during 1997.
The Company has submitted proposals, either individually or in conjunction with
local partners, for all such licenses, as well as for additional licenses
throughout Brazil.
CONTINUE NETWORK ENHANCEMENT. The Company is positioning itself to provide
high speed data transmission, interactive and other telecommunications services
over its systems and to take advantage of possible deregulation and the growing
demand for these services in Brazil. The Company is expanding its Cable systems
with fiber optic and coaxial cable capable of being upgraded to provide such
enhanced services. In addition, the Company continues to explore the development
of digital compression of MMDS signals.
Through the implementation of the Company's strategy, the Company has been
able to achieve rapid subscriber growth. The following chart sets forth
information regarding (i) the number of subscribers to the Company's Owned
Systems at December 31, 1993, 1994, 1995 and at September 30, 1996,
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<PAGE>
(ii) the number of new installations during the years ended December 31, 1993,
1994, and 1995, and the nine month period ended September 30, 1996, and (iii)
the average installation fee for the year ended December 31, 1995.
<TABLE>
<CAPTION>
SUBSCRIBERS AT
END OF PERIOD(A) NEW INSTALLATIONS
------------------------------------------------ DURING PERIOD
SEPTEMBER 30, --------------------------------------------
1993 1994 1995 1996 1993 1994 1995 1996(B)
--------- --------- --------- --------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MMDS
Sao Paulo................... 54,183 72,425 121,969 133,005 33,966 34,372 75,332 45,098
Rio de Janeiro.............. 20,490 28,234 51,664 75,921 12,961 13,855 31,733 36,952
Curitiba.................... 7,801 11,112 15,260 20,730 5,965 5,972 10,513 11,220
--------- --------- --------- --------------- --------- --------- --------- -----------
Total MMDS.................... 82,474 111,771 188,893 229,656 52,892 54,199 117,578 93,270
--------- --------- --------- --------------- --------- --------- --------- -----------
CABLE
Sao Paulo................... -- 1,007 13,885 19,575 -- 482 6,546 5,082
Curitiba.................... -- -- 1,244 9,545 -- -- 434 2,712
Foz do Iguacu(c)............ -- -- -- 6,184 -- -- -- 1,325
Camboriu(c)................. -- -- -- 3,949 -- -- -- 436
Florianopolis(c)............ -- -- -- -- -- -- -- --
--------- --------- --------- --------------- --------- --------- --------- -----------
Total Cable................... -- 1,007 15,129 39,253 -- 482 6,980 9,555
--------- --------- --------- --------------- --------- --------- --------- -----------
DBS
C--Band/DIRECTV(d)............ 511 2,075 15,126 47,436 511 1,914 16,873 36,834
--------- --------- --------- --------------- --------- --------- --------- -----------
TOTAL SUBSCRIBERS-OWNED
SYSTEMS..................... 82,985 114,853 219,148 316,345 53,403 56,595 141,431 139,659
--------- --------- --------- --------------- --------- --------- --------- -----------
--------- --------- --------- --------------- --------- --------- --------- -----------
<CAPTION>
AVERAGE
INSTALLATION
FEE FOR THE
YEAR ENDED
DEC. 31,
1995
-----------
<S> <C>
MMDS
Sao Paulo................... $ 180.30
Rio de Janeiro.............. 163.52
Curitiba.................... 122.45
-----------
Total MMDS.................... --
-----------
CABLE
Sao Paulo................... $ 81.97
Curitiba.................... 80.02
Foz do Iguacu(c)............ 150.00
Camboriu(c)................. 150.00
Florianopolis(c)............ 150.00
-----------
Total Cable................... --
-----------
DBS
C--Band/DIRECTV(d)............ $ 586.79
-----------
TOTAL SUBSCRIBERS-OWNED
SYSTEMS..................... --
-----------
-----------
</TABLE>
- ------------------------
(a) Excludes backlog, reconnected and disconnected subscribers.
(b) Includes installations for the nine months ended September 30, 1996.
(c) Average Installation Fee for the period ended September 30, 1996.
(d) DIRECTV service was launched, on a limited basis, in July 1996. The full
list price for initiation of the service is $990.00.
OWNERSHIP
Tevecap is a majority owned subsidiary of Abril, the leading magazine
publishing, printing and distribution company in Latin America. Abril publishes
over 266 weekly, bi-weekly and monthly titles. During 1995, the combined monthly
paid circulation of Abril and its affiliates averaged 15.6 million copies. TVA
benefits from Abril's extensive experience in the business of subscriptions and
distribution, advertising synergies, common research resources and financial
analysis and support. Certain of Tevecap's other shareholders provide the
Company with access to additional international programming and certain
technical and financial expertise. The Company's shareholders have invested, in
aggregate, approximately $288.0 million in the Company. Tevecap's current
ownership is as follows: Abril, 56.5%; Falcon International, 14.2%; Hearst,
10.0%; ABC, 10.0%; and CMIF, 9.3%. See "Principal Shareholders."
63
<PAGE>
DISTRIBUTION OPERATING SYSTEMS
TVA and the Operating Ventures distribute programming through five different
technologies: MMDS, Cable, Ku-Band, C-Band, and UHF. The availability of
multiple distribution technologies enables the Company to exploit the population
and income characteristics, topography and competitive dynamics of each of its
markets.
MMDS
TVA's strategy of rapidly deploying an extensive MMDS network has allowed it
to enter new markets quickly and develop broad geographic coverage which the
Company may expand utilizing signal repeaters. TVA has developed Brazil's
largest MMDS network, and with the Operating Ventures, serves the country's
major metropolitan areas. MMDS systems are typically easier to deploy and
require relatively little capital investment for construction and maintenance as
compared to Cable systems. Programming is transmitted by signals through the air
from microwave transmitters to a small receiving antenna located at a
subscriber's home or dwelling unit. At the subscriber's location, the microwave
signals are converted to frequencies that can pass through a conventional
coaxial cable into a decoder located near a television set. Under recently
passed Brazilian regulations, each MMDS license allows an MMDS operator to
provide service to households in a circular area within a radius of up to 50
kilometers, depending on the technical capability of the operator. It is
expected that expansion into such newly available territory would require
minimal additional capital spending by the Company. However, tall buildings and
other tall structures may block reception of an MMDS signal. See
"Business--Regulatory Framework." MMDS is being used in other emerging pay
television markets such as Venezuela and Hong Kong, and in Mexico, where Cable
has a strong incumbent position.
TVA owns eight MMDS licenses and operates MMDS systems in Sao Paulo, Rio de
Janeiro and Curitiba, which have an aggregate population of approximately 17.4
million. TVA serves 229,656 MMDS subscribers in these three cities. During the
12-month period ended September 30, 1996, TVA averaged approximately 4,000 net
new MMDS subscribers per month. The MMDS systems of TVA offer between 15 to 18
channels of programming. Management intends to increase its channel offerings to
31 soon after the Ministry of Communications grants additional channel rights as
allowed under recently passed regulations. See "Business--Regulatory Framework."
TV Filme, an Operating Venture, operates MMDS systems in Brasilia, Goiania and
Belem and has 62,774 MMDS subscribers. See "Regulatory Framework--MMDS
Regulation." During the 12-month period ended September 30, 1996, the Operating
Ventures averaged approximately 2,700 net new MMDS subscribers per month. In
addition, TVA provides UHF service to 11,453 subscribers in the Sao Paulo
metropolitan area.
CABLE
TVA has recently emphasized the strategic deployment of Cable service and
currently operates Cable systems in Sao Paulo, Curitiba and three other cities.
Cable service involves a broad band network employing radio frequency
transmission through coaxial and/or fiber optic cable. Cable systems consist of
four major parts: a headend, a distribution network, a subscriber network and a
house terminal. The programming is collected from the headend, then processed
and fed into the distribution path consisting of trunk and distribution cable,
which consists of coaxial and/or fiber optic cables. The signal is then fed into
a subscriber network that is either located in an apartment building or a
subscriber's home. Most of the Company's systems are constructed with either 750
MHz or 550 MHz bandwidth capacity, the latter of which is readily upgradeable to
750 MHz bandwidth capacity. The Company's four newly acquired systems in
Curitiba (2), Camboriu and Foz do Iguacu are being upgraded to 550 MHz bandwidth
capacity. The Company's new system in Florianopolis is being constructed to 550
MHz bandwidth capacity. It is expected that this technology will enable the
Company to provide interactive services, including telecommunications in the
future. In addition, the Company's Cable systems generally use addressable
converters, which allow the provision of pay-per-view services
64
<PAGE>
and enable TVA to upgrade, downgrade or disconnect a subscriber's service from
the headend on short notice.
TVA, through TVA Sistema and TVA Sul, owns eight Cable licenses and operates
Cable systems in Sao Paulo, Curitiba, Camboriu, Florianopolis and Foz do Iguacu,
which have an aggregate population of approximately 11.9 million and 39,253
subscribers. As of September 30, 1996, TVA had deployed approximately 900
kilometers of its Cable network, including 80 kilometers of fiber optic cable,
and passed approximately 270,000 homes. By the end of 1996, the Company added an
additional 890 kilometers to its Cable systems. As part of this build-out plan,
the Company constructed a 281 kilometer fiber optic network, including a 57
kilometer fiber optic loop in Sao Paulo and a 28 kilometer fiber optic network
in Curitiba, and is upgrading or constructing the three recently acquired Cable
systems. As a result of this buildout, by the end of 1996, TVA Cable systems
passed approximately 300,000 homes in Sao Paulo, approximately 118,000 homes in
Curitiba and a total of 494,000 throughout all of the Company's Cable systems.
As of September 30, 1996, Canbras TVA, an Operating Venture, had an existing
Cable network of approximately 151 kilometers, with approximately 22,200 Homes
Passed and approximately 3,614 subscribers. Canbras TVA is constructing Cable
networks in ten cities in the greater Sao Paulo area with a combined population
of over 2.8 million. By comparison, TVA's largest competitor in Sao Paulo for
Cable service had, as of June 30, 1996, a Cable network in Sao Paulo of
approximately 1,225 miles (including approximately 151 miles of fiber optic
cable) with 463,900 Homes Passed. TVA and Canbras TVA currently offer between 31
and 44 analog channels of programming (including off-air channels) on their
Cable systems, depending on the market, and have the capability of offering up
to 78 analog channels. During the 12-month period ended September 30, 1996, TVA
averaged approximately 2,200 net new Cable subscribers per month, and Canbras
TVA, after its first five months of operation ended September 30, 1996, had
3,614 subscribers.
DIRECTV
In July 1996, TVA launched, on a limited basis, Brazil's DIRECTV service,
Brazil's first Ku-Band service. A nationwide rollout of DIRECTV was launched in
November 1996, at which time TVA initiated a publicity campaign supported by a
nationwide network of trained installers. By comparison, DIRECTV, Inc., a unit
of Hughes Electronics, started its DIRECTV service in the United States in June
1994 and had, as of September 30, 1996, approximately 1.9 million subscribers
for this service.
Galaxy Brasil receives programming from GLA, including programming which GLA
purchases from TVA. Additionally, GLA provides scheduling and related services
to Galaxy Brasil for use with DIRECTV. GLA distributes programming to Brazil
through the transmission of an encoded signal via the Galaxy III-R satellite
utilizing 12 transponders to a subscriber's 60 centimeter dish antenna which can
be mounted outside a window or on a rooftop. The signal is then transmitted to
an integrated receiver decoder in the subscriber's home. A single antenna may
serve a single family dwelling or a multifamily dwelling, such as an apartment
building, in which case each apartment needs to be equipped with a decoder. A
unit of Hughes Electronics leases the Galaxy III-R satellite and provides the
use of the satellite and related services to GLA pursuant to a technical service
agreement, the term of which extends until October 31, 2010. GLA, in turn,
charges Galaxy Brasil a royalty on a per subscriber basis for the use of the
satellite transponders and related services. The orbital location of the Galaxy
III-R satellite enables the Company to offer DIRECTV service to substantially
all of the TV Homes in Brazil. However, in the less populated northern and
western regions of Brazil, reception of DIRECTV programming requires a dish
antenna 1.1 meters in diameter and in the western third of Brazil (a sparsely
populated area when compared to the southern and eastern regions) reception may
require an even larger antenna. In addition, tall buildings and other tall
structures may block reception of the DIRECTV programming signal. The Galaxy
III-R satellite was launched in December 1995 and has an expected useful life of
nine years from the date of launch. Hughes Electronics expects to launch within
the next 12 months a second satellite to provide
65
<PAGE>
additional transponders for transmission of DIRECTV programming. With DIRECTV
service, TVA provided 49 channels of video programming (including 19
pay-per-view channels) as of September 30, 1996, and is capable of, and expects
to eventually distribute, up to 70 channels of video programming and 30 channels
of audio programming. Since September 30, 1996, the number of channels offered
by the Company with DIRECTV service has increased to 56. In addition, since
September 30, 1996 a competitor has entered the Ku-Band market, but offers only
26 channels of programming (including four pay-per-view channels). TVA owns and
has made a substantial investment in a satellite uplink center for the Brazilian
DIRECTV service in Tambore in greater Sao Paulo (the "Tambore Facility"). The
Tambore Facility is used to uplink programming to the Galaxy III-R satellite.
C-BAND
TVA has offered C-Band service since 1993, and is the only pay television
operator to deliver a digital C-Band signal in Brazil. TVA's C-Band service
consists of the transmission of a digital encoded signal via the Brasilsat
satellite utilizing four transponders to a satellite antenna 1.1 meters in
diameter located at a subscriber's home, where the signal passes through an
integrated receiver decoder. A single antenna may serve a single family dwelling
or a multifamily dwelling, such as an apartment building, in which case each
apartment needs to be equipped with a decoder. The Brasilsat satellite was
launched in July 1994 and is owned by EMPRESA BRASILEIRA DE TELECOMUNICACOES
(Brazilian Telecommunications Company, or "Embratel"), the Brazilian
Government-owned company authorized to provide satellite telecommunications
services utilizing the SISTEMA BRASILEIRO DE TELECOMUNICACOES POR SATELITE
(Brazilian Satellite Telecommunications System, or "SBTS"). TVA utilizes the
Brasilsat satellite pursuant to three satellite transponder leases that expire
on May 30, 2002, November 20, 2003, and November 24, 2003, respectively. The
orbital location of the Brasilsat satellite enables TVA to provide C-Band
service throughout Brazil with little or no interference. However, tall
buildings and other tall structures may block reception of C-Band programming.
The Brasilsat satellite has an expected useful life of approximately 12 to 15
years from the date of launch.
TVA's C-Band service provides the Company with national coverage via
satellite transmission and a large preinstalled market. As of September 30,
1996, there were approximately 3.7 million parabolic C-Band antennae in use in
Brazil, most of which receive only off-air channels. This installed base
represents the Company's target market for its digital C-Band service and the
Company expects to attract these viewers through marketing and promotional
initiatives. TVA is able to deliver 38 channels of programming (including nine
SAP channels) in addition to the off-air channels and currently delivers 26
channels (including nine SAP channels) as compared to the six channels in
addition to the off-air channels offered by its only significant competitor for
this service. TVA provides service to 41,637 C-Band subscribers throughout much
of Brazil. During the twelve-month period ended September 1996, TVA averaged
approximately 2,600 net new C-Band subscribers per month.
UHF SERVICE
TVA's UHF service is the broadcast of an encoded UHF signal over a
geographic area. TVA provides UHF service only in Sao Paulo and has 11,453
subscribers for such service. TVA's UHF service provides two channels of
programming, HBO Brasil and ESPN Brasil. This service is provided to subscribers
who are unable to receive or have chosen not to have access to other pay
television services. UHF subscribers pay on average approximately $22.80 per
month for this limited service.
RECENT ACQUISITIONS AND LICENSE APPLICATIONS
TVA's expansion into new metropolitan areas is limited by the number of MMDS
and Cable licenses held by TVA. In order to expand, TVA seeks to purchase
existing operations and licenses, form new ventures such as the Operating
Ventures to offer pay television in markets for which TVA does not hold a
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license, find new Independent Operators to purchase TVA programming, and, either
individually or along with various partners and affiliated parties, apply for
new MMDS and Cable licenses.
Since January 1996, TVA has purchased four existing Cable systems, two in
Curitiba and one in each of two other cities in southern Brazil, and has
purchased a license to operate a Cable system in a fourth city. As of the
respective dates of their acquisitions, the two systems in Curitiba had a total
of 4,515 subscribers, and the systems in the two other cities had a total of
8,298 subscribers. The four acquired systems had in the aggregate, as of
September 30, 1996, Cable networks comprising approximately 490 kilometers. The
Company is upgrading the operations of the four existing Cable systems and is
constructing a cable system in the fourth city.
In addition, TVA has submitted proposals to the Ministry of Communications
for concessions to provide service in numerous locations, including the 15 state
capitals, currently being evaluated by the Ministry of Communications for pay
television service (none of which currently receive either MMDS or Cable
service). No date has been set for the auction of these concessions, in which
TVA intends to participate either individually or in conjunction with local
partners. See "Business--Regulatory Framework." Management expects the bidding
process for new Cable licenses to begin in 1997.
TVA SISTEMA AND TVA SUL
TVA Sistema and TVA Sul operate the Company's MMDS, Cable and C-Band
businesses. TVA holds a 98.0% equity interest in TVA Sistema, and the estate of
Matias Machline, a Brazilian national, holds the remaining 2.0% equity interest.
The Company holds an 87.0% equity interest in TVA Sul, and Leonardo Petrelli, a
Brazilian national, holds the remaining 13.0%. Pursuant to an Association
Agreement, dated February 15, 1996 (the "TVA Sul Agreement"), for so long as Mr.
Petrelli controls at least 8.0% of the voting capital of TVA Sul, he is allowed
to exercise veto power over a number of decisions relating to TVA Sul,
including: any merger, split, liquidation or dissolution of TVA Sul; any sale,
purchase of or lien on property of over R$50,000 in value; any acquisition or
transfer of any debt of over R$50,000 in value; any guaranty or surety given by
TVA Sul; approval of budget and business plans; approval of dividends of over
25.0% of net profit; and any modifications to TVA Sul's ESTATUTO SOCIAL
(BYLAWS). Mr. Petrelli has irrevocably waived his veto rights and consented to
the execution and delivery by TVA Sul of the Indenture and the Subsidiary
Guarantee by TVA Sul and such other documents and agreements as may be required
under the Indenture and the Subsidiary Guarantee and the performance by TVA Sul
of its rights and obligations under the Indenture, the Subsidiary Guarantee and
such other documents and agreements to which TVA Sul may be a party pursuant to
the Indenture. The TVA Sul Agreement has a term equal to the longer of 10 years
or the duration of the licenses required to operate TVA Sul, and for equal
successive periods thereafter.
GLA AND GALAXY BRASIL
Pursuant to a Partnership Agreement, dated February 13, 1995 (the "GLA
Agreement"), GLA is managed by a seven-member Executive Committee to which
Hughes Communications GLA ("HCGLA") can appoint four members and each of the
other partners, including Tevecap, can appoint one member as long as such
partner holds at least an eight percent equity interest in GLA. The GLA
Agreement provides for local operating agreements between GLA and local
operators throughout South America, Central America, Mexico and the Caribbean
which will govern the relationship between GLA and such local operator. The GLA
Agreement stipulates that the local operator in Brazil shall be Galaxy Brasil,
100.0% of the equity interest of which is currently owned by Tevecap, but up to
12.5% of which may be purchased by HCGLA and up to 12.5% of which may be
purchased by Darlene Investments, a member of the Cisneros Group. Tevecap, in
turn, has an option to purchase up to 15.0% of the equity interest of the local
operator in Venezuela, all of which is currently owned by Darlene Investments.
The current partners in GLA have also agreed to "seek and maintain" equity
positions in other local operators. The Company has agreed to make capital
contributions under the GLA Agreement of $33.5 million, which
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amount was paid in quarterly installments ending on January 1, 1997. The GLA
Agreement places restrictions, including first negotiation, approval and
tag-along rights, on the transfer of capital stock or voting securities of each
of the current partners in GLA and in certain circumstances their parent
entities. Management expects GLA to become a Delaware limited liability company
by the end of 1997. The proposed limited liability company agreement would
contain substantially the same rights and obligations as set forth in the GLA
Agreement. In connection with the conversion of GLA into a limited liability
company, it is anticipated that GLA's uplink facility, CBC, will be transferred
to a newly-organized Delaware limited liability company, to be owned by two
units of Hughes Electronics.
Pursuant to a Local Operating Agreement (the "Local Operating Agreement")
between GLA and Galaxy Brasil, dated March 3, 1995, GLA has agreed to provide to
Galaxy Brasil the exclusive right and ability to supply the DIRECTV service in
Brazil. In accordance with a formula based on the number of subscribers, Galaxy
Brasil is obligated to pay a periodic royalty to GLA. In addition, TVA may not
own or engage in any other Ku-Band service and GLA may not own or engage in any
other pay television service in Brazil. GLA, upon the occurrence of certain
events, has the right to terminate the Local Operating Agreement, or to
terminate Galaxy Brasil's exclusive rights to distribute DIRECTV programming.
Such events include breach of any material obligation of Galaxy Brasil to GLA
and the failure of Galaxy Brasil to meet certain specified performance goals.
See "Description of Certain Indebtedness" and "Risk Factors--Rights to DIRECTV
Programming."
THE OPERATING VENTURES
The Operating Ventures also operate MMDS (TV Filme) or Cable (Canbras TVA)
systems. TVA holds a 36.0% equity interest in each of Canbras TVA Cabo and TV
Cabo Santa Branca (the "Canbras TVA Companies"). Canbras Communications Corp., a
publicly-traded Canadian company ("Canbras"), and Canbras Participacoes Ltda., a
Brazilian company ("Canbras-Par") hold the remaining interests in Canbras TVA
Cabo and Canbras-Par owns the remaining interest in TV Cabo Santa Branca. Bell
Canada International, Inc. ("BCI"), an affiliate of BCE Inc., Canada's largest
telecommunications group, holds a $27.0 million convertible debenture that upon
conversion, would permit BCI to become, inter alia, a majority shareholder of
Canbras-Par. The Canbras Association Agreement provides for each of the Canbras
TVA companies to be governed by a management committee of three members, one of
which TVA has the right to designate. In addition, TVA agreed to supply to the
Canbras TVA companies all programming regularly supplied to the Owned Systems at
"most favored prices" and other terms at which programming is provided to the
Owned Systems or to third parties in arm's- length transactions. TVA will
continue to provide MMDS service, where possible, to customers in the Santo
Andre and Sao Bernardo operating area of the Canbras TVA Companies until cable
service is available in these areas. Canbras TVA Cabo and TV Cabo Santa Branca
will compensate TVA for each subscriber that transfers from TVA's MMDS system to
a Canbras TVA Cable system. The Company agreed to grant to Canbras-Par a "right
of first refusal" to participate in Cable licenses that the Company may obtain,
directly or indirectly, and Canbras-Par granted to the Company a similar "right
of first refusal" to participate in Cable licenses acquired by Canbras-Par. The
term of the Canbras Association Agreement is for so long as Canbras-Par or its
assignee owns shares "in companies which have the objective of engaging in the
cable TV business." The Canbras Association Agreement does not specify the terms
and conditions on which any co-investments in Cable licenses are to be made, and
such terms and conditions will be negotiated in good faith, on a case-by-case
basis, in connection with any future cable license investments. See "Risk
Factors--Ownership of Future Cable Television Licenses."
TVA holds a 14.3% equity interest (not including a 2.4% interest which may
be acquired by TVA under an outstanding warrant having a nominal exercise price)
in TV Filme. The remaining interests are held by Warburg, Pincus Investors,
L.P., which currently holds a 41.2% equity interest; members of the Lins family,
Brazilian nationals, who currently hold a 16.2% equity interest; and public
shareholders, who currently hold a 28.3% equity interest. On July 29, 1996, TV
Filme completed a public offering of 2.5
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million shares of its common stock in the United States at an initial price of
$10.00 per share. Pursuant to a programming agreement, TVA provides programming
to TV Filme, and TV Filme has agreed to use 50.0% of the channel capacity of
each of its MMDS systems in Brasilia, Goiania and Belem (the "TV Filme Service
Area") to broadcast TVA programming so long as (i) the quality of TVA
programming, in the reasonable judgment of TV Filme, remains compatible with the
taste and standards of TV Filme's subscribers, (ii) TVA continues to own,
directly or indirectly, 10.0% of TV Filme's common stock and (iii) TVA remains a
subsidiary of Abril. Within the TV Filme Service Area, TVA may not provide TVA
programming to any Cable or other MMDS pay television service provider and TVA
may not compete with TV Filme as an MMDS service provider. TV Filme also has a
nonexclusive license to TVA programming in 19 cities in which TV Filme has
pending license applications, subject to any exclusive license previously
granted by TVA to other pay television service providers in such cities and
which exclusive license TVA, using its best efforts, is unable to renegotiate to
allow TVA to provide for TV Filme to have a nonexclusive license. TVA may not
charge TV Filme an amount greater than the minimum rates charged by TVA to other
subscription 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 20, 2004. From time to time, in connection with the
programming agreement, TV Filme has agreed to enter into additional agreements
with the Company regarding specified channels. The agreements typically have two
year terms and determine the monthly fees which TV Filme pays for such channels.
PROGRAMMING
TVA
TVA, through its MMDS, Cable and C-Band systems, currently provides a
programming package consisting of 15 to 44 television channels. TVA programming
emphasizes sports, movies, and news with a secondary emphasis on general
entertainment.
With respect to MMDS and Cable service in TVA's market, TVA is currently the
sole provider of ESPN Brasil, HBO Brasil, CMT Brasil, Bravo Brasil, the
Superstation, RTPi and Eurochannel. In addition, as of January 1997, TVA has
exclusive distribution rights to certain of Brazil's most important soccer
championships, including the Brasil Cup, the Brazilian Championship and the Sao
Paulo and Rio de Janeiro State Championships. TVA has entered into two
Programming Ventures, ESPN do Brasil Ltda. ("ESPN Brasil Ltda.") and HBO Brasil
Partners, through which it distributes a large volume of programming which
management believes is especially important to its subscribers. ESPN Brasil
Ltda. is a joint venture between Tevecap and ESPN Brazil, Inc. (a subsidiary of
ESPN, Inc.), each of which holds a 50.0% equity interest. ESPN, Inc. is a joint
venture between ABC and Hearst. ESPN, Inc. provides the programming of the US
channel ESPN2 to ESPN Brasil Ltda., which packages such programming with
Brazilian and other international content and provides such packaged programming
to TVA. Pursuant to a Quotaholders Agreement, dated June 26, 1995 (the "ESPN
Agreement"), ESPN Brasil has the right to transmit "ESPN2 Service" programming
as well as all library programming of ESPN. The Company has the exclusive right
to broadcast the programming of ESPN Brasil Ltda. in Sao Paulo, Rio de Janeiro,
Curitiba, Brasilia, Belem and Goiania. The Company also acts as the exclusive
sales representative of ESPN Brasil programming with respect to sales to other
Brazilian pay television providers and receives a commission in connection
therewith. The Company is also the sole advertising agent for ESPN Brasil until
June 1999 and receives a commission on advertising sales. ESPN Brasil Ltda., in
turn, receives on an exclusive basis from the Company all rights to soccer and
other sporting events acquired by the Company after February 24, 1995. ESPN
Brazil, Inc. has the right to terminate the ESPN Agreement and dissolve ESPN
Brasil Ltda. in the event that a Brazilian court issues a non-appealable
decision that the Company did not have the right to grant these rights to ESPN
Brasil. TVA's mandatory capital contributions to ESPN Brasil Ltda. are subject
to a maximum aggregate amount of $5.0 million, whether in the form of loans or
subscriptions for additional quotas. The ESPN Agreement is effective until June
17, 2045 and automatically renewable for a 50-year period.
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HBO Brasil Partners is a joint venture between TVA, which holds a 33.3%
equity interest, and HBO Ole Partners, which holds the remaining 66.7% equity
interest. HBO Ole Partners is, in turn, a joint venture among Time-Warner, Sony
and Ole Communications, Inc. HBO Brasil Partners has exclusive programming
contracts with Sony, Time-Warner and certain independent programming
distributors. HBO Brasil Partners, through an affiliate, provides the
programming for HBO Brasil to TVA. Pursuant to a Partnership Agreement dated
April 15, 1994 (the "HBO Agreement"), HBO Brasil Partners is managed by a
Partners' Committee comprised of an equal number of agents appointed by TVA and
HBO Ole Partners, the other partner. The HBO Agreement provides for the Company
to enter into an affiliation agreement with HBO Brasil Partners, pursuant to
which the Company pays a monthly fee per subscriber to the partnership.
In addition to the Programming Ventures, TVA has entered into a number of
other programming agreements. Since June 1991, TVA has had a programming
agreement with De Santi & Vallone to broadcast SuperStation programming in
Brazil, with exclusivity in Sao Paulo, Rio de Janeiro, Curitiba, Brasilia, Belem
and Goiania, as well as throughout all of Brazil via C-Band. Through the
SuperStation, TVA provides exclusive attractions from the news departments of
two major US television networks (CBS and NBC) as well as general interest
programming. In December 1996, TVA began transmitting programming from the
History Channel on the SuperStation. TVA acquired the rights to transmit the
History Channel programming through an agreement with A&E Networks Television.
The Bravo Company, a joint venture among NBC and certain other parties, provides
international movies and arts programming for the Bravo Brasil channel on an
exclusive basis to TVA for distribution in Brazil. TVA customizes Bravo Brasil
with the insertion of Brazilian arts and movie programming. Country Music
Television, which is owned by Group W Broadcasting, Inc. and Gaylord
Entertainment Company, provides programming for CMT Brasil, which TVA customizes
with Brazilian content. Pursuant to a Letter of Understanding, dated January 18,
1996, TVA and Country Music Television ("CMT") agreed to form CMT Brasil as a
joint venture entity, in which TVA will hold a 75.0% equity interest and CMT
will hold the remaining 25.0% equity interest. The formation of this joint
venture is still under discussion by the parties. Eurochannel is a channel
assembled exclusively by TVA with programming from the German channel Deutsche
Welle, the Spanish channel Radiotelevision Espanola, European movies, and series
acquired from the BBC. Additionally, pursuant to existing agreements, TVA is
planning, through DIRECTV service, to become the first provider of Cinemax
programming in Brazil (expected by March 1997). TVA also plans to transmit CNA,
a Brazilian news channel to be produced by Abril with programming from SBT, a
Brazilian off-air channel. TVA distributes its programming through its own
operations and through sales of programming to the Operating Ventures, Galaxy
Latin America, the Independent Operators and, to a lesser extent, to competing
pay television providers.
In addition, TVA offers non-exclusive programming from major international
subscription television programming providers, including such channels as ESPN
International, CNN, TNT, Fox, and the Discovery Channel.
TVA currently offers subscribers the following channels, among others:
HBO BRASIL is the dominant first-run pay television movie channel in Brazil.
HBO Brasil airs 24 hours a day offering an average of 12 different films per day
with limited commercial slots. All films are either subtitled or dubbed into
Portuguese. In the case of dubbed versions, viewers can listen to the original
soundtrack on an SAP channel. Recently, in some locations, TVA began offering
HBO Brasil2, transmitting HBO Brasil films with a six hour time shift.
ESPN BRASIL, offered exclusively by TVA, began transmission on June 17,
1995. TVA negotiated agreements with the major Brazilian soccer confederations,
providing TVA, as of the 1997 season, exclusive first choice coverage of soccer
games of the Brazilian Soccer Championship, the Sao Paulo State Championship and
the Brazil Cup. ESPN Brasil's programming centers around these exclusive
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soccer games and other exclusive Brazilian and international sports
entertainment programs, mixed with programming from ESPN2.
ESPN INTERNATIONAL is the second sports channel offered by TVA, for which
TVA recently signed a new non-exclusive 50-year contract automatically renewable
for another 50-year period. ESPN International offers a number of different
sporting events, which include auto racing, National Football League games,
professional tennis matches, Major League Baseball games, and National
Basketball Association games. ESPN International also currently provides
Portuguese language commentaries exclusively to TVA.
CNN INTERNATIONAL features news and information programming, offering
international news coverage concerning politics, business, financial and
economic developments, 24 hours a day.
TNT is a movie channel which, pursuant to a non-exclusive agreement with
Turner International, Inc., offers the Turner Network Television movie
collection, including over 5,000 classic movie titles from MGM. In addition, TNT
airs children's programming, documentaries and sporting events. The movies
presented by TNT are broadcast in stereo sound and subtitled or dubbed in
Portuguese or Spanish. In the case of dubbed versions, viewers can listen to the
original soundtrack on a SAP channel.
CARTOON NETWORK is an animated cartoon channel targeted to children that
offers programs such as THE FLINTSTONES, THE JETSONS, THE SMURFS, YOGI BEAR and
other classic series.
DISCOVERY BRASIL is comprised of programming shown on the US Discovery
Channel, based on topics in the areas of nature, science and technology,
history, adventure and world cultures.
THE FOX CHANNEL presents movies, as well as programs from the 2,000 titles
in Fox's library. Fox also presents American television series, such as L.A.
LAW, M*A*S*H, and THE SIMPSONS, among many others.
THE SUPERSTATION is a general entertainment channel programmed by a third
party for TVA's distribution in Brazil. This third party has entered into
exclusive contracts with leading American networks for the transmission of
documentary, variety, music and news programming. The SuperStation offers
popular programs, such as THE LATE SHOW WITH DAVID LETTERMAN, E! ENTERTAINMENT
programs, NBC and CBS news, as well as a variety of other programs, including
programming from the History Channel, interviews, and programs on such topics as
food and cooking, travel and fashion.
EUROCHANNEL is specially assembled and packaged by TVA and offers
subscribers European programming. The channel presents programs from the Spanish
Radiotelevision Espanola, the German Deutsche Welle, the BBC, the news from the
French TF1, as well as a variety of quality European films. News, sports, music
and variety shows are also offered.
MTV BRASIL is a 24-hour channel produced by MTV Brasil, a joint venture
company owned by Abril and an indirect subsidiary of Viacom International. MTV
Brasil is entirely produced in Brazil in Portuguese. MTV Brasil has licensing
agreements with the MTV Network, a division of Viacom International, and
transmits a combination of music and other video clips, cartoons and local
programming.
MTV LATINO presents original programming from MTV Latin America, which
includes music and other video clips and cartoons in Spanish.
CMT BRASIL is a country music channel with programming supplied from the US
version of Country Music Television channel exclusively to TVA and customized
for Brazil with Brazilian country music and local events.
SONY ENTERTAINMENT is primarily a situation-comedy channel, consisting of
Sony's film library, including FRIENDS, SEINFELD, MAD ABOUT YOU and E.R.
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THE WARNER CHANNEL is a family entertainment channel, with new and classic
cartoons, children's programs and movies.
BRAVO BRASIL is an arts and movie channel, following the same concept as the
US version of the Bravo channel, showing high quality, cultural events, such as
classical music, jazz, opera, ballet and European movies. TVA inserts local
programming, such as Brazilian music and movies, as well as shows performed in
Brazil by international artists.
RTPI, Radiotelevisao Portuguesa Internacional, is a Portuguese state-owned
general entertainment channel produced and assembled in Portugal, airing music
events, talk shows, movies, news, documentaries, exclusive to TVA.
TVA's complete channel offerings as of September 1996 were as follows:
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
HBO Brasil.............................................. movie channel
HBO Brasil 2............................................ HBO Brasil with a six-hour time shift
ESPN Brasil............................................. sports channel
ESPN International...................................... sports channel
CNN International....................................... news channel
TNT..................................................... movie channel
Cartoon Network......................................... cartoon channel
Discovery Brasil........................................ science and documentary channel
Fox Channel............................................. movie channel
SuperStation............................................ variety programming channel
Eurochannel............................................. European variety programming channel
MTV Brasil.............................................. music channel
MTV Latino.............................................. music channel
RTPi.................................................... Portugal's state television channel
CMT Brasil.............................................. music channel
TV5..................................................... French variety programming channel
WorldNet................................................ American news and variety channel
RTVE.................................................... Spanish variety channel
Deutsche Welle.......................................... German variety channel
America 2............................................... Argentine variety channel
CV Noticias............................................. Argentine news channel
CV Sports............................................... Argentine sports channel
Canal de Noticias NBC................................... NBC news channel in Spanish
TeleUno................................................. Spanish variety channel
Sony Entertainment...................................... situation comedy channel
The Warner Channel...................................... family entertainment channel
Bravo Brasil............................................ arts and movie channel
Globo................................................... national off-air channel
SBT..................................................... national off-air channel
Gazeta/CNT.............................................. national off-air channel
Bandeirantes............................................ national off-air channel
Record.................................................. national off-air channel
Manchete................................................ national off-air channel
Cultura................................................. national off-air channel
CBI..................................................... local off-air channel
Rede Mulher............................................. local off-air channel
Rede Vida............................................... local off-air channel
TV Senado............................................... local off-air channel
TV Educativa Rio........................................ local off-air channel
</TABLE>
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The following additional channels are under development and are expected to
be offered by TVA to the Brazilian subscription television marketplace.
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Cinemax................................................. movie channel
CNA..................................................... news channel
Mundo................................................... variety channel
E! Entertainment........................................ entertainment news channel
</TABLE>
DIRECTV
The DIRECTV programming package currently offered by Galaxy Brasil as of
September 30, 1996 consisted of 49 video channels (including 19 pay-per-view
channels), certain of which, such as Bravo Brasil and CMT Brasil, are provided
by TVA. Since September 30, 1996, the number of channels offered by Galaxy
Brasil has increased to 56. The Company expects that the number of channels will
increase to approximately 70 video and 30 audio channels in the first quarter of
1997. Programming includes movies, news, athletic events and other programs
available on a pay-per-view basis. The complete DIRECTV service channel
offerings, other than pay-per-view, as of September 1996 were as follows:
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
HBO Brasil.............................................. movie channel
HBO Brasil 2............................................ HBO Brasil with a six-hour time shift
ESPN Brasil............................................. sports channel
ESPN International...................................... sports channel
Eurochannel............................................. European variety programming channel
CMT Brasil.............................................. music channel
MTV Brasil.............................................. music channel
MTV Latino.............................................. music channel
RTPi.................................................... Portugal's state television channel
CNN International....................................... news channel
TNT..................................................... movie channel
Cartoon Network......................................... cartoon channel
Discovery Brasil........................................ science and documentary channel
Sony Entertainment...................................... sit-com channel
Bravo Brasil............................................ art and movie channel
Deutsche Welle.......................................... German variety channel
RTVE.................................................... Spanish variety channel
Tele Uno................................................ Spanish variety channel
Warner Channel.......................................... family entertainment channel
CBS Telenoticias........................................ CBS news channel in Spanish
Bloomberg............................................... business news channel
Multipremier............................................ Mexican movie channel
ZAZ..................................................... Mexican children's programming channel
Travel Channel.......................................... travel programming channel
NHK..................................................... Japanese general entertainment channel
BBC..................................................... U.K. news channel
TVN..................................................... Chilean programming channel
Gazeta/CNT.............................................. national off-air channel
TV Senado............................................... local off-air channel
TV Educativa Rio........................................ local off-air channel
TV Cultura.............................................. local off-air channel
</TABLE>
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Since September 30, 1996, the Company has added the following channels to
the DIRECTV service:
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Nickelodeon............................................. children's programming channel
Discovery Kids.......................................... children's programming channel
Locomotion.............................................. children's programming channel
BBC World............................................... world news channel
TV Chile................................................ Chilean programming channel
Playboy TV.............................................. adult programming channel
AdulTVision............................................. adult programming channel
</TABLE>
OPERATIONS
MARKETING. The Company periodically conducts marketing surveys to gauge
consumer preferences and evaluate new and existing markets. TVA also frequently
evaluates the demographics of the subscribers to its programming, seeking to
provide programming most in demand. In each market, TVA's marketing staff
typically applies one or more of 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, billboard,
magazine and newspaper advertisements, (vi) prewiring arrangements with
residential housing developers and (vii) other promotional marketing activities,
including referral programs and promotional gifts.
INSTALLATION. The installation package delivered to a new subscriber
depends upon the type of programming delivery service chosen by the subscriber.
The MMDS installation package features a standard rooftop mount linked to an
antenna and related equipment, including a decoder, located at the subscriber's
location. Cable service requires the installation of a cable line and a decoder
at the subscriber's dwelling. Ku-Band satellite service typically involves
installation of a 60-centimeter dish antenna, which can be mounted outside a
subscriber's window or on the rooftop of a subscriber's building or house,
together with a decoder located at the subscriber's dwelling. As with Ku-Band
service, C-Band service installation includes the installation of a dish
antenna, although of a greater size (1.1 meters in diameter) and a decoder and
related equipment at the subscriber's home. DBS installations at single-family
homes require an entire installation package, while installations at multiple
dwelling units in which drop lines are installed require only a decoder at each
subscriber's location and therefore are less costly to the Company. Once a new
subscriber has requested service, the amount of time a subscriber waits for the
commencement of service depends on several factors, including type of service,
whether the subscriber has access to Cable, whether the subscriber is in a
single family home or multiple dwelling unit, whether the topography of the
surrounding area makes MMDS service viable and whether the subscriber is located
in an area of Brazil that can be reached by C-Band or Ku-Band service. TVA
provides installation service with its own personnel and through local
subcontractors. TVA or such subcontractor attempts to complete installation and
begin service within 30 days of a subscription order.
UPLINK FACILITIES. A major part of the delivery of TVA's DBS service,
whether Ku-Band or C-Band, is the collection of programming and the
transmission, or uplinking, of such programming to the Galaxy III-R satellite
and the Brasilsat satellite, respectively. Upon receipt of programming, the
Company processes, compresses, encrypts, multiplexes (combines with other
channels) and modulates (prepares for transmission to the satellite at a
designated carrier frequency) such programming. The Company uses uplink
facilities of Embratel in Sao Paulo to service its existing C-Band service. TVA
delivers its programming to the Embratel uplink center via microwave
transmission, where it is prepared for transmission to the Brasilsat satellite
using equipment provided by TVA. For its DIRECTV service, the Company has built
the Tambore Facility, an uplink center, for a total cost of approximately $20
million in
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Tambore in the State of Sao Paulo consisting of an uplink antenna and ancillary
equipment. The Tambore Facility has operated since June 1996 and is used to
uplink Brazilian programming to the Galaxy III-R satellite. Through the Galaxy
III-R satellite, programming from Galaxy Brasil is mixed with programming from
the California Broadcast Center (the "CBC") in Long Beach and with programming
provided by members of the Cisneros Group through an uplink facility in
Venezuela and by Grupo Frequencia Modulada Television through its uplink
facility in Mexico, for delivery to subscribers in Brazil and other countries to
which GLA provides DIRECTV service. The Tambore Facility and the uplink
facilities in Venezuela, Mexico and the United States are equipped with full
emergency power generation equipment and other emergency facilities to enable
GLA to avoid signal disruptions.
PROGRAMMING FACILITIES. Programming equipment is used to prepare the
programming material for transmission via the Company's MMDS, Cable or DBS
systems, including compression with respect to Cable and Ku-Band service. The
programming equipment inserts commercial or promotional material, if
appropriate, monitors the quality of the picture and sound, and delivers the
material to the multiplexing system. For programming delivered to TVA as taped
material, the programming equipment also compiles the various programming
segments, inserting commercial and promotional material.
COMPRESSION SYSTEM. The Company also uses its programming facilities to
digitize the programming signals used in TVA's Cable and Ku-Band service.
Digital technology permits the compression and transmission of a digital signal
to facilitate multiple channel transmission through a single channel's
bandwidth, thereby giving broadcasters the ability to offer significantly more
channels than is currently the case with analog systems. Digitized signals are
compressed using the MPEG-2 standard. (Moving Pictures Expert Group-2, the
international video compression standard).
CONDITIONAL ACCESS SYSTEM. GLA and News Digital Systems Limited ("NDS"), a
wholly-owned subsidiary of News Corporation, are parties to a System
Implementation and License Agreement. Under the Local Operating Agreement, GLA
provides to Galaxy Brasil the use of the access control system licensed from NDS
and the Smart Cards provided by NDS. The Company expects the access control
system to adequately protect DIRECTV programming from unauthorized access. With
Smart Card technology, it is possible to change the access control system in the
event of a security breach allowing TVA to reestablish security. Management
believes that the ability to take electronic measures and to replace the Smart
Cards will provide an effective means to combat unauthorized programming access.
SUBSCRIBER SERVICE. Management believes that delivering high levels of
subscriber service in installation and maintenance enables it to maintain high
levels of subscriber satisfaction and to maximize subscriber retention. To this
end, TVA attempts to promptly schedule installations, provides a subscriber
service hotline in each of the metropolitan areas in which TVA operates,
attempts to promptly provide response repair service, and attempts to make
follow-up calls to new subscribers shortly after installation to ensure
subscriber satisfaction. TVA seeks to instill a subscriber 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 ways to increase subscriber satisfaction. TVA also has various
employee bonus programs linked to measures of subscriber satisfaction. To enable
its employees to provide quicker service, TVA is working to decentralize its
subscriber service operations by opening small service offices throughout TVA's
served markets.
MANAGEMENT INFORMATION SYSTEMS AND BILLING. Management believes that TVA's
proprietary management information systems enable TVA to deliver superior
subscriber service, monitor subscriber payment patterns and facilitate the
efficient management of each of its operating systems. Management believes that
TVA's billing procedures are an integral part of its strategy to maintain high
levels of subscriber satisfaction and to maximize subscriber retention.
Subscribers select the day of the month on which payment for that month's
service is due, and pay their bills at a bank through direct transfers, which is
the standard payment method in Brazil. After disconnection and the removal of
the delinquent
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subscribers decoder box, the Company generally offers to reconnect the
delinquent subscribers for a fee of approximately $50.00.
COMPETITION
GENERAL
TVA and the Operating Ventures compete with pay television service providers
using Cable, MMDS and DBS transmission technologies. The Company expects to
continue to face competition from a number of existing and future sources,
including potential competition as a result of new and developing technologies
and the easing of regulation in the pay television industry. TVA believes that
competition is and will continue to be primarily based upon program offerings,
customer satisfaction, quality of the system network and price. Since there is a
very limited history of pay television services in Brazil, there can be no
assurance that, based on the potential size of the Brazilian pay television
industry, the pay television market will be able to sustain a number of
competing pay television providers. The Company and the Operating Ventures also
compete with national broadcast networks and regional and local broadcast
stations. TVA's MMDS and Cable operations and its C-Band satellite service and
Ku-Band satellite service may compete for the same subscribers.
MMDS AND CABLE SERVICE
TVA's principal competitors in Cable service are operations owned or
controlled by Multicanal Participacoes S.A. ("Multicanal"), Net Brasil S.A.
("Net Brasil"), Globo Cabo S.A. ("Globo Cabo") and RBS Participacoes S.A.
("RBS"). Multicanal and Net Brasil operate Cable systems throughout much of
Brazil, including Sao Paulo, Rio de Janeiro, Curitiba and several other large
metropolitan areas. Globo Cabo has Cable systems in approximately 18 cities
including Brasilia. RBS operates Cable services in 19 cities in Brazil and
provides MMDS service in Porto Alegre. Net Brasil also provides MMDS service in
Recife, and has a license to provide MMDS service in Curitiba. Globo
Comunicacoes e Participacoes Ltda. ("Globo Par") and TV Globo, the owners of
Brazil's most popular off-air channels (together, "Globo"), control, or have
significant interests, in each of Multicanal, Net Brasil and Globo Cabo. RBS
also holds an interest in Multicanal. The systems controlled by Multicanal, Net
Brasil, Globo Cabo and RBS offer a similar number of channels of programming at
prices comparable to those charged for TVA's MMDS and Cable Service. Each of
these systems broadcasts programming purchased from TVA as well as from other
services.
DBS SERVICE
Management believes its only competitor in DBS service is Net Sat Servicos
Ltda. ("Net Sat") in which Globo Par also has a controlling interest and whose
other equity holders include News Corporation plc, a subsidiary of The News
Corporation Limited and Grupo Televisa, S.A., of Mexico. TVA offers 26 channels
of programming with its C-Band service, compared to the six channels offered by
Net Sat's C-Band service. However, while monthly charges are comparable and
TVA's digital C-Band service offers more channels, often with better picture
quality, the analog decoder necessary for Net Sat's C-Band service is
significantly less expensive than the digital decoder TVA's subscribers must
purchase. With respect to Ku-Band service, Net Sat uses a satellite which
provides broader coverage of Brazil. The orbital location of the Galaxy III-R
satellite enables GLA to offer DIRECTV service to substantially all of the TV
Homes in Brazil. However, in the less populated northern and western regions of
Brazil, reception of DIRECTV programming requires a dish antenna up to 1.1
meters in diameter and in the western third of Brazil (a sparsely populated area
when compared to the southern and eastern regions) reception may not be
practical due to the size of the antenna necessary for reception. TVA's Ku-Band
service currently offers 56 channels of programming, including 9 SAP channels
and 19 pay-per-view channels, as compared to the 26 channels of programming,
including 4 pay-per-view channels, offered by Net Sat.
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OFF-AIR BROADCAST TELEVISION
Broadcasting services are currently available to substantially all of the
Brazilian population without payment of a subscription fee by six
privately-owned national broadcast television networks and a government-owned
national public television network. The six national broadcast television
networks and their local affiliates currently provide services to nearly all
Brazilian TV Homes without payment of a subscription fee. The national broadcast
television networks and local broadcast stations receive a significant portion
of their revenues from the sale of television advertising, which revenues are
based in part on the audience share and ratings for the networks' programs.
Programming offered by pay television providers, including TVA, directly
competes for audience share and ratings with the programming offered by
broadcast television networks as well as regional and local television
broadcasters. The six national broadcast television networks are Globo, SBT,
Bandeirantes, TV Manchete, TV Record and Gazeta/CNT. The national television
networks utilize one or more satellites to retransmit their signals to their
local affiliates throughout Brazil.
PROGRAMMING SALES
TVA competes with a variety of Brazilian and international programming
providers for sales of its programming to the Operating Ventures and Independent
Operators. In addition, TVA competes with other pay television operators to
purchase programming from some of these Brazilian and international sources.
REGULATORY FRAMEWORK
The subscription television industry in Brazil is subject to regulation by
the Brazilian Ministry of Communications pursuant to the Brazilian
Telecommunications Code of 1962, as amended (the "Telecommunications Code"). The
Ministry of Communications grants concessions for MMDS, Cable, DBS, and UHF
licenses.
MMDS REGULATIONS
GENERAL. The Telecommunications Code empowers the Ministry of
Communications, among other things, to issue, revoke, modify and renew licenses
within the spectrum available to MMDS systems, to approve the assignments and
transfer of control of such licenses, to approve the location of channels that
comprise MMDS systems, to regulate the kind, configuration and operation of
equipment used by MMDS systems, and to impose certain other reporting
requirements on channel license holders and MMDS operators. The licensing and
operation of MMDS channels are currently governed by Rule No. 002/94 ("Rule
002/94"), adopted by Ministry of Communications Administrative Rule No. 043/94
("Rule 043/94"). Under Rule 002/94, 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. On September 9, 1996,
the Ministry of Communications issued Ordinance No. 1,085 ("Ordinance 1085"),
which revised Rule 002/94 and imposed restrictions on the granting and use of
MMDS licenses.
LICENSES. The Ministry of Communications grants licenses and regulates the
use of channels by MMDS operators to transmit video programming, entertainment
services and other information. A maximum of 31 MMDS channels (constituting a
spectrum bandwidth of 186 MHz) may be authorized for use in an MMDS market.
While licenses are usually granted for the use of up to 16 channels, depending
on technical feasibility and the existence of competition, the Ministry of
Communications can grant a license for all 31 channels available in one specific
area. If the license is for 16 or more channels, at least two channels must be
reserved for educational and cultural programming. If the license involves less
than 15 channels, only one channel must be reserved for educational and cultural
purposes. If a license is for fewer than 15 channels, there is no obligation to
reserve any channel for educational and cultural
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purposes. 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).
Any company in which nationals of Brazil own at least 51.0% of the voting
capital is eligible to be granted a license to operate an MMDS service. For
purposes of this regulation, "national" means any native Brazilian or a
naturalized Brazilian who has held Brazilian citizenship for at least ten years.
The license is granted for a renewable period of 15 years. The application for
renewal of a license must be filed with the Ministry of Communications during
the period from 180 to 120 days before the end of the license term. To renew the
license, the license holder must (i) meet applicable legal and regulatory
requirements, (ii) have complied with all legal and contractual obligations
during the term of such license, (iii) meet certain technical and financial
requirements and (iv) provide educational and cultural programming.
Under the most recently promulgated rules of Ordinance 1085, each license
holder and its affiliates may be granted permission to operate MMDS systems in
different areas of Brazil, provided that no holder may be granted licenses for
(i) more than seven municipalities with a population equal to or exceeding
700,000 inhabitants and (ii) more than 12 municipalities with a population
between 300,000 and 700,000 inhabitants. The restrictions 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. Ordinance 1085 grants the Ministry of Communications
full discretion to alter or eliminate the restrictions. The term affiliate is
defined by Ordinance 1085 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." The Company
currently controls four MMDS licenses in cities of more than 700,000 inhabitants
(Sao Paulo, Rio de Janeiro, Curitiba and Porto Alegre), but in each such city
TVA has at least one competitor. No assurance can be given as to the number of
licenses that will be granted, if any. 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.
The Ministry of Communications awards licenses to use MMDS channels based
upon applications demonstrating that the applicant is qualified to hold the
license, that the proposed market is viable and that the operation of the
proposed channels will not cause impermissible interference to other permitted
channels. After the Ministry of Communications determines that an application
has met these requirements, it publishes a notice requesting comments from all
parties interested in providing the same services in the same or a near area.
Depending on the comments received, the Ministry of Communications may decide to
open a public bid for the service in that area, although it has not done so in
the past. In the case of a public bid, applicants would be evaluated based on a
number of factors including the applicant's proposed schedule for implementing
service aspects of the applicant's community relations, such as involvement of
local residents as stockholders of the applicant, the applicant's commitment to
local programming and the extent to which the applicant provides free
programming to local cultural and educational institutions. Once an MMDS license
application is granted by the Ministry of Communications, the license holder
must finalize construction and begin operations within 12 months, which period
may be extended by an additional 12 months.
In addition to qualifying under the application process described above, a
license holder must also demonstrate that its proposed signal does not violate
interference standards in the area of another MMDS channel license holder. To
this end, existing license holders are given a 30-day period in which to
ascertain and comment to the Ministry of Communications whether the new license
holder's proposed signal will interfere with existing signals. The area covered
by the services is exclusive to a radius of five to 50 kilometers around the
transmission site, depending on the technical capability of the operator.
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On November 28, 1995, the President of Brazil enacted Decree No. 1719, which
provides that all granting of concessions and licenses for the rendering of
commercial telecommunications services in Brazil shall be made through bidding
procedures. As of March 31, 1996, the Ministry of Communications had not granted
any new licenses for the operation of MMDS systems pursuant to such Decree.
OTHER REGULATIONS. MMDS license holders are subject to regulation with
respect to the construction, marketing 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 subscription 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. Rule No. 002/94 and Ordinance 1085 have 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 subscription 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. See "Risk Factors--Risk
Factors Relating to the Company--Government Regulation."
CABLE REGULATION
GENERAL. Cable services in Brazil are licensed and regulated by the
Ministry of Communications pursuant to Law No. 8977, enacted by the Brazilian
National Congress on January 6, 1995 ("Law 8977"), and Decree No. 1718, enacted
by the President of Brazil on November 28, 1995 ("Decree 1718"). Until Law 8977
was enacted in 1995, the Brazilian Cable industry had been governed by two
principal regulatory measures since its inception in 1989: Ordinance No. 250,
issued by the Ministry of Communications on December 13, 1989 ("Ordinance 250"),
and its successor, Ordinance No. 36, issued by the Ministry of Communications on
March 21, 1991 ("Ordinance 36"). On September 9, 1996, the Ministry of
Communications issued Ordinance 1086 ("Ordinance 1086") regulating the granting
and use of Cable Licenses.
Ordinance 250 regulated the distribution of television signals ("DISTV") by
physical means (I.E., by Cable) to end-users. DISTV services generally are
limited only to the reception and transmission of signals without any
interference by a DISTV operator with the signal content. Under Ordinance 250,
101 authorizations were granted by the Ministry of Communications to local
operators to commercially exploit DISTV services. Although Ordinance 250 did not
specifically address Cable services, a number of DISTV operators (including the
Company's Cable systems) began to offer Cable services based on DISTV
authorizations.
By issuing Ordinance 36 in March 1991, the Ministry of Communications
suspended Ordinance 250, although it allowed the DISTV authorizations issued
during the preceding 15 months to remain valid. The Ministry of Communications
submitted proposed regulations relating to Cable services for public comment at
the same time Ordinance 36 was issued. These proposed regulations were never
adopted and no further regulatory action was taken until the enactment of Law
8977 in 1995. Currently Law 8977, together with Decree 1718 (which provides the
implementing procedures for Law 8977) and Ordinance 1086, constitute the
regulatory framework for Cable services in Brazil.
LICENSES. Under Law 8977, a Cable operator must obtain a license from the
Ministry of Communications in order to provide Cable services in Brazil. All
Cable licenses are nonexclusive licenses to provide Cable services in a service
area. Cable licenses are granted by the Ministry of Communications for a period
of 15 years and are renewable for equal and successive periods. Renewal of the
Cable license by the Ministry of Communications is mandatory if the Cable system
operator has (i) complied
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with the terms of the license grant and applicable governmental regulations and
(ii) agrees to meet certain technical and economic requirements relating to the
furnishing of adequate service to subscribers, including system modernization
standards.
Ordinance 1086 imposes restrictions on the number of areas that can be
served by a Cable television system operator (or an affiliate thereof). Pursuant
to Ordinance 1086, a Cable system operator (or an affiliate thereof) may only
hold licenses with respect to (i) a maximum of seven areas with a population of
700,000 and above and (ii) a maximum of 12 areas with a population of 300,000 or
more and less than 700,000. The restrictions only apply to areas in which the
Cable system operator (or an affiliate thereof) faces no competition from other
pay television services, excluding services that utilize a satellite to transmit
their signal. Ordinance 1086 grants the Ministry of Communications full
discretion to alter or eliminate the restrictions. The term affiliate is defined
by Ordinance 1086 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." The Company
currently controls four Cable licenses in cities of more than 700,000
inhabitants (Sao Paulo and Curitiba), but in each such city TVA has at least one
competitor.
Generally, only legal entities that are headquartered in Brazil and that
have 51.0% of their voting capital by Brazilian-born citizens or persons who
have held Brazilian citizenship for more than 10 years are eligible to receive a
license to operate Cable systems in Brazil. In the event that no private entity
displays an interest in providing Cable services in a particular service area,
the Ministry of Communications may grant the local public telecommunications
operator a license to provide Cable services.
Cable operators that presently provide Cable services under a DISTV
authorization granted under Ordinance 250 are required under Law 8977 to file
applications to have their DISTV authorizations converted into Cable licenses.
Ordinance 1086 grants a one year period from the date a DISTV authorization is
converted into a cable television license for any Cable system operator to
comply with the restrictions. The Company's Cable systems, all of which are
operating under DISTV authorizations, have applied for conversion of their DISTV
authorizations.
Cable licenses for service areas not covered by existing authorizations will
be granted pursuant to a public bidding process administered by the Ministry of
Communications after prior public consultation. All such licenses shall be
nonexclusive licenses. In order to submit a bid for a license, a bidder must
meet certain financial and legal prerequisites. After such prerequisites are
met, a bidder must then submit a detailed bid describing its plan to provide
Cable services in the service area. In the qualification phase of the bidding
process, the Ministry of Communications assigns a number of points to each bid
based on certain weighted criteria, including the degree of ownership of the
bidder by residents of the local service area; the channel capacity of the
proposed system; the timetable for installing the Cable system; the timetable
for offering subscription programming and amount of such programming; the time
allocated to local public interest programming; the number of channels allocated
to educational and cultural programming; the number of establishments, such as
schools, hospitals and community centers, to which basic service programming
will be offered free of charge; and the proposed basic subscription rate. After
calculating the number of points awarded to each bidder, the Ministry of
Communications will then apply a formula based on the population of the service
area to select the winning bid from among those bidders that meet certain
defined minimum qualifying thresholds. For service areas with a population of
700,000 or more inhabitants, the qualified bidder that submits the highest bid
for the license will be selected. For service areas with a population between
300,000 and 700,000 inhabitants, the winning bid is selected based on the
highest product obtained by multiplying the number of points awarded in the
qualification phase and the amount bid for the license. For service areas with
less than 300,000 inhabitants, the winning bid is selected on the basis of the
number of points awarded in the qualification phase and the payment of a fixed
fee.
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Once a Cable license is granted, the licensee has an 18 month period from
the date of the license grant to complete the initial stage of the installation
of the Cable system and to commence providing Cable services to subscribers in
the service area. The 18 month period is subject to a single 12 month extension
for cause at the discretion of the Ministry of Communications.
Any transfer of a Cable license is subject to the prior approval of the
Ministry of Communications. A license generally may not be transferred by a
licensee until it has commenced providing Cable services in its service area.
Transfers of shares causing a change in the control of a license or the legal
entity which controls a license also is subject to the prior approval of the
Ministry of Communications. The Ministry of Communications must receive notice
of any change in the capital structure of a licensee, including any transfer of
shares or increase of capital that do not result in a change of control.
A license can be revoked, upon the issue of a judicial decision, in the
event the licensee lacks technical, financial or legal capacity to continue to
operate a Cable system; is under the management of individuals, or under the
control of individuals or corporations who, according to Law 8977, do not
qualify for such positions; has its license transferred, either directly or by
virtue of a change in control, without the prior consent of the Ministry of
Communications; does not start to provide Cable services within the time limit
specified by Law 8977; or suspends its activities for more than thirty
consecutive days without justification, unless previously authorized by the
Ministry of Communications.
CABLE RELATED SERVICE REGULATION
GENERAL. Brazilian telecommunications services are governed primarily by
(i) Article 21 of the Federal Constitution, as amended by Amendment No. 8 of
August 15, 1995 ("Amendment 8"), and (ii) the Telecommunications Code (Law No.
4117 of August 27, 1962, as amended). The Brazilian Government also has issued
detailed regulations covering specific areas of telecommunications services,
including radio broadcasting, paging, trunking, subscription television, Cable
television and cellular telephony. The Ministry of Communications presently is
responsible for the regulation of telecommunications services in Brazil. Prior
to its amendment in 1995, Article 21 of the Federal Constitution required the
Brazilian Government to operate directly, or through concessions granted to
companies whose shares are controlled by the Brazilian Government, all
telephone, telegraph, data transmission and other public telecommunications
services. This constitutional requirement was the basis for the establishment of
the state-owned telephone monopoly, Telebras, which holds controlling interests
in 27 regional telephone operating companies. With the adoption of Amendment 8,
Article 21 was modified to permit the Brazilian Government to operate
telecommunications services either directly or through authorizations,
concessions or permissions granted to private entities. In particular, Amendment
8 removed the constitutional requirement that the Brazilian Government must
either directly operate or control the shares of companies which operate
telecommunications services. Even with the adoption of Amendment 8, the
Brazilian Government still retains broad regulatory powers over
telecommunications services. Notwithstanding the existence of the Telebras
monopoly, private companies have been permitted under Brazilian law to provide a
number of telecommunications services other than telephony, including radio
broadcasting, paging, trunking, subscription television and cable television
services. However, fixed public telephony and cellular telephony were
exclusively provided by Telebras through its regional telephone operating
companies. While Amendment 8 permits the Brazilian Government to authorize
private companies to provide such services, further action on the part of the
Brazilian legislature will be required before private entities may actually
provide fixed telephony services.
HIGH-SPEED CABLE DATA SERVICES. Law 8977 and Decree 1718, among other
things, authorize cable television operators, such as the Company, in addition
to furnishing video and audio signals on their cable networks, to utilize their
networks for the transmission of meteorological, banking, financial, cultural,
prices and other data. This broad grant of authority by the Ministry of
Communications is understood to permit Cable television operators to furnish
services such as interactive home banking and high-speed Cable data services to
subscribers through their cable television networks.
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CABLE TELEPHONY. Under present Brazilian law, only Telebras' regional
telephone operating companies are permitted to furnish fixed telephone services
in Brazil. Therefore, absent a change in Brazilian law, the Company would not be
permitted to furnish cable telephony on its network. There are, however, certain
limited regulatory exceptions pursuant to which private entities other than
Telebras and the regional telephone operating companies have been permitted to
provide limited fixed telephony services in Brazil. Under one particular
exception, certain private telephone networks (CENTRAIS PRIVADAS DE COMUTACAO
TELEFONICA or "CPCT") serving "condominiums" (as such term is defined under
Brazilian law) have been permitted to interconnect their private telephone
networks to the public telephone network operated by the local telephone
operating company. A CPCT is comparable to a private branch exchange (PBX) found
in some larger apartment complexes, hotels and businesses in the United States.
Under Brazilian law, the term "condominium" refers to residential and
nonresidential buildings or building complexes that have entered into a legal
association. In practice, a condominium desiring to establish a CPCT will
generally contract with a private service provider to install, operate and
maintain the CPCT and to secure interconnection with the public telephone
network. Ordinance No. 119/90 of the 10 December 1990 ("Ordinance 119"), which
was issued by the predecessor to the Ministry of Communications, sets forth
requirements for the interconnection of CPCTs with the public telephone network.
In general the installation, operation and maintenance of a CPCT does not
require any authorization from the Ministry of Communications or Telebras. In
order to interconnect with the public telephone network, a CPCT must comply with
the requirements set forth in Ordinance 119. Such requirements primarily relate
to meeting technical equipment certification and acceptance standards. Assuming
that such standards are met, the regional telephone operating company is
required under Ordinance 119 to interconnect the CPCT requesting interconnection
to the public telephone network. The Company believes that, under current
Brazilian law, Cable television operators can utilize their Cable television
networks in order to facilitate the installation and operation of a CPCT.
Furthermore, under the authority granted by Ordinance 119, CPCTs may be
interconnected through Cable television networks to the public telephone
network.
SATELLITE SERVICE REGULATION. On October 1, 1991, the Ministry of
Communications enacted Ordinance No. 230 to regulate telecommunications services
via satellite in Brazil ("Ordinance 230"). Under Ordinance 230 any company
authorized to broadcast television by any means is also authorized to broadcast
by satellite transmission. The Company has operated satellite pay-television
services since 1993 through a contract signed with Embratel.
Ordinance No. 281, issued by the Ministry of Communications on November 28,
1995, partially amended Ordinance 230 allowing only companies to which a
concession, permission or authorization had been granted previously by the
Ministry of Communications to provide telecommunications services via satellite.
Companies that were already operating satellite telecommunications services
without such authorization were given a period of 60 days to seek such
authorization. The Company applied for such authorization within the 60-day
period, and on April 23, 1996, the Ministry of Communications issued Ordinance
No. 87/96 ("Ordinance 87"), granting TVA the non-exclusive permission to operate
a pay television service via satellite. Such authorization is valid for a term
of fifteen years, commencing October 26, 1994. Ordinance 87 further provides
that TVA has the obligation to (a) render services continuously and efficiently
in order to fully satisfy users, (b) in an emergency or disaster, render
services to the entities that require services without charge, and (c) meet the
technical adequacy requirements which the Ministry of Communications considers
essential to guarantee fulfillment of the obligations under the permission
granted. In addition, on April 23, 1996, Galaxy Brasil received approval from
the Ministry of Communications, pursuant to Ordinance No. 86/96 ("Ordinance
86"), to operate satellite services via the Galaxy III-R satellite, leased by
Hughes Electronics. Galaxy Brasil also received approval to operate the
corresponding ground transmission station pursuant to Ordinance 86.
On May 31, 1996, the Ministry of Communications presented Ordinance No. 23
("Ordinance 23") for a 30-day period of public review and comment. Ordinance 23
is a proposed general rule which would
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govern the granting of licenses to provide satellite pay television services.
Under the proposed rule, licenseholders would be required to be legal entities
at least 51.0% of whose voting capital is owned by (a) Brazilian citizens who
are either born in Brazil or naturalized for at least ten years or (b) a
corporation organized in Brazil and controlled by Brazilian citizens who are
either born in Brazil or naturalized for at least ten years. Furthermore,
licenses would be granted for a renewable period of ten years, and could be
transferred only with prior approval of the Ministry of Communications. If
issued as currently drafted, these proposed rules will not have a material
impact on the Ku-Band and C-Band operations of TVA.
PROPERTIES
The Company owns most of the assets essential to its operations. The major
fixed assets of the Company are coaxial and fiber optic cable, converters for
subscribers' homes, electronic transmission, receiving, processing and
distribution equipment, microwave equipment and antennae. The Company leases
certain distribution facilities from third parties, including space on utility
poles, roof rights and land leases for the placement of certain of its hub
sights and head ends and space for other portions of its distribution system.
The Company leases its offices from third parties, with the exception of certain
offices of TVA Sul, located in Curitiba, State of Parana, and the offices and
uplink facility for Galaxy Brasil, located in Tambore, Sao Paulo State, all of
which are owned by the Company. The Company also owns its data processing
facilities and test equipment.
EMPLOYEES
TVA had 1,666 employees as of September 30, 1996. TVA utilizes third-party
contract employees in connection with the construction of its broadcast system
network and certain other activities. Substantially all of the employees of TVA
are represented by unions. TVA believes that it has good employee and labor
relations.
LEGAL PROCEEDINGS
The Company is party to certain legal actions arising in the ordinary course
of its business which, individually or in the aggregate, are not expected to
have a material adverse effect on the combined financial position of the
Company. The Company has reserved approximately $4.1 million as contingent
liabilities in connection with certain litigation contingencies. See Note 21 to
the Financial Statements of the Company.
The Company's operating companies are currently defending a lawsuit brought
by the Escritorio Central de Arrecadacao e Distribuicao (Central Collection and
Distribution Office, or "ECAD"), a government-created entity authorized to
enforce copyright laws relating to musical works. ECAD filed a lawsuit in 1993
against all pay-television operators in Brazil seeking to collect royalty
payments in connection with musical works broadcast by the operators. The suit
was filed against TVA in the Tribunal de Justica do Estado de Sao Paulo, the 16
Vara Civil do Estado de Sao Paulo, the Tribunal de Justica do Estado do Parana
and the Tribunal de Justica do Estado de Santa Catarina. The suit was filed
against TV Filme in the Tribunal de Justica do Estado de Goias, the Tribunal de
Justica do Distrito Federal and the Tribunal de Justica do Estado do Para and
against Canbras TVA in the Tribunal de Justica do Estado de Sao Paulo. ECAD is
seeking a judgment award of 2.55% of all past and present revenues generated by
the operators. The Company and all such cable operators are currently in the
process of responding to this suit. Although the Company intends to vigorously
defend this suit, the loss of such suit may have a material adverse effect on
the consolidated financial position of the Company.
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MANAGEMENT
The Company is managed by its CONSELHO DE ADMINISTRACAO ("Board of
Directors"), CONSELHO CONSULTIVO ("Advisory Board") and DIRETORIA ("Committee of
Officers"). Members of the Board of Directors and Committee of Officers are
elected for a two-year period, currently expiring on April 30, 1998. Day-to-day
operations of the Company are managed by the Company's EXECUTIVOS ("Executive
Officers").
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
MEMBER AGE POSITION
- ---------------------------------------------------------------------------------------------- --- -----------
<S> <C> <C>
Robert Civita................................................................................. 60 President
Jose Augusto P. Moreira....................................................................... 53 Member
Robert Hefley Blocker......................................................................... 61 Member
Giancarlo Francesco Civita.................................................................... 33 Member
Thomaz Souza Correa Neto...................................................................... 58 Member
Francisco Savio Couto Pinheiro................................................................ 43 Member
Arnaldo Bonoldi Dutra......................................................................... 44 Member
Sergio Vladimirschi Junior.................................................................... 31 Member
Jose Luis de Salles Freire.................................................................... 48 Member
Jorge Fernando Koury Lopes.................................................................... 46 Member
Oswaldo Leite de Moraes Filho................................................................. 47 Member
</TABLE>
ADVISORY BOARD
<TABLE>
<CAPTION>
MEMBER AGE POSITION
- ---------------------------------------------------------------------------------------------- --- -----------
<S> <C> <C>
Robert Civita................................................................................. 60 President
Jose Augusto P. Moreira....................................................................... 53 Member
Robert Hefley Blocker......................................................................... 61 Member
Claudio Dascal................................................................................ 53 Member
Angelo Silvio Rossi........................................................................... 50 Member
Francisco Savio Couto Pinheiro................................................................ 43 Member
Stephen Vaccaro............................................................................... 42 Member
Marc Nathanson................................................................................ 51 Member
Tully M. Friedman............................................................................. 54 Member
Raymond E. Joslin............................................................................. 60 Member
Herbert A. Granath............................................................................ 68 Member
</TABLE>
COMMITTEE OF OFFICERS
<TABLE>
<CAPTION>
MEMBER AGE POSITION
- ----------------------------------------------------------------------------------------------- --- ----------
<S> <C> <C>
Jose Augusto Pinto Moreira..................................................................... 53 Member
Angelo Silvio Rossi............................................................................ 50 Member
Claudio Cesar D`Emilio......................................................................... 46 Member
Sergio Vladimirschi Junior..................................................................... 31 Member
</TABLE>
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EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
MEMBER AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Claudio Dascal....................................... 53 Chief Executive Officer
Gene Musselman....................................... 52 Executive Vice President and Chief Operating Officer
Douglas Duran........................................ 43 Chief Financial Officer
Jose Antonio de Camargo Barros....................... 50 Development Officer
Marcos de Almeida Amazonas........................... 45 Programming Officer
Luis Alberto Villaca Leao............................ 38 Management Information System Officer
Virgilio Jose Carreira Amaral........................ 43 Engineering Officer
Jose Luiz Navarro Frauendorf......................... 51 Operations Officer
Antonio Alberto Teixeira Filho....................... 43 Technology Officer
Angelo Longuini Neto................................. 40 Human Resources Officer
Jacques Wladimirski.................................. 35 Galaxy Brasil Officer
Leonardo Petrelli Neto............................... 36 Curitiba Officer
Luiz Eduardo B.P. Rocha.............................. 36 Rio de Janeiro Officer
</TABLE>
ROBERT CIVITA has been President of the Board of Directors since July 1994
and President of the Advisory Board since September 1995. Mr. Civita has been
Chairman and Chief Executive Officer of Abril since 1990 and previously served
as its President for eight years. Mr. Civita attended Columbia University's
graduate program in sociology, and holds a degree in economics, with a minor in
publishing, from the University of Pennsylvania. In 1991 Mr. Civita was elected
"Person of the Year" by the Brazilian American Chamber of Commerce in New York.
Mr. Civita is the father of Giancarlo Francesco Civita.
JOSE AUGUSTO P. MOREIRA has been a member of the Board of Directors since
July 1994, a member of the Advisory Board since September 1995 and a member of
the Committee of Officers since July 1992. Mr. Moreira has been associated with
Abril since 1965, and currently serves as Abril's Vice President of Finance and
Administration. Mr. Moreira has a degree in Economics from the Faculdade de
Economia Sao Luis in Sao Paulo, and participates in the Program for Management
Development at Harvard Business School.
ROBERT HEFLEY BLOCKER has been a member of the Board of Directors since
April 1995 and a member of the Advisory Board since September 1995. Mr. Blocker
was associated with the Chase Manhattan Bank for 22 years, the last nine of
which he served as President Director. Mr. Blocker is currently President and
Managing Partner of Blocker Assessoria de Investimentos e Participacoes S.A., a
consulting firm for national and multinational companies. Mr. Blocker is also a
member of several other Boards of Directors, including those of Arno S.A. and
the American Chamber of Commerce in Sao Paulo.
GIANCARLO FRANCESCO CIVITA has been a member of the Board of Directors since
August 1994. Mr. Civita has been associated with Abril since 1986, and currently
serves as the General Director of MTV Brasil. From 1992 to 1994 Mr. Civita was
the General Director of the Programming Unit at TVA Brasil. Mr. Civita holds an
M.B.A. from Harvard Graduate School of Business Administration, as well as an
undergraduate degree in Social Communication from the Escola Superior de
Propaganda e Marketing in Sao Paulo. Mr. Civita is the son of Robert Civita.
THOMAZ SOUTO CORREA NETO has been a member of the Board of Directors since
November 1995. Mr. Correa is Executive Vice President and Editorial Director of
Abril, and has served as Editor-in-Chief of several of Abril's major magazines.
Mr. Correa is also the President of the Brazilian Publishers Association. Mr.
Correa studied Economics at Universidade MacKenzie.
FRANCISCO SAVIO COUTO PINHEIRO has been a member of the Board of Directors
since September 1995 and a member of the Advisory Board since September 1995.
Mr. Pinheiro is a former Secretary
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of Communications who has also held posts at Embratel and Radiobras, the
Brazilian government-owned broadcasting company. Mr. Pinheiro is currently a
consultant and General Manager of SP Communications. Mr. Pinheiro holds
undergraduate and graduate degrees in Telecommunications.
ARNALDO BONOTRI DUTRA has been a member of the Board of Directors since
April 1996. Mr. Dutra is the Country General Counsel of Banco Chase Manhattan
S.A., an affiliate of The Chase Manhattan Bank. Mr. Dutra is also the legal
advisor to all the Chase companies in Brazil. Mr. Dutra holds a law degree from
the Pontificia Universidade Catolica de Sao Paulo and a master of laws degree
from the Universidade de Sao Paulo.
SERGIO VLADIMIRSCHI JUNIOR has been a member of the Board of Directors since
September 1995 and a member of the Committee of Officers since April 1996. Mr.
Vladimirschi was associated with Drexel Burnham Lambert, where he worked as an
analyst for two years, and is an executive with Fechaduras Brasil S.A., one of
Brazil's leading hardware manufacturers, where he served as Marketing Officer
for seven years. Mr. Vladimirschi holds a B.S. in Finance from the Wharton
School at the University of Pennsylvania. Mr. Vladimirschi is the nephew of Marc
Nathanson.
JOSE LUIS DE SALLES FREIRE has been a member of the Board of Directors since
September 1995. Mr. Freire has been active in the areas of banking, corporate
finance and corporate law, and is a member of the Board of Directors of the
BOLSA DE VALORES DE SAO PAULO (Sao Paulo Stock Exchange). Mr. Freire holds a law
degree from the Universidade de Sao Paulo and a master of laws degree in
Comparative Law from New York University Law School.
JORGE FERNANDO KOURY LOPES has been a member of the Board of Directors since
November 1995. Mr. Lopes holds a law degree from the Faculdade de Direito
Sorocaba and a master of laws degree in Corporate Jurisprudence from New York
University.
OSWALDO LEITE DE MORAES FILHO has been a member of the Board of Directors
since November 1995. Mr. Moraes holds a law degree from the Universidade de Sao
Paulo and a master of laws degree in Corporate Jurisprudence from New York
University. Mr. Moraes is a member of the Instituto Brasileiro de Direitos
Tributarios (Brazilian Tax Law Institute).
ANGELO SILVIO ROSSI has been a member of the Advisory Board since April 1996
and a member of the Committee of Officers since July 1994. Mr. Rossi has been
associated with Abril since 1968, and holds a graduate degree in Economics from
the Fundacao Getulio Vargas, as well as an undergraduate degree in Economics
from Universidade MacKenzie.
STEPHEN VACCARO has been a member of the Advisory Board since April 1996.
Mr. Vaccaro has been a Managing Director of The Chase Manhattan Bank since
February 1990 and is currently responsible for the bank's Media and
Telecommunications business in Latin America. Mr. Vaccaro has been employed by
The Chase Manhattan Bank in various positions since 1977. He is a graduate of
Cornell University with a B.A. in Economics.
MARC NATHANSON has been a member of the Advisory Board since September 1995.
Mr. Nathanson is the Chairman and Chief Executive Officer of Falcon
International and Falcon Holding Group, L.P., one of the largest cable TV
operators in the United States. Mr. Nathanson is a 27 year veteran of the cable
TV industry and a Director and member of the Executive Committee of the National
Cable Television Association. He was appointed by President Clinton and
confirmed by the U.S. Senate for a three year term as a member of the
International Broadcasting Board of Governors of the United States Information
Agency. He holds an M.A. from the University of California and a B.A. from the
University of Denver. Mr. Nathanson is the uncle of Sergio Vladimirschi Junior.
TULLY M. FRIEDMAN has been a member of the Advisory Board since September
1995. Mr. Friedman is a General Partner of Hellman & Friedman. He is currently a
member of the board of directors of: Falcon International Communications LLC,
APL Limited, Levi Strauss & Co., Mattel, Inc., McKesson Corporation
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<PAGE>
and MobileMedia Corporation. Mr. Friedman is a member of the Executive Committee
and a Trustee of the American Enterprise Institute, and a Director of the
Stanford Management Company. Mr. Friedman holds a J.D. from Harvard Law School
and a B.A. from Stanford University.
RAYMOND E. JOSLIN has been a member of the Advisory Board since April 1996.
Mr. Joslin is group head of Hearst Entertainment & Syndication and is a vice
president and member of the board of directors of The Hearst Corporation. Mr.
Joslin has 30 years of experience in the cable communications industry, and
holds executive positions at The A&E Television Networks, The History Channel,
Lifetime Television and ESPN. Mr. Joslin attended the Carnegie Institute of
Technology and Harvard Business School, and holds a B.A. in Economics from
Trinity College.
HERBERT A. GRANATH has been a member of the Advisory Board since April 1996.
Mr. Granath was recently promoted to Chairman, Disney/ABC International
Television; before that he was President of ABC Cable and International
Broadcast Group. Mr. Granath is also the Chairman of the Board of ESPN and A&E
Television Networks. From 1982 to 1993, Mr. Granath served as President of
Capital Cities/ABC Video Enterprises. Mr. Granath holds a B.S. degree from
Fordham University's College of Arts and Sciences. He later did graduate work in
communication arts.
CLAUDIO CESAR D`EMILIO has been a member of the Committee of Officers since
July 1992. Mr. D`Emilio has been associated with Abril since 1975, and currently
holds the position of Finance Officer of Abril. Mr. D`Emilio holds undergraduate
degrees in Corporate Management and Accounting and a master's degree in Finance
from the Universidade de Sao Paulo.
CLAUDIO DASCAL has been a member of the Advisory Board since April 1996 and
Chief Executive Officer of the Company since May 1996. Mr. Dascal has also been
an Executive Vice President of Abril since April 1996. Mr. Dascal served as
Access General Director at Alcatel Standard Electrica in Spain and Chief
Operating Officer of Alcatel Telecommunicacoes in Brazil and Senior Vice
President of Alcatel Access Business Division Worldwide, before joining the
Company. Mr. Dascal holds a degree in Electrical Engineering and Electronics
from the Polytechnic School at the Universidade de Sao Paulo, and has also taken
several graduate courses in Electronics at the Universidade de Sao Paulo and the
IESE of Navarra University in Madrid, Spain.
GENE MUSSELMAN has been Executive Vice President and Chief Operating Officer
of the Company since January 1996. Mr. Musselman, who is also a Managing
Director of Falcon International, has been involved in the Cable industry since
1974, and has held positions such as Executive Vice President of Hearst
CableVision of California, Inc. and Director of New Business Development for the
Hearst Corporation. Mr. Musselman has also spent five years developing
pay-television systems throughout Eastern Europe. Mr. Musselman holds a master's
degree from Loyola College of Chicago.
DOUGLAS DURAN has been the Chief Financial Officer of the Company since
April 1992. Mr. Duran has 25 years of experience in corporate finance, and has
held positions at Abril such as Manager of Financial Operations and Corporate
Treasury Officer. Mr. Duran holds a degree in Business Administration from
Amador Aguiar College and has completed several extension courses in Finance at
the Universidade de Sao Paulo.
JOSE ANTONIO DE CAMARGO BARROS has been the Development Officer of the
Company since March 1996. Mr. Camargo has extensive experience as a journalist,
administrator and marketing and sales executive. Mr. Camargo has worked at
various Brazilian newspapers as a reporter and editor, and as a director of
marketing and sales at Gazeta Mercantil, Brazil's leading financial newspaper.
Mr. Camargo holds a B.A. in Communication and Arts from the Universidade de Sao
Paulo.
MARCOS DE ALMEIDA AMAZONAS has been the Programming Officer of the Company
since August 1994. Mr. Amazonas has broad experience in television and
publishing, having held officer positions at TV Globo and MTV Brasil, as well as
Editor-in-Chief positions at Rio Grafica Editora and
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Editora Abril. Since 1989 Mr. Amazonas is joint owner and officer of an
independent pay-television operator in Sao Paulo. Mr. Amazonas holds an
undergraduate degree in Sociology.
LUIZ ALBERTO VILLACA LEAO has been the Management Information System Officer
of the Company since December 1995. Mr. Leao was associated for six years with
Citibank, N.A. as a vice-president, as well as another six years with Banco Itau
S.A., the third-largest commercial bank in Brazil. Mr. Leao has an undergraduate
degree in Electronic Engineering from the Instituto Tecnologico de Aeronautica
and a master's degree from Carnegie-Mellon University.
VIRGILIO JOSE CARREIRA AMARAL has been the Engineering Officer of the
Company since February 1995. Mr. Amaral has extensive experience in the field of
broadcasting technology, including 18 years developing and installing television
transmission systems for TV Globo. Mr. Amaral holds a degree in Electronic
Engineering from the Universidade de Sao Paulo.
JOSE LUIZ NAVARRO FRAUENDORF has been the Operations Officer of the Company
since August 1994. Mr. Frauendorf has held technical and executive positions at
various telecommunications-related companies, including Phillips do Brasil and
Digital do Brasil. Mr. Frauendorf holds degrees in Industrial Management from
the Universidade de Sao Paulo and Electronic Engineering from the Escola de
Engenharia Maua.
ANTONIO ALBERTO TEIXEIRA FILHO has been the Technology Officer of the
Company since August 1994. Mr. Teixeira has held various positions in the field
of telecommunications, including that of Division Chief at Light Servicos de
Eletricidade S.A. Mr. Teixeira holds a degree in Electrical/Telecommunication
Engineering.
ANGELO LONGUINI NETO has been the Human Resources Officer of the Company
since April 1994. Mr. Longuini has been associated with Abril since 1979,
holding technical and managerial positions in the development and installation
of new technologies in the area of graphics. Mr. Longuini holds degrees in
Chemical Engineering and Industrial Management from the Universidade de Sao
Paulo and in Human Resources from the Fundacao Getulio Vargas.
JACQUES WLADIMIRSKI has been the Galaxy Brasil Officer of the Company since
February 1996. Mr. Wladimirski has 12 years of experience in business,
marketing, and the development of new companies in Latin America, the United
States and Europe. Mr. Wladimirski holds an undergraduate degree in Corporate
Management from Universidade MacKenzie and a graduate degree in Marketing from
the Fundacao Getulio Vargas.
LEONARDO PETRELLI NETO has been the Curitiba Officer of the Company since
March 1992. Mr. Petrelli has extensive experience in the telecommunication
industry, and is currently a shareholder and officer of TVA Sul and SSC--Sistema
Sul de Comunicacao, a radio and television holding company. Mr. Petrelli holds
degrees in Telecommunications from Grossmont College in San Diego, California
and Cinema from the University of Sound and Arts in Hollywood, California.
LUIZ EDUARDO B. P. ROCHA has been the Rio de Janeiro Officer of the Company
since March 1996. Mr. Rocha has held several high-level positions, such as
Superintendent of Purchasing, at two of the largest department store chains in
Brazil: Lojas Americanas S.A. and Mesbla Lojas de Departamento, with which he
was associated for 11 years. Mr. Rocha holds an undergraduate degree in Civil
Engineering from the Universidade Federal do Rio de Janeiro and a masters degree
in Finance and Marketing from COPPEAD.
COMPENSATION FOR DIRECTORS, OFFICERS AND EXECUTIVE OFFICERS
For the year ended December 31, 1995, the aggregate compensation, including
bonuses, of all Directors, Officers and Executive Officers of the Company was
R$2,317,688. Members of the Board of Directors, the Advisory Board and the
Committee of Officers do not receive a salary from the Company.
For the year ended December 31, 1995, the aggregate amount set aside by the
Company to provide pension, retirement or similar benefits to Directors,
Officers and Executive Officers was approximately $64,000.
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PRINCIPAL SHAREHOLDERS
Tevecap has one class of capital stock, common shares, authorized and
outstanding. As of September 30, 1996, 196,712,855 common shares were
outstanding representing authorized social capital of R$366,000,715. The
following table sets forth as of September 30, 1996, information regarding the
beneficial ownership of Tevecap's common shares:
<TABLE>
<CAPTION>
NUMBER OF COMMON
SHAREHOLDER SHARES OWNED PERCENTAGE
- ------------------------------------------------------------------------------ -------------------- -------------
<S> <C> <C>
Abril S.A..................................................................... 111,075,318 56.47%
Falcon International Communications (Bermuda) L.P.(a)......................... 27,930,827 14.20
Hearst/ABC Video Services II(b)............................................... 34,714,031 17.65
Cable Participacoes Ltda.(b).................................................. 4,628,536 2.35
Chase Manhattan International Finance Ltd.(c)................................. 18,364,122 9.33
All directors and executive officers as a group............................... 21 --(d)
</TABLE>
- ------------------------
(a) A subsidiary of Falcon International Communications L.L.C.
(b) Each of Hearst and ABC indirectly holds a 50.0% equity interest in each of
Hearst/ABC Video Services II and Cable Participacoes Ltda.
(c) 11,496,329 and 6,867,793 of the shares beneficially owned by Chase Manhattan
International Finance Ltd. ("CMIF") are held of record by two wholly-owned
subsidiaries of CMIF (the "Chase Parties"). In December 1995, CMIF sold a
portion of the shares beneficially owned by it to Hearst and ABC.
(d) Less than 1.0%.
The relations among the Company's equity holders are governed by a
Stockholders Agreement (the "Stockholders Agreement"), dated December 6, 1995,
among Tevecap, Robert Civita, Abril, the Chase Parties, Falcon International and
HABC II and CPL (together with HABC II, "Hearst/ABC Parties" and together with
Robert Civita, Abril, the Chase Parties and Falcon International, the
"Stockholders"). The following describes certain terms of the Stockholders
Agreement, as amended.
TRANSFER OF SHARES. Any Stockholder desiring to transfer shares of capital
stock to any third party, including another Stockholder, must first offer such
shares to Tevecap and all of the other Stockholders. Tevecap has the right to
determine first whether to purchase such shares; if Tevecap elects not to
exercise its right to purchase the shares, the other Stockholders may elect to
purchase such shares. If Tevecap or the other Stockholders decide to purchase
the offered shares, all of such shares must be purchased. If neither Tevecap nor
the other Stockholders offer to purchase all of the offered shares, the
Stockholder desiring to sell such shares may sell the shares to any person,
provided that (i) all of the shares are sold simultaneously within six months
after the decision by Tevecap and the Stockholders not to purchase the shares,
(ii) Tevecap has not determined that the person making such purchase is a
stockholder of undesirable character, lacks necessary financial capacity or
competes with the Company, and (iii) the price for sale to such third party is
at least 90.0% of the price offered to the Company and the other Stockholders.
The provisions regarding transfers of shares do not apply to transfers to
certain affiliates of the Stockholders. In addition, the Stockholders have
preference over all other persons or entities to subscribe for new issuances of
capital stock by the Company in proportion to their existing ownership of
capital stock.
EVENT PUT OPTIONS. Upon the occurrence of certain defined "triggering
events" each of the Stockholders, other than Abril, may demand that Tevecap buy
all or a portion of the shares of capital stock of Tevecap held by such
Stockholder, unless the shares of capital stock held by such Stockholder are
publicly registered, listed or traded (collectively referred to as an "Event
Put"). The triggering events are:
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(i) the amount of capital stock held by such Stockholder exceeds the amount
allowed under any legal restriction to which such Stockholder may be subject
("Regulatory Put"); (ii) a breach without cure within a designated period by
Robert Civita, Abril, any of the respective affiliates of Robert Civita or Abril
or Tevecap of any representation, warranty, covenant or duty made or owed
pursuant to the Stockholders Agreement, the Stock Purchase Agreement, dated
August 25, 1995, among Robert Civita, Abril, the Chase Parties, and certain
other parties, or the Stock Purchase Agreement, dated December 6, 1995, among
Tevecap, Robert Civita, Abril, HABC Parties, the Chase Parties, Falcon
International and certain other parties; (iii) a breach without cure within a
designated period by Abril of the Abril Credit Facility; (iv) Robert Civita
ceases to directly or indirectly hold without the approval of the Stockholders
31.258% of the capital stock and voting capital stock of Tevecap or he ceases to
control the voting capital stock held by his affiliates representing 50% or more
of the voting capital stock of Tevecap; (v) the Service Agreement, dated July
22, 1994, as amended, among Tevecap, Televisao Show Time Ltda. ("TV Show Time"),
TVA Brasil Radioenlaces Ltda. ("TVA Brasil") and Abril, each of which holds
certain licenses covering certain operations of TVA, ceases to be valid or
effective or TV Show Time, TVA Brasil or Abril is liquidated or dissolved or
files voluntarily, or has filed against it involuntarily, any petition in
bankruptcy or (vi) another Stockholder exercises an Event Put, other than a
Regulatory Put. The price to be paid in connection with an Event Put is set at
fair market value determined by appraisal or by a multiple of Tevecap's most
recent quarterly earnings. The Indenture, however, contains restrictions on the
ability of Tevecap to purchase shares of its capital stock. See "Description of
Notes--Certain Covenants-- Limitation on Restricted Payments." Accordingly, the
parties to the Stockholders Agreement have agreed to amend the Stockholders
Agreement prior to the Offering to provide that if the terms of the Indenture
prohibit the Company from purchasing shares that are subject to an Event Put
("Event Put Shares"), in whole or in part, the Company shall not be obligated to
purchase such shares to the extent it is so restricted. However, in such event,
the Company shall, subject to the terms of the Indenture, have the obligation to
issue shares of preferred stock of the Company ("Special Preferred Shares")
should the Tevecap Stockholder elect to convert Event Put Shares to Special
Preferred Shares. The holders of Special Preferred Shares will be entitled to
dividends required by law and a cumulative dividend equal to LIBOR plus a 4.0%
margin, provided that if the terms of the Indenture prohibit the payment of
dividends on the Special Preferred Shares, the Company shall not be obligated to
make such dividend payments to the extent so restricted. After the payment of
all dividends on the Special Preferred Shares, the Company must use any
remaining profit or reserve to purchase the largest number of Event Put Shares
and Special Preferred Shares, provided that, if the terms of the Indenture
prohibit the purchase of such shares, the Company shall not be obligated to make
such purchases until permitted by the terms of the Indenture.
TIME PUT OPTIONS. In addition, pursuant to the Stockholders Agreement,
Falcon International may demand that Tevecap buy all or any portion of the
shares of capital stock of Tevecap held by Falcon International if such shares
are not publicly registered, listed or traded by September 22, 2002 (the "Falcon
Time Put"). The price to be paid in connection with the Falcon Time Put is fair
market value determined in the same manner as an Event Put. If Tevecap
determines that the terms of the Indenture prohibit it from purchasing such
shares, Tevecap may, subject to the terms of the Indenture, delay the payment of
such purchase price with three annual payments ("Put Annual Payments") or issue
promissory notes denominated in US dollars for the amount of such price ("Put
Promissory Notes"). The Put Promissory Notes would mature three years after
issuance with interest payments due quarterly in arrears. The interest rate on
the Put Promissory Notes would be equal to the rate applicable to US Treasury
obligations of similar maturity plus a margin to be negotiated. While the Put
Promissory Notes are outstanding, Tevecap may not pay any dividends or make
distributions with respect to its capital stock, including the Special Preferred
Shares, should they exist. If the terms of the Indenture prohibit the Company
from making the Put Annual Payments, the Company shall not be required to make
such payment, but shall be required to deliver Put Promissory Notes in the
principal amount of the affected Put Annual Payments. If the terms of Indenture
prohibit the Company from making an interest payment
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required under any Put Promissory Note, the Company shall not be required to
make such payment at such time, provided that any accrued and unpaid interest
shall accumulate and interest on such unpaid amount shall compound quarterly and
the Company shall make payments of interest as soon as such payment is no longer
restricted under the Indenture. Pursuant to the terms of the proposed amendment
to the Stockholders Agreement, payment of the principal and interest on the Put
Promissory Notes would be subordinated to the prior payment in full of the
Notes. See "Description of Notes--Certain Covenants--Limitation on Restricted
Payments" and "--Limitation on Indebtedness."
REGISTRATION RIGHTS. At any time after December 6, 1997, the Chase Parties,
considered together, the Hearst/ABC Parties or Falcon International may request
that the Company effect the registration of any or all of the capital stock held
by such Stockholder. However, the Company is not obligated to effect more than
one registration requested by a Stockholder in any 12 month period or more than
three registrations requested by a Stockholder in total. Also, the capital stock
that is the subject of the registration demand must be of a certain minimum
amount. In addition, Tevecap must offer each Stockholder other than Abril the
opportunity to register capital stock held by such Stockholder, subject to
standard reductions in amount such Stockholder may register as recommended by
the managing underwriter. Tevecap is obligated to pay all registration expenses
other than underwriting discounts and commissions or transfer taxes, and Tevecap
is only obligated to pay for the fees and expenses of Tevecap's counsel and
accountants.
BOARD OF DIRECTORS AND ADVISORY BOARD. Tevecap is governed by a board of
directors with 11 members. Under the Stockholders Agreement, Abril designates
six members, Falcon International designates two members, the Chase Parties
together designate one member, and Hearst/ABC Parties designates 2 members. The
affirmative vote of members of the board representing the Chase Parties, Falcon
International and Hearst/ABC Parties is required for: acquisition of ownership
interests in other companies; acquisition or liens on equity in other companies
or liens on assets other than in ordinary course and in aggregate less than
$500,000; incurrence of indebtedness of less than one year maturity and in an
amount greater than $1,000,000; incurrence of indebtedness of greater than one
year maturity except trade debt and in an aggregate amount of less than
$500,000; loans on advance payments; non-financial guarantees in aggregate
totalling more than $100,000; transactions with affiliates; and modifications to
Service Agreement. Tevecap must get the approval of Hearst/ABC Parties before
entering into contracts in excess of $1,000,000 in value and making any material
programming decisions. Tevecap must get the approval of Falcon International
before entering into contracts in excess of $1,000,000. Tevecap must get the
approval of each of Hearst/ABC Parties, the Chase Parties and Falcon
International before any corporate restructuring or any public offering of
securities of Tevecap.
REQUIRED DIVIDEND. Tevecap is required by the terms of the Stockholders
Agreement to pay annual dividends equal to the net cash flow of Tevecap or 25.0%
of the net consolidated profit (as defined by Brazilian law) of Tevecap.
However, Tevecap may delay the payment of such dividends to the extent the
payment of such dividends is prohibited by the Indenture, and such dividends
will accumulate and be payable to the extent allowed under the Indenture. See
"Risk Factors--Risks Relating to the Company-- Dividends to Shareholders."
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CERTAIN TRANSACTIONS WITH RELATED PARTIES
OVERVIEW
Tevecap has engaged in a significant number and variety of related party
transactions, including, without limitation, the transactions described below.
Tevecap has not performed any studies or analyses to determine whether the terms
of past transactions with related parties have been equivalent to arm's-length
transactions and cannot state with any certainty the extent to which such
transactions are comparable to those which might have been obtained from a
non-affiliated third party.
TRANSACTIONS AMONG SHAREHOLDERS
On December 6, 1995, Tevecap's shareholders executed a Stock Purchase
Agreement and a Stockholders Agreement relating to the investment of ABC and
Hearst in the Company through Hearst/ ABC Parties. See "Principal Shareholders."
On that date, the Tevecap shareholders also executed a series of
inter-shareholder agreements relating to, among other things, the provision of
services and programming among the shareholders. These agreements supplemented
other existing agreements among Shareholders. The following contracts are the
principal agreements among the Company and the Tevecap shareholders (each of
which, unless specified otherwise, is dated as of December 6, 1995).
GENERAL AND ADVISORY SERVICES
Under an Advisory Services Agreement, each of Hearst, ABC and HABC II has
agreed, upon a request from the Company, to use its reasonable efforts to
arrange for the investors to furnish personnel to provide advisory services to
the Company. To date, the Company and Hearst, ABC and HABC II have not entered
into a supplemental agreement to provide specific personnel or services at a
particular cost.
In addition, on April 1, 1996, Tevecap entered into a separate Advisory
Services Agreement with Falcon International Communications, L.L.C. Pursuant to
this agreement, which has a renewable two-year term, Falcon International
Communications, L.L.C. has agreed to provide a range of advisory services to the
Company, encompassing such areas as accounting, budget and billing procedures,
financial and operation statements, customer, employee and government relations,
the design, purchase and maintenance of equipment and supplies, negotiations
with programmers and other such matters as the Company may reasonably request.
In exchange for such services, the Company has agreed to pay Falcon
International Communications, L.L.C. an annual fee of $200,000, which amount may
be revised on each anniversary of the agreement.
PROGRAMMING
In connection with the investment by Hearst and ABC in Tevecap, Tevecap and
these two parties entered into a Programming Agreement (the "Hearst/ABC
Programming Agreement"). Pursuant to the Hearst/ABC Programming Agreement, each
of Hearst and ABC has agreed to offer first to Tevecap pay programming that
Hearst or ABC (or any subsidiary of which either Hearst or ABC owns at least
80.0% of the outstanding equity interests) intends to license for use in Brazil
in the pay television markets served by TVA. The parties also agreed to consider
future co-production activities which could enhance TVA's business and
competitive position. Tevecap agreed to pay to each of Hearst and ABC such fees
and expenses as are agreed upon at the time such programming or co-production
services are provided. The Hearst/ABC Programming Agreement does not apply to
The Walt Disney Company or its subsidiaries other than ABC and ABC's
subsidiaries. In addition, the Hearst/ABC Programming Agreement does not apply
to the activities of The A&E Television Networks, Lifetime Television and ESPN,
including agreements relating to ESPN Brasil.
OTHER TRANSACTIONS AMONG SHAREHOLDERS
Each of Tevecap's corporate shareholders has entered into a side letter to
the Stock Purchase Agreement and the Stockholders Agreement pursuant to which
each of Abril, Falcon and the Chase
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Parties agreed, with certain exceptions, to exchange all of its respective
shares in Tevecap for a corresponding number of shares of a newly-formed
Brazilian corporation. The new corporation would become an 80.0% shareholder in
Tevecap and Hearst/ABC would remain a 20.0% shareholder in Tevecap, which would
be reorganized as a Brazilian limitada. This new structure would not result in
any change in the current beneficial equity participation of the Stockholders in
Tevecap. As of the date hereof, the timing of the restructuring is under
discussion by the Stockholders.
TRANSACTIONS AMONG RELATED PARTIES
GENERAL AND ADVISORY SERVICES
TVA Sistema and MTV Brasil have entered into various agreements, dated
August 27, 1996, governing reciprocal services between the Company and MTV
Brasil. The services covered by the agreement include billing, subleasing,
equipment use, administrative, financial, accounting, human resources,
engineering, infrastructure and satellite services. TVA Sistema and Abril have
also entered into an agreement, dated January 1995, with Uniser, a division of
Abril, pursuant to which Uniser provides telecommunications, maintenance, human
resources, travel, legal other services in exchange for a monthly payment of
approximately $20,000.
In addition, pursuant to an agreement dated January 10, 1995, Tevecap has
agreed to provide various financial services to Canbras, in return for which
Tevecap receives a monthly payment of approximately $5,000. Tevecap provides
similar financial services to Galaxy Brasil, in return for which the Company
receives a monthly payment of $5,000 pursuant to an agreement dated March 9,
1995. Tevecap also provides to ESPN Brasil Ltda. financial services, for which
it receives a payment of approximately $7,500 per month, and satellite and other
engineering services, for which it receives a payment of approximately $78,000
per month, pursuant to an agreement dated June 26, 1995.
The Company has also entered into an agreement with SMC Marketing Ltda.
("SMC"), dated September 1, 1995, to provide space, equipment and personnel to
SMC, in return for which the Company receives a monthly payment of approximately
US$29,000.
PUBLISHING AND ADVERTISING
The Company publishes a monthly magazine detailing the Company's programming
options in a given month. In connection with this magazine, TVA Sistema has
entered into an agreement with Abril, dated September 1992, pursuant to which
Abril publishes approximately 300,000 copies of the Company's monthly magazine
in return for a monthly payment of approximately $240,000. The monthly magazine
is distributed in accordance with a distribution agreement, dated September
1992, between the Company and Irmaos Reis, pursuant to which the Company pays
Irmaos Reis approximately $60,000 per month.
TVA Sistema and Abril also have a reciprocal advertising agreement in which
the Company publishes advertisements for Abril in the Company's monthly magazine
in exchange for advertisements for the Company (and third parties through the
Company) in the magazines published by Abril.
In addition, the Company has an agreement with SMC, dated September 1, 1995,
pursuant to which the Company assists SMC in selling advertising, in return for
which the Company receives 25.0% of SMC's advertising revenues.
INSURANCE
TVA currently reimburses TVA Sistema for payments made by TVA Sistema
pursuant to an insurance policy covering the operations of TVA Sistema, TVA
Brasil Abril Video da Amazonia and the former MTV Division of Abril
(collectively, the "Insureds"). TVA Sistema makes such payments pursuant to an
agreement among the Insureds dated September 30, 1996. The annual premiums paid
by TVA Sistema and reimbursed by the Company amount to approximately $84,000.
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ABRIL CREDIT FACILITY
Tevecap has entered, as the borrower, into a revolving credit facility (the
"Abril Credit Facility") with Abril, as the lender. The Abril Credit Facility,
effective December 6, 1995 and valid for a period of 36 months, allows the
Company to draw down amounts not to exceed a maximum aggregate principal amount
of $60,000,000. Since June 1996, Tevecap has from time to time requested, and
Abril has provided, funding in excess of the aggregate maximum principal amount.
The loans provided under the Abril Credit Facility are denominated in reais,
unless the loan is a pass-through loan that Abril has funded in US dollars, in
which case the loan is funded in a real-equivalent amount. Abril has agreed to
use its reasonable commercial efforts to obtain the lowest possible interest
rates for its loans to Tevecap under the Abril Credit Facility. As of October
31, 1996, the aggregate principal amount of loans outstanding under the Abril
Credit Facility was approximately $105.8 million, which was fully repaid to
Abril with the proceeds of the offering of the Old Securities. As of ,
1997, the Company had not redrawn any amounts under the Abril Credit Facility.
See Note 11 to the Consolidated Financial Statements of the Company.
OTHER INTERCOMPANY/SHAREHOLDER LOANS
Tevecap has used the proceeds from the Abril Credit Facility to make capital
contributions to TVA Sistema and Galaxy Brasil, as well as to extend loans to
various interrelated companies. The aggregate outstanding amounts under these
loans as of September 30, 1996 were: $12.7 million to TVA Communications; $14.1
million to TVA Sul; $304,000 to Canbras-Par; and $179,000 to Comercial Cabo Sao
Paulo.
In addition to the funding from Abril under the Abril Credit Facility,
Tevecap has received loans from Canbras TVA, which loans, as of September 30,
1996, had an aggregate outstanding amount of $1.7 million. Furthermore, Abril
has received loans from ESPN Brasil Ltda., which loans, as of September 30,
1996, had an aggregate principal outstanding amount of $1.6 million.
In addition, TVA Sistema has made loans to various interrelated companies.
The aggregate principal outstanding amounts under these loans as of September
30, 1996 were $2.8 million to TVA Sul and $126,000 to TV Show Time. TV Show Time
has loans outstanding to Abril, which loans, as of September 30, 1996, had an
aggregate outstanding amount of approximately $2.8 million.
All other Intercompany and shareholder loans outstanding as of September 30,
1996 equalled an aggregate principal amount of approximately $283,000.
ADVANCES OF CAPITAL CONTRIBUTIONS
As of September 30, 1996, the Company had made advance capital contributions
to Canbras TVA of approximately $1.7 million.
SERVICE AGREEMENT WITH LICENSEHOLDERS
Pursuant to a Service Agreement, dated July 22, 1994, as amended, TVA Brasil
and TV Show Time (the "Licenseholders") agreed to transfer to TVA all the rights
and benefits associated with their current and future pay-television licenses,
with the exception of licenses operated by companies in which TVA has minority
interests. While the Licenseholders retained the title to such licenses, the
Licenseholders promised to take all steps necessary to transfer the title of
such licenses to Tevecap. Such steps included the appropriate procedures
required by the Ministry of Communications and any other governmental authority
regulating the transfers. The transfer of the title to such licenses is
currently either pending, subject to approval by the Ministry of Communications,
or waiting for the passage of certain statutory or regulatory waiting periods.
AFFILIATE INTERESTS IN THE OFFERING
The Company will use a portion of the net proceeds of the Offering to repay
the amount currently outstanding under the Abril Credit Facility. See "Use of
Proceeds" and "Description of Certain Indebtedness."
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The Company has entered into, or will soon enter into, certain arrangements
for the purpose of obtaining financing for its operations, including the
purchase of decoders for use in its DBS operations and for working capital. Set
forth below is a summary of these arrangements.
The Abril Credit Facility allows the Company to borrow up to $60.0 million
on a revolving basis until December 1998. Since June 1996, the Company has from
time to time requested, and Abril has provided, funds in excess of $60.0
million. The loans are generally denominated in reais and bear interest at a
rate equal to 99.5% of the CDI rate, the Brazilian interbank lending rate,
adjusted at the beginning of each month. During June 1996, the applicable
interest rate was 2.013% per month. As of September 30, 1996, after giving
effect to the Offering and the application of approximately $105.78 million of
the proceeds from the Notes to reduce the amounts outstanding thereunder, the
Company had no amounts outstanding under the Abril Credit Facility. As of
, 1997, the Company had not redrawn any amounts under the Abril Credit
Facility. However, the Company will be able to re-borrow the full amount of such
facility, as required.
On December 9, 1996, TVA Sistema, as Borrower, and Tevecap, as Guarantor,
entered into a credit agreement with The Chase Manhattan Bank to finance the
acquisition of C-Band decoders and other related equipment. The Export-Import
Bank of the United States (the "EximBank") will guarantee 85.0% of amounts
borrowed under the credit facility (the "EximBank Facility"). The credit
facility will be made available to TVA on terms customary for credits to
Brazilian companies that are supported by the EximBank, and will bear interest
at LIBOR plus a specified margin. The EximBank Facility is in the amount of
$29,349,780, which will be dispersed in two tranches, the first in the principal
amount of $11,400,000, with a term of 4.5 years, and the second in the principal
amount of $17,949,780, with a term of five years. TVA Sistema's obligations
under the EximBank Facility will be unconditionally guaranteed by Tevecap.
During the first half of 1997, Galaxy Brasil anticipates financing equipment
leases under a five-year, $49.9 million lease and sale-leaseback facility (the
"Galaxy Brasil Leasing Facility") with Citibank, N.A. Under the Galaxy Brasil
Leasing Facility, Galaxy Brasil will obtain financing for the purpose of
acquiring dish antennas, decoder boxes and other equipment for Ku-Band service.
The amount financed under the Galaxy Brasil Leasing Facility bears interest at a
margin over LIBOR. The lease payment obligation of Galaxy Brasil is secured by a
pledge of subscriber revenues, together with a secured guarantee by the partners
of GLA. The terms of the Galaxy Brasil Leasing Facility (i) prohibit the payment
of dividends by Galaxy Brasil if, after giving effect to such payment, Galaxy
Brasil's ratio of debt (including capital lease obligations and guarantees) to
tangible net worth would be greater than three to one (3:1) and (ii) prohibit
the incurrence of debt to third parties and affiliates if such ratio would be
greater than four to one (4:1) and three to one (3:1), respectively. However,
Citibank N.A. has agreed to provide exceptions to these provisions to allow the
guarantee of the Notes by Galaxy Brasil.
Management expects that each of the partners of GLA will severally guarantee
the obligations of Galaxy Brasil under the Galaxy Brasil Leasing Facility, in
each case up to a negotiated limit. The obligations of Tevecap under the
guarantee are limited to approximately $25.5 million of principal and a
proportionate share of interest, fees, and other amounts. The guarantors,
including Tevecap, expect to enter into a contribution agreement, pursuant to
which each partner will agree to contribute to payments required to be made by
any partner under the guaranty. Under the contribution agreement, the
obligations of Tevecap are expected to be limited to $25.5 million of principal
and a proportionate share of interest, fees, and other amounts. Tevecap's
obligations under the contribution agreement are expected to be secured by a
pledge of its equity interests in GLA and SurFin, as well as by an agreement to
pledge any future debt or equity interests it may hold relating to CBC.
In connection with the operations of GLA and Galaxy Brasil, TVA and the
other members of GLA have formed SurFin Ltd. ("SurFin"), a corporation organized
under the laws of the Bahamas, to provide
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financing to local operating companies for the purchase of equipment provided to
subscribers. TVA owns 20.5% of the capital stock of SurFin. The other (direct
and indirect) shareholders of SurFin Ltd. are affiliates of (i) Hughes
Electronics, with 39.3% of the capital stock, (ii) Darlene Investments, with
20.4% of the capital stock, and (iii) Grupo MVS, with 19.8% of the capital
stock.
On September 24, 1996, SurFin entered into a syndicated credit agreement
with Citicorp USA, Inc., as administrative agent, which establishes a
three-year, $150.0 million revolving credit facility (the "SurFin Credit
Facility"). Proceeds from the SurFin Credit Facility will be used by SurFin to
provide financing to DIRECTV local operating companies in Latin America, which
are (in most cases) affiliates of GLA and/or one or more of GLA's shareholders,
including Galaxy Brasil. Such local operating companies will use the funds
borrowed from SurFin for the purpose of financing the acquisition of dish
antennas, decoder boxes and other equipment for Ku-Band service. Loans under the
SurFin Credit Facility will bear interest, at SurFin's option, at a rate equal
to LIBOR plus a specified margin, or at a rate equal to Citibank's prime rate.
Loans made by SurFin to such local operating companies will bear interest at
rates to be negotiated.
Each of the partners of GLA (other than TVA) has jointly and severally
guaranteed the full amount of the obligations of SurFin under the SurFin Credit
Facility. TVA has also guaranteed the obligations of SurFin to the syndicate of
lenders, but TVA's obligations under such guaranty are limited to $10.5 million
of principal and a proportionate share of interest, fees, and other amounts. The
guarantors, including TVA, have entered into a contribution agreement, setting
forth their obligations to contribute to each other in connection with their
respective obligations under their respective guarantees. Under the contribution
agreement, the obligations of TVA are limited to $10.5 million of principal and
a proportionate share of interest, fees, and other amounts. TVA's obligations
under the contribution agreement are secured by a pledge of its equity interests
in GLA and SurFin, as well as by an agreement to pledge any future debt or
equity interests it may hold relating to CBC. Management expects the SurFin
Credit Facility to facilitate the expansion of GLA by enabling local operating
companies (including, possibly, Galaxy Brasil) to finance the acquisition of
dish antennae decoder boxes and other equipment, thereby permitting subscribers
to spread the expense of installing such equipment over time.
During 1997, management expects that a new Delaware limited liability
company will be established, the principal asset of which will be GLA's uplink
facility, CBC. The new company will be owned by two subsidiaries of Hughes
Electronics. In connection with the establishment of the new company, TVA
Communications and Tevecap have agreed, pursuant to the Indemnification
Agreement, to provide certain indemnities in favor of GLA, Hughes Communications
GLA, the newly-established company and its shareholders. To secure its
obligations under the Indemnification Agreement, Tevecap has agreed to pledge
its equity interest in GLA, as well as any future notes or interests it may hold
relating to CBC.
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DESCRIPTION OF NOTES
GENERAL
The Old Notes were issued and the Exchange Notes are to be issued under an
Indenture, to be dated as of November 26, 1996 (the "Indenture"), between the
Company, the Guarantors, The Chase Manhattan Bank, as Trustee (the "Trustee")
and Chase Trust Bank, as Paying Agent, a copy of which is available upon request
to the Company. The terms of the Exchange Notes are identical in all material
respects to the terms of the Old Notes, except for certain transfer restrictions
and registration rights relating to the Old Notes and except that, if the
Registered Exchange Offer is not consummated by May 23, 1997, Tevecap will be
obligated to pay each holder of the Old Notes an amount equal to $0.192 per week
per $1,000 of the Old Notes until the Registered Exchange Offer is consummated.
The Exchange Notes and the Old Notes are deemed the same class of notes under
the Indenture and are entitled to the benefit thereof. Unless specifically
stated otherwise, this description applies to both the Exchange Notes and the
Old Notes. The statements under this caption relating to the Notes and the
Indenture are summaries and do not purport to be complete, and where reference
is made to particular provisions of the Indenture, such provisions, including
the definitions of certain terms, are incorporated by reference as a part of
such summaries or terms, which are qualified in their entirety by such
reference. A summary of certain defined terms used in the Indenture and referred
to in the following summary description of the Notes is set forth under "Certain
Definitions."
Principal of, premium, if any, and interest on, the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee in New York, New York), except
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the holders as such address appears in the Note
Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
The Notes have been designated for trading in the PORTAL market.
TERMS OF THE NOTES
The Notes will be unsecured, senior obligations of the Company, limited to
$250 million aggregate principal amount, and will mature on November 26, 2004.
Each Note will bear interest at the rate per annum shown on the front cover of
this Prospectus from the date of issuance, or from the most recent date to which
interest has been paid or provided for, payable semiannually in cash on May 26
and November 26 of each year commencing May 26, 1997 to holders of record at the
close of business on the May 1 or November 1 immediately preceding the interest
payment date.
OPTIONAL REDEMPTION
At any time and from time to time prior to November 26, 2000, if the Company
receives Net Cash Proceeds from one or more (i) Significant Equity Offerings or
(ii) sales of the Company's Capital Stock to a Strategic Investor, the Company
may redeem in the aggregate up to $75.0 million principal amount of Notes, at a
redemption price (expressed as a percentage of principal amount) of 112.625%,
plus accrued and unpaid interest, if any, to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date); PROVIDED, HOWEVER, that at least $175.0
million aggregate principal amount of the Notes must remain outstanding after
each such redemption.
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ADDITIONAL AMOUNTS
All payments made by the Company or any Guarantor under or with respect to
the Notes or any Guarantee will be made free and clear of and without
withholding or deduction for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed or levied
by or on behalf of the Federative Republic of Brazil or Japan or any political
subdivision or taxing authority thereof or therein ("Taxes"), unless the Company
or such Guarantor, as the case may be, is required to withhold or deduct any
amount for or on account of Taxes by law or by the interpretation or
administration thereof. If the Company or any Guarantor is so required to
withhold or deduct any amount for or on account of Taxes from any payment made
under or with respect to the Notes or the Subsidiary Guarantee of such
Guarantor, the Company or such Guarantor, as the case may be, will pay such
additional amounts ("Additional Amounts") as may be necessary so that the net
amount received by each holder of Notes (including Additional Amounts) after
such withholding or deduction will not be less than the amount the holder would
have received if such Taxes had not been withheld or deducted. Provided,
however, that no such Additional Amounts will be payable with respect to a
payment made to a holder of Notes with respect to any Tax which would not have
been imposed, payable or due (i) but for the fact that the holder or a
beneficial owner of a Note is or was a domiciliary, national or resident of, or
engages or engaged in business, maintains or maintained a permanent
establishment or is or was physically present in Brazil or Japan, or otherwise
has some present or former connection with Brazil or Japan other than the mere
holding of such Notes or the receipt of principal or interest in respect
thereof; (ii) but for the failure of the holder or beneficial owner of Notes to
comply with a request by the Company or any Guarantor to satisfy any
certification, identification or other reporting requirements which the holder
or such beneficial owner is legally entitled to satisfy, whether imposed by
statute, treaty, regulation or administrative practices, concerning the
nationality, residence or connection with Brazil or Japan of such holder or
beneficial owner; or (iii) if, where presentation is required, the presentation
for payment had occurred within 30 days after the date such payment was due and
payable or was provided for, whichever is later. Notwithstanding the preceding
sentence, the limitations on the Company's obligation to pay Additional Amounts
set forth in clause (ii) of the preceding sentence shall not apply if a
certification, identification, or other reporting requirement described in
clause (ii) would be materially more onerous, in form, in procedure or in the
substance of information disclosed, to such Holders or beneficial owners (taking
into account any relevant differences between U.S. and Brazilian law, regulation
or administrative practice) than comparable information or other reporting
requirements imposed under U.S. tax law, regulation (including proposed
regulations) and administrative practice or other reporting requirements imposed
as of the date of this Prospectus under U.S. tax law, regulation (including
proposed regulations) and administrative practice (such as IRS Forms 1001, W-8
and W-9). The obligation of the Company or any Guarantor to pay Additional
Amounts in respect of Taxes shall not apply with respect to (x) any estate,
inheritance, gift, sales, transfer, personal property or any similar Tax or (y)
any Tax which is payable otherwise than by deduction or withholding from
payments made under or with respect to the Notes. The Company and the Guarantor,
as applicable, will (i) make any required withholding or deduction, (ii) remit
the full amount deducted or withheld to the relevant authority (the "Taxing
Authority") in accordance with applicable law, (iii) use their best efforts to
obtain certified copies of tax receipts evidencing the payment of any Taxes so
deducted or withheld from each Taxing Authority imposing such Taxes and (iv) in
the event that such certified copies of tax receipts are obtained, promptly send
such certified copies of tax receipts to the Principal Paying Agent for prompt
forwarding to any holder that has made a written demand therefor of the
Principal Paying Agent. The Company or the Guarantor will attach to each
certified copy a certificate stating (x) that the amount of withholding tax
evidenced by the certified copy was paid in connection with payments in respect
of the principal amount of Notes then outstanding and (y) the amount of such
withholding tax paid per US$1,000 of principal amount of the Notes. See "Income
Tax Considerations--United States--Effect of Brazilian Withholding Taxes." If,
notwithstanding the Company's or such Guarantor's efforts to obtain such
receipts, the same
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are not obtainable, the Company or such Guarantor will provide to the Principal
Paying Agent such other evidence of such payments as the Company or such
Guarantor may reasonably obtain.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable (unless such obligation to pay
Additional Amounts arises after the 30th day prior to such date, in which case
it shall be promptly thereafter), if the Company or any Guarantor will be
obligated to pay Additional Amounts with respect to such payment, the Company or
such Guarantor will deliver to the Trustee and each Paying Agent an Officers'
Certificate stating the fact that such Additional Amount will be payable and the
amounts so payable and will set forth such other information necessary to enable
the Trustee and each Paying Agent to pay such Additional Amounts to holders of
Notes on the payment date. Each Officers' Certificate shall be relied upon until
receipt of a further Officers' Certificate addressing such matters.
Whenever in the Indenture or in this "Description of Notes" there is
mentioned, in any context, the payment of amounts based upon the payment of
principal, premium, if any, interest or of any other amount payable under or
with respect to any Note, such mention shall be deemed to include mention of the
payment of Additional Amounts as are, were or would be payable in respect
thereof.
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES
The Notes may be redeemed at the option of the Company, in whole but not in
part, at any time prior to maturity if (i) there is any change in or amendment
to the Treaty to Avoid Double Taxation entered into between Brazil and Japan,
approved by Legislative Decree No. 43 dated November 23, 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, which has the effect of increasing the rate of tax
applicable under such treaty to a rate exceeding 15.0% of interest payable; or
(ii) as the result of any change in or amendment to the laws, regulations or
rulings of Brazil or Japan or any political subdivision or taxing authority
thereof or therein, or any change in the application or official interpretation
of such laws, regulations or rulings (including the holding of a court of
competent jurisdiction), the Company or any Guarantor has or will become
obligated to pay Additional Amounts (excluding interest and penalties) in excess
of the Additional Amounts that the Company or any Guarantor would be obligated
to pay if Taxes (excluding interest and penalties) were imposed with respect to
such payments of interest at a rate of 15.0%, and such obligation cannot be
avoided by the Company or the Guarantors, as the case may be, taking reasonable
measures available to them, then the Company may, at its option, redeem or cause
the redemption of the Notes, as a whole but not in part, upon not more than 60
nor less than 30 days' notice to the holders of such Notes (with copies to the
Trustee and each Paying Agent) at 100.0% of their principal amount, together
with accrued interest to (but excluding) the date fixed for redemption, plus any
such Additional Amounts payable with respect to such principal amount and
interest as provided under "--Additional Amounts." Prior to the giving of notice
of redemption of the Notes as described herein and as a condition to any such
redemption, the Company will deliver to the Trustee an Officers' Certificate
(together with a copy of the written opinion of counsel to the effect that the
applicable rate has so increased, or the Company or any Guarantor has or will
become so obligated to pay Additional Amounts as a result of such change or
amendment), stating that the Company is entitled to effect such redemption and
setting forth in reasonable detail a statement of facts relating thereto. No
notice of redemption shall be given earlier than 90 days prior to the earliest
date on which the Company or any Guarantor would be obligated to pay such
Additional Amounts were a payment in respect of the Notes then due and, at the
time such notice of redemption is given, such obligation to pay such Additional
Amounts remains in effect.
SELECTION
In the case of any partial redemption or repurchase, selection of the Notes
for redemption or repurchase will be made by the Trustee on a pro rata basis, by
lot or by such other method as the Trustee
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in its sole discretion shall deem to be fair and appropriate, although no Note
of $1,000 in original principal amount or less will be redeemed or repurchased
in part. If any Note is to be redeemed or repurchased in part only, the notice
of redemption or repurchase relating to such Note shall state the portion of the
principal amount thereof to be redeemed or repurchased. A new Note in principal
amount equal to the unredeemed or unrepurchased portion thereof will be issued
in the name of the holder thereof upon cancellation of the original Note.
RANKING
The Notes will be unsecured, senior obligations of the Company ranking PARI
PASSU in right of payment with all other existing and future unsecured, senior
Indebtedness of the Company and senior in right of payment to all other existing
and future subordinated Indebtedness of the Company. The Subsidiary Guarantees
will be unsecured, senior obligations of the Guarantors ranking PARI PASSU in
right of payment with all other existing and future unsecured, senior
Indebtedness of the Guarantors and senior in right of payment to all other
existing and future subordinated Indebtedness of the Guarantors. Subject to
certain limitations set forth in the Indenture, the Company and its Subsidiaries
may Incur other senior Indebtedness, including Indebtedness that is secured by
certain assets of the Company and its Subsidiaries. At September 30, 1996, after
giving effect to the Offering and the application of the net proceeds therefrom,
the aggregate principal amount of outstanding senior Indebtedness of the
Company, other than the Notes, would have been $2.8 million (exclusive of unused
commitments).
SUBSIDIARY GUARANTEES
Each of the Company's existing and future Restricted Subsidiaries (the
"Guarantors"), as primary obligor and not merely as surety, will jointly and
severally, irrevocably and fully and unconditionally Guarantee, on a senior
basis, the performance and punctual payment when due, whether at Stated
Maturity, by acceleration or otherwise, of all obligations of the Company under
the Indenture and the Notes, whether for principal of or interest on the Notes,
expenses, indemnification or otherwise (all such obligations guaranteed by such
Guarantors being herein called the "Guaranteed Obligations"). Such Guarantors
will agree to pay, in addition to the amount stated above, any and all expenses
(including reasonable counsel fees and expenses) incurred by the Trustee or the
Holders in enforcing any rights under the Subsidiary Guarantees.
Each Subsidiary Guarantee will be limited to an amount not to exceed the
maximum amount that can be Guaranteed, as it relates to such Guarantor, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. See "Risk
Factors--Fraudulent Conveyance Considerations."
Each Subsidiary Guarantee is a continuing Guarantee and shall (i) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(ii) be binding upon such Guarantor and (iii) inure to the benefit of and be
enforceable by the Trustee, the Holders and their successors, transferees and
assigns.
The Indenture will provide 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) 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)
assumes all the obligations of such Guarantor under the Subsidiary Guarantee and
the Indenture pursuant to a supplemental indenture, in form satisfactory to the
Trustee, (ii) immediately after such transaction, no Default or Event of Default
exists, (iii) immediately after such transaction, the Company will have
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately preceding such transaction and (iv) the Company will, at
the time of such transaction after giving pro forma effect thereto, be permitted
to Incur at least $1.00 of additional Indebtedness pursuant to paragraph (a)
under "Certain Covenants--Limitation on Indebtedness."
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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
(including the covenant described under "Certain Covenants--Limitation on Sales
of Assets and Subsidiary Stock") (other than a transaction subject to the
provisions described under "Merger and Consolidation") by the Company or a
Restricted Subsidiary to any Person that is not an Affiliate of the Company or
any of the 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 the Company shall also terminate upon such release, sale or
transfer.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder will have the right to require the Company to repurchase
all or any part of such holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
(i) an event or series of events by which any "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other
than one or more Permitted Holders, is or becomes after the date of issuance
of the Notes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act as in effect on the date of the Indenture), of more
than 35.0% of the total voting power of all Voting Stock of the Company
outstanding;
(ii) (A) another corporation merges into the Company or the Company
consolidates with or merges into any other corporation or (B) the Company
conveys, transfers or leases all or substantially all its assets to any
person or group (other than any conveyance, transfer or lease between the
Company and a Wholly-Owned Subsidiary of the Company), in each case, in one
transaction or a series of related transactions with the effect that a
person or group other than one or more Permitted Holders becomes the
"beneficial owner" of more than 35.0% of all Voting Stock of the Company
then outstanding;
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (or equivalent
governing body) of the Company (together with any new Directors (or
equivalent persons) whose election by the Company's Board of Directors (or
equivalent governing body), or whose nomination for election by such
entity's shareholders, was approved by a vote of a majority of the Directors
(or equivalent persons) then still in office who were either Directors (or
equivalent persons) at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Directors (or equivalent persons) then in
office; or
(iv) the Permitted Holders collectively shall fail to beneficially own
at least 35.0% of all Voting Stock of the Company then outstanding.
The Company's other senior Indebtedness may contain prohibitions of certain
events that would constitute a Change of Control. In addition, the exercise by
the Holders of Notes of their right to require the Company to repurchase the
Notes could cause a default under such other senior Indebtedness, even if the
Change of Control itself does not, due to the financial effect of such
repurchases on the Company. Finally, the Company's ability to pay cash to the
Holders of Notes upon a repurchase may be limited by the Company's then existing
financial resources. The consent of the Brazilian Central Bank will be required
prior to the funding of the repurchase of the Notes.
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Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes after such
Change of Control, the Company shall mail a notice to each holder with a copy to
the Trustee stating: (i) that a Change of Control has occurred and that such
holder has the right to require the Company to purchase such holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of Holders of record on a record date to receive interest on the relevant
interest payment date); (ii) the circumstances and relevant facts and financial
information concerning such Change of Control; (iii) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); and (iv) the procedures determined by the Company, consistent
with the Indenture, that a Holder must follow in order to have its Notes
purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The definition of "Change of Control" includes a disposition of all or
substantially all of the property and assets of the Company and its
Subsidiaries. With respect to the disposition of property or assets, the phrase
"all or substantially all" as used in the Indenture varies according to the
facts and circumstances of the subject transaction, has no clearly established
meaning under New York law (which is the choice of law under the Indenture) and
is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
property or assets of a Person, and therefore it may be unclear as to whether a
Change of Control has occurred and whether the Company is required to make an
offer to repurchase the Notes as described above.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
LIMITATION ON INDEBTEDNESS. (a) The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, directly or indirectly, Incur any
Indebtedness, and the Company shall not issue any Disqualified Stock; PROVIDED,
HOWEVER, that the Company and any Restricted Subsidiary may Incur Indebtedness,
and the Company may issue shares of Disqualified Stock, if on the date thereof
the Indebtedness to Annualized Operating Cash Flow Ratio of the Company would
have been less than or equal to (i) 6.5 to 1.0 in the case of Indebtedness
Incurred prior to November 26, 1999 and (ii) 6.0 to 1.0 in the case of
Indebtedness Incurred on and after November 26, 1999, in each case determined on
a pro forma basis.
(b) The foregoing limitation shall not apply to the Incurrence of: (i)
Indebtedness of the Company or any Restricted Subsidiary under any Senior Credit
Facility or the Abril Credit Facility in an aggregate principal amount at any
one time outstanding not to exceed $50.0 million; (ii) Indebtedness of the
Company to any Restricted Subsidiary and Indebtedness of a Restricted Subsidiary
to the Company or another Restricted Subsidiary; PROVIDED, HOWEVER, that any
subsequent issuance or transfer of any Capital Stock which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Indebtedness (other than to another Restricted Subsidiary) will
be deemed, in each case, to constitute the Incurrence of such Indebtedness by
the issuer thereof; (iii) Indebtedness represented by the Notes (including the
Subsidiary Guarantees); (iv) Indebtedness outstanding on the Issue Date (other
than Indebtedness described in clause (i), (ii) or (iii) of this paragraph); (v)
Refinancing Indebtedness in respect of Indebtedness of the Company or any
Restricted Subsidiary Incurred pursuant to clauses (i) through (iv) above, this
clause (v), or clause (xiv) below in a principal
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amount (or, for original issue discount Indebtedness, the accredited principal
thereof) so refinanced; (vi) Hedging Obligations consisting of Interest Rate
Agreements and Currency Agreements related to Indebtedness otherwise permitted
to be Incurred pursuant to the Indenture or otherwise entered into in the
ordinary course of business, PROVIDED that in each case the notional amount
shall not exceed the underlying obligations or assets; (vii) Guarantees by the
Company of Indebtedness or other obligations of any of its Restricted
Subsidiaries so long as the Incurrence of such Indebtedness or obligations by
such Restricted Subsidiary is permitted under the terms of the Indenture; (viii)
Indebtedness of Galaxy Brasil in an aggregate principal amount at any one time
outstanding not to exceed the lesser of (A) an amount equal to the sum of (I)
the product of (1) $480.0 multiplied by (2) the number of Galaxy Brasil
Subscribers at the date of Incurrence plus (II) $20 million and (B) $130.0
million; (ix) Indebtedness of any Special Restricted Subsidiary if, after giving
effect to such Incurrence, the ratio of (A) the aggregate principal amount of
all Indebtedness of such Special Restricted Subsidiary outstanding as of the
date of determination to (B) the total shareholders' equity (excluding any
retained earnings or accumulated deficit) of such Special Restricted Subsidiary
as of the date of determination is less than or equal to 2:1; (x) Indebtedness
of the Company represented by Subordinated Shareholder Loans in an aggregate
principal amount at any one time outstanding not to exceed $100.0 million; (xi)
Indebtedness consisting of performance and other similar bonds and reimbursement
obligations Incurred in the ordinary course of business securing the performance
of contractual, franchise or license obligations of the Company or a Restricted
Subsidiary, or in respect of a letter of credit obtained to secure such
performance; (xii) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any Restricted Subsidiary pursuant to such
agreements, Incurred in connection with any Asset Disposition; (xiii)
Indebtedness of the Company represented by the SurFin Guarantee in an aggregate
principal amount at any one time outstanding not to exceed $25.0 million; (xiv)
Indebtedness of TVA Sistema under the EximBank Credit Agreement in an aggregate
principal amount at any one time outstanding not to exceed $30.0 million; (xv)
Indebtedness of the Company represented by the Put Promissory Notes; (xvi)
Indebtedness of Galaxy Brasil in an aggregate principal amount at any one time
outstanding not to exceed $25.0 million; and (xvii) other Indebtedness in an
aggregate principal amount which, together with all other Indebtedness of the
Company then outstanding (other than Indebtedness permitted by clauses (i)
through (xvi) above or the preceding paragraph) does not exceed $50.0 million.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) except (1) dividends or distributions payable in its Capital Stock
(other than Disqualified Stock) and (2) dividends or distributions payable
solely to the Company or another Restricted Subsidiary (and, if such Restricted
Subsidiary is not a Wholly-Owned Subsidiary, to its other stockholders on a PRO
RATA basis), (ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock (including options or warrants to acquire such Capital Stock) of
the Company or any Restricted Subsidiary, (iii) purchase, repurchase, redeem,
prepay interest, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment, scheduled interest payment date or
scheduled sinking fund payment, any Subordinated Obligations, or make any cash
interest payment on Subordinated Shareholder Loans or (iv) make any Investment
(other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement, interest payment or Investment being herein referred to as a
"Restricted Payment"), if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment: (x) after giving effect to such Restricted
Payment, a Default shall have occurred and be continuing (or would result
therefrom); or (y) the Company could not incur at least an additional $1.00 of
Indebtedness under the covenant described under "Certain Covenants--Limitation
on Indebtedness"; or (z) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared (the amount so expended, if other
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than in cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a resolution of the Board of
Directors) or made subsequent to the Issue Date would exceed the sum of: (A) an
amount equal to the Company's Cumulative Operating Cash Flow less 1.6 times the
Company's Cumulative Consolidated Interest Expense; plus (B) the aggregate Net
Cash Proceeds received by the Company from the issue or sale of its Capital
Stock (other than Disqualified Stock) or other cash contributions to its capital
subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of
the Company or an employee stock ownership plan or other trust established by
the Company or any of its Subsidiaries); plus (C) the amount by which
Indebtedness of the Company is reduced on the Company's balance sheet upon
conversion or exchange (other than by a Restricted Subsidiary of the Company)
subsequent to the Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash or other property distributed by the Company upon
such conversion or exchange); and plus (D) in the case of the disposition or
repayment of any Investment constituting a Restricted Payment other than an
Investment made pursuant to clause (v) of paragraph (b) below made after the
Issue Date, an amount equal to the lesser of the return of capital with respect
to such Investment and the cost of such Investment, in either case, less the
cost of the disposition of such Investment. For purposes of determining the
amount expended for Restricted Payments, cash distributed shall be valued at the
face amount thereof and property or services distributed or transferred other
than cash shall be valued at its Fair Market Value.
(b) So long as there is no Default or Event of Default continuing, the
provisions of paragraph (a) shall not prohibit: (i) any purchase or redemption
of Capital Stock or Subordinated Obligations of the Company or Capital Stock of
any Restricted Subsidiary made by exchange for, or out of the Net Cash Proceeds
from a substantially concurrent sale (other than to a Restricted Subsidiary of
the Company) of, Capital Stock of the Company (other than Disqualified Stock) or
any purchase of Capital Stock made with Put Promissory Notes; PROVIDED, HOWEVER,
that (A) such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall
be excluded from the calculation of amounts under clause (B) of paragraph (a);
(ii) any purchase or redemption of Subordinated Obligations of the Company made
by exchange for, or out of the proceeds from a substantially concurrent sale of,
Subordinated Obligations of the Company; PROVIDED, HOWEVER, that (A) the final
maturity date of such Subordinated Obligations, determined as of the date of
Incurrence, occurs not earlier than the Stated Maturity of the Notes and (B) the
Average Life of such Subordinated Obligations is equal to or greater than the
Average Life of the Subordinated Obligations being purchased or redeemed; and
PROVIDED, FURTHER, that such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments; (iii) dividends paid within 60
days after the date of declaration if at such date of declaration such dividend
would have complied with this provision; PROVIDED, HOWEVER, that such dividends
shall be included in the calculation of the amount of Restricted Payments; (iv)
Investments in Galaxy Latin America or its Affiliates made subsequent to the
Issue Date in an aggregate amount at any time outstanding not to exceed $15.0
million; (v) Investments in a Permitted Business financed with the net proceeds
of this Offering as described under "Use of Proceeds"; and (vi) Minority
Investments made subsequent to the Issue Date constituting a Restricted Payment
by the Company or any Restricted Subsidiary in any Person that operates
principally, or has been formed to operate principally, a Permitted Business in
an aggregate amount at any time outstanding not to exceed $45.0 million.
The Indenture will provide that the Company will be required, as a condition
to the issuance of the Notes, and to thereafter maintain enforceable written
commitments (the Shareholder Commitments") from each shareholder of the Company
agreeing that such shareholder will not exercise its voting rights to receive
mandatory statutory dividends (without limiting such shareholder's right
otherwise to receive dividends pursuant to and in compliance with this covenant
"Limitation on Restricted Payments"), PROVIDED that the Shareholder Commitments
will cease to be effective on the first to occur of (x) the date that shares of
Capital Stock of the Company are issued and listed on a Brazilian or United
States
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securities exchange in connection with a bona fide public offering of such
shares or the date that any shares of the Capital Stock of the Company are
otherwise effectively listed and traded on any Brazilian or United States
securities exchange, (y) the date that none of the Notes remain outstanding or
(z) the date that such commitment is no longer effective, enforceable or legal
under applicable Brazilian laws and regulations (including without limitation
any construction or interpretation thereof by CVM, any court or any other
governmental authority). The Indenture will provide that the Company will obtain
Shareholder Commitments in connection with any future issuances of Capital Stock
to the extent the Shareholder Commitments would then be effective, enforceable
and legal under the terms of the foregoing proviso. Notwithstanding the
foregoing, but provided it would not render any of the other Shareholder
Commitments unenforceable, the Company need not obtain and/or maintain
Shareholder Commitments from persons that are not shareholders of the Company on
the Issue Date or any Affiliate of any such shareholder to the extent it does
not relate to more than 10.0% of the outstanding shares of Capital Stock of the
Company.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligation owed to the Company or another
Restricted Subsidiary of the Company, (ii) make any Investment in the Company or
another Restricted Subsidiary of the Company or (iii) transfer any of its
property or assets to the Company or another Restricted Subsidiary of the
Company; except: (A) any encumbrance or restriction pursuant to an agreement in
effect on the date of Issuance of the Notes and described in this Prospectus;
(B) any encumbrance or restriction with respect to a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness Incurred by a Restricted
Subsidiary prior to the date on which such Restricted Subsidiary was acquired by
the Company (other than Indebtedness Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary was acquired by the Company) and outstanding on such date; (C) any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
an agreement effecting a refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clauses (A) or (B) or this clause (C) or contained in
any amendment to an agreement referred to in clauses (A) or (B) or this clause
(C); PROVIDED, HOWEVER, that the encumbrances and restrictions contained in any
such refinancing agreement or amendment are no less favorable to the holders of
the Notes than encumbrances and restrictions contained in such agreements; (D)
any such customary encumbrance or restriction contained in a security document
creating a Lien permitted under the Indenture to the extent relating to the
property or asset subject to such Lien following a default in respect of the
applicable obligation; (E) in the case of clause (iii), any encumbrance or
restriction (1) that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is subject to a lease, license, or
similar contract, or (2) contained in security agreements securing Indebtedness
of a Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such security agreements; (F)
any restriction with respect to a Restricted Subsidiary imposed pursuant to an
agreement in effect for the sale or disposition thereof and the duration of
which does not exceed 60 days; or (G) any encumbrance or restriction contained
in an agreement pursuant to which Galaxy Brasil Incurs Indebtedness in
compliance with the terms of the Indenture, PROVIDED, HOWEVER, that the terms of
such encumbrance or restriction are no more restrictive than those contained in
the Equipment Agreements as they exist on the Issue Date.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, make any Asset
Disposition, unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the Fair Market Value of the shares
and assets subject to such Asset
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Disposition, (ii)(A) at least 75.0% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents
or (B) at least 75.0% of the consideration thereof received by the Company or
such Restricted Subsidiary consists of assets used in connection with a
Permitted Business; and (iii) an amount equal to 100.0% of the Net Available
Cash from such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) FIRST, to the extent the Company elects (or
is required by the terms of any senior Indebtedness of the Company or
Indebtedness of a Restricted Subsidiary), to prepay, repay or purchase such
senior Indebtedness, or such Indebtedness of a Restricted Subsidiary (in each
case other than Indebtedness owed to the Company or an Affiliate of the Company)
within 365 days from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (B) SECOND, to the extent of the balance of
Net Available Cash after application in accordance with clause (A), to the
extent the Company or such Restricted Subsidiary elects, to reinvest in
Additional Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by the Company or another
Restricted Subsidiary) within 365 days from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (C) THIRD, to the extent
of the balance of such Net Available Cash after application in accordance with
clauses (A) and (B) ("Excess Proceeds"), to make an offer ("Asset Sale Offer")
to purchase Notes pursuant and subject to the conditions of the Indenture to the
Noteholders at a purchase price of 100.0% of the principal amount thereof plus
accrued and unpaid interest to the purchase date, and (D) FOURTH, to the extent
of the balance of such Net Available Cash after application in accordance with
clauses (A), (B) and (C), for general corporate purposes. Notwithstanding the
foregoing provisions, the Company and its Restricted Subsidiaries shall not be
required to apply any Net Available Cash in accordance herewith except to the
extent that the aggregate Net Available Cash from all Asset Dispositions which
are not applied in accordance with this covenant at any time exceed $10 million.
Upon completion of any Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
For the purposes of this covenant, the following will be deemed to be cash
or Cash Equivalents: (i) the assumption of Indebtedness (other than Disqualified
Stock) of the Company or any Restricted Subsidiary and the release of the
Company or such Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Disposition and (ii) securities received by the
Company or any Restricted Subsidiary of the Company from the transferee that are
promptly converted by the Company or such Restricted Subsidiary into cash at its
face value.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(C), the Company will be required to purchase Notes
tendered pursuant to an offer by the Company for the Notes at a purchase price
of 100.0% of their principal amount plus accrued interest to the purchase date
in accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. If the aggregate purchase price of
the Notes tendered pursuant to the offer is less than the Net Available Cash
allotted to the purchase of the Notes, the Company will apply the remaining Net
Available Cash in accordance with clause (a)(iii)(D) above.
(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
conduct any transaction (including the purchase, sale, lease or exchange of any
property, or the rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") unless: (i) the terms of such Affiliate Transaction are
no less favorable to the Company or such Restricted Subsidiary, as the case may
be, than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate; (ii) in the
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event such Affiliate Transaction involves an aggregate amount in excess of $2.0
million, the terms of such transaction have been approved by a majority of the
members of the Board of Directors of the Company and by a majority of the
members of such Board having no personal stake in such Affiliate Transaction, if
any; and (iii) in the event such Affiliate Transaction involves an aggregate
amount in excess of $10.0 million, the Company has received a written opinion
from an independent investment banking firm of nationally recognized standing in
the United States that such Affiliate Transaction is fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial point of view;
PROVIDED that, in the case of an Affiliate Transaction described in clause (ii)
or (iii), the Company shall promptly after consummation thereof deliver an
Officers' certificate to the Trustee certifying as to the compliance by the
Company with clauses (i) and (ii) or (i) and (iii) as the case may be, of this
covenant; and PROVIDED FURTHER that in the case of an Affiliate Transaction with
Galaxy Latin America, the Company or such Restricted Subsidiary shall only be
required to obtain the opinion described in clause (iii) if such Affiliate
Transaction involves an aggregate amount in excess of $20.0 million.
(b) The provisions of the foregoing paragraph (a) will not apply to (i)
transactions with or among the Company and/or any of the Restricted
Subsidiaries; PROVIDED in any such case, no officer, director or beneficial
holder of 5% or more of any class of Capital Stock of the Company shall
beneficially own any Capital Stock of any such Restricted Subsidiary, (ii)
transactions between the Company and any Restricted Subsidiary that are solely
for the benefit of the Company or a Subsidiary Guarantor, (iii) transactions
between or among Unrestricted Subsidiaries, (iv) any dividend permitted by the
covenant described under "Certain Covenants--Limitation on Restricted Payments,"
(v) directors' fees, indemnification and similar arrangements, officers'
indemnification, employee stock option or employee benefit plans, employee
salaries and bonuses or legal fees paid or created in the ordinary course of
business and (vi) transactions and arrangements pursuant to agreements in
existence on the Issue Date and described in the Prospectus. In addition,
paragraph (a) shall not apply (x) to Indebtedness Incurred by the Company from
Abril under the Abril Credit Facility or from shareholders pursuant to
Subordinated Shareholder Loans and (y) to any transaction entered into in
connection with the reorganization of the Company's ownership structure or the
restructuring of its legal form described under "Certain Transactions with
Related Parties--Transactions Among Shareholders" in the Prospectus.
LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien, other than Permitted Liens, on any of its property or assets (including
Capital Stock of any Restricted Subsidiary), whether owned on the Issue Date or
thereafter acquired, securing any obligation, unless the obligations due under
the Indenture and the Notes and the Subsidiary Guarantees are secured, on an
equal and ratable basis (or on a senior basis, in the case of Indebtedness
subordinated in right of payment to the Notes or the Subsidiary Guarantees),
with the obligations so secured.
LIMITATION ON SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The
Company will not (i) sell, and will not permit any Restricted Subsidiary of the
Company to issue, sell or transfer, any Capital Stock of a Restricted Subsidiary
or (ii) permit any Person (other than the Company or a Wholly-Owned Restricted
Subsidiary) to acquire Capital Stock of any Restricted Subsidiary, if in either
case as the result thereof such Restricted Subsidiary would no longer be a
Restricted Subsidiary of the Company, except for (A) Capital Stock issued, sold
or transferred to the Company or a Wholly-Owned Restricted Subsidiary and (B)
Capital Stock issued by a Person prior to the time (1) such Person becomes a
Restricted Subsidiary, (2) such Person merges with or into a Restricted
Subsidiary or (3) a Restricted Subsidiary merges with or into such Person,
PROVIDED, that such Capital Stock was not issued by such Person in anticipation
of the type of transaction contemplated by subclause (1), (2) or (3). This
provision shall not prohibit the Company or any of its Restricted Subsidiaries
from selling or otherwise disposing of all of the Capital Stock of any
Restricted Subsidiary; PROVIDED that any such sale constitutes an Asset
Disposition for purposes of, and the Net Cash Proceeds from any such sale are
applied in accordance with, the covenant described under "Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock."
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ADDITIONAL SUBSIDIARY GUARANTEES. The Indenture will provide that if the
Company or any of its Restricted Subsidiaries shall acquire or create another
Restricted Subsidiary after the Issue Date, then such newly acquired or created
Restricted Subsidiary shall execute a Subsidiary Guarantee and deliver an
opinion of counsel, in accordance with the terms of the Indenture.
MERGER AND CONSOLIDATION. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person and the Company will not permit any of its Restricted
Subsidiaries to enter into such a transaction if such transaction, in the
aggregate, would result in the conveyance or transfer of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole, to any Person, unless: (i) the resulting, surviving or transferee Person
(the "Successor Company") is a corporation organized and existing under the laws
of the Federative Republic of Brazil or any State or political subdivision
thereof and the Successor Company (if not the Company) expressly assumes, by
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness that becomes an obligation of the Successor Company or
any Restricted Subsidiary of the Successor Company as a result of such
transaction as having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default shall have occurred and
be continuing; (iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur at least an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under "Certain
Covenants--Limitation on Indebtedness"; (iv) immediately after giving effect to
such transaction, the Successor Company will have Consolidated Net Worth in an
amount which is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; (v) each Guarantor shall have delivered a
written instrument in form satisfactory to the Trustee confirming its Guarantee;
and (vi) the Company 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; PROVIDED, HOWEVER, that clause (iii) shall not apply to the merger of
Cable Participacoes Ltda., or Hearst/ABC Video Services II, each an entity owned
by The Hearst Corporation and ABC, Inc., or Falcon International Communications
(Bermuda) L.P. with and into the Company in connection with the reorganization
of the Company's ownership structure described under "Certain Transactions with
Related Parties--Transactions Among Shareholders" in the Prospectus.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
Company, in the case of a lease of all or substantially all its assets, will not
be released from the obligation to pay the principal of and interest on the
Notes.
SEC REPORTS. The Indenture will provide that, whether or not the Company
has a class of securities registered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), following any Exchange Offer or the
effectiveness of any Shelf Registration Statement, the Company shall furnish
without cost to each holder of Notes, the Trustee and the Initial Purchasers and
file with the Commission (whether or not the Company is a public reporting
company at the time): (i) within 140 days after the end of each fiscal year of
the Company, annual reports on Form 20-F (or any successor form) containing the
information required to be contained therein (or required in such successor
form); (ii) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form 6-K (or any successor form)
containing substantially the same information required to be contained therein;
and (iii) promptly from time to time after the occurrence of an event required
to be therein reported, such other reports on Form 6-K (or any successor form)
containing substantially the same information required to be contained in Form
8-K (or required in any successor form). Prior to the effectiveness of the
Exchange Offer Registration Statement with the Commission, the Company will file
with the Trustee and provide the Initial Purchasers, all of the information that
would have been required to have been filed with the
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Commission pursuant to clauses (i), (ii) and (iii) above. Each of the reports
will be prepared in accordance with US GAAP consistently applied, will include
the amounts of EBITDA (as defined herein), based on US GAAP financial data and
will be prepared in accordance with the applicable rules and regulations of the
Commission. The Company will agree to use its reasonable best efforts to
schedule, disseminate in a customary manner for public companies information
concerning, and conduct a conference call for holders of Notes to discuss with
appropriate senior officers of the Company the results of operating and
financial conditions of the Company within 30 days of filing any reports
described in clause (i) and (ii) above with the Commission.
LIMITATION ON DESIGNATIONS OF SPECIAL RESTRICTED SUBSIDIARIES. The
Indenture will provide that the Company may designate any Restricted Subsidiary
as a "Special Restricted Subsidiary" under the Indenture (a "Special
Designation") if such Special Restricted Subsidiary engages in, or will engage
principally in, a Permitted Business in a Newly-Licensed Service Area. Such
Special Designation may be revoked at any time if all Indebtedness of such
Special Restricted Subsidiary that is outstanding immediately following such
revocation would, if Incurred at such time, have been permitted to be Incurred
for all purposes under the Indenture. All Special Designations and revocations
thereof must be evidenced by Board Resolutions of the Company delivered to the
Trustee certifying compliance with the foregoing provisions. In any event, a
Special Restricted Subsidiary will remain a Restricted Subsidiary for all
purposes of the Indenture, except that a Special Restricted Subsidiary shall be
treated as an Unrestricted Subsidiary for purposes of calculating Operating Cash
Flow, Consolidated Income Tax Expense, Consolidated Interest Expense and
Consolidated Net Income.
LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. The Indenture will
provide that the Board of Directors may designate any Subsidiary of the Company
(other than a Guarantor, but including any newly acquired or newly formed
Subsidiary) (a "Designation") to be an Unrestricted Subsidiary if: (a) no
Default shall have occurred and be continuing at the time of or after giving
effect to such Designation; (b) the Company would be permitted under the
Indenture to make an Investment under all applicable provisions of the covenant
described under "Certain Covenants--Limitation on Restricted Payments" at the
time of Designation (assuming the effectiveness of such Designation) in an
amount (the "Designation Amount") equal to the Fair Market Value of such
Subsidiary on such date; and (c) such Subsidiary and its Subsidiaries own no
Capital Stock or Indebtedness of, and hold no Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary (a "Revocation");
PROVIDED, HOWEVER, that immediately after giving effect to such designation (x)
no Default shall have occurred and be continuing and (y) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately following
such Revocation would, if Incurred at such time, have been permitted to be
Incurred for all purposes of the Indenture. Any such Designation and Revocation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the board resolution giving effect thereto and an
Officers' Certificate certifying that such action complied with the foregoing
provisions.
LIMITATION ON INVESTMENTS IN UNRESTRICTED SUBSIDIARIES. The Company will
not make, and will not permit its Restricted Subsidiaries to make, any
Investment in Unrestricted Subsidiaries if, at the time thereof, such
Investment, together with the aggregate amount of all Investments previously
made (other than Permitted Investments), would exceed the amount of Restricted
Payments then permitted to be made pursuant to the covenant described under
"Certain Covenants--Limitation on Restricted Payments". Any Investments in
Unrestricted Subsidiaries permitted to be made pursuant to this covenant (i)
will be treated as a Restricted Payment in calculating the amount of Restricted
Payments made by the Company and (ii) may be made in cash or property.
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BUSINESS OF THE COMPANY; RESTRICTIONS ON TRANSFERS OF EXISTING
BUSINESS. The Indenture will provide that the Company will not, and will not
permit any of the Restricted Subsidiaries to, be principally engaged in any
business or activity other than a Permitted Business. In addition, the Company
and the Restricted Subsidiaries will not be permitted to, directly or
indirectly, transfer to any Unrestricted Subsidiary (i) any of the licenses,
permits or authorizations used in the Permitted Business of the Company and the
Restricted Subsidiaries on the Issue Date or (ii) any material portion of the
"property and equipment" (as such term is used in the Company's consolidated
financial statements) of the Company or any Restricted Subsidiary used in the
licensed service areas of the Company and the Restricted Subsidiaries as they
exist on the Issue Date; PROVIDED that the Company and the Restricted
Subsidiaries may make Asset Dispositions in compliance with the covenant
described under "Certain Covenants--Limitation on Sales of Assets and Subsidiary
Stock" and pledge property and assets to the extent permitted in the covenant
described under "Certain Covenants--Limitations on Liens."
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal or premium, if any, of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, (iii) the failure by the Company or any Restricted
Subsidiary to comply with its obligations under "Certain Covenants--Merger and
Consolidation" above, (iv) the failure by the Company or any Restricted
Subsidiary to comply with any covenants (other than the covenant described under
"Certain Covenants--Merger and Consolidation") or any other agreements contained
in the Indenture for 45 days after notice (in each case, other than a failure to
purchase Notes which shall constitute an Event of Default under clause (ii)
above), (v) Indebtedness of the Company or any Restricted Subsidiary is not paid
within any applicable grace period after failure to pay when due or is
accelerated by the holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds $10.0 million (or the US Dollar
Equivalent) (the "cross acceleration provision"), (vi) certain events of
bankruptcy, insolvency or reorganization of the Company or a Restricted
Subsidiary (the "bankruptcy provisions"), (vii) any judgment or decree for the
payment of money in excess of $10.0 million (or the US Dollar Equivalent) (to
the extent not covered by insurance as acknowledged in writing by the insurer)
is rendered against the Company or a Restricted Subsidiary and such judgment or
decree shall remain undischarged or unstayed for a period of 60 days after such
judgment becomes final and non-appealable (the "judgment default provision"),
(viii) there shall have occurred any seizure, compulsory acquisition,
expropriation or nationalization of material assets of the Company and its
Subsidiaries or (ix) the failure of any Subsidiary Guarantee to be in full force
and effect (except as contemplated by the terms thereof) or the denial or
disaffirmation by any Guarantor of its obligations under the Indenture or any
Subsidiary Guarantee if such default continues for 10 days, unless otherwise
released from such Guarantee obligation pursuant to the Indenture. However, a
default under clause (iv) will not constitute an Event of Default until the
Trustee or the holders of 25.0% in principal amount of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified in clause (iv) hereof after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25.0% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and accrued
and unpaid interest shall be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
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Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25.0% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder or that would
involve the Trustee in personal liability. Prior to taking any action under the
Indenture, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its Trust officers in good
faith determines that withholding notice is in the interests of the Noteholders.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any events which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the holders of a majority in principal amount of the Notes then
outstanding. However, without the consent of each holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the amount of Notes
whose holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the
redemption or repurchase of any Note or change the time at which any Note may be
redeemed as described under "Optional Redemption" above, (v) make any Note
payable in money other than that stated in the Note, (vi) amend or modify any of
the provisions of the Indenture relating to the ranking of the Notes or the
Subsidiary Guarantees in any manner that adversely affects the rights of any
holder of the Notes, (vii) impair the right of any holder to receive payment of
principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes, (viii) release any Guarantor from any of its
obligations under its Subsidiary Guarantee or the Indenture, except in
compliance with the terms thereof or (ix) make any change in the amendment
provisions which require each holder's consent or in the waiver provisions.
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Without the consent of any holder, the Company and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, to secure the
Notes, to add to the covenants of the Company for the benefit of the Noteholders
or to surrender any right or power conferred upon Company, to make any change
that does not adversely affect the rights of any holder or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment. After an amendment under the
Indenture becomes effective, the Company is required to mail to the holders a
notice briefly describing such amendment. However, the failure to give such
notice to all the holders, or any defect therein, will not impair or affect the
validity of the amendment.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Noteholder to pay any taxes
or other charges required by law. The Company is not required to transfer or
exchange any Note selected for redemption or to transfer or exchange any Note
for a period of 15 days prior to a selection of Notes to be redeemed. The Notes
will be issued in registered form and the registered holder of a Note will be
treated as the owner of such Note for all purposes.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "--Certain Covenants" (other than the covenant described under
"Certain Covenants--Merger and Consolidation"), the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Restricted
Subsidiaries and the judgment default provision described under "Defaults" above
and the limitations contained in clauses (iii) and (iv) under "Certain
Covenants--Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (v) and (vi) (with respect only to
Restricted Subsidiaries), or (vii) or (ix) under "Defaults" above or because of
the failure of the Company to comply with clause (iii) or (iv) under "Certain
Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or US
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for U.S. Federal income tax purposes as a result of such
deposit and defeasance and will be subject to U.S. Federal income tax on the
same amount and in the same manner and at the same times as would have been the
case if such
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deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
FOREIGN EXCHANGE RESTRICTIONS; CURRENCY INDEMNITY
Payments in respect of the Notes or any Subsidiary Guarantee shall be made
in US 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 Notes or any Subsidiary Guarantee, any restrictions or
prohibition of access to the Brazilian foreign exchange market exists, the
Company and each Guarantor agree 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 Brazilian 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 the Company
and the Guarantors.
US dollars are the sole currency of account and payment for all sums payable
by the Company and the Guarantors under or in connection with the Notes and the
Subsidiary Guarantees, including damages. Any amount received or recovered in a
currency other than US 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 and the Guarantors or otherwise) by any holder of a
Note in respect of any sum expressed to be due to it from the Company and the
Guarantors shall only constitute a discharge to the Company and the Guarantors
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 dollar
amount is less than the dollar amount expressed to be due to the recipient under
any Note, the Company and the Guarantors shall, jointly and severally, indemnify
it against any loss sustained by it as a result. In any event the Company 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
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 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 the Company 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 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.
ENFORCEABILITY OF JUDGMENTS WITH RESPECT TO THE NOTES AND SUBSIDIARY GUARANTEES
Service of process upon the Company 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 Indenture, the Notes or the Subsidiary Guarantees may be
obtained within the United States by service upon CT Corporation System. See
"Risk Factors-- Risks Relating to the Notes--Enforceability of Judgments." Since
substantially all of the assets of the Company and its subsidiaries are outside
the United States, any judgment obtained in the United States against the
Company or any Guarantor, including judgments with respect to the payment of
amounts owing with respect to the Notes or the Subsidiary Guarantees, may not be
collectible within the United States.
Judgments for monetary claims obtained in US courts arising out of or in
relation to the obligations of the Company and the Guarantors under the
Indenture and the Notes will be enforceable in Brazil, provided that such
judgment has been previously confirmed by the Brazilian Federal Supreme Court.
In
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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 "Enforceability of
Civil Liabilities."
Any judgment obtained against the Company or the Guarantors in a court in
Brazil under any Note or under the Indenture will be expressed in the Brazilian
currency equivalent to the US dollar amount of such sum at the commercial
exchange rate of the date at which such judgment is obtained, and such Brazilian
currency amount will be corrected in accordance with the exchange variation
until the judgment holder receives effective payment.
CERTAIN BANKRUPTCY LAW CONSIDERATIONS
Brazilian Bankruptcy Law (Decree-law No. 7,661, 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
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 the Company or any of the
Guarantors is declared bankrupt or enters into a CONCORDATA, the Notes will be
considered general unsecured indebtedness of the Company 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 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 and (iv)
unsecured credits (including the Notes). 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 bear
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;
and (v) a company under CONCORDATA which fails to meet its rescheduled
obligations will be declared bankrupt.
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CONSENT TO JURISDICTION AND SERVICE
The Indenture will provide that the Company and the Guarantors will appoint
CT Corporation System as their agent for service of process in any suit, action
or proceeding with respect to the Indenture, the Notes 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 will
submit to such jurisdiction. See "Risk Factors--Risks Relating to the
Notes--Enforceability of Judgments."
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is to be the Trustee under the Indenture and has
been appointed by the Company as Registrar, and Chase Trust Bank has been
appointed as Paying Agent with regard to the Notes. Affiliates of the Trustee
own approximately 9.3% of the common shares of the Company.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
For purposes of the following definitions and the Indenture generally, all
calculations and determinations shall be made in accordance with US GAAP and
shall be based upon the consolidated financial statements of the Company and its
Subsidiaries prepared in accordance with US GAAP. For purposes of this
"Description of Notes," the term "Company" means Tevecap S.A. excluding its
Subsidiaries.
"Abril Credit Facility" means the Revolving Credit Agreement, dated December
6, 1995 between the Company and Abril S.A., as lender, as amended, refinanced or
replaced from time to time.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such Person merges with or
into or consolidates with or becomes a Restricted Subsidiary of such specified
Person and (ii) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person, which Indebtedness was not incurred in anticipation of,
and was outstanding prior to, such merger, consolidation or acquisition.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Permitted Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted
Subsidiary; PROVIDED, HOWEVER, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Permitted Business.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described under "Certain Covenants-- Limitation on
Sales of Assets and Subsidiary Stock" and "Certain Covenants--Limitation on
Affiliate Transactions", "Affiliate" shall also include any beneficial owner of
shares representing 10.0% or more of the total voting power of the Voting Stock
(on a fully diluted basis) of the Company or of rights or warrants to purchase
such Voting Stock (whether or not currently exercisable) and any Person who
would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof, and for the purposes of the covenant described under "Certain
Covenants--Limitation on Affiliate Transactions" only, shall include
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(i) Bell Canada, (ii) Canbras Communications Corp., (iii) Canbras Participacoes
Ltda., (iv) Canbras TVA Cabo Ltda., (v) TV Cabo Santa Branca Comercio Ltda. and
(vi) Galaxy Latin America.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares), property,
services or other assets (each referred to for the purposes of this definition
as a "disposition") by the Company or any of its Restricted Subsidiaries
(including any disposition by means of a merger, consolidation or similar
transaction) other than (i) a disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly-Owned
Restricted Subsidiary, (ii) a disposition of inventory, services or accounts
receivable in the ordinary course of business consistent with market practice,
(iii) a disposition of obsolete or worn out equipment or equipment that is no
longer useful in the conduct of the business of the Company and its Subsidiaries
and that is disposed of in each case in the ordinary course of business, and
(iv) a disposition by Galaxy Brasil of up to 25.0% of its Capital Stock to
Hughes Communications GLA and Darlene Investments, a member of the Cisneros
Group, or their respective affiliates, pursuant to the Galaxy Latin America
Partnership Agreement as it exists on the Issue Date.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"California Broadcast Center" or "CBC" means the California Broadcast Center
LLC, the owner of an uplink center located in Long Beach, California, which
provides certain uplink services to Galaxy Latin America.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock and
Disqualified Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means, at any time, (i) any direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America or the Federative Republic of Brazil (including any
agency or instrumentality thereof) for the payment of which the full faith and
credit of the United States of America or the Federative Republic of Brazil is
pledged and which are not callable or redeemable at the issuer's option, each
with a maturity of 180 days or less from the date of acquisition; (ii)
certificates of deposit, money market deposit accounts and acceptances with a
maturity of 180 days
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or less from the date of acquisition of any financial institution that is a
Brazilian regulated Bank or a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $500.0
million (or the US dollar equivalent); and (iii) commercial paper with a
maturity of 180 days or less from the date of acquisition issued by a
corporation that is not an Affiliate of the Company or any of its Subsidiaries
and is organized under the laws of any state of the United States or the
District of Columbia whose debt rating, at the time as of which such investment
is made, is at least "A-1" by Standard & Poor's Corporation or at least "P-1" by
Moody's Investors Service, Inc. or rated at least an equivalent rating category
of another nationally recognized securities rating agency.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Income Tax Expense" means, with respect to any Person, for any
period the aggregate of the federal, state, local and foreign income tax expense
of such Person and its Subsidiaries for such period, on a consolidated basis as
determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to Capitalized Lease Obligations, (ii) amortization of debt
discount, (iii) capitalized interest, (iv) non-cash interest expenses, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) the net costs associated with
Hedging Obligations (including amortization of fees), (vii) Preferred Stock
dividends in respect of all Preferred Stock of the Company or a Wholly-Owned
Restricted Subsidiary, (viii) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by the Company or any
Restricted Subsidiary and (ix) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Restricted Subsidiary, except that (A)
subject to the limitations contained in clause (iv) below, the Company's equity
in the net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) the Company's equity in a net loss of any such
Person (other than an Unrestricted Subsidiary) for such period shall be included
in determining such Consolidated Net Income; (ii) any net income (loss) of any
person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income (loss) of any Restricted Subsidiary if such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that (A) subject to the limitations contained
in (iv) below, the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another Restricted
Subsidiary as a dividend (subject, in the case of a dividend that could have
been made to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income; (iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company or its consolidated Subsidiaries which
are not sold or otherwise disposed of in the ordinary course of business and any
gain (but not loss) realized upon the sale or other disposition of any Capital
Stock of any Person; (v) any extraordinary gain or loss; and (vi) the cumulative
effect of a change in accounting principles.
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"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and the Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii) paid
in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense from October 1, 1996 to the end of
the Company's most recently ended full fiscal quarter for which financial
statements are available prior to such date, taken as a single accounting
period.
"Cumulative Operating Cash Flow" means, as of any date of determination,
Operating Cash Flow from October 1, 1996 to the end of the Company's most
recently ended full fiscal quarter for which financial statements are available
prior to such date, taken as a single accounting period.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which 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
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Notes.
"Equipment Agreements" means the Equipment Lease Agreement, dated as of July
30, 1996, between Citibank N.A., as lessor, and Galaxy Brasil, as lessee, and
related agreements, and the Equipment Sale and Leaseback Agreement, dated as of
July 30, 1996, between Citibank N.A., as lessor, and Galaxy Brasil, as lessee,
and related agreements, as each such agreement may be amended, supplemented or
otherwise modified from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"EximBank Credit Agreement" mean the Credit Agreement to be entered into
among the Company, The Chase Manhattan Bank, as lender, and the Export-Import
Bank of the United States, as amended, supplemented or otherwise modified from
time to time.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under compulsion to
complete the transaction. The Fair Market Value of any asset or assets shall be
determined by the Board of Directors of the Company, acting in good faith, and
shall be evidenced by a resolution of such Board of Directors provided to the
Trustee; PROVIDED that, solely for purposes of clause (i) of the covenant
described under "Certain Covenants--Limitation on Sales of Assets and Subsidiary
Stock" the Company shall be deemed not to have received Fair Market Value for an
Asset Disposition unless (a) in the event such Asset Disposition involves an
aggregate amount in excess of $2.0 million, the terms of such transaction have
been approved by a majority of the members of the Board of Directors of the
Company and by a majority of the members of such Board having no personal stake
in such Asset Disposition, if any, and (b) in the event such Asset Disposition
involves an aggregate amount in excess of $20.0 million, the Company has
received a written opinion from an independent investment banking firm of
nationally recognized standing in the United States that such
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Asset Disposition is fair to the Company or such Restricted Subsidiary, as the
case may be, from a financial point of view (except that no such opinion shall
be required in connection with a public offering of common stock of a Restricted
Subsidiary either (A) registered under the Securities Act and/or (B) registered
with the CVM and listed on the Sao Paulo Stock Exchange or Rio de Janeiro Stock
Exchange).
"Galaxy Brasil" means Galaxy Brasil S.A., a Restricted Subsidiary of the
Company on the Issue Date.
"Galaxy Brasil Subscribers" means, as of any date, the number of subscribers
to the pay television services offered by Galaxy Brasil, excluding subscribers
who have paid an installation fee to Galaxy Brasil at such date but who are
awaiting installation of such services.
"Galaxy Latin America" means Galaxy Latin America, a Delaware general
partnership in which the Company holds a 10% equity interest on the Issue Date.
"Galaxy Latin America Partnership Agreement" means the Partnership
Agreement, dated February 13, 1995, as in effect on the Issue Date, among Galaxy
Brasil and a unit of Hughes Electronics, a member of the Cisneros Group and a
subsidiary of Grupo MVS.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those 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 approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP as in effect on the Issue Date.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of any other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor" means any Subsidiary that has issued a Guarantee.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder," "holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" or "incur" means issue, assume, Guarantee, incur or otherwise become
liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a
Person existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
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bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all obligations
of such Person to pay the deferred and unpaid purchase price of property or
services, which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations of such
Person and all Attributable Indebtedness of such Person, (vi) all Indebtedness
of other Persons secured by a Lien on any asset of such Person, whether or not
such Indebtedness is assumed by such Person, PROVIDED, HOWEVER, that the amount
of Indebtedness of such Person shall be the lesser of (A) the fair market value
of such asset at such date of determination and (B) the amount of such
Indebtedness of such other Persons, (vii) all Indebtedness of other Persons to
the extent Guaranteed by such Person, (viii) the amount of all obligations of
such Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of the Company, any
Preferred Stock (but excluding, in each case, any accrued dividends) and (ix) to
the extent not otherwise included in this definition, Hedging Obligations of
such Person; PROVIDED, HOWEVER, that in no event shall Indebtedness include
Trade Payables not overdue or being contested in good faith. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
"Indebtedness to Annualized Operating Cash Flow Ratio" means, as of any date
of determination, the ratio of (i) the aggregate principal amount of all
outstanding Indebtedness of the Company and its Restricted Subsidiaries as of
such date plus, without duplication, the aggregate liquidation preference or
redemption amount of all Disqualified Stock of the Company (excluding any such
Disqualified Stock (x) held by the Company or a Wholly-Owned Restricted
Subsidiary of the Company or (y) outstanding on the Issue Date), to (ii)
Operating Cash Flow of the Company and its Restricted Subsidiaries for the most
recently ended fiscal quarter for which financial statements are available prior
to such date multiplied by four, determined on a pro forma basis (and after
giving pro forma effect to (A) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such period; (B) the
incurrence, repayment or retirement of any other Indebtedness by the Company and
its Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average balance of
such Indebtedness at the end of each month during such period); (C) in the case
of Acquired Indebtedness, the related acquisition as if such acquisition had
occurred at the beginning of such period; and (D) any acquisition or disposition
by the Company and its Restricted Subsidiaries (or by 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) of any
company or any business or any assets out of the ordinary course of business, or
any related repayment of Indebtedness, in each case since the first day of such
period, assuming such acquisition or disposition had been consummated on the
first day of such period). For purposes of this definition, whenever pro forma
effect is to be given to a transaction, the pro forma calculation shall be made
in good faith by a responsible financial or accounting officer of the Company.
"Indemnification Agreement" means the Indemnification Agreement to be
entered into among the Company, Galaxy Latin America, Hughes Communications GLA
and affiliates thereof, California Broadcast Center, TVA Communications Ltd.,
Darlene Investments, Inversiones Divtel, D.T., C.A., Grupo Frecuencia Modulada
Television and Grupo MVS.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement,
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interest rate cap agreement, interest rate collar agreement, interest rate hedge
agreement or other similar agreement or arrangement as to which such Person is
party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement, but excluding
any debt or extension of credit represented by a bank deposit other than a time
deposit) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Minority Investment" means any Investment by the Company or any Restricted
Subsidiary in an entity or Person in which the Company or such Restricted
Subsidiary owns or controls 50.0% or less of the total voting power of the
Capital Stock or other equity interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees of any such entity or Person.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to any Person owning a beneficial interest in assets subject
to sale or minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition and (iv) the deduction of appropriate amounts
to be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition and
retained by the Company or any Restricted Subsidiary of the Company after such
Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Newly-Licensed Service Area" means a service area in which (i) such Special
Restricted Subsidiary is licensed to provide any of Cable or MMDS service and
(ii) neither the Company nor any Restricted Subsidiary is then licensed to
provide such Cable or MMDS service in such service area on the Issue Date.
"Officers' Certificate" means a certificate signed by two Officers.
"Operating Cash Flow" means, for any period, the Consolidated Net Income
(Loss) of the Company and its Restricted Subsidiaries for such period, plus,
without duplication, (i) extraordinary net losses and
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net losses on sales of assets outside the ordinary course of business during
such period, to the extent such losses were deducted in computing Consolidated
Net Income (Loss), plus (ii) Consolidated Income Tax Expense, and any provision
for taxes utilized in computing the net losses under clause (i) hereof, plus
(iii) Consolidated Interest Expense (income), net, plus (iv) Other nonoperating
(expenses) income, net (v) depreciation, amortization and all other non-cash
charges, to the extent such depreciation, amortization and other non-cash
charges were deducted in computing such Consolidated Net Income (Loss)
(including amortization of goodwill and other intangibles) (other than non-cash
charges which require an accrual or reserve for cash charges in future periods),
less (vi) non-cash items increasing Consolidated Net Income (Loss) of such
Person for such period (excluding any items which represent the reversal of any
accrual of, or cash reserve for, anticipated cash charges in any prior period
and excluding the amortization of deferred sign-on and hook-up fee revenue).
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Business" means (i) the delivery or distribution of television,
radio, paging or other telecommunications services in Latin America and Portugal
and (ii) any business or activity reasonably related thereto, including, without
limitation, any business conducted by the Company or any Restricted Subsidiary
on the Issue Date, the acquisition, holding or exploitation of any license
relating to the delivery of the services described in clause (i) of this
definition, the development or acquisition of rights to programming for delivery
or distribution in accordance with clause (i) of this definition and any other
business involving voice, data or video telecommunications services.
"Permitted Holders" means each of Abril S.A., Falcon International
Communications LLC, Falcon International Communications L.P., Falcon
International Communications (Bermuda) L.P., The Hearst Corporation, ABC, Inc.
and Chase Manhattan International Finance Ltd. and any entity of which any of
the foregoing, individually or collectively, beneficially owns more than 50.0%
of the Voting Stock.
"Permitted Investment" means (i) an Investment by the Company or any of its
Restricted Subsidiaries in the Company or a Restricted Subsidiary of the Company
or a Person which will, upon making such Investment, become a Restricted
Subsidiary; PROVIDED, HOWEVER, that the primary business of such Restricted
Subsidiary is a Permitted Business; (ii) any Investment in the California
Broadcast Center by the Company or a Restricted Subsidiary in an amount not to
exceed $10.0 million and, upon the repayment in full of such Investment by the
California Broadcast Center to the Company, the Investment of such amount in
Galaxy Latin America; and (iii) Temporary Cash Investments.
"Permitted Liens" means, (i) Liens for taxes, assessments or other
governmental charges not yet delinquent or which are being contested in good
faith and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or such Subsidiary, as the case may
be, in accordance with GAAP; (ii) carriers', warehousemen's, mechanics',
landlords', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business in respect of obligations which are not yet due or
which are bonded or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Company or such Restricted Subsidiary, as the case may be, in
accordance with GAAP; (iii) pledges or deposits in connection with workmen's
compensation, unemployment insurance and other social security legislation; (iv)
deposits to secure the performance of bids, tenders, trade or government
contracts (other than for borrowed money), leases, licenses, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (v) judgment or
attachment Liens against the Company or any of its Restricted Subsidiaries not
giving rise to an Event of Default; (vi) Liens arising by operation of law;
(vii) Liens in favor of the Company or any Wholly-Owned Restricted Subsidiary of
the Company; (viii) Liens securing Indebtedness Incurred by the Company in
compliance with to clause (i) of paragraph (b) of the covenant described under
"Certain Covenants--Limitation on Indebtedness"; (ix) Liens on property and
assets (together with accounts
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receivable arising from such property and assets) of Galaxy Brasil acquired with
the proceeds of Indebtedness Incurred by Galaxy Brasil in compliance with clause
(viii) of paragraph (b) of the covenant described under "Certain
Covenants--Limitation on Indebtedness" or with the proceeds of other
Indebtedness Incurred in compliance with the Indenture, PROVIDED that such Liens
may not secure Indebtedness exceeding an amount equal to the greater of (A) the
amount permitted to be Incurred pursuant to such clause (viii) and (B) an amount
equal to the Operating Cash Flow of Galaxy Brasil for the four most recent
fiscal quarters for which financial statements are available prior to the date
of Incurrence; (x) Liens on real or personal property of the Company or a
Restricted Subsidiary of the Company acquired, constructed or constituting
improvements made after the Issue Date to secure Purchase Money Indebtedness
Incurred after the Issue Date in compliance with the Indenture; PROVIDED, that
(A) such Liens do not extend to any assets other than the assets so acquired,
(B) such Liens shall be created no later than 10 days after the acquisition of
such assets and (C) the principal amount of such Indebtedness secured by such a
Lien does not exceed 80% of such purchase price or cost of construction or
improvement of the property subject to such Lien; (xi) Liens existing on the
Issue Date; (xii) the pledge by the Company (A) to the other members of Galaxy
Latin America of warrants and promissory notes it holds in the California
Broadcast Center to secure its obligations under the Equipment Agreements and
the contribution agreement to be entered into in connection with the SurFin
Guarantee and the pledge of such warrants and promissory notes, together with
the equity interest it holds of Galaxy Latin America, to secure its tax
indemnity obligations under the Indemnification Agreement and (B) to Falcon
International of the shares of Capital Stock of the Company purchased with Put
Promissory Notes; and (xiii) Liens to secure Indebtedness Incurred to extend,
renew, refinance or refund (or successive extensions, renewals, refinancings or
refundings), in whole or in part, Indebtedness secured by any Lien referred to
in the foregoing clauses (vii), (viii), (ix), (x) and (xi) so long as such Lien
does not extend to any other property and the principal amount of Indebtedness
so secured is not increased except as otherwise permitted under the definition
of Refinancing Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision hereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the note which is due or overdue or is to become due at the
relevant time.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations, obligations
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions or improvements.
"Put Promissory Notes" means any promissory notes which may be issued by the
Company to Falcon International pursuant to the Stockholders Agreement, as
amended, in the event the Indenture prohibits the Company from purchasing shares
of Capital Stock held by such stockholder; PROVIDED that (a) such notes have
been expressly subordinated in right of payment in full to the Notes (including
principal, interest and premium, if any, and as a consequence of any repurchase,
redemption, or other repayment of the Notes, by way of optional redemption,
Asset Sale Offer or Change of Control Offer to the extent any applicable rights
to repayment are exercised by the Noteholders), (b) such notes are not
Guaranteed by any of the Company's Subsidiaries and are not secured by any Lien
on any property or asset of the Company or any Restricted Subsidiary (other than
by the pledge of the shares of Capital
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Stock of the Company purchased with Put Promissory Notes), (c) such notes do not
have a Stated Maturity of principal or any redemption or repurchase or other
similar provision (upon a default or otherwise) earlier than a date at least one
year after the final Stated Maturity of the Notes; and (d) such notes bear
interest at a rate consistent with the terms of the Stockholders Agreement, as
amended; PROVIDED, FURTHER, that payments of interest on such notes may be made
solely to the extent Restricted Payments in like amount may then be made in
accordance with the covenant described under "Certain Covenants--Limitation on
Restricted Payments," with any such interest payment being included in the
calculation of whether the conditions of clause (z) of paragraph (a) of such
covenant have been met with respect to any subsequent Restricted Payments.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Company
that refinances Indebtedness of any Restricted Subsidiary and Indebtedness of
any Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness,
PROVIDED, HOWEVER, that (i) in respect of Indebtedness having a Stated Maturity
after the Stated Maturity of the Notes, the Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
refinanced, (ii) in respect of Indebtedness having a Stated Maturity prior to
the Stated Maturity of the Notes, the Refinancing Indebtedness bears an interest
rate materially lower than that of the Indebtedness being refinanced, (iii) the
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced, (iv) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the sum of the
aggregate principal amount (or if issued with original issue discount, the
aggregate accredited value) then outstanding of the Indebtedness being
refinanced and (v) the Refinancing Indebtedness shall be subordinated or PARI
PASSU (whichever is applicable) in right of payment to the Notes to the same
extent as the Indebtedness being refinanced is subordinated or PARI PASSU in
right of payment to the Notes; PROVIDED, FURTHER, that Refinancing Indebtedness
shall not include Indebtedness of a Restricted Subsidiary which refinances
Indebtedness of the Company or Indebtedness of the Company or a Restricted
Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary.
Notwithstanding the foregoing, in the case of Indebtedness represented by
obligations described in clause (iv) of the definition of "Indebtedness," the
re-incurrence of such Indebtedness within 60 days after the repayment thereof
shall be deemed to be Refinancing Indebtedness for purposes of this definition;
PROVIDED, HOWEVER, that it otherwise complies with the terms of this definition
and that the amount of such Indebtedness deemed to be Refinancing Indebtedness
hereunder shall not exceed $50.0 million at any one time.
"Representative" means any trustee, agent or representative (if any) of an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Person owning such property transfers
such property to another Person and leases it back from such Person.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Senior Credit Facility" means any senior credit facility (whether a term or
a revolving facility) as such credit facility may be amended, modified,
supplemented, restated or replaced from time to time.
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"Significant Equity Offering" means either (i) a public offering of Common
Stock of the Company either (A) registered under the Securities Act and/or (B)
registered with the CVM and listed on the Sao Paulo Stock Exchange or Rio de
Janeiro Stock Exchange or (ii) an offering on behalf of the Company pursuant to
Rule 144A under the Securities Act of Common Stock of the Company to 100 or more
beneficial holders if such Common Stock is thereafter included for trading
privileges in the PORTAL trading system of Nasdaq.
"Special Restricted Subsidiary" means any Restricted Subsidiary of the
Company that has been designated by the Board of Directors, by a Board
Resolution delivered to the Trustee, as a Special Restricted Subsidiary and as
to which there has not been an effective revocation, in each case in accordance
with the covenant under "Certain Covenants--Limitation on Designations of
Special Restricted Subsidiaries."
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable.
"Strategic Investor" means any Person engaged in a Permitted Business that
as of the date of determination has a Total Equity Market Capitalization of at
least $1.0 billion.
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subordinated Shareholder Loans" means Indebtedness of the Company for money
borrowed from a shareholder beneficially owning at least 5.0% of the issued and
outstanding shares of common stock of the Company (or any Affiliate of such
shareholder), PROVIDED that (A) such Indebtedness (and any refinancing thereof)
has been expressly subordinated in right of payment to the prior payment in full
of all Indebtedness (including principal, interest and premium, if any, under
the Notes and the Indenture) of the Company (including as a consequence of any
repurchase, redemption or other repayment of the Notes, by way of optional
redemption, Asset Sale Offer, or Change of Control Offer to the extent any
applicable rights to repayment are exercised by the Noteholders), (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 Restricted Subsidiary, (C) such Indebtedness (and any
refinancing thereof) does not have a Stated Maturity of principal or any
redemption or repurchase or other similar provision (upon a default or
otherwise) earlier than a date at least one year after the final Stated Maturity
of the Notes and (D) such Indebtedness bears interest at a rate consistent with
prevailing market practice for subordinated loans; PROVIDED FURTHER that
payments of interest on such Indebtedness (and any refinancing thereof) may be
made solely to the extent Restricted Payments in like amount may then be made in
accordance with the covenant described under "Certain Covenants--Limitation on
Restricted Payments," with any such interest payment being included in the
calculation of whether the conditions of clause (z) of paragraph (a) of such
covenant have been met with respect to any subsequent Restricted Payments.
"Subsidiary" of any Person means any corporation, association, partnership,
joint venture or other business entity (i) of which more than 50.0% of the total
voting power of shares of Capital Stock or other interests (including
partnership interests) 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 (A) such Person,
(B) such Person and one or more Subsidiaries of such Person or (C) one or more
Subsidiaries of such Person and (ii) which is controlled by such Person. Unless
otherwise specified herein, each reference to a Subsidiary shall refer to a
Subsidiary of the Company.
"Subsidiary Guarantee" means, individually, any Guarantee of payment of the
Notes which may from time to time be executed and delivered by a Subsidiary or
affiliate of the Company pursuant to the
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terms of the Indenture, and, collectively, all such Guarantees. Each such
Subsidiary Guarantee will be in the form prescribed in the Indenture.
"SurFin Guarantee" means the Guarantee, dated as of September 18, 1996, by
the Company in favor of Citicorp USA, Inc. as such guarantee may be amended,
modified, supplemented or restated from time to time.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital, surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group.
"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 in good faith and evidenced
by a resolution of the Board of Directors filed with the Trustee.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person (including letters of credit issued in respect
thereof) arising in the ordinary course of business in connection with the
acquisition of either (x) current assets as characterized in accordance with
GAAP or (y) services which are currently expensed in accordance with GAAP.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company (other
than a Guarantor) designated as such pursuant to and in compliance with the
covenant described under "Certain Covenants--Limitation on Designations of
Unrestricted Subsidiaries" and (ii) any Subsidiary of an Unrestricted
Subsidiary.
"US Dollar Equivalent" means, with respect to any monetary amount in a
currency other than the US dollar at any one time for the determination thereof,
the amount of US dollars obtained by converting such foreign currency involved
in such computation into US dollars at the spot rate for the purchase of US
dollars with the applicable foreign currency as quoted by Reuters at
approximately 11:00 a.m. (New York time) on the date not more than two business
days prior to such determination. For purposes of determining whether any
Indebtedness can be incurred (including Permitted Indebtedness), any Investment
can be made and any Affiliate Transaction can be undertaken (a "Tested
Transaction"), the "US Dollar Equivalent" of such Indebtedness, Investment or
Affiliate Transaction shall be determined on the date incurred, made or
undertaken and no subsequent change in the US Dollar Equivalent shall cause such
Tested Transaction to have been incurred, made or undertaken in violation of the
Indenture.
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"US Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly-Owned Subsidiary" means a Subsidiary of the Company, at least 95.0%
of the Capital Stock of which (other than directors' qualifying shares) is owned
by the Company or another Wholly-Owned Subsidiary of the Company.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the Exchange Notes will be issued in the form of
one or more registered notes in global form without coupons (each a "Global
Note"). Upon issuance, each Global Note will be deposited with, or on behalf of,
The Depository Trust Company ("DTC") and registered in the name of Cede & Co.,
as nominee of DTC.
Old Notes originally purchased by or transferred to (i) institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) who are not "qualified institutional buyers" (as defined in Rule
144A under the Securities Act and referred to as "QIBs"), (ii) QIBs who elected
to take physical delivery of their certificates instead of holding their
interest in Global Notes, or (iii) any other holders who are not QIBs, which Old
Notes were issued in registered form without coupons (the "Old Certificated
Notes") are exchangeable for Exchange Notes in registered form without coupons
(the "Exchange Certificated Notes").
Interests in the Global Notes will be exchangeable or transferable, as the
case may be, for Exchange Certificated Notes if (i) DTC notifies Tevecap that it
is unwilling or unable to continue as depositary for such Global Notes, or DTC
ceases to be a "Clearing Agency" registered under the Exchange Act, and a
successor depositary is not appointed by Tevecap within 90 days, or (ii) an
Event of Default has occurred and is continuing with respect to such Notes. Upon
the occurrence of any of the events described in the preceding sentence, Tevecap
will cause the appropriate Exchange Certificated Notes to be delivered.
The Depository has advised the Company that it is (i) a limited purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depository was
created to hold securities for its participants (collectively, the
"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 Depository's 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 (collectively, the "Indirect Participants") that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly. QIBs who are not Participants may beneficially own
securities held by or on behalf of the Depository only through Participants or
Indirect Participants.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Notes, the Depository or its custodian
will credit the accounts of Participants designated by the Initial Purchasers
with an interest in a Global Note and (ii) ownership of the Notes will be shown
on, and the transfer of ownership thereof will be effected only through, records
maintained by the Depository (with respect to the interest of Participants), the
Participants and the Indirect Participants. The laws of some states require that
certain persons take physical delivery in definitive form of securities that
they
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own and that security interests in negotiable instruments can only be perfected
by delivery of certificates representing the instruments. Consequently, the
ability to transfer Notes or to pledge the Notes as collateral will be limited
to such extent.
So long as the Depository or its nominee is the registered owner of a Global
Note, the Depository or such nominee, as the case may be, will be considered the
sole owner or Holder of the Notes represented by such Global Note for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of Certificated Securities, and will not be considered
the owners or holders thereof under the Indenture for any purpose, including
with respect to giving of any directions, instruction or approval to the Trustee
thereunder. As a result, the ability of a person having a beneficial interest in
Notes represented by a Global Note to pledge such interest to persons or
entities that do not participate in the Depository's system or to otherwise take
action with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Accordingly, each person owning a beneficial interest in a Global Note must
rely on the procedures of the Depository and, if such beneficial owner is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a Holder
under the Indenture or such Global Note. The Company understands that under
existing industry practice, in the event the Company requests any action of
holders or a person that is an owner of a beneficial interest in a Global Note
desires to take any action that the Depository, as the Holder of such Global
Note, is entitled to take, the Depository would authorize the Participants to
take such action and the Participant would authorize beneficial owners owning
through such Participants to take such action or would otherwise act upon the
instruction of such beneficial owners. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of Notes by the Depository, or for maintaining,
supervising or reviewing any records of the Depository relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest on
any Notes represented by a Global Note registered in the name of the Depository
or its nominee on the applicable record date 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 such Global Note representing such Notes under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payment and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Notes (including principal, premium, if
any, and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interest in a Global Note as shown on
the records of the Depository. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, or (iii) upon the occurrence of certain
other events, then, upon surrender by the Depository of its Global Notes,
Certificated Securities will be issued to each person that the Depository
identifies as the beneficial owner of the Notes represented by the Global Note.
In addition, subject to certain conditions, any person having a beneficial
interest in a Global Note may,
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upon request to the Trustee, exchange such beneficial interest for Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of such person or persons (or the nominee of
any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depository or any Participant or Indirect Participant in identifying the
beneficial owners of the related Notes and each such person may conclusively
rely on, and shall be protected in relying on, instructions from the Depository
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Notes to be issued).
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds. So
long as the Notes are represented by a permanent Global Note or Notes, all
payments of principal, premium, if any, and interest will be made by the Company
in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. So long as the Notes are
represented by a permanent Global Note or Notes registered in the name of the
Depositary or its nominee, except for trades between Euroclear and Cedel
participants, interests in the Notes are expected to trade in the Depositary's
Same-Day Funds Settlement System, and secondary market trading activity in the
Notes will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on the trading activity in the Notes.
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INCOME TAX CONSIDERATIONS
BRAZIL
The following is a summary of the material Brazilian income tax consequences
to Tevecap in connection with the sale and repayment of the Notes (including any
interest thereon) and to beneficial owners of the Notes that are non-residents
of Brazil in connection with the purchase, ownership and disposition of such
Notes. This summary is limited to Tevecap and to non-residents of Brazil which
acquire the Notes at the issue price from the Initial Purchasers, and does not
address investors who purchase Notes at a premium or market discount. In
addition, this summary is based on the Brazilian tax regulations as presently in
effect and does not take into account possible future changes in such tax laws.
Prospective purchasers of the Notes are advised to consult their tax advisers as
to the consequences of a purchase and sale of the Notes.
Individuals domiciled in Brazil and Brazilian companies are taxed in Brazil
on the basis of their worldwide income (which includes earnings of Brazilian
companies' foreign subsidiaries, branches and affiliates). The earnings of
branches of foreign companies and non- Brazilian residents in general are taxed
in Brazil only when derived from Brazilian sources. Interest, fees, commissions
and any other income (which for the purposes of this paragraph includes any
deemed income on the difference between the issue price of the Notes and the
price at which the Notes are redeemed) payable by a Brazilian obligor to an
individual, company, entity, trust or organization domiciled outside Brazil is
considered derived from Brazilian sources and is therefore subject to income tax
withheld at the source. Brazilian tax laws expressly authorize the paying source
to pay the income or earnings net of taxes and, therefore, to assume the cost of
the applicable tax. The rate of withholding is 15.0% or such other lower rate as
is provided for in an applicable tax treaty between Brazil and such other
country where the recipient of the payment has its domicile. Notwithstanding the
foregoing, the applicable withholding tax rate for negotiable instruments such
as the Notes was reduced to zero, pursuant to Resolutions 1853 of July 31, 1991
and 644 of October 22, 1980 of the Central Bank, subject to Central Bank
Circular 2661 of February 8, 1996, which restricts such withholding tax
reductions to negotiable instruments having a minimum maturity of 96 months. As
a result, since the Notes have an original maturity of 96 months, such reduction
will apply to payments of interest and other income with respect to the Notes.
If, however, any Note is redeemed prior to November 26, 2004, such reduction
will not apply and, therefore, upon such redemption the Brazilian withholding
tax will be imposed on the amount of interest, fees and commissions paid on such
Notes from the date of issue through the date of redemption. Based on the advice
of its Brazilian tax counsel, Tevecap believes and intends to take the position
for tax reporting purposes that, in the event of any such early redemption to
which such withholding tax applies, so long as the Principal Paying Agent is
located in Japan and payment to the Principal Paying Agent discharges the
obligations of Tevecap to make payments in respect of the Notes, interest and
other income with respect to the Notes will be subject to Brazilian withholding
tax at a rate of 12.5% under the tax treaty in effect between Brazil and Japan.
In any event, under the terms of the Notes, Tevecap would be required to gross
up Noteholders for any Brazilian withholding tax, subject to customary
exceptions. See "Description of the Notes--Additional Amounts." Tevecap has the
right to redeem the Notes at par in the event that it is required to gross up
for Brazilian withholding tax imposed at a rate in excess of 15.0%. See
"Description of the Notes--Redemption for Changes in Withholding Taxes."
Any earnings or capital gains resulting from the sale (whether inside or
outside Brazil) of any Notes by a non-resident of Brazil to another non-resident
of Brazil are not subject to tax in Brazil. Earnings or capital gains resulting
from the sale (whether inside or outside Brazil) of any Notes by a non-resident
of Brazil to a resident of Brazil should not be subject to tax in Brazil,
although the matter is not free from doubt.
On February 8, 1996, the Brazilian Federal Government issued Decree No.
1815, implemented by Portaria No. 28 (as amended from time to time), which
imposed a tax on Brazilian issuers with respect to
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<PAGE>
foreign exchange transactions ("IOF Tax") related to the entering into Brazil of
proceeds resulting from foreign loans (including the issuance of securities such
as the Notes). The IOF Tax has varying rates depending on the final maturity of
the transaction as follows: (i) foreign loans with a minimum average maturity of
less than 3 years are subject to a 3.0% IOF Tax; (ii) foreign loans with a
minimum average maturity of 3 years or more but less than 4 years are subject to
a 2.0% IOF Tax; (iii) foreign loans with a minimum average maturity of 4 years
or more but less than 5 years are subject to a 1.0% IOF Tax; and (iv) foreign
loans with a minimum average maturity of 5 years or more are not subject to IOF
Tax. Only Brazilian issuers, and not holders of foreign loans such as the Notes
are liable for payment of IOF Tax.
There is no stamp, transfer or other similar tax in Brazil with respect to
the transfer, assignment or sale or any debt instrument--outside Brazil
(including the Notes).
UNITED STATES
The following is a summary of the material United States Federal income tax
consequences to beneficial owners of the Notes that are citizens or residents of
the United States, corporations, partnerships or other entities created or
organized in or under the laws of the United States or any State thereof, or
estates or trusts the income of which is subject to United States Federal income
taxation regardless of its source, as well as other persons subject to United
States Federal income taxation on a net income basis in respect of the purchase,
ownership and disposition of a Note ("US Holders"). Such tax treatment may vary
depending upon the particular situation of a US Holder. This summary does not
discuss all of the tax consequences that may be relevant to certain types of
investors subject to special treatment under the United States Federal income
tax laws (such as individual retirement accounts and other tax deferred
accounts, banks, securities broker- dealers, life insurance companies,
tax-exempt organizations, foreign persons, persons whose "functional currency"
is other than the US dollar or persons which hold Notes as part of a "straddle"
or "conversion transaction" or otherwise as part of a "synthetic asset") and is
limited to investors which hold Notes as capital assets. In addition, this
summary is limited to US Holders which acquire the Notes at their issue price
from the Initial Purchasers and does not address investors who purchase Notes at
a premium or market discount. This summary is based on the Internal Revenue Code
of 1986, as amended (the "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 United States Internal Revenue Service
(the "IRS").
PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR TAX
ADVISERS AS TO THE CONSEQUENCES OF A PURCHASE AND SALE OF NOTES, INCLUDING,
WITHOUT LIMITATION, (I) THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
NON-US TAX LAWS TO WHICH THEY MAY BE SUBJECT, AND OF ANY POSSIBLE LEGISLATIVE OR
ADMINISTRATIVE CHANGES IN LAW, (II) THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE POSSIBLE DEDUCTION BY THE ISSUER OF BRAZILIAN TAXES (AND OF
THE PAYMENT BY THE ISSUER OF ADDITIONAL AMOUNTS WITH RESPECT THERETO) FROM
PAYMENTS ON THE NOTES, (III) THE AVAILABILITY FOR UNITED STATES FEDERAL INCOME
TAX PURPOSES OF A CREDIT OR DEDUCTION FOR ANY BRAZILIAN TAXES SO DEDUCTED AND
(IV) THE CONSEQUENCES OF PURCHASING THE NOTES AT A PRICE OTHER THAN THEIR ISSUE
PRICE.
INTEREST ON THE NOTES
Interest on the Notes will be taxable to a US Holder as ordinary income at
the time it accrues or is received in accordance with the US Holder's method of
accounting for tax purposes. The amount includible in the income of a US Holder
will be the gross amount of interest, including any Additional Amounts, if any,
payable to holders of Notes (i.e., the amount before deduction of any Brazilian
withholding taxes).
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<PAGE>
DISPOSITION OF A NOTE
Generally, any sale, redemption or other taxable disposition of a Note by a
US Holder will result in taxable gain or loss equal to the difference between
(1) the sum of the amount of cash and the fair market value of other property
received with respect to such taxable sale, redemption or other distribution
(other than consideration attributable to accrued interest not previously taken
into account, which consideration would be treated as interest received) and (2)
the US Holder's tax basis in the Note. Any gain or loss upon a sale or other
disposition of a Note will be capital gain or loss (which will be long-term if
the Note is held for more than one year).
EXCHANGE OFFER
The exchange of Old Notes for Exchange Notes pursuant to the Exchange Offer
will not be considered a recognition event for United States Federal income tax
purposes and accordingly a US Holder will not recognize taxable gain or loss as
a result thereof. For the purposes of determining the amount and character of
gain or loss upon the subsequent sale or exchange of Exchange Notes, a US Holder
would have the same tax basis and holding period in an Exchange Note as such US
Holder's tax basis and holding period in the Note exchanged therefor.
EFFECT OF BRAZILIAN WITHHOLDING TAXES
It is believed that payments with respect to a Note will not be subject to
Brazilian withholding tax unless the Note is redeemed prior to November 26,
2004. See "--Brazil." In the case of any Note which is so redeemed, withholding
taxes in respect of interest previously paid may be imposed by Brazil at the
time of redemption. Any Brazilian tax withheld generally will be treated as a
foreign income tax that US Holders may elect to deduct in computing their
taxable income or, subject to the limitations on foreign tax credits generally,
to credit against their United States Federal income tax liability. No such
deduction or credit will be available to the extent Brazil pays a subsidy to a
US Holder, a related person or Tevecap, the amount of which is determined
(directly or indirectly) by reference to the amount of the withholding tax.
While Brazil does not have a program or policy of paying such subsidies at
present, it has had programs of that nature in the past and could implement such
programs again in the future. For purposes of determining a US Holder's United
States foreign tax credit, the gain or loss on the sale, redemption or other
taxable disposition of a Note will generally constitute United States source
income. Interest (including any Additional Amounts payable by Tevecap) will
generally constitute foreign source passive income or financial services income
for United States foreign tax credit purposes. However, if a Note is redeemed
prior to November 26, 2004, and payments with respect to the Note are subject to
Brazilian withholding tax imposed at a rate of 5.0% or more, the IRS might
retroactively treat interest paid with respect to the Note as high withholding
tax interest. In any event, because the amount of foreign taxes for which the
foreign tax credit may be taken for the taxable year is generally limited to an
amount equal to the US Holder's United States Federal income tax rate multiplied
by its foreign source income for the taxable year, a US Holder may have
insufficient foreign source income to utilize fully any foreign tax credit
attributable to such Brazilian withholding taxes (but such US Holder may be
entitled to utilize the foreign tax credit attributable to such withholding
taxes for the holders' previous two or succeeding five taxable years, or such
withholding taxes may instead be deductible by the US Holder). A US Holder may
be required to provide the IRS with a certified copy of the receipt evidencing
payment of withholding tax imposed in respect of payments on the Notes (a
"Certified Copy") in order to claim a foreign tax credit in respect of such
withholding tax. A US Holder (or its agent) may obtain a Certified Copy by
providing written demand therefor to the Principal Paying Agent. The Principal
Paying Agent will contact Tevecap, which will provide such Certified Copy to the
Principal Paying Agent for prompt forwarding to the relevant US Holder. Tevecap
will attach to each Certified Copy a certificate stating (x) that the amount of
withholding tax evidenced by the Certified Copy was paid in connection with
payments in respect of
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<PAGE>
the principal amount of Notes then outstanding and (y) the amount of such
withholding tax paid per US$1,000 of principal amount of the Notes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, each DTC
participant or indirect participant holding an interest in a Note on behalf of a
US Holder and each paying agent making payments in respect of a Note will
generally be required to provide the IRS with certain information, including
such US Holder's name, address and taxpayer identification number (either such
US Holder's Social Security number or its employer identification number, as the
case may be), and the aggregate amount of interest and principal paid to such US
Holder during the calendar year. These reporting requirements, however, do not
apply with respect to certain US Holders, including corporations, securities
dealers, other financial institutions, tax-exempt organizations, qualified
pension and profit sharing trusts, individual retirement accounts.
In the event that a US Holder fails to establish its exemption from such
information reporting requirements or is subject to the reporting requirements
described above and fails to supply its correct taxpayer identification number
in the manner required by applicable law, or underreports its tax liability, the
direct or indirect DTC participant holding such interest on behalf of such US
Holder or paying agent making payments in respect of a Note may be required to
"backup" withhold a tax equal to 31.0% of each payment of interest and principal
with respect to the Notes. This backup withholding tax is not an additional tax
and may be credited against the US Holder's United States Federal income tax
liability if the required information is furnished to the IRS.
133
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resales of such Exchange Securities. 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 Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. Each of the Company and
the Subsidiary Guarantors has agreed that, for a period of 90 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1997, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Registered 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
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company and the Subsidiary Guarantors have jointly and
severally agreed to pay all expenses incident to the Registered Exchange Offer
(including the expenses of one counsel for the Holders of the Securities) other
than commissions or concessions of any broker-dealers and will indemnify the
Holders of the Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
EXPERTS
The consolidated balance sheets of Tevecap S.A. and subsidiaries as of
December 31, 1995 and 1994 and the related statements of income, changes in
shareholders' equity and cash flows for the two years in the period ended
December 31, 1995 and the combined statements of income, shareholders' equity
and cash flows of the Tevecap S.A. and subsidiaries for the year ended December
31, 1993 have been included herein in reliance on the report of Coopers &
Lybrand, independent public accountants, given on the authority of that firm as
experts in auditing and accounting.
The balance sheets of TVA Sistema De Televisao S.A. as of December 31, 1995
and 1994 and the related statements of income, changes in shareholders' equity
and cash flows for the three years in the period ended December 31, 1995 have
been included herein in reliance on the report of Coopers & Lybrand, independent
public accountants, given on the authority of that firm as experts in auditing
and accounting.
The combined balance sheets of TVA Sul Participacoes S.A. and subsidiaries
as of December 31, 1995 and 1994 and the related statements of income, changes
in shareholders' equity and cash flows for
134
<PAGE>
the three years in the period ended December 31, 1995 have been included herein
in reliance on the report of Coopers & Lybrand, independent public accountants,
given on the authority of that firm as experts in auditing and accounting.
With respect to the unaudited interim financial information of Tevecap S.A.
and subsidiaries for the nine-months ended September 30, 1995 and 1996, Coopers
& Lybrand reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their report
dated , states that they did not audit and they do not express
opinions on the aforementioned unaudited interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Coopers & Lybrand are not subject to the liability provisions of Section 11 of
the Securities Act of 1933 (the "Act") for their report on the aforementioned
unaudited interim condensed financial statements because this report is not a
"report" or a "part" of the registration statement prepared or certified by
Coopers & Lybrand within the meaning of Sections 7 and 11 of the Act.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
Exchange Notes being offered hereby will be passed upon for the Company by Basch
& Rameh--Advogados e Consultores, Sao Paulo, with respect to matters of
Brazilian law, and by Mayer, Brown & Platt, New York, with respect to matters of
United States federal law and New York law. The matters referred to under
"Income Tax Considerations--United States" will be passed upon for the Company
by Mayer, Brown & Platt, New York.
AVAILABLE INFORMATION
Tevecap and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form F-4 under the
Securities Act of 1933 (the "Securities Act"), with respect to the Exchange
Securities offered hereby (the "Exchange Offer Registration Statement"). This
Prospectus, which constitutes a part of the Exchange Offer Registration
Statement, does not contain all the information set forth in the Exchange Offer
Registration Statement, certain parts of which have been omitted from the
Prospectus in accordance with the rules and regulations of the Commission. For
further information with respect to Tevecap, the Guarantors and the Exchange
Securities offered hereby, reference is made to the Exchange Offer Registration
Statement, including the exhibits and schedules filed therewith, and the
financial statements and notes filed as a part thereof. Statements made in the
Prospectus concerning the contents of any document referred to herein are not
necessarily complete. With respect to each such document filed with the
Commission as an exhibit to the Exchange Offer Registration Statement, reference
is made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirely by such
reference.
Tevecap is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file reports with the Commission. All reports and other
information filed by Tevecap, and the Exchange Offer Registration Statement,
including the exhibits and schedules thereto, may be inspected and copied at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in New
York, New York, and Chicago, Illinois, at the prescribed rates.
135
<PAGE>
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Guarantors will become subject to the informational
requirements of the Exchange Act, and in accordance therewith will be required
to file reports and other information with the Commission. The Indenture
provides that, whether or not Tevecap has a class of securities registered under
the Exchange Act, Tevecap shall furnish without cost to each holder of Notes and
file with the Commission (whether or not Tevecap is a public reporting company
at the time), the Trustee and the Initial Purchasers: (i) within 140 days after
the end of each fiscal year of Tevecap, annual reports on Form 20-F (or any
successor form) containing the information required to be contained therein (or
required in such successor form); (ii) within 60 days after the end of each of
the first three fiscal quarters of each fiscal year, reports on Form 6-K (or any
successor form); and (iii) promptly from time to time after the occurrence of
any event required to be therein reported, such other reports on Form 6-K (or
any successor form) containing substantially the same information required to be
contained in Form 8-K (or required in any successor form). Each of the reports
will be prepared in accordance with US GAAP consistently applied and will be
prepared in accordance with the applicable rules and regulations of the
Commission.
As foreign private issuers, Tevecap and the Guarantors are exempt from
certain provisions of the Exchange Act prescribing the furnishing and content of
proxy statements.
PUBLIC DOCUMENTS
The information presented in the section entitled "Annex A--The Federative
Republic of Brazil" is based upon material obtained from the Central Bank of
Brazil, the Sao Paulo and Rio de Janeiro Stock Exchanges, the IBGE and from
other publicly available information referred to therein. The information is
believed to be accurate but has not been independently verified by Tevecap or
any of its advisors in connection with the Offering.
136
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Accountants.................................................... F-2
Balance Sheets at September 30, 1996 (unaudited) and December 31, 1995 and 1994...... F-3
Statements of Income for the nine months ended September 30, 1996 (unaudited), and
September 30, 1995 (unaudited) and each of the three years ended December 31,
1995............................................................................... F-5
Statements of Changes in Shareholders' Equity and Statement of Redeemable Common
Stock for the nine months ended September 30, 1996 (unaudited), and September 30,
1995 (unaudited) and each of the three years ended December 31, 1995............... F-6
Statements of Cash Flows for the nine months ended September 30, 1996 (unaudited) and
September 30, 1995 (unaudited) and each of the three years ended December 31,
1995............................................................................... F-7
Notes to these Financial Statements.................................................. F-9
</TABLE>
TVA SISTEMA DE TELEVISAO S.A.
CONTENTS
<TABLE>
<S> <C>
Report of Independent Accountants.................................................... F-
Balance Sheets at September 30, 1996 (unaudited) and December 31, 1995 and 1994...... F-
Statements of Income for the nine months ended September 30, 1996 (unaudited) and
September 30, 1995 (unaudited) and each of the three years ended December 31,
1995............................................................................... F-
Statements of Changes in Shareholders' Equity for the nine months ended September 30,
1996 (unaudited) and September 30, 1995 (unaudited) and each of the three years
ended December 31, 1995............................................................ F-
Statements of Cash Flows for the nine months ended September 30, 1996 (unaudited) and
September 30, 1995 (unaudited) and each of the three years ended December 31,
1995............................................................................... F-
Notes to these Financial Statements.................................................. F-
</TABLE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
CONTENTS
<TABLE>
<S> <C>
Report of Independent Accountants.................................................... F-
Balance Sheets at September 30, 1996 (unaudited) and December 31, 1995 and 1994...... F-
Statements of Income for the nine months ended September 30, 1996 (unaudited) and
September 30, 1995 (unaudited) and each of the three years in the period ended
December 31, 1995.................................................................. F-
Statements of Changes in Shareholders' Equity for the nine months ended September 30,
1996 (unaudited) and September 30, 1995 (unaudited) and each of the three years in
the period ended December 31, 1995................................................. F-
Statements of Cash Flows for the nine months ended September 30, 1996 (unaudited) and
September 30, 1995 (unaudited) and each of the three years in the period ended
December 31, 1995.................................................................. F-
Notes to these Financial Statements.................................................. F-
</TABLE>
TVA ALFA CABO LTDA.("TV ALFA"); TCC TV A CABO LTDA. ("TCC"); CCS CAMBORIU CABLE
SYSTEM DE TELECOMUNICACOES LTDA. ("CCS");TVA SUL PARANA LTDA.("TVA PARANA); TVA
SUL FOZ DO IGUACU LTDA.("FOZ DO IGUACU");AND, TVA SUL SANTA
CATARINA LTDA ("SSC")
INDEX TO UNAUDITED FINANCIAL INFORMATION
<TABLE>
<S> <C>
Balance Sheets at September 30, 1996 (unaudited)..................................... F-
Statements of Income for the nine months ended September 30, 1996 (unaudited)........ F-
Statements of Changes in Shareholders' Equity for the nine months ended September 30,
1996 (unaudited)................................................................... F-
Statements of Cash Flows for the nine months ended September 30, 1996 (unaudited).... F-
Notes to these Unaudited Financial Information....................................... F-
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of
TEVECAP S.A.
We have audited the accompanying a) consolidated balance sheets of TEVECAP
S.A. and subsidiaries (the "Company") as of December 31, 1995 and 1994 and the
related consolidated statements of income, changes in shareholders' equity and
redeemable common stock and cash flows for the two years in the period ended
December 31, 1995; and, b) combined statements of income, shareholders' equity
and cash flows of the Company for the year ended December 31, 1993, all
expressed in United States dollars. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, a) the consolidated financial position of the Company
as of December 31, 1995 and 1994 and the consolidated results of operations and
cash flows for the two years in the period ended December 31, 1995; and, b) the
combined results of operations and cash flows of the Company for the year ended
December 31, 1993, in conformity with accounting principles generally accepted
in the United States of America.
As discussed in Note 3 to these financial statements, the Company has
retroactively changed its method of accounting for installation equipment costs
and operating costs incurred during the period of constructing their television
systems.
As discussed in Note 4, the previously issued financial statements as of
December 31, 1994 and 1995 and for each of the two years in the period ended
December 31, 1995 have been restated to reflect the reclassification of common
stock subject to redemption separately from equity and the reporting of an
investment on the equity method.
Coopers & Lybrand
Sao Paulo, Brazil
August 23, 1996, except as to the information presented
in Notes 4, 20, 25 and 26 for which the date is February 5, 1997.
F-2
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 (UNAUDITED), AND DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1996 1995 1994
-------------- ----------- ---------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents (Note 5).................................... $ 619 $ 24,201 $ 4,644
Accounts receivable, net (Note 6)..................................... 21,645 11,253 7,541
Inventories (Note 7).................................................. 15,840 13,076 5,703
Film exhibition rights (Note 8)....................................... 725 30 1,417
Prepaid and other assets (Note 9)..................................... 2,511 2,968 1,699
Other accounts receivable (Note 10)................................... 2,259 985 384
-------------- ----------- ---------
Total current assets................................................ 43,599 52,513 21,388
-------------- ----------- ---------
Property, plant and equipment (Note 14)................................. 188,063 131,266 51,426
Investments (Note 13)
Equity affiliates..................................................... 6,231 3,462 1,856
Cost basis investees.................................................. 16,371 11,240 39
Concessions, net...................................................... 18,743 7,978 2,035
Loans to related companies (Note 11).................................... 15,793 6,732 1,019
Other................................................................... 2,354 3,657 2,678
-------------- ----------- ---------
Total assets........................................................ $ 291,154 $ 216,848 $ 80,441
-------------- ----------- ---------
-------------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 (UNAUDITED), AND DECEMBER 31, 1995, 1994
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------
1996 1995 1994
-------------- ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term bank loans (Note 15).................................... $ 5,441 -- --
Film suppliers..................................................... 5,738 $ 5,892 $ 6,586
Other suppliers.................................................... 51,055 52,078 15,109
Taxes payable other than income taxes.............................. 8,205 6,171 1,290
Accrued payroll and related liabilities............................ 7,777 4,571 2,935
Advance payments received from subscribers......................... 7,473 3,986 1,030
Other accounts payable (Note 15)................................... 3,683 3,272 1,624
-------------- ------------ ------------
Total current liabilities........................................ 89,372 75,970 28,574
-------------- ------------ ------------
Long-term liabilities
Loans from related companies (Note 10)............................. 91,926 586 --
Loans from shareholders (Note 16).................................. 4,607 3,086 2,864
Provision for claims (Note 20)..................................... 5,854 3,763 1,075
Liability to fund equity investee (Note 12)........................ -- 2,169 584
Deferred hook up fee revenue....................................... 2,943 -- --
-------------- ------------ ------------
Total long-term liabilities...................................... 105,330 9,604 4,523
-------------- ------------ ------------
Commitments and contingencies (Note 18)
Minority interest.................................................... 2,198 -- --
Redeemable common stock, no par value, 85,637,516, 85,637,516 and
22,992,650 shares issued and outstanding........................... 163,225 149,534 19,754
Shareholders' equity
Common stock, no par value, 111,075,339 shares issued and
outstanding (Note 19)............................................ 142,495 142,495 142,495
Accumulated deficit................................................ (211,466) (160,755) (114,905)
-------------- ------------ ------------
Total shareholders' equity....................................... (68,971) (18,260) 27,590
-------------- ------------ ------------
Total liabilities and shareholders' equity....................... $ 291,154 $ 216,848 $ 80,441
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND SEPTEMBER 30, 1995
(UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------------ -------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
(CONSOLIDATED) (CONSOLIDATED) (CONSOLIDATED) (CONSOLIDATED) (COMBINED)
-------------- -------------- -------------- -------------- -----------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues
Monthly subscriptions........... $ 85,301 $ 41,296 $ 62,496 $ 27,976 $ 12,544
Installation.................... 39,396 17,995 26,045 6,997 4,350
Advertising..................... 5,362 5,505 8,377 5,727 2,099
Indirect programming............ 5,278 2,114 2,866 1,626 530
Other........................... 5,295 2,194 2,226 1,446 369
Revenue taxes................... (8,881) (5,171) (7,506) (872) (371)
-------------- -------------- -------------- -------------- -----------
Net revenue............... 131,751 63,933 94,504 42,900 19,521
-------------- -------------- -------------- -------------- -----------
Direct operating expenses
Payroll and benefits............ 19,467 8,868 12,520 8,022 6,079
Programming..................... 25,477 14,105 21,609 12,133 18,156
Transponder lease cost.......... 6,575 5,357 7,568 1,555 1,262
Technical assistance............ 4,923 3,913 5,152 1,622 1,773
Vehicle rentals................. 1,252 1,114 1,732 788 597
TVA magazine.................... 4,680 2,164 3,318 1,430 725
Other costs..................... 13,183 6,758 10,127 3,109 1,187
-------------- -------------- -------------- -------------- -----------
75,557 42,279 62,026 28,659 29,779
-------------- -------------- -------------- -------------- -----------
Selling, general and
administrative expenses
Payroll and benefits............ 21,521 15,790 21,627 14,241 10,945
Advertising and promotion....... 12,794 5,882 11,122 3,540 2,205
Rent............................ 2,323 770 1,073 656 847
Other administrative expenses... 9,989 4,557 6,673 2,206 2,265
Other general expenses.......... 7,083 3,788 6,407 3,727 3,695
-------------- -------------- -------------- -------------- -----------
53,710 30,787 46,902 24,370 19,957
-------------- -------------- -------------- -------------- -----------
Depreciation...................... 17,436 8,657 12,848 6,177 4,813
Amortization...................... 1,111 208 420 -- --
-------------- -------------- -------------- -------------- -----------
Operating loss............ (16,063) (17,998) (27,692) (16,306) (35,028)
-------------- -------------- -------------- -------------- -----------
Interest income................... 3,650 1,360 3,118 21,806 5,369
Interest expense.................. (10,125) (12,493) (17,745) (16,413) (8,492)
Translation (loss) gain........... 243 (41) (339) (914) 788
Equity in (losses) income of
affiliates...................... (6,642) (2,084) (3,672) 383 --
Other nonoperating (expenses)
income, net..................... (9,511) 3,267 4,389 (1,273) (557)
-------------- -------------- -------------- -------------- -----------
Loss before income taxes
and minority interest... (38,448) (27,989) (41,941) (12,717) (37,920)
Income taxes (Note 12).......... (105) -- -- -- --
-------------- -------------- -------------- -------------- -----------
Net loss before minority
interest........................ (38,553) (27,989) (41,941) (12,717) (37,920)
Minority interest................. 1,533 572 871 720 292
-------------- -------------- -------------- -------------- -----------
Net loss.................. $ (37,020) $ (27,417) $ (41,070) $ (11,997) $ (37,628)
-------------- -------------- -------------- -------------- -----------
-------------- -------------- -------------- -------------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
TEVECAP S.A AND
SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND
STATEMENT OF REDEEMABLE COMMON STOCK
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
SEPTEMBER 30, 1995 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
REDEEMABLE
PAID-IN TOTAL COMMON
CAPITAL ACCUMULATED SHAREHOLDERS STOCK
(NOTE 19) DEFICIT EQUITY (NOTE 19)
----------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 (combined)................ $ 10,797 $ (65,280) $ (54,483) --
Net loss for the year.................................. -- (37,628) (37,628) --
----------- ------------- ------------- ------------
Balance at December 31, 1993 (combined)............ 10,797 (102,908) (92,111) --
----------- ------------- ------------- ------------
Capital contributed on:
June 30, 1994........................................ 131,698 -- 131,698 --
July 25, 1994........................................ -- -- -- $ 19,754
Net loss for the period................................ -- (11,997) (11,997) --
----------- ------------- ------------- ------------
Balance at December 31, 1994 (consolidated).......... 142,495 (114,905) 27,590 19,754
----------- ------------- ------------- ------------
Capital contributed on:
September 22, 1995................................... -- -- -- 2,000
September 25, 1995................................... -- -- -- 8,000
September 26, 1995................................... -- -- -- 40,000
December 8, 1995..................................... -- -- -- 75,000
Net loss for the period................................ -- (41,070) (41,070) --
Accretion related to Redeemable Common Stock........... -- (4,780) (4,780) 4,780
----------- ------------- ------------- ------------
Balance at December 31, 1995 (consolidated).......... 142,495 (160,755) (18,260) 149,534
Net loss for the period (unaudited).................... -- (37,020) (37,020) --
Accretion related to Redeemable Common Stock........... -- (13,691) (13,691) 13,691
----------- ------------- ------------- ------------
Balance at September 30, 1996 (consolidated)......... $ 142,495 $ (211,466) $ (68,971) $ 163,225
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED):
Balance at December 31, 1994 (consolidated).......... $ 142,495 $ (114,905) $ 27,590 19,754
Capital contributed on:
September 22, 1995................................... -- -- -- 2,000
September 25, 1996................................... -- -- -- 8,000
September 26, 1995................................... -- -- -- 40,000
Net loss for the period (unaudited).................... -- (27,417) (27,417) --
----------- ------------- ------------- ------------
Balance at September 30, 1995 (consolidated)......... $ 142,495 $ (142,322) $ 173 $ 69,754
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
</TABLE>
On June 30, 1994 the paid in capital of the entities previously under common
control was transferred to Tevecap in exchange for shares in Tevecap.
Accordingly, the paid in capital of the combined entities became that of
Tevecap.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED), AND SEPTEMBER 30, 1995
(UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS OF
U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
CONSOLIDATED CONSOLIDATED CONSOLIDATED CONSOLIDATED COMBINED
------------- ------------- ------------- ------------- ------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $ (37,020) $ (27,417) $ (41,070) $ (11,997) $ (37,628)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES:
Depreciation........................... 17,436 8,657 12,848 6,141 5,081
Amortization........................... 1,111 208 420 -- --
Allowance for exhibition costs......... -- -- 827 -- --
Allowance for doubtful accounts........ 3,040 -- 2,196 848 --
Allowance for obsolescence............. 2,493 -- -- -- --
Provision for claims................... 2,091 2,411 2,688 864 (131)
Minority interest...................... (1,533) (571) (871) (721) (292)
Disposal and write-off of fixed
assets............................... 1,163 -- 341 662 --
Equity in losses (earnings) of
affiliates........................... 6,642 2,084 3,672 (383) --
CHANGES IN OPERATING ASSETS AND
LIABILITIES:
Film exhibition rights................. (695) 213 560 (114) 4,843
Accounts receivable.................... (13,432) (4,899) (5,908) (7,007) (181)
Prepaid and other assets............... 457 (1,496) (1,269) (1,364) 113
Other accounts receivable.............. (1,188) (947) (601) (199) (90)
Other.................................. 5,168 856 -- (2,450) (221)
Accrued Interest....................... 4,700 9,509 9,241 723 8,368
Inventories............................ (5,257) (6,716) (7,373) (2,383) (533)
Legal deposits......................... (134) (953) (108) (154) (415)
Suppliers.............................. (1,177) 14,807 36,275 5,309 40
Taxes payable other than income
taxes................................ 2,034 466 4,881 685 167
Accrued payroll and related
liabilities.......................... 3,206 2,681 1,636 1,454 140
Advances received from subscribers..... 3,487 (127) 2,956 (496) 1,415
Deferred accounts payable.............. 2,943 -- -- -- --
Other accounts payable................. (920) 2,333 1,648 1,341 144
------------- ------------- ------------- ------------- ------------
Net cash (used in) provided by
operating activities............... (5,385) 1,099 22,989 (9,707) (19,180)
------------- ------------- ------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets................... (72,538) (52,987) (93,029) (22,369) (11,379)
Loans to related companies................. (22,669) (3,501) (7,967) (3,482) (1,811)
Cash received on loans to affiliated
companies................................ 13,608 1,981 2,591 4,481 --
Acquisiton of businesses, net of cash
acquired................................. (13,490) (8,398) (6,393) (2,035) --
Investments in equity and cost
investments.............................. (16,711) (5,636) (14,863) (929) --
------------- ------------- ------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED), AND SEPTEMBER 30, 1995
(UNAUDITED) AND YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS OF
U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------------- ------------------------------------------
1996 1995 1995 1994 1993
CONSOLIDATED CONSOLIDATED CONSOLIDATED CONSOLIDATED COMBINED
------------- ------------- ------------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash used in investing
activities......................... (111,800) (68,541) (119,661) (24,334) (13,190)
------------- ------------- ------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term bank loans...................... $ 5,441 $ -- $ -- $ -- $ --
Capital contributions...................... -- 49,998 125,000 151,452 --
Repayments of loans from shareholders...... -- -- -- (3,082) --
Loans from shareholders.................... 1,522 -- -- -- 3,299
Loans to shareholders...................... -- -- -- -- (3,298)
Loans from related companies............... 116,178 103,284 131,860 96,986 106,023
Repayments of loans from related
companies................................ (29,538) (90,445) (140,631) (186,755) (67,056)
Repayments of loans from banks............. -- -- -- (19,935) (6,620)
------------- ------------- ------------- ------------- ------------
Net cash provided by financing
activities......................... 93,603 62,837 116,229 38,666 32,348
------------- ------------- ------------- ------------- ------------
Net (decrease) increase in cash and cash
equivalents................................ (23,582) (4,605) 19,557 4,625 (22)
Cash and cash equivalents at beginning of the
period..................................... 24,201 4,644 4,644 19 41
------------- ------------- ------------- ------------- ------------
Cash and cash equivalents at end of
the period......................... $ 619 $ 39 $ 24,201 $ 4,644 $ 19
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest..................... $ -- $ 2,435 $ 8,390 $ 16,413 $ 1,183
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
SUPPLEMENTAL NON CASH FINANCING ACTIVITIES:
Accrued interest on related company loans
refinanced as principal balance.......... $ 4,684 $ 7,027 $ 9,355 $ -- $ 8,225
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
DETAILS OF ACQUISITIONS:
Fair value of assets acquired.............. 14,895 -- -- -- --
Liabilities assumed........................ (1,330) -- -- -- --
------------- ------------- ------------- ------------- ------------
Cash paid.................................. 13,565 -- -- -- --
Less: cash acquired........................ (75) -- -- -- --
------------- ------------- ------------- ------------- ------------
Net cash paid for acquisitions............. $ 13,490 -- -- -- --
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS
1. THE COMPANY AND ITS PRINCIPAL OPERATIONS
The accompanying financial statements have been prepared to reflect the
consolidated results of TEVECAP S.A. and its subsidiaries (the "Company") and
the combined results of commonly controlled entities which became subsidiaries
of TEVECAP S.A. ("Tevecap") on June 30, 1994 (see Note 2.1).
TEVECAP is a holding company, the subsidiaries of which render services
related to wireless cable and cable and parabolic antenna television systems,
including marketing and advertising, production, distribution and licensing of
domestic and foreign television programs. The Company has wireless cable channel
rights primarily in major urban markets in Brazil.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant policies followed in the preparation of the accompanying
consolidated and combined financial statements are described below:
2.1 BASIS OF PRESENTATION; CONSOLIDATION AND COMBINED
A) BASIS OF PRESENTATION
The consolidated and combined financial statements are presented in US
Dollars and have been prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP), which differ in
certain respects from accounting principles applied by the Company in its local
currency financial statements, which are prepared in accordance with accounting
principles generally accepted in Brazil ("Brazilian GAAP").
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
financial statement dates and the reported amount of revenues and expenses
during the reporting periods. Since management's judgment involves making
estimates concerning the likelihood of future events, the actual results could
differ from those estimates which will have a positive or negative effect on
future period results.
B) CONSOLIDATION AS OF AND FOR THE TWO YEARS ENDED DECEMBER 31, 1995
On June 30, 1994, Tevecap was established as a holding company for certain
entities which were under common control. Subsequent to this date, additional
entities were formed under, or acquired by Tevecap, as described elsewhere in
these financial statements. Accordingly, the financial statements as of and for
the year ended December 31, 1994 and thereafter are prepared on a consolidated
basis.
The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated on consolidation.
C) COMBINED PRESENTATION FOR THE YEAR ENDED DECEMBER 31, 1993
The combined financial statements for the year ended December 31, 1993,
reflect the results of certain entities which were under common control and
which were acquired by Tevecap on June 30, 1994.
All significant intercompany balances have been eliminated on combination.
2.2 ACCOUNTING RECORDS
As required by Brazilian Law, and in accordance with local accounting
practices, the accounting records of the Company are maintained in Brazilian
currency (REAL). In order to present the financial
F-9
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
statements in conformity with accounting principles generally accepted in the
United States of America, the Company maintains additional accounting records
which are used solely for this purpose.
2.3 CURRENCY REMEASUREMENT
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52, "Foreign Currency Transactions," the United States dollar has been assumed
to be the functional currency as Brazil is a "hyperinflationary" country. As
such, the local accounts of the Company are translated into United States
dollars as follows:
- Nonmonetary assets and liabilities are translated at historical rates. All
other assets and liabilities are translated at the official rate of
exchange of R$1.022 to US$1 in effect on September 30, 1996; R$0.973 to
US$1 in effect on December 31, 1995; and, R$0.846 to US$1 on December 31,
1994.
- Income and expenses are translated at the average exchange rates in effect
each month, except for those related to assets and liabilities which are
translated at historical exchange rates, and deferred income taxes, which
are translated at the current rate. Translation gains/losses are
recognized in the income statement.
2.4 CONSOLIDATED FINANCIAL STATEMENTS
The Company's consolidated operating subsidiaries included in the
consolidated financial statements are:
<TABLE>
<CAPTION>
OWNERSHIP INTEREST AS OF
-------------------------------
<S> <C> <C>
SEPTEMBER 30, DECEMBER 31,
1996 1995
--------------- --------------
OWNED SYSTEMS:
TVA Sistema de Televisao S.A........................... 98.00% 98.00%
TVA Sul Participacoes S.A.............................. 87.00% --
TVA Sul Parana Ltda.(a), (b)......................... 87.00% 80.00%
TVA Sul Santa Catarina Ltda. (b)..................... 87.00% --
TVA Sul Foz do Iguacu Ltda. (b)...................... 87.00% --
TCC TV a Cabo Ltda. (b).............................. 100.00% --
TV Alfa Cabo Ltda. (b)............................... 100.00% --
CCS Camboriu Cable Systems de Telecomunicacoes
Ltda................................................. 52.20% --
Galaxy Brasil S.A...................................... 100.00% 100.00%
LICENSE SUBSIDIARY:
Comercial Cabo TV Sao Paulo Ltda. (c).................. 100.00% 100.00%
PROGRAMMING VENTURES:
TVA Communications Ltd 100.00% 100.00%
TVA Communications Aruba N.V. 100.00% --
</TABLE>
- ------------------------
(a) In August 1996, TVA Curitiba Servicos Telecomunicacoes Ltda. changed its
name to TVA Parana Ltda. ("Parana"). The Company's initial investment in
Parana together with its contributions of $18,963 relating to the
acquisition of 27,212,345 shares during the nine months ended September 30,
1996, was in excess of the Company's share of the book value of Parana after
the contribution. This resulted in a loss of $2,727.
F-10
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
2.4 CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(b) One common share in each of these entities is owned by a Brazilian National
pursuant to local legislative requirements.
(c) 0.00149% of the common shares in this entity are owned by the controlling
shareholder of the parent company pursuant to local legislative
requirements.
2.5 ACQUISITIONS
During the nine month period ending September 30, 1996 (unaudited), the
Company acquired control of the following entities which were accounted for
under the purchase method of accounting: i) In February 1996, the Company
acquired TVA Sul Santa Catarina ("TVA SSC"); ii) In March 1996, the Company
acquired TCC TV a Cabo Ltda. ("TCC") and TV Alfa Cabo Ltda. ("TV Alfa"); and
iii) In May 1996, the Company acquired TVA Sul Foz do Iguacu Ltda ("TVA SF") and
CCS Camboriu Cable Systems de Telecomunicacoes Ltda. ("CCS"). In each case, the
excess of the purchase price over the fair value of assets acquired represents
the value of concessions of certain television stations. These concessions are
being amortized on a straight line basis over 10 years.
The operating results of these acquired businesses, which hold licenses to
operate cable TV, have been included in the consolidated statements of income
from the dates of acquisition.
The purchase prices have been allocated to the assets purchased and the
liabilities assumed based upon the fair values on the dates of acquisition, as
follows:
<TABLE>
<CAPTION>
TVA SSC TVA SF CCS TCC TV ALFA
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current assets, other than cash.............................. $ -- $ 23 $ 4 $ 51 $ 5
Property, plant and equipment................................ 25 319 2,101 238 176
Other assets................................................. -- 3 -- -- --
Concessions.................................................. 45 5,348 1,424 2,629 2,429
Other liabilities............................................ (55) (377) (84) (127) (687)
----------- --------- --------- --------- ---------
Purchase price, net of cash received......................... $ 15 $ 5,316 $ 3,445 $ 2,791 $ 1,923
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Total purchase price......................................... $ 15 $ 5,326 $ 3,445 $ 2,841 $ 1,939
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
</TABLE>
The Company is unable to present pro forma results as if the acquisitions
had taken place at the beginning of 1995 and 1996 because, although management
attempted to obtain such information from the owners, it was not available.
These entities were acquired for the purpose of expanding the cable TV system
penetration of the Company. The assets purchased will be operated under the
Company's management, using the Company's programming and employees.
2.6 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as cash and cash in banks and
investments in interest-bearing securities and are carried at cost plus accrued
interest. Short-term investments with original maturities of three months or
less at the time of purchase are considered cash equivalents.
2.7 FINANCIAL INSTRUMENTS
In accordance with SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," information is provided about the fair value of certain financial
instruments for which it is practicable to estimate that value.
F-11
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
2.7 FINANCIAL INSTRUMENTS (CONTINUED)
For the purposes of SFAS No. 107, the estimated fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
The carrying values of the Company's financial instruments as of September 30,
1996, December 31, 1995 and December 31, 1994 approximate management's best
estimate of their estimated fair values. The following methods and assumptions
were used to estimate the fair value of each class of financial instrument for
which it is practicable to estimate that value:
- The fair value of certain financial assets carried at cost, including
cash, accounts receivable, other accounts receivables, and certain other
short-term assets is considered to approximate their respective carrying
value due to their short-term nature.
- The fair value of payables to film suppliers and other suppliers, other
accounts payable, loans to related companies and certain other short-term
liabilities are considered to approximate their respective carrying values
due to their short-term nature.
- The fair value of loans from related companies approximates their
respective carrying values as interest on these loans is at market rates.
2.8 ACCOUNTS RECEIVABLE
Accounts receivable are stated at their estimated realizable values. An
allowance for doubtful accounts is established on the basis of an analysis of
the accounts receivable, in light of the risks involved, and is considered
sufficient to cover any losses incurred in realization of credits.
2.9 INVENTORIES
Inventories consist of materials and supplies and imports in transit.
Materials and supplies are used to provide service to new customers, and to
ensure continuity of service to existing customers. Imports in transit represent
materials purchased from foreign countries that have not yet been received.
Inventories are stated at the lower of cost or market. Cost is determined
principally under the average cost method.
An allowance for obsolescence has been established on the basis of an
analysis of slow-moving materials and supplies.
2.10 FILM EXHIBITION RIGHTS AND PROGRAM LICENSING
Film exhibition rights and program licensing costs are deferred and
recognized as the films and/or programs are exhibited. The allowance for
exhibition expiration is determined based on management's estimate of the
Company's capacity to telecast the films and projected revenue streams.
2.11 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated using the
straight-line method, over the remaining useful lives, as described in Note 14.
2.12 ADVERTISING
Advertising revenues are recognized, and the production cost of commercials
and programming are charged to expense, when the commercial is telecast.
F-12
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
2.13 RECOVERABILITY OF LONG-LIVED ASSETS TO BE HELD AND USED IN THE BUSINESS
Management reviews long-lived assets, primarily the Company's licenses and
its property and equipment to be held and used in the business, for the purposes
of determining and measuring impairment on a recurring basis or when events or
changes in circumstances indicate that the carrying value of an asset or group
of assets may not be recoverable. Assets are grouped and evaluated for possible
impairment at the level of each cable television system; impairment is assessed
on the basis of the forecasted undiscounted cash flows of the businesses over
the estimated remaining lives of the assets related to those systems. A
write-down of the carrying value of the assets or group of assets to estimated
fair value will be made, when appropriate.
2.14 SUBSCRIPTIONS
Installation fees are recognized as revenue on the equipment installation
date to the extent of direct selling costs incurred. The remainder is deferred
and amortized to income over the estimated average period that subscribers are
expected to remain connected to the system. Subscription revenues are recognized
as earned on an accrual basis.
2.15 LICENSES
Televisao Show Time Ltda. ("TV Show Time") and TVA Brasil Radioenlaces Ltda.
("TVA Brasil") hold certain licenses covering certain operations of the Company.
The use of such licenses is provided to the Company, for a nominal fee, under a
Service Agreement dated July 22, 1994, as amended, among Tevecap, TV Show Time,
TVA Brasil and Abril.
Pursuant to the Service Agreement, TV Show Time and TVA Brasil have agreed
to transfer the licenses, which are carried at nil value, to Tevecap at nominal
cost.
2.16 ACCOUNTING FOR SALES OF STOCK BY SUBSIDIARIES
Gains or losses arising from the sale of shares by subsidiaries are
recognized in the profit and loss account as non-operating income to the extent
that the net book value of the shares owned by the parent after the sale exceeds
or is lower than the net book value per share immediately prior to the sale of
the shares by the subsidiary.
2.17 FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
The unaudited consolidated financial statements as of September 30, 1996 and
for the nine months ended September 30, 1996 and 1995 have been derived from the
Company's records and reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial data.
F-13
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
3. ACCOUNTING CHANGES
To more appropriately account for the cost of (i) installation equipment and
(ii) operating costs incurred during the period of constructing their television
systems, the Company has restated all prior year amounts as compared to those
previously reported by the separate combined and consolidating entities:
(i) Installation equipment
The Company has changed the estimated useful life of installation
equipment to five years. The costs of such equipment had previously been
accounted for as period costs.
(ii) Operating costs incurred during the period of construction of
television systems
The Company has changed its policy of deferring operating costs during
the period of construction of its television systems, to treat such costs
as period costs.
4. RESTATEMENT
The Company's financial statements as of and for the two years in the period
ended December 31, 1995 and as of and for the nine months ended September 30,
1996 (unaudited) have been restated to reflect the reclassification of common
stock subject to redemption separately from equity. See also Note 20.
In addition, the Company's financial statements as of and for the two years
in the period ended December 31, 1995 and as of and for the nine months ended
September 30, 1996 (unaudited) have been restated to reflect the recognition of
the Company's share in the earnings and losses of HBO Brasil Partners after the
date of acquisition. The Company holds a 33.33% interest in this partnership.
Historically, such interest was accounted for at cost as financial information
on the performance of the venture was unavailable. In January 1997, the Company
received audited financial statements covering the two years in the period
ending December 31, 1995.
The Company's financial statements for the nine months ended September 30,
1996 (unaudited) have also been restated to reflect the consolidation of
subsidiaries previously treated as advances for investments. The net impact of
this change on the result for this period was a loss of $555,000.
F-14
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
4. RESTATEMENT (CONTINUED)
The following summarizes the impact on previously issued financial
statements resulting from the adjustments as of and for the two years in the
period ended December 31, 1995 and as of and for the nine months ended September
30, 1996 (unaudited):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1995 1994
----------------------------- ----------------------------- -----------------------------
AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY
REPORTED AS RESTATED REPORTED AS RESTATED REPORTED AS RESTATED
-------------- ------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEETS
Equity affiliates.. 5,946 6,231 2,352 3,462 1,856 1,856
Advances payments
for investments... 16,683 -- 3,117 -- -- --
Liability to fund
equity investee... -- -- 2,169 2,169 4 584
Redeemable Common
Stock............. -- 163,225 -- 149,534 -- 19,754
Common Stock....... 287,962 142,495 287,962 142,495 162,962 142,495
STATEMENTS OF
INCOME
Equity in (losses)
income of
affiliates........ (5,817) (6,642) (2,245) (3,672) 963 383
Net loss........... (35,460) (37,020) (39,643) (41,070) (13,500) (11,997)
Accretion related
to Redeemable
Common Stock...... -- 13,691 -- 4,780 -- --
</TABLE>
5. CASH AND CASH EQUIVALENTS
At September 30, 1996, December 31, 1995 and 1994, cash was comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------ --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Cash on hand and in banks..................................................... $ 609 $ 640 $ 178
Short-term investments........................................................ 10 23,561 4,466
------------ --------- ---------
$ 619 $ 24,201 $ 4,644
------------ --------- ---------
------------ --------- ---------
</TABLE>
F-15
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
6. ACCOUNTS RECEIVABLE
At September 30, 1996, December 31, 1995 and 1994, accounts receivable were
comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------ --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Subscriptions................................................................. $ 6,521 $ 5,154 $ 1,879
Installation fees............................................................. 10,425 4,637 1,686
Advertising & programming..................................................... 2,359 1,810 1,560
Barter........................................................................ 4,977 2,989 3,627
Others........................................................................ 200 70 --
Allowance for doubtful accounts............................................... (2,837) (3,407) (1,211)
------------ --------- ---------
$ 21,645 $ 11,253 $ 7,541
------------ --------- ---------
------------ --------- ---------
</TABLE>
7. INVENTORIES
At September 30, 1996, December 31, 1995 and 1994, inventories were
comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------ --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Materials and supplies........................................................ $ 16,660 $ 10,913 $ 4,985
Imports in transit............................................................ 1,673 2,163 718
Allowance for obsolescence.................................................... (2,493) -- --
------------ --------- ---------
$ 15,840 $ 13,076 $ 5,703
------------ --------- ---------
------------ --------- ---------
</TABLE>
8. FILM EXHIBITION RIGHTS
At September 30, 1996, December 31, 1995 and 1994, film exhibition rights
were comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------ --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Exhibition rights.............................................................. $ 1,887 $ 1,192 $ 1,752
Allowance for exhibition expiration............................................ (1,162) (1,162) (335)
------------ --------- ---------
$ 725 $ 30 $ 1,417
------------ --------- ---------
------------ --------- ---------
</TABLE>
9. PREPAID AND OTHER ASSETS
At September 30, 1996, December 31, 1995 and 1994, prepaid expenses were
comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------ --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Advances to suppliers.......................................................... $ 1,124 $ 2,078 $ 977
Prepaid TVA magazine publishing expenses....................................... 845 562 379
Prepaid meals and transportation............................................... 189 171 197
Others......................................................................... 353 157 146
------------ --------- ---------
$ 2,511 $ 2,968 $ 1,699
------------ --------- ---------
------------ --------- ---------
</TABLE>
F-16
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
10. OTHER ACCOUNTS RECEIVABLE
At September 30, 1996, December 31, 1995 and 1994, other accounts receivable
were comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------ --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Advances to employees.............................................................. $ 805 $ 491 $ 58
Accounts receivable from related companies (Note 11)............................... 953 389 281
Others............................................................................. 501 105 45
------------ --------- ---------
$ 2,259 $ 985 $ 384
------------ --------- ---------
------------ --------- ---------
</TABLE>
11. RELATED-PARTY TRANSACTIONS
The following tables summarize the transactions between the Company and
related companies at September 30, 1996 (unaudited) and December 31, 1995, and
1994 and for the nine month periods ended September 30, 1996 (unaudited) and
1995 (unaudited) and the three years ended December 31, 1995:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1995 1994
AT SEPTEMBER 30, --------- ---------
-----------------
1996
-----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Abril S.A.
Loans payable ................................................. $ 90,205 $ 39 --
ESPN do Brasil Ltda
Loans receivable .............................................. -- 3,913 --
Accounts payable .............................................. -- 963 --
Canbras TV a Cabo Ltda
Loans receivable .............................................. 3,000 815 $ 33
Accounts payable .............................................. 1,721 -- --
Canbras Partcipacoes
Loans receivable .............................................. 304 -- --
HBO Partners
Loans receivable .............................................. 1,792 -- --
Aico
Loans receivable .............................................. 7,930 -- --
TV Aico
Loans receivable .............................................. 1,640 -- --
</TABLE>
F-17
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
11. RELATED-PARTY TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTH PERIOD
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- -------------------------------
1996 1995 1995 1994 1993
----------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Abril S.A.
Net interest expense.................................... $ 4,684 $ 9,461 $ 9,324 -- --
ESPN do Brasil Ltda
Programming costs....................................... 2,560 851 646 -- --
Net interest expense.................................... -- -- 330 -- --
Abril Communications Ltda
Net interest expense.................................... -- -- -- -- $ 8,379
</TABLE>
The Abril S.A. and other related company loans receivable are denominated in
REAIS and are subject to monetary restatement plus interest charges at the
market rate which was 1.79% per month in September 1996 (3.44% per month in
December 1995).
The loans payable to Abril S.A. are pursuant to a revolving credit facility.
This facility, effective December 31, 1995, is valid for a period of 36 months.
Additionally, Abril S.A. provided a guarantee in the amount of $28,847 on
September 30, 1996, for equipment imported by Galaxy Brasil S.A., TVAST, TV
Filme and TVA Parana.
The Company and Falcon International Communications Services Inc., one of
the Company's shareholders, signed a consulting service agreement on April 1,
1996 related to the Company's operations and technologies. Initially, the
duration of this agreement is two years, renewable every subsequent two-year
period thereafter. The payment for the consulting services amounts to $200 per
annum.
12. DEFERRED INCOME TAX
The tax effects of temporary differences that give rise to a significant
portion of the deferred tax asset and deferred tax liability at September 30,
1996 and at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Deferred tax assets:
Net operating loss carryforwards........................................... $ 37,981 $ 33,964 $ 22,764
Deferred charges........................................................... 7,485 7,720 11,818
Deferred hook-up fee revenue............................................... 1,030 -- --
Others..................................................................... 1,015 175 920
----------- --------- ---------
Total gross deferred tax asset......................................... 47,511 41,859 35,502
----------- --------- ---------
Less, valuation allowance................................................ (42,610) (34,568) (28,913)
----------- --------- ---------
Net deferred tax asset....................................................... 4,901 7,291 6,589
Deferred tax liability:
Inflationary profit........................................................ -- -- (4,107)
Installation costs......................................................... (4,901) (7,291) (2,482)
----------- --------- ---------
Total gross deferred tax liability..................................... (4,901) (7,291) (6,589)
----------- --------- ---------
Net deferred tax asset................................................... $ -- $ -- $ --
----------- --------- ---------
----------- --------- ---------
</TABLE>
F-18
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
12. DEFERRED INCOME TAX (CONTINUED)
The Company has a limited operating history and has generated losses since
its inception. The valuation allowance has been established in accordance with
the requirements of SFAS No. 109 and relates to the amount of net operating loss
carryforwards in excess of net taxable temporary differences.
As of September 30, 1996, the Company has unexpirable accumulated tax losses
of $118,569.
The consolidated and combined income tax credit was different from the
amount computed using the Brazilian statutory income tax for the reasons set
forth in the following table:
<TABLE>
<CAPTION>
DECEMBER, 31
SEPTEMBER 30, ------------------------------------
1996 1995 1994 1993
-------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Loss before income taxes and minority interest............ $ 38,448 $ 41,941 $ 12,717 $ 37,920
Statutory income tax rate................................. 30.56% 30.56% 43.0% 35.2%
-------------- ------------ ---------- ----------
11,750 12,817 5,468 13,348
Profit on intercompany transaction not eliminated on
fiscal books............................................ -- -- -- (7,762)
Expiration of tax losses.................................. -- -- -- (691)
Increase (decrease) in the income tax rate................ -- (8,639) 3,373 --
Monetary correction net of unallowable amortization....... (1,129) 308 -- --
Monetary correction of deferred charges................... (905) 1,342 4,899 3,003
Translation rate difference on exhibition rights.......... -- 381 (476) --
Monetary correction over U.S. Dollar on tax losses........ -- -- 1,668 --
Others.................................................... (1,779) (554) (1,964) (620)
-------------- ------------ ---------- ----------
Net income tax benefit for the period..................... 7,937 5,655 12,968 7,278
Increase in valuation allowance........................... (8,042) (5,655) (12,968) (7,278)
-------------- ------------ ---------- ----------
$ (105) $ -- $ -- $ --
-------------- ------------ ---------- ----------
-------------- ------------ ---------- ----------
</TABLE>
Income tax payable represents amounts owing by subsidiaries calculated on a
unitary basis.
F-19
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
13. INVESTMENTS
Investments at September 30, 1996, December 31, 1995 and 1994 were comprised
of:
<TABLE>
<CAPTION>
PERCENTAGE
OF CONTROL 1996 1995 1994
------------- ----------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
Equity basis investments:
TV Filme, Inc. ............................................... 14.3(a) $ 4,628 $ 2,352 $ 1,856
ESPN Brasil Ltda.............................................. 50 1,234 -- --
Canbras TV a Cabo............................................. 36 84 -- --
HBO Brasil Partners........................................... 33 285 1,110 --
----------- --------- ---------
$ 6,231 $ 3,462 $ 1,856
----------- --------- ---------
----------- --------- ---------
Liability to Fund Joint Venture and Equity Investee:
ESPN Brasil Ltda.............................................. 50 $ -- $ (2,009) --
Canbras TV a Cabo............................................. -- (160) (4)
HBO Brasil Partners........................................... -- -- (580)
----------- --------- ---------
$ -- $ (2,169) $ (584)
----------- --------- ---------
----------- --------- ---------
Cost Basis Investments:
Galaxy Latin America.......................................... 10 $ 16,320 $ 11,220 $ --
Others........................................................ 51 20 39
----------- --------- ---------
$ 16,371 $ 11,240 $ 39
----------- --------- ---------
----------- --------- ---------
Concessions, net:
Stations in south of Brazil................................... $ 11,876 $ -- $ --
Ype Radio e Televisao Ltda Concessions........................ 6,363 6,363 --
Comercial Cabo Ltda........................................... 1,970 1,970 1,970
Other......................................................... 65 65 65
Amortization.................................................. (1,531) (420) --
----------- --------- ---------
$ 18,743 $ 7,978 $ 2,035
----------- --------- ---------
----------- --------- ---------
</TABLE>
- ------------------------
(a) Accounted for under the equity method because the Company has one seat out
of six on the Board of Directors, is dependent on the Company for a
substantial portion of its revenue and has an option to acquire an
additional 2% interest.
On February 3, 1995, an agreement was signed between Tevecap, Hughes (GLA
Inc./USA), Inversiones Divtel (ODC Cisneiros/Venezuela) and Multivision
(MVS/Mexico) for the incorporation of Galaxy Latin America in August 1995. On
March 3, 1995, the operational agreement between Galaxy Latin America and
Tevecap was formalized with the purchase of 10% of the shares of Galaxy Latin
America for $7,194. On March 9, 1995, Galaxy Brasil S.A. was created, with 99.5%
of the shares held by Tevecap. Galaxy Brasil S.A. provides distribution services
of multichannel TV programs to all national regions. The transmission commenced
February 1996. Galaxy Latin America will charge Galaxy Brasil for the use of a
satellite.
The ESPN Brasil joint venture was formed in June 1995, with Tevecap and ESPN
International each holding 50% of ESPN Brasil's shares. Operations commenced on
June 15, 1995, and the objective of
F-20
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
13. INVESTMENTS (CONTINUED)
ESPN Brasil is the transmission of ESPN's international sport programs.
Condensed financial information of the joint venture as of and for the nine
month period ended September 30, 1996 and as of and for the year ended December
31, 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current Assets.......................................................... $ 3,546 $ 2,905
Non-current Assets...................................................... 2,163 262
Current Liabilities..................................................... 3,241 3,272
Long-Term Liabilities................................................... -- 3,913
Revenues................................................................ 8,538 4,748
Gross Losses............................................................ (9,536) (2,884)
Loss before Taxes....................................................... (10,330) (4,020)
Net Loss................................................................ (10,330) (4,020)
</TABLE>
On April 3, 1995, Tevecap acquired 49% of the common shares and 49% of the
preferred shares of Ype Radio e Televisao Ltda., for $6,363, obtaining the
concession of certain television channels. The concessions are being amortized
over 10 years.
In previous years the Company acquired Comercial Cabo Ltda., obtaining the
concessions for certain television channels and other minor investments. The
consessions are being amortized over ten years.
F-21
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
14. PROPERTY, PLANT AND EQUIPMENT
At September 30, 1996, December, 31, 1995 and 1994, property, plant and
equipment were comprised of:
<TABLE>
<CAPTION>
ANNUAL
DEPRECIATION
RATE
% 1996 1995 1994
------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Machinery and Equipment.................................... 10 $ 46,613 $ 37,877 $ 25,512
Converters................................................. 10 76,067 36,485 10,809
Leasehold Improvements..................................... 25 5,449 1,830 1,477
Furniture and Fixtures..................................... 10 2,136 1,226 704
Premises................................................... 10 2,286 1,116 559
Vehicles................................................... 20 1,404 457 161
Software................................................... 20 2,646 1,529 472
Tools...................................................... 10 715 621 439
Reception Equipment........................................ 20 65,470 45,711 19,265
Cable Plant................................................ 10 11,482 6,513 --
Building................................................... 4 8,326 342 155
----------- ----------- ----------
222,594 133,707 59,553
Accumulated Depreciation................................... (41,448) (23,373) (10,184)
Telephone Line Use Rights.................................. 2,219 1,453 787
Trademarks, Patents and Others............................. 164 577 186
Fixed Assets in Transit.................................... 3,779 18,902 1,084
Others..................................................... 755 -- --
----------- ----------- ----------
$ 188,063 $ 131,266 $ 51,426
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
15. SHORT-TERM BANK LOANS
Short-term bank loans at September 30, 1996 represent the refinancing of
certain supplier payables. The average short-term interest rate on such loans is
LIBOR plus 1.5%.
16. OTHER ACCOUNTS PAYABLE
At September 30, 1996, December, 31, 1995 and 1994, other accounts payable
were comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Accounts payable to related companies (Note 11)................................ $ 252 $ 1,122 $ 13
Advertising.................................................................... 1,088 427 851
Importation expenses payable................................................... 667 599 86
Others......................................................................... 1,676 1,124 674
----------- --------- ---------
$ 3,683 $ 3,272 $ 1,624
----------- --------- ---------
----------- --------- ---------
</TABLE>
F-22
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
17. LOANS FROM SHAREHOLDERS
Loans from shareholders at September 30, 1996, December 31, 1995 and 1994,
were comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Roberto Civita................................................................. $ 2,490 $ 2,616 $ 2,455
Maricla I. R. Rossi............................................................ 59 61 58
Edgard Silvio Faria............................................................ 175 184 174
Angelo Silvio Rossi............................................................ 42 45 42
Leonardo Petrelli.............................................................. 1,841 180 135
----------- --------- ---------
$ 4,607 $ 3,086 $ 2,864
----------- --------- ---------
----------- --------- ---------
</TABLE>
Interest on loans from shareholders is based on the UFIR (Fiscal Reference
Unit) variation which was 0% during the nine-month period ended September 30,
1996 (22.46% in December 1995).
18. INSURANCE
The Company maintains insurance coverage for its fixed assets and
inventories in an amount considered sufficient to cover the risks involved.
19. LEASED ASSETS AND COMMITMENTS
The Company has entered into film distribution contracts and licensing
agreements with film producers for programming for future periods. Such
contracts and agreements, which range in life from 1 to 9 years with the
exception of a specific contract with ESPN which has a life of 50 years, require
a per-subscriber fee to be paid by the Company on a monthly basis.
The Company has funding commitments related to Galaxy Latin America, TV
Filme, ESPN Brasil Ltda., HBO Brasil Partners, Canbras TVA and CNBC of
approximately $26,992 which must be met prior to December, 1997.
The Company has rented its office space until the year 2001. At December 31,
1995 future minimum rental payments applicable to operating leases in respect of
this space aggregate approximately $4,874 as follows:
<TABLE>
<S> <C>
1996............................................................... $ 1,588
1997............................................................... 769
1998............................................................... 663
1999............................................................... 643
2000............................................................... 608
2001............................................................... 603
---------
Total.............................................................. $ 4,874
---------
---------
</TABLE>
F-23
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
19. LEASED ASSETS AND COMMITMENTS (CONTINUED)
At December 31, 1995, the Company had contractual commitments with Embratel
for transponder use until the year 2003. Based on the contract provisions, these
commitments are currently estimated to aggregate approximately $52,361, as
follows:
<TABLE>
<S> <C>
1996.............................................................. $ 8,302
1997.............................................................. 8,302
1998.............................................................. 8,302
1999.............................................................. 8,035
2000.............................................................. 7,768
2001.............................................................. 7,768
2002.............................................................. 3,884
---------
Total............................................................. $ 52,361
---------
---------
</TABLE>
20. COMMON STOCK
Common stock at September 30, 1996, December 31, 1995 and 1994, was
comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ------------------------ ------------------------
US$ SHARES US$ SHARES US$ SHARES
--------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Common stock subject to
redemption....................... 144,754 85,637,516 144,754 85,637,516 19,754 22,992,650
--------- ------------- --------- ------------- --------- -------------
--------- ------------- --------- ------------- --------- -------------
Paid-in capital.................... 142,495 111,075,339 142,495 111,075,339 142,495 111,075,339
--------- ------------- --------- ------------- --------- -------------
--------- ------------- --------- ------------- --------- -------------
</TABLE>
(a) COMMON STOCK SUBJECT TO REDEMPTION
As at September 30, 1996 and December 31, 1995, 43.5% of the common stock of
Tevecap was subject to an Event Put i.e. a "triggering event" under the
Stockholders Agreement pursuant to which each of the shareholders (other that
Abril) may, in certain circumstances, demand that Tevecap purchase all or a
portion of its shares, unless the shares of capital stock held by such
Stockholder are publicly registered, listed or traded. In addition, as at
September 30, 1996 and December 31, 1995, 14.2% of these shares are also subject
to Time Put whereby, pursuant to the Stockholders Agreement, Falcon
International may demand that Tevecap buy all or a portion of their shares of
capital stock held in Tevecap if such shares are not publicly registered, listed
or traded by September 22, 2002.
For purposes of the Event Put, triggering events are: (i) the amount of the
capital stock held by a stockholder with an Event Put exceeds the amount allowed
under any legal restriction to which such Stockholder may be subject
("Regulatory Put"); (ii) a breach without cure within a designated period by
certain specified entities/individuals of any representation, warranty, covenant
or duty made or owed pursuant to certain agreements; (iii) a breach without cure
within a designated period by Abril of the Abril Credit Facility; (iv) the
controlling shareholder of Abril ceases to directly or indirectly hold a
specified percentage of Tevecap without the approval of the Stockholders or
ceases to control the voting capital stock held by his affiliates representing
50% or more of the voting capital stock of Tevecap; (v) the Service Agreement as
amended, among Tevecap, TV Show Time, TVA Brasil and Abril ceases to be valid or
effective or TV Show Time, TVA Brasil and Abril is liquidated or dissolved or
files voluntarily, or has filed
F-24
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
20. COMMON STOCK (CONTINUED)
against it involuntarily, any petition in bankruptcy; or (vi) another
Stockholder exercises an Event Put other than a Regulatory Put.
The Company's management believes that the probability of occurrence of the
triggering events which would permit any of its shareholders to exercise its
Event Put is remote. However, a company that is public in the United States, and
which therefore is required to register its securities with the United States
Securities and Exchange Commission (the "SEC"), is required for accounting
purposes to present redeemable equity securities separately from shareholders'
equity, if redemption of such securities is beyond the control of the
registrant. That presentation is required even if the likelihood of redemption
is remote.
As the Company's financial statements are to be included in a registration
statement to be filed with the SEC, the presentation of redeemable common stock
separately from shareholders' equity differs from the presentation of such stock
in the Company's previously issued financial statements.
The Common Shares subject to the Time Put are redeemable at fair value
determined by appraisal or by a multiple of the Company's most recent quarterly
earnings. The Company has recorded an accretion on these shares to fair market
value of $4,780 and $13,691 with respect to the year ended December 31, 1995 and
the nine months ended September 30, 1996.
(b) PAID-IN CAPITAL
Paid-in capital represents registered common shares without par value.
The Company's shareholders are entitled to minimum dividends of 25% of net
income for the year, adjusted according to Corporation Law. As the Company has
not recorded net income since its inception, no such dividends are payable.
21. LITIGATION CONTINGENCIES
Certain claims and lawsuits arising in the ordinary course of business have
been filed or are pending against the Company which were not recognized in the
financial statements. The Company has also recorded provisions related to
certain claims in amounts that management considers to be adequate after
considering a number of factors including (but not limited to) the views of
legal counsel, the nature of the claims and the prior experience of the Company.
In management's opinion, all contingencies have been adequately provided for
or are without merit, or are of such kind that if disposed of unfavorably, would
not have a material adverse effect on the financial position or future results
of operations of the Company.
22. PENSION PLAN
In April 1996, the Company became a co-sponsor of the private pension entity
named Abrilprev Sociedade de Previdencia Privada, the primary objective of which
is to grant employees benefits other than those provided by Social Security. The
plan is optional to all employees of the sponsoring entities. Abrilprev operates
as a Defined Contribution Plan. Company contributions are made based on a fixed
percentage applied to the payroll of the sponsoring entities based on actuarial
calculations. Plan expenses amounted to $263 in 1996.
23. WORKING CAPITAL DEFICIENCY
The Company's consolidated financial statements for the period ended
September 30, 1996 were prepared on a going concern basis which contemplates the
realization of assets and settlement of
F-25
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
23. WORKING CAPITAL DEFICIENCY (CONTINUED)
liabilities and commitments in the normal course of business. The Company
incurred net losses of $37,020, $41,070 and $11,997 and cash (used in)/provided
by operating activities was $(5,385), $22,989 and $(9,474) for the nine months
ended September 30, 1996 and the two years in the period ended December 31,
1995, respectively. In addition, the Company had negative working capital of
$45,773 at September 30, 1996. The continuation of the Company as a going
concern is dependent upon its ability to generate sufficient cash from
operations and financing activities. In this regard, managements' plans include:
(i) raising additional debt financing through a private placement of Senior
Notes; (ii) entering into a credit agreement for a total of $29,350 with a Bank;
and, (iii) entering into a five-year $49,900 sale leaseback of certain assets.
The financial statements do not include any adjustments related to the
recoverability and classification of recorded amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
24. SUPPLEMENTARY INFORMATION--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
DEFERRED
ALLOWANCE FOR ALLOWANCE FOR TAXATION
DOUBTFUL ALLOWANCE FOR EXHIBITION VALUATION PROVISION
ACCOUNTS OBSOLESCENCE EXPIRATION ALLOWANCE FOR CLAIMS
-------------- -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1993 (combined)............. $ 363 $ 91 $ 3,367 $ 15,251 210
Additions Charged to expense............. 848 -- -- -- 920
Reduction................................ -- (91) (3,032) 12,968 (55)
------- ------- ------- ----------- -----------
Balance at December 31, 1994
(consolidated)......................... 1,211 -- 335 28,219 1,075
Additions Charged to expense............. 2,196 -- 827 5,655 2,688
------- ------- ------- ----------- -----------
Balance at December 31, 1995
(consolidated)......................... 3,407 -- 1,162 33,874 3,763
Additions Charged to expense
(unaudited)............................ 3,040 2,493 -- 7,937 1,940
Reduction (unaudited).................... (3,610) -- -- -- --
------- ------- ------- ----------- -----------
Balance at September 30, 1996 (unaudited)
(consolidated)......................... $ 2,837 $ 2,493 $ 1,162 $ 41,811 $ 5,703
------- ------- ------- ----------- -----------
------- ------- ------- ----------- -----------
</TABLE>
25. SUBSEQUENT EVENTS.
The Company generated additional debt financing of approximately $241,200
(net proceeds) in November, 1996 through a private placement of $250 million
12 5/8% Senior Notes issued to certain qualified institutional buyers. These
proceeds were used to repay short term loans from affiliated companies. It is
management's intention to use the remaining proceeds for capital expenditures,
investments and other general corporate purposes. In addition, management
entered into a credit agreement for a total of $29,350 with a Bank.
26. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES
Tevecap conducts a significant portion of its business through subsidiaries.
The $250 million 12 5/8% Senior Notes issued to certain qualified institutional
buyers in November, 1996 are jointly and severally, irrevocably and fully and
unconditionally guaranteed, on a senior basis, by all of Tevecap's direct and
indirect subsidiaries except for TVA Communications Aruba N.A. and TVA TCG
Sistema TV.
F-26
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
26. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
Presented below is condensed consolidating and combined financial
information for: i) Tevecap on a parent company only basis; ii) the Wholly-Owned
Guarantor Subsidiaries; iii) the Majority-Owned Guarantor Subsidiaries; iv)
Non-Guarantor Subsidiaries; v) Eliminations; and, vi) Consolidated Tevecap S.A.
and Subsidiaries.
The equity method has been used by Tevecap, the Wholly-Owned Guarantor
Subsidiaries and the Majority-Owned Guarantor Subsidiaries with respect to
investments in their subsidiaries.
The following sets forth the Wholly-Owned Guarantor Subsidiaries, the
Majority-Owned Guarantor Subsidiaries and the Non-Guarantor Subsidiaries:
A) WHOLLY OWNED GUARANTOR SUBSIDIARIES
TVA Communications Ltd.
Galaxy Brasil S.A.
Comercial Cabo TV Sao Paulo Ltda.
B) MAJORITY-OWNED GUARANTOR SUBSIDIARIES
TVA Sistema de Televisao S.A.
TVA Sul Participacoes S.A.
TVA Parana Ltda.
TVA Alfa Cabo Ltda.
CCS Camboriu Cable System de Telecomunicacoes Ltda.
TCC TV a Cabo Ltda.
TVA Sul Foz do Iguacu Ltda.
TVA Sul Santa Catarina Ltda.
C) NON-GUARANTOR SUBSIDIARIES
TVA Communications Aruba N.A
TVA TCG Sistema de Televisao de Porto Alegre S.A.
Separate financial statements for TVA Sistema de Televisao S.A. have been
presented as of September 30, 1996 (unaudited) and 1995 (unaudited) and December
31, 1995 and 1994, and the related statements of income, changes in
shareholders' equity and cash flows for the nine months ended September 30, 1996
(unaudited) and 1995 (unaudited) and the three years in the period ended
December 31, 1995.
Separate consolidated and combined financial statements for TVA Sul
Partipacoes S.A. have also been presented as of September 30, 1996 and 1995
(unaudited) and December 31, 1995 and 1994, and the related statements of
income, changes in shareholders' equity and cash flows for the nine months ended
September 30, 1996 (unaudited) and 1995 (unaudited) and the three years in the
period ended December 31, 1995.
Unaudited financial information has also been included for TVA Alfa Cabo
Ltda., CCS Camboriu Cable System de Telecomunicacoes Ltda, TVA Sul Santa
Catarina Ltda., TCC TV a Cabo Ltda, TVA Sul Parana Ltda, and TVA Sul Foz do
Iguacu Ltda of as and for the nine months ended September 30, 1996.
Separate financial statements for the Wholly-Owned Guarantor Subsidiaries
have not been presented based on management's determination that they do not
provide additional information that is material to investors.
F-27
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AT SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
MAJORITY- NON-
PARENT WHOLLY-OWNED OWNED GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- --------------- ------------ --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents........... $ 1 $ 26 $ 592 -- -- $ 619
Accounts receivable,
net................... -- 2,922 18,909 -- $ (186) 21,645
Accounts receivable from
related companies..... -- -- 2,639 -- (2,639) --
Inventories............. -- -- 15,840 -- 15,840
Film exhibition
rights................ -- -- 725 -- -- 725
Prepaid and other
assets................ -- 284 2,227 -- -- 2,511
Other accounts
receivable............ 117 -- 1,950 -- 192 2,259
----------- --------------- ------------ ----- ------------ -------------
Total current assets...... 118 3,232 42,882 -- (2,633) 43,599
----------- --------------- ------------ ----- ------------ -------------
Property, plant and
equipment............... -- 33,552 154,255 -- 256 188,063
Investments
Equity affiliates....... 22,685 240 -- $ 285 (16,979) 6,231
Cost basis investees.... -- 16,371 -- -- -- 16,371
Concessions, net........ 7,348 -- 11,395 -- -- 18,743
Loans to related
companies............... 344,272 16,125 2,953 -- (347,557) 15,793
Other..................... -- -- 2,642 -- (288) 2,354
----------- --------------- ------------ ----- ------------ -------------
Total assets.............. $ 374,423 $ 69,520 $ 214,127 $ 285 $ (367,201) $ 291,154
----------- --------------- ------------ ----- ------------ -------------
----------- --------------- ------------ ----- ------------ -------------
</TABLE>
F-28
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AT SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
MAJORITY- NON-
PARENT WHOLLY-OWNED OWNED GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- -------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short term bank loan.... -- -- $ 5,441 -- -- $ 5,441
Film suppliers.......... -- 18,544 $ (12,806) 5,738
Other suppliers......... -- $ 14,757 36,298 -- -- 51,055
Taxes payable other than
income taxes.......... -- 1,338 6,867 -- -- 8,205
Accrued payroll and
related liabilities... -- 623 7,154 -- -- 7,777
Advance payments
received from
subscribers........... -- -- 7,473 -- -- 7,473
Other accounts payable.. $ 790 25 4,341 -- (1,473) 3,683
----------- -------------- ------------ ------------- ------------ -------------
Total current
liabilities......... 790 16,743 86,118 -- (14,279) 89,372
----------- -------------- ------------ ------------- ------------ -------------
Long-term liabilities
Loans from related
companies............. 91,324 44,274 291,695 -- (335,367) 91,926
Loans from
shareholders.......... -- -- 4,607 -- -- 4,607
Provision for claims.... -- -- 5,854 -- -- 5,854
Deferred hook up fee.... -- 2,943 -- -- -- 2,943
Liability to Fund Equity
investee.............. 160,484 -- -- -- (160,484) --
----------- -------------- ------------ ------------- ------------ -------------
Total long-term
liabilities......... 251,808 47,217 302,156 -- (495,851) 105,330
----------- -------------- ------------ ------------- ------------ -------------
Commitments and
contingencies
Minority interest......... -- -- 1,361 -- 837 2,198
Redeemable common stock,
no par value............ 144,754 -- -- -- -- 144,754
Shareholders' equity
Paid-in capital......... 142,495 22,251 35,267 $ 3,117 (60,635) 142,495
Accumulated deficit..... (165,424) (16,691) (210,775) (2,832) 202,727 (192,995)
----------- -------------- ------------ ------------- ------------ -------------
Total shareholders'
equity.............. (22,929) 5,560 (175,508) 285 142,092 (50,500)
----------- -------------- ------------ ------------- ------------ -------------
Total liabilities and
shareholders'
equity.............. $ 374,423 $ 69,520 $ 214,127 $ 285 $ (367,201) $ 291,154
----------- -------------- ------------ ------------- ------------ -------------
----------- -------------- ------------ ------------- ------------ -------------
</TABLE>
F-29
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
MAJORITY- NON-
PARENT WHOLLY-OWNED OWNED GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues
Monthly subscriptions......... -- $ 501 $ 84,800 -- -- $ 85,301
Installation.................. -- 3,200 36,196 -- -- 39,396
Advertising................... -- -- 5,362 -- -- 5,362
Indirect programming.......... -- -- 5,278 -- -- 5,278
Other......................... -- 1 5,294 -- -- 5,295
Revenue taxes................. -- (508) (8,373) -- -- (8,881)
----------- -------------- ------------- ------------- ------------ -------------
Net revenue................. -- 3,194 128,557 -- -- 131,751
----------- -------------- ------------- ------------- ------------ -------------
Direct operating expenses
Payroll and benefits.......... -- 2,100 17,367 -- -- 19,467
Programming................... -- -- 25,477 -- -- 25,477
Transponder lease cost........ -- 4 6,571 -- -- 6,575
Technical assistance.......... -- -- 4,923 -- -- 4,923
Vehicle rentals............... -- -- 1,252 -- -- 1,252
TVA magazine.................. -- -- 4,680 -- -- 4,680
Other costs................... -- 3,006 10,177 -- -- 13,183
----------- -------------- ------------- ------------- ------------ -------------
-- 5,110 70,447 -- -- 75,557
----------- -------------- ------------- ------------- ------------ -------------
Selling, general and
administrative expenses
Payroll and benefits.......... -- 525 20,996 -- -- 21,521
Advertising and promotion..... -- 1,761 11,033 -- -- 12,794
Rent.......................... -- -- 2,323 -- -- 2,323
Other administrative
expenses.................... $ 463 1,871 7,655 -- -- 9,989
Other general expenses........ -- -- 7,083 -- -- 7,083
----------- -------------- ------------- ------------- ------------ -------------
463 4,157 49,090 -- -- 53,710
Depreciation.................... -- 1,059 16,377 -- -- 17,436
Amortization.................... 630 -- 481 -- -- 1,111
----------- -------------- ------------- ------------- ------------ -------------
Operating loss.............. (1,093) (7,132) (7,838) -- -- (16,063)
Interest income................. 358 8 5,779 -- $ (2,495) 3,650
Interest expense................ (6,095) (890) (5,635) -- 2,495 (10,125)
Translation (loss) gain......... 275 (168) 136 -- -- 243
Equity in (losses) income of
affiliates.................... (26,703) (825) -- $ (825) 21,711 (6,642)
Other nonoperating (expenses)
income, net................... (3,382) (1,689) (4,440) -- -- (9,511)
----------- -------------- ------------- ------------- ------------ -------------
Loss before income taxes and
minority interest......... (36,640) (10,696) (11,998) (825) 21,711 (38,448)
Income taxes.................... -- -- (105) -- -- (105)
----------- -------------- ------------- ------------- ------------ -------------
Net loss before minority
interest...................... (36,640) (10,696) (12,103) (825) 21,711 (38,553)
Minority interest............... -- -- (14) -- 1,547 1,533
----------- -------------- ------------- ------------- ------------ -------------
Net loss.................... $ (36,640) $ (10,696) $ (12,117) $ (825) $ 23,258 $ (37,020)
----------- -------------- ------------- ------------- ------------ -------------
----------- -------------- ------------- ------------- ------------ -------------
</TABLE>
F-30
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
MAJORITY- NON-
PARENT WHOLLY-OWNED OWNED GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss...................... $ (36,640) $ (10,696) $ (12,117) $ (825) $ 23,258 $ (37,020)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH (USED IN)
PROVIDED BY OPERATING
ACTIVITIES:
Depreciation................ -- 1,059 16,377 -- -- 17,436
Amortization................ 630 -- 481 -- -- 1,111
Allowance for exhibition
costs..................... -- -- -- -- -- --
Allowance for doubtful
accounts.................. -- -- 3,040 -- -- 3,040
Allowance for obsolescence.. -- -- 2,493 -- -- 2,493
Provision for claims........ -- -- 2,091 -- -- 2,091
Minority interest........... -- -- -- -- (1,533) (1,533)
Disposal and write-off of
fixed assets.............. -- -- 1,163 -- -- 1,163
Equity in losses (earnings)
of affiliates............. 6,682 825 -- 825 (1,690) 6,642
CHANGES IN OPERATING ASSETS AND
LIABILITIES:
Film exhibition rights...... -- -- (695) -- -- (695)
Accounts receivable......... -- (2,922) (10,696) -- 186 (13,432)
Prepaid and other assets.... -- -- 686 -- (229) 457
Other accounts receivable... (115) (228) (3,013) -- 2,168 (1,188)
Other....................... -- -- 190 -- 4,978 5,168
Accrued Interest............ 5,461 (491) (1,675) -- 1,405 4,700
Inventories................. -- -- (5,257) -- (5,257)
Legal deposits.............. -- -- (306) -- 172 (134)
Suppliers................... -- 8,898 (891) -- (9,184) (1,177)
Taxes payable other than
income taxes.............. -- 243 1,791 -- -- 2,034
Accrued payroll and related
liabilities............... -- 555 2,651 -- -- 3,206
Advances received from
subscribers............... -- -- 3,487 -- -- 3,487
Deferred hook up fee........ -- 2,943 -- -- -- 2,943
Other accounts payable...... 13 (235) 184 -- (882) (920)
----------- -------------- ------------- ------ ------------ -------------
Net cash (used in) provided by
operating activities.......... (23,969) (49) (16) -- 18,649 (5,385)
----------- -------------- ------------- ------ ------------ -------------
</TABLE>
F-31
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
MAJORITY- NON-
PARENT WHOLLY-OWNED OWNED GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- -------------- ------------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of fixed assets...... -- (21,956) (50,835) -- 253 (72,538)
Loans to related companies.... (77,586) (10,700) (1,468) -- 67,085 (22,669)
Cash received on loans to
affiliated companies........ 3,333 1,474 9,315 -- (514) 13,608
Purchase of concessions....... 13,490 -- (13,490) -- (13,490) (13,490)
Investments in equity and cost
investments................. (24,474) (5,100) -- -- 12,863 (16,711)
----------- -------------- ------------- ------ ------------ -------------
Net cash used in investing
activities.................... (85,237) (36,282) (56,478) -- 67,197 (111,800)
----------- -------------- ------------- ------ ------------ -------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Short term bank loans......... -- -- 5,441 -- -- 5,441
Capital contributions......... -- 16,036 18,964 -- (35,000) --
Repayments of loans from
shareholders................ -- -- (162) -- 1,684 1,522
Loans from shareholders....... -- 3,963 1,822 -- (5,785) --
Loans from related companies.. 126,227 17,349 38,232 -- (65,630) 116,178
Repayments of loans from
related companies........... (40,466) (1,003) (9,315) -- 21,246 (29,538)
Minority interest............. -- -- 1,361 -- (1,361) --
----------- -------------- ------------- ------ ------------ -------------
Net cash provided by financing
activities.................... 85,761 36,345 56,343 -- (84,846) 93,603
----------- -------------- ------------- ------ ------------ -------------
Net (decrease) increase in cash
and cash equivalents (23,445) 14 (151) -- -- (23,582)
Cash and cash equivalents at
beginning of the period....... 23,446 12 743 -- -- 24,201
----------- -------------- ------------- ------ ------------ -------------
Cash and cash equivalents at end
of the period................. $ 1 $ 26 $ 592 $ -- $ -- $ 619
----------- -------------- ------------- ------ ------------ -------------
----------- -------------- ------------- ------ ------------ -------------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest........ -- -- -- -- -- --
----------- -------------- ------------- ------ ------------ -------------
----------- -------------- ------------- ------ ------------ -------------
SUPPLEMENTAL NON CASH FINANCING
ACTIVITIES:
Accrued interest on related
company loans refinanced as
principal balance........... 4,684 -- 1,272 -- (1,272) 4,684
----------- -------------- ------------- ------ ------------ -------------
----------- -------------- ------------- ------ ------------ -------------
DETAILS OF ACQUISITIONS:
Fair value of assets
acquired.................... -- -- 14,895 -- -- --
Liabilities assumed........... -- -- (1,330) -- -- --
----------- -------------- ------------- ------ ------------ -------------
Cash paid..................... -- -- (13,565) -- -- --
Less: cash acquired........... -- -- (75) -- -- --
Net cash paid for
acquisitions................ -- -- $ 13,490 -- -- --
----------- -------------- ------------- ------ ------------ -------------
----------- -------------- ------------- ------ ------------ -------------
</TABLE>
F-32
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AT DECEMBER 31, 1995
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
MAJORITY - NON-
PARENT WHOLLY-OWNED OWNED GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- --------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents........... $ 23,446 $ 12 $ 743 -- -- $ 24,201
Accounts receivable,
net................... -- -- 11,253 -- -- 11,253
Inventories............. -- -- 13,076 -- -- 13,076
Film exhibition
rights................ -- -- 30 -- -- 30
Prepaid and other
assets................ -- 55 2,913 -- -- 2,968
Other accounts
receivable............ 2 -- 1,490 -- $ (507) 985
----------- --------------- ------------ ------------- ------------ -------------
Total current
assets.............. 23,448 67 29,505 $ -- (507) 52,513
----------- --------------- ------------ ------------- ------------ -------------
Property, plant and
equipment............... -- 11,492 120,350 -- (576) 131,266
Investments
Equity affiliates....... 7,252 1,110 -- 1,110 (6,010) 3,462
Cost basis investees.... 15 11,225 -- -- -- 11,240
Concessions, net........ 7,978 -- -- -- -- 7,978
Loans to related
companies............... 281,034 6,786 10,480 -- (291,568) 6,732
Other..................... -- -- 1,568 -- 2,089 3,657
----------- --------------- ------------ ------------- ------------ -------------
Total assets.......... $ 319,727 $ 30,680 $ 161,903 $ 1,110 $ (296,572) $ 216,848
----------- --------------- ------------ ------------- ------------ -------------
----------- --------------- ------------ ------------- ------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Film suppliers.......... -- -- $ 9,512 -- $ (3,620) $ 5,892
Other suppliers......... -- $ 5,859 46,219 -- -- 52,078
Taxes payable other than
income taxes.......... -- 1,095 5,076 -- -- 6,171
Accrued payroll and
related liabilities... -- 68 4,503 -- -- 4,571
Advance payments
received from
subscribers........... -- -- 3,986 -- -- 3,986
Other accounts payable.. $ 169 273 2,830 -- -- 3,272
----------- --------------- ------------ ------------- ------------ -------------
Total current
liabilities......... 169 7,295 72,126 $ -- (3,620) 75,970
----------- --------------- ------------ ------------- ------------ -------------
Long-term liabilities
Loans from related
companies............. 585 23,174 265,282 -- (288,455) 586
Loans from
shareholders.......... -- -- 3,086 -- -- 3,086
Provision for claims.... -- -- 3,763 -- -- 3,763
Liability to Fund Equity
investee.............. 160,508 -- -- -- (158,339) 2,169
----------- --------------- ------------ ------------- ------------ -------------
Total long-term
liabilities......... 161,093 23,174 272,131 -- (446,794) 9,604
----------- --------------- ------------ ------------- ------------ -------------
Redeemable common stock,
no par value............ 144,754 -- -- -- -- 144,754
Shareholders' equity
Paid-in capital......... 142,495 6,214 17,017 3,117 (26,348) 142,495
Accumulated deficit..... (128,784) (6,003) (199,371) (2,007) 180,190 (155,975)
----------- --------------- ------------ ------------- ------------ -------------
Total shareholders'
equity.............. 13,711 211 (182,354) 1,110 153,842 (13,480)
----------- --------------- ------------ ------------- ------------ -------------
Total liabilities and
shareholders'
equity.............. $ 319,727 $ 30,680 $ 161,903 $ 1,110 $ (296,572) $ 216,848
----------- --------------- ------------ ------------- ------------ -------------
----------- --------------- ------------ ------------- ------------ -------------
</TABLE>
F-33
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
WHOLLY- MAJORITY- NON-
PARENT OWNED OWNED GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues
Monthly subscriptions......................... -- -- $ 62,496 -- -- $ 62,496
Installation.................................. -- -- 26,045 -- -- 26,045
Advertising................................... -- -- 8,377 -- -- 8,377
Indirect programming.......................... -- -- 2,866 -- -- 2,866
Other......................................... -- -- 2,226 -- -- 2,226
Revenue taxes................................. -- -- (7,506) -- -- (7,506)
---------- ------------ ------------ ------------ ------------ -------------
Net revenue................................. $ -- $ -- 94,504 $ -- $ -- 94,504
---------- ------------ ------------ ------------ ------------ -------------
Direct operating expenses
Payroll and benefits.......................... -- 315 12,205 -- -- 12,520
Programming................................... -- -- 21,609 -- -- 21,609
Transponder lease cost........................ -- -- 7,568 -- -- 7,568
Technical assistance.......................... -- -- 5,152 -- -- 5,152
Vehicle rentals............................... -- 7 1,725 -- -- 1,732
TVA magazine.................................. -- -- 3,318 -- -- 3,318
Other costs................................... -- 705 9,422 -- -- 10,127
---------- ------------ ------------ ------------ ------------ -------------
-- 1,027 60,999 -- -- 62,026
---------- ------------ ------------ ------------ ------------ -------------
Selling, general and administrative expenses
Payroll and benefits.......................... -- -- 21,627 -- -- 21,627
Advertising and promotion..................... -- 62 11,060 -- -- 11,122
Rent.......................................... -- 18 1,055 -- -- 1,073
Other administrative expenses................. 198 202 6,273 -- -- 6,673
Other general expenses........................ -- 4 6,403 -- -- 6,407
---------- ------------ ------------ ------------ ------------ -------------
198 286 46,418 -- -- 46,902
---------- ------------ ------------ ------------ ------------ -------------
Depreciation.................................... -- 127 12,721 -- -- 12,848
Amortization.................................... 420 -- -- -- -- 420
---------- ------------ ------------ ------------ ------------ -------------
Operating loss.............................. (618) (1,440) (25,634) -- -- (27,692)
---------- ------------ ------------ ------------ ------------ -------------
Interest income................................. 6,772 350 7,965 -- (11,969) 3,118
Interest expense................................ (15,273) (1,226) (13,215) -- 11,969 (17,745)
Translation loss................................ (28) (151) (160) -- -- (339)
Equity in (losses) of affiliates................ (27,316) (1,427) -- (1,427) 26,498 (3,672)
Other nonoperating (expenses) income, net....... (477) 811 4,055 -- -- 4,389
---------- ------------ ------------ ------------ ------------ -------------
Loss before income taxes and minority
interest.................................. (36,940) (3,083) (26,989) (1,427) 26,498 (41,941)
Income taxes -- -- -- -- -- --
---------- ------------ ------------ ------------ ------------ -------------
Net loss before minority interest............... (36,940) (3,083) (26,989) (1,427) 26,498 (41,941)
Minority interest............................... -- -- -- -- 871 871
---------- ------------ ------------ ------------ ------------ -------------
Net loss.................................... $ (36,940) $ (3,083) $ (26,989) $ (1,427) $ 27,369 $ (41,070)
---------- ------------ ------------ ------------ ------------ -------------
---------- ------------ ------------ ------------ ------------ -------------
</TABLE>
F-34
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
WHOLLY- MAJORITY- NON-
PARENT OWNED OWNED GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS
----------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss......................................... $ (36,940) $ (3,083) $ (26,989) $ (1,427) $ 27,369
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES:
Depreciation................................. -- 127 12,721 -- --
Amortization................................. 420 -- -- -- --
Allowance for exhibition costs............... -- -- 827 -- --
Allowance for doubtful accounts.............. -- -- 2,196 -- --
Provision for claims......................... -- -- 2,688 -- --
Minority interest............................ -- -- -- -- (871)
Disposal and write-off of fixed assets....... -- 4,352 474 -- (4,485)
Equity in losses (earnings) of affiliates.... 27,316 (1,427) -- 1,427 (23,644)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Film exhibition rights....................... -- -- 560 -- --
Accounts receivable.......................... -- -- (5,908) -- --
Prepaid and other assets..................... -- (55) (1,214) -- --
Other accounts receivable.................... (2) -- (599) -- --
Accrued Interest............................. 8,473 244 5,395 -- (4,871)
Inventories.................................. -- 333 (7,706) -- --
Legal deposits............................... -- -- (108) -- --
Suppliers.................................... -- 5,385 34,004 -- (3,114)
Taxes payable other than income taxes........ -- 1,095 3,786 -- --
Accrued payroll and related liabilities...... -- 68 1,568 -- --
Deferred accounts payable.................... -- -- 2,956 -- --
Other accounts payable....................... 3 273 1,372 -- --
----------- ------------- ------------- ------------- ------------
Net cash (used in) provided by operating
activities............................... (730) 7,312 26,023 -- (9,616)
----------- ------------- ------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets....................... -- (11,619) (86,470) -- 5,060
Loans to related companies..................... (115,498) (6,709) (8,220) -- 122,460
Cash received on loans to related companies.... 34,220 -- 26 -- (31,655)
Purchase of concessions........................ (6,393) -- -- -- --
Investments in equity and cost investments..... (4,382) (13,763) -- (3,117) 6,399
----------- ------------- ------------- ------------- ------------
Net cash used in investing activities...... (92,053) (32,091) (94,664) (3,117) 102,264
----------- ------------- ------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions.......................... 125,000 2,154 -- 3,117 (5,271)
Repayments of loans from shareholders.......... -- 2,154 -- -- (2,154)
Loans from related companies................... 131,858 22,848 97,218 -- (120,064)
Repayments of loans from related companies..... (140,629) (2,365) (32,477) -- 34,840
----------- ------------- ------------- ------------- ------------
Net cash provided by financing
activities............................... 116,229 24,791 64,741 3,117 (92,649)
----------- ------------- ------------- ------------- ------------
Net increase (decrease) in cash and cash
equivalents.................................... 23,446 12 (3,901) -- --
Cash and cash equivalents at beginning of the
period......................................... -- -- 4,644 -- --
----------- ------------- ------------- ------------- ------------
Cash and cash equivalents at end of the
period................................... $ 23,446 $ 12 $ 743 $ -- $ --
----------- ------------- ------------- ------------- ------------
----------- ------------- ------------- ------------- ------------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest......................... $ 8,390 $ -- $ 2,708 $ -- $ (2,708)
----------- ------------- ------------- ------------- ------------
----------- ------------- ------------- ------------- ------------
SUPPLEMENTAL NON-CASH FINANCINGactivities:
Accrued interest on related company loans
refinanced as principal balance.............. $ 9,355 $ 34 $ 4,754 $ -- $ (4,788)
----------- ------------- ------------- ------------- ------------
----------- ------------- ------------- ------------- ------------
<CAPTION>
CONSOLIDATED
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss......................................... $ (41,070)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES:
Depreciation................................. 12,848
Amortization................................. 420
Allowance for exhibition costs............... 827
Allowance for doubtful accounts.............. 2,196
Provision for claims......................... 2,688
Minority interest............................ (871)
Disposal and write-off of fixed assets....... 341
Equity in losses (earnings) of affiliates.... 3,672
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Film exhibition rights....................... 560
Accounts receivable.......................... (5,908)
Prepaid and other assets..................... (1,269)
Other accounts receivable.................... (601)
Accrued Interest............................. 9,241
Inventories.................................. (7,373)
Legal deposits............................... (108)
Suppliers.................................... 36,275
Taxes payable other than income taxes........ 4,881
Accrued payroll and related liabilities...... 1,636
Deferred accounts payable.................... 2,956
Other accounts payable....................... 1,648
-------------
Net cash (used in) provided by operating
activities............................... 22,989
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets....................... (93,029)
Loans to related companies..................... (7,967)
Cash received on loans to related companies.... 2,591
Purchase of concessions........................ (6,393)
Investments in equity and cost investments..... (14,863)
-------------
Net cash used in investing activities...... (119,661)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions.......................... 125,000
Repayments of loans from shareholders.......... --
Loans from related companies................... 131,860
Repayments of loans from related companies..... (140,631)
-------------
Net cash provided by financing
activities............................... 116,229
-------------
Net increase (decrease) in cash and cash
equivalents.................................... 19,557
Cash and cash equivalents at beginning of the
period......................................... 4,644
-------------
Cash and cash equivalents at end of the
period................................... $ 24,201
-------------
-------------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest......................... $ 8,390
-------------
-------------
SUPPLEMENTAL NON-CASH FINANCINGactivities:
Accrued interest on related company loans
refinanced as principal balance.............. $ 9,355
-------------
-------------
</TABLE>
F-35
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET AT DECEMBER 31, 1994
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
WHOLLY- MAJORITY-
PARENT OWNED OWNED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.............. -- -- $ 4,644 -- $ 4,644
Accounts receivable, net............... -- -- 7,541 -- 7,541
Inventories............................ -- $ 333 5,370 -- 5,703
Film exhibition rights................. -- -- 1,417 -- 1,417
Prepaid and other assets............... -- -- 1,699 -- 1,699
Other accounts receivable.............. -- -- 891 $ (507) 384
----------- ------------- ------------ ------------ -------------
Total current assets................. $ -- 333 21,562 (507) 21,388
----------- ------------- ------------ ------------ -------------
Property, plant and equipment............ -- 4,352 47,074 -- 51,426
Investments............................ -- -- -- -- --
Equity affiliates...................... 3,664 -- -- (1,808) 1,856
Cost basis investees................... 39 -- -- -- 39
Concessions, net....................... 2,035 -- -- -- 2,035
Loans to related companies............... 196,504 33 103 (195,621) 1,019
Other.................................... -- -- 1,357 1,321 2,678
----------- ------------- ------------ ------------ -------------
Total assets......................... $ 202,242 $ 4,718 $ 70,096 $ (196,615) $ 80,441
----------- ------------- ------------ ------------ -------------
----------- ------------- ------------ ------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Film suppliers......................... -- -- $ 7,093 $ (507) $ 6,586
Other suppliers........................ -- $ 474 14,635 -- 15,109
Taxes payable other than income
taxes................................ -- -- 1,290 -- 1,290
Accrued payroll and related
liabilities.......................... -- -- 2,935 -- 2,935
Advance payments received from
subscribers.......................... -- -- 1,030 -- 1,030
Other accounts payable................. $ 166 -- 1,458 -- 1,624
----------- ------------- ------------ ------------ -------------
Total current liabilities............ 166 474 28,441 (507) 28,574
----------- ------------- ------------ ------------ -------------
Long-term liabilities
Loans from related companies........... -- 2,436 193,082 (195,518) --
Loans from shareholders................ -- -- 2,864 -- 2,864
Provision for claims................... -- -- 1,075 -- 1,075
Liability to Fund Equity investee...... 131,672 -- -- (131,088) 584
----------- ------------- ------------ ------------ -------------
Total long-term liabilities.......... 131,672 2,436 197,021 (326,606) 4,523
----------- ------------- ------------ ------------ -------------
Redeemable common stock, no par value.... 19,754 -- -- -- 19,754
Shareholders' equity
Paid-in capital........................ 142,495 1,823 17,017 (18,840) 142,495
Accumulated deficit.................... (91,845) (15) (172,383) 149,338 (114,905)
----------- ------------- ------------ ------------ -------------
Total shareholders' equity........... 50,650 1,808 (155,366) 130,498 27,590
----------- ------------- ------------ ------------ -------------
----------- ------------- ------------ ------------ -------------
Total liabilities and shareholders'
equity........................... $ 202,242 $ 4,718 $ 70,096 $ (196,615) $ 80,441
----------- ------------- ------------ ------------ -------------
----------- ------------- ------------ ------------ -------------
</TABLE>
F-36
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
MAJORITY-
PARENT OWNED
COMPANY SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Gross revenues
Monthly subscriptions.................................. -- $ 27,976 -- $ 27,976
Installation........................................... -- 6,997 -- 6,997
Advertising............................................ -- 5,727 -- 5,727
Indirect programming................................... -- 1,626 -- 1,626
Other.................................................. -- 1,446 -- 1,446
Revenue taxes.......................................... -- (872) -- (872)
---------- ------------ ------------ -------------
Net revenue........................................ $ -- 42,900 $ -- 42,900
---------- ------------ ------------ -------------
Direct operating expenses
Payroll and benefits................................... -- 8,022 -- 8,022
Programming............................................ -- 12,133 -- 12,133
Transponder lease cost................................. -- 1,555 -- 1,555
Technical assistance................................... -- 1,622 -- 1,622
Vehicle rentals........................................ -- 788 -- 788
TVA magazine........................................... -- 1,430 -- 1,430
Other costs............................................ -- 3,109 -- 3,109
---------- ------------ ------------ -------------
-- 28,659 -- 28,659
---------- ------------ ------------ -------------
Selling, general and administrative expenses
Payroll and benefits................................... -- 14,241 -- 14,241
Advertising and promotion.............................. -- 3,540 -- 3,540
Rent................................................... -- 656 -- 656
Other administrative expenses.......................... -- 2,206 -- 2,206
Other general expenses................................. 143 3,584 -- 3,727
---------- ------------ ------------ -------------
143 24,227 -- 24,370
---------- ------------ ------------ -------------
Depreciation............................................. -- 6,177 -- 6,177
Operating loss........................................... (143) (16,163) (16,306)
---------- ------------ ------------ -------------
Interest income.......................................... 64,360 8,479 (51,033) 21,806
Interest expense......................................... (5,279) (62,166) 51,032 (16,413)
Translation loss......................................... (231) (683) -- (914)
Equity in (losses) income of affiliates.................. (61,063) -- 61,446 383
Other nonoperating expenses, net......................... (1,228) (45) -- (1,273)
---------- ------------ ------------ -------------
Loss before income taxes and minority interest......... (3,584) (70,578) 61,445 (12,717)
Income taxes (Note 11)
---------- ------------ ------------ -------------
Net loss before minority interest........................ (3,584) (70,578) 61,445 (12,717)
Minority interest........................................ -- -- 720 720
---------- ------------ ------------ -------------
Net loss............................................... $ (3,584) $ (70,578) $ 62,165 $ (11,997)
---------- ------------ ------------ -------------
---------- ------------ ------------ -------------
</TABLE>
F-37
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
WHOLLY- MAJORITY-
PARENT OWNED OWNED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS
----------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................... $ (3,584) -- $ (70,578) $ 62,165
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
PROVIDED BY OPERATING ACTIVITIES:
Depreciation................................................ -- -- 6,141 --
Allowance for doubtful accounts............................. -- -- 848 --
Provision for claims........................................ -- -- 864 --
Minority interest........................................... -- -- -- (721)
Disposal and write-off of fixed assets...................... -- -- 662 --
Equity in losses (earnings) of affiliates................... 61,063 -- -- (61,446)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Film exhibition rights...................................... -- -- (114) --
Accounts receivable......................................... -- -- (7,007) --
Prepaid and other assets.................................... -- -- (1,364) --
Other accounts receivable................................... -- -- (706) 507
Other....................................................... -- -- (2,683) (233)
Accrued Interest............................................ (74,306) -- 57,221 17,808
Inventories................................................. -- $ (333) (2,050) --
Legal deposits.............................................. -- -- (154) --
Suppliers................................................... -- 474 5,342 (507)
Taxes payable other than income taxes....................... -- -- 685 --
Accrued payroll and related liabilities..................... -- -- 1,454 --
Advances received from subscribers.......................... -- -- (496) --
Other accounts payable...................................... 166 -- 1,175 --
----------- ------------- ------------- ------------
Net cash (used in) provided by operating activities..... (16,661) 141 (10,761) 17,574
----------- ------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets.................................... -- (4,362) (18,007) --
Loans to related companies.................................. (148,622) (33) (2,098) 147,271
Cash received on loans to related companies................. 5,997 -- 4,019 (5,535)
Purchase of concessions..................................... (2,035) -- -- --
Investments in equity and cost investments.................. (929) -- -- --
----------- ------------- ------------- ------------
Net cash used in investing activities................... (145,589) (4,395) (16,086) 141,736
----------- ------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions....................................... 162,250 1,808 7,588 (20,194)
Repayments of loans from shareholders....................... -- -- (3,082) --
Loans from related companies................................ -- 2,446 225,581 (131,041)
Repayments of loans from related companies.................. -- -- (178,680) (8,075)
Repayments of loans from banks.............................. -- -- (19,935) --
----------- ------------- ------------- ------------
Net cash provided by financing activities............... 162,250 4,254 31,472 (159,810)
----------- ------------- ------------- ------------
Net increase in cash and cash equivalents..................... -- -- 4,625 --
Cash and cash equivalents at beginning of the period.......... -- -- 19 --
----------- ------------- ------------- ------------
Cash and cash equivalents at end of the period.......... $ -- $ -- $ 4,644 $ --
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest...................................... $ 16,413 $ -- $ 8,583 $ (8,583)
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Accrued interest on related company loans refinanced as
principal balance......................................... $ -- $ -- $ 56,427 $ (56,427)
----------- ------------- ------------- ------------
----------- ------------- ------------- ------------
<CAPTION>
CONSOLIDATED
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................... $ (11,997)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
PROVIDED BY OPERATING ACTIVITIES:
Depreciation................................................ 6,141
Allowance for doubtful accounts............................. 848
Provision for claims........................................ 864
Minority interest........................................... (721)
Disposal and write-off of fixed assets...................... 662
Equity in losses (earnings) of affiliates................... (383)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Film exhibition rights...................................... (114)
Accounts receivable......................................... (7,007)
Prepaid and other assets.................................... (1,364)
Other accounts receivable................................... (199)
Other....................................................... (2,450)
Accrued Interest............................................ 723
Inventories................................................. (2,383)
Legal deposits.............................................. (154)
Suppliers................................................... 5,309
Taxes payable other than income taxes....................... 685
Accrued payroll and related liabilities..................... 1,454
Advances received from subscribers.......................... (496)
Other accounts payable...................................... 1,341
-------------
Net cash (used in) provided by operating activities..... (9,707)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets.................................... (22,369)
Loans to related companies.................................. (3,482)
Cash received on loans to related companies................. 4,481
Purchase of concessions..................................... (2,035)
Investments in equity and cost investments.................. (929)
-------------
Net cash used in investing activities................... (24,334)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions....................................... 151,452
Repayments of loans from shareholders....................... (3,082)
Loans from related companies................................ 96,986
Repayments of loans from related companies.................. (186,755)
Repayments of loans from banks.............................. (19,935)
-------------
Net cash provided by financing activities............... 38,666
-------------
Net increase in cash and cash equivalents..................... 4,625
Cash and cash equivalents at beginning of the period.......... 19
-------------
Cash and cash equivalents at end of the period.......... $ 4,644
-------------
-------------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest...................................... $ 16,413
-------------
-------------
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Accrued interest on related company loans refinanced as
principal balance......................................... $ --
-------------
-------------
</TABLE>
F-38
<PAGE>
TEVECAP S.A. AND
SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
MAJORITY-
OWNED
SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------ -------------
<S> <C> <C> <C>
Gross revenues
Monthly subscriptions.............................................. $ 12,544 -- $ 12,544
Installation....................................................... 4,350 -- 4,350
Advertising........................................................ 2,099 -- 2,099
Indirect programming............................................... 530 -- 530
Other.............................................................. 369 -- 369
Revenue taxes...................................................... (371) -- (371)
------------ ------------ -------------
Net revenue...................................................... 19,521 $ -- 19,521
------------ ------------ -------------
Direct operating expenses
Payroll and benefits............................................... 6,079 -- 6,079
Programming........................................................ 18,156 -- 18,156
Transponder lease cost............................................. 1,262 -- 1,262
Technical assistance............................................... 1,773 -- 1,773
Vehicle rentals.................................................... 597 -- 597
TVA magazine....................................................... 725 -- 725
Other costs........................................................ 1,187 -- 1,187
------------ ------------ -------------
29,779 -- 29,779
------------ ------------ -------------
Selling, general and administrative expenses
Payroll and benefits............................................... 10,945 -- 10,945
Advertising and promotion.......................................... 2,205 -- 2,205
Rent............................................................... 847 -- 847
Other administrative expenses...................................... 2,265 -- 2,265
Other general expenses............................................. 3,695 -- 3,695
------------ ------------ -------------
19,957 -- 19,957
------------ ------------ -------------
Depreciation......................................................... 4,813 -- 4,813
------------ ------------ -------------
Operating loss................................................... (35,028) -- (35,028)
Interest income...................................................... 5,369 -- 5,369
Interest expense..................................................... (8,492) -- (8,492)
Translation gain..................................................... 788 -- 788
Other nonoperating expenses, net..................................... (557) -- (557)
------------ ------------ -------------
Loss before income taxes and minority interest................... (37,920) -- (37,920)
Income taxes..................................................... -- -- --
------------ ------------ -------------
Net loss before minority interest.................................... (37,920) -- (37,920)
Minority interest.................................................... -- 292 292
------------ ------------ -------------
Net loss......................................................... $ (37,920) 292 $ (37,628)
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
F-39
<PAGE>
TEVECAP S.A. AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
25. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES (CONTINUED)
CONDENSED COMBINED CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
MAJORITY-
OWNED
SUBSIDIARIES ELIMINATIONS COMBINED
------------- --------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................... $ (37,920) $ 292 $ (37,628)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES:
Depreciation..................................................... 5,081 -- 5,081
Provision for claims............................................. (131) -- (131)
Minority interest................................................ -- (292) (292)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Film exhibition rights........................................... 4,843 -- 4,843
Accounts receivable.............................................. (181) -- (181)
Prepaid and other assets......................................... 113 -- 113
Other accounts receivable........................................ (90) -- (90)
Other............................................................ (221) -- (221)
Accrued Interest................................................. 8,368 -- 8,368
Inventories...................................................... (533) -- (533)
Legal deposits................................................... (415) -- (415)
Suppliers........................................................ 40 -- 40
Taxes payable other than income taxes............................ 167 -- 167
Accrued payroll and related liabilities.......................... 140 -- 140
Advances received from subscribers............................... 1,415 -- 1,415
Other accounts payable........................................... 144 -- 144
------------- ------ -------------
Net cash used in operating activities.......................... (19,180) -- (19,180)
------------- ------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets........................................... (11,379) -- (11,379)
Loans to related companies......................................... (1,811) -- (1,811)
------------- ------ -------------
Net cash used in investing activities.......................... (13,190) -- (13,190)
------------- ------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans from shareholders............................................ 3,299 -- 3,299
Loans to shareholders.............................................. (3,298) -- (3,298)
Loans from related companies....................................... 106,023 -- 106,023
Repayments of loans from related companies......................... (67,056) -- (67,056)
Repayments of loans from banks..................................... (6,620) -- (6,620)
------------- ------ -------------
Net cash provided by financing activities...................... 32,348 -- 32,348
------------- ------ -------------
Net (decrease) increase in cash and cash equivalents................. (22) -- (22)
Cash and cash equivalents at beginning of the period................. 41 -- 41
------------- ------ -------------
Cash and cash equivalents at end of the period................. $ 19 $ -- $ 19
------------- ------ -------------
------------- ------ -------------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest............................................. $ 1,183 $ -- $ 1,183
------------- ------ -------------
------------- ------ -------------
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Accrued interest on related company loans refinanced as principal
balance.......................................................... $ 8,225 $ -- $ 8,225
------------- ------ -------------
------------- ------ -------------
</TABLE>
F-40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of
TVA SISTEMA DE TELEVISAO S.A.
We have audited the accompanying balance sheets of TVA SISTEMA DE TELEVISAO
S.A. (the "Company") as of December 31, 1995 and 1994, and the related
statements of income, changes in shareholders' equity and cash flows for the
three years in the period ended December 31, 1995, all expressed in United
States dollars. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TVA SISTEMA DE TELEVISAO
S.A. as of December 31, 1995 and 1994, and the related results of their
operations and cash flows for the three years in the period ended December 31,
1995, in conformity with accounting principles generally accepted in the United
States of America.
As discussed in Note 3 to financial statements, the Company has
retroactively changed its method of accounting for installation equipment costs
and operating costs incurred during the period of constructing their television
systems.
Sao Paulo, Brazil
August 23, 1996
F-41
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
BALANCE SHEETS
SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1996 1995 1994
-------------- ----------- ---------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents (Note 4).................................... $ 178 $ 698 $ 4,644
Accounts receivable, net (Note 5)..................................... 18,160 11,221 7,541
Accounts receivable from related companies (Note 9)................... 2,639 945 707
Inventories (Note 6).................................................. 14,464 13,076 5,370
Film exhibition rights (Note 7)....................................... 725 30 1,417
Prepaid and other assets (Note 8)..................................... 1,639 2,845 1,654
Other accounts receivable............................................. 834 543 177
-------------- ----------- ---------
Total current assets................................................ 38,639 29,358 21,510
-------------- ----------- ---------
Property, plant and equipment (Note 12)................................. 140,706 118,884 46,877
Loans to related companies (Note 9)..................................... 2,953 10,480 --
Other................................................................... 1,665 1,559 1,452
-------------- ----------- ---------
Total assets........................................................ $ 183,963 $ 160,281 $ 69,839
-------------- ----------- ---------
-------------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-42
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
BALANCE SHEETS
AT SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER --------------------------
30, 1996 1995 1994
-------------- ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term bank loans (Note 13)..................................... $ 5,441 -- --
Film suppliers...................................................... 18,544 $ 9,512 $ 7,093
Other suppliers..................................................... 35,546 46,123 14,532
Taxes payable other than income taxes............................... 6,659 5,020 1,261
Accrued payroll and related liabilities............................. 6,549 4,250 2,795
Advance payments received from subscribers.......................... 7,473 3,986 1,031
Other accounts payable (Note 14).................................... 1,913 1,828 1,402
-------------- ------------ ------------
Total current liabilities....................................... 82,125 70,719 28,114
-------------- ------------ ------------
Long-term liabilities
Loans from shareholders (Note 10)................................... 2,767 2,906 2,729
Loans from related companies (Note 9)............................... 274,719 254,802 187,196
Provision for claims (Note 18)...................................... 5,704 3,763 1,075
-------------- ------------ ------------
Total long-term liabilities..................................... 283,190 261,471 191,000
-------------- ------------ ------------
Commitments and contingencies (Note 18)
Shareholders' equity
Common shares, no par value, 6,980,764 shares issued and outstanding
(Note 17)......................................................... 16,303 16,303 16,303
Accumulated deficit................................................. (197,655) (188,212) (165,578)
-------------- ------------ ------------
Total shareholders' equity...................................... (181,352) (171,909) (149,275)
-------------- ------------ ------------
Total liabilities and shareholders' equity...................... $ 183,963 $ 160,281 $ 69,839
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-43
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
SEPTEMBER 30, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------ ----------------------------------
1996 1995 1995 1994 1993
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Gross revenues
Monthly subscriptions................................. $ 76,588 $ 39,106 $ 59,263 $ 26,584 $ 12,147
Installation.......................................... 35,377 17,995 26,045 6,997 4,350
Advertising........................................... 5,362 5,505 8,377 5,721 2,099
Indirect programming.................................. 5,278 2,114 2,866 1,626 628
Other................................................. 5,229 2,194 2,226 1,446 271
Revenue taxes......................................... (8,065) (5,018) (7,280) (801) (352)
----------- ----------- ---------- ---------- ----------
Net revenue......................................... 119,769 61,896 91,497 41,573 19,143
----------- ----------- ---------- ---------- ----------
Direct operating expenses
Payroll and benefits.................................. 14,600 7,742 10,749 7,017 5,152
Programming........................................... 24,336 14,105 21,609 12,133 18,156
Transponder lease cost................................ 6,571 5,357 7,568 1,555 1,262
Technical assistance.................................. 4,219 3,753 4,937 1,607 1,692
Vehicle rentals....................................... 1,014 941 1,478 767 525
TVA magazine.......................................... 4,522 2,164 3,318 1,430 725
Other costs........................................... 9,047 5,961 9,190 2,677 932
----------- ----------- ---------- ---------- ----------
64,309 40,023 58,849 27,186 28,444
----------- ----------- ---------- ---------- ----------
Selling, general and administrative expenses
Payroll and benefits.................................. 20,032 15,396 21,089 14,034 10,699
Advertising and promotion............................. 10,711 5,702 10,793 3,540 2,163
Rent.................................................. 2,165 688 941 656 837
Other administrative expenses......................... 6,535 4,134 5,981 2,205 2,265
Other general expenses................................ 6,752 3,522 5,917 2,782 3,697
----------- ----------- ---------- ---------- ----------
46,195 29,442 44,721 23,217 19,661
----------- ----------- ---------- ---------- ----------
Depreciation............................................ 15,980 8,544 12,535 6,141 4,793
----------- ----------- ---------- ---------- ----------
Operating loss...................................... (6,715) (16,113) (24,608) (14,971) (33,755)
----------- ----------- ---------- ---------- ----------
Interest income......................................... 5,612 5,388 7,800 8,298 5,331
Interest expense........................................ (3,894) (6,724) (9,687) (59,598) (7,997)
Translation gain (loss)................................. 236 14 (167) (662) 506
Other nonoperating (expenses) income, net............... (4,682) 3,032 4,028 (45) (557)
----------- ----------- ---------- ---------- ----------
Loss before income taxes and minority interest...... (9,443) (14,403) (22,634) (66,978) (36,472)
Income taxes (Note 11) -- -- -- -- --
----------- ----------- ---------- ---------- ----------
Net loss............................................ $ (9,443) $ (14,403) $ (22,634) $ (66,978) $ (36,472)
----------- ----------- ---------- ---------- ----------
----------- ----------- ---------- ---------- ----------
</TABLE>
F-44
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
AND SEPTEMBER 30, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
PAID-IN
CAPITAL ACCUMULATED
(NOTE 17) DEFICIT TOTAL
---------- ------------- ------------
<S> <C> <C> <C>
Balance at December 31, 1992............................................ $ 10,797 $ (62,128) $ (51,331)
Net loss for the year................................................... -- (36,472) (36,472)
---------- ------------- ------------
Balance at of December 31, 1993..................................... 10,797 (98,600) (87,803)
Capital contributed on:
February 28, 1994..................................................... 5,432 -- 5,432
April 4, 1994......................................................... 74 -- 74
Net loss for the year................................................... (66,978) (66,978)
---------- ------------- ------------
Balance at December 31, 1994...................................... 16,303 (165,578) (149,275)
Net loss for the year................................................... -- (22,634) (22,634)
---------- ------------- ------------
Balance at December 31, 1995...................................... 16,303 (188,212) (171,909)
Net loss for the period (unaudited)..................................... -- (9,443) (9,443)
---------- ------------- ------------
Balance at September 30, 1996 (unaudited)......................... $ 16,303 $ (197,655) $ (181,352)
---------- ------------- ------------
---------- ------------- ------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995:
Balance at December 31, 1994...................................... $ 16,303 $ (165,578) $ (149,275)
Net loss for the period (unaudited)..................................... -- (14,403) (14,403)
---------- ------------- ------------
Balance at September 30, 1995 (unaudited)......................... $ 16,303 $ (179,981) $ (163,678)
---------- ------------- ------------
---------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-45
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
AND SEPTEMBER 30, 1995 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------ -------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
----------- ----------- --------- --------- ---------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (9,443) $ (14,403) $ (22,634) $ (66,978) $ (36,472)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
PROVIDED BY OPERATING ACTIVITIES:
Depreciation.............................................. 15,980 8,544 12,535 6,141 4,793
Allowance for exhibition costs............................ -- -- 827 -- --
Allowance for doubtful accounts........................... 3,040 -- 2,196 848 --
Allowance for obsolescence................................ 2,493 -- -- -- --
Provision for claims...................................... 1,941 2,411 2,688 865 (133)
Minority interest......................................... -- -- -- -- (331)
Loss on disposal of fixed assets.......................... 368 -- 474 629 --
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Film exhibition rights.................................... (695) 213 560 (114) 4,843
Accounts receivable....................................... (9,979) (4,899) (5,876) (7,007) (181)
Prepaid and other assets.................................. 1,206 949 (1,191) (1,330) 117
Other accounts receivable................................. (1,985) (2,854) (604) (712) (77)
Other..................................................... 200 (507) -- (600) 107
Accrued Interest.......................................... (2,974) (48) 356 54,019 7,994
Inventories............................................... (3,881) (7,049) (7,706) (2,050) (533)
Legal deposits............................................ (306) (83) (107) (149) (413)
Suppliers................................................. (1,545) 16,057 34,010 5,270 46
Taxes payable other than income taxes..................... 1,639 448 3,759 662 161
Accrued payroll and related liabilities................... 2,299 2,468 1,453 1,394 123
Advances received from subscribers........................ 3,487 1,005 2,955 (495) 1,415
Other accounts payable.................................... 85 999 426 1,128 148
----------- ----------- --------- --------- ---------
Net cash provided by (used in) operating activities..... 1,930 3,251 24,121 (8,479) (18,393)
----------- ----------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets.................................... (38,170) (56,332) (85,016) (17,938) (11,061)
Loans to affiliated companies............................... (508) (7,633) (8,220) (2,098) (1,811)
Cash received on loans to related companies................. 9,315 26 26 3,942
----------- ----------- --------- --------- ---------
Net cash used in investing activities................... (29,363) (63,939) (93,210) (16,094) (12,872)
----------- ----------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term bank loans....................................... 5,441 -- -- -- --
Capital contributions....................................... -- -- -- 5,506 --
Repayments of loans from shareholders....................... -- -- -- (3,082) --
Loans from shareholders..................................... -- -- -- -- 3,298
Loans to shareholders....................................... -- -- -- -- (3,298)
Loans from related companies................................ 21,472 71,785 89,000 227,188 104,863
Repayments of loans from related companies.................. -- (15,734) (23,857) (180,477) (67,002)
Repayments of loans from banks.............................. -- -- -- (19,935) (6,620)
----------- ----------- --------- --------- ---------
Net cash provided by financing activities............... 26,913 56,051 65,143 29,200 31,241
----------- ----------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents.......... (520) (4,637) (3,946) 4,627 (24)
Cash and cash equivalents at beginning of the period.......... 698 4,644 4,644 17 41
----------- ----------- --------- --------- ---------
Cash and cash equivalents at end of the period.......... $ 178 $ 7 $ 698 $ 4,644 $ 17
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest...................................... $ -- $ -- $ -- $ 8,583 $ --
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Accrued interest on related company loans refinanced
as principal balance........................................ $ -- $ 1,597 $ 2,468 $ 54,158 $ 7,862
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-46
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS
1. THE COMPANY AND ITS PRINCIPAL OPERATIONS
The Company renders services related to wireless cable and cable and
parabolic antenna television systems, including marketing and advertising,
production, distribution and licensing of domestic and foreign television
programs. The Company has wireless cable channel rights primarily in major urban
markets in Brazil.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant policies followed in the preparation of the accompanying
financial statements are described below:
2.1 BASIS OF PRESENTATION
The financial statements are presented in US Dollars and have been prepared
in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP), which differ in certain respects from accounting
principles applied by the Company in its local currency financial statements,
which are prepared in accordance with accounting principles generally accepted
in Brazil ("Brazilian GAAP").
The Company was formed on July 31, 1993 by transferring net assets, at book
value, from TVA Brasil, an entity under common control. Results for the year
ended December 31, 1993 include those of TVA Brasil for the period from January
1, 1993 to July 31, 1993 and those of TVA Sistema, therafter.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
financial statement dates and the reported amount of revenues and expenses
during the reporting periods. Since management's judgment involves making
estimates concerning the likelihood of future events, the actual results could
differ from those estimates which will have a positive or negative effect on
future period results.
2.2 ACCOUNTING RECORDS
As required by Brazilian Law, and in accordance with local accounting
practices, the accounting records of the Company are maintained in Brazilian
currency (REAL). In order to present the financial statements in conformity with
U.S. GAAP, the Company maintains additional accounting records which are used
solely for this purpose.
2.3 CURRENCY REMEASUREMENT
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52, "Foreign Currency Transactions", the United States dollar has been assumed
to be the functional currency as Brazil is a "hyperinflationary" country. As
such, the local accounts of the Company are translated into United States
dollars as follows:
- Nonmonetary assets and liabilities are translated at historical rates. All
other assets and liabilities are translated at the official rate of
exchange of R$1.022 to US$1 in effect on September 30, 1996; R$0.973 to
US$1 in effect on December 31, 1995; and, R$0.846 to US$1 on December 31,
1994.
- Income and expenses are translated at the average exchange rates in effect
each month, except for those related to assets and liabilities which are
translated at historical exchange rates, and
F-47
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2.3 CURRENCY REMEASUREMENT (CONTINUED)
deferred income taxes, which are translated at the current rate.
Translation gains/losses are recognized in the income statement.
2.4 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as cash and cash in banks and
investments in interest-bearing securities and are carried at cost plus accrued
interest. Short-term investments with original maturities of three months or
less at the time of purchase are considered cash equivalents.
2.5 FINANCIAL INSTRUMENTS
In accordance with SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," information is provided about the fair value of certain financial
instruments for which it is practicable to estimate that value.
For the purposes of SFAS No. 107, the estimated fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
The carrying values of the Company's financial instruments as of September 30,
1996, December 31, 1995 and December 31, 1994 approximate management's best
estimate of their estimated fair values. The following methods and assumptions
were used to estimate the fair value of each class of financial instrument for
which it is practicable to estimate that value:
- The fair value of certain financial assets carried at cost, including
cash, accounts receivable, other accounts receivable, and certain other
short-term assets is considered to approximate their respective carrying
value due to their short-term nature.
- The fair value of payables to film suppliers and other suppliers, other
accounts payable, loans to related companies and certain other short-term
liabilities is considered to approximate their respective carrying value
due to their short-term nature.
- The fair value of loans from related companies approximates their
respective carrying values, as interest on these loans is at market rates.
2.6 ACCOUNTS RECEIVABLE
Accounts receivable are stated at their estimated realizable values. An
allowance for doubtful accounts is established on the basis of an analysis of
the accounts receivable, in light of the risks involved, and is considered
sufficient to cover any losses incurred in realization of credits.
2.7 INVENTORIES
Inventories consist of materials and supplies and imports in transit.
Materials and supplies are used to provide service to new customers, and to
ensure continuity of service to existing customers. Imports in transit represent
materials purchased from foreign countries that have not yet been received.
Inventories are stated at the lower of cost or market. Cost is determined
principally under the average cost method. An allowance for obsolescence has
been established on the basis of an analysis of slow-moving materials and
supplies.
F-48
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2.8 FILM EXHIBITION RIGHTS AND PROGRAM LICENSING
Film exhibition rights and program licensing costs are deferred and
recognized as the films and/or programs are exhibited. The allowance for
exhibition expiration is determined based on management's estimate of the
Company's capacity to telecast the films and projected revenue streams.
2.9 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated using the
straight-line method, over the remaining useful lives, as described in Note 12.
2.10 ADVERTISING
Advertising revenues are recognized, and the production cost of commercials
and programming are charged to expense, when the commercial is telecast.
2.11 RECOVERABILITY OF LONG-LIVED ASSETS TO BE HELD AND USED IN THE BUSINESS
Management reviews long-lived assets, primarily the Company's licenses and
its property and equipment to be held and used in the business, for the purposes
of determining and measuring impairment on a recurring basis or when events or
changes in circumstances indicate that the carrying value of an asset or group
of assets may not be recoverable. Assets are grouped and evaluated for possible
impairment at the level of each cable television system; impairment is assessed
on the basis of the forecasted undiscounted cash flows of the businesses over
the estimated remaining lives of the assets related to those systems. A
write-down of the carrying value of the assets or group of assets to estimated
fair value will be made, when appropriate.
2.12 SUBSCRIPTIONS
Installation fees are recognized as revenue on the equipment installation
date to the extent of direct selling costs incurred. Subscription revenues are
recognized as earned on an accrual basis.
2.13 LICENSES
Televisao Show Time Ltda. ("TV Show Time") and TVA Brasil Radioenlaces Ltda.
("TVA Brasil") hold certain licenses covering certain operations of the Company.
The use of such licenses is provided to the Company, for a nominal fee, under a
Service Agreement dated July 22, 1994, as amended, among TEVECAP, TV Show Time,
TVA Brasil and Abril.
Pursuant to the Service Agreement, TV Show Time and TVA Brasil have agreed
to transfer the licenses, which are carried at nil value, to TEVECAP at nominal
cost.
2.14 FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
The unaudited financial statements for the nine months ended September 30,
1996 and 1995 have been derived from the Company's records and reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial data.
F-49
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. ACCOUNTING CHANGES
To more appropriately account for the cost of (i) installation equipment and
(ii) operating costs incurred during the period of constructing their television
systems, the Company has restated all prior-year amounts as compared to those
previously reported by the separate combining entities:
(i) Installation equipment
The Company has changed the estimated useful life of installation
equipment to five years. The costs of such equipment had previously been
accounted for as period costs.
(ii) Operating costs incurred during the period of construction of
television systems
The Company has changed its policy of deferring operating costs during
the period of construction of its television systems, to treat such costs
as period costs.
4. CASH AND CASH EQUIVALENTS
At September 30, 1996 (unaudited), December 31, 1995 and 1994, cash was
comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, --------------------
1996 1995 1994
------------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Cash on hand and in banks................................................... $ 129 $ 582 $ 178
Short-term investments...................................................... 49 116 4,466
----- --------- ---------
$ 178 $ 698 $ 4,644
----- --------- ---------
----- --------- ---------
</TABLE>
5. ACCOUNTS RECEIVABLE
At September 30, 1996 (unaudited), December 31, 1995 and 1994, accounts
receivable were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, --------------------
1996 1995 1994
----------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Subscriptions........................................................... $ 5,978 $ 5,154 $ 1,879
Installation fees....................................................... 7,508 4,605 1,686
Advertising & programming............................................... 2,359 1,810 1,560
Barter.................................................................. 4,976 2,989 3,627
Others.................................................................. 176 70 --
Allowance for doubtful accounts......................................... (2,837) (3,407) (1,211)
-------- --------- ---------
$ 18,160 $ 11,221 $ 7,541
-------- --------- ---------
-------- --------- ---------
</TABLE>
F-50
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6. INVENTORIES
At September 30, 1996 (unaudited), December 31, 1995 and 1994, inventories
were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, --------------------
1996 1994 1995
----------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Materials and supplies.................................................. $ 15,284 $ 10,913 $ 4,652
Imports in transit...................................................... 1,673 2,163 718
Allowance for obsolescence.............................................. (2,493) -- --
-------- --------- ---------
$ 14,464 $ 13,076 $ 5,370
-------- --------- ---------
-------- --------- ---------
</TABLE>
7. FILM EXHIBITION RIGHTS
At September 30, 1996 (unaudited), December 31, 1995 and 1994, film
exhibition rights were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, --------------------
1996 1995 1994
----------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Exhibition rights........................................................ $ 1,887 $ 1,192 $ 1,752
Allowance for exhibition expiration...................................... (1,162) (1,162) (335)
------- --------- ---------
$ 725 $ 30 $ 1,417
------- --------- ---------
------- --------- ---------
</TABLE>
8. PREPAID AND OTHER ASSETS
At September 30, 1996, December 31, 1995 and 1994, prepaid expenses were
comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, --------------------
1996 1995 1994
----------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Advances to suppliers..................................................... $ 470 $ 2,022 $ 954
Prepaid TVA magazine publishing expenses.................................. 822 562 379
Prepaid meals and transportation.......................................... 189 147 186
Others.................................................................... 158 114 135
------- --------- ---------
$ 1,639 $ 2,845 $ 1,654
------- --------- ---------
------- --------- ---------
</TABLE>
9. RELATED-PARTY TRANSACTIONS
The following tables summarize the transactions between the Company and
related companies at September 30, 1996 (unaudited) and December 31, 1995, 1994
and for the nine month periods ended
F-51
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9. RELATED-PARTY TRANSACTIONS (CONTINUED)
September 30, 1996 (unaudited) and 1995 (unaudited) and the three years in the
period ended December 31, 1995:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ------------------------
1996 1995 1994
----------------- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED)
TVA Parana
Loans receivable.................................................. $ 2,878 $ 10,480
Accounts receivable............................................... 1,546
TV Cabo Santa Catarina
Loans receivable.................................................. 75
Tevecap S.A
Loans payable..................................................... 270,014 249,885 $ 187,196
Coml. Cabo
Loans payable..................................................... 4,705 4,917
HBO Brasil
Accounts receivable............................................... 786 507 507
Televisao Abril Ltda.
Accounts receivable............................................... 178
ESPN Brasil Ltda.
Accounts receivable............................................... 438
Accounts payable.................................................. 29 510
Editora Abril S.A.
Accounts payable.................................................. 78 108
Others
Accounts receivable............................................... 129 200
Accounts payable.................................................. 7 9
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Tevecap
Net interest expense.................................. $ 1,299 $ 1,595 $ 2,465 $ 54,143 $ 831
Abril Comunicacoes
Net interest expense.................................. 8,505
Abrilpar
Net interest expense.................................. 78
Coml. Cabo
Net interest expense.................................. 256
TV Cabo Santa Catarina
Net interest income................................... (8)
ESPN do Brasil Ltda.
Programming (income) costs, net....................... (2,576) (851) 646
TVA Parana
Net interest income................................... (1,272) (1,661) (2,286)
</TABLE>
F-52
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9. RELATED-PARTY TRANSACTIONS (CONTINUED)
The related company loans are denominated in REAIS and are subject to
monetary restatement plus interest charges at the market rate which was 1.79%
per month in September 1996 (3.44% per month in December 1995).
The Company's parent, TEVECAP S.A. ("Tevecap"), and Falcon International
Communications Services Inc., one of Tevecap's shareholders, signed a consulting
service agreement on April 1, 1996 related to the Company's operations and
technologies. Initially, the duration of this agreement is two years, renewable
every subsequent two-year period thereafter. The payment for the consulting
services amounts to $200 per annum.
10. LOANS FROM SHAREHOLDERS
Loans from shareholders at September 30, 1996, December 31, 1995 and 1994,
were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER --------------------
30, 1996 1995 1994
-------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Roberto Civita............................................................... $ 2,490 $ 2,616 $ 2,455
Maricla I. Rossi............................................................. 59 61 58
Edgard Silvio Faria.......................................................... 175 184 174
Angelo Silvio Rossi.......................................................... 43 45 42
------- --------- ---------
$ 2,767 $ 2,906 $ 2,729
------- --------- ---------
------- --------- ---------
</TABLE>
Interest on loans from shareholders is based on the Ufir (Fiscal Reference
Unit), the variation of which was 0% during the nine-month period ended
September 30, 1996 (unaudited) (22.46% in December 1995).
F-53
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11. DEFERRED INCOME TAX
The tax effects of temporary differences that give rise to a significant
portion of the deferred tax asset and deferred tax liability at September 30,
1996 (unaudited) and at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER ----------------------
30, 1996 1995 1994
-------------- ---------- ----------
<S> <C> <C> <C>
(UNAUDITED)
Deferred tax assets:
Net operating loss carryforwards....................................... $ 25,751 $ 24,267 $ 20,937
Deferred charges....................................................... 5,649 7,238 11,818
Others................................................................. 976 165 796
-------------- ---------- ----------
Total gross deferred tax asset..................................... 32,376 31,670 33,551
Less, valuation allowance................................................ (27,720) (24,693) (26,962)
-------------- ---------- ----------
Net deferred tax asset................................................... 4,656 6,977 6,589
Deferred tax liability:
Inflationary profit.................................................... -- -- (4,107)
Installation costs..................................................... (4,656) (6,977) (2,482)
-------------- ---------- ----------
Total gross deferred tax liability................................. (4,656) (6,977) (6,589)
-------------- ---------- ----------
Net deferred tax asset................................................... $ -- $ -- $ --
-------------- ---------- ----------
-------------- ---------- ----------
</TABLE>
The Company has a limited operating history and has generated losses since
its inception. The valuation allowance has been established in accordance with
the requirements of SFAS No. 109 and relates to the amount of net operating loss
carryforwards in excess of net taxable temporary differences. As of September
30, 1996, the Company has unexpirable accumulated tax losses of $84,264.
F-54
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11. DEFERRED INCOME TAX (CONTINUED)
Income tax was different from the amount computed using the Brazilian
statutory income tax for the reasons set forth in the following table:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------
1996 1995 1994 1993
-------------- --------- ---------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
Loss before income taxes and minority interest............... $ 9,447 $ 22,635 $ 66,979 $ 36,473
Statutory income tax rate.................................... 30.56% 30.56% 43.0% 35.2%
------- --------- ---------- ---------
2,887 6,917 28,801 12,838
Profit on intercompany transaction not eliminated on fiscal
books...................................................... -- -- -- (7,834)
(Decrease) increase in the income tax rate................... -- (7,800) 3,161 --
Monetary correction of deferred charges...................... -- 1,342 (19,031) 3,003
Translation rate difference on exhibition rights............. -- 381 -- --
Others....................................................... 140 1,429 198 (1,311)
------- --------- ---------- ---------
Income tax benefit for the period............................ 3,027 2,269 13,129 6,696
Increase in valuation allowance.............................. (3,027) (2,269) (13,129) (6,696)
------- --------- ---------- ---------
$ -- $ -- $ -- $ --
------- --------- ---------- ---------
------- --------- ---------- ---------
</TABLE>
F-55
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. PROPERTY, PLANT AND EQUIPMENT
At September 30, 1996, December, 31, 1995 and 1994, property, plant and
equipment were comprised of:
<TABLE>
<CAPTION>
ANNUAL
DEPRECIATION AT DECEMBER 31,
RATE AT SEPTEMBER 30, -----------------------
% 1996 1995 1994
----------------- ----------------- ----------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Machinery and Equipment............................... 10 $ 31,608 $ 29,598 $ 21,095
Converters............................................ 10 63,588 36,485 10,809
Leasehold Improvements................................ 25 1,950 1,795 1,463
Furniture and Fixtures................................ 10 1,239 1,032 626
Premises.............................................. 10 1,232 1,066 551
Vehicles.............................................. 20 1,013 442 147
Software.............................................. 20 2,379 1,360 388
Tools................................................. 10 621 621 439
Reception Equipment................................... 20 62,159 44,508 19,265
Cable Plant........................................... 10 8,178 7,089 --
Building.............................................. 4 -- 342 155
----------------- ----------- ----------
173,967 124,338 54,938
Accumulated Depreciation.............................. (39,120) (23,114) (10,105)
Telephone Line Use Rights............................. 1,718 1,370 773
Trademarks, Patents and Others........................ 165 164 186
Fixed Assets in Transit............................... 3,285 16,126 1,085
Others................................................ 691 -- --
----------------- ----------- ----------
$ 140,706 $ 118,884 $ 46,877
----------------- ----------- ----------
----------------- ----------- ----------
</TABLE>
13. SHORT-TERM BANK LOANS
Short-term bank loans at September 30, 1996 represent the refinancing of
certain supplier payables. The average short-term interest rate on such loans is
Libor Plus 1.5%.
14. OTHER ACCOUNTS PAYABLE
At September 30, 1996 (unaudited), December, 31, 1995 and 1994, other
accounts payable were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER --------------------
30, 1996 1995 1994
-------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Accounts payable to related Companies (Note 9)............................... $ 114 $ 627 $ 13
Advertising.................................................................. 751 427 851
Importation expenses payable................................................. 580 328 86
Others....................................................................... 468 446 452
------- --------- ---------
$ 1,913 $ 1,828 $ 1,402
------- --------- ---------
------- --------- ---------
</TABLE>
F-56
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15. INSURANCE
The Company maintains insurance coverage for its fixed assets and
inventories in an amount considered sufficient to cover the risks involved.
16. LEASED ASSETS AND COMMITMENTS
The Company has entered into film distribution contracts and licensing
agreements with film producers for programming for future periods. Such
contracts and agreements, which range in life from 1 to 9 years with the
exception of a specific contract with ESPN, which has a life of 50 years,
require a per-subscriber fee to be paid by the Company on a monthly basis.
The Company has rented its office space until the year 2001. At December 31,
1995, future minimum rental payments applicable to operating leases in respect
of this space aggregate approximately $4,874 as follows:
<TABLE>
<S> <C>
1996............................................................... $ 1,588
1997............................................................... 769
1998............................................................... 663
1999............................................................... 643
2000............................................................... 608
2001............................................................... 603
---------
Total.............................................................. 4,874
---------
---------
</TABLE>
At December 31, 1995, the Company had contractual commitments with Embratel
for transponder use until the year 2003. Based on estimated to aggregate
approximately $52,361, as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 8,302
1997.............................................................. 8,302
1998.............................................................. 8,302
1999.............................................................. 8,035
2000.............................................................. 7,768
2001.............................................................. 7,768
2002.............................................................. 3,884
---------
Total............................................................. $ 52,361
---------
---------
</TABLE>
17. PAID-IN CAPITAL
Paid-in capital represents registered common shares without par value.
The Company's shareholders are entitled to minimum dividends of 25% of net
income for the year, adjusted according to Corporation Law. As the Company has
not recorded net income since its inception, no such dividends are payable.
18. LITIGATION CONTINGENCIES
Certain claims and lawsuits arising in the ordinary course of business have
been filed or are pending against the Company which were not recognized in the
financial statements. The Company has also recorded provisions related to
certain claims in amounts that management considers to be adequate after
considering a number of factors including (but not limited to) the views of
legal counsel, the nature of the claims and the prior experience of the Company.
F-57
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18. LITIGATION CONTINGENCIES (CONTINUED)
In management's opinion, all contingencies have been adequately provided for
or are without merit, or are of such kind that if disposed of unfavorably, would
not have a material adverse effect on the financial position or future results
of operations of the Company.
19. PENSION PLAN
In April 1996, the Company became a co-sponsor of the private pension entity
named Abrilprev Sociedade de Previdencia Privada, the primary objective of which
is to grant employees benefits other than those provided by Social Security. The
plan is optional to all employees of the sponsoring entities. Abrilprev operates
as a Defined Contribution Plan. Company contributions are made based on a fixed
percentage applied to the payroll of the sponsoring entities based on actuarial
calculations. Plan expenses amounted to $263 in 1996.
20. WORKING CAPITAL DEFICIENCY
The Company's financial statements for the period ended September 30,1996
were prepared on a going concern basis which contemplates the realization of
assets and settlement of liabilities and commitments in the normal course of
business. The company incurred net losses of $9,433, $22,634 and $66,978 for the
nine months ended September 30,1996 and the two years in the period ended
December 31,1995 respectively. In addition, the Company had negative working
capital of $44,319 at September 30,1996.
The Company is endeavoring to reverse its pattern of losses and effectively
meet its liquidity needs through increasing the revenue base and other means.
In the event that these steps prove to be inadequate to maintain Sistema's
operating cash flow, the Company's principal shareholder, Tevecap, intends to
maintain the company as a going concern. Tevecap's support may be in the form of
cash advances, loans, equity infusions or external guarantees.
21. SUPPLEMENTARY INFORMATION--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
DEFERRED
ALLOWANCE ALLOWANCE FOR TAXATION PROVISION
FOR DOUBTFUL ALLOWANCE FOR EXHIBITION VALUATION FOR
ACCOUNTS OBSOLENSCENCE EXPIRATION ALLOWANCE CLAIMS
------------ --------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
December 31, 1993................................. $ 363 $ 91 $ 3,367 $ 13,833 $ 210
Additions Charged to Expense...................... 848 -- -- 13,129 920
Reduction......................................... -- (91) (3,032) -- (55)
------------ ------- ------- --------- -----------
Balance at December 31, 1994...................... 1,211 -- 335 26,962 1,075
Additions Charged to Expense...................... 2,196 -- 827 (2,269) 2,688
------------ ------- ------- --------- -----------
Balance at December 31, 1995...................... 3,407 -- 1,162 24,693 3,763
Additions Charged to Expense...................... 3,040 2,493 -- 3,027 1,940
Reduction......................................... (3,610) -- -- -- --
------------ ------- ------- --------- -----------
Balance at September 30, 1996..................... $ 2,837 $ 2,493 $ 1,162 $ 27,720 $ 5,703
------------ ------- ------- --------- -----------
------------ ------- ------- --------- -----------
</TABLE>
F-58
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Directors of
TVA SUL PARTICIPACOES S.A.
We have audited the accompanying combined balance sheets of TVA SUL
PARTICIPACOES S.A., and subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related combined statements of income, changes in shareholders'
equity and cash flows for the three years in the period ended December 31, 1995,
all expressed in United States dollars. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of TVA SUL
PARTICIPACOES S.A., and subsidiaries as of December 31, 1995 and 1994, and the
related combined results of their operations and cash flows for the three years
in the period ended December 31, 1995, in conformity with accounting principles
generally accepted in the United States of America.
Sao Paulo, Brazil
August 23, 1996
F-59
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
BALANCE SHEETS
AT SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF US. DOLLARS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ---------------------------
1996 1995 1994
(CONSOLIDATED) (COMBINED) (COMBINED)
----------------- ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents (Note 3).............................. $ 414 $ 45 --
Accounts receivable, net (Note 4)............................... 749 32 --
Inventories..................................................... 1,376 -- --
Prepaid and other assets (Note 5)............................... 588 68 $ 45
Other accounts receivable (Note 6).............................. 1,116 2 7
-------- ------------ -----
Total current assets........................................ 4,243 147 52
Property, plant and equipment, net (Note 9)....................... 13,549 1,466 198
Concessions, less accumulated amortization ($481)................. 11,395 -- --
Other............................................................. 977 9 8
-------- ------------ -----
Total assets................................................ $ 30,164 $ 1,622 $ 258
-------- ------------ -----
-------- ------------ -----
</TABLE>
The accompanying notes are an integral part of these financial statements
F-60
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
BALANCE SHEETS
AT SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995 AND 1994
(IN THOUSANDS OF US. DOLLARS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, --------------------------
1996 1995 1994
(CONSOLIDATED) (COMBINED) (COMBINED)
----------------- ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Suppliers....................................................... $ 751 $ 97 $ 103
Taxes payable other than income taxes........................... 208 56 29
Accrued payroll and related liabilities......................... 605 253 140
Other accounts payable.......................................... 990 18 56
Accounts payable to related companies (Note 7).................. 1,438 983 --
-------- ------------ ------------
Total current liabilities................................... 3,992 1,407 328
-------- ------------ ------------
Long-term liabilities
Loans from related companies (Note 7)........................... 16,976 10,480 5,886
Loans from shareholders......................................... 1,840 180 135
Other........................................................... 151 -- --
-------- ------------ ------------
Total long-term liabilities................................. 18,967 10,660 6,021
-------- ------------ ------------
Minority interest................................................. 1,361 -- --
Shareholders' equity
Paid in capital (Note 11)....................................... 18,964 1 1
Accumulated deficit............................................. (13,120) (10,446) (6,092)
-------- ------------ ------------
Total shareholders' equity.................................. 5,844 (10,445) (6,091)
-------- ------------ ------------
Total liabilities and shareholders' equity.................. $ 30,164 $ 1,622 $ 258
-------- ------------ ------------
-------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-61
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND SEPTEMBER 30, 1995
(UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS OF US. DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
(CONSOLIDATED) (COMBINED) (COMBINED) (COMBINED) (COMBINED)
--------------- ------------ ------------ ------------ ------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Gross revenues
Monthly subscriptions......................... $ 8,212 $ 2,189 $ 3,233 $ 1,392 $ 397
Installation.................................. 819 -- -- -- --
Advertising................................... -- -- -- 6 --
Other......................................... 65 -- -- -- --
Revenue taxes................................. (308) (153) (227) (71) (19)
------- ------------ ------------ ------------ ------------
Net revenue................................. 8,788 2,036 3,006 1,327 378
------- ------------ ------------ ------------ ------------
Direct operating expenses
Payroll and benefits.......................... 2,767 1,073 1,456 1,005 927
Programming................................... 1,141 -- -- -- --
Technical assistance.......................... 704 160 215 15 81
Vehicle rentals............................... 239 173 247 21 72
TVA magazine.................................. 158 -- -- -- --
Other costs................................... 1,129 181 232 432 253
------- ------------ ------------ ------------ ------------
6,138 1,587 2,150 1,473 1,333
------- ------------ ------------ ------------ ------------
Selling, general and administrative expenses
Payroll and benefits.......................... 964 393 538 207 246
Advertising and promotion..................... 322 174 267 -- 42
Rent.......................................... 158 82 114 -- 10
Other administrative expenses................. 1,120 206 292 1 --
Other general expenses........................ 331 266 486 802 --
------- ------------ ------------ ------------ ------------
2,895 1,121 1,697 1,010 298
------- ------------ ------------ ------------ ------------
Depreciation.................................... 397 112 186 36 20
Amortization.................................... 481 -- -- -- --
------- ------------ ------------ ------------ ------------
Operating loss.............................. (1,123) (784) (1,027) (1,192) (1,273)
------- ------------ ------------ ------------ ------------
Interest income................................. 167 133 165 181 38
Interest expense................................ (1,741) (2,195) (3,527) (2,568) (495)
Translation gain (loss)......................... (100) (11) 8 (22) 282
Other nonoperating (expenses) income, net....... 242 -- 27 -- --
------- ------------ ------------ ------------ ------------
Loss before income taxes and minority
interest.................................. (2,555) (2,857) (4,354) (3,601) (1,448)
Income taxes (Note 8)........................... (105) -- -- -- --
------- ------------ ------------ ------------ ------------
Net loss before minority interest........... (2,660) (2,857) (4,354) (3,601) (1,448)
Minority interest............................... (14) -- -- -- --
------- ------------ ------------ ------------ ------------
Net loss.................................... (2,674) (2,857) (4,354) (3,601) (1,448)
------- ------------ ------------ ------------ ------------
------- ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-62
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
SEPTEMBER 30, 1995 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1995, 1994 AND
1993
(IN THOUSANDS OF US. DOLLARS)
<TABLE>
<CAPTION>
PAID-IN
CAPITAL ACCUMULATED
(NOTE 11) DEFICIT TOTAL
--------- ------------- ----------
<S> <C> <C> <C>
Balance at December 31, 1992 (Combined)................................... $ 1 $ (1,043) $ (1,042)
Net loss for the year..................................................... -- (1,448) (1,448)
--------- ------------- ----------
Balance at December 31, 1993 (Combined)........................... 1 (2,491) (2,490)
Net loss for the year..................................................... -- (3,601) (3,601)
--------- ------------- ----------
Balance at December 31, 1994 (Combined)........................... 1 (6,092) (6,091)
Net loss for the year..................................................... -- (4,354) (4,354)
--------- ------------- ----------
Balance as of December 31, 1995 (Combined)........................ 1 (10,446) (10,445)
Capital contributed on:
April 30, 1996 (unaudited).............................................. 14,865 -- 14,865
August 30, 1996 (unaudited)............................................. 4,098 -- 4,098
Net loss for the period (unaudited)....................................... -- (2,674) (2,674)
--------- ------------- ----------
Balance at September 30, 1996 (Consolidated) (unaudited).......... $ 18,964 $ (13,120) $ 5,844
--------- ------------- ----------
--------- ------------- ----------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995:
Balance at December 31, 1994 (Combined)................................... $ 1 $ (6,092) $ (6,091)
Net loss for the period (unaudited)....................................... -- (2,857) (2,857)
--------- ------------- ----------
Balance at September 30, 1995 (Combined).................................. $ 1 $ (8,949) $ (8,948)
--------- ------------- ----------
--------- ------------- ----------
</TABLE>
- ------------------------
In September 1996, the paid in capital of the entities previously under common
control was transferred by Tevecap S.A. to TVA Sul Participacoes S.A in exchange
for shares in TVA Sul Participacoes S.A. Accordingly, the paid in capital of the
combined entities became that of TVA Sul Participacoes S.A.
The accompanying notes are an integral part of these financial statements
F-63
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
SEPTEMBER 30, 1995 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1995, 1994 AND
1993
(IN THOUSANDS OF US. DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------------- ----------------------------------------
1996 1995 1995 1994 1993
(CONSOLIDATED) (COMBINED) (COMBINED) (COMBINED) (COMBINED)
--------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................... $ (2,674) $ (2,857) $ (4,354) $ (3,601) $ (1,448)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES:
Depreciation................................ 397 112 186 36 20
Amortization................................ 481 -- -- -- --
Provision for claims........................ 151 -- -- -- --
Disposal of fixed assets.................... 795 (6) (15) 4
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable......................... (717) -- (32) -- --
Prepaid and other assets.................... (520) (12) (23) (34) (4)
Other accounts receivable................... (1,028) (18) 5 6 (13)
Accrued Interest............................ 1,299 1,695 2,331 2,328 454
Inventories................................. (1,376) -- -- -- --
Other assets................................ (10) (13) (1) (5) (3)
Suppliers................................... 654 (20) (6) 72 (5)
Taxes payable other than income taxes....... 152 17 27 22 7
Accrued payroll and related liabilities..... 352 192 113 59 18
Other accounts payable...................... 99 280 945 47 (6)
--------------- ------------ ------------ ------------ ------------
Net cash used in operating activities... (1,945) (630) (809) (1,085) (976)
--------------- ------------ ------------ ------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed assets...................... (12,665) (1,074) (1,454) (69) (54)
Loans to related companies.................... (960) -- -- -- --
Acquisition of businesses, net of cash
acquired.................................... (13,490) -- -- -- --
--------------- ------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities............................ (27,115) (1,074) (1,454) (69) (54)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions......................... 18,963 -- -- -- --
Repayments of loans from shareholders......... (162) -- -- -- --
Loans from shareholders....................... 1,822 -- -- -- --
Loans from related companies.................. 16,760 7,633 8,220 1,152 1,086
Repayments of loans from related companies.... (9,315) (5,912) (5,912) -- (54)
Minority Interest............................. 1,361
--------------- ------------ ------------ ------------ ------------
Net cash provided by financing
activities............................ 29,429 1,721 2,308 1,152 1,032
--------------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents................................... 369 17 45 (2) 2
Cash and cash equivalents at beginning of the
period........................................ 45 -- -- 2 --
--------------- ------------ ------------ ------------ ------------
Cash and cash equivalents at end of the
period................................ $ 414 $ 17 $ 45 $ -- $ 2
--------------- ------------ ------------ ------------ ------------
--------------- ------------ ------------ ------------ ------------
</TABLE>
The acompanying notes are an integral part of these financial statements
F-64
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND
SEPTEMBER 30, 1995 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 1995, 1994 AND
1993
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
(CONSOLIDATED) (COMBINED) (COMBINED) (COMBINED) (COMBINED)
--------------- ----------- ------------ ------------ ------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest................. $ -- $ 2,708 $ 2,708 $ -- $ --
--------------- ----------- ------------ ------------ ------------
--------------- ----------- ------------ ------------ ------------
SUPPLEMENTAL NON-CASH FINANCING
ACTIVITIES:
Accrued interest on related company
loans refinanced as principal
balance.............................. $ 1,272 $ 1,659 $ 2,286 $ 2,269 $ 439
--------------- ----------- ------------ ------------ ------------
--------------- ----------- ------------ ------------ ------------
DETAILS OF ACQUISITIONS:
Fair value of assets acquired.......... 14,895 -- -- -- --
Liabilities assumed.................... (1,330) -- -- -- --
--------------- ----------- ------------ ------------ ------------
Cash paid.............................. 13,565 -- -- -- --
Less: cash acquired.................... (75) -- -- -- --
--------------- ----------- ------------ ------------ ------------
Net cash paid for acquisitions......... 13,490 -- -- -- --
--------------- ----------- ------------ ------------ ------------
--------------- ----------- ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-65
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS
1. THE COMPANY AND ITS PRINCIPAL OPERATIONS
The accompanying financial statements reflect the consolidated results of
operations of TVA Sul Participacoes S.A and its subsidiaries (the "Company") and
the combined results of commonly controlled entities which became subsidiaries
of TVA Sul Participacoes S.A. in September, 1996 (see Note 2.1).
TVA Sul Participacoes S.A is a holding company, the subsidiaries of which
render services related to wireless cable and cable television systems,
including marketing and advertising, production, distribution and licensing of
domestic and foreign television programs. The Company has wireless cable channel
rights primarily in major urban markets in the South of Brazil.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant policies followed in the preparation of the accompanying
consolidated and combined financial statements are described below:
2.1 BASIS OF PRESENTATION; COMBINED AND CONSOLIDATION
A) BASIS OF PRESENTATION
The combined and consolidated financial statements are presented in US
Dollars and have been prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP), which differ in
certain respects from accounting principles applied by the Company in its local
currency financial statements, which are prepared in accordance with accounting
principles generally accepted in Brazil ("Brazilian GAAP").
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
financial statement dates and the reported amount of revenues and expenses
during the reporting periods. Since management's judgment involves making
estimates concerning the likelihood of future events, the actual results could
differ from those estimates which will have a positive or negative effect on
future period results.
B) CONSOLIDATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
TVA Sul Participacoes S.A was incorporated on March 3, 1996 as a holding
company for certain entities which were under common control. Accordingly, the
financial statements as of and for the nine months ended September 30, 1996
(unaudited) are prepared on a consolidated basis.
The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated on consolidation.
C) COMBINED PRESENTATION FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER
31, 1995 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
The combined financial statements for the three years in the period ended
December 31, 1995 and the nine months ended September 30, 1995 (unaudited),
reflect the results of TVA Parana (formerly TVA Curitiba Servicos
Telecomunicacoes Ltda.).
F-66
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
2.2 ACCOUNTING RECORDS
As required by Brazilian Law, and in accordance with local accounting
practices, the accounting records of the Company are maintained in Brazilian
currency (REAIS). In order to present the financial statements in conformity
with accounting principles generally accepted in the United States of America,
the Company maintains additional accounting records which are used solely for
this purpose.
2.3 CURRENCY REMEASUREMENT
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52, "Foreign Currency Transactions", the United States dollar has been assumed
to be the functional currency as Brazil is a "hyperinflationary" country. As
such, the local accounts of the Company are translated into United States
dollars as follows:
- Nonmonetary assets and liabilities are translated at historical rates. All
other assets and liabilities are translated at the official rate of
exchange of R$1.022 to US$1 in effect on September 30, 1996; R$0.973 to
US$1 in effect on December 31, 1995; and, R$0.846 to US$1 on December 31,
1994.
- Income and expenses are translated at the average exchange rates in effect
each month, except for those related to assets and liabilities which are
translated at historical exchange rates, and deferred income taxes, which
are translated at the current rate. Translation gains/losses are
recognized in the income statement.
2.4 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as cash and cash in banks and
investments in interest-bearing securities and are carried at cost plus accrued
interest. Short-term investments with original maturities of three months or
less at the time of purchase are considered cash equivalents.
2.5 COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
The Company's combined and consolidated operating subsidiaries included in
the financial statements are:
<TABLE>
<CAPTION>
OWNERSHIP INTEREST AT
----------------------------------------
<S> <C> <C>
DECEMBER 31,1995
SEPTEMBER 30,1996 AND 1994
(CONSOLIDATED) (COMBINED)
------------------- -------------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
TVA Sul Parana Ltda. (a), (b)........................................... 100.00% 80.00%
TVA Sul Santa Catarina Ltda (b)......................................... 99.50% --
TVA Sul Foz do Iguacu Ltda (b).......................................... 100.00% --
CCS Camboriu Cable System de Telecomunicacoes Ltda...................... 60.00% --
TCC TV a Cabo Ltda. (b)................................................. 100.00% --
TV Alfa Cabo Ltda. (b).................................................. 100.00% --
</TABLE>
- ------------------------
(a) In August 1996, TVA Curitiba Sevicos Telecommunications Ltda. changed its
name to TVA Parana Ltda ("Parana"). The Company's capital contribution of
$18,963 relating to the acquisition of 27,712,345 shares during the nine
months ended September 30, 1996 (unaudited) to the equity of
F-67
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
2.5 COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Parana was in excess of the Company's share of the book value prior to the
contribution, resulting in a loss of $2,727.
(b) One common share in each of these entities is owned by a Brazilian National
pursuant to local legislation.
2.6 ACQUISITIONS
During the nine month period ending September 30, 1996 (unaudited), the
Company acquired the entities described below which were accounted for under the
purchase method of accounting: i) In February 1996, the Company acquired control
of TVA Sul Santa Catarina ("TVA SSC"); ii) In March 1996, the Company acquired
control of TCC TV a Cabo Ltda. ("TCC") and TV Alfa Cabo Ltda. ("TV Alfa") ; and
iii) In May 1996, the Company acquired control of TVA Sul Foz do Iguacu Ltda
("TVA SF") and CCS Camboriu Cable Systems de Telecomunicacoes Ltda. ("CCS"). In
each case, the excess of the purchase price over the fair value of the net
assets acquired represents the value of concessions of certain television
stations. These concessions are being amortized on a straight line basis over 10
years.
The operating results of these acquired businesses, which hold licenses to
operate cable TV, have been included in the consolidated statement of income
from the dates of acquisition.
The purchase prices have been allocated to the assets purchased and the
liabilities assumed based upon the fair values on the dates of acquisition, as
follows:
<TABLE>
<CAPTION>
TVA SSC TVA SF CCS TCC TV ALFA
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current assets, other than cash..................................... $ -- 23 $ 4 $ 51 $ 5
Property, plant and equipment....................................... 25 319 2,101 238 176
Other assets........................................................ -- 3 -- -- --
Concessions......................................................... 45 5,348 1,424 2,629 2,429
Other liabilties.................................................... (55) (377) (84) (127) (687)
----- --------- --------- --------- ---------
Purchase price, net of cash received................................ $ 15 5,316 $ 3,445 $ 2,791 $ 1,923
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
Total purchase price................................................ $ 15 $ 5,326 $ 3,445 $ 2,841 $ 1,939
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------
</TABLE>
The Company is unable to present pro forma results as if the acquisitions
had taken place at the beginning of 1995 and 1996 because, although management
attempted to obtain such information from the owners, it was not available.
These entities were acquired for the purpose of expanding the cable TV system
penetration of the Company and that of its parent, TEVECAP S.A. ("Tevecap"). The
assets purchased will be operated under Tevecap's management, using Tevecap and
the Company's programming and employees.
2.7 FINANCIAL INSTRUMENTS
In accordance with SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," information is provided about the fair value of certain financial
instruments for which it is practicable to estimate that value.
F-68
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
2.7 FINANCIAL INSTRUMENTS (CONTINUED)
For the purposes of SFAS No. 107, the estimated fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
The carrying values of the Company's financial instruments as of September 30,
1996 (unaudited), December 31, 1995 and December 31, 1994 approximate
management's best estimate of their estimated fair values. The following methods
and assumptions were used to estimate the fair value of each class of financial
instrument for which it is practicable to estimate that value:
- The fair value of certain financial assets carried at cost, including
cash, accounts receivable, other accounts receivable, and certain other
short-term assets is considered to approximate their respective carrying
value due to their short-term nature.
- The fair value of payables to suppliers, other accounts payable, loans to
related companies and certain other short-term liabilities is considered
to approximate their respective carrying value due to their short-term
nature.
- The fair value of loans from related companies approximates their
respective carrying values as interest on these loans is at market rates.
2.8 ACCOUNTS RECEIVABLE
Accounts receivable are stated at their estimated realizable values. An
allowance for doubtful accounts will be established on the basis of an analysis
of the accounts receivable, in light of the risks involved, in an amount
sufficient to cover any losses incurred in realization of credits when
necessary.
2.9 INVENTORIES
Inventories consist of materials and supplies used to provide service to new
customers, and to ensure continuity of service to existing customers.
Inventories are stated at the lower of cost or market. Cost is determined
principally under the average cost method.
2.10 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated using the
straight-line method, over the remaining useful lives, as described in Note 9.
2.11 RECOVERABILITY OF LONG-LIVED ASSETS TO BE HELD AND USED IN THE BUSINESS
Management reviews long-lived assets, primarily the Company's concessions
and its property and equipment to be held and used in the business, for the
purposes of determining and measuring impairment on a recurring basis or when
events or changes in circumstances indicate that the carrying value of an asset
or group of assets may not be recoverable. Assets are grouped and evaluated for
possible impairment at the level of each cable television system; impairment is
assessed on the basis of the forecasted undiscounted cash flows of the
businesses over the estimated remaining lives of the assets related to those
systems. A write-down of the carrying value of the assets or group of assets to
estimated fair value will be made, when appropriate.
F-69
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
2.12 SUBSCRIPTIONS
Installation fees are recognized as revenue on the equipment installation
date to the extent of direct selling costs incurred. Subscription revenues are
recognized as earned on an accrual basis.
2.13 ACCOUNTING FOR SALES OF STOCK BY SUBSIDIARIES
Gains or losses arising from the sale of previously unissued shares to an
unrelated party by a subsidiary are recognized in the profit and loss account as
non-operating income to the extent that the net book value of the shares owned
by the parent after the sale exceeds or is lower than the net book value per
share immediately prior to the sale of the shares by the subsidiary.
2.14 FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
The unaudited financial statements for the nine months ended September 30,
1996 and 1995 have been derived from the Company's records and reflect all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial data.
3. CASH AND CASH EQUIVALENTS
At September 30, 1996 (unaudited), December 31, 1995 and 1994, cash and cash
equivalents were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ----------------------
1996 1995 1994
------------------- ----- ---------
<S> <C> <C> <C>
(UNAUDITED)
Cash on hand and in banks............................... $ 380 $ 45 --
Short-term investments.................................. 34 -- --
----- --- ---------
$ 414 $ 45 --
----- --- ---------
----- --- ---------
</TABLE>
4. ACCOUNTS RECEIVABLE
At September 30, 1996 (unaudited), December 31, 1995 and 1994, accounts
receivable were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ----------------------
1996 1995 1994
------------------- ----- ---------
<S> <C> <C> <C>
(UNAUDITED)
Subscriptions........................................... $ 286 -- --
Installation fees....................................... 329 $ 32 --
Others.................................................. 134 -- --
----- --- ---------
$ 749 $ 32 --
----- --- ---------
----- --- ---------
</TABLE>
F-70
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
5. PREPAID AND OTHER ASSETS
At September 30, 1996 (unaudited), December 31, 1995 and 1994, prepaid
expenses were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ------------------------
1996 1995 1994
------------------- ----- -----
<S> <C> <C> <C>
(UNAUDITED)
Advances to suppliers.................................. $ 544 $ 22 $ 23
Prepaid meals and transportation....................... 32 20 11
Others................................................. 12 26 11
----- --- ---
$ 588 $ 68 $ 45
----- --- ---
----- --- ---
</TABLE>
6. OTHER ACCOUNTS RECEIVABLE
At September 30, 1996 (unaudited), December 31, 1995 and 1994, other
accounts receivable were comprised of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ------------------------
1996 1995 1994
----------------- ----- -----
<S> <C> <C> <C>
(UNAUDITED)
Advances to employees.................................. $ 119 -- $ 7
Accounts receivable from Related Companies (Note 7).... 765 -- --
Others................................................. 232 $ 2 --
--
------- ---
$ 1,116 $ 2 $ 7
--
--
------- ---
------- ---
</TABLE>
7. RELATED-PARTY TRANSACTIONS
The following tables summarize the transactions between the Company and
related companies at September 30, 1996 (unaudited) and December 31, 1995, 1994
and for the nine month periods ended September 30, 1996 (unaudited) and 1995
(unaudited) and the three years in the period ended December 31, 1995 :
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
----------------- --------------------
<S> <C> <C> <C>
1996 1995 1994
----------------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
TVA Sistema
Loans payable................................. $ 2,877 $ 10,480 --
Accounts Payable.............................. 1,438 983 --
Tevecap S.A.
Loans payable................................. 14,099 -- $ 5,886
</TABLE>
F-71
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
7. RELATED-PARTY TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
--------- ----------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tevecap
Net interest expense............... $ -- $ -- $ -- $ (2,269) $ (439)
TVA Sistema de Televisao S.A.
Net interest expense............... (1,272) (1,659) (2,286) -- --
</TABLE>
The related company loans are denominated in reais and are subject to
monetary restatement plus interest charges at the market rate which was 1.79%
per month in September 1996 (3.44% per month in December 1995).
8. DEFERRED INCOME TAX
The tax effects of temporary differences that give rise to a significant
portion of the deferred tax asset and deferred tax liability at September 30,
1996 (unaudited) and at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, --------------------
1996 1995 1994
----------------- --------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Deferred tax assets:
Net operating loss carryforwards...................................... $ 4,057 $ 3,425 $ 2,509
Others................................................................ 38 11 61
-------- --------- ---------
Total gross deferred tax asset.................................... 4,095 3,436 2,570
Less, valuation allowance............................................. (3,850) (3,122) (2,570)
-------- --------- ---------
Net deferred tax asset.................................................. 245 314 --
Deferred tax liability:
Installation costs.................................................... (245) (314) --
-------- --------- ---------
Total gross deferred tax liability................................ (245) (314) --
-------- --------- ---------
Net deferred tax asset.................................................. $ -- $ -- $ --
-------- --------- ---------
-------- --------- ---------
</TABLE>
The Company has a limited operating history and has generated losses since
its inception. The valuation allowance has been established in accordance with
the requirements of SFAS No. 109 and relates to the amount of net operating loss
carryforwards in excess of net taxable temporary differences.
As of September 30, 1996 (unaudited), the Company has unexpirable
accumulated tax losses of $13,276.
F-72
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
8. DEFERRED INCOME TAX (CONTINUED)
The combined income tax credit was different from the amount computed using
the Brazilian statutory income tax for the reasons set forth in the following
table:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C> <C>
NINE MONTHS
ENDED
SEPTEMBER 30,
1996 1995 1994 1993
--------------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Loss before income taxes and minority
interest................................... $ 2,555 $ 4,354 $ 3,601 $ 1,448
Statutory income tax rate.................... 30.56% 30.56% 43.0% 35.2%
------- --------- --------- ---------
781 1,331 1,548 509
Increase (decrease) in the income tax rate... -- (753) 212 --
Others....................................... (158) (26) (116) 157
------- --------- --------- ---------
Net income tax benefit for the period........ 623 552 1,644 666
Increase in valuation allowance.............. (728) (552) (1,644) (666)
------- --------- --------- ---------
$ (105) $ -- $ -- $ --
------- --------- --------- ---------
------- --------- --------- ---------
</TABLE>
Income tax payable represents amounts owing by subsidiaries calculated on an
unitary basis.
9. PROPERTY, PLANT AND EQUIPMENT
At September 30, 1996 (unaudited), December, 31, 1995 and 1994, property,
plant and equipment were comprised of:
<TABLE>
<CAPTION>
ANNUAL
DEPRECIATION AT DECEMBER 31,
RATE AT SEPTEMBER 30, --------------------
% 1996 1995 1994
----------------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
Machinery and Equipment...................................... 10 $ 1,436 172 $ 112
Converters................................................... 10 3,532 -- --
Leasehold Improvements....................................... 25 3,499 35 14
Furniture and Fixtures....................................... 10 567 164 78
Premises..................................................... 10 23 3 3
Vehicles..................................................... 20 129 15 14
Software..................................................... 20 80 45 31
Tools........................................................ 10 86 -- --
Reception Equipment.......................................... 20 4,170 1,203 --
Cable Plant.................................................. 10 1,440 -- --
Building..................................................... 4 355 -- --
-------- --------- ---------
15,317 1,637 252
Accumulated Depreciation..................................... (2,056) (254) (68)
Telephone Line Use Rights.................................... 158 83 14
Fixed Assets in Transit...................................... 130 -- --
-------- --------- ---------
$ 13,549 $ 1,466 $ 198
-------- --------- ---------
-------- --------- ---------
</TABLE>
F-73
<PAGE>
TVA SUL PARTICIPACOES S.A.
AND SUBSIDIARIES
NOTES TO THESE FINANCIAL STATEMENTS (CONTINUED)
10. INSURANCE
The Company maintains insurance coverage for its fixed assets and
inventories in an amount considered sufficient to cover the risks involved.
11. PAID-IN CAPITAL
Paid-in capital at September 30, 1996 (unaudited), December 31, 1995 and
1994, was comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------ ------------------------ -----------
US$ SHARES US$ SHARES US$
--------- ------------- --- ----------- ---
<S> <C> <C> <C> <C> <C>
TVA Parana..................................................... -- -- $ 1 1,000 $ 1
-- --
-- --
--------- ------------- -----
--------- ------------- -----
TVA Sul Participacoes S.A. .................................... $ 18,964 18,470,825 -- -- --
-- --
-- --
--------- ------------- -----
--------- ------------- -----
<CAPTION>
SHARES
-----------
<S> <C>
TVA Parana..................................................... 1,000
-----
-----
TVA Sul Participacoes S.A. .................................... --
-----
-----
</TABLE>
Paid-in capital represents registered common shares without par value.
The Company's shareholders are entitled a minimum dividend of 25% of net
income for the year, adjusted according to Corporation Law. As the Company has
not recorded net income since its inception, no such dividends are payable.
12. SUPPLEMENTARY INFORMATION--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
DEFERRED TAXATION
VALUATION
ALLOWANCE
-----------------
<S> <C>
December 31, 1993.......................................................... $ 926
Additions Charged to Expense............................................... 1,644
Reduction.................................................................. --
-------
Balance at December 31, 1994............................................... 2,570
Additions Charged to Expense............................................... 552
-------
Balance at December 31, 1995............................................... 3,122
Additions Charged to Expense............................................... 490
Reduction.................................................................. --
-------
Balance at September 30, 1996.............................................. $ 3,612
-------
-------
</TABLE>
F-74
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
BALANCE SHEET AT SEPTEMBER 30, 1996 (UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
FOZ DO
TV ALFA TCC CCS SSC IGUACU
----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
<CAPTION>
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents(Note 3)........................... $ 19 $ 162 $ 68 $ -- $ 50
Accounts receivable, net (Note 4)........................... 124 45 3 12 22
Inventories................................................. -- 44 78 54 81
Prepaid and other assets (Note 5)........................... -- 9 -- 128 55
Other accounts receivable (Note 6).......................... 294 45 53 12 169
----------- --------- --------- --------- -----
Total current assets.................................... 437 305 202 206 377
Property, plant and equipment (Note 8)........................ 160 225 3,491 750 316
Loans to related companies (Note 7)........................... -- -- -- -- 42
Other......................................................... -- -- -- -- 3
----------- --------- --------- --------- -----
Total assets.................................................. $ 597 $ 530 $ 3,693 $ 956 $ 738
----------- --------- --------- --------- -----
----------- --------- --------- --------- -----
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities
Suppliers................................................... $ 117 $ 102 $ 98 $ 64 $ 10
Taxes payable other than income taxes....................... 106 42 34 1 19
Accrued payroll and related liabilities..................... 14 -- 18 33 69
Other accounts payable (Note 9)............................. 82 2 141 -- 337
----------- --------- --------- --------- -----
Total current liabilities............................... 319 146 291 98 435
----------- --------- --------- --------- -----
Long-term liabilities
Loans from related companies (Note 7)....................... 497 -- -- 1,669 83
Loans from shareholders..................................... -- -- -- -- --
Other....................................................... -- -- -- -- --
----------- --------- --------- --------- -----
Total long-term liabilities............................. 497 -- -- 1,669 83
----------- --------- --------- --------- -----
Shareholders' equity
Paid in capital............................................. 344 47 4,012 1 5
Accumulated deficit......................................... (563) 337 (610) (812) 215
----------- --------- --------- --------- -----
Total shareholders' equity.............................. (219) 384 3,402 (811) 220
----------- --------- --------- --------- -----
Total liabilities and shareholders' equity.............. $ 597 $ 530 $ 3,693 $ 956 $ 738
----------- --------- --------- --------- -----
----------- --------- --------- --------- -----
<CAPTION>
TVA
PARANA
----------
<S> <C>
ASSET
<S> <C>
Current assets
Cash and cash equivalents(Note 3)........................... $ 114
Accounts receivable, net (Note 4)........................... 543
Inventories................................................. 1,119
Prepaid and other assets (Note 5)........................... 396
Other accounts receivable (Note 6).......................... 543
----------
Total current assets.................................... 2,715
Property, plant and equipment (Note 8)........................ 10,856
Loans to related companies (Note 7)........................... --
Other......................................................... 931
----------
Total assets.................................................. $ 14,502
----------
----------
LIABILITIES AND SHAR
<S> <C>
Current liabilities
Suppliers................................................... $ 360
Taxes payable other than income taxes....................... 471
Accrued payroll and related liabilities..................... 6
Other accounts payable (Note 9)............................. 1,866
----------
Total current liabilities............................... 2,703
----------
Long-term liabilities
Loans from related companies (Note 7)....................... 5,223
Loans from shareholders..................................... 27
Other....................................................... 151
----------
Total long-term liabilities............................. 5,401
----------
Shareholders' equity
Paid in capital............................................. 18,964
Accumulated deficit......................................... (12,566)
----------
Total shareholders' equity.............................. 6,398
----------
Total liabilities and shareholders' equity.............. $ 14,502
----------
----------
</TABLE>
The accompanying notes are an integral part of the Unaudited Financial
Information
F-75
<PAGE>
TVA ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
TV FOZ DO
ALFA TCC CCS SSC IGUACU
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Gross revenues
Monthly subscriptions............................................ $ 768 $ 625 $ 642 $ 16 $ 784
Installation..................................................... 6 -- -- 7 50
Other............................................................ -- 2 29 -- --
Revenue taxes.................................................... (20) (17) (17) -- (15)
--------- --------- --------- --------- -----
Net revenue.................................................... 754 610 654 23 819
--------- --------- --------- --------- -----
Direct operating expenses
Payroll and benefits............................................. -- 3 91 82 94
Programming...................................................... 159 146 155 -- 271
Technical assistance............................................. -- -- -- 44 --
Vehicle rentals.................................................. -- -- -- -- --
TVA magazine..................................................... 2 -- -- -- 20
Other costs...................................................... -- 40 101 567 59
--------- --------- --------- --------- -----
161 189 347 693 444
--------- --------- --------- --------- -----
Selling, general and administrative expenses
Payroll and benefits............................................. 143 4 77 -- 116
Advertising and promotion........................................ -- 3 14 -- 16
Rent............................................................. 35 13 4 45 --
Other administrative expenses.................................... 33 42 77 -- 53
Other general expenses........................................... 52 -- -- -- 5
--------- --------- --------- --------- -----
263 62 172 45 190
--------- --------- --------- --------- -----
Depreciation....................................................... 22 -- 75 17 20
--------- --------- --------- --------- -----
Operating income/(loss)........................................ 308 359 60 (732) 165
--------- --------- --------- --------- -----
Interest income.................................................... 14 2 12 -- 4
Interest expense................................................... (8) (12) (7) -- (1)
Translation (loss) gain............................................ (43) (128) (13) (49) 113
Other nonoperating income, net..................................... -- -- -- -- --
--------- --------- --------- --------- -----
Loss before income taxes....................................... 271 221 52 (781) 281
Income taxes (Note 10)............................................. -- (48) (18) -- (39)
--------- --------- --------- --------- -----
Net income (loss).............................................. 271 173 34 (781) 242
--------- --------- --------- --------- -----
--------- --------- --------- --------- -----
<CAPTION>
TVA
PARANA
---------
<S> <C>
Gross revenues
Monthly subscriptions............................................ $ 5,377
Installation..................................................... 756
Other............................................................ 34
Revenue taxes.................................................... (239)
---------
Net revenue.................................................... 5,928
---------
Direct operating expenses
Payroll and benefits............................................. 2,497
Programming...................................................... 410
Technical assistance............................................. 660
Vehicle rentals.................................................. 239
TVA magazine..................................................... 136
Other costs...................................................... 362
---------
4,304
---------
Selling, general and administrative expenses
Payroll and benefits............................................. 624
Advertising and promotion........................................ 244
Rent............................................................. 106
Other administrative expenses.................................... 915
Other general expenses........................................... 274
---------
2,163
---------
Depreciation....................................................... 263
---------
Operating income/(loss)........................................ (802)
---------
Interest income.................................................... 135
Interest expense................................................... (1,713)
Translation (loss) gain............................................ 18
Other nonoperating income, net..................................... 242
---------
Loss before income taxes....................................... (2,120)
Income taxes (Note 10)............................................. --
---------
Net income (loss).............................................. (2,120)
---------
---------
</TABLE>
The accompanying notes are an integral part of the Unaudited Financial
Information
F-76
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
TVA PARANA
------------------------------------
<S> <C> <C> <C>
PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL
--------- ------------- ----------
Balance at January 1, 1996................................................ $ 1 $ (10,446) $ (10,445)
Capital contributed on:
April 30, 1996.......................................................... 14,865 -- 14,865
August 30, 1996......................................................... 4,098 -- 4,098
Net loss for the period................................................... -- (2,120) (2,120)
--------- ------------- ----------
Balance at September 30, 1996......................................... $ 18,964 (12,566) (6,398)
--------- ------------- ----------
--------- ------------- ----------
<CAPTION>
SSC
------------------------------------
PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL
--------- ------------- ----------
<S> <C> <C> <C>
Balance at February 28, 1996.............................................. $ 1 $ (31) $ (30)
Net loss for the period................................................... -- (781) (781)
--------- ------------- ----------
Balance at September 30, 1996......................................... $ 1 (812) (811)
--------- ------------- ----------
--------- ------------- ----------
</TABLE>
<TABLE>
<CAPTION>
TV ALFA TCC
------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
PAID-IN ACCUMULATED PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL CAPITAL DEFICIT
--------- --------------- --------- ----------- ---------------
Balance at March 30, 1996............................ $ 344 $ (834) $ (490) $ 47 $ 164
Net loss for the period.............................. -- 271 271 -- 173
--------- ------ --------- --- -----
Balance at September 30, 1996.................... $ 344 (563) (219) 47 337
--------- ------ --------- --- -----
--------- ------ --------- --- -----
<CAPTION>
CCS FOZ DO IGUACU
------------------------------------- ----------------------------
PAID-IN ACCUMULATED PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL CAPITAL DEFICIT
--------- --------------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at May 30, 1996.............................. $ 4,012 $ (644) $ 3,368 $ 5 $ (27)
Net loss for the period.............................. -- 34 34 -- 242
--------- ------ --------- --- -----
Balance at September 30, 1996.................... $ 4,012 (610) 3,402 5 215
--------- ------ --------- --- -----
--------- ------ --------- --- -----
<CAPTION>
<S> <C>
TOTAL
---------
Balance at March 30, 1996............................ $ 211
Net loss for the period.............................. 173
---------
Balance at September 30, 1996.................... 384
---------
---------
TOTAL
---------
<S> <C>
Balance at May 30, 1996.............................. $ (22)
Net loss for the period.............................. 242
---------
Balance at September 30, 1996.................... 220
---------
---------
</TABLE>
The accompanying notes are an integral part of the Unaudited Financial
Information
F-77
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
TV FOZ DO
ALFA TCC CCS SSC IGUACU
----------- --------- ----- --------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................... $ 271 $ 173 $ 34 $ (781) $ 242
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
PROVIDED BY OPERATING ACTIVITIES:
Depreciation............................................. -- 13 75 14 20
Amortization............................................. 22 -- -- -- --
Provision for claims..................................... -- -- -- -- --
Disposal and write-off of fixed assets................... -- -- -- -- --
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable...................................... (123) (45) (3) (12) (22)
Prepaid and other assets................................. 1 -- -- (125) (32)
Other accounts receivable................................ (291) (44) (46) (12) (169)
Accrued interest......................................... -- -- -- -- --
Inventories.............................................. -- (2) (78) (54) (81)
Legal Deposits...........................................
Suppliers................................................ (111) (5) 8 64 10
Taxes payable other than income taxes.................... 14 38 11 1 19
Accrued payroll and related liabilities.................. (124) (13) (7) 33 47
Advances received from subscribers....................... (45) -- -- -- --
Other accounts payable................................... (102) (2) 139 -- (18)
----------- --------- --- --------- -----------
Net cash (used in) operating activities................ (488) 113 133 (872) 16
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed assets................................... (6) -- (65) (742) (17)
Loans to related companies................................. -- -- -- -- (42)
Goodwill................................................... -- -- -- -- --
----------- --------- --- --------- -----------
Net cash provided by (used in) investing activities.... (6) -- (65) (742) (59)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions...................................... -- -- -- -- --
Repayments of loans from shareholders...................... -- -- -- -- --
Loans from shareholders.................................... -- -- -- -- --
Loans from related companies............................... 497 -- -- 1,614 83
Repayment of loans from related companies.................. -- -- -- -- --
----------- --------- --- --------- -----------
Net cash provided by financing activiites.............. 497 -- -- 1,614 83
----------- --------- --- --------- -----------
Net increase (decrease) in cash and cash equivalents......... 3 113 68 -- 40
Cash and cash equivalents at beginning of year............... 16 49 -- -- 10
----------- --------- --- --------- -----------
Cash and cash equivalents at end of year............... $ 19 $ 162 $ 68 $ -- $ 50
----------- --------- --- --------- -----------
----------- --------- --- --------- -----------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest..................................... $ -- $ -- $ -- $ -- $ --
----------- --------- --- --------- -----------
----------- --------- --- --------- -----------
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Accrued interest on related company loans refinanced as
principal balance........................................ $ -- $ -- $ -- $ -- $ --
----------- --------- --- --------- -----------
----------- --------- --- --------- -----------
<CAPTION>
TVA
PARANA
---------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................... $ (2,120)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN)
PROVIDED BY OPERATING ACTIVITIES:
Depreciation............................................. 263
Amortization............................................. --
Provision for claims..................................... 151
Disposal and write-off of fixed assets................... 795
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable...................................... (511)
Prepaid and other assets................................. (328)
Other accounts receivable................................ (541)
Accrued interest......................................... 1,281
Inventories.............................................. (1,119)
Legal Deposits........................................... (4)
Suppliers................................................ 263
Taxes payable other than income taxes.................... (50)
Accrued payroll and related liabilities.................. 218
Advances received from subscribers....................... --
Other accounts payable................................... 864
---------
Net cash (used in) operating activities................ (838)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed assets................................... (10,448)
Loans to related companies................................. (918)
Goodwill................................................... --
---------
Net cash provided by (used in) investing activities.... (11,366)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions...................................... 18,963
Repayments of loans from shareholders...................... (162)
Loans from shareholders.................................... --
Loans from related companies............................... 2,786
Repayment of loans from related companies.................. (9,314)
---------
Net cash provided by financing activiites.............. 12,273
---------
Net increase (decrease) in cash and cash equivalents......... 69
Cash and cash equivalents at beginning of year............... 45
---------
Cash and cash equivalents at end of year............... $ 114
---------
---------
SUPPLEMENTAL CASH DISCLOSURE:
Cash paid for interest..................................... $ --
---------
---------
SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:
Accrued interest on related company loans refinanced as
principal balance........................................ $ 1,272
---------
---------
</TABLE>
The accompanying notes are an integral part of the Unaudited Financial
Information
F-78
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
NOTES TO UNAUDITED FINANCIAL INFORMATION
1. PRINCIPAL OPERATIONS
The accompanying Unaudited Financial Information reflects the results of
operations of Alfa Cabo Ltda. ("TV Alfa"), CCS Camboriu Cable System De
Telecomunicacoes Ltda. ("CCS"), TVA Sul Parana Ltda. ("TVA Parana"), TVA Sul Foz
Do Iguacu Ltda.("Foz do Iguacu") and, TVA Sul Santa Catarina Ltda. ("SSC"), all
subsidiaries of TVA Sul Participacoes S.A ("the Subsidiaries").
These subsidiaries render services related to wireless cable and cable
television systems, including marketing and advertising, production,
distribution and licensing of domestic and foreign television programs. The
Company has wireless cable channel rights primarily in major urban markets in
the South of Brazil.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant policies followed in the preparation of the accompanying
Unaudited Financial Information are described below:
2.1 BASIS OF PRESENTATION
The accompanying Unaudited Financial Information are presented in U.S.
Dollars and have been prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP), which differ in
certain respects from accounting principles applied by the Company in its local
currency financial statements, which are prepared in accordance with accounting
principles generally accepted in Brazil ("Brazilian GAAP").
The Unaudited financial information has been derived from the Company's
records and reflects all adjustments which are, in the opinion of management,
necessary for a fair presentation of the financial information.
The preparation of Condensed Financial Information requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
Financial Information dates and the reported amount of revenues and expenses
during the reporting periods. Since management's judgment involves making
estimates concerning the likelihood of future events, the actual results could
differ from those estimates which will have a positive or negative effect on
future period results.
2.2 ACCOUNTING RECORDS
As required by Brazilian Law, and in accordance with local accounting
practices, the accounting records of the Subsidiaries are maintained in
Brazilian currency (reais). In order to present the Financial Information in
conformity with accounting principles generally accepted in the United States of
America, the subsidiaries maintain additional accounting records which are used
solely for this purpose.
2.3 CURRENCY REMEASUREMENT
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52, "Foreign Currency Transactions", the United States dollar has been assumed
to be the functional currency as Brazil is
F-79
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
NOTES TO UNAUDITED FINANCIAL INFORMATION
2.3 CURRENCY REMEASUREMENT (CONTINUED)
a "hyperinflationary" country. As such, the local Financial Information of the
Subsidiaries is translated into United States dollars as follows:
- Nonmonetary assets and liabilities are translated at historical rates. All
other assets and liabilities are translated at the official rate of
exchange of R$1,022 to US$1 in effect on September 30, 1996.
- Income and expenses are translated at the average exchange rates in effect
each month, except for those related to assets and liabilities which are
translated at historical exchange rates, and deferred income taxes, which
are translated at the current rate. Translation gains/losses are
recognized in the income statement.
2.4 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as cash and cash in banks and
investments in interest-bearing securities and are carried at cost plus accrued
interest. Short-term investments with original maturities of three months or
less at the time of purchase are considered cash equivalents.
2.5 FINANCIAL INSTRUMENTS
In accordance with SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," information is provided about the fair value of certain financial
instruments for which it is practicable to estimate that value.
For the purposes of SFAS No. 107, the estimated fair value of a financial
instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
The carrying values of the Subsidiarys' financial instruments as of September
30, 1996 (unaudited) approximate management's best estimate of their estimated
fair values. The following methods and assumptions were used to estimate the
fair value of each class of financial instrument for which it is practicable to
estimate that value:
- The fair value of certain financial assets carried at cost, including
cash, accounts receivable, other accounts receivable, and certain other
short-term assets is considered to approximate their respective carrying
value due to their short-term nature.
- The fair value of payables to suppliers, other accounts payable, loans to
affiliated companies and certain other short-term liabilities is
considered to approximate their respective carrying value due to their
short-term nature.
- The fair value of loans from affiliated companies approximates their
respective carrying values as interest on these loans is at market rates.
2.8 ACCOUNTS RECEIVABLE
Accounts receivable are stated at their estimated realizable values. An
allowance for doubtful accounts will be established on the basis of an analysis
of the accounts receivable, in light of the risks involved, in an amount
sufficient to cover any losses incurred in realization of credits when
necessary.
F-80
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
NOTES TO UNAUDITED FINANCIAL INFORMATION
2.9 INVENTORIES
Inventories consist of materials and supplies used to provide service to new
customers, and to ensure continuity of service to existing customers.
Inventories are stated at the lower of cost or market. Cost is determined
principally under the average cost method.
2.10 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated using the
straight-line method, over the remaining useful lives, as described in Note 8.
2.11 RECOVERABILITY OF LONG-LIVED ASSETS TO BE HELD AND USED IN THE BUSINESS
Management reviews long-lived assets, primarily the Subsidiaries property
and equipment to be held and used in the business, for the purposes of
determining and measuring impairment on a recurring basis or when events or
changes in circumstances indicate that the carrying value of an asset or group
of assets may not be recoverable. Assets are grouped and evaluated for possible
impairment at the level of each cable television system; impairment is assessed
on the basis of the forecasted undiscounted cash flows of the businesses over
the estimated remaining lives of the assets related to those systems. A
write-down of the carrying value of the assets or group of assets to estimated
fair value will be made, when appropriate.
2.12 SUBSCRIPTIONS
Installation fees are recognized as revenue on the equipment installation
date to the extent of direct selling costs incurred. Subscription revenues are
recognized as earned on an accrual basis.
3. CASH AND CASH EQUIVALENTS
At September 30, 1996 (unaudited) cash and cash equivalents were comprised
of:
<TABLE>
<CAPTION>
FOZ DO
TV ALFA TCC CCS SSC IGUACU
----------- --------- ----- --------- -----------
<S> <C> <C> <C> <C> <C>
Cash on hand and in banks............................................. $ 13 $ 160 $ 68 $ -- $ 50
Short-term investments................................................ 6 2
--- --------- --- --------- ---
$ 19 $ 162 $ 68 $ -- $ 50
--- --------- --- --------- ---
--- --------- --- --------- ---
<CAPTION>
TVA
PARANA
-----------
<S> <C>
Cash on hand and in banks............................................. $ 91
Short-term investments................................................ 23
-----
$ 114
-----
-----
</TABLE>
4. ACCOUNTS RECEIVABLE
At September 30, 1996 (unaudited) accounts receivable, net, were comprised
of:
<TABLE>
<CAPTION>
TV ALFA TCC CCS SSC
----------- ----- ----- -----
<S> <C> <C> <C> <C>
Subscriptions............................................................ $ -- $ 45 $ -- $ 10
Installation fees........................................................ 4 -- -- 2
Other.................................................................... 120 -- 3 --
----- --- --- ---
$ 124 $ 45 $ 3 $ 12
----- --- --- ---
----- --- --- ---
<CAPTION>
FOZ DO TVA
IGUACU PARANA
----------- -----------
<S> <C> <C>
Subscriptions............................................................ $ 22 $ 209
Installation fees........................................................ -- 323
Other.................................................................... -- 11
--- -----
$ 22 $ 543
--- -----
--- -----
</TABLE>
F-81
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
NOTES TO UNAUDITED FINANCIAL INFORMATION
5. PREPAID AND OTHER ASSETS
At September 30, 1996 (unaudited) prepaid expenses were comprised of:
<TABLE>
<CAPTION>
TV ALFA TCC CCS SSC
----------- ----- ----- ---------
<S> <C> <C> <C> <C>
Advances to suppliers................................................... $ -- $ 8 $ -- $ 126
Prepaid meals and transportation........................................ -- -- -- --
Other................................................................... -- 1 -- 2
--
--- --- ---------
$ -- $ 9 $ -- $ 128
--
--
--- --- ---------
--- --- ---------
<CAPTION>
FOZ DO TVA
IGUACU PARANA
----------- -----------
<S> <C> <C>
Advances to suppliers................................................... $ 46 $ 364
Prepaid meals and transportation........................................ -- 32
Other................................................................... 9 --
--- -----
$ 55 $ 396
--- -----
--- -----
</TABLE>
6. OTHER ACCOUNTS RECEIVABLE
At September 30, 1996 (unaudited) other accounts receivable were comprised
of:
<TABLE>
<CAPTION>
TV ALFA TCC CCS SSC
----------- ----- ----- -----
<S> <C> <C> <C> <C>
Advances to employees.................................................... $ -- $ -- $ 32 $ --
Accounts receivable from related Company................................. 294 -- 21 11
Other.................................................................... -- 45 -- 1
----- --- --- ---
$ 294 $ 45 $ 53 $ 12
----- --- --- ---
----- --- --- ---
<CAPTION>
FOZ DO TVA
IGUACU PARANA
----------- -----------
<S> <C> <C>
Advances to employees.................................................... $ 5 $ 82
Accounts receivable from related Company................................. 164 461
Other.................................................................... -- --
----- -----
$ 169 $ 543
----- -----
----- -----
</TABLE>
7. RELATED-PARTY TRANSACTIONS
The following tables summarize the transactions between the Subsidiaries and
related companies at and for the nine months ended September 30, 1996
(unaudited):
<TABLE>
<CAPTION>
FOZ DO TVA
TVA ALFA IGUACU SSC PARANA
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
TVA BRASIL
Loans payable.......................................... -- -- $ 1,584 --
TEVECAP
Loans payable.......................................... -- -- 85 --
TVA SISTEMA
Loans payable.......................................... -- -- -- $ 2,877
TVA PARANA
Loans receivable....................................... -- $ 42 -- --
TVA SUL
Loans payable.......................................... 497 63 -- 2,346
CCS CAMBORIU
Loans payable.......................................... -- 20 -- --
</TABLE>
The related company loans are denominated in reais and are subject to
monetary restatement plus interest charges at the market rate which was 1.79%
per month in September 1996.
F-82
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
NOTES TO UNAUDITED FINANCIAL INFORMATION
8. PROPERTY, PLANT AND EQUIPMENT
At September 30, 1996 (unaudited) property, plant and equipment were
comprised of:
<TABLE>
<CAPTION>
FOZ DO
TV ALFA TCC CCS SSC IGUACU
----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Machinery and equipment......................................... $ -- $ 81 $ 26 $ 156 $ 73
Converters...................................................... -- 29 -- 66 --
Leasehold improvements.......................................... -- -- 3,447 2 --
Furniture and fixtures.......................................... 270 2 56 25 17
Premises........................................................ -- 3 6 --
Vehicles........................................................ -- -- 19 51 20
Software........................................................ -- -- 8 12 15
Tools........................................................... -- -- 2 -- --
Reception equipment............................................. -- -- -- -- --
Cable plant..................................................... -- 186 -- 396 280
Building........................................................ -- -- -- -- --
----------- --------- --------- --------- -----------
270 301 3,558 714 405
----------- --------- --------- --------- -----------
Accumulated depreciation........................................ (110) (76) (77) (16) (110)
Telephone line use rights....................................... -- -- 10 -- 9
Fixed asset in transit.......................................... -- -- -- -- --
Other........................................................... -- -- -- 52 12
----------- --------- --------- --------- -----------
$ 160 $ 225 $ 3,491 $ 750 $ 316
----------- --------- --------- --------- -----------
----------- --------- --------- --------- -----------
<CAPTION>
TVA
PARANA
----------
<S> <C>
Machinery and equipment......................................... $ 1,100
Converters...................................................... 5,684
Leasehold improvements.......................................... 52
Furniture and fixtures.......................................... 197
Premises........................................................ 14
Vehicles........................................................ 39
Software........................................................ 45
Tools........................................................... 84
Reception equipment............................................. 4,170
Cable plant..................................................... 578
Building........................................................ 355
----------
12,318
----------
Accumulated depreciation........................................ (1,667)
Telephone line use rights....................................... 139
Fixed asset in transit.......................................... 66
Other........................................................... --
----------
$ 10,856
----------
----------
</TABLE>
9. OTHER ACCOUNTS PAYABLE
At September 30, 1996 (unaudited) other accounts payable were comprised of:
<TABLE>
<CAPTION>
FOZ DO
TV ALFA TCC CCS SSC IGUACU
----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Accounts payable to related companies............................... $ -- $ -- $ 138 $ -- $ 3
Advertising......................................................... -- -- 1 -- --
Other............................................................... 82 2 2 334
----- --------- --------- --------- -----
$ 82 $ 2 $ 141 $ -- $ 337
----- --------- --------- --------- -----
----- --------- --------- --------- -----
<CAPTION>
TVA
PARANA
---------
<S> <C>
Accounts payable to related companies............................... $ 1,438
Advertising......................................................... --
Other............................................................... 428
---------
$ 1,866
---------
---------
</TABLE>
F-83
<PAGE>
TV ALFA, TCC, CCS, TVA PARANA, FOZ DO
IGUACU AND SSC
NOTES TO UNAUDITED FINANCIAL INFORMATION
10. INCOME TAXES
The subsidiaries income tax was different from the amount computed using the
Brazilian statutory income tax for the reasons set forth in the following table:
<TABLE>
<CAPTION>
FOZ DO TVA
TV ALFA TCC CCS SSC IGUACU PARANA
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income tax....................... 271 221 51 (781) 283 (2,120)
Statutory income tax rate............................. 30.56% 30.56% 30.56% 30.56% 30.56% 30.56%
--------- --------- --------- --------- --------- ---------
83 67 16 (239) 86 (648)
Utilization of tax loss carryforwards................. (83) -- -- -- (54) --
Others................................................ -- (19) 2 35 7 158
--------- --------- --------- --------- --------- ---------
-- 48 18 (204) 39 (490)
Increase in valuation allowance....................... -- -- -- 204 -- 490
--------- --------- --------- --------- --------- ---------
$ -- $ 48 $ 18 -- $ 39 --
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
11. INSURANCE
The Subsidiaries maintain insurance coverage for their fixed assets and
inventories in an amount considered sufficient to cover the risks involved.
12. PAID-IN CAPITAL
Paid-in capital at September 30, 1996 (unaudited) was comprised of:
<TABLE>
<CAPTION>
FOZ DO TVA
TV ALFA TCC CCS SSC IGUACU PARANA
--------- --------- ----------- ----- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
US$......................................... 344 47 4,012 1 4,771 18,964
--------- --------- ----------- --- ----- -------------
--------- --------- ----------- --- ----- -------------
Shares...................................... 278,000 250,000 4,850,000 200 5,000 27,712,345
--------- --------- ----------- --- ----- -------------
--------- --------- ----------- --- ----- -------------
</TABLE>
F-84
<PAGE>
ANNEX A
THE FEDERATIVE REPUBLIC OF BRAZIL
THE INFORMATION SET FORTH BELOW IS BASED ON MATERIAL OBTAINED FROM VARIOUS
SOURCES BELIEVED TO BE ACCURATE BUT HAS NOT BEEN INDEPENDENTLY VERIFIED.
GENERAL
GEOGRAPHY AND DEMOGRAPHY. Brazil is the fifth largest country in the world
and the largest country in Latin America, occupying approximately 3.3 million
square miles and 60% of South America's land mass.
Brazil's population in 1995 was approximately 157 million, the sixth largest
in the world. The population is currently growing at a rate of approximately
1.9% per year and is expected to reach 172 million by the end of this century.
Brazil is comprised of 26 states and the federal district in which Brasilia,
the capital, is located. The largest cities in Brazil are Sao Paulo and Rio de
Janeiro with metropolitan area populations of 10.2 million and 5.7 million,
respectively. Brasilia, Belem, Belo Horizonte, Curitiba, Fortaleza, Porto
Alegre, Recife and Salvador also have populations of more than one million each.
GOVERNMENT. Brazil is a federative republic with a representative form of
federal government. In October 1988, a new constitution was enacted, and the
presidential form of government consisting of three independent branches
executive, legislative and judicial was maintained. The constitutional review
prescribed by the Constitution of 1988 was initiated by the Brazilian National
Congress ("Congress") in October 1993 and resulted in the creation of the Social
Emergency Fund outlined below and the reduction of the presidential term from
five years to four years. See Appendix B, "The Brazilian Economy." 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 parliamentary monarchy. Brazilians voted to continue the current
presidential republic form of government.
Executive power is vested in the President, who is elected by popular vote
for a term of four years and currently cannot be reelected for successive terms.
The President has the power to appoint Ministers and to appoint other executives
in selected administrative and political posts. The presidential powers are
limited by the Constitution. Under certain circumstances, the President may
issue provisional measures which, to be effective beyond 30 days, need the
approval of the Brazilian Congress. The legislative branch is composed of a
Senate consisting of 81 Senators elected for eight-year terms, and a Chamber of
Deputies consisting of 513 Deputies elected for four-year terms. Senators and
Deputies are elected directly by popular vote. The judicial branch is headed by
the Federal Supreme Court, which is, in constitutional matters, the court of
final appeal from both federal and state courts. The judicial branch also
includes the Superior Court of Justice and various lower federal courts. On the
state level, executive power is vested in Governors who are elected for
four-year terms; legislative power is vested in State Deputies who are also
elected for four years. Judicial power is vested in state courts; however,
judicial proceedings in which the Federal Government is involved must be
submitted to federal courts sitting in each state.
RECENT POLITICAL HISTORY. The Brazilian military ruled the country from
1964 to 1985, when a series of political reforms were enacted culminating in the
reintroduction of direct elections for President and the convening of a
Constitutional Assembly to adopt a new Brazilian Constitution. During this
period, Brazil solidified its position as one of the 10 largest economies in the
world in terms of gross domestic product ("GDP") with an industrial base focused
on exports.
A-1
<PAGE>
On December 17, 1989, Fernando Collor de Mello became the first President of
Brazil elected by direct popular vote since 1960. Elections were held in late
1990 for state governorships, one-third of the federal Senate and all of the
federal Chamber of Deputies. As a result of these elections, the Brazilian
Democratic Movement Party, which had won a majority in the federal legislature
and most of the state governorships in the 1986 elections, lost its majority in
the legislature as many of its seats were lost to several other parties.
On September 29, 1992, Brazil's lower house of Congress voted to authorize
the Senate to begin an impeachment trial against President Collor based on
corruption charges. At that time, the members of the President's cabinet
submitted their resignations. According to Brazilian law, Mr. Collor was
required to step down from office for a period of 180 days while the trial
proceeded. During this 180-day period, Vice President Itamar Franco became
acting President while the Senate decided whether to convict or to acquit the
President. On December 29, 1992, Mr. Collor submitted his official resignation
as President of Brazil. Consequently, Mr. Franco, as elected Vice President,
assumed the position of President for the remainder of Mr. Collor's term in
office, which concluded on January 1, 1995.
General elections were held on October 3, 1994 to elect a new President, all
state governors, and to renew the federal Chamber of Deputies and the federal
Senate. Fernando Henrique Cardoso (who served as Finance Minister under Mr.
Franco's administration and is generally viewed as the architect of the Real
Plan), representing the Partido Social Democrata Brasileiro (the Brazilian
Social Democratic Party or the "PSDB"), was elected in the first round with 54%
of the valid vote. Luis Inacio da Silva, of the Worker's Party, was his closest
contender. Mr. Cardoso's presidential campaign received a strong boost from the
rapid fall in the rate of inflation which followed the introduction of the new
currency in July 1994. See Appendix B, "The Brazilian Economy."
Since his election Mr. Cardoso has appointed Mr. Pedro Malan, the former
President of the Central Bank of Brazil, as the new Finance Minister. In May
1995, the President of the Central Bank, Mr. Persio Arida resigned and in June
1995 Mr. Gustavo Loyola was appointed as the new President of the Central Bank.
President Cardoso has indicated that the overriding goals of his economic
policies will be to continue the effort to combat inflation while negotiating
with Congress for permanent fiscal reforms.
THE CARDOSO ADMINISTRATION
Mr. Cardoso took office on January 1, 1995, and has concentrated his efforts
on two main issues: making structural reforms and completing the anti-inflation
program. Those efforts have demanded extensive political negotiations with the
various parties in and outside the Government.
The objectives of the structural reforms are to provide the Government with
a sound fiscal budget by revamping the tax and social security systems, and to
enhance and create incentives to stimulate private sector participation in
former Government monopolies such as telecommunications, oil and infrastructure
in general.
AMENDMENTS TO BRAZILIAN CONSTITUTION
On August 15, 1995, four amendments to the Brazilian Constitution were
approved by Congress which allow greater competition in the Brazilian economy:
(i) Constitutional Amendment no. 5/95 altered Article 25, paragraph 2 of the
Constitution by extinguishing the monopoly over pipeline distribution of gas;
(ii) Constitutional Amendment no. 6/95 altered Article 175, paragraph 1 and
Article 170, item IX of the Constitution by removing the distinction between
Brazilian companies capitalized from domestic sources (capital nacional) and
those capitalized from foreign sources (capital estrangeiro) and granting both
types of company mineral exploration rights; (iii) Constitutional Amendment no.
7/95 altered Article 78 of the Constitution by permitting foreign vessels to
engage in inland and coastal shipping; and
A-2
<PAGE>
(iv) Constitutional Amendment no. 8/95 altered Article 21 items XI and XII(a) of
the Constitution by opening the telecommunications sector to private sector
companies.
On November 9, 1995, Congress enacted Constitutional Amendment no. 9 which
altered Article 177 of the Brazilian Constitution allowing the Republic to
contract state owned or private companies in order to carry out, in accordance
with a law which has not yet been enacted, certain oil-related activities, such
as (i) prospecting for and exploitation of deposits of oil and natural gas; (ii)
refining of national or foreign oil; imports and exports of oil, natural gas and
its basic by-products; (iii) oceanic transportation of crude oil of national
origin or of basic oil by-products produced in Brazil; and (iv) pipeline
transportation of crude oil, its by-products and natural gas of any origin.
Presently, Congress is discussing a constitutional amendment proposing
changes in the social security system, which is considered to be one of Brazil's
greatest fiscal problems. The proposed changes are aimed at stabilizing the
system's financial condition through modifications in the pension benefit
structure, increases in mandatory contributions, changes in retirement criteria,
and the elimination of certain privileges such as the federal civil servant
retirement plan. The Cardoso administration has also sent to Congress a
proposal, presently being discussed by a special commission in the Chamber of
Deputies, for administrative reforms aimed at increasing management efficiency
and extinguishing the job stability presently granted to public sector
employees, thereby allowing a reduction of payroll expenses.
In addition, the Government has stated that it intends to propose a new tax
system which would attempt to simplify and enhance the efficiency of the current
tax structure. The proposed system would shift allocations from the Government
to the states and municipalities, in order to reduce the allocation of
expenditures on the federal level. In addition, the proposed system would lower
taxes on investments and exports from their current levels.
A-3
<PAGE>
ANNEX B
THE BRAZILIAN ECONOMY
THE INFORMATION SET FORTH BELOW IS BASED ON MATERIAL OBTAINED FROM VARIOUS
SOURCES BELIEVED TO BE ACCURATE BUT HAS NOT BEEN INDEPENDENTLY VERIFIED.
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. Gross domestic
product ("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
US$3.2 billion in 1995 compared to a surplus of the equivalent of US$10.6
billion in 1994. Through July 1996, the trade balance has shown a modest US$600
million (0.1% of GDP) deficit, compared to a US$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
US$51.8 billion at year-end 1995, up from US$38.8 billion at year-end 1994 and
US$32.2 billion at year-end 1993. By July 31, 1996, reserves totaled more than
the equivalent of US$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 US dollar from R$0.844 to R$0.972 per US dollar and
has since depreciated to 1.015 on August 23, 1996, reflecting this policy of
gradual depreciation.
In 1995, Brazil experienced an average monthly rate of inflation of 1.75%,
as measured by the FIPE (Foundation for Economic Research) consumer price index.
In the period from January 1994 through June 1994, average monthly inflation, as
measured by the FIPE, was 43.75%, but declined to 2.86% in the period from July
1994 through December 1994. This reduction resulted from the implementation of
the third phase of the Real Plan and occurred without the price, wage or asset
freezing mechanisms previously utilized in prior stabilization programs. See
"Real Plan and Current Economic Policy."
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.
B-1
<PAGE>
The following table sets forth selected Brazilian economic indicators for
the years indicated:
SELECTED BRAZILIAN ECONOMIC INDICATORS
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
THE ECONOMY
Gross domestic product ("GDP"):.......................... $ 330.7 328.2 341.7 355.6 370.5
(in billions of constant 1994 REAIS(a)
(in billions of dollars)(b)............................ 436.8 449.9 484.9 528.0 650.0
Real GDP growth (decline)(a)............................. 0.3% (0.8)% 4.2% 5.9% 4.2%
Population (millions).................................... 147.1 149.4 151.6 153.7 156.6
GDP per capita (in US$)(c)............................... $ 2,970.0 3,012.0 3,199.0 3,435.0 4,151.0
Unemployment rate(d)..................................... 4.83% 5.76% 5.31% 5.06% 4.7%
Consumer price increase (FIPE) (rate of change)(e)....... 458.6% 1,129.4% 2,491.0% 941.3% 23.1%
Nominal devaluation rate(f).............................. 528.5% 1,059.0% 2,532.5% 613.4% 15.0%
Domestic real interest rate(g)........................... 6.7% 30.2% 7.1% 24.8% 33.4%
Balance of payments (in billions of dollars):
Exports.................................................. $ 31.6 35.8 38.6 43.5 46.5
Imports.................................................. 21.0 20.6 25.3 33.1 49.6
Current account.......................................... (1.4) 6.1 (0.6) (1.5) N.A.
Capital account.......................................... 0.8 10.3 10.7 9.2 N.A.
Change in total reserves(h).............................. (0.6) 14.4 8.4 6.6 13
Total official reserves.................................. 9.4 23.8 32.2 38.8 51.8
PUBLIC FINANCE
Primary surplus (deficit) as % of GDP(i)................. 2.9 1.6 2.3 5.1 0.4
Real interest expense as % of GDP........................ (1.6) (4.6) (2.4) (3.7) 5.4
Operational surplus (deficit) as % of GDP(j)............. (.2) (2.8) (1.2) 1.3 (5.0)
PUBLIC DEBT (in billions of US dollars)
Gross internal debt (nominal)(k)......................... 71.6 97.6 101.0 191.3 256.4
Gross external debt (nominal)(l)......................... 100.8 99.6 104.5 118.2 130.9
Net Public debt.......................................... 144.3 150.6 149.4 181.5 217.1
Internal............................................... 52.9 74.8 84.0 128.9 176.3
External............................................... 91.4 75.8 65.4 52.6 40.9
</TABLE>
- ------------------------
Notes:
(a) Calculated based upon constant average 1994 REAIS.
(b) Converted to dollars based on the weighted average exchange rate for each
year.
(c) Not adjusted for purchasing parity.
(d) Average annual unemployment rate of the metropolitan regions of Belo
Horizonte, Porto Alegre, Recife, Rio de Janeiro, Salvador and Sao Paulo.
(e) The FIPE index is one indicator of inflation. While many inflation
indicators are used in Brazil, the FIPE is calculated by the Foundation for
Economic Research at the University of Sao Paulo, an independent research
organization, and is one of the most widely utilized indices.
(f) Year on year percentage devaluation of the REAL against the US dollar (sell
side).
(g) Brazilian federal treasury securities deflated by the GPI-DS., General Price
Index-Domestic Supply calculated by the Getulio Vargas Foundation.
(h) Because of the impact of "Errors and omissions" and adjustments for
valuation/devaluation of other currencies against the US dollar,
monetization/demonetization of gold and reclassified assets, figures
regarding changes in total reserves do not reflect the sum of the "Current
account" and the "Capital account." See "Balance of Payments and Foreign
Trade--Balance of Payments."
(i) The primary surplus results represent Government revenues less
expenditures, excluding interest expenditures on public debt.
(j) The operational balance reflects the consolidated fiscal balance less
interest expenditures, adjusted for the effects of inflation.
(k) Consolidated debt, calculated as the gross internal debt less credits
between governmental entities.
(l) Gross external debt less total reserves.
SOURCES: IBGE; GETULIO VARGAS FOUNDATION; CENTRAL BANK.
B-2
<PAGE>
REAL PLAN AND CURRENT ECONOMIC POLICY
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 was formulated as a three-stage process: 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 US$22.0 billion (4.2% of GDP). 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 Emergency Social Fund ("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 investment, (iv) new taxes, including a new levy on
financial transactions and (v) recovery of mandatory Social Security
Contributions ("COFINS"), due to judicial acknowledgment that such contributions
were permissible under the Constitution.
The centerpiece of the first stage of the Real Plan was the creation in 1994
of the ESF, the mandate for which has been renewed for the current year through
1997. The ESF enables the Federal Government to temporarily break certain
constitutionally mandated links between revenue and expenditure. Pursuant to
this amendment, 20.0% 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, Congress did not modify the
existing provisions requiring the Federal Government to share a significant
portion of its revenues with the States and municipalities.
The second stage of the Real Plan, initiated on 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 account. The process of
rehabilitation of the national currency began with the creation and
dissemination of the UNIDADE 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
drawn from three price indices: the National Consumer Price Index (Extended)
developed by the IBGE; the General Price Index (Market) calculated by the FGV
and the Consumer Price Index developed by the Institute of Economic Research
Foundation ("FlPE"). The URV index 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 (although the CRUZEIRO
REAL was generally accepted until August 31, 1994). Just after its introduction,
the REAL appreciated significantly; the REAIS/US dollar exchange rate (sell
side) in the commercial market, set at 1.00 REAL/1.00 US dollar when the REAL
was introduced, stood at 0.846 REAIS/US dollar on December 31, 1994. In March
1995, the government adopted an exchange rate band and since then a policy to
avoid further exchange rate
B-3
<PAGE>
overvaluation has been followed. The REAL/US dollar exchange rate was set at
0.973 on December 31, 1995 (sell side), which meant a devaluation of 15% of the
REAL against the US dollar. On August 23, 1996 the REAL/US rate was set at 1.015
(sell side).
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.
GROSS DOMESTIC PRODUCT
Brazil's economic growth has fluctuated greatly in recent years. The average
real growth rate of GDP during the six-year period from 1990 to 1995 was 1.5%,
but real GDP growth was negative in both 1990, when it declined by 4.4%, and
1992, when it declined by 0.8%. During this period, the services and agriculture
sectors grew at average rates of 2.3% and 2.8%, respectively, while the
industrial sector increased by 0.2%. During 1993, the Brazilian economy
recovered: real GDP grew by 4.2%, the industrial sector grew by 6.9% and the
services sector grew by 3.5%. Agriculture was the only principal sector to
decline during 1993, by 1%. In 1994, the agricultural sector recovered,
registering a growth rate of 8.1%, due primarily to the record grain harvest,
which reached 75.2 million tons. In 1994, the industrial and services sectors
grew at rates of 7.0% and 4.1%, respectively, and GDP grew 5.9%. In 1995,
overall GDP growth was 4.2%, with agriculture and services growing 5.9% and
5.7%, respectively, and industry growing 2%.
B-4
<PAGE>
The following table sets forth Brazil's real GDP for each of the years
indicated:
REAL GROWTH (DECLINE) OF GDP PER SECTORS (% OF CHANGE)
<TABLE>
<CAPTION>
1991 1992 1993 1994
--------- ----- --------- ---------
<S> <C> <C> <C> <C>
Total GDP................................................................... 0.3 (0.8) 4.2 5.9
Agriculture................................................................. 2.8 5.4 (1.0) 8.1
Industry.................................................................... (1.8) (3.8) 6.9 7.0
Mining.................................................................... 0.9 0.8 0.6 4.7
Manufacture
Building.................................................................. (3.5) (6.6) 4.8 6.1
Public Utilities.......................................................... 4.3 1.6 3.7 2.4
Services.................................................................... 1.6 0.0 3.5 4.1
Retail Sales.............................................................. 0.0 (2.5) 6.7 5.9
Transportation............................................................ 2.5 2.4 4.2 4.3
Communication............................................................... 19.6 5.7 10.7 13.6
Financial Institutions...................................................... (8.0) (4.6) (2.2) (2.8)
Public Administration....................................................... 1.6 1.5 1.5 1.4
<CAPTION>
1995
---------
<S> <C>
Total GDP................................................................... 4.2
Agriculture................................................................. 5.9
Industry.................................................................... 2.0
Mining.................................................................... 3.1
Manufacture
Building.................................................................. 0.1
Public Utilities.......................................................... 7.5
Services.................................................................... 5.7
Retail Sales.............................................................. 7.4
Transportation............................................................ 3.9
Communication............................................................... 24.3
Financial Institutions...................................................... (7.4)
Public Administration....................................................... 1.4
</TABLE>
- ------------------------
SOURCE: IBGE and Central Bank.
PRIVATIZATION PROGRAM
The Federal Government, directly or through various state-owned enterprises,
owns many companies and controls a major portion of activities in the mining and
oil and gas sectors. Energy production, rail transport, postal services and
telecommunications are all directly or indirectly controlled by the Federal
Government. The public sector grew very rapidly during the 1970s and continues
to play a significant role in Brazil's economy.
To reduce its participation in the economy, the Federal Government has
engaged in the privatization of certain State enterprises. The objectives of the
privatization program are (i) to reduce the role of the State in the economy and
allocate more resources to social investment, (ii) to reduce the public sector
debt, (iii) to encourage increased competition and thereby raise the standards
and efficiency of Brazilian industry and (iv) to strengthen the capital markets
and promote wider share ownership. As originally presented, the PLANO REAL
contemplated constitutional amendments which would permit private participation
in the State-controlled petroleum and telecommunication sectors and in other
areas that had constitutionally mandated monopolies, such as pipeline
distribution of gas and the shipping industry. These amendments were not adopted
during the constitutional review that concluded on May 31, 1994, but the
amendments were presented to Congress again in 1995 and all have been approved.
A council directly subordinate to the President (the CONSELHO NACIONAL DE
DESESTATIZACAO or "Privatization Council") along with BNDES are responsible for
administering the privatization program. To date, privatizations have, for the
most part, been effected through share auctions conducted on Brazil's stock
exchanges.
As of February 29, 1996, a total of 42 State enterprises had been
privatized, and several minority interests held by Government companies had been
sold for nominal consideration (consisting of Brazilian currency or devalued
debt issued by the Federal Government, its agencies or State- controlled
enterprises and redeemable at face value) totaling US$9.6 billion.
For 1996, plans are to privatize electric utilities and rail transport
services companies. In February 1995, the LEI DE CONCESSOES DE SERVICOS PUBLICOS
("Public Services Concessions Law") was enacted permitting investment in the
electricity sector by private companies or individuals. In addition,
B-5
<PAGE>
on July 7, 1995, Congress approved Law No. 9074, which permits independent,
third-party producers of electricity to compete with the State monopolies. The
President has also sent to Congress a constitutional amendment that would allow
the private sector to build and operate hydroelectric plants. Within the
electricity sector, priority is being given to the privatization of Light S.A.,
the auction of which took place in May 1996. Escelsa, the other distribution
company owned by the Federal Government, was privatized on July 11, 1995. During
the first quarter of 1997, the government plans to privatize the Companhia Vale
do Rio Doce ("CVRD") conglomerate, one of the largest corporations in Brazil and
the largest explorer of iron ore in the world.
Several Brazilian labor unions have opposed certain of the privatization
measures proposed by the Federal Government, but the Federal Government has to
date been able to move forward with its program despite such opposition.
In addition to the privatization program, the Federal Government has sought
to reduce the regulation of economic activity generally. Important developments
in this regard include the trade liberalization and the termination of most
price controls. The Federal Government has also acted to deregulate certain
segments of the economy, including fuel and oil derivatives, airlines, shipping
and steel, and is introducing measures designed to increase competition in areas
such as highway maintenance and transportation, areas which were previously
controlled, in most cases, by Government enterprises.
PRICES
Brazil has experienced high and chronic inflation for many years, which
hindered investment and economic growth and contributed to income inequality.
Inflation and certain Federal Government measures taken to combat inflation have
had significant negative effects on the Brazilian economy generally, on the
fiscal accounts of the Federal Government and on its ability to service its
external debt. See "Public Finance" and "Public Debt."
B-6
<PAGE>
The following table sets forth consumer price increases in the city of Sao
Paulo, as measured by the FIPE price index.
<TABLE>
<CAPTION>
FIPE CONSUMER PRICES
--------------------------
<C> <S> <C> <C>
TRAILING
PERIOD MONTHLY 12 MONTHS(A)
- ----------- ----------- -------------
1989 December....................................................................... 1,635.90%
1990 December....................................................................... 1,639.10
1991 December....................................................................... 458.60
1992 December....................................................................... 1,129.50
1993 December....................................................................... 2,490.10
1994 December....................................................................... 941.30
1995 January........................................................................ 0.80 648.10
February....................................................................... 1.32 448.50
March.......................................................................... 1.93 293.89
April.......................................................................... 2.64 176.49
May............................................................................ 1.97 94.31
June........................................................................... 2.66 32.32
July........................................................................... 3.72 28.33
August......................................................................... 1.43 27.67
September...................................................................... 0.74 27.57
October........................................................................ 1.48 25.48
November....................................................................... 1.14 23.19
December....................................................................... 1.21 23.14
1996 January........................................................................ 1.82 24.39
February....................................................................... 0.40 23.26
March.......................................................................... 0.23 21.20
April.......................................................................... 1.62 20.00
May............................................................................ 1.34 19.26
June........................................................................... 1.41 17.81
July........................................................................... 1.31 15.07
</TABLE>
- ------------------------
Notes:
(a) Annual figures for each month from January 1995 represent trailing 12-month
inflation rates.
SOURCE: Institute for Economic Research (FIPE).
Throughout the 1980s Brazil experienced periods of severe inflation. In
1986, President Jose Sarney's government endeavored to confront the problem with
the Cruzado Plan, which sought to end inflation via a general price and wage
freeze and the introduction of a new currency. The plan succeeded in bringing
down inflation for the year to 68.1% as measured by the FIPE index of consumer
prices in Sao Paulo and was very popular for a time. The Cruzado Plan, however,
eventually created serious distortions in the economy as well as shortages and
finally failed, resulting in renewed high inflation.
From 1987 through 1990, annual inflation rates rose from a year-end low of
367.2% in 1987 to close 1990 at 1,639.1% for the year. The new government of
President Fernando Collor de Mello tried a number of plans to ameliorate the
situation but, after some success at first with inflation falling to 458.6% in
1991, failed to stabilize prices.
During the planning stages of the current Real Plan in 1993, inflation rose
to levels around 30% per month and 2,490.1% for the year. In the implementation
of the Real Plan in mid-1993, the Unit of Real Value ("URV") was implemented as
a general price and wage index that would peg real prices to the value of the
dollar and adjusted based on depreciation of the currency as well as inflation.
This served to
B-7
<PAGE>
downplay the effects of inflation to the public since both prices and wages
would be adjusted automatically to compensate. This allowed the nominal
currency, the CRUZEIRO REAL to become de-linked from price expectations allowing
inflation measured in the nominal currency to reach 50% per month while the real
value of wages and prices were kept constant by the URV.
Since the implementation of the third phase of the Real Plan, including the
introduction of the real, in July 1994, the rate of inflation has decreased
significantly. See "Real Plan and Current Economic Policy." The high monthly
rates of inflation experienced in the first half of 1994 have fallen to single
digits. Residual inflation from the end of the first six months of 1994 resulted
in a monthly inflation rate of approximately 5.5% for July. The gradual decline
of the impact of these factors resulted in decreasing inflation rates, reaching
1.55% for the month of September. In October and November, the inflation rate
moved upward approximately one percentage point due to seasonal factors,
accentuated by a long period of drought in the producer regions. In December,
the inflation rate dropped to 0.57% as the supply of farm products normalized.
In January 1995, the inflation rate reached 1.36% impacted by rises in natural
resource products prices and costs of building. Less intense upwards movement in
these factors caused the rate of inflation to decrease to 1.15% in February
1995. The inflation rate reached 1.8% and 2.3% in March and April 1995,
respectively. The acceleration in the rate of inflation was caused primarily by
the increase in industrial prices, housing and clothing costs. After another
decline in May to 0.4%, inflation rose to 2.62% and 2.24% in June and July 1995,
respectively. This acceleration resulted from a rise in public transport fares.
In September and October a sharp decline in farm product prices reduced
inflation significantly. In January 1996, the increase in inflation was caused
by a rise in electricity and telephone prices.
BALANCE OF PAYMENTS AND FOREIGN TRADE
GENERAL
Like other countries in Latin America, Brazil's balance of payments
deteriorated in the early 1980s as the result of a series of adverse economic
developments. These developments were further exacerbated by rising US dollar
interest rates, which increased the cost of servicing Brazil's external debt and
led to current account deficits, the debt crisis and curtailment of Brazil's
access to international financial markets.
Since 1992, however, Brazil has experienced an increase in capital inflows,
as foreign investments, have surged. Net direct investments increased to over
US$2.9 billion from in 1995, from US$1.7 billion in 1994 and US$901 million in
1990. For the period of January 1996 through June 1996, foreign direct
investment totaled US $4.5 billion. Foreign reserves edged up during the 1990s.
From December 31, 1990 to December 31, 1995, the foreign reserves maintained by
the Central Bank increased by 451%, totaling US$51.8 billion at December 31,
1995, which covered approximately 13 months of imports of goods, or 8 months of
imports of goods and services.
Since 1990, the Federal Government's economic policies have increased the
importance of the external sector of the economy. Recent reforms directly
affecting the external sector include a reduction in import tariffs, the
negotiation of the Mercosul free trade agreement among Brazil, Argentina,
Uruguay and Paraguay, the liberalization of certain foreign exchange
transactions and the liberalization of foreign investment regulations.
B-8
<PAGE>
BALANCE OF PAYMENTS
The following table sets forth information regarding Brazil's balance of
payments for each of the years indicated:
BALANCE OF PAYMENTS
IN US$ MILLION
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
--------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
CURRENT ACCOUNT..................................... $ (1,407) $ 6,143 $ (592) $ (1,689) $ (17,784)
Trade balance..................................... 10,579 15,239 13,307 10,466 (3,157)
Exports......................................... 31,620 35,793 38,563 43,545 46,506
Imports......................................... 21,041 20,554 25,256 33,079 49,663
Services (net).................................... (13,542) (11,339) (15,585) (14,743) (18,600)
Interest.......................................... (8,621) (7,253) (8,280) (5,668) (8,158)
Other............................................. (4,921) (4,086) (7,305) (8,405) (10,442)
Unilateral transfers.............................. 1,558 2,243 1,686 2,568 3,973
Revenues........................................ 1,599 2,315 1,792 2,751 4,224
Expenditures.................................... 43 72 106 183 251
CAPITAL ACCOUNT..................................... (4,148) 25,271 10,115 14,294 29,820
Investment (net).................................. 170 2,972 6,170 8,131 4,670
Reinvestment...................................... 365 175 100 83 200
Financing......................................... 2,026 13,258 2,380 1,939 2,641
Foreign......................................... 2,125 13,191 2,625 2,389 3,487
Brazilian....................................... (99) 67 (245) (450) (845)
Amortizations..................................... (7,830) (8,572) (9,978) (50,411) (11,026)
Paid............................................ (7,830) (7,147) (9,288) (11,001) (11,026)
Refinanced (incl. Paris Club)................... 0 1,425 (710) (39,410) 0
Currency loans.................................... 964 17,577 11,659 53,802 34,403
Short-term...................................... (3,033) 2,602 869 909 19,667
Long-term....................................... 3,997 14,975 10,790 52,893 14,736
Other capital..................................... 157 (139) (215) 750 (1,068)
ERRORS AND OMISSIONS................................ 876 (1,386) (1,119) 334 1,444
SURPLUS (DEFICIT)................................... (4,679) 30,028 8,404 12,939 13,480
FINANCING........................................... 4,679 (30,028) (8,404) (12,939) (13,480)
Assets (increase)................................. 369 (14,670) (8,709) (7,215) (12,919)
Use of IMF credit................................. (590) (406) (495) (129) (47)
Short-term liabilities............................ 4,900 (14,952) 800 (5,593) (514)
Arrears........................................... 5,621 (14,259) 1,133 (5,535) (510)
Others............................................ (721) (699) (333) 58 (4)
</TABLE>
In 1995, Brazil's balance of payments registered a surplus of US$13.5
billion. In 1994 and 1993 the surplus in Brazil's balance of payments reached
US$12.9 billion and US$8.4 billion, respectively.
After recording a US$6.1 billion current account surplus in 1992, Brazil
registered a US$592 million Current account deficit in 1993. Among the factors
that led to that decline were reductions of 12.7% and 24.8% in the trade surplus
and the net inflow of Unilateral transfers, respectively, and an increase of
37.4% in the service deficit, reflecting an increase both in external debt
service costs and expenses related to other services. In 1994, the Current
account registered a deficit of US$1.7 billion due to a decrease of 21.3% in the
trade surplus. The reduction in the trade surplus resulted from a 31.0% increase
in imports, which totaled US$33.1 billion, caused by a significant increase in
imports of consumer goods and capital goods as a result of the Real Plan.
Exports increased by 12.9% in 1994, totaling US$43.6 billion. In 1995 the
Current account turned sharply negative as imports grew 50.1% while exports grew
B-9
<PAGE>
by a mere 6.8%. This growth in imports was primarily the result of an
appreciation of the real and the release of pent-up demand from the stability in
the new currency. Overall trade balance figures for 1995 showed a deficit of
US$3.2 billion, with exports of US$46.5 billion and imports of US$49.7 billion.
Despite the development of a the first trade deficit in many years, Brazil's
Capital account surplus grew to a record US$29.8 billion.
Brazil's Capital account includes direct investments, portfolio investments
and short, medium and long-term indebtedness. The Capital account has registered
a surplus since 1992 and in 1995 the surplus climbed 108.6% to reach US$29.8
billion. In 1994, the Capital account rose to US$14.3 billion mainly as a result
of the Brady program which resulted in a 361.4% increase in Currency loans to
US$52.9 billion. During 1995, although Currency loans declined when compared to
the previous year, the rise in short-term inflows by US$18.8 billion was still
impressive when compared to 1993. Overall Currency loans totaled US$34.4 billion
in 1995.
FOREIGN TRADE
The following table sets forth certain details regarding Brazil's foreign
trade for the years indicated:
PRINCIPAL FOREIGN TRADE INDICATORS
<TABLE>
<CAPTION>
1991 1992 1993 1994
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Exports as % of GDP........................................... 7.2% 8.0% 8.0% 8.2%
Imports as % of GDP........................................... 4.8 4.6 5.3 6.2
Trade balance as % of GDP..................................... 2.4 3.4 2.7 2.0
Growth (decline) in foreign trade(a).......................... 1.1 7.0 13.7 19.7
Exports: % increase (decrease)(b)............................. 0.7 13.2 7.8 12.9
Imports: % increase (decrease)(b)............................. 1.8 (2.3) 24.0 30.2
Trade balance: % change from prior period..................... (1.6) 44.0 (13.9) (20.8)
Exports/Imports(c)............................................ 1.5x 1.7x 1.5x 1.3x
<CAPTION>
1995
-------------
<S> <C>
Exports as % of GDP........................................... 7.0%
Imports as % of GDP........................................... 8.0
Trade balance as % of GDP..................................... (0.5)
Growth (decline) in foreign trade(a).......................... 25.5
Exports: % increase (decrease)(b)............................. 7.0
Imports: % increase (decrease)(b)............................. 50.0
Trade balance: % change from prior period..................... (131)
Exports/Imports(c)............................................ 0.94x
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
EXPORTS:
US$ in millions................................. $ 31,620 $ 35,793 $ 38,563 $ 43,545 $ 46,506
1,000 tons...................................... 165,974 167,295 182,323 194,880 N.A.
% change from period(d)......................... (1.3)% 0.8% 9.0% 6.9% N.A.
IMPORTS:
US$ in millions................................. $ 21,041 $ 20,554 $ 25,256 $ 33,079 $ 49,663
1,000 tons...................................... 63,278 68,057 77,813 84,819 N.A.
% change from prior period(d)................... 10.7% 7.6% 14.7% 8.6% N.A.
Trade balance..................................... $ 10,579 $ 15,239 $ 13,307 $ 10,466 $ (3,157)
</TABLE>
- ------------------------
Notes:
(a) Percentage change in exports and imports from previous year.
(b) Percentage change from previous year.
(c) Exports divided by imports.
(d) Percentage change in volume, by weight.
SOURCE: Central Bank
Overall trade flows in 1995 totaled a record US$96.2 billion, representing
an increase of 25.5% over those of the previous year.
In addition to maintaining an export financing program, PROEX, which in 1991
replaced the previous FINEX program, the Federal Government has adopted a series
of measures aimed at promoting foreign trade. The Federal Government has
attempted to encourage domestic competition by liberalizing imports through the
elimination of certain non-tariff restrictions, such as the list of goods with
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<PAGE>
respect to which the issuance of import licenses had been suspended, the
requirement that traders submit their import requirements to the Federal
Government in advance and the linking of certain imports to exports.
In 1991, the Federal Government announced a schedule for tariff reductions
for a three-year period ending in January 1994, aimed at attaining rates varying
from zero to 40%, with an average tariff of 14.2%. As of February 1992, further
tariff reductions were made, with adjustments every nine months instead of at
one-year intervals. Accordingly, the reduction in tariffs to an average rate of
16.8% from 20.8% originally scheduled for January 1, 1993 was implemented on
October 1, 1992. The Federal Government implemented the last set of scheduled
tariff reductions on July 1, 1993, when the average duty and the maximum tariff
were reduced to 14.2% and 40%, respectively.
The Federal Government also reduced tariffs to moderate domestic price
increases to support the Real Plan. In September and October 1994 it implemented
significant new tariff reductions, covering over 5,000 products and reducing the
average tariff to 11.32%. In September 1996, the government removed the ICMS
export tax. This tax was applied to a broad range of mostly primary goods and
its removal is expected to boost export competitiveness.
Average tariffs are also being reduced as a result of Brazil's
implementation of a schedule of preferences from its current tariffs applicable
to imports from Mercosul countries. The preference, which was a 75% reduction
from otherwise applicable rates during the second half of 1993 and 82% during
the first half of 1994, was raised to 89% beginning on July 1, 1994 and to 100%
beginning on January 1, 1995, although certain products were excepted from this
discount. In December 1994, the four member countries of Mercosul established
January 1, 1995 as the date for the implementation of the Common External Tariff
("CET"), intended to transform the region into a customs union. The CET ranges
from 0.0% to a maximum of 20.0%, but each member country was allowed a list of
300 exceptions (399 in the case of Paraguay) to the CET. The products on each
country's list of exceptions have tariffs varying from the CET, but such tariffs
are scheduled to be reduced automatically each year until 2001, at which time
such tariffs will equal the CET rates. The introduction of the CET has raised
Brazil's average tariffs slightly, to 11.99%.
In February 1995, the Minister of Finance increased the import tariff on
passenger cars to 32.0% from 20.0%, with a scheduled reduction of 2.0 percentage
points each year until reaching 20.0% again in 2001. In addition, in order to
reduce the current account deficit, in March 1995, the Minister of Finance
increased to 70.0% the import tariff on roughly 100 durable consumer goods,
including passenger cars (but not utility vehicles), home appliances and
electric and electronic equipment, to be in effect for a period of one year. In
May 1995, the tariff on utility vehicles was raised to 70.0%. In April 1995,
approximately 20 of such durable goods had their tariffs reduced to a range
between 40.0% and 63.0% to meet the tariff level established in GATT
negotiations. Passenger cars and utility vehicles will also have their maximum
tariffs reduced to 63.0% as of January 1, 1997, 49% as of January 1, 1998, 35%
as of January 1, 1999 and 20% as of January 1, 2000, which is the CET level. A
recent agreement with the European Union, Japan and the Republic of Korea will
result in a reduction to 30% in the import tariff on up to 50,000 vehicles per
year.
Brazil's list of exceptions to the CET was published in April 1995 revised
in May 1995, encompassing 460 products (including those that had their tariffs
increased in March and May 1995), some of which are expected to remain on the
list until 2001, while others of which may be withdrawn or have their tariffs
altered in order to assure domestic supply or to prevent domestic speculative
price movements.
Brazil is a signatory to the Final Act of the GATT Uruguay Round, pursuant
to which it is committed to staged reductions in tariffs beginning in 1995, over
five years with respect to industrial products and over ten years with respect
to agricultural products.
B-11
<PAGE>
FOREIGN INVESTMENT
Foreign investment in Brazil has traditionally focused on direct investment
in the manufacturing sector. Beginning in 1991, foreign investment increased
substantially, surpassing the levels reached during the period from 1973 to
1982, before the debt crisis. In 1994, net foreign direct investment increased
by more than US$1 billion, to reach US$1.7 billion, while the net portfolio
investment decreased US$1.9 billion, reaching US$11.6 billion. Figures indicate
that in 1995 net foreign direct investment reached US$3.0 billion while net
portfolio investment was US$4.8 billion.
The following table sets forth information regarding foreign investment in
Brazil for each of the years indicated.
FOREIGN INVESTMENT IN BRAZIL (IN US$)
<TABLE>
<CAPTION>
INFLOWS OUTFLOWS NET INFLOWS
----------------------------------- ------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO(A) DIRECT(B) TOTAL PORTFOLIO(A) DIRECT(B) TOTAL PORTFOLIO(A) DIRECT(B)
----------- ----------- --------- ----------- ------------- --------- ----------- -----------
1990................. 824 1,131 1,955 245 230 475 579 901
1991................. 4,187 1,095 5,282 378 123 601 3,809 972
1992................. 9,930 1,749 11,709 2,594 189 2,763 7,366 1,580
1993................. 23,554 1,302 24,854 10,019 580 10,599 13,451 722
1994................. 32,621 2,356 30,265 21,046 618 21,664 11,575 1,738
1995................. 25,559 3,285 25,844 17,806 315 18,121 4,753 2,970
<CAPTION>
<S> <C>
TOTAL
---------
1990................. 1,480
1991................. 4,781
1992................. 8,946
1993................. 14,173
1994................. 9,837
1995................. 7,723
</TABLE>
- ------------------------
Notes:
(a) Includes bonds, commercial paper and notes, except those related to external
debt restructuring bonds.
(b) Includes reinvestment of earnings.
SOURCE: Central Bank.
In March 1995, the Federal Government eased certain restrictions on foreign
lending and investment in response to the deterioration in the current account.
Such measures included the reduction of the IOF on foreign capital inflows, if
over a certain maturity, to 0.0% from 7.0% on loans, to 5.0% from 9.0% on
investments in foreign capital fixed income funds and to 0.0% from 1.0% on
portfolio investments. In August 1995, responding to the strong capital inflows
of the end of the second quarter of 1995, the government increased restrictions
on foreign lending and investments. The IOF charged on bonds and loans issued
abroad was increased to 5% and the IOF charged on fixed income funds was
increased to 7%. In February 1996, the Government increased to 3 years the
minimum term for the issuance of bonds, and in October 1996 established the
following IOF charges:
(i) 3% for loans with a minimum maturity of less than 3 years;
(ii) 2% for loans with a minimum maturity of or in excess of 3 years but
less than 4 years;
(iii) 1% for loans with a minimum maturity of or in excess of 4 years
but less than 5 years; and
(iv) 0% for loans with a minimum maturity of or in excess of 5 years.
PUBLIC FINANCE
CONSOLIDATED PUBLIC SECTOR FISCAL PERFORMANCE
The consolidated public sector is comprised of the Federal Government, the
several State enterprises, and State and local governments. In turn, the Federal
Government consolidates the accounts of the National Treasury, the social
security system, and the income and loss statement of the Central Bank, but not
the proceeds from privatization. With the adoption of several important
structural reforms in recent years, the Federal Government has established as
its objective a substantial improvement in the fiscal performance of the
consolidated public sector as measured by the operational results.
Brazil reports its fiscal balance using two principal measures, all of which
are calculated according to the official statistical guidelines of the IMF:
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<PAGE>
- PRIMARY BALANCE, which is the financial balance less net borrowing costs
of the Federal Government.
- OPERATIONAL BALANCE, which is similar to primary balance but excludes the
inflationary component of interest payments on domestic debt of the
non-financial public sector. This balance is the primary balance plus
accrued real interest on the external and domestic debt. This balance is
used to correct the distortions which affect the measurement of public
finances in an inflationary environment.
Brazil generated a consolidated primary surplus in each year from 1990 to
1995. However, real interest expense (both domestic and external) on the public
debt accounted for the operational deficits registered during most of the
period. In 1994, a significant increase in tax revenues, due to the reduction in
inflation and to the economic boom, increased the primary surplus to 5.1% of GDP
while the real interest expense on the public debt reached 3.7% of GDP.
Consequently, Brazil posted an operational surplus of 1.1% of GDP in 1994
compared with a deficit of 2.2% in 1992 and a surplus of 0.2% in 1993. In 1995,
the operational deficit reached 4.95% of GDP due to real interest expenses which
totaled 5.4% of GDP while in the primary concept a surplus of 0.45% of GDP was
registered.
Set forth below are the public sector borrowing requirements since 1990:
PUBLIC SECTOR BORROWING REQUIREMENTS HISTORICAL SUMMARY(A)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SELECTED ECONOMIC INDICATORS(b)
Real GDP growth (decline).......................................... 0.2% (0.8)% 4.2% 5.9% 4.2%
Monetary base (end of period) change............................... 291.2 991.3 1,953.2 308 22.60
Real interest rate(c).............................................. 6.7 30.1 7.1 24.8 33.5
PUBLIC FINANCE(d)
Financial result................................................... (24.4)% (44.3)% (58.4)% (44.4)% 7.4%
Primary result..................................................... 3.0 2.4 2.6 5.1 0.4
Real interest...................................................... (1.6) (4.6) (2.4) (3.7) (5.4)
Domestic........................................................... 0.4 (3.2) (0.9) (3.0) (4.7)
External........................................................... (2.0) (1.4) (1.5) (0.7) (0.7)
Operational result................................................. 1.4 (2.2) 0.2 1.1 (5.0)
Domestic financing................................................. 3.7 (3.3) 0.2 2.4 7.8
External financing................................................. 0.0 2.8 2.4 2.7 (3.3)
Issue of money..................................................... (2.3) (2.7) (2.4) (4.1) 0.5
</TABLE>
- ------------------------
Notes:
(a) Surplus (deficit).
(b) Deflated by official government deflator.
(c) Implicit real interest rate on public sector internal debt.
(d) All figures expressed as a percentage of GDP.
SOURCE: Central Bank.
PUBLIC DEBT
GENERAL
Public sector debt ("public debt") in Brazil consists of the internal and
external debt of the Federal Government, State and local governments and public
sector enterprises. Pursuant to the Constitution, the Brazilian Senate is vested
with powers to establish, upon a request by the President, (i) global limits for
the consolidated debt of the Government, States, and municipalities, (ii) the
terms and conditions of the internal and external financial transactions of the
Federal Government, including public sector enterprises, at all levels of
government, and (iii) the terms and conditions for guarantees of the Government
of any internal and external financial transaction. Furthermore, any external
financial transaction entered into at any level of government must be authorized
by the Senate.
B-13
<PAGE>
The following table sets forth the consolidated gross and net debt of the
public sector as at December 31 for each of the years 1991 through 1995:
PUBLIC SECTOR DEBT
IN US$ MILLION
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED GROSS PUBLIC SECTOR DEBT(a)........ $ 172,371 $ 196,733 $ 205,460 $ 309,530 $ 387,340
Internal...................................... 71,557 97,159 100,990 91,340 256,420
External(b)................................... 100,834 99,574 104,470 118,190 130,920
BY SECTOR, FEDERAL GOVERNMENT AND CENTRAL BANK
Gross debt.................................... 99,904 120,105 124,820 203,840 247,920
Internal...................................... 33,965 52,039 57,160 126,600 170,650
Securities debt............................. 11,561 36,403 42,060 71,400 116,340
Other debt(c)............................. 22,404 15,636 15,100 55,200 54,310
External...................................... 65,939 69,663 67,660 74,240 77,270
Credits
Internal.................................... (41,480) (49,128) (48,810) (87,060) (104,270)
Public sector(d).......................... (26,179) (27,697) (34,440) (30,780) (32,830)
Other(e).................................. (15,301) (21,431) (14,470) (56,280) (71,440)
External(f)................................. (9,406) (23,754) (32,210) (38,810) (51,260)
STATE AND LOCAL GOVERNMENT
Gross debt.................................... 29,098 39,263 43,540 63,520 81,750
Internal.................................... 24,887 34,861 38,940 61,380 79,350
External.................................... 4,211 4,402 4,600 2,140 2,400
Credits
Internal.................................... (1,103) (1,843) (1,370) (2,990) (4,580)
Public sector(d).......................... 0 0 0 0 0
Other(e).................................. (1,103) (1,843) 1,370 (2,990) (4,580)
External(f)................................. 0 0 0 0 0
STATE ENTERPRISES
Gross debt.................................... 69,568 65,062 64,650 46,140 51,730
Internal.................................... 38,884 39,549 39,330 34,140 39,250
External.................................... 30,684 25,510 25,320 11,980 12,480
Credits
Internal.................................... (935) (1,131) (1,240) (3,183) (4,150)
Public sector(d).......................... (692) (870) (1,090) (2,735) (3,800)
Other(e).................................. (243) (261) (15) (45) (35)
External(f)................................. 0 0 0 0 0
NET PUBLIC SECTOR DEBT(g)....................... 144,286 150,594 149,390 181,500 217,140
Internal...................................... 52,858 74,776 84,000 128,900 176,250
External...................................... 91,428 75,818 65,390 52,600 40,890
</TABLE>
- ------------------------
Notes:
(a) Consolidated gross public sector debt consolidates debts between public
sector entities.
(b) Includes short-term debt obligations.
(c) Includes monetary base, CRUZADOS NOVOS in accounts frozen under the Collor
Plan, compulsory deposits required upon release of frozen accounts, other
deposits of the financial system with the Central Bank and federal
securities that can be used in the national privatization program.
(d) Internal public sector credits owed by other public sector entities. These
amounts are consolidated into the consolidated gross public sector debt
amounts above.
(e) Other internal credits consist primarily of deposits at private sector
financial institutions.
(f) External credits are equivalent to the Federal Government's international
reserves. The external credits of the Federal Government and Central Bank
include collateral acquired in connection with the April 1994 debt
restructuring.
(g) Net public sector debt is consolidated gross public sector debt less
aggregate credits of the Federal Government and Central Bank, State and
local governments and state enterprises (excluding internal public sector
credits that have been excluded from the consolidated gross public sector
debt).
SOURCE: Central Bank.
B-14
<PAGE>
In 1994, net public sector debt was approximately US$182 billion, of which
US$129 billion represented domestic indebtedness. Net public debt in 1995
reached US$217 billion, an increase of 20% from the December 1994 figure. This
result was mainly due to a 36.7% rise in the net internal debt which is related
to a significant increase registered by the federal security debt. The rise of
net public debt is also attributable in large part to the substantial increase
in the net debt of State and local governments, which stood at US$60.5 billion
in 1994 and US$77.2 billion in 1995. On the other hand, in the same period, net
external debt decreased by 22% to US$41 billion due a significant accumulation
of international reserves.
EXTERNAL DEBT
As of December 31, 1995, Brazilian foreign debt was US$159 billion.
Approximately US$125 billion of the total represented medium and long-term debt,
of which US$25 billion was owned to foreign commercial banks, US$32 billion to
international entities and government agencies, US$54 billion to bond holders
and US$14 billion to suppliers and other creditors. Most of the commercial bank
debt was denominated in US dollars and bore interest at floating rates. The
"Brady Plan"-type debt restructuring of April 1994 substantially altered
Brazil's external debt profile. While the interest arrears were capitalized, the
restructuring reduced previously outstanding principal obligations by about US$4
billion. See "Public Debt--Debt Crisis and Restructuring."
The following table sets forth details of Brazil's public sector external
debt by type of borrower for each of the years indicated:
PUBLIC SECTOR EXTERNAL DEBT BY TYPE OF BORROWER(A)
(US DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Public sector.......................................... 94,627 93,437 90,613 87,330 87,455
Registered(a)........................................ 75,423 86,669 83,515 86,864 87,168
Non registered....................................... 19,204 6,768 7,098 466 287
Private sector......................................... 29,283 42,512 55,113 60,965 71,550
Registered(a)........................................ 17,573 24,166 30,755 32,804 42,145
Non registered....................................... 11,710 18,346 24,358 28,161 29,405
Total.................................................. 123,910 135,949 145,726 148,295 159,005
External debt/% of GDP................................. 28.35% 31.11% 33.35% 33.93% 42.97%
</TABLE>
- ------------------------------
Notes:
(a) Debt with an original maturity of one year or more.
SOURCE: Central Bank.
DEBT CRISIS AND RESTRUCTURING
With the inception of the debt crisis in 1982, voluntary lending to Brazil
by commercial banks ceased. With its foreign reserves in decline, Brazil
struggled to make debt service payments by achieving substantial trade
surpluses. Emergency lending by commercial banks and multilateral organizations
in 1983 and 1984, together with rescheduling of outstanding commercial bank
debt, helped to stem the loss of reserves. In 1983, the IMF undertook to provide
Brazil with R$2 billion of Special Drawing Rights ("SDRs") (approximately US$4.6
billion, as at December 31, 1982) over a three-year period, and commercial bank
creditors agreed to reschedule US$4.5 billion in principal payments and provide
US$4.4 billion in new money. Agreement was also reached with the country's
foreign governmental (Paris Club) creditors that year, resulting in the
restructuring of 95% of Brazil's principal and interest obligations falling due
during the period from August 31, 1983 through December 31, 1984, as well as
arrearages relating to the period from January 1, 1983 through July 1, 1983 in
the aggregate amount of approximately US$3 billion. In 1984, commercial bank
creditors agreed to an additional rollover of
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US$5.2 billion in principal and a new money facility for US$6.5 billion in
additional funds. Brazil's subsequent inability to meet all of the lending
conditions established by the IMF led to a succession of new letters of intent
and periodic suspensions of IMF disbursements.
Brazil did not seek new money from commercial banks in a 1986 debt
rescheduling covering approximately US$16 billion of 1985 and 1986 medium and
long-term maturities and approximately US$15 billion of short-term trade and
interbank lines. A sharp drop in reserves in 1986 as a result of a large capital
account deficit and a sizable current account shortfall led the Federal
Government to declare a moratorium on principal and interest payments to
commercial banks in February 1987.
1988 FINANCING PLAN
In September 1988, Brazil's bank creditors agreed, among other things, to
reschedule approximately US$61 billion over a 20-year period pursuant to a
Multi-Year Deposit Facility Agreement ("MYDFA") and to provide an additional
US$5.2 billion in new money pursuant to a Parallel Financing Agreement (a
syndicated term loan), a Commercial Bank Co-financing Agreement (a parallel
co-financing with certain World Bank project and sector loans), a New Money
Trade Deposit Facility Agreement (to be used for medium-term trade finance
starting one year after original disbursement) and 1988 New Money Bonds.
Approximately US$1 billion of Brazil Investment Bonds were also issued as part
of this package, and approximately US$15 billion of short-term lines were
extended. The deal was accompanied by an IMF standby arrangement of US$1.44
billion agreed in August 1988. The IMF suspended disbursements in 1989, however,
because of the Federal Government's inability to meet public-sector deficit
targets. As a result, the third tranche (US$600 million) of the US$5.2 billion
new money package was not disbursed. With reserves once again under pressure,
the Federal Government imposed new limitations on interest payments to holders
of external commercial bank debt in July 1989.
Brazil initiated formal negotiations with commercial bank creditors in
August 1990. As of January 1991, the Federal Government permitted the full
payment of external debts owed by private sector and financial institution
borrowers and the servicing of 30.0% of interest payments due and payable by
public sector obligors. Following the promulgation of CMN Resolution 1,812, as
of April 1, 1991, the treatment previously accorded to private sector debt was
extended to the external debt obligations of Petrobras and CVRD and their
subsidiaries. In April 1991, Brazil and the Bank Advisory Committee ("BAC"),
consisting of approximately 20 of Brazil's largest commercial bank creditors,
reached agreement on the treatment of approximately US$9.1 billion in interest
arrears accrued on Brazil's external commercial bank debt up to December 31,
1990. Under the agreement, the commercial banks received US$2 billion of such
amount in 1991, and the remainder of such past due interest was exchanged for
approximately US$7.1 billion aggregate principal amount of IDU Bonds on November
20, 1992 and March 18, 1993.
1992 ARRANGEMENTS WITH IMF AND PARIS CLUB
In January 1992, Brazil reached agreement with the IMF on a standby facility
of 1.5 billion SDR (approximately US$2 billion). Of this amount, 75.0% was to
have entered the country in the form of new money, while the remaining 25.0% was
to have been used to finance the acquisition of collateral for the proposed
restructuring of Brazil's medium and long-term public sector indebtedness
described below. The standby arrangement was subsequently suspended, however,
because of Brazil's inability to meet agreed performance criteria targets,
leaving 1.37 billion SDR undrawn as of the August 31, 1993 facility expiration
date.
On February 26, 1992, Brazil reached agreement with Paris Club creditors for
the rescheduling of debt owed to other governments and governmental agencies
totaling US$12.1 billion. The agreement required Brazil to make approximately
US$4.1 billion in debt service payments in 1992 and 1993 and provided for the
rescheduling of approximately US$11 billion over a 14-year period, with a grace
period of three years. Although Brazil has completed bilateral agreements
implementing the February 1992 accord with all countries except Italy, debt
relief for some maturities was conditional on continued
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performance under the IMF standby facility, and Brazil continues to discuss the
impact, if any, of this condition with some countries.
1992 FINANCING PLAN
On July 9, 1992, Brazil and the BAC reached an agreement-in-principle on the
restructuring of Brazil's medium and long- term public sector indebtedness owed
to commercial banks, as well as on a parallel arrangement for interest arrears
accrued in respect of such indebtedness since January 1, 1991. Pursuant to that
agreement, on April 15, 1994, Brazil issued approximately US$43.1 billion
principal amount of bonds to holders of certain medium and long-term public
sector debt ("Eligible Debt") of Brazil or guaranteed by Brazil owed to
commercial banks and certain other private sector creditors in consideration for
the tender by such holders of their Eligible Debt and interest arrears accrued
in respect thereof since January 1, 1991 ("Eligible Interest"). The bonds were
issued pursuant to exchange agreements, implementing the Republica Federativa do
Brazil 1992 Financing Plan (the "Financing Plan"), which provided for the
restructuring of approximately US$41.6 billion of Eligible Debt and arrangements
for approximately US$5.5 billion of Eligible Interest. The Financing Plan was a
"Brady Plan"-type restructuring, the term coined for debt restructuring based on
the policy articulated by US Treasury Secretary Nicholas Brady in a speech
before the Third World Debt Conference in March 1989. The Brady Plan advocated
restructuring which would, among other things, (i) exchange debt for freely
transferable bonds, (ii) result in significant reductions in the level of debt
and the rate of interest payable thereon, and (iii) collateralize some types of
new bonds with the pledge of US Treasury zero-coupon obligations.
Holders of Eligible Debt exchanged their Eligible Debt for the following
types of bonds: (i) Par Bonds ("Par Bonds"), (ii) Discount Bonds ("Discount
Bonds"), (iii) Front-Loaded Interest Reduction Bonds ("FLIRBs"), (iv)
Front-Loaded Interest Reduction with Capitalization Bonds ("C-Bonds"), and (v) a
combination of New Money Bonds ("New Money Bonds"), and Debt Conversion Bonds
("Debt Conversion Bonds"). Eligible Interest was exchanged (after giving effect
to certain interest rate adjustments and cash interest payments made by Brazil
pursuant to the Financing Plan) for EI Bonds (the "EI Bonds"). The Par Bonds,
Discount Bonds, FLIRBs, C-Bonds, New Money Bonds, Debt Conversion Bonds and EI
Bonds are referred to herein collectively as the "Brady Bonds." Subject to their
respective terms, each of the Brady Bonds is eligible for use as currency in the
Brazilian privatization program.
The Financing Plan produced a reduction of US$4 billion in the stock of
Eligible Debt: the US$11.20 billion allocated to Discount Bonds will result in
the issuance of US$7.28 billion of such bonds (assuming the exchange of Phase-In
Bonds for Discount Bonds). In addition, the Federal Government estimates that
the Financing Plan will generate another US$4 billion in interest savings over
the 30-year repayment period. Upon completion of the phased delivery of
collateral (scheduled for April 15, 1996), Brazil will have defeased
approximately US$17.8 billion of its external debt in the form of Par and
Discount Bonds. The total cost of collateral to the Republic will be
approximately US$3.9 billion, of which US$2.8 billion was delivered on April 15,
1994 from the Republic's own resources; the Republic subsequently delivered
US$251.9 million of collateral as scheduled on 17th October, 1994 and US$237.1
million as scheduled on April 18, 1995.
At the Republic's option, the Brady Bonds may be redeemed at par in whole or
in part prior to their maturity. The EI Bonds and New Money Bonds also include a
mandatory redemption provision under which the Republic is required to redeem
the EI Bonds and New Money Bonds at par if the Republic prepays certain
obligations.
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ANNEX C
GLOSSARY
ABC: ABC, Inc., formerly known as "Capital Cities/ABC, Inc."
ABC CLASS HOUSEHOLDS: The highest three classes of Brazilian households
based upon the achievement of a total of 10 points or higher on the
classification scale used by the Associacao Brasileira de Anunciantes (Brazilian
Advertisers Association) to determine a household's socio-economic class, which
ranges from A to E depending on the education level of the head of the
household, the possession by the household of certain items of material comfort,
including automobiles, television sets and other household items, and the hiring
of domestic servants by the household.
ABRIL: Abril S.A., the leading magazine publishing, printing and
distribution company in Latin America.
ABRIL CREDIT FACILITY: A revolving credit facility, dated December 6, 1995,
between Tevecap, as the borrower, and Abril, as the lender.
BBC: British Broadcasting Corporation.
BCE: BCE, Inc., an affiliate of Bell Canada Inc., Canada's largest
telecommunications group.
BCI: Bell Canada International, Inc., an affiliate of BCE.
BNDES: Banco National de Desenolvimento Economico e Social, the national
development bank owned by the Brazilian Government.
BRASILSAT: A satellite operated by Embratel through which the Company
provides C-Band service.
C-BAND: A satellite transmission system which provides a signal on the "c"
bandwidth.
CABLE: A Cable network 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.
Networks may allow one-way (from a headend to a residence and/or business) or
two-way transmission from a headend to a residence and/or business with a data
return path for the headend.
CABLE LICENSE: A license that is granted by the applicable governing body
pursuant to its authority under the communications laws of a particular country
for the purpose of providing Cable services for a specific franchise/license
area.
CANBRAS: Canbras Communications Corp., a Canadian corporation.
CANBRAS ASSOCIATION AGREEMENT: Association Agreement dated June 14, 1995,
among Tevecap, TVA Sistema, the Canbras TVA Companies, Canbras and Canbras-Par.
CANBRAS TVA COMPANIES: Canbras TVA Cabo and TV Cabo Santa Branca.
CANBRAS TVA CABO: Canbras TVA Cabo Ltda., a Brazilian limitada.
CANBRAS TVA: The operations of Canbras TVA Cabo and TV Cabo Santa Branca, in
each of which Tevecap holds a 36.0% equity interest and Canbras Par holds a
64.0% equity interest.
CANBRAS-PAR: Canbras Participacoes, Ltda., a Brazilian limitada wholly-owned
by Canbras.
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CBC: California Broadcasting Center, an uplink center for GLA located in
Long Beach, California.
CBS: CBS, Inc.
CENTRAL BANK: Central Bank of Brazil (Banco Central do Brasil)
CHASE PARTIES: Two wholly owned subsidiaries of CMIF through which CMIF
holds its equity interest in Tevecap.
CHURN: With respect to a pay television system for a given period, the
quotient expressed as a percentage of (i) the number of subscribers disconnected
from such system less the number of formerly disconnected subscribers
reconnected to the system divided by (ii) the number of subscribers to the
system as of the beginning of the period plus the number of subscribers added to
the system.
CISNEROS GROUP: Cisneros Group of Companies, which holds a 10% interest in
GLA through Darlene Investments.
CMIF: Chase Manhattan International Finance Ltd., an affiliate of The Chase
Manhattan Bank which holds a 9.3% interest in Tevecap through two wholly owned
subsidiaries.
COAXIAL CABLE: Cable consisting of a central conductor surrounded by and
insulated from another conductor. It is the standard material used in
traditional Cable systems. Signals are transmitted through it at different
frequencies, giving greater channel capacity than is possible with twisted pair
cable, but less than is allowed by optical fiber.
COMERCIAL CABO SAO PAULO: Comercial Cabo TV Sao Paulo Ltda., a Brazilian
limitada in which Tevecap holds a 99% equity interest.
COMPANY: Tevecap, together with its consolidated subsidiaries.
CONSOLIDATED FINANCIAL STATEMENTS: The audited and unaudited consolidated
financial statements of Tevecap and its subsidiaries and the notes thereto
included herein.
CPL: Cable Participacoes Ltda., a Brazilian limitada, jointly owned by
Hearst and ABC, which limitada holds a 2.35% equity interest in Tevecap.
CPCT: Centrais Privadas de Comutacao Telefonica, certain private telephone
networks comparable to private branch exchanges (PBX) found in larger apartment
complexes, hotels and businesses in the United States.
CVM: Comissao de Valores Mobiliarios, the securities commission of Brazil.
DARLENE INVESTMENTS: Darlene Investments, LLC, a Cayman Islands limited
liability company which is part of the Cisneros Group of Companies.
DBS: Direct broadcast satellite service, operating in C-Band or Ku-Band
width, by which television programming is transmitted to individual dwellings,
each served by a single satellite dish.
DBS SYSTEMS: Ku-Band and C-Band operations of Galaxy Brasil and TVA Sistema,
respectively.
DE SANTI & VALLONE: De Santi & Vallone Antennas & Telecommunications
Consultants.
DIRECTV: Brazil's first digital Ku-Band service, which is operated by Galaxy
Brasil and Galaxy Latin America.
DISTV: The distribution of television signals by physical means (i.e., by
Cable) to end users, generally limited to signals without interference by a
DISTV operator with the signal content.
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EMBRATEL: Empresa Brasileira de Telecommunicacoes, the Brazilian
government-owned company authorized to provide satellite telecommunications
services utilizing the Sistema Brasiliero de Telecomunicacoes por Satelite
(Brazilian Satellite Telecommunications System).
EQUITY SUBSCRIBERS: Subscribers to the Operating Ventures adjusted for the
Company's equity ownership in the Operating Ventures.
ESPN: ESPN, Inc., in which ABC has an 80.0% equity interest and Hearst has a
20.0% equity interest.
ESPN AGREEMENT: Quotaholders Agreement, dated June 26, 1995, among Tevecap,
TVA Sistema, ESPN Brazil, Inc. and ESPN Brasil Ltda.
ESPN BRASIL: Programming provided by ESPN Brasil Ltda.
ESPN BRAZIL, INC.: A Delaware corporation wholly owned by ESPN.
ESPN BRASIL LTDA.: ESPN do Brasil Ltda., a Brazilian limitada in which
Tevecap holds a 50.0% equity interest and ESPN Brazil, Inc., holds a 50.0%
equity interest.
EVENT PUT: A triggering event under the Stockholders Agreement pursuant to
which each of the Stockholders (other than Abril) may, in certain circumstances,
demand that Tevecap purchase all or a portion of its shares.
EXIMBANK: The Export-Import Bank of the United States.
EXIMBANK FACILITY: A credit facility, dated December 9, 1996, among TVA
Sistema, as Borrower, Tevecap, as Guarantor, and The Chase Manhattan Bank, N.A.,
as lender. The EximBank will guarantee 85% of amounts borrowed under the
EximBank Facility.
FALCON INTERNATIONAL: Falcon International Communications (Bermuda L.P.), a
subsidiary of Falcon International Communications, L.L.C., a Delaware limited
liability company.
FALCON TIME PUT: A provision of the Stockholders Agreement pursuant to which
Falcon International may, in certain circumstances, demand that Tevecap purchase
all or a portion of the shares held by Falcon International.
FIBER-OPTIC CABLE: Cable made of glass fibers through which signals are
transmitted as pulses of light. Fiber-optic cable has the capacity for a large
number of channels.
FOX: Twentieth Century Fox Television International.
GALAXY BRASIL: Galaxy Brasil S.A., a wholly-owned subsidiary of Tevecap
which operates Brazil's first Ku-Band system.
GALAXY BRASIL LEASING FACILITY: An anticipated five-year, $49.9 million
lease and sale-leaseback facility to be entered into by Galaxy Brasil, as
lessee, and Citibank, N.A., as lessor.
GALAXY LATIN AMERICA: A Delaware limited liability company the members of
which are Hughes Communications GLA, which holds a 60.0% equity interest,
Darlene Investments, which holds a 20.0% equity interest, TVA Communications,
which holds a 10% equity interest, and Grupo Frecuencia Modulada Television,
which holds a 10.0% equity Interest.
GALAXY III-R: A satellite owned and operate by Hughes Communications through
which Galaxy Brasil provides DIRECTV service.
GLA: Galaxy Latin America.
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GLA AGREEMENT: Partnership Agreement, dated February 13, 1995 among the GLA
partners.
GLOBO: Globo Par and TV Globo, the owners of a number of Brazil's over the
air channels.
GLOBO CABO: Globo Cabo S.A., a Cable service provider in Brazil.
GLOBO PAR: Globo Comunicacoes e Participacoes Ltda.
GRUPO MIDIA: Grupo de Midia Sao Paulo.
GRUPO FRECUENCIA MODULADA TELEVISION: Grupo Frecuencia Modulada Television,
S.A. de C.V., a Mexican corporation wholly owned by Grupo MVS.
GRUPO MVS: Grupo MVS, S.A. de C.V., a Mexican corporation.
GUARANTORS: Tevecap's Restricted Subsidiaries (as defined in the Indenture).
HABC II: Hearst/ABC Video Services II, a Delaware general partnership
jointly owned by Hearst and ABC, which partnership holds a 17.65% equity
interest in Tevecap.
HBO BRASIL: Programming provided by HBO Brasil Partners.
HBO BRASIL PARTNERS: HBO Brasil Partners Ltd., a joint venture between TVA,
which holds a 33% equity interest, and HBO Ole Partners, which holds a 66.7%
equity interest.
HBO OLE PARTNERS: A partnership among Time Warner Entertainment Company,
L.P., SPE Latin American Acquisition Corporation and Ole Communications, Inc.
HEADEND: A collection of hardware, typically including satellite receivers,
modulators, amplifiers and videocassette playback machines. Signals, when
processed, are then combined for distribution within the Cable network.
HEARST: The Hearst Corporation.
HEARST/ABC PARTIES: HABC II and CPL.
HEARST/ABC PROGRAMMING AGREEMENT: Programming Agreement, dated December 6,
1995, among Tevecap, Hearst and ABC.
HOMES PASSED: Homes that can be connected to a Cable distribution system
without further extension of the distribution network.
HUGHES COMMUNICATIONS: Hughes Communications, Inc.
HUGHES COMMUNICATIONS GLA: Hughes Communications GLA, Inc., a California
corporation, wholly-owned by Hughes Communications, that holds a 60.0% equity
interest in GLA.
HUGHES ELECTRONICS: Hughes Electronics Corporation.
IBGE: Instituto Brasileiro de Geografia e Estatistica.
IBOPE: Instituto Brasileiro de Opiniao Publica e Estatistica.
INDEMNIFICATION AGREEMENT: Indemnification Agreement to be entered into
among the Company, GLA, Hughes Communications and affiliates thereof, CBC, TVA
Communications, Darlene Investments, Inversiones Divtel, D.T., C.A., Grupo
Frecunencia Modulada Television and Grupo MVS.
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INDENTURE: The indenture to be executed by Tevecap, Tevecap's subsidiaries,
Chase Manhattan Bank Trustee Ltd., as trustee, and Chase Manhattan Trust &
Banking Co. (Japan) Ltd., as paying agent in connection with the Notes.
INDEPENDENT OPERATORS: Independent pay television system operators to which
TVA sells programming.
INITIAL PURCHASERS: Chase Securities Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, Bear Stearns & Co. Inc. and Bozano, Simonsen Securities
Inc.
INTERACTIVE SERVICES: Services commonly referred to as pay-on-demand,
shop-at-home, video games, ATM services, or such other interactive services as
video phone and telephony which can be more easily provided with the development
of high-capacity hybrid fiber optic/coaxial distribution networks.
IRMAOS REIS: Distribuidora Irmaos Reis S.A., a Brazilian corporation in
which Abril holds a 30.5% equity interest.
KU-BAND: A satellite transmission system which provides a signal over the
"ku" bandwidth.
LICENSE SUBSIDIARIES: Companies that hold pay television licenses covering
the operation of certain of the Owned Systems.
LOCAL OPERATING AGREEMENT: Local Operating Agreement, dated March 3, 1995,
between GLA and Tevecap.
LOS: An unobstructed "Line of Sight" from any of the Company's MMDS headends
to a subscriber's antenna.
MGM: Metro Goldwyn Mayer, Inc.
MINISTRY OF COMMUNICATIONS: The Brazilian Ministry of Communications,
authorized to regulate the Brazilian subscription television industry pursuant
to the Brazilian Telecommunications Code of 1962.
MMDS (MULTI-CHANNEL MULTI-POINT 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.
MMDS LICENSE: A license that is granted by the applicable governing body
pursuant to its authority under the communications laws of a particular country
for the purpose of providing MMDS services for a specific franchise/license
area.
MTV BRASIL: MTV Brasil Ltda., a Brazilian LIMITADA in which Abril holds a
50.0% equity interest and Viasem Brasil Holdings Ltda. (an indirect subsidiary
of Viacom International) holds the remaining 50% equity interest.
MULTICANAL: Multicanal Participacoes S.A., a Cable service provider in
Brazil.
NBC: National Broadcasting Company, Inc.
NDS: News Digital Systems Limited, a wholly-owned subsidiary of News
Corporation.
NET BRASIL: Net Brasil S.A., a Cable and MMDS service provider in Brazil.
NET SAT: Net Sat Servicos Ltda., TVA's prospective competitor in DBS
Service, in which Globo Par has a controlling interest and whose other equity
holders include News Corporation, a subsidiary of The News Corporation Limited,
and Grupo Televisa, S.A. of Mexico.
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NEWS CORPORATION: News Corporation plc.
OPERATING VENTURES: Canbras TVA and TV Filme, two of TVA's minority-owned
ventures.
OWNED SYSTEMS: TVA Sistema, TVA Sul and Galaxy Brasil.
PANAMSAT: PanAmSat Corporation, the current owner and operator of the
PAS-III satellite.
PAY-PER-VIEW: Payment made for individual programs rather than a monthly
subscription for a whole channel or group of channels. Currently only offered in
Brazil by TVA through DIRECTV, and envisioned as a means of providing certain
popular sporting events or major motion pictures for which customers may be
prepared to make a special payment.
PENETRATION RATE: The measurement of the take-up of Cable services. The
penetration rate as of a given date is calculated by dividing the number of
subscribers connected to a system on such date by the total number of homes
passed in such system.
PROGRAMMING VENTURES: HBO Brasil Partners and ESPN Brasil Ltda.
RBS: RBS Participacoes S.A., a Cable and MMDS service provider in Brazil.
REAL PLAN: A Brazilian Government stabilization program, announced in
December 1993, aimed at curtailing inflation and building a foundation for
sustained economic growth.
REGISTRATION RIGHTS AGREEMENT: The Registration Rights Agreement pursuant to
which Tevecap and the Guarantors agree to file with the United States Securities
and Exchange Commission the Exchange Offer Registration Statement on an
appropriate form under the Securities Act with respect to an offer to exchange
the Notes for Exchange Notes.
REGULATORY PUT: A provision in the Stockholders Agreement pursuant to which
an Event Put is triggered if the amount of capital stock held by a Stockholder
(other than Abril) exceeds the amount allowed under an appropriate legal
restriction.
REVENUE PER SUBSCRIBER: Total revenue derived from a subscriber television
system divided by the average number of subscribers for that period.
SAP: Second Audio Programming, which provides the option of audio in a
second language for the programming on channels for which it is offered.
SBT: TVSBT--Canal 4 de Sao Paulo S.A., a Brazilian national off-air channel.
SECURITIES ACT: United States Securities Act of 1933, as amended.
SMART CARD: Encoded card placed in a decoder used for Ku-Band service. The
Smart Card is used to regulate access to Ku-Band services.
SMC: SMC Marketing Ltda., a Brazilian limitada, wholly owned by HBO
Partners, that distributes HBO programming in Brazil.
SONY: Sony Pictures Entertainment, Inc.
STOCKHOLDERS: HABC II, CPL, Robert Civita, Abril, the Chase Parties and
Falcon International.
STOCKHOLDERS AGREEMENT: Stockholders Agreement, dated December 6, 1995,
among the Stockholders.
SUBSIDIARY GUARANTEES: Guarantees executed by each of Tevecap's Restricted
Subsidiaries (as defined in the Indenture).
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SURFIN: SurFin Ltd., a corporation organized under the laws of the Bahamas,
the (direct and indirect) shareholders of which are Tevecap, holding 20.5%,
DIRECTV International Inc., a subsidiary of Hughes Communications, holding
39.3%, Darlene Investments, holding 20.4%, and Grupo Frecuencia Modulada
Television, holding 19.8%.
SURFIN CREDIT FACILITY: A three year $150.0 million credit facility between
SurFin and Citicorp USA, Inc., as administrative agent, under a syndicated
credit agreement, dated September 24, 1996.
TAMBORE FACILITY: TVA's Ku-Band uplink center located in the city of Tambore
in greater Sao Paulo.
TELECOMMUNICATIONS CODE: The Brazilian Telecommunications Code of 1962, as
amended.
TELEPHONY: The provision of telephone service.
TEVECAP: Tevecap S.A.
TIME WARNER: Time Warner Entertainment Company, L.P.
TRUNK: The "transportation" component within a Cable and/or broadband
network architecture that carries the system product to the distribution portion
of the architecture, which in turn goes to customers' homes.
TV CABO SANTA BRANCA: TV Cabo Santa Branca Comercio Ltda., a Brazilian
limitada, in which Tevecap holds a 36% equity interest and Canbras Par holds a
64.0% equity interest.
TV FILME: TV Filme, Inc., a Delaware corporation in which Tevecap currently
holds a 14.3% equity interest, Warburg, Pincus Investors, L.P. currently holds a
41.2% equity interest, members of the Lins family currently hold a 16.2% equity
interest, and public stockholders currently hold a 28.3% equity interest. Upon
exercise of a warrant with a nominal exercise price, Tevecap's ownership
interest will increase to 16.7%.
TV FILME SERVICE AREA: Brasilia, Belem and Goiania.
TV GROUP: The operations of TVA excluding the operations and results of
Galaxy Brasil.
TV HOMES: The number of households in a given area possessing at least one
television set.
TV SHOW TIME: Televisao Show Time Ltda., a Brazilian limitada in which the
estate of Matias Machline and an associate currently hold a 53.0% equity
interest and in which the remaining 47.0% is currently held by various Abril
shareholders.
TVA: Tevecap S.A. and its consolidated subsidiaries and affiliates.
TVA BRASIL: TVA Brasil Radioenlaces S.A., a Brazilian limitada in which the
estate of Matias Machline currently holds a 50.0% equity interest and in which
the remaining 50.0% is currently held by various Abril shareholders.
TVA COMMUNICATIONS: TVA Communications Ltd., a British Virgin Islands
company wholly-owned by Tevecap, through which Tevecap holds a 10.0% equity
interest in Galaxy Latin America.
TVA CURITIBA: TVA Curitiba Servicos em Telecommunicacoes Ltda., a Brazilian
limitada in which Tevecap held an 80.0% equity interest and Leonardo Petrelli
held a 20.0% equity interest prior to TVA Curitiba's merger into TVA Parana
Ltda. and the reorganization of TVA Parana Ltda. as a subsidiary of TVA Sul
Participacoes S.A. in October 1996.
TV GLOBO: A provider of off-air programming in Brazil and an affiliate of
Globo.
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TVA SISTEMA: TVA Sistema de Televisao S.A., a Brazilian corporation in which
Tevecap holds a 98.0% equity interest and the estate of Matias Machline holds a
2.0% equity interest.
TVA SUL: The operations of TVA Parana Ltda., TVA Alfa Cabo Ltda., TVA Cabo
Camboriu Ltda., TCC TV a Cabo Ltda. and TVA Cabo Foz do Iguacu Ltda., which are
wholly-owned subsidiaries of TVA Sul Participacoes S.A., a Brazilian corporation
in which Tevecap holds an 87.0% equity interest and Leonardo Petrelli Neto holds
the remaining 13.0% equity interest.
UHF: Broadcast of a television signal at an ultra-high frequency over a
given geographical area.
VCR: Video cassette recorders.
VIACOM INTERNATIONAL: Viacom International (Netherlands B.V.).
C-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Purchase Agreement, Registration Rights Agreement and Stockholders
Agreement (included as Exhibits 10.1, 10.2 and 10.3 to this Registration
Statement, respectively) provide for the indemnification under certain
circumstances of directors, officers and controlling persons of the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- ----------------------------------------------------------------------------------------------------
<C> <C> <S>
3.1 -- Articles of Incorporation of Tevecap S.A. (English translation including amendments)
3.2 -- Memorandum of the Organizational Shareholders' Meeting and By-laws of TVA Sistema de Televisao S.A.
(English translation including amendments)
3.3 -- Memorandum and Articles of Association of TVA Communications Ltd.
3.4 -- Memorandum of General Meeting of Association and By-laws of Galaxy Brasil S.A. (English translation
including amendments)
3.5 -- Memorandum of General Meeting of Association and By-laws of TVA Sul Participacoes S.A. (English
translation including amendments)
3.6 -- Articles of Incorporation of Comercial Cabo TV Sao Paulo Ltda. (English translation including
amendments)
3.7 -- Articles of Incorporation of TVA Parana S.A. (English translation including amendments)
3.8 -- Articles of Incorporation of TVA Alfa Cabo Ltda. (English translation including amendments)
3.9 -- Articles of Incorporation of CCS Camboriu Cable System de Telecommunicacoes Ltda. (English
translation including amendments)
3.10 -- Articles of Incorporation of TCC TV a Cabo Ltda. (including English translation)
3.11 -- Articles of Incorporation of TVA Sul Foz do Iguacu Ltda. (English translation including amendments)
4.1 -- Indenture dated as of November 26, 1996, among Tevecap S.A., the Guarantors and The Chase Manhattan
Bank, as Trustee (including exhibits)
4.2 -- Forms of Notes (included in Exhibit 4.1)
4.3 -- Forms of Guarantees (included in Exhibit 4.1)
*5.1 -- Opinion of Basch & Rameh, Brazilian counsel to certain of the Registrants, as to the legality of the
Notes and Guarantees of Guarantors incorporated under the Federative Republic of Brazil
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- ----------------------------------------------------------------------------------------------------
<C> <C> <S>
*5.2 -- Opinion of Mayer, Brown & Platt, U.S. counsel to the Registrants, as to the legality of the Notes
and the Guarantees
*5.3 -- Opinion of Harney, Westwood & Riegels, British Virgin Islands counsel to TVA Communications Ltd. as
to the legality of the Guarantee of TVA Communications Ltd.
*8.1 -- Opinion of Mayer, Brown & Platt, U.S. counsel to the Registrants, as to certain U.S. tax matters
10.1 -- Purchase Agreement dated as of November 21, 1996 among Tevecap S.A., the Guarantors and the Initial
Purchasers
10.2 -- Registration Rights Agreement dated as of November 26, 1996, among Tevecap S.A., the Guarantors and
the Initial Purchasers
10.3 -- Stockholders Agreement, dated December 6, 1995, among Tevecap S.A., Robert Civita, Abril S.A.,
Falcon International Communications (Bermuda L.P.), Hearst/ABC Video Services II, Cable
Participacoes Ltda., Harpia Holdings Limited and Curupira Holdings Limited (including amendments)
10.4 -- Side Letter, dated December 6, 1995, among Abril S.A., Falcon International Communications (Bermuda
L.P.), Hearst/ABC Video Services II, Cable Participacoes Ltda., Harpia Holdings Limited and Curupira
Holdings Limited
10.5 -- Revolving Credit Facility, dated December 6, 1995, between Tevecap S.A. and Abril S.A.
10.6 -- Credit Facility, dated December 9, 1996, among Tevecap S.A., TVA Sistema de Televisao S.A., The
Chase Manhattan Bank and the Export-Import Bank of the United States
10.7 -- Association Agreement, dated February 15, 1996, among Tevecap S.A., TVA Sistema de Televisao S.A.,
TVA Brasil Radioenlaces Ltda., Leonardo Petrelli Neto, TV Delta de Curitiba Ltda., TV Cabo Servicos
Santa Catarina Ltda., TV Cabo Servicos Parana Ltda. and TVA Curitiba Servicos em Telecomunicacoes
Ltda. (including English Translation)
10.8 -- Services Agreement, dated July 22, 1994, among TVA Brasil Radioenlaces Ltda., Televisao Show Time
Ltda., Abril S.A. and Tevecap S.A. (English translation including amendments)
*11.1 -- Computation of per share earnings
*15.1 -- Letter of Coopers & Lybrand Auditores Independentes re: unaudited financial information
*21.1 -- Subsidiaries of Tevecap S.A.
*23.1 -- Consent of Coopers & Lybrand Auditores Independentes
*23.2 -- Consent of Basch & Rameh (included in Exhibit 5.1)
*23.3 -- Consent of Mayer, Brown & Platt re: its opinion as to the legality of the Notes and the Guarantees
(included in Exhibits 5.2 and 8.1)
*23.5 -- Consent of Harney, Westwood & Riegels (included in Exhibit 5.3)
24.1 -- Powers of Attorney for Tevecap S.A. and each of the Guarantors (included in signature pages to the
Registration Statement)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- ----------------------------------------------------------------------------------------------------
<C> <C> <S>
*25.1 -- Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Chase
Manhattan Bank, as Trustee on Form T-1 (bound separately)
99.1 -- Authorization of the Central Bank authorizing the issuance of the Notes (English translation)
*99.2 -- Form of Letter of Transmittal
*99.3 -- Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------------
* To be filed by Amendment.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that 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.
Each of the undersigned Registrants hereby undertakes (i) to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 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; and (ii) to arrange or provide for a
facility in the U.S. for the purpose of responding to such requests.
Each of the undersigned Registrants hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction that was not
the subject of and included in the registration statement when it became
effective.
No Registrant has entered into any arrangement or understanding with any
person to distribute the securities to be received in the Registered Exchange
Offer and to the best of each Registrant's information and belief, each person
participating in the Exchange Offer is acquiring the securities in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the securities to be received in the
Registered Exchange Offer. In this regard, the registrant will make each person
participating in the Registered Exchange Offer aware (through the Exchange Offer
Prospectus or otherwise) that if the Registered Exchange Offer is being
registered for the purpose of secondary resales, any securityholder using the
exchange offer to participate in a distribution of the securities to be acquired
in the Registered Exchange Offer (1) could not rely on the staff position
enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) or
similar letters and (2) must comply with registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. The registrant acknowledges that such a secondary resale
transaction should be covered by an effective registration statement containing
the selling securityholder information required by Item 507 of Regulation S-K.
II-3
<PAGE>
Each of the Registrants hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
undersigned undertake that such reoffering prospectus will contain the
information called for by the applicable registration form who respect to
reofferings by persons who may be deemed to be underwriters, in addition to the
information called for by the other Items of the applicable form.
Each of the undersigned Registrants hereby undertakes that every prospectus:
(i) that is filed pursuant to the immediately preceding paragraph or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Each of the undersigned Registrants hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) 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. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus file with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(3) 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.
(b) 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.
(c) 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Tevecap S.A., has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Sao Paulo,
the Federative Republic of Brazil, on this 21st day of February, 1997.
Tevecap S.A.
By /s/ JOSE AUGUSTO P. MOREIRA
-----------------------------------------
Jose Augusto P. Moreira
Officer
By /s/ CLAUDIO CESAR D'EMILIO
-----------------------------------------
Claudio Cesar D'Emilio
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------ ---------------------------
<S> <C>
/s/ CLAUDIO DASCAL Chief Executive Officer
- ------------------------------ (Principal Executive
CLAUDIO DASCAL Officer)
/s/ DOUGLAS DURAN Chief Financial Officer
- ------------------------------ Principal Financial and
DOUGLAS DURAN Accounting Officer)
/s/ ROBERT CIVITA Director
- ------------------------------
ROBERT CIVITA
/s/ JOSE AUGUSTO P. MOREIRA Director
- ------------------------------
JOSE AUGUSTO P. MOREIRA
/s/ ROBERT HEFLEY BLOCKER Director
- ------------------------------
ROBERT HEFLEY BLOCKER
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------ ---------------------------
<S> <C>
/s/ GIANCARLO FRANCESCO Director
CIVITA
- ------------------------------
GIANCARLO FRANCESCO CIVITA
/s/ THOMAZ SOUTO CORREA Director
NETTO
- ------------------------------
THOMAZ SOUTO CORREA NETTO
/s/ FRANCISCO SAVIO COUTO Director
PINHEIRO
- ------------------------------
FRANCISCO SAVIO COUTO PINHEIRO
/s/ ARNALDO BONOTRI DUTRA Director
- ------------------------------
ARNALDO BONOTRI DUTRA
/s/ SERGIO VLADIMIRSCHI Director
JUNIOR
- ------------------------------
SERGIO VLADIMIRSCHI JUNIOR
/s/ JOSE LUIS DE SALLES Director
FREIRE
- ------------------------------
JOSE LUIS DE SALLES FREIRE
/s/ JORGE FERNANDO KOURY Director
LOPES
- ------------------------------
JORGE FERNANDO KOURY LOPES
/s/ OSWALDO LEITE DE MORAES Director
FILHO
- ------------------------------
OSWALDO LEITE DE MORAES FILHO
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
TVA Sistema de Televisao S.A., has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Sao Paulo, the Federative Republic of Brazil, on this 21st day of February,
1997.
TVA Sistema de Televisao S.A.
By /s/ ROBERT CIVITA
-----------------------------------------
Robert Civita
President
By /s/ JOSE AUGUSTO P. MOREIRA
-----------------------------------------
Jose Augusto P. Moreira
Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ ROBERT CIVITA President
- ------------------------------ (Principal Executive
ROBERT CIVITA Officer)
/s/ JOSE AUGUSTO P. MOREIRA Financial Director
- ------------------------------ (Principal Financial and
JOSE AUGUSTO P. MOREIRA Accounting Officer)
/s/ GIANCARLO FRANCESCO Director
CIVITA
- ------------------------------
GIANCARLO FRANCESCO CIVITA
/s/ VICTOR CIVITA Director
- ------------------------------
VICTOR CIVITA
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
TVA Communications, Ltd., has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Sao Paulo, the Federative Republic of Brazil, on this 21st day of February,
1997.
TVA Communications, Ltd.
By /s/ ROBERT CIVITA
-----------------------------------------
Robert Civita
Officer
By /s/ JOSE AUGUSTO P. MOREIRA
-----------------------------------------
Jose Augusto P. Moreira
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ ROBERT CIVITA President
- ------------------------------ (Principal Executive
ROBERT CIVITA Officer)
/s/ JOSE AUGUSTO P. MOREIRA Financial Officer
- ------------------------------ (Principal Financial and
JOSE AUGUSTO P. MOREIRA Accounting Officer)
/s/ ANGELO SILVIO ROSSI Officer
- ------------------------------
ANGELO SILVIO ROSSI
/s/ PLACIDO LORIGGIO Officer
- ------------------------------
PLACIDO LORIGGIO
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Galaxy Brasil S.A., has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Sao
Paulo, the Federative Republic of Brazil, on this 21st day of February, 1997.
Galaxy Brasil S.A.
By /s/ JOSE AUGUSTO P. MOREIRA
-----------------------------------------
Jose Augusto P. Moreira
President
By /s/ CLAUDIO CESAR D'EMILIO
-----------------------------------------
Claudio Cesar D'Emilio
Financial Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ JOSE AUGUSTO P. MOREIRA President
- ------------------------------ (Principal Executive
JOSE AUGUSTO P. MOREIRA Officer)
/s/ CLAUDIO CESAR D'EMILIO Financial Director
- ------------------------------ (Principal Financial and
CLAUDIO CESAR D'EMILIO Accounting Officer)
/s/ ANGELO SILVIO ROSSI Administrative Director
- ------------------------------
ANGELO SILVIO ROSSI
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
TVA Sul Participacoes S.A., has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Sao Paulo, the Federative Republic of Brazil, on this 21st day of February,
1997.
TVA Sul Participacoes S.A.
By /s/ DOUGLAS DURAN
-----------------------------------------
Douglas Duran
Director
By /s/ LEONARDO PETRELLI
-----------------------------------------
Leonardo Petrelli
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ JOSE AUGUSTO P. MOREIRA Director
- ------------------------------ (Principal Executive
JOSE AUGUSTO P. MOREIRA Officer)
/s/ DOUGLAS DURAN Director
- ------------------------------ (Principal Financial and
DOUGLAS DURAN Accounting Officer)
/s/ LEONARDO PETRELLI Director
- ------------------------------
LEONARDO PETRELLI
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Comercial Cabo TV Sao Paulo Ltda., has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Sao Paulo, the Federative Republic of Brazil, on this 21st day of
February, 1997.
Comercial Cabo TV Sao Paulo Ltda.
By /s/ JOSE AUGUSTO P. MOREIRA
-----------------------------------------
Jose Augusto P. Moreira
Financial Director
By /s/ CLAUDIO CESAR D'EMILIO
-----------------------------------------
Claudio Cesar D'Emilio
Financial Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ JOSE AUGUSTO P. MOREIRA Financial Director
- ------------------------------ (Principal Executive
JOSE AUGUSTO P. MOREIRA Officer)
/s/ CLAUDIO CESAR D'EMILIO Financial Director
- ------------------------------ (Principal Financial and
CLAUDIO CESAR D'EMILIO Accounting Officer)
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
TVA Parana Ltda., has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Sao
Paulo, the Federative Republic of Brazil, on this 21st day of February, 1997.
TVA Parana Ltda.
By /s/ DOUGLAS DURAN
-----------------------------------------
Douglas Duran
Director
By /s/ LEONARDO PETRELLI
-----------------------------------------
Leonardo Petrelli
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ JOSE AUGUSTO P. MOREIRA Director
- ------------------------------ (Principal Executive
JOSE AUGUSTO P. MOREIRA Officer)
/s/ DOUGLAS DURAN Director
- ------------------------------ (Principal Financial and
DOUGLAS DURAN Accounting Officer)
/s/ LEONARDO PETRELLI Director
- ------------------------------
LEONARDO PETRELLI
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
TVA Alfa Cabo Ltda., has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Sao
Paulo, the Federative Republic of Brazil, on this 21st day of February, 1997.
TVA Alfa Cabo Ltda.
By /s/ DOUGLAS DURAN
-----------------------------------------
Douglas Duran
Director
By /s/ LEONARDO PETRELLI
-----------------------------------------
Leonardo Petrelli
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ JOSE AUGUSTO P. MOREIRA Director
- ------------------------------ (Principal Executive
JOSE AUGUSTO P. MOREIRA Officer)
/s/ DOUGLAS DURAN Director
- ------------------------------ (Principal Financial and
DOUGLAS DURAN Accounting Officer)
/s/ LEONARDO PETRELLI Director
- ------------------------------
LEONARDO PETRELLI
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
CCS Camboriu Cable System de Telecomunicacoes Ltda., has duly caused this
Registration Statement thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Sao Paulo, the Federative Republic of
Brazil, on this 21st day of February, 1997.
CCS Camboriu Cable System de Telecomunicacoes
Ltda.
By /s/ DOUGLAS DURAN
-----------------------------------------
Douglas Duran
Director
By /s/ LEONARDO PETRELLI
-----------------------------------------
Leonardo Petrelli
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ DOUGLAS DURAN Director
- ------------------------------ (Principal Executive
DOUGLAS DURAN Officer)
/s/ LEONARDO PETRELLI Director
- ------------------------------ (Principal Financial and
LEONARDO PETRELLI Accounting Officer)
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
TCC TV a Cabo Ltda., has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Sao
Paulo, the Federative Republic of Brazil, on this 21st day of February, 1997.
TCC TV a Cabo Ltda.
By /s/ DOUGLAS DURAN
-----------------------------------------
Douglas Duran
Director
By /s/ LEONARDO PETRELLI
-----------------------------------------
Leonardo Petrelli
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ JOSE AUGUSTO P. MOREIRA Director
- ------------------------------ (Principal Executive
JOSE AUGUSTO P. MOREIRA Officer)
/s/ DOUGLAS DURAN Director
- ------------------------------ (Principal Financial and
DOUGLAS DURAN Accounting Officer)
/s/ LEONARDO PETRELLI Director
- ------------------------------
LEONARDO PETRELLI
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
TVA Sul Foz do Iguacu Ltda., has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Sao Paulo, the Federative Republic of Brazil, on this 21st day of February,
1997.
TVA Sul Foz do Iguacu Ltda.
By /s/ DOUGLAS DURAN
-----------------------------------------
Douglas Duran
Director
By /s/ LEONARDO PETRELLI
-----------------------------------------
Leonardo Petrelli
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Claudio Dascal, Gene Musselman, Douglas
Duran and Jose Augusto P. Moreira (each an "Authorized Agent") to be its lawful
attorney in name and in fact (with full power to any two of them to act jointly)
to sign any or all amendments (including post-effective amendments) to this
Registration Statement and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto any two said Authorized Agents, acting jointly, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
Authorized Agents may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 21, 1997.
NAME TITLE
- ------------------------------ ---------------------------
/s/ JOSE AUGUSTO P. MOREIRA Director
- ------------------------------ (Principal Executive
JOSE AUGUSTO P. MOREIRA Officer)
/s/ DOUGLAS DURAN Director
- ------------------------------ (Principal Financial and
DOUGLAS DURAN Accounting Officer)
/s/ LEONARDO PETRELLI Director
- ------------------------------
LEONARDO PETRELLI
II-16
<PAGE>
SIGNATURE OF AUTHORIZED UNITED STATES REPRESENTATIVE
Pursuant to the Securities Act of 1933, the undersigned certifies that it is
the duly authorized United States representative of each of Tevecap S.A., TVA
Sistema de Televisao S.A., TVA Communications Ltd., Galaxy Brasil S.A., TVA Sul
Participacoes S.A., Comercial Cabo TV Sao Paulo Ltda., TVA Parana Ltda., TVA
Alfa Cabo Ltda., CCS Camboriu Cable System de Telecomunicacoes Ltda., TCC TV a
Cabo Ltda. and TVA Sul Foz do Iguacu Ltda., and has signed this Registration
Statement on this 21st day of February, 1997.
T-Cap, Inc.
(Authorized U.S. Representative)
By /s/ DOUGLAS DURAN
-----------------------------------------
Douglas Duran
Secretary
II-17
<PAGE>
Exhibit 3.1
I hereby certify that the exhibit attached hereto is a fair and
accurate English translation of the Articles of Incorporation of Tevecap S.A.
By: /s/ DOUGLAS DURAN
-----------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
TEVECAP S.A.
BY LAWS
CHAPTER I
NAME, DURATION, REGISTERED OFFICE AND OBJECT
1. The sociedade anonima TEVECAP S.A., organized for an undetermined period of
time, shall be governed by the provisions of these Bylaws and the applicable
legal provisions.
2. The Company shall have its registered office located at Rua de Rocio No. 313,
suite 101, in the City of Sao Paulo, State of Sao Paulo, and it may, upon
resolution of the Administration Board, open branches, offices or representation
offices anywhere in the country, the opening of branches abroad being subject to
resolution by the Shareholders' Meeting.
3. The Company object is (i) the production, acquisition, licensing,
distribution, import and export of television programs, of its own or of third
parties; (ii) the rendering of telecommunication services, especially paid TV
services, under any modality, and the other services relating to signal
transmission, reception and distribution systems and television programs; (iii)
advertisement and publicity exploitation; and (iv) participation in the capital
of other companies, especially those in the telecommunication field.
CHAPTER II COMPANY CAPITAL
4. The Company capital, of three hundred and fourteen million, seven hundred and
six thousand, and seven hundred reais (R$314,706,700.00) is divided into and
represented by one hundred and ninety-six million, seven hundred and twelve
thousand, eight hundred and fifty-three (196,712,853) shares, all of which
ordinary registered shares, without a par value.
5. Any ordinary registered share entitles to one vote in the resolutions of the
Shareholders' Meeting.
6. The ownership of the Company shares is evidenced by the inscription of the
shareholder name in the book "Register of Registered Shares" and the Company
shall only issue share certificates upon request of the shareholders, who shall
be charged for the relevant costs.
7. The share certificates or cautelas, shall be signed by two (02) Directors or
by one (01) Director jointly with one (01) attorney of the Company or by two
(02) attorneys with special powers.
8. The sale, charge or disposal or shares, under any form, the rights to
subscription to shares or securities convertible into shares, are governed by
and subject to the same terms and conditions set forth under the Shareholders'
Agreement entered into as of the date hereof and filed at the Company registered
office (the "Shareholders' Agreement").
CHAPTER III
SHAREHOLDERS' MEETINGS
9. The Shareholders' Meetings are Annual or Extraordinary. The Shareholders'
Annual Meetings shall be held within the four (04) months following the closing
of the fiscal year, and the Shareholders' Extraordinary Meetings shall be held
whenever necessary.
<PAGE>
10. The Annual Meetings shall be called by the Administration Board, and
presided over by the shareholder to be appointed then, by the majority votes of
those present to the Meeting, and shall have as its secretary whoever the
President to the Meeting shall appoint.
11. Only the shareholders whose shares are subscribed to in his name, in the
applicable register, up to three (03) days before the date fixed for the
Meeting, may participate and vote in the Shareholders' Meetings.
12. The resolutions of the Shareholders' Meetings, except as to the special
cases provided for by Law, shall be taken by majority vote of those present, the
blank votes not being counted, except as to the following resolutions which
shall comply with the provisions under Article 13 of the Shareholders'
Agreement:
(i) any corporate restructuring, reorganization, merge, consolidation,
splitting, liquidation, winding up, share splitting, division, combination or
consolidation of the Company assets;
(ii) starting of any public offer of shares or any issuance or resale, by the
Company, of any of the Company's securities, including but not limited to,
debentures, subscription bonuses, founders' shares, options for purchase of or
subscription to shares and other similar rights, except in the cases provided
for under the Company Shareholders' Agreement;
(iii) purchase or redemption of the Company shares, except in the cases provided
for under the Company Shareholders' Agreement;
(iv) any modification in the business conducted by the Company;
(v) any amendment to these Bylaws; and
(vi) establishment of any activity or subsidiary in the United States of
America.
CHAPTER IV
MANAGEMENT
13. The Company shall be managed by the Administration Board and by the Board of
Directors. The Shareholders' Meeting shall fix the aggregate compensation of the
Administration Board and the Board of Directors, which shall be distributed
among the Counselors and Directors as determined by the Administration Board at
a meeting.
14. The members of the Administration Board and the Directors shall remain in
their offices until the election and empowerment of their successors.
CHAPTER V
ADMINISTRATION BOARD
15. The Administration Board is composed of eleven (11) regular members and
eleven (11) alternates, all of them shareholders and resident in the country,
elected by the Shareholders' Meeting as provided for under Article 10 of these
Bylaws and Paragraph 11.1 of The Shareholders' Agreement, for a term of two (02)
years, their reelection being permitted.
16. In case of impediment or temporary absence of any regular member of the
Administration Board, he will be replaced by its relevant alternate.
17. In case of a vacancy in the office of any member, regular or alternate, of
the Administration Board, the Shareholders' Meeting shall be immediately called
to elect his substitute.
18. The Administration Board shall meet whenever necessary and at least every
three months, upon call in writing by any of its regular or alternate members,
at least ten (10)
- 2 -
<PAGE>
business days before the date of the meeting and upon presentation of the agenda
to be discussed. The meetings of the Administration Board shall be presided over
by the Counselor appointed by majority vote of those present to the meeting.
19. The meetings of the Administration Board shall be installed only with the
attendance of at least six (6) of its regular members, in person or as
represented by their respective alternates. Irrespective of the formalities
provided for under this and the previous article, a meeting shall be considered
regular upon attendance of all regular Counselors, in person or as represented
by their respective alternates.
20. The resolutions of the Administration Board shall be taken by the favorable
vote of the majority of the Counselors present to the meeting, including but not
limited to, the approval of the annual business plan of the Company and its
subsidiaries, including values and terms relating to their expenses, investment
and new projects. However, the approval of the following matters shall require,
in addition to any other matters contained in the Shareholders' Agreement, the
favorable vote of all regular counselors, in person or as represented by their
respective alternates:
(i) acquisition or subscription, by the Company, to any equity in other
companies (except those acquired or subscribed to non-permanently pursuant to
the usual practices of cash management);
(ii) any acquisitions or sales or disposals, charges, liens or encumbrances on
equity held in other companies and any acquisitions or sales or disposals,
charges or encumbrances on property, equipment, trademarks, patents, licenses
and franchises or other similar assets and rights, except: (a) acquisitions,
sales, disposals, charges or encumbrances in the normal course of the company
business, (b) acquisition not in the normal course of the company business in an
aggregate amount lower than the equivalent in Reais to US$500,000 within one
calendar year, (c) sales not in the normal course of business in an aggregate
amount lower than the equivalent in Reais to US$500,000 within one calendar year
and (d) disposals, charges or encumbrances not in the normal course of the
company business in an aggregate amount lower than the equivalent in Reais to
US$500,000 within one calendar year;
(iii) the entering into any indebtedness by the Company, or guarantees to any
debt of any other individual or legal entity with maturity date before 365 days,
but in an aggregate amount higher than the equivalent in Reais to US$1,000,000,
subject to Paragraph 12.4 of the Shareholders' Agreement;
(iv) the entering into any indebtedness by the Company, or guarantees to any
debt of any individual or legal entity with maturity date as of or after 365
days, except the commercial debts incurred in the normal course of the company
business in one only transaction or series of related transactions, in an
aggregate amount lower than the equivalent in Reais to US$500,000, subject to
the provisions under Paragraph 12.4 of the Shareholders' Agreement;
(v) granting of loans or advancements by the Company (not including loans and
advancements occurring only between the companies and their subsidiaries),
except the loans or advancements to members of the Administration Board,
Directors or employees, in the normal course of the company business;
- 3 -
<PAGE>
(vi) issuance by the Company, of non-financial guarantees of any nature
whatsoever, except those non-financial guarantees totaling, individually or
jointly, up to the equivalent in Reais to US$1,000,000; and
(vii) any transactions or agreements or amendments or terminations or waives of
rights, or defaults, pursuant to the existing agreements between the Company, on
one side, and any shareholders or its allied companies on the other side,
subject to the provisions under Paragraph 12.1 (vii) of the Shareholders'
Agreement.
CHAPTER VI
THE BOARD OF DIRECTORS
21. The Board of Director's shall comprise a minimum of two (2) and a maximum of
5 (five) members, shareholders or not, resident in the country and elected by
the Administration Board for a period of two (2) years, their reelection being
permitted.
22. The Company Directors shall not have a specific designation.
23. In case of a vacancy in the office of a Director, a meeting of the
Administration Board shall be immediately called to elect the substitute, who
shall complete the term of the Director replaced. In case of absence or
temporary impediment of any Director, its functions shall be performed by the
other Directors, as agreed upon by them.
24. The Board of Directors shall manage the company business in general, and
therefor it shall practice any and all acts necessary or advisable, except those
which, pursuant to the Law or these Bylaws or the Shareholders' Agreement, shall
be under the responsibility of the Shareholders' Meeting or the Administration
Board. Their powers and duties include but are not limited to the following:
(i) to watch over for the compliance with the laws, these Bylaws and the
Shareholders Agreement;
(ii) to watch over for the compliance with the resolutions adopted at the
Shareholders' Meetings, the meetings of the Administration Board and its own
meetings;
(iii) to administer, manage and supervise the Company business;
(iv) to issue and approve the instructions and internal regulations which it
shall consider useful or necessary;
(v) to distribute, among its members, the Company management functions;
(vi) to prepare and submit to the Administration Board the financial statements
and the annual and quarterly budgets; and
(vii) to communicate to the Administration Board, as soon as it knows of any
material event of a legal, regulatory, technical or operational nature, which
may affect the Company or its controlled companies.
25. The Company representations in or out of court, actively or passively,
before any third parties, public agencies, either federal, state or local, and
the execution of deeds of any nature, letters of exchange, checks, payment
orders, agreements and generally any other documents or acts implying in any
liability or obligation to the Company or releasing it from any obligations
before third parties, shall fall to and shall be obligatorily practiced:
(i) by any two (2) Directors, jointly;
(ii) by any Director jointly with an attorney; or
(iii) by two (2) attorneys jointly, provided that vested with special and
express powers.
- 4 -
<PAGE>
26. The powers of attorney shall be granted on behalf of the Company by any two
(02) Directors jointly, and shall specify the powers granted and, except as to
those with the ad judicia clause, shall be valid for limited periods of no more
than one (01) year.
27. For the purpose of representing the Company in court and before the
governmental bodies, either federal, state or local, or even, of representing
the Company abroad, the powers may be granted for one only attorney.
28. The acts of any Director, attorney or employee binding the Company in any
business or transactions other than those relating to the Company object, such
as sureties, collateral signatures, endorsements or any guarantees before third
parties, are expressly forbidden, and they shall be null and void as regards the
Company.
29. The Board of Directors shall meet whenever called by any of its members, at
least three (03) days in advance, and it will be installed only upon attendance
of at least two (02) of its members. The Board of Directors meetings shall be
presided over by the Director appointed at the time and the resolutions thereof
shall be taken by the majority votes of those present or unanimously in the
event that only two (02) Directors are present to the meeting. Copies of the
minutes of the Board of Directors meetings shall be obligatorily sent to all
members of the Administration Board.
CHAPTER VII
THE ADVISORY COUNCIL
30. Besides the Administration Board, the Company shall have an Advisory
Council. The Advisory Council shall advise the Shareholders and the
Administration Board as regards the Company activities, in accordance with the
applicable laws, these Bylaws and the Shareholders' Agreement.
31. The Advisory Council shall comprise eleven (11) members who may be resident
in Brazil or not, shareholders or not.
32. The Shareholders shall elect the members of the Advisory Council at the
Shareholders' Meeting, in accordance with the provisions of Paragraph 11.1 of
the Shareholders' Agreement.
33. The term of office of the members of the Advisory Council shall be two (2)
years, and it shall be automatically extended until their successors, as duly
elected, take office. The reelection of the members of the Advisory Council, is
permitted unlimitedly.
34. The Advisory Council shall keep a book of minutes, where its resolutions
shall be registered.
35. Any member of the Advisory Council may have an alternate, who shall be
elected in the same form as the regular Counselor. The alternates shall
substitute for their respective regular counselors in their absence or
inability. In case of a vacancy in the Advisory Council for which office no
alternate has been elected, the Shareholders shall elect a new member within 30
days of the vacancy; and the Shareholder who designated and elected the member
to be replaced shall designate a new member.
36. The Advisory Council shall hold regular meetings at the end of every
three-month period and special meetings whenever called by any two (2) members
of the Advisory Council, but he call notice may be waived upon the consent of
all members of the Advisory Council or such notice shall be considered
automatically waived if all members are present to the meeting.
- 5 -
<PAGE>
37. Any member of the Advisory Council may authorize another member, by letter,
facsimile, cable or telex, to represent the former at any meeting of the
Advisory Council, either to form a quorum or to vote. Also, any member may vote
by letter, facsimile, cable or telex, which shall be received at the Company's
registered office at the time fixed for the meeting.
38. The attendance of at least six (6) members, either in person, by proxy or by
vote submitted in writing before the meeting, shall be a valid quorum for the
holding of a meeting of the Advisory Council.
39. The Advisory Council shall be consulted on any matters as requested by the
Administration Board or the Shareholders. The Administration Board shall not
delegate to the Advisory Council any of its powers to take any decision on
behalf of the Company.
40. The resolutions adopted by the Advisory Council shall require the favorable
vote of at least six (6) of its members.
CHAPTER VIII
THE AUDIT COMMITTEE
41. The Company shall have a non-permanent Audit Committee, composed of three
(03) regular members and the same number of alternates, as elected by the
Shareholders' Meeting which shall resolve on the installation thereof, and shall
fix their fees, subject to the legal restrictions. When operating, the Audit
Committee shall have the functions and powers granted by the law.
CHAPTER IX
THE FISCAL YEAR, BALANCE SHEET AND PROFITS
42. The fiscal year shall start on January 01 and end on December 31 of every
year.
43. At the end of any fiscal year, a balance sheet shall be prepared, subject to
the legal provisions in force. From the net profits earned, five per cent (5%)
can be deducted to form the legal reserve which shall not exceed twenty per cent
(20%) of the Company capital. The balance shall be designed as determined at the
Shareholders' Meeting, provided that the minimum obligatory dividend of
twenty-five per cent (25%) shall have been distributed to the shareholders, as
provided for under article 202 of Law 6404, of December 15, 1976.
44. Upon resolution by the Company Administration Board, interim dividends may
be distributed, to the account of the profit appraised in a semi-annual balance
sheet, or in shorter periods, as well as to the account of accrued profits or
reserves of profits existing in the last annual or semi-annual balance sheet.
The Administration Board is further authorized to distribute dividends, on
account of the minimum obligatory dividend referred to under the previous
article, before the Annual Shareholders' Meeting is held, but ad referendum
thereof.
CHAPTER X
LIQUIDATION
45. In the event that the Company is liquidated, the Shareholders' Meeting shall
determine the form of liquidation and shall appoint the liquidator and the Audit
Committee to operate during the liquidation period.
Sao Paulo, November 30, 1995.
(sgd) Jose Augusto P. Moreira, Secretary.
- 6 -
<PAGE>
TEVECAP S.A.
General Taxpayers Register (CGCMF) No. 57.574.170/0001-05
Commercial Registry No. 35300139623
MINUTES OF THE ANNUAL SHAREHOLDERS MEETING
HELD ON APRIL 30, 1996
PLACE AND TIME: Company registered office, at Rua do Rocio 313, suite 101, in
Sao Paulo, SP, at 05:00 PM.
ATTENDANCE: Shareholders representing the whole company stock capital. Also
present the Company's officers.
BOARD: President: Robert Civita; Secretary: Valter Pasquini.
LEGAL PUBLICATIONS: a) Management Report and Financial Statements, as published
in the Official Gazette of the State of Sao Paulo, on 03/23/96, on pages 25, 26
and 27, and in the newspaper "O Estado de Sao Paulo", on 03/22/96, on pages L8,
L9 and L10; b) Call Notice, waived under paragraph 4, of article 124, of Law
6404/76; c) Publications referred to under article 133 of Law 6404/76, waived
under paragraph 5 of the mentioned law. RESOLUTIONS: Approved, upon abstention
of those legally barred:
1) the Management Report and the Financial Statements for the fiscal year ended
on December 31, 1995;
2) the non-distribution of the dividends for the fiscal year 1995 as the Company
had no profits during the fiscal year, pursuant the documents hereby approved;
3) the monetary adjustment of the paid-in capital, in the amount of fifty-one
million, two hundred and ninety-three thousand, seven hundred and twenty-seven
reais and two centavos (R$51,293,727.02);
4) the capitalization of part of the balance of the account "Provision for
Capital Monetary Adjustment" in the amount of fifty-one million, two hundred and
ninety-four thousand and fifteen reais (R$51,294,015.00), without the issuance
of new shares, thus increasing the company capital, from three hundred and
fourteen million, seven hundred and six thousand and seven hundred reais
(R$314,706,700.00) to three hundred and sixty-six million, seven hundred and
fifteen reais (R$366,000,715.00), with the consequent amendment to Article 4 of
the Bylaws, which shall hereinafter read as follows: "Article 4 - The Company
capital, in the amount of three hundred and sixty-six million, seven hundred and
fifteen reais (R$366,000,715.00) is divided into and represented by one hundred
and ninety-six million, seven hundred and twelve thousand, eight hundred and
fifty-five (196,712,855) common registered shares, without a par value";
5) Election of the members of the Administration Board and their alternates, for
a term of two (02) years, that is, until the 1998 Annual Shareholders' Meeting,
to wit: (a) President: Robert Civita, Brazilian, legally separated, editor,
bearer of the Identity Card (RG) No. 1.666.785 and Individual Taxpayer Register
No. 006.890.178-04, resident and domiciled at Rua Escocia, 153, apt. 11, Sao
Paulo/SP, Alternate: Victor Civita, Brazilian, married, bachelor in political
sciences, bearer of RG No. 6.166.935 and CPF No. 040.666.138-37, resident and
domiciled at Rua Picone, 53, Sao Paulo/SP; (b) Counselor: Jose Augusto Pinto
Moreira, Brazilian, married, economist, bearer of RG No. 2.944.700 and CPF
<PAGE>
No. 128.701.967-68, resident and domiciled at Alameda Argentina 406 (Alphaville
II), Barueri/SP, Alternate: Valter Pasquini, Brazilian, married, engineer,
bearer of RG No. 3.643.843 and CPF No. 297.183.928-15, resident and domiciled at
Rua Dr. Jose Carlos de Toledo Piza, 215, Sao Paulo/SP; (c) Counselor: Robert
Hefley Blocker, Brazilian, divorced, business administrator, bearer of RG No.
17.470.959 and CPF No. 007.336.878-49, resident and domiciled at Rua Sao Carlos
do Pinhal, 743, 4th floor, Sao Paulo/SP, Alternate: Fatima Ahmad Ali, Brazilian,
divorced, journalist, bearer of RG No. 3.089.193 and CPF No. 028.881.658/72,
resident and domiciled at Rua Bauru 216, Sao Paulo/SP; (d) Counselor: Giancarlo
Francesco Civita, Brazilian, married, bachelor in Social Communication, bearer
of RG No. 6.167.806 and CPF No. 040.666.108-11, resident and domiciled at Rua
Capitao Antonio Rosa 07, Sao Paulo/SP, Alternate: Isacco Zarmati, Brazilian,
married, civil engineer, bearer of RG No. 3.128.036-5 and of CPF No.
029.932.878-34, resident and domiciled at Rua Albuquerque Lins 915, Sao
Paulo/SP; (e) Counselor: Thomaz Souto Correa Netto, Brazilian, single,
journalist, bearer of RG No. 2.254.403 and CPF No. 008.807.018-20, resident and
domiciled at Rua Aracari 139, apt. 06, Sao Paulo/SP, Alternate: Luiz Gabriel
Cepeda Rico, Brazilian, married, engineer, bearer of RG No. 3.403.698 and CPF
No. 321.649.558-20, resident and domiciled at Rua Chibata Miyakoshi, 300 - Block
B, 10th floor, Sao Paulo/SP; (f) Counselor: Francisco Savio Couto Pinheiro,
Brazilian, married, engineer, bearer of RG No. 3.064.761/RJ and CPF No.
336.882.907-63, resident and domiciled at SHIS - Q 1-27, group 1, house 15,
Brasilia/DF, Alternate: vacant; (g) Counselor: Arnaldo Bonoldi Dutra, Brazilian,
married, lawyer, enrolled with the BBA/SP under No. 59.434 and with CPF under
No. 932.755.608-91, resident and domiciled at Rua Dr. Brasilio Machado, 47, apt.
101, Sao Paulo/SP, Alternate: Marcilio Macedo de Andrade, Brazilian, legally
separated, engineer, bearer of RG No. 6.974.039 and of CPF No. 006.921.798-01,
resident and domiciled at Rua Marechal Bina Machado 382, Sao Paulo/SP; (h)
Counselor - Sergio Vladimirschi Junior, Brazilian, married, businessman, bearer
of RG No. 14.188.274 and CPF No. 128.909.598-13, resident and domiciled at Rua
Guayaquil 114, Sao Paulo/SP, Alternate: Viviane Vladimirschi, Brazilian, single,
of age, psychologist, bearer of RG No. 13.485.275 and CPF No. 063.828.858-43,
resident and domiciled at Alameda Franca 84, apt. 191, Sao Paulo/SP; (i)
Counselor: Jose Luis de Salles Freire, Brazilian, divorced, lawyer, bearer of RG
No. 3.966.406 and of CPF No. 265.116.658-87, resident and domiciled at Rua 31 de
Marco 53, Sao Paulo/SP, Alternate: Nina Vladimirschi Farina, North-American,
married, publicist, bearer of identity card for foreigners (RNE) No. W562051-G
and CPF No. 213.275.668-69, resident and domiciled at Rua Lelis Vicira 185, Sao
Paulo/SP; (j) Counselor: Jorge Fernando Koury Lopes, Brazilian, married, lawyer,
bearer of RG No. 5.262.528 and CPF No. 588.944.978-87, with office at Alameda
Campinas 1070, Sao Paulo/SP, Alternate: Leonardo Barem Leite, Brazilian,
married, lawyer, bearer of RG No. 13.611.342 and CPF No. 111.367.728-71, with
office at Alameda Campinas 1070, Sao Paulo/SP; (l) Counselor: Oswaldo Leite de
Moraes Filho, Brazilian, married, lawyer, bearer of RG No. 3.596.880 and CPF No.
416.116.918-34, with office at Alameda Campinas 1070, Sao Paulo/SP, Alternate:
Miriam de Lourdes Medeiros e Silva Machado, Brazilian, single, lawyer, bearer of
RG No. 16.540.320 and CPF No. 083.904.508-52, with office at Alameda Campinas
1070, Sao Paulo/SP;
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<PAGE>
6) Fixation of the members of the Administration Board's compensation for the
present fiscal year, in up to the maximum limit of deductibility permitted by
the income tax legislation, as subject to the aggregate limit and considered the
individual limited multiplied by the number of Officers who effectively shall
receive a compensation, the same criterion to be observed by the Administration
Board as regards the compensation of the Members of the Board of Directors,
except as to those officers with whom the waiving of compensation shall be
covenanted.
7) Appointment of the members of the Advisory Council and their respective
alternates, such Council being a merely consulting body, the resolutions of
which shall not be binding on the Company and its administrative bodies, to wit:
(a) President: Robert Civita, Brazilian, legally separated, editor, bearer of RG
No. 1.666.785 and CPF No. 006.890.178-04, resident and domiciled at Rua Escocia
253, apt. 11, Sao Paulo/SP, Alternate: Victor Civita, Brazilian, married,
bachelor in political sciences, bearer of RG No. 6.166.935 and CPF No.
040.666.138-37, resident and domiciled at Rua Picone 53, Sao Paulo/SP; (b)
Counselor: Jose Augusto Pinto Moreira, Brazilian, married, economist, bearer of
RG No. 2.944.700 and CPF No. 128.701.967-68, resident and domiciled at Alameda
Argentina 406 (Alphaville II), Barueri/SP, Alternate: Valter Pasquini,
Brazilian, married, engineer, bearer of RG No. 3.643.843 and CPF No.
297.183.928-15, resident and domiciled at Rua Dr. Jose Carlos de Toledo Piza,
215. Sao Paulo/SP; (c) Counselor: Robert Hefley Blocker, Brazilian, divorced,
business administrator, bearer of RG No. 17.470.959 and CPF No. 077.336.878-49,
resident and domiciled at Rua Sao Carlos do Pinhal 743, 4th floor, Sao Paulo/SP,
Alternate: Fatima Ahmad Ali, Brazilian, divorced, journalist, bearer of RG No.
3.089.193 and of CPF No. 028.881.658/72, resident and domiciled at Rua Bauru
216, Sao Paulo/SP; (d) Counselor: Claudio Dascal, Brazilian, married, engineer,
bearer of RG No. 2.620.281 and CPF No. 038.152.508-20, resident and domiciled at
Rua Francisco Isoldi, 315, apt. 82, Sao Paulo/SP, Alternate: Isacco Zarmati,
Brazilian, married, civil engineer, bearer of RG No. 3.128.036-5 and CPF No.
029.932.878-34, resident and domiciled at Rua Albuquerque Lins 915, Sao
Paulo/SP; (e) Counselor: Angelo Silvio Rossi, Brazilian, divorced, editor,
resident and domiciled at Alameda Joaquim Eugenio de Lima, 1647, apt. 18, Sao
Paulo/SP, Alternate: Luiz Gabriel Cepeda Rico, Brazilian, married, engineer,
bearer of RG No. 3.403.698 and CPF No. 321.649.558-20, resident and domiciled at
Rua Chibata Miyakoshi 300, Block B, 10th floor, Sao Paulo/SP; (f) Counselor:
Francisco Savio Couto Pinheiro, Brazilian, married, engineer, bearer of RG No.
3.064.761/RJ and CPF No. 336.882.907-63, resident and domiciled at SHIS - Q
I-27, group 1 - house 15, Brasilia/DF, Alternate: vacant; (g) Counselor: Stephen
Vaccaro, American citizen, divorced, bank employee, resident and domiciled at 1
Chase Manhattan Plaza, 4th floor, Nova York NY, Alternate: Fernando Vianna,
American citizen, married, bank employee, resident and domiciled at 1 Chase
Manhattan Plaza, 4th floor, New York, NY; (h) Counselor: Marc Nathanson,
American citizen, married, businessman, resident and domiciled at 282 South
Mapleton Drive, Los Angeles, California, Alternate: Christopher Derick, American
citizen, married, businessman, resident and domiciled at 10900, Wilshire
Boulevard, Suite 850, CA 90024, Los Angeles, California; (i) Counselor: Tully
Michael Friedman, American citizen, married, businessman, resident and domiciled
at 1 Maritime Plaza, Suite 1200, Sao Francisco, California, Alternate: Joseph M.
Niehaus, American citizen,
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<PAGE>
married, businessman, resident and domiciled at One Maritime Plaza 1200, CA
94111, San Francisco; (j) Counselor: Raymond E. Joslin, American citizen,
married, businessman, resident and domiciled at 84 Cowdray Park Drive Conyers
Farm, Greenwich, CT 06831, Alternate: Jack T. Healy, American citizen, married,
businessman, resident and domiciled at 414 East 52nd Street, apt. 11C, New York,
NY; (l) counselor: Herbert A. Granath, American citizen, married, businessman,
resident and domiciled at 244 Long Neck Point Road, Darien, Alternate: Richard
F. Cuningham, American citizen, married, businessman, resident and domiciled at
45 Maplewood Boulevard, Suffen, NY.
8) Waived the installation of the Advisory Counsel for the current fiscal year.
QUORUM FOR RESOLUTIONS: The resolutions were taken by unanimous vote of those
present to the meeting.
CLOSING: As there were no more matters to be discussed and as nobody else wished
to speak, the present Meeting was closed and the minutes thereof are hereby
signed by all shareholders present to the Meeting. Sao Paulo, April 30, 1996
(sgd) ABRILCAP Comercio e Participacoes Ltda. (represented by its Directors
Robert Civita and Jose Augusto P. Moreira); HARPIA Holdings Limited and CURUPIRA
Holdings Limited (represented by their attorney Marcilio Macedo de Andrade);
FALCON International Communications (Bermuda) L.P. (represented by Jose Luis de
Salles Freire); HEARST/ABC Video Services II and TVA Participacoes Ltda.
(represented by their attorney Jorge Fernando Koury Lopes), Robert Civita; Jose
Augusto Pinto Moreira, Robert Hefley Blocker; Giancarlo Francesco Civita; Thomaz
Souto Correa Netto; Francisco Savio Couto Pinheiro; Victor Civita; Valter
Pasquini; Fatima Ahmad Ali; Isacco Zarmati; Luis Gabriel Cepeda Rico; Arnaldo
Bonoldi Dutra; Marcilio Macedo de Andrade; Sergio Vladimirschi Junior; Jose Luis
de Salles Freire; Viviane Vladimirschi; Nina Vladimirschi Farina; Jorge Fernando
Koury Lopes; Oswaldo Leite de Moraes Filho; Leonardo Barem Leite; Miriam Lourdes
Medeiros e Silva Machado.
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<PAGE>
(sgd) Valter Pasquini, Secretary
Lawyer,
(sgd) Silvia C.L. Bernardes
BBA/SP No. 74,256
Follows a stamp of the Commercial Registry of the State of Sao
Paulo (JECESP), reading as follows: "I certify the registration
under No. 81,129/96-8. (sgd) antonio Carlos Guido, Secretary
General".
IN WITNESS WHEREOF, I have set hereunto my hand and seal.
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<PAGE>
TEVECAP S.A.
General Taxpayers Register (CGCMF) No. 57.574.170/0001-05
Commercial Registry No. 35300139623
MINUTES OF THE ADMINISTRATION BOARD MEETING
HELD ON APRIL 30, 1996
PLACE AND TIME: Company registered office, at Rua do Rocio 313, suite 101, in
Sao Paulo, SP, at 05:30 PM.
ATTENDANCE: All members of the Administration Board.
BOARD: President: Robert Civita; Secretary: Jose Augusto P. Moreira.
AGENDA: Election of Director
RESOLUTIONS: (unanimously approved): Election of Mr. Sergio Vladimirschi Junior,
identified hereinbelow, for the position of Director of the Company. As a result
of the above-mentioned election, the Board of Directors, to be in office until
the election and empowerment of the members of the Administration Board, at the
1998 Annual Shareholders' Meeting, shall hereinafter be as follows: Directors:
Jose Augusto Pinto Moreira, Brazilian, married, economist, bearer of Identity
Card (RG) No. 2.944.700 and of the Individaul Taxpayer Registry (CPF) No.
128.701.967-68, resident and domiciled at Alameda Argentina 406 (Alphaville II),
Barueri /SP, Angelo Silvio Rossi, Brazilian, divorced, editor, bearer of RG No.
3.253.153 and CPF No. 169.959.538-00, resident and domiciled at Alameda Joaquim
Eugenio de Lima 1647, apt. 18, Sao Paulo/SP; Claudio Cesar D'Emilio, Brazilian,
married, business administrator, bearer of RG No. 4.493.895 and CPF No.
273.258.818-00, resident and domiciled at Rua Sicano 110, Sao Paulo/SP and
Sergio Vladimirschi Junior, Brazilian, married, businessman, bearer of RG No.
14.188.274 and CPF No. 128.909.598-13 resident and domiciled at Rua Guayaquil
114, Sao Paulo/SP.
CLOSING: As there were no more issues to be discussed and as no one else wished
to speak, the meeting was closed, and the minutes thereof are hereby signed by
all Counselors present to the meeting. Sao Paulo, April 30, 1996 (sgd) Robert
Civita, Jose Augusto P. Moreira, Robert Hefley Blocker, Giancarlo Francesco
Civita, Thomaz Souto Correa Netto, Francisco Savio Couto Pinheiro, Arnaldo
Bonoldi Dutra, Sergio Vladimirschi Junior, Jose Luis de Sales Freire, Jorge
Fernando Koury Lopes, Oswaldo Leite de Moraes Filho.
It compares to the original
(sgd) Robert Civita, President
Lawyer:
(sgd) Silvia C.L. Bernardes
BBA/SP No. 74.256
Follows a stamp of the Commercial Registry of the State of Sao Paulo(JECESP),
reading as follows: "I certify the registration under No. 81.130/96-0. (sgd)
Antonio Carlos Guido, Secretary General".
<PAGE>
Exhibit 3.2
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Memorandum of the Organizational Shareholders'
Meeting and By-laws of TVA Sistema de Televisao S.A.
By: /s/DOUGLAS DURAN
---------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
ORGANIZATIONAL SHAREHOLDERS' MEETING
DATE, TIME AND PLACE: On May 13, 1993, at 10:00 AM, in this Capital City, at Rua
do Rocio 313, 5th floor.
ATTENDANCE: ABRILPAR COMERCIO E PARTICIPACOES LTDA., with registered office at
Avenida Otaviano Alves de Lima, 4400, 6th floor, enrolled with the General
Taxpayer Registry of the Ministry of Finance (CGC/MF) under No.
59.801.076/0001-69 and registered with the Commercial Registry of the State of
Sao Paulo (JUCESP) under No. 35208399428, on 12/29/88, represented by its
Directors, Robert Civita, Brazilian, married, editor, bearer of Identity Card
(RG) No. 1.666.785 and Individual Taxpayer Registry (CIC) No. 006.890.178-04,
resident and domiciled at Rua Tabapua No. 1554, apt. 1301, in Sao Paulo, SP, and
Jose Augusto Pinto Moreira, Brazilian, married, economist, bearer of RG No.
2.944.700 and CIC No. 128.701.967-68, resident and domiciled at Alameda
Argentina No. 406, Alphaville II, Barueri, SP: and MATIAS MACHLINE, Brazilian,
married, industrialist, bearer of RG No. 2.936.723 and CIC No. 007.209.098-72,
resident and domiciled at Rua Manoel Goes No. 157, in Sao Paulo, SP.
BOARD: Robert Civita, President; Jose Augusto Pinto Moreira, Secretary.
AGENDA: Organization of a Sociedade Anonima.
DOCUMENTS: Bylaws (annex I), Subscription Bulletin (annex II); Receipt of
Deposit (annex III).
RESOLUTIONS: 1) Approved the organization of a Sociedade Anonima named "TVA
SISTEMA DE TELEVISAO S/A", having its principal place of business located in
this Capital City at Rua do Rocio 313, 5th floor, with the initial stock capital
of three billion cruzeiros (Cr$ 3,000,000,000.00), divided into three hundred
thousand (300,000) common registered shares without a par value, fully
subscribed to by ABRILPAR COMERCIO E PARTICIPACOES LTDA. and by MATIAS MACHLINE,
to be paid-in in the Brazilian legal tender, of which ten per cent (10%) to be
paid herein and the remaining ninety per cent (90%) up to one year as from the
date hereof, pursuant to the subscription bulletin (annex II) the deposit with
Banco do Brasil, on behalf of the Company being organized (annex III) having
been made, and the starting of operations being subject to the filing of these
articles of incorporation with the Commercial Registry; 2) Waived the reading of
the subscription bulletin (annex II) and Bylaws (annex I) as they are fully
known by the subscribers to the Company capital, and ratification and approval
thereof in all of their terms; 3) Elected the Board of Directors as follows:
Director President: Robert Civita, identified hereinabove; Financial Director:
Jose Augusto Pinto Moreira, identified hereinabove; and Directors without a
special designation: Giancarlo Francesco Civita, Brazilian, married, Bachelor in
Social Communication, bearer of RG No. 6.167.806 and
<PAGE>
CIC No. 040.666.108-11, resident and domiciled at Rua Capital Antonio Rosa No.
7, in Sao Paulo, SP, and Victor Civita, Brazilian, single, Bachelor in Political
Sciences, bearer of RG No. 6.166.935 and CIC No. 040.666.138-37, resident and
domiciled at Rua Tucuma 141, apt. 205, in Sao Paulo, SP, the relevant
compensation being fixed up to the individual and collective limits for
deduction permitted by the income tax law, as adjusted pursuant to the variance
of such limits which shall occur during their term of offices, except as to the
offices for which the waive of compensation shall be resolved at a meeting of
the Board of Directors. The term of office of the Board of Directors hereby
elected shall exceptionally extend until the first Annual Shareholders Meeting
of the Company, however the present Directors shall remain in their offices
until the effective empowerment of the Board of Directors to be elected at that
Shareholders' Meeting.
CLOSING: As there were no other matters to be discussed, the Meeting was closed,
and the minutes thereof were signed by all present to the Meeting. Sao Paulo,
May 13, 1993.
ABRILPAR COMERCIO E PARTICIPACOES LTDA.:
(sgd) Robert Civita
(sgd) Jose Augusto Pinto Moreira
(sgd) MATIAS MACHLINE
Lawyer's visa:
(sgd) Luis Carlos Balieiro
BBA/SP No. 33,225
TVA SISTEMA DE TELEVISAO S/A
ORGANIZATIONAL SHAREHOLDERS' MEETING
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ANNEX I - BYLAWS
NAME, REGISTERED OFFICE, OBJECT, DURATION
Article 1 - TVA SISTEMA DE TELEVISAO S/A is a sociedade anonima, governed by
these Bylaws and by the applicable legal provisions.
Article 2 - The Company has its principal place of business and jurisdiction in
the City of Sao Paulo, State of Sao Paulo, and it may, upon resolution of the
Board of Directors, open or close establishments anywhere in the country or
abroad.
Article 3 - The Company object is the supplying of television signals repeated
via satellite; production, distribution, import and export of television
programs, owned by the Company and/or by third parties; import of equipment and
spare parts for its own use; rendering of the other services relating to signal
transmission, reception and distribution systems and television programs;
participation on other companies.
Article 4 - The Company is organized for an undetermined period of time.
COMPANY CAPITAL
Article 5 - The company capital is three billion cruzeiros
(Cr$3,000,000,000.00), divided into three hundred thousand (300,000) ordinary
registered shares without a par value.
Article 6 - Any ordinary shares shall entitle to one vote in the resolutions of
the Shareholders' Meetings.
Article 7 - The shareholders are entitled the right of first refusal for the
subscription to new shares, in the same proportion of the shares already held.
Article 8 - The shareholders shall pay the capital subscribed, under the terms
set forth upon subscription, which may determine that the payment shall be made
upon call by the company administration bodies.
Sole paragraph - Any shareholder not effecting the payments on the due dates,
shall be deemed to be in arrears and therefore subject to the payment of
interest of one per cent (1%) per month plus monetary adjustment and a fine of
ten per cent (10%) on the amount overdue.
<PAGE>
SHAREHOLDERS' MEETING
Article 9 - The Annual Shareholders' Meeting shall be ordinarily and
extraordinarily held in accordance with the Law, as presided over by the
Shareholder appointed at the installation of the Meeting.
Article 10 - The Annual Shareholders' Meeting shall be called by the Director
President in office.
Article 11 - The Annual Shareholders' Meeting, besides other matters provided
for in Law, shall:
I - amend the Company Bylaws;
II - elect or divest, at any time, the Company Directors, and fix their
compensation;
III - establish the Company policies and guidelines;
IV - authorize the disposal and the encumbrance of the Company permanent assets
above the amount equivalent to sixty thousand (60,000) UFIRs - Referential Tax
Unit;
V - authorize the granting of guarantees, including sureties and collateral
signatures to third parties, except as to guarantees to controlling, controlled
and allied companies.
Article 12 - The matters listed below shall be approved by the shareholders
representing at least fifty-one per cent (51%) of the Company voting capital:
I - amendment to the preferences, advantages and conditions for redemption or
repayment of shares; or the creation of new classes of shares;
II - creation of founders' shares;
III - amendment to the minimum obligatory dividend;
IV - material change in the company, including the undertaking of new business
areas;
V - merger of the Company into another company, its consolidation or splitting;
VI - dissolution of the Company or cessation of the state of liquidation;
VII - creation and issuance of debentures;
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<PAGE>
VIII - practice of any acts, not expressly mentioned herein, which are beyond
the Company usual operational scope.
MANAGEMENT
Article 13 - The Company shall be managed by a Board of Directors comprising
four members, shareholders or not, resident in the country, elected and divested
by the Shareholders' Meeting, of which one shall be the Director President,
another shall be the Financial Director and the other two, Directors shall have
no special designation.
Sole paragraph - The term of the Board of Directors' office is three years and
its members may be reelected, remaining in their offices until the empowerment
of their successors.
Article 14 - The Directors shall substitute for each other in their absences or
impediments. In case of a permanent vacancy, the Shareholders' Meeting shall
fill in the vacancy for the non-expired term of the position replaced.
Article 15 - The Board of Directors shall meet to:
I - prepare the financial statements and the management report to be submitted
to the members of the audit Committee for approval, if any, and addressed to the
Shareholders' Meeting;
II - resolve on the creation, extinction and transfer of establishments anywhere
in the country or abroad;
III - authorize the disposal and encumbrance of the Company permanent assets up
to the amount equivalent to sixty thousand (60,000,) UFIRs - Referential Tax
Unit;
IV - appoint and divest the independent auditors;
V - resolve on the participation in other companies or undertakings;
VI - resolve on the submission to the Shareholders' Meeting of proposals of
capital increases and amendments to these Bylaws;
VII - decide on the matters entrusted to it by Law, the Bylaws and the
Shareholders' Meeting.
Sole Paragraph - The Board of Directors shall meet upon call by any of the
Directors and, in case of tie vote, the issue shall be submitted to the
Shareholders' Meeting.
Article 16 - The Director President shall be responsible for supervising the
management and administration of the Company business, and especially for its
representation with the applicable authorities in their relevant areas.
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<PAGE>
Article 17 - The Financial Director shall determine the Company financial
policies, maintain contacts with official and private financial institutions and
governmental bodies in the financial area.
Article 18 - The Directors without a special designation shall be responsible
for the duties entrusted to them by the Shareholders' Meeting or at the Board of
Directors meetings.
Article 19 - The active and passive representation of the Company, in and out of
court and before any public bodies, either federal, state or local, autarchies
and any individual or legal entities generally, shall fall on any of the
Directors separately or even to an attorney appointed under the terms of these
Bylaws.
Paragraph One - The granting of powers of attorney shall be obligatorily
effected with the signature of two Directors, upon specification of the powers
granted, limits, conditions and terms, except as to the powers of attorney with
the ad judicia clause, which shall be granted for an undetermined period of
time.
Paragraph Two - The acts, agreements and documents implying in any liability
before the Company or the release of third parties from their obligations before
the Company, as well as the disposal or encumbrance of permanent assets, up to
an amount equivalent to sixty thousand (60,000) UFIRs - Referential Fiscal Unit,
shall be always signed by two Directors or by one Director jointly with an
attorney or even by two attorneys as appointed under the terms hereof.
Paragraph Three - For the practice of the routine acts, issuance of the usual
correspondence, receipts, endorsement of checks for deposit in the Company
banking accounts, endorsements and bills of trade issued by the Company or for
account of the Company, for collection, discount or pledge with financial
institutions to be credit to the Company, only the separate signature of any
Director or of an attorney regularly appointed and having special powers, shall
be necessary.
Article 20 - It is expressly forbidden to use the Company name in sureties,
collateral signatures, acceptances, endorsements or in any documents which are
of no interest for the Company or implying in a mere liberality.
THE AUDIT COMMITTEE
Article 21 - The company shall have an Audit Committee, the operation of which
shall not be permanent, comprising three (03) regular members and an equal
number of alternates, shareholders or not, elected by the Shareholders' Meeting,
to perform the functions permitted by law.
Paragraph One - Only individuals, who are resident in the country and complying
with the legal requirements may be elected for the Audit Committee, and they
shall hold their offices until the first Annual Shareholders' Meeting held after
their election, and they may be reelected.
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<PAGE>
Paragraph Two - The compensation of the members of the Audit Committee shall be
fixed by the Shareholders' Meeting which elects them, subject to the provisions
of Law.
FISCAL YEAR, FINANCIAL STATEMENTS AND PROFIT DISTRIBUTION
Article 22 - The fiscal year shall begin on January 1st and end on December 31st
of every year.
Article 23 - At the end of every fiscal year, the financial statements shall be
prepared, subject to the legal provisions.
Article 24 - The net profit earned in every fiscal year, after the legal
deductions, shall be designed pursuant to determination by the Shareholders'
meeting, upon advice of the Audit Committee, when operating.
Paragraph One - The Shareholders are assured the right to receive an obligatory
minimum dividend not lower than twenty-five per cent (25%) of the net profit in
the fiscal year after deduction of the quota designed for the formation of the
legal reserve.
Paragraph Two - Every six (6) months or shorter periods, the Company may prepare
the balance street and distribute dividends.
GENERAL PROVISIONS
Article 25 - The Company shall be dissolved in the cases provided for in Law or
upon resolution of the Shareholders' Meeting, which shall also resolve on the
way of liquidation and shall appoint the liquidator and the Audit Committee to
operate in the relevant period.
Sao Paulo, May 13, 1993.
ABRILPAR COMERCIO E PARTICIPACOES LTDA.
(sgd) Robert Civita
(sgd) Jose Augusto Pinto Moreira
(sgd) MATIAS MACHLINE
Lawyers' Visa:
(sgd) Luis Carlos Balieiro
BBA/SP No. 33,225
Translator's Note: On the overleaf of every page of these Bylaws, there are two
mechanical stamps of the Commercial Register of the State of Sao Paulo (JUCESP),
one of them containing the number 35300136187 and the other certifying that the
document was filed under the number and date mechanically affixed to the
document.
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<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
General Taxpayer Register 71.613.400/0001-10
Register with the Commercial Registry No. 35300136187
MINUTES OF THE SHAREHOLDERS' ANNUAL AND
EXTRAORDINARY MEETING
Held on April 30, 1994
PLACE AND TIME: At the Company's registered office at Rua do Rocio 313, 5th
floor, Sao Paulo, SP, at 10:00 AM.
ATTENDANCE: Shareholders representing the whole company capital, pursuant to the
signatures apposed on the "Attendance Book". Also present the Company officers.
BOARD: President: Robert Civita; Secretary: Angelo Silvio Rossi.
LEGAL PUBLICATIONS: a) Management Report and Financial Statements published in
the Official Gazette of the State of Sao Paulo and in the newspaper "O Estado de
Sao Paulo" on 04/30/94, on pages 25, 26 and 64 and L8/L9, respectively; b) Call
Notice, waived under the provisions of article 124, paragraph 4, of Law 6404/76;
c) publications referred to under article 133 of Law 6404/76, waived under the
terms of paragraph 4 of the mentioned legal provision.
RESOLUTIONS: I - At the Annual Shareholders' Meeting, those legally barred
having refrained from voting: 1) Approved the Management Report and the
Financial Statements for the fiscal year ended on 12/31/93; 3) Approved the
non-distribution of dividends for the fiscal year 1993, as the Company had no
profits in the year, pursuant to the documents herein approved; 4) Approved the
monetary adjustment of the paid-in capital, in the amount of two million, two
hundred and ninety thousand, nine hundred and sixty-nine cruzeiros reais and
fifteen centavos (CR$2,290,969.15) and subsequently the capitalization in the
amount of two million, two hundred and thirty-five thousand, six hundred and
sixty cruzeiros reais (CR$2,235,660.00), without the issuance of new shares, the
remaining fifty-five thousand three hundred and nine cruzeiros reais and fifteen
centavos (CR$55,309.15) to remain recorded in the account "Capital Reserve",
thus increasing the company capital, from six billion, nine hundred and eighty
million, seven hundred and sixty-four thousand, three hundred and forty
cruzeiros reais (CR$6,980,764,340.00) to six billion, nine hundred and
eighty-three million cruzeiros reais (CR$6,983,000,000.00); 5) Elected the
Company Board of Directors for a term of office of three years, that is, until
the 1997 Shareholders' Annual Meeting, hereinafter composed as follows: Director
President: Robert Civita, Brazilian, married, editor, bearer of Identity Card
(RG) No. 1.666.785 and Individual Taxpayers' Registry (CIC) No. 006.890.178-04,
resident and domiciled at Rua Escocia, 253, apt. 11, Sao Paulo, SP; Financial
Director: Jose Augusto Pinto Moreira, Brazilian, married, economist, bearer of
RG No. 2.944.700 and CIC
<PAGE>
No. 128.701.967-68, resident and domiciled at Alameda Argentina, 406, Alphaville
II, Barueri, SP; and Directors: Giancarlo Francesco Civita, Brazilian, married,
bachelor in Social Communication, bearer of RG No. 6.167.806 and CIC No.
040.666.108-11, resident and domiciled at Rua Capitao Antonio Rosa, 07,
Pinheiros, Sao Paulo, SP and Victor Civita, Brazilian, married, Bachelor in
Political Sciences, bearer of RG No, 6.166.935 and CIC No. 040.666.138-37,
resident and domiciled at Rua Pocone, 53, Sao Paulo, SP. Fixed the compensation
of the Board of Directors in up to the maximum individual and aggregate limits
of deductibility permitted by the income tax legislation, as subject to
adjustment pursuant the variance of such limits incurring during the term of
office, except as to the cases for which the waiving of compensation shall be
resolved in a meeting of the Board of Directors; 6) Waived the installation of
the Audit Committee for the present fiscal year. II - Shareholders'
Extraordinary Meeting: 7) Approved the consolidation of the shares representing
the Company capital in the proportion of one thousand (1,000) shares for one (1)
share, that is, of every thousand existing shares into one new share. The
fractional shares resulting from the consolidation shall be acquired by the
Company immediately after they are canceled. 8) As a result of preceding items 3
and 6, approved the amendment to article 5 of the Bylaws, which shall
hereinafter read as follows-. "Article 5 - The Company capital is six billion,
nine hundred and eighty-three million cruzeiros reais (CR$ 6,983,000,000.00),
divided into six million, nine hundred and eighty thousand, seven hundred and
sixty-four (6,980,764) common registered shares without a par value".
QUORUM FOR DELIBERATIONS: The resolutions were adopted by unanimous vote of
those present to the Meeting.
CLOSING: As there were no other matters to be discussed and nobody else wished
to speak, the minutes thereof were drawn up and signed and the Meeting was
closed. Sao Paulo, April 30, 1994. (sgd) Matias Machline (sgd) Robert Civita
(sgd) Edgard de Silvio Faria (sgd) Angelo Silvio Rossi (sgd) Maricla lnes Romana
Rossi It compares with the original (sgd) Robert Civita, President Lawyer: (sgd)
Silvia Cristina L. Bernardes BBA/SP No. 74,256 Follows a stamp of the Commercial
Registry of the State of Sao Paulo (JUCESP), reading as follows: "I certify
registration under No. 75,483/94-4, (sgd) Jose Edgard L. Gomes, Secretary
General".
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<PAGE>
TVA SISTEMA DE TELEVISAO S.A.
General Taxpayer Register 71.613.400/0001-10
Register with the Commercial Registry No. 35300136187
MINUTES OF THE ANNUAL SHAREHOLDERS' MEETING
Held on April 30, 1996
PLACE AND TIME: At the Company's registered office at Rua do Rocio 313, 5th
floor, Sao Paulo, SP, at 09:00 AM.
ATTENDANCE: Shareholders representing the whole company capital. Also present
the Company officers.
BOARD: President: Robert Civita; Secretary: Jose Augusto P. Moreira.
LEGAL PUBLICATIONS: a) Management Report and Financial Statements published in
the Official Gazette of the State of Sao Paulo, on 03/23/96, on pages 29 and 30,
and in the newspaper "O Estado de Sao Paulo", on 03/22/96, on pages L11 and L12;
b) Call Notice, waived under the provisions of article 124, paragraph 4, of Law
6404/76; c) publications referred to under article 133 of the mentioned law,
waived under the terms of paragraph 5 of the mentioned legal provision.
RESOLUTIONS: Approved, those legally barred having refrained from voting:
1) the Management Report and the Financial Statements for the fiscal year ended
on 12/31/95;
2) the non-distribution of dividends for the fiscal year 1995, as the Company
had no profits in the year, pursuant to the documents herein approved;
3) the monetary adjustment of the paid-in capital, in the amount of four
million, three hundred and seventy-seven thousand, eight hundred and
seventy-nine reais and seventy one centavos (R$4,377,879.71);
4) the capitalization of part of the balance of the account "Reserve for Capital
Monetary Adjustment", in the amount of four million, three hundred and
seventy-eight million and eighty-four reais (R$4,378,084.00), without the
issuance of new shares, thus increasing the Company capital, from nineteen
million, four hundred and ninety thousand reais (R$19,490,000.00) to
twenty-three million, eight hundred and sixty-eight thousand, and eighty-four
reais (R$23,868,084.00), with the consequent amendment to article 5 of the
Bylaws, which shall hereinafter read as follows: "Article 5 - The Company
capital is twenty-three million, eight hundred and sixty-eight thousand and
eighty-four reais (R$23,868,084.00), divided into six
<PAGE>
million, nine hundred and eighty thousand, seven hundred and sixty-four
(6,980,764) common registered shares without a par value".
5) the fixation of the Board of Directors' compensation for the current year in
up to the maximum limit of deductibility permitted by the income tax
legislation, as subject to the aggregate limit and considered the individual
limited multiplied by the number of Directors who effectively shall receive a
compensation, except as to those positions for which the waiving of compensation
shall be resolved at a meeting of the Board of Directors;
6) Waived the installation of the Audit Committee for the present fiscal year.
QUORUM FOR RESOLUTIONS: The resolutions were approved by unanimous vote of those
present to the meeting.
CLOSING: As there were no more matters to be discussed and nobody else wished to
speak, the minutes of the meeting were drawn up, approved and signed, the
meeting having been closed. Sao Paulo, April 29, 1996. (sgd) TEVECAP S.A. (as
represented by its Directors, Jose Augusto P. Moreira and Claudio Cesar
D'Emilio) and the Estate of Matias Machline (executor, Carlos Alberto Machline).
It compares with the original.
(sgd) Jose Augusto P. Moreira, Secretary
Lawyer:
(sgd) Silvia Cristina L. Bernardes.
BBA/SP No. 74,256
Follows a stamp of the Commercial Registry of the State of Sao Paulo (JUCESP),
reading as follows: "I certify registration under No. 78,265/96-4. (sgd) Antonio
Carlos Guido, Secretary General".
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<PAGE>
Exhibit 3.3
<PAGE>
BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ORDINANCE
(No. 8 of 1984)
MEMORANDUM OF ASSOCIATION
AND
ARTICLES OF ASSOCIATION
OF
TVA COMMUNICATIONS LTD.
Incorporated the 5th day of October, 1990.
SUCRE & SUCRE TRUST LIMITED
P.O. BOX 3163
CHERA CHAMBERS
ROAD TOWN
TORTOLA
BRITISH VIRGIN ISLANDS
<PAGE>
ARTICLES OF ASSOCIATION
OF
TVA COMMUNICATIONS LTD.
INDEX
CLAUSE PAGES
1 Definitions and Interpretation.......................... 1
2 Registered Shares....................................... 1
3 Bearer Shares........................................... 2
4 Shares, Authorised Capital and Capital.................. 3
5 Transfer of Shares...................................... 4
6 Transmission of Shares.................................. 4
7 Reduction or Increase in Authorised Capital
or Capital............................................ 5
8 Meetings and Consents of Members........................ 5
9 Directors............................................... 7
10 Powers of Directors..................................... 8
11 Proceedings of Directors................................ 9
12 Officers................................................ 10
13 Conflict of Interests................................... 11
14 Indemnification......................................... 11
15 Seal.................................................... 12
16 Dividends............................................... 12
17 Accounts................................................ 13
18 Notices................................................. 13
19 Arbitration............................................. 13
20 Voluntary Winding Up and Dissolution.................... 14
21 Continuation............................................ 14
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<PAGE>
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ORDINANCE
(NO. 8 OF 1984)
MEMORANDUM OF ASSOCIATION
OF
TVA COMMUNICATIONS LTD.
1. NAME
The name of the Company is TVA COMMUNICATIONS LTD.
2. REGISTERED OFFICE
The Registered Office of the Company will be the offices of SUCRE & SUCRE
TRUST LIMITED, CHERA CHAMBERS, Road Town, Tortola, British Virgin Islands.
3. REGISTERED AGENT
The Registered Agent of the Company will be SUCRE & SUCRE TRUST LIMITED,
P.O. Box 3163, CHERA CHAMBERS, Road Town, Tortola, British Virgin Islands.
4. GENERAL OBJECTS AND POWERS
The object of the Company is to engage in any act or activity that is not
prohibited under any law for the time being in force in the British Virgin
Islands including but not limited to:
4.1 a) Invest, gather or subscribe the necessary capital to
promote, establish or develop enterprises and businesses;
<PAGE>
b) subscribe or promote subscription, buy, possess, hold, acquire
by any other means and sell, negotiate, guarantee, assign,
exchange and transfer by any other means, capital shares,
credits, obligations, securities, certificates of partnership
and any other title or document of any private, public or
semi-public corporation or juridical person and while being
owner of same, possess and exercise all the corresponding
rights and privileges;
c) To execute all kind of contracts, for itself or others and
specially trust contracts and for the administration of
stocks, credits, obligations, securities, certificates of
partnership and any other title or document of any corporation
or juridical persons;
d) To give or receive loans, with or without guarantees such as
mortgages, pledges and sureties;
e) To purchase or sell, charter, sail or operate ships and
vessels, as well as to execute all kind of marine contracts;
f) To do and perform all and everything necessary for the
attainment of any of the purposes stated in its Memorandum or
Articles of Association or any amendment of same or whatever
is necessary or convenient for the protection and benefit of
the corporation; and,
g) To carry on any lawful business whether not such business is
set forth in its Memorandum or Articles of Association or in
any amendment thereof.
4.2 The Company shall have all such powers as are permitted by law for
the time being in force in the British Virgin Islands, to perform
all acts and engage in all activities necessary or conducive to the
conduct or attainment of the objects of the company.
5. EXCLUSIONS
5.1 The Company may not:
5.1.1 carry on business with persons resident in the British
Virgin Islands;
5.1.2 own an interest in real property situated in the British
Virgin Islands, other than a lease referred to in paragraph
5.2.5 of sub-clause 5.2;
5.1.3 carry on banking business;
5.1.4 carry on business as an insurance or reinsurance company;
or,
- 2 -
<PAGE>
5.1.5 carry on the business of providing the registered office
for companies.
5.2 For purposes of paragraph 5.1.1 of sub-clause 5.1, the Company shall
not be treated as carrying on business with persons resident in the
British Virgin Islands if:
5.2.1 it makes or maintains deposits with a person carrying on
banking business within the British Virgin Islands;
5.2.2 it makes or maintains professional contact with solicitors,
barristers, accountants, bookkeepers, trust companies,
administration companies, investment advisers or other
similar persons carrying on business within the British
Virgin Islands;
5.2.3 it prepares or maintains books and records within the
British Virgin Islands;
5.2.4 it holds, within the British Virgin Islands, meetings of
its directo rs or members;
5.2.5 it holds a lease of property for use as an office from
which to communicate with members or where books and
records of the Company are prepared or maintained;
5.2.6 it holds shares, debt obligations or other securities in a
company incorporated under the International Business
Companies Ordinance or under the Companies Act; or
5.2.7 shares, debt obligations or other securities in the Company
are owned by any person resident in the British Virgin
Islands or by any company incorporated under the
International Business Companies Ordinance or under the
Companies Act.
6. SHARE CAPITAL
6.1 CURRENCY
Shares in the Company shall be issued in the currency of The United
States of America.
- 3 -
<PAGE>
6.2 AUTHORISED CAPITAL AND CLASSES OF SHARES
The authorised capital of the Company is Cr$900,000.00 divided into
900,000 shares of one class, of Cr$1.00 par value each.
6.2.1 The directors shall not allocate different rights as to
voting, dividends, redemption or distributions on
liquidation unless the Memorandum of Association shall have
been amended to create separate classes of shares and all
the aforesaid rights shall be identical in each separate
class.
6.3 RIGHTS, QUALIFICATIONS OF SHARES
The directors shall by resolution have the power to issue any class
or series of shares that the Company is authorised to issue in its
capital, original or increased, with or subject to any designations,
powers, preferences, rights, qualifications, limitations and
restrictions.
6.4 REGISTERED OR BEARER SHARES
6.4.1 The directors may issue all or part of its authorised
shares either as registered shares or as shares to bearer.
6.4.2 Shares issued as registered shares may be exchanged for
shares issued to bearer and vice versa.
6.4.3 Notice to members with bearer shares shall be given to one
or more Special Agents for Service appointed by the Board
of Directors and notified to members upon the issue of
their shares. Service upon such Special Agent of any
notice, information or written statement required to be
given to members, constitute service upon the bearer of
such shares until such time as a new name and address for a
Special Agent for Service is appointed and notice thereof
served on members as provided herein. In the absence of
such Agent it shall be sufficient for the purposes of
service for the Company to publish the notice, information
or written statement in one or more newspapers published or
circulated in the British Virgin Islands and in such other
place, if any, as the Company shall from time to time by a
resolution of directors or a resolution or members
determine.
6.5 TRANSFER OF SHARES
Registered shares in the Company may be transferred subject to the
prior or subsequent approval of the Company as evidenced by a
resolution of directors or by a resolution of members.
- 4 -
<PAGE>
6.6 PREFERENTIAL RIGHT
A preference is granted in favor of the members to buy the
corporation registered shares that the members wish to transfer,
preference that can be exercised by paying as price for said shares
their book value at the close of the fiscal period immediately
preceding. If there are two (2) or more members that wish to
exercise the preferences granted in the Memorandum and/or Articles
of Association, then each one may buy shares proportionally to the
number of shares that he already has to the number of shares
offered. All shares of the same class are equal, award the same
rights and are subject to the same obligations and restrictions.
7. AMENDMENTS
The Company may amend its Memorandum of Association and Articles of
Association by a resolution of members.
The directors may, however, amend the Memorandum of Association solely for
the purpose of changing the Registered Office.
We, the undersigned of the address stated below for the purpose of incorporating
an International Business under the laws of the British Virgin Islands hereby
subscribe our name to this Memorandum of Association the 5th day of October 1990
in the presence of the undersigned witness:
SIGNATURES
NAME AND ADDRESS OF WITNESS SUBSCRIBER
c/o P.O. Box 3163 SUCRE & SUCRE TRUST LIMITED
Chera Chambers P.O. BOX 3163
Road Town, Tortola, CHERA CHAMBERS
British Virgin Islands Road Town, Tortola
British Virgin Islands
- 5 -
<PAGE>
TERRITORY OF THE BRITISH VIRGIN ISLANDS
THE INTERNATIONAL BUSINESS COMPANIES ORDINANCE
(No. 8 of 1984)
ARTICLES OF ASSOCIATION OF
TVA COMMUNICATIONS LTD.
1. DEFINITIONS AND INTERPRETATION
1.1 The meanings of words in the Memorandum of Association and Articles
of Association are as defined in the International Business
Companies Ordinance number 8 of 1984 as amended by the International
Business Companies Amendment Act of 1988.
1.2 Any words or expressions defined in the ordinance shall bear the
same meaning in these Articles.
1.3 Whenever the singular or plural number, or the masculine, feminine
or neuter gender is used in these Articles, it shall equally, where
the context admits, include the others.
1.4 A reference in these Articles to voting in relation to shares shall
be construed as a reference to voting by members holding the shares
except that it is the votes allocated to the shares that shall be
counted and not the number of members who actually voted and a
reference to shares being present at a meeting shall be given a
corresponding construction.
1.5 A reference to money in these Articles is a reference to the
currency of the United States of America unless otherwise stated.
2. REGISTERED SHARES
2.1 The Company shall issue to every member holding registered or bearer
shares in the Company a certificate that must be:
a) Signed by two directors or two officers of the Company, or by
one director and one officer; or
b) Under the common seal of the Company, with or without the
signature of any director or officer of the Company.
<PAGE>
2.2 Any member receiving a share certificate for registered shares shall
indemnify and hold the Company and its directors and officers
harmless from any loss or liability which it or they may incur by
reason of the wrongful or fraudulent use or representation made by
any person by virtue of the possession thereof. If a share
certificate for registered shares is worn out or lost it may be
renewed on production of the worn out certificate or on satisfactory
proof of its loss together with such indemnity as may be required by
a resolution of directors.
2.3 If several persons are registered as joint holders of any shares,
any one of such persons may be given an effectual receipt for any
dividend payable in respect of such shares.
3. BEARER SHARES
3.1 Subject to a request for the issue of bearer shares and to the
payment of the appropriate consideration for the shares to be
issued, the Company may, to the extent authorised by the Memorandum,
issue bearer shares to, and at the expense of, such person as shall
be specified in the request.
3.2 The Company may also upon receiving a request in writing accompanied
by the share certificate for the shares in question, exchange
registered shares for bearer shares and unless the request is
delivered in person by the registered owner, it shall be
authenticated. The Company may also exchange bearer shares for
registered shares, but such request served on the Company by the
holder of bearer shares shall specify the name and address of the
person to be registered. Following such exchange the share
certificate relating to the exchanged shares shall be delivered as
directed by the member requesting the exchange.
3.3 Subject to the provisions of the Ordinance and of these Articles the
bearer of a bearer share certificate shall be deemed to be a member
of the Company and shall be entitled to the same rights and
privileges as he would have had if his name had been included in the
share register of the Company as the holder of the shares.
3.4 Subject to any specific provisions in these Articles, in order to
exercise his rights as a member of the Company, the bearer of a
bearer share certificate shall produce the bearer share certificate
as evidence of his membership in the Company.
Without prejudice to the generality of the foregoing, the member,
instead of producing the certificate may, through the Special Agent
for Service, if one is appointed by the Board of Directors, exercise
his rights to requisition meetings, to be present in said meetings,
to vote, to be convened for meetings, to waive said right and to
receive the payment of dividends.
- 2 -
<PAGE>
3.4.1 The Special Agent must certify to the Company that he is
holding the bearer share certificate, the number of the
certificate, the date of issue, the period of time for
which he will be holding the share certificate, which in
the case of meetings must be a period of at least three (3)
days after the meeting is held.
3.5 The bearer of a bearer share certificate shall for all purposes be
deemed to be the owner of the shares comprised in such certificate
and in no circumstances shall the Company or the Chairman of any
meeting of members or the Company's registrars or any director or
officer of the Company or any authorised person be obliged to
inquire into the circumstances whereby a bearer share certificate
came into the hands of the bearer thereof, or to question the
validity or authenticity of any action taken by the bearer of a
bearer share certificate whose signature has been authenticated as
provided herein.
3.6 If the bearer of a bearer share certificate shall be a corporation,
then all the rights exercisable by virtue of such shareholding may
be exercised by an individual duly authorised to represent the
corporation; but, unless such individual shall acknowledge that he
is representing a corporation and shall produce, upon request,
satisfactory evidence that he is duly authorised to represent the
corporation, the individual shall, for all purposes hereof, be
regarded as the holder of the shares in any bearer share certificate
held by him.
3.7 If any bearer share certificate be worn out or defaced, the
directors may, upon the surrender thereof for cancellation, issue a
new one in its stead, and if any bearer share certificate be lost or
destroyed, the directors may upon the loss or destruction being
established to their satisfaction, and upon such indemnity being
established to their satisfaction, and upon such indemnity being
given to the Company as it shall by resolution of directors
determine, issue a new bearer share certificate in its stead, and in
either case on payment of such sum as the Company may from time to
time by resolution of directors require. In case of loss or
destruction, the person to whom such new bearer share certificate is
issued shall also bear and pay to the Company all expenses
incidental to the investigation by the Company of the evidence of
such loss or destruction and to such indemnity.
4. SHARES, AUTHORISED CAPITAL AND CAPITAL
4.1 Subject to the provisions of these Articles and any resolution of
members the unissued shares of the Company shall be at the disposal
of the directors who may without prejudice to any rights previously
conferred on the holders of any existing shares or class or series
of shares, offer, allot, grant options over or otherwise dispose of
the shares to such persons, at such times and upon such terms and
conditions as the Company may by resolution of directors determine.
- 3 -
<PAGE>
4.2 Shares in the Company shall be issued for money, goods or services
rendered, or any combination of the foregoing as shall be determined
by a resolution of directors.
4.3 Shares in the Company may be issued for such amount or consideration
as the directors may from time to time by resolution of directors
determine, except that in the case of shares with par value, the
amount shall not be less than the par value, and in the absence of
fraud the decision of the directors as to the value of the
consideration received by the Company in respect of the issue is
conclusive unless a question of law is involved.
The consideration in respect of the shares constitutes capital to
the extent of the par value and the excess constitutes surplus.
4.4 Treasury shares may be disposed of by the Company on such terms and
conditions (not otherwise inconsistent with these Articles) as the
Company may by resolution of directors determine.
4.5 The Company may not issue fractions of a share.
4.6 The Company may purchase, redeem or otherwise acquire and hold its
own shares but no purchase, redemption or other acquisition which
shall constitute a reduction in capital shall be made except in
compliance with the law.
4.7 Shares that the Company purchases, redeems or otherwise acquires
pursuant to sub-clause 4.6 may be cancelled or held as treasury
shares unless such shares are in excess of 80 percent of the issued
shares of the Company, in which case they shall be cancelled but
they shall be available for reissue. Upon the cancellation of a
share, the amount included as capital of the Company with respect to
that share shall be deducted from the capital of the Company.
5. TRANSFER OF SHARES
5.1 Subject to any limitations in the Memorandum, registered shares in
the Company may be transferred by a written instrument of transfer
signed by the transferor and containing the name and address of the
transferee, but in the absence of such written instrument of
transfer the directors may accept such evidence of a transfer of
shares as they consider appropriate.
- 4 -
<PAGE>
5.2 The Company shall not be required to treat a transferee of a
registered share in the Company as a member until the transferee's
name has been entered in the share register.
5.3 For the purpose of Section 55 of the International Business
Companies Ordinance, the Registered Agent shall have the same
benefits as any director, officer, agent and liquidator, with
respect to the same records therein mentioned or those under his
possession, save in the case of fraud.
6. TRANSMISSION OF SHARES
6.1 The executor or administrator of a deceased member, the guardian of
an incompetent member or the trustee of a bankrupt member shall be
the only person recognised by the Company as having any title to his
share but they shall not be entitled to exercise any rights as a
member of the Company until they have proceeded as set forth in the
next following two sub-clauses.
6.2 Any person becoming entitled by operation of law or otherwise to a
share or shares in consequence of the death, incompetence or
bankruptcy of any member may be registered as a member upon such
evidence being produced as may reasonably be required by the
directors. An application by any such person to be registered as a
member shall be deemed to be a transfer of shares of the deceased,
incompetent or bankrupt member and the directors shall treat it as
such.
6.3 Any person who has became entitled to a share or shares in
consequence of the death, incompetence or bankruptcy of any member
may, instead of being registered himself, request in writing that
some person to be named by him be registered as the transferee of
such share or shares and such request shall likewise be treated as
if it were a transfer.
6.4 What amounts to incompetence on the part of a person is a matter to
be determined by the court having regard to all the relevant
evidence and the circumstances of the case.
7. REDUCTION OR INCREASE IN AUTHORISED CAPITAL OR CAPITAL
7.1 The Company may by a resolution of members amend the Memorandum to
increase or reduce its authorised capital and in connection
therewith the Company may in respect of any unissued shares increase
or reduce the number of shares, increase or reduce the par value of
any shares or effect any combination of the foregoing.
7.2 The Company may amend the Memorandum to:
- 5 -
<PAGE>
7.2.1 divide the shares, including issued shares, of a class or
series into a larger number of shares of the same class or
series; or,
7.2.2 combine the shares, including issued shares, of a class or
series into a smaller number of shares of the class or
series; provided, however, that where shares are divided or
combined under this section, the aggregate par value of the
new shares must be equal to the aggregate par value of the
original shares.
7.3 The capital of the Company may by a resolution of directors be
increased by transferring an amount of the surplus of the Company to
capital, and, subject to the provisions of the Law, the capital of
the Company may be reduced by transferring an amount of the capital
of the Company to surplus.
8. MEETINGS AND CONSENTS OF MEMBERS
8.1 The directors of the Company may convene meetings of the members of
the Company at such times and in such manner and places within or
outside the British Virgin Islands as the directors consider
necessary or desirable.
8.2 Upon the written request of members holding 5 percent or more of the
outstanding voting shares in the Company the directors shall convene
a meeting of members.
8.3 The directors shall give not less than 15 days' notice of meetings
of members to those persons whose names, on the date the notice is
given, appear as members in the share register of the Company.
8.4 A meeting of members held in contravention of the requirement in
sub-clause 8.3 is valid if:
8.4.1 All members holding shares entitled to vote on all or any
matters to be considered at the meeting have waived notice
of the meeting and for this purpose their presence at the
meeting shall be deemed to constitute waiver.
8.5 A member may be represented at a meeting of members by a proxy who
may speak and vote on behalf of the member.
8.6 The instrument appointing a proxy shall be produced at the place
appointed for the meeting before the time for holding the meeting at
which the person in such instrument proposes to vote.
- 6 -
<PAGE>
8.7 The following shall apply in respect of joint ownership of shares:
8.7.1 if two or more persons hold shares jointly each of them may
be present in person or by proxy at a meeting of members
and may speak as a member;
8.7.2 if only one of the joint owners is present in person or by
proxy he may vote on behalf of all joint owners, and;
8.7.3 if two or more of the joint owners are present in person or
by proxy they must vote as one.
8.8 A member shall be deemed to be present at a meeting of members if he
participates by telephone or other electronic means and all members
participating in the meeting are able to hear each other.
8.9 A meeting of members is duly constituted if, at the commencement
and throughout of the meeting, there are present in person or by
proxy not less than 51 percent of the votes of the shares or class
or series of shares entitled to vote on resolutions of members to
be considered at the meeting.
8.10 If within two hours from the time appointed for the meeting a quorum
is not present, the meeting, if convened upon the requisition of
members, shall be dissolved; in any other case it shall stand
adjourned to the next business day at the same time and place or to
such other time and place as the directors may determine.
8.11 At every meeting of members, the Chairman of the Board of Directors
shall preside as chairman of the meeting. If there is no Chairman of
the Board of Directors or if the Chairman of the Board of Directors
is not present at the meeting, the members present shall choose
someone of their number to be the chairman. If the members are
unable to choose a chairman for any reason, then the person
representing the greatest number of voting shares present in person
or by prescribed form of proxy at the meeting shall preside as
chairman failing which the oldest individual member or
representative of a member present shall take the chair.
8.12 Should the chairman have any doubt as to the outcome of any
resolution put to the vote, he shall cause a poll to be taken of all
votes cast upon such resolution, but if the chairman should fail to
take a poll then any member present in person or by proxy who
disputes the announcement by the chairman of the result of any vote
may immediately following such announcement demand that a poll be
taken and the chairman shall thereupon cause a poll to be taken. If
a poll is taken at
- 7 -
<PAGE>
any meeting, the result thereof shall be duly recorded in the
minutes of that meeting by the chairman.
8.13 Any person other than an individual shall be regarded as one member
and subject to sub-clause 8.14 the right of any individual to speak
for or represent such member shall be determined by the law of the
jurisdiction where, and by the documents by which, the person is
constituted or derives its existence. In case of doubt, the
directors may in good faith seek legal advice from any qualified
person and unless and until a court of competent jurisdiction shall
otherwise rule, the directors may rely and act upon such advice
without incurring any liability to any member.
8.14 Any person other than an individual which is a member of the Company
may by resolution of its directors or other governing body authorise
such person as it thinks fit to act as its representative at any
meeting of the Company or of any class of members of the Company,
and the person so authorised shall be entitled to exercise the same
powers on behalf of the person which he represents as that person
could exercise if it were an individual member of the Company.
8.15 Directors of the Company may attend and speak at any meeting of
members of the Company and at any separate meeting of the holders of
any class or series of shares in the Company.
9. DIRECTORS
9.1 The first directors of the Company shall be elected by the
subscribers to the Memorandum; and thereafter, the directors shall
be elected by the members for such terms as the members may
determine.
9.2 The minimum number of directors shall be one, and the maximum number
shall be fifteen.
9.3 Each director shall hold office for the term, if any, fixed by
resolution of members or until his earlier death, resignation or
removal.
9.4 A director may be removed from office, with or without cause by a
resolution of members.
9.5 A director may resign his office by giving written notice of his
resignation to the Company and the resignation shall have effect
from the date the notice is received by the Company or from such
later date as may be specified in the notice. The notice should be
addressed at least to the Registered Agent's office in the British
Virgin Islands.
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9.6 A vacancy in the Board of Directors may be filled by a resolution of
members or by a resolution of a majority of the remaining directors.
9.7 With the prior or subsequent approval by a resolution of members,
the directors may, by a resolution of directors, fix the emoluments
of directors with respect to services to be rendered in any capacity
to the Company.
9.8 A director need not be a member and may be an individual or a
company.
10. POWERS OF DIRECTORS
10.1 The business and affairs of the Company shall be managed by the
directors who shall pay all expenses incurred preliminary to and in
connection with the formation, registration and corporate matters
and may exercise all such powers of the Company as are not by the
Ordinance or by the Memorandum of these Articles required to be
exercised by the members of the Company, subject to such
requirements as may be prescribed by a resolution of members; but no
requirement made by a resolution of members shall prevail if it be
inconsistent with these Articles nor shall such requirement
invalidate any prior act of the directors which would have been
valid if such requirement had not been made.
10.2 The directors may, by a resolution of directors, appoint any person,
including a person who is a director, to be an officer or agent of
the Company.
10.3 Every officer or agent of the Company has such powers and authority
of the director, including the power and authority to affix the
Seal, as are set forth in these Articles or in the resolution of
directors appointing the officer or agent, except that no officer or
agent has any power or authority with respect to fixing the
emoluments of directors.
10.4 Any director which is a body corporate may appoint any person its
duly authorized representative for the purpose of representing it at
meetings of the Board of Directors or with respect to unanimous
written consents.
10.5 The continuing directors may act notwithstanding any vacancy in
their body, save that if their number is reduced below the number
fixed by or pursuant to these Articles as the necessary quorum for a
meeting of directors, until the vacancy is filled the continuing
directors or director may act only for the purpose of appointing
directors to fill any vacancy that has arisen or summoning a meeting
of members.
10.6 All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for monies paid to the
Company, shall be signed,
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drawn, accepted, endorsed or otherwise executed, as the case may be,
in such manner as shall from time to time be determined by
resolution of directors.
11. PROCEEDINGS OF DIRECTORS
11.1 The directors of the Company or any committee thereof may meet at
such times and in such manner and places within or outside the
British Virgin Islands as the directors may determine to be
necessary or desirable.
11.2 A director shall be deemed to be present at a meeting of directors
if he participates by telephone or other electronic means and all
directors participating in the meeting are able to hear each other.
11.3 A director shall be given not less than 7 days' notice of meetings
of directors, but a meeting of directors held without 7 days' notice
having been given to all directors shall be valid if all the
directors entitled to vote at the meeting who do not attend, waive
notice of the meeting.
11.4 A director may by a written instrument appoint an alternate who need
not be a director and an alternate is entitled to attend meetings in
the absence of the director who appointed him and to vote or consent
in place of the director.
11.5 A meeting of directors is duly constituted for all purposes if at
the commencement and throughout the meeting there are present in
person or by alternate the majority of the total number of
directors, unless there are only 2 directors in which case the
quorum shall be 2.
11.6 If the Company shall have only one director the provisions herein
contained for meetings of the directors shall not apply but such
sole director shall have full power to represent and act for the
Company in all matters as are not by the Ordinance or the Memorandum
or these Articles required to be exercised by the members of the
Company and in lieu of minutes of a meeting shall record in writing
and sign a note or memorandum of all matters requiring a resolution
of directors. Such a note or memorandum shall constitute sufficient
evidence of such resolution for all purposes.
11.7 At every meeting of directors the Chairman of the Board of Directors
shall preside as chairman of the meeting. If there is no Chairman of
the Board of Directors or if the Chairman of the Board of Directors
is not present at the meeting the Vice Chairman of the Board of
Directors shall preside. If there is no Vice Chairman of the Board
of Directors or if the Vice Chairman of the Board of Directors is
not present at the meeting the directors present shall choose
someone of their number to be chairman of the meeting.
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11.8 The directors shall cause the following corporate records to be
kept:
11.8.1 minutes of all meetings of directors, members, committees
of directors, committees of officers and committees of
members;
11.8.2 copies of all resolutions consented to by directors,
members, committees of directors, committees of officers
and committees of members; and,
11.8.3 such other accounts and records as the directors by
resolution of directors consider necessary or desirable in
order to reflect the financial position of the Company.
11.9 The books, records and minutes shall be kept at the registered
office of the Company or at such other place as the directors
determine.
11.10 The directors may, by a resolution of directors, designate one or
more committees, each consisting of one or more directors.
11.11 Each committee of directors has such powers and authorities of the
directors, including the power and authority to affix the Seal, as
are set forth in the resolution of directors establishing the
committee, except that no committee has any power or authority
either to amend the Memorandum or these Articles or with respect
to the matters requiring a resolution of directors under
sub-clauses 9.6, 9.7 and 10.2.
11.12 The meetings and proceedings of each committee of directors
consisting of 2 or more directors shall be governed by the
provisions of these Articles regulating the proceedings of
directors so far as the same are not superseded by any provisions
in the resolution establishing the committee.
12. OFFICERS
12.1 The Company may by resolution of directors appoint officers of the
Company at such times as shall be considered necessary or
expedient. Such officers may consist of a President and one or
more Vice Presidents, Secretaries and Treasurers and such other
officers as may from time to time be deemed desirable. Any number
of offices may be held by the same person.
12.2 The officers shall perform such duties as shall be prescribed at
the time of their appointment subject to any modification in such
duties as may be prescribed thereafter by resolution of directors
or resolution of members, but in the absence of any specific
allocation of duties it shall be the responsibility of the
President
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to manage the day to day affairs of the Company, the Vice Presidents
to act in order of seniority in the absence of the President but
otherwise to perform such duties as may be delegated to them by the
President, the Secretaries to maintain the share register, minute
books and records (other than financial records) of the Company and
to ensure compliance with all procedural requirements imposed on the
Company by applicable law, and the Treasurer to be responsible for
the financial affairs of the Company.
12.3 The emoluments of all officers shall be fixed by resolution of
directors.
12.4 The officers of the Company shall hold office until their successors
are duly elected and qualified, but any officer elected or appointed
by the directors may be removed at any time, with or without cause,
by resolution of directors. Any vacancy occurring in any office of
the Company may be filled by resolution of directors. The officers
may resign in the same manner as the directors.
13. CONFLICT OF INTERESTS
13.1 No agreement or transaction between the Company and one or more of
its directors or any person in which any director has a financial
interest or to whom any director is related, including as a director
of that other person, is void or voidable for this reason only or by
reason only that the director is present at the meeting of directors
or at the meeting of the committee of directors that approves the
agreement or transaction or that the vote or consent of the director
is counted for that purpose if the material facts of the interest of
each director in the agreement or transaction and his interest in or
relationship to any other party to the agreement or transaction are
disclosed in good faith or are known by the other directors.
13.2 A director who has an interest in any particular business to be
considered at a meeting of directors or members may be counted for
purposes of determining whether the meeting is duly constituted.
14. INDEMNIFICATION
14.1 Subject to sub-clause 14.2 the Company may indemnify against all
expenses, including legal fees, and against all judgements, fines
and amounts paid in settlement and reasonably incurred in connection
with legal, administrative or investigative proceedings any person
who:
14.1.1 is or was a party or is threatened to be made a party to
any threatened, pending or completed proceedings, whether
civil,
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criminal, administrative or investigative, by reason of the
fact that the person is or was a director, an officer,
Registered Agent or a liquidator of the Company; or
14.1.2 is or was, at the request of the Company, serving as a
director, officer, Registered Agent or liquidator of or in
any other capacity is or was acting for another company or
a partnership, joint venture, trust or other enterprise.
14.2 Sub-clause 14.1 only applies to a person referred to in that
regulation if the person acted honestly and in good faith with a
view to the best interests of the Company and, in the case of
criminal proceedings, the person had no reasonable cause to believe
that his conduct was unlawful.
14.3 The decision of the directors as to whether the person acted
honestly and in good faith and with a view to the best interests of
the Company and as to whether the person had no reasonable cause to
believe that his conduct was unlawful, is in the absence of fraud,
sufficient for the purposes of these Articles, unless a question of
law is involved.
15. SEAL
The directors shall provide for the safe custody of the Seal. The Seal
when affixed to any written instrument shall, unless otherwise provided
herein, be witnessed by a director or any other person so authorised from
time to time by resolution of directors.
The directors may provide for a facsimile of the Seal and of the signature
of any director or authorised person which may be reproduced by printing
or other means on any instrument and it shall have the same force and
validity as if the Seal had been affixed to such instrument and the same
had been signed as hereinbefore described.
16. DIVIDENDS
16.1 The Company may by a resolution of directors declare and pay
dividends in money, shares, or other property but dividends shall
only be declared and paid out of surplus. In the event that
dividends are paid in specie the directors shall have
responsibility for establishing and recording in the resolution of
directors authorising the dividends, a fair and proper value for
the assets to be so distributed.
16.2 The directors may, before declaring any dividend, set aside out of
the profits of the Company such sum as they think proper as a
reserve fund, and may invest the sum so set apart as a reserve
fund upon such securities as they may select.
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<PAGE>
16.3 Notice of any dividend that may have been declared shall be given
to each member in manner hereinafter mentioned and all dividends
unclaimed for 3 years after having been declared may be forfeited
by resolution of directors for the benefit of the Company.
16.4 No dividend shall bear interest as against the Company.
16.5 A share issued as a dividend by the Company shall be treated for
all purposes as having been issued for money equal to the surplus
that is transferred to capital upon the issue of the share.
16.6 In the case of a dividend of authorised but unissued shares with
par value, an amount equal to the aggregate par value of the
shares shall be transferred from surplus to capital at the time of
the distribution.
16.7 In the case of a dividend of authorized but unissued shares
without par value, the amount designated by the directors shall be
transferred from surplus to capital at the time of the
distribution, except that the directors must designate as capital
an amount that is at least equal to the amount that the shares are
entitled to as a preference, if any, in the assets of the Company
upon liquidation of the Company.
16.8 A division of the issued and outstanding shares of a class or
series of shares into a larger number of shares of the same class
or series having a proportionately smaller par value does not
constitute a dividend of shares.
17. ACCOUNTS
The Company shall keep such accounts and records as the directors consider
necessary or desirable in order to reflect the financial position of the
Company.
18. NOTICES
18.1 Any notice, information or written statement to be given by the
Company to members must be served in the case of members holding
registered shares by mail addressed to each member at the address
shown in the share register and in the case of members holding
shares issued to bearer, in the manner provided in the Memorandum
and in these Articles.
18.2 Any summons, notice, order, document, process, information or
written statement to be served on the Company may be served by
leaving it, or by sending it by registered mail addressed to the
Company, at its registered office,
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or by leaving it with, or by sending it by registered mail to, the
registered agent of the Company.
18.3 Service of any summons, notice, order, document, process,
information or written statement to be served on the Company may be
proved by showing that the summons, notice, order, document,
process, information or written statement was mailed in such time as
to admit to its being delivered in the normal course of delivery
within the period prescribed for service and was correctly addressed
and the postage was prepaid.
19. ARBITRATION
19.1 Whenever any difference arises between the Company on the one hand
and any of the members or their executors, administrators or assigns
and/or directors, officers, or the Registered Agent on the other
hand, or between any of the above-mentioned touching the true intent
and construction or the incidence or consequences of these Articles
or of the Ordinance, touching anything done or executed, omitted or
suffered in pursuance of the Ordinance or touching any breach or
alleged breach, or otherwise relating to the premises or to these
Articles, or to any Act or Ordinance affecting the Company or to any
of the affairs of the Company such difference shall, unless the
parties agree to refer the same to a single arbitrator, be referred
to 2 arbitrators one to be chosen by each of the parties to the
difference and the arbitrators shall, before entering on the
reference, appoint an umpire.
19.2 If either party to the reference defaults in appointing an
arbitrator either originally or by way of substitution (in the event
that an appointed arbitrator shall die, be incapable of acting or
refuse to act) for 10 days after the other party has given him
notice to appoint the same, such other party may apply before Court
for the appointment of an arbitrator to act in the place of the
arbitrator of the defaulting party.
20. VOLUNTARY WINDING UP AND DISSOLUTION
The Company may voluntarily commence to wind up and dissolve by a
resolution of members but if the Company has never issued shares it may
voluntarily commence to wind up and dissolve by resolution of directors.
21. CONTINUATION
The Company may by resolution of members or by resolution passed
unanimously by all directors of the Company continue as a company
incorporated under the laws of a jurisdiction outside the British Virgin
Islands in the manner provided under those laws.
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We, SUCRE & SUCRE TRUST LIMITED, of P.O. Box 3163, CHERA CHAMBERS, Road
Town, Tortola, British Virgin Islands for the purpose of incorporating an
International Business Company under the laws of the British Virgin Islands
hereby subscribe our name to the Articles of Association on this 5th day of the
month of October, 1990, in the presence of the undersigned witness.
SIGNATURES
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NAME AND ADDRESS OF WITNESS SUBSCRIBER
c/o P.O. Box 3163 SUCRE & SUCRE TRUST LIMITED
Chera Chambers P.O. BOX 3163
Road Town, Tortola, CHERA CHAMBERS
British Virgin Islands Road Town, Tortola
British Virgin Islands
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<PAGE>
Exhibit 3.4
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Memorandum of General Meeting of Association and
By-laws of Galaxy Brasil S.A.
By: /s/DOUGLAS DURAN
-------------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
GALAXY BRASIL S.A.
MEMORANDUM OF GENERAL MEETING OF ASSOCIATION
DATE, TIME AND PLACE: On March 9, 1995, at 10:00 AM, in this capital city, at
Rua do Rocio, 313 - 9th floor.
ATTENDANCE: TEVECAP S.A., with its principal place of business at Rua do Rocio,
313, suite 101, enrolled with the Board of Taxpayers CGC/MF under no.
57.574.170/0001-05 and registered with the Board of Trade of Sao Paulo under
NIRC no. 35300129623 on 07.27.94, represented by its Directors, Jose Augusto
Pinto Moreira, a Brazilian citizen, married, economist, residing and domiciled
at Alameda Argentina, 406, Barueri-SP, bearer of ID Card RG no. 2.944.700 and
enrolled with the Board of Taxpayers CIC under no. 128.701.967-68 and Claudio
Cesar D'Emilio, a Brazilian citizen, married, business administrator, residing
and domiciled at Rua Padre Anibal Difrancia, 182 - Sao Paulo-SP, bearer of ID
Card RG no. 4.493.895 and enrolled with the Board of Taxpayers CIC under no.
273.258.818-00, and JOSE AUGUSTO PINTO MOREIRA, whose particulars are given
above.
CHAIRMAN: Jose Augusto P. Moreira.
SECRETARY: Claudio Cesar D'Emilio.
AGENDA: Organization of Joint Stock Company.
DOCUMENTS: By-Laws (Exhibit I), Subscription Bulletin and Deposit receipt
(Exhibit II).
RESOLUTIONS: 1) The organization of a joint stock company was approved, to be
called "GALAXY BRASIL S.A.", with its principal place of business in this
capital city, at Rua do Rocio, 313 - 9th floor, with an initial capital of
R$2,000.00 (two thousand Reais) divided into 200 (two hundred) nominative common
shares, without par value, totally subscribed and paid-up in Brazilian currency
by the subscribers TEVECAP S.A. and Jose Augusto P. Moreira, according to the
subscription bulletin (Exhibit II). On the date hereof a deposit has been made
with Banco do Brasil in the name of the corporation under organization (Exhibit
II). The filing of this memorandum of association with the Board of Trade will
precede the start-up of operations;
2) The members present waived the reading of the Subscription Bulletin (Exhibit
II) and of the By-Laws (Exhibit I) in view of the fact that the subscribers of
the Corporation's capital stock were fully aware thereof, which documents were
entirely ratified and approved.
3) The Board of Directors was elected as follows: Director President - Jose
Augusto Pinto Moreira, whose particulars are given above; Financial Director -
Claudio Cesar D'Emilio,
<PAGE>
whose particulars are given above; and Administrative Director - Angelo Silvio
Rossi, a Brazilian citizen, divorced, publisher, bearer of ID Card RG no.
3.253.153 and enrolled with the Board of Taxpayers CIC under no. 169.959.538-00,
residing and domiciled at Alameda Joaquim Eugenio de Lima, 1647 - apt. 18, Sao
Paulo-SP. The compensation of the Directors was fixed, at the maximum, at the
individual and joint deductibility limit established by the income tax
legislation, which may be updated in accordance with the variation of such
limits which takes place during their term of office, with the exception of
those positions for which compensation is waived at the Board of Directors'
Meeting. The Directors elected hereby will remain in office until the
Corporation's First General Shareholders Meeting is held; however, the current
Directors will remain in office until such time as the newly elected Directors
take office.
TERMINATION: Having nothing further to discuss, the Meeting was
terminated and these Minutes were signed by all those present.
Sao Paulo, March 09, 1995.
TEVECAP S.A.
(signed by Jose Augusto P. Moreira and Claudio Cesar D'Emilio)
(signature)
JOSE AUGUSTO P. MOREIRA
ATTEST:
(Attorney's signature)
(enclosure)
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GALAXY BRASIL S.A.
MEMORANDUM OF GENERAL MEETING OF ASSOCIATION
EXHIBIT I
BY-LAWS
NAME, HEAD OFFICE, OBJECT AND DURATION
ARTICLE ONE. GALAXY BRASIL S.A. is a joint stock company governed by these
By-Laws and by the applicable legal provisions.
ARTICLE TWO. The Corporation's principal place of business and venue are located
in the City of Sao Paulo, State of Sao Paulo and it may, by resolution of the
Board of Directors, open or close facilities anywhere in Brazil or abroad.
ARTICLE THREE. The Corporation's objects are: (i) the performance of
distribution services of subscriber multi channel television programming,
throughout the Brazilian territory, through direct satellite transmission, as
well as the performance of any other related activity; (ii) participation in
other companies.
ARTICLE FOUR. The Corporation has an indeterminate term of duration.
CAPITAL STOCK
ARTICLE FIVE. The capital stock is R$2,000.00 (two thousand Reais) divided into
200 (two hundred) nominative common shares, without par value.
ARTICLE SIX. Each common share will entitle its holder to one vote at the
General Meeting's resolutions.
ARTICLE SEVEN. The shareholders have the right of first refusal in the
subscription of new shares, in the proportion of their stockholdings.
ARTICLE EIGHT. Shareholders will necessarily pay up the subscribed capital under
the conditions provided at the time of subscription, which may provide payment
through calls made by the Corporation's management bodies.
Sole Paragraph. The shareholder who fails to make payment on the agreed
dates will be legally deemed in arrears and will be subject to the payment of
one percent (1%) interest, monetary restatement and a fine of ten percent (10%)
of the value of the installment in arrears.
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GENERAL MEETING
ARTICLE NINE. The Shareholders' General Meeting will meet annually and specially
in accordance with the law and the Meeting will be chaired by the Shareholder
appointed at the time it convenes.
ARTICLE TEN. The General meeting will be called by the acting Director
President.
ARTICLE ELEVEN. The General Meeting will exclusively resolve upon the following,
apart from the other matters provided by law:
I - Amendment to the By-laws;
II - Election or removal, at any time, of the Corporation's directors and
determination of their compensation;
III - establishment of policies and guidelines for the Corporation;
IV - authorization of the disposal and encumbrance of the Corporation's
fixed assets, in excess of R$34,000.00 (thirty-four thousand Reais); and
V - authorization of the offering of guarantees, including surety and
collateral to third parties, except guarantees to Controlling and controlled
Companies or affiliates.
ARTICLE TWELVE. The matters listed below will necessarily be approved by
shareholders representing at least 51% (fifty-one percent) of the Corporation's
voting stock:
I - change in preferences, advantages and redemption or amortization
conditions for shares or creation of new classes of shares;
II - creation of beneficiary portions;
III - change of compulsory minimum dividend;
IV - fundamental change in the Corporation, including undertaking new
lines of business;
V - Corporation's incorporation by another company, or its merger or
split-off;
VI - Corporation's dissolution or suspension of liquidation status;
VII - creation and issue of debentures;
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VIII - the performance of acts not specifically listed which go beyond the
Corporation's ordinary sphere of operation.
MANAGEMENT
ARTICLE THIRTEEN. The Corporation shall be managed by a Board of Directors,
consisting of three members, who may or may not be shareholders, residents of
Brazil, elected and subject to removal by the General Meeting. The Corporation's
Directors will be one Director President, one Financial Director and one
Administrative Director.
Sole Paragraph. The Board of Director's term of office is three years,
reelection being permitted. The elected Directors will remain in office until
their successors take office.
ARTICLE FOURTEEN. The Directors will replace each other in their absences or
disabilities. In the event of a definitive vacancy, the General Meeting will
appoint a substitute, who will remain in office for the substituted Director's
remaining term of office.
ARTICLE FIFTEEN. The Board of Directors will meet to:
I - prepare the financial statements and the management's report, which
will be submitted to review by the Audit Committee members, if applicable, and
forwarded to the General Meeting;
II - resolve upon the opening, closing down and transfer of facilities
anywhere in Brazil or abroad;
III - authorize the disposal and encumbrance of the Corporation's fixed
assets up to a maximum limit of R$34,000.00 (thirty-four thousand Reais);
IV - appoint and remove independent auditors;
V - resolve upon its participation in other companies or ventures;
VI - resolve upon the submission to the General Meeting of proposals for
capital increases and amendment to these By-Laws; and
VII - resolve upon matters attributed by law, by the by-Laws and by the
General Meeting.
Sole Paragraph. The Board of Directors will meet at the call of any of the
Directors and in the event of a draw as regards any resolution, the matter will
be put forward at the General Meeting.
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ARTICLE SIXTEEN. The Director President will be mainly responsible for the
management of the Corporation's external business.
ARTICLE SEVENTEEN. The Financial Director will establish the Corporation's
financial policy and will liaise with official and private financial
institutions and with the Government's agencies in the financial area.
ARTICLE EIGHTEEN. The Administrative Director will mainly be responsible for the
Corporation's general and internal management.
ARTICLE NINETEEN. Any Director or an attorney-in-fact appointed in compliance
with the provisions hereof will individually represent the Corporation as
Plaintiff or Defendant, in or out of Court and before any federal, state,
municipal and quasi-governmental departments and any individuals and
corporations in general.
Paragraph One. Two Directors will necessarily sign powers-of-attorney
specifying the granted powers, limits, conditions and term of validity, with the
exception of the "ad judicia" powers-of-attorney, which will have an
indeterminate term of validity.
Paragraph Two. The acts, agreements and documents which represent a
liability for the Corporation or exempt third parties from liabilities before
the Corporation, as well as the disposal or encumbrance of fixed assets up to
the amount of R$34,000.00 (thirty-four thousand Reais), will always be signed by
two Directors, or one Director jointly with one attorney-in-fact or further, two
attorneys-in-fact empowered pursuant to the provisions hereof.
Paragraph Three. Only the individual signature of any Director or of one
attorney-in-fact duly appointed and with specific powers will be necessary for
the performance of day-to-day acts, forwarding ordinary mail, issuing receipts,
endorsing checks for deposit in the Corporation's bank accounts, endorsing trade
bills issued by the Corporation or in its favor for collection, discount or
collateral with financial institutions for the Corporation's credit.
ARTICLE TWENTY. The use of the company's name is strictly barred in sureties,
collateral, acceptances, endorsements or in documents which do not represent
acts of interest to the Corporation or which imply an act of graciousness.
AUDIT COMMITTEE
ARTICLE TWENTY-ONE. The Corporation will have an Audit Committee which will not
convene permanently, consisting of three (3) standing and three (3) deputy
members, who may or may not be shareholders, elected by the General Meetings and
with the attributions afforded by law.
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Paragraph One. Only individuals residing in Brazil may be elected to the
Audit Committee, who will be required to comply with the legal requirements and
who will remain in office until the first Annual Shareholders Meeting which is
held after their election, reelection being permitted.
Paragraph Two. The compensation of the Audit Committee members will be
established by the General Meeting which elects them, subject to the legal
provisions.
FISCAL YEAR, FINANCIAL STATEMENTS AND PROFIT DISTRIBUTION
ARTICLE TWENTY-TWO. The fiscal year will begin on January 1 and will end on
December 31 of each year.
ARTICLE TWENTY-THREE. Subject to the legal provisions in force, the financial
statements will be drawn up at the end of each fiscal year.
ARTICLE TWENTY-FOUR. The net profits ascertained in each fiscal year, after the
legal deductions, will be appropriated according to the General Meeting's
resolution, once the Audit Committee has expressed its opinion, if it is
convened.
Paragraph One. The shareholders are assured the right to an annual
compulsory dividend not less than twenty-five percent (25%) of the fiscal year's
net profits, after the deduction of the quota appropriated for legal reserves.
Paragraph Two. The Corporation may draw up interim balance sheets every
six (6) months or at shorter intervals and distribute dividends.
MISCELLANEOUS PROVISIONS
ARTICLE TWENTY-FIVE. The Corporation will be dissolved in the events provided by
law or by resolution of the General Meeting, which will determine the manner of
liquidation and will appoint the liquidator and the Audit Committee which will
convene during the liquidation period.
Sao Paulo, March 09, 1995
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<PAGE>
TEVECAP S.A.
(signed by Jose Augusto P. Moreira and Claudio Cesar D'Emilio)
(signature)
JOSE AUGUSTO P. MOREIRA
(authenticity seal)
(enclosure)
SUBSCRIPTION BULLETIN FOR INITIAL CAPITAL OF
GALAXY BRASIL S.A.
EXHIBIT II
Subscription bulletin for capital stock in the amount of R$2,000.00 (two
thousand Reais), represented by 200 (two hundred) nominative common shares,
without par value, hereby totally subscribed and paid up in Brazilian currency,
by the undersigned subscribers, whose particulars are given below.
Unit issue price: R$10.00 (ten Reais)
NAME AND PARTICULARS OF SHARES PAID UP VALUE
SUBSCRIBER SUBSCRIBED (R$)
TEVECAP S.A., enrolled with the Board of
Taxpayers CGC/MF under no.
57.574.170/0001-05, represented by its 199 1,990.00
Directors Jose Augusto P. Moreira and Claudio
Cesar D'Emilio
Jose Augusto P. Moreira, a Brazilian citizen,
married, economist, residing and domiciled at
Alameda Argentina, 406, Alphaville II, 1 2,000
Barueri-SP, ID Card RG no. 2.944.700 and
CIC no. 128.701.967-68
TOTAL 1,000 1,000.00
Sao Paulo, March 09, 1995
- 8 -
<PAGE>
TEVECAP S.A.
(signed by Jose Augusto P. Moreira and Claudio Cesar D'Emilio)
(signature)
JOSE AUGUSTO P. MOREIRA
(authenticity seal)
- 9 -
<PAGE>
I hereby declare that I have received the following MINUTES OF SPECIAL
SHAREHOLDERS MEETING, in Portuguese, which I duly translate into English as
follows:
GALAXY BRASIL S.A.
CGC/MF No. 00.497.373/0001-10
NIRE No. 35300141385
MINUTES OF THE SPECIAL SHAREHOLDERS MEETING
HELD ON April 30,1996
PLACE AND TIME: Company's headquarters, at Rua do Rocio,313 - 9th floor, at 8:00
AM
ATTENDANCE: Shareholders representing the full amount of capital stock.
CHAIRMAN: Mr. Jose Augusto P. Moreira.
SECRETARY: Claudio Cesar D'Emilio.
RESOLUTIONS: (Taken by unanimous vote):
1) The capital increase was approved from R$5,702,449.00 (five million seven
hundred and two thousand four hundred and forty-nine Reais) to R$15,702,449.00
(fifteen million seven hundred and two thousand four hundred and forty-nine
Reais), an increase, therefore, of R$10,000,000.00 (ten million Reais), through
the issue of 1,000,000 (one million) nominative common shares, without par
value, hereby fully subscribed and paid up by TEVECAP S.A., by using credits
against the Corporation, pursuant to the enclosed subscription bulletin. The
shareholder Jose Augusto P. Moreira waived his right of first refusal to
subscribe for said shares. Unit Price of Issue: R$10.00 (ten Reais);
2) In view of the provisions of item "1" above, the amendment to Article Five of
the By-Laws was approved, which shall henceforth be worded as follows:
"ARTICLE FIVE. The capital stock is R$15,702,449.00 (fifteen million
seven hundred and two thousand four hundred and forty-nine Reais),
divided into 1,570,200 (one million five hundred and seventy thousand
and two hundred) nominative common shares, without par value."
TERMINATION: Having nothing further to discuss or to add, the Meeting was
terminated and these Minutes were signed by all the shareholders present. Sao
Paulo, April 30, 1996. (signed) TEVECAP S.A. (represented by its Directors Jose
Augusto P. Moreira and Claudio Cesar D'Emilio) and JOSE AUGUSTO P. MOREIRA.
- 10 -
<PAGE>
Conforms with original
(signed) Jose Augusto P. Moreira, Chairman.
ATTEST:
(signed by attorney, Silvia Cristina L. Bernardes, OAB/SP 74.256)
- 11 -
<PAGE>
(enclosure)
GALAXY BRASIL S.A.
CGC/MF No. 00.497.373/0001-10
NIRE No. 35300141385
LIST OF SHAREHOLDERS PRESENT
SPECIAL SHAREHOLDERS MEETING
HELD ON APRIL 30, 1996
01 TEVECAP S.A., with address at Rua do Rocio, 313 - suite 101 - SP, holder of
570,199 shares.
02 JOSE AUGUSTO P. MOREIRA, a Brazilian citizen, residing at Alameda Argentina,
406, Alphaville II, Barueri-SP, holder of one share.
Total 570,200 shares
Conforms with original
(signed) Jose Augusto P. Moreira, Chairman
(Authenticity Seal)
GALAXY BRASIL S.A.
CGC/MF No. 00.497.373/0001-10
NIRE No. 35300141385
SUBSCRIPTION BULLETIN
SPECIAL SHAREHOLDERS MEETING
HELD ON APRIL 30,1996
Subscription bulletin for capital stock increase, resolved at the Special
Shareholders Meeting held on April 30, 1996.
Issue of 1,000,000 (one million) nominative common shares, without par value,
totally subscribed and paid up on the date hereof through credits against the
Corporation.
Unit issue price: R$10.00 (ten Reais)
- 12 -
<PAGE>
NAME AND PARTICULARS OF SHARES PAID UP VALUE
SUBSCRIBER SUBSCRIBED (R$)
TEVECAP S.A., with head offices at Rua do 1,000,000 10,000,000.00
Rocio 313, suite 101, enrolled with the Board
of Taxpayers CGC/MF under no.
57.574.170/0001-05, represented by its
Directors Jose Augusto P. Moreira and Claudio
Cesar D'Emilio
TEVECAP S.A.
(signed by Jose Augusto P. Moreira and Claudio Cesar D'Emilio)
GALAXY BRASIL S.A.
(signatures)
- 13 -
<PAGE>
Exhibit 3.5
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Memorandum of General Meeting of Association and
By-laws of TVA Sul Participacoes S.A.
By: /s/DOUGLAS DURAN
--------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
TVA SUL PARTICIPACOES S.A.
MEMORANDUM OF GENERAL MEETING OF ASSOCIATION
DATE, TIME AND PLACE: On March 5, 1996, at 10:00 AM, at Rua Marta Kateiva de
Oliveira, 49 - room 4, in Curitiba/PR.
ATTENDANCE: LEONARDO PETRELLI NETO, a Brazilian citizen, married, expert in
telecommunications, residing and domiciled at Rua Pasteur, 780 - apt. 502,
Curitiba/PR, bearer of ID Card RG no 736.678-7 and enrolled with the Board of
Taxpayers CPF under no 401.596.049-15 and Jose Augusto Pinto Moreira, a
Brazilian citizen, married, economist, residing and domiciled at Alameda
Argentina, 406, Barueri-SP, bearer of ID Card RG no 2.944.700 and enrolled with
the Board of Taxpayers CIC under no 128.701.967-68.
CHAIRMAN: Leonardo Petrelli Neto; SECRETARY: Jose Augusto P. Moreira.
AGENDA: Organization of Joint Stock Company.
DOCUMENTS: Bylaws (Exhibit I), Subscription Bulletin and Deposit receipt
(Exhibit II).
RESOLUTIONS: 1) The organization of a joint stock company was approved, to be
called "TVA SUL PARTICIPACOES S.A.", with its principal place of business in the
city of Curitiba/PR, at Rua Marta Kateiva de Oliveira, 49 - room 4, with an
initial capital of R$1,000.00 (one thousand Reais) divided into 1,000 (one
thousand) nominative common shares, without par value, totally subscribed and
paid-up in Brazilian currency by the subscribers Leonardo Petrelli Neto and Jose
Augusto P. Moreira, according to the subscription bulletin (Exhibit II). On the
date hereof a deposit has been made with "Caixa Economica Federal" (Federal
Savings Bank) branch 373, opr. 011, account 118-4, in the name of the
corporation under organization (Exhibit III).
2) The members present waived the reading of the Subscription Bulletin (Exhibit
II) and of the By-laws (Exhibit I) in view of the fact that the subscribers of
the Corporation's capital stock were fully aware thereof, which documents were
entirely ratified and approved.
3) The Board of Directors was elected as follows: Jose Augusto Pinto Moreira,
whose particulars are given above; Douglas Duran, a Brazilian citizen, married,
business administrator, residing and domiciled at Alameda das Rosas, 444,
Barueri/SP, bearer of ID Card RG no 6.702.950 and enrolled with the Board of
Taxpayers CIC under no 541.326.068-72 and Leonardo Petrelli Neto, a Brazilian
citizen, married, expert in telecommunications, residing and domiciled at Rua
Clovis Bevilaqua, 420 - apt. 701, Curitiba/PR, bearer of ID Card RG no 736.678-7
and enrolled with the Board of Taxpayers CPF under no 401.596.049-15. The
compensation of the Directors was fixed, at the maximum, at the individual and
joint deductibility limit established by the income tax legislation, which may
be updated in accordance with the variation of such limits which takes place
during their term of office, with the exception of those positions for which
compensation is waived at the Board of Directors' Meeting. The Directors elected
hereby will remain in office until the Corporation's First General Shareholders
Meeting is held, however, the current Directors will remain in office until such
time as the newly elected Directors take office.
<PAGE>
TERMINATION: Having nothing further to discuss, the meeting was terminated and
these Minutes were signed by all those present.
Curitiba, March 5, 1996
(signature)
LEONARDO PETRELLI NETO
(signature)
JOSE AUGUSTO, P. MOREIRA
ATTEST:
(Attorney's signature)
(Authenticity Stamp)
(enclosure)
TVA SUL PARTICIPACOES S.A.
MEMORANDUM OF GENERAL MEETING OF ASSOCIATION
EXHIBIT I
BY-LAWS
NAME, HEAD OFFICE, OBJECT AND DURATION
ARTICLE ONE. TVA SUL PARTICIPACOES S.A. is a joint stock company governed by
these By-Laws and by the applicable legal provisions.
ARTICLE TWO. The Corporation's principal place of business and venue are located
in the City of Curitiba, State of Parana, at Rua Marta Kateiva de Oliveira, 49 -
room 4, and it may, by resolution of the Board of Directors, open or close
facilities anywhere in Brazil or abroad.
ARTICLE THREE. The Corporation's objects are its participation in the capital of
other companies, especially those which exploit the communications business
whether in Brazil or abroad, in the capacity of quotaholder or shareholder,
further acting as agent in general, for itself or on behalf of third parties, in
domestic or international ventures.
ARTICLE FOUR. The Corporation has an indeterminate term of duration.
- 2 -
<PAGE>
CAPITAL STOCK
ARTICLE FIVE. The capital stock is R$1,000.00 (one thousand Reais) divided into
1,000 (one thousand) nominative common shares without par value.
ARTICLE SIX. Each common share will entitle its holder to one vote at the
General Meeting's resolutions.
ARTICLE SEVEN. The shareholders have the right of first refusal in the
subscription of new shares, in the proportion of their stockholdings.
ARTICLE EIGHT. Shareholders will necessarily pay up the subscribed capital under
the conditions provided at the time of subscription, which may provide payment
through calls made by the Corporation's management bodies.
Sole Paragraph. The shareholder who fails to make payment on the agreed
dates will be legally deemed in arrears and will be subject to the payment of
one percent (1%) interest, monetary restatement and a fine of ten percent (10%)
of the value of the installment in arrears.
GENERAL MEETING
ARTICLE NINE. The Shareholders' General Meeting will meet annually and specially
in accordance with the law and the Meeting will be chaired by the Shareholders
appointed at the time it convenes.
ARTICLE TEN. The General Meeting will be called by the Board of Directors.
ARTICLE ELEVEN. The General Meeting's resolutions, with the exception of the
special events provided by law, will be taken by a majority vote of those
members present, with the exception of the following decisions which must comply
with the provisions of Clause Six of the Shareholders Agreement:
I - change in preferences, advantages and redemption or amortization
conditions for shares or creation of new classes of shares;
II - creation of beneficiary portions;
III - change of compulsory minimum dividend;
IV - fundamental change in the Corporation, including undertaking new
lines of business;
V - Corporation's incorporation by another company, or its merger or
split-off;
- 3 -
<PAGE>
VI - Corporation's dissolution or suspension of liquidation status;
VII - creation and issue of debentures;
VIII - purchase, sale, disposal, encumbrance or lien upon the
Corporation's real estate in an amount in excess of R$50,000.000 (fifty thousand
Reais);
IX - purchase, as well as disposal, under any heading, or establishment of
mortgages over the Corporation's fixed assets or stocks, the value of which
exceeds, on a case by case basis, R$50,000.00 (fifty thousand Reais);
X - authorization of the offering of guarantees, including collateral and
security to third parties;
XI - the performance of acts not specifically listed which go beyond the
Corporation's ordinary sphere of operation.
MANAGEMENT
ARTICLE TWELVE. The Corporation shall be managed by a Board of Directors,
consisting of three members, who may or may not be shareholders, residents of
Brazil, elected and subject to removal by the General Meeting. The Corporation's
Directors will not have a specific designation.
Sole Paragraph. The Board of Director's term of office is three years,
reelection being permitted. The elected Directors will remain in office until
their successors take office.
ARTICLE THIRTEEN. The Directors will replace each other in their absences or
disabilities. In the event of a definitive vacancy, the General Meeting will
appoint a substitute, who will remain in office for the substituted Director's
remaining term of office.
ARTICLE FOURTEEN. The Board of Directors will meet to:
I - prepare the financial statements and the management's report, which
will be submitted to review by the Audit Committee members, if applicable, and
forwarded to the General Meeting;
II - resolve upon the opening, closing down and transfer of facilities
anywhere in Brazil or abroad;
III - authorize the disposal and encumbrance of the Corporation's fixed
assets up to a maximum limit of R$50,000.00 (fifty thousand Reais);
- 4 -
<PAGE>
IV - appoint and remove independent auditors;
V - resolve upon its participation in other companies or ventures;
VI - resolve upon the submission to the General Meeting of proposals for
capital increase and amendment to these By-Laws;
VII - resolve upon matters attributed by law, by the By-Laws and by the
General Meeting.
Sole Paragraph. The Board of Directors will meet at the call of any of the
Directors and in the event of a draw as regards any resolution, the matter will
be put forward at the General Meeting.
ARTICLE FIFTEEN. Any Director or an attorney-in-fact appointed in compliance
with the provisions hereof will individually represent the Corporation as
Plaintiff or Defendant, in or out of Court and before any federal, state,
municipal and quasi-governmental departments and any individuals and
corporations in general.
Paragraph One. Two Directors will necessarily sign powers-of-attorney
specifying the granted powers, limits, conditions and term of validity, with the
exception of the "ad judicia" powers-of-attorney, which will have an
indeterminate term of validity.
Paragraph Two. The acts, agreements and documents which represent a
liability for the Corporation or exempt third parties from liabilities before
the Corporation, as well as the disposal or encumbrance of fixed assets up to
the amount of R$50,000.00 (fifty thousand Reais), will always be signed by two
Directors, or one Director jointly with one attorney-in-fact or further, two
attorneys-in-fact empowered pursuant to the provisions hereof.
Paragraph Three. Only the individual signature of any Director or of one
attorney-in-fact duly appointed and with specific powers will be necessary for
the performance of day-to-day acts, forwarding ordinary mail, issuing receipts,
endorsing checks for deposit in the Corporation's bank accounts, endorsing trade
bills issued by the Corporation or in its favor for collection, discount or
collateral with financial institutions for the Corporation's credit.
ARTICLE SIXTEEN. The use of the company's name is strictly barred in sureties,
collateral, acceptances, endorsements or in documents which do not represent
acts of interest to the Corporation or which imply an act of graciousness.
- 5 -
<PAGE>
AUDIT COMMITTEE
ARTICLE SEVENTEEN. The Corporation will have an Audit Committee which will not
convene permanently, consisting of three (3) standing and three (3) deputy
members, who may or may not be shareholders, elected by the General Meetings and
with the attributions afforded by law.
Paragraph One. Only individuals residing in Brazil may be elected to the
Audit Committee, who will be required to comply with the legal requirements and
who will remain in office until the first Annual Shareholders Meeting which is
held after their election, reelection being permitted.
Paragraph Two. The compensation of the Audit Committee members will be
established by the General Meeting which elects them, subject to the legal
provisions.
FISCAL YEAR, FINANCIAL STATEMENTS AND PROFIT DISTRIBUTION
ARTICLE EIGHTEEN. The fiscal year will begin on January 1 and will end on
December 31 of each year.
ARTICLE NINETEEN. Subject to the legal provisions in force, the financial
statements will be drawn up at the end of each fiscal year.
ARTICLE TWENTY. The net profits ascertained in each fiscal year, after the legal
deductions, will be appropriated according to the General Meeting's resolution,
once the Audit Committee has expressed its opinion, if it is convened.
Paragraph One. The shareholders are assured the right to an annual
compulsory dividend not less than twenty-five percent (25%) of the fiscal year's
net profits, after the deduction of the quota appropriated for legal reserves.
Paragraph Two. The Corporation's Board of Directors may draw up interim
balance sheets at any time and declare interim dividends which will be booked to
the accrued profits or profit reserves account, existing as at the least annual
or six-monthly balance sheet.
MISCELLANEOUS PROVISIONS
ARTICLE TWENTY-ONE. The Corporation will be dissolved in the events provided by
law or by resolution of the General Meeting, which will determine the manner of
liquidation and will appoint the liquidator and the Audit Committee which will
convene during the liquidation period.
Curitiba, March 05, 1996
- 6 -
<PAGE>
(signature)
LEONARDO PETRELLI NETO
(signature)
JOSE AUGUSTO, P. MOREIRA
(authenticity seal)
(enclosure)
SUBSCRIPTION BULLETIN FOR INITIAL CAPITAL OF
TVA SUL PARTICIPACOES S.A.
EXHIBIT II
Subscription bulletin for capital stock in the amount of R$1,000.00 (one
thousand Reais), represented by 1,000 (one thousand) nominative common shares,
without par value, hereby totally subscribed and paid up in Brazilian currency,
by the undersigned subscribers, whose particulars are given below.
Unit issue price: R$10.00 (ten Reais)
NAME AND PARTICULARS OF SHARES PAID UP VALUE
SUBSCRIBER SUBSCRIBED (R$)
Leonardo Petrelli Neto, a Brazilian
citizen, married, expert in tele- 999 999.00
communications, residing and
domiciled at Rua Clovis Bevilaqua,
420 - apt. 701, Curitiba-PR,
ID Card RG no 736.678-7 and
CPF no 401.596.049-15
Jose Augusto P. Moreira, a
Brazilian citizen, married, economist, 1 1.00
residing and domiciled at Alameda
Argentina, 406, Alphaville II -
Barueri-SP, ID Card RG no 2.944.700
and CIC no 128.701.967-68
TOTAL 1,000 1,000.00
- 7 -
<PAGE>
Curitiba, March 05, 1996
(signature)
LEONARDO PETRELLI NETO
(signature)
JOSE AUGUSTO, P. MOREIRA
(authenticity seal)
Board of Trade of the State of Parana
I certify registration on March 28, 1996
Under number 41300063451
(signed by Sidmar Antonio Cavet, Secretary General)
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<PAGE>
TVA SUL PARTICIPACOES S.A.
CGC/MF No 01.201.577/0001-24
NIRE No 41300063451
MINUTES OF THE SPECIAL SHAREHOLDERS MEETING
HELD ON AUGUST 30, 1996
PLACE AND TIME: Corporate headquarters, at Rua Martha Kateiva de Oliveira, 49 -
room 4, in Curitiba/PR, at 4:00 PM.
ATTENDANCE: Shareholders representing the full amount of the capital stock.
NOTICE OF CALL: Waived, pursuant to the provisions of article 124, paragraph 4
of Law 6404/76.
CHAIRMAN: Jose Augusto P. Moreira; SECRETARY: Leonardo Petrelli Neto.
AGENDA: Capital Increase
RESOLUTIONS: (taken by unanimous vote)
1. The increase of the capital stock was approved through the award of 170,217
(one hundred and seventy thousand two hundred and seventeen) quotas which the
shareholder Leonardo Petrelli Neto holds in the company TVA Parana Ltda. (CGCMF
no 84.938.786/0001- 82), the value of which will be determined through a
specific appraisal;
2. The appointment was ratified, in order to proceed with the appraisal of TVA
Parana Ltda.'s net worth, of Messrs. Antonio Pereira dos Anjos, a Brazilian
citizen, married, accountant, residing and domiciled at Rua Josefina Arnoni, 141
- - apt. 23, Sao Paulo/SP, CRC no 1SP134755/O-2 and CPF no 999.868.688-15, Pietro
Filomeno Pizzolante, a Brazilian citizen, married, accountant, residing and
domiciled at Rua Batista Cerruti, 194, Sao Paulo/SP, CRC no 1SP178092/O-0 and
CPF no 074.455.328-89 and Eduardo Soldi, a Brazilian citizen, married,
accountant, residing and domiciled at Alameda Safira, 520 - Alphaville IX,
Barueri/SP, CRC no 1SP138610/O-3 and CPF no 898.842.728-91;
3. The appraisal report for TVA Parana Ltda.'s net worth was approved, as
prepared by the experts named in the preceding item, on the basis of the balance
sheet closed on 07.31.96, which report was certified by the Presiding Board and
filed with the Corporation, and which confirmed the value of R$0.2168 as the net
worth of each quota;
4. In view of the above, the capital stock increase was approved from R$1,000.00
(one thousand Reais) to R$37,909.00 (thirty-seven thousand nine hundred and nine
Reais) an increase, therefore, of R$36,909.00 (thirty-six thousand nine hundred
and nine Reais) through the issue of 36,909 (thirty-six thousand nine hundred
and nine) nominative common shares, without par value, at the issue price of
R$1.00 (one Real) each share. The currently issued shares were totally
subscribed and paid up by the shareholder Leonardo Petrelli Neto through the
award of 170,217 (one hundred and seventy thousand two hundred and seventeen)
quotas which the shareholder Leonardo Petrelli Neto holds in the company TVA
Parana Ltda., according to the
<PAGE>
enclosed Subscription Bulletin; the shareholder Jose Augusto P. Moreira
expressly waived his right of first refusal.
5. Consequently, the amendment to Article Five of the By-Laws was approved,
which shall henceforth be worded as follows: "Article Five - The capital stock
is R$37,909.00 (thirty-seven thousand nine hundred and nine Reais) divided into
37,909 (thirty-seven thousand nine hundred and nine) nominative common shares,
without par value."
TERMINATION: Having nothing further to discuss or to add, these minutes were
drawn up, approved and signed and the meeting was terminated. Curitiba, August
30, 1996. (signed) Leonardo Petrelli Neto and Jose Augusto P. Moreira. Conforms
with original (signed by Leonardo Petrelli Neto, Secretary) Attorney: (signed by
Silvia C.L. Bernardes, OAB/SP 74.256)
Board of Trade of the State of Parana
I certify registration on December 5, 1996
Under number 961684941
(signed by Sidmar Antonio Cavet, Secretary General)
(Authenticity seal)
(enclosure)
TVA SUL PARTICIPACOES S.A.
CGC/MF No 01.201.577/0001-24
NIRE No 41300063451
LIST OF SHAREHOLDERS PRESENT
SPECIAL SHAREHOLDERS MEETING
HELD ON AUGUST 30, 1996 - 4:00 PM
01 LEONARDO PETRELLI NETO, a Brazilian citizen, residing at Rua Clovis
Bevilaqua, 420 - apt. 701, Curitiba/PR, holder of 999 shares.
02 JOSE AUGUSTO PINTO MOREIRA, a Brazilian citizen, residing at Alameda
Argentina, 406, Alphaville II - Barueri-SP, holder of 1 share. Total no of
shares: 1,000.
CONFORMS WITH ORIGINAL
(signed by Leonardo Petrelli Neto, Secretary)
(Authenticity Seal)
(enclosure)
- 2 -
<PAGE>
TVA SUL PARTICIPACOES S.A.
CGC/MF No 01.201.577/0001-24
NIRE No 41300063451
SUBSCRIPTION BULLETIN
SPECIAL SHAREHOLDERS MEETING
HELD ON AUGUST 30, 1996
EXHIBIT
Subscription of capital stock increase, resolved at the Special Shareholders
Meeting held on August 30, 1996. Issue of 36,909 nominative common shares,
without par value, subscribed and paid up on the date hereof.
NAME AND PARTICULARS SHARES PAID UP AMOUNT
OF SUBSCRIBER (R$)
Leonardo Petrelli Neto, a Brazilian
citizen, married, expert in tele- 36.909 36,909.00
communications, residing and
domiciled at Rua Clovis Bevilaqua,
420 - apt. 701, Curitiba-PR,
ID Card RG no 736.678-7 and
CPF no 401.596.049-15
These shares were paid up through the award of 170.217 quotas representing TVA
Parana Ltda.'s capital stock.
(signed by Leonardo Petrelli Neto)
(signed for TVA SUL PARTICIPACOES S.A. by Jose Augusto P. Moreira and Leonardo
Petrelli Neto)
(Authenticity seal)
(enclosure)
- 3 -
<PAGE>
APPRAISAL REPORT
The undersigned:
Antonio Pereira dos Anjos, a Brazilian citizen, married, accountant, residing
and domiciled at Rua Josefina Arnoni, 141 - apt. 23, Sao Paulo/SP, CRC no
1SP134755/O-2 and CPF no 999.868.688-15;
Eduardo Soldi, a Brazilian citizen, married, accountant, residing and domiciled
at Alameda Safira, 520 - Alphaville IX, Barueri/SP, CRC no 1SP138610/O-3 and CPF
no 898.842.728-91;
Pietro Filomeno Pizzolante, a Brazilian citizen, married, accountant, residing
and domiciled at Rua Batista Cerruti, 194, Sao Paulo/SP, CRC no 1SP178092/O-0
and CPF no 074.455.328-89.
Experts appointed by the management of TVA SUL PARTICIPACOES S.A., with its
principal place of business at Rua Martha Kateiva de Oliveira, 49, room 4, in
the city of Curitiba - PR, enrolled with the Board of Taxpayers CGCMF under no
01.201.577/0001-24, registered with the Board of Trade of the State of Parana
under NIRE 41300063451, which appointment is to be ratified by said company's
partners, to proceed with the appraisal of TVA PARANA LTDA.'s net worth, with
its principal place of business at Rua Martha Kateiva de Oliveira, 49, room 4,
in the City of Curitiba - PR, enrolled with the Board of Taxpayers CGCMF under
no 84.938.786/0001-82, registered with the Board of Trade of the State of Parana
under NIRE 41202681240, in order to ascertain the value of the quotas which
shall be awarded to increase the capital of the Corporation TVA SUL
PARTICIPACOES, which appointment they accepted and hereby submit the result of
their work on the grounds of Exhibit I which is an integral part of this report.
Once the necessary verifications and exams were carried out, on the basis of the
Balance Sheet closed on July 31, 1996, which is an integral part of this report
as Exhibit II, as adjusted by the relevant facts which took place from August 1
to 30, 1996, among them the company's capitalization, they concluded that TVA
PARANA LTDA.'s net worth for the purposes of appraising the value of the quotas
which will be used to pay up capital in assets of TVA SUL PARTICIPACOES S.A.,
corresponds to R$6,009,000.90 (six million nine thousand Reais and ninety
cents), which amount complies with the "caput" of article 226 of Law no 6.404/76
and can therefore be used as a basis for the intended award.
The experts consider their work concluded and have signed this report in three
(30 typed counterparts, all of which have been duly initialed, and are at the
disposal of TVA SUL PARTICIPACOES S.A.'s shareholders for any clarifications
they deem necessary.
(signed by Antonio Pereira dos Anjos, Eduardo Soldi and Pietro Filomeno
Pizzolante)
- 4 -
<PAGE>
CERTIFICATE: We certify that this document is an integral part of the process
filed under number 961684941 on 12.5.96 and cannot be used separately.
Curitiba - PR 12/05/1996.
(Authenticity seal)
APPRAISAL REPORT - EXHIBIT I
The undersigned, experts appointed by TVA SUL PARTICIPACOES S.A.'s management,
pursuant to the provisions of Article 8 of Law 6.404/786, hereby submit the
result of their work, on the grounds of this Exhibit to the report, the purpose
of which was to ascertain TVA PARANA LTDA.'s net worth in order to pay up
capital in assets of TVA SUL PARTICIPACOES S.A., as follows:
1. The work was begun by examining the books and accounting records of TVA
PARANA LTDA., including the Balance Sheet closed on July 31, 1996, as adjusted
by the relevant facts which took place from August 1 to 30, 1996, among them the
company's capitalization, all of which are in good order in accordance with
legal and tax formalities.
2. TVA PARANA LTDA.'s capital stock is R$19,121,518.05 (nineteen million one
hundred and twenty-one thousand five hundred and eighteen reais and five cents),
divided into 27,712,345 (twenty-seven million seven hundred and twelve thousand
three hundred and forty-five) quotas, in the par value of R$0.69 (sixty-nine
cents of one Real) each.
3. According to the Board of Director's proposal and justification, TVA PARANA
LTDA.'s Net Worth which shall be used to ascertain the value of the quotas which
will be used to pay up capital in assets, consists of the following assets and
liabilities.
ASSETS R$
o Current 5,564,081.11
o Long-term 100,921.76
o Fixed 6,097,423.24
-------------
o Total Assets 11,762,426.11
-------------
LIABILITIES R$
o Current 2,820,088.00
o Long-Term 2,933,337.21
-------------
o Total Liabilities 5,753,425.21
-------------
SUMMARY
Total Assets 11,762,426.11
Total Liabilities 5,753,425.21
-------------
Net Worth 6,009,000.90
-------------
- 5 -
<PAGE>
4. The components of Assets and Liabilities of TVA PARANA LTDA.'s net worth,
indicated in item 3 above, were appraised according to the legal provisions
after a detailed examination of accounts and of the receipts which were used as
a basis for the above balance sheet, with the enforcement of the following
criteria:
ASSETS
Current
Cash and Banks represent immediate availability in currency and in view of the
fact they are monetary amounts, they were appraised for the values indicated in
the books.
The assets represented by clients' credits were appraised at their realization
value, i.e., deducted by the respective provision for doubtful debtors.
The assets booked at Stocks, were appraised by the criteria of purchase cost,
monetarily restated according to the legal indices.
The assets booked to Accounts Receivable from Affiliates are represented by
credits against affiliate companies.
The resources invested in Prepaid Expenses are indicated at their historical
value and coincide with the balances indicated in the books.
The assets booked as Other Accounts Receivable were appraised at their
realization value which, for the purposes of this report, coincides with the
balances indicated in the books.
Long-Term Assets
The assets booked as Long-Term Assets, which are represented by deposits for
defenses and resources and credits against affiliate companies, have been
monetarily restated based on the legal indices.
Fixed Assets
The assets book to this account, which basically refer to fixed assets, have
been appraised at their purchase cost, restated until the date of the balance
sheet based on legal indices, net of depreciation and amortization which have
also been restated on the same basis.
- 6 -
<PAGE>
LIABILITIES
Current Liabilities
The liabilities booked as current are monetary in nature and coincide with the
balances indicated in the books.
Long-Term Liabilities
These refer to loan agreements with affiliate companies and have been appraised
at the value of the loans, monetarily restated on the basis of legal indices.
5. Consequently, after a detailed examination of the Accounting records and
receipts which were the basis for the Balance Sheet drawn up on July 31, 1996,
adjusted by the relevant facts which took place from August 1 to 30, 1996, among
which the capitalization of the company, the expert appraisers confirm that TVA
PARANA LTDA.'s net worth at R$6,009,000.90 (six million nine thousand Reais and
ninety cents) actually exists and its appraisal complied with all legal
provisions, including the provisions of the "caput" of Article 226 of Law
6.404/76.
To sum up, the undersigned declare that the independent and objective appraisal
of all the components results in actual values which coincide with the book
values and there is no reason for diversion thereof.
We consider our work concluded and submit this exhibit to the appraisal report
in three typed counterparts, in four pages, duly initialed and signed.
Curitiba, August 30, 1996.
(signed by Antonio Pereira dos Anjos, Eduardo Soldi and Pietro Filomeno
Pizzolante)
(Authenticity seal)
(Enclosure)
- 7 -
<PAGE>
APPRAISAL REPORT - EXHIBIT II
TVA PARANA LTDA.
STATEMENT OF ASSETS AND LIABILITIES
as at 31 JULY 1996
Corporate Law
(values in Reais)
ASSETS
CURRENT
On hand 84,713.73
Accounts receivable 479,530.96
Stocks 4,556,771.24
Accounts Receivable from Affiliates 166,624.00
Prepaid Expenses 32,262.96
Other Accounts Receivable 241,178.22
-------------
Total Current Assets 5,564,081.11
LONG-TERM
Loans with Affiliates 87,127.32
Court Deposits 13,794.44
-------------
Total Long-Term Assets 100,921.76
FIXED
Real estate 423,764.75
Fixed 5,673,658.49
Total Fixed Assets 6,097,423.24
TOTAL ASSETS 11,762,426.11
-------------
- 8 -
<PAGE>
APPRAISAL REPORT - EXHIBIT II
TVA PARANA LTDA.
STATEMENT OF ASSETS AND LIABILITIES
as at 31 JULY 1996
Corporate Law
(values in Reais)
LIABILITIES
CURRENT
Suppliers 315,633.36
Taxes payable 151,611.48
Salaries and social contributions 427,135.11
Other Accounts Payable 1,915,708.05
--------------
LONG-TERM
Loans with affiliate companies 2,906,471.33
Loans from shareholders 26,865.88
--------------
Total Long-Term Liabilities 2,933,337.21
NET WORTH
Capital Stock 19,121,518.05
Monetary Restatement of Capital 120.35
Accrued Losses (13,112,627.50)
--------------
Total Net Worth 6,009,000.90
Total Liabilities and Net Worth 11,762,426.11
- 9 -
<PAGE>
TVA SUL PARTICIPACOES S.A.
CGC/MF No 01.201.577/0001-24
NIRE No 41300063451
MINUTES OF THE SPECIAL SHAREHOLDERS MEETING
HELD ON AUGUST 30, 1996
PLACE AND TIME: Corporate headquarters, at Rua Martha Kateiva de Oliveira, 49,
room 4, Curitiba/PR, at 5:00 PM.
ATTENDANCE: Shareholders representing the full amount of the capital stock.
NOTICE OF CALL: Waived, pursuant to the provisions of article 124, paragraph 4
of Law 6404/76.
CHAIRMAN: Jose Augusto P. Moreira; SECRETARY: Leonardo Petrelli Neto.
AGENDA: Capital Increase
RESOLUTIONS: (taken by unanimous vote)
1. The increase of the capital stock was approved from R$37,909.00 (thirty-seven
thousand nine hundred and nine Reais) to R$18,470,825.00 (eighteen million four
hundred and seventy thousand eight hundred and twenty-five Reais) an increase
therefore, of R$18,432,916.00 (eighteen million four hundred and thirty-two
thousand nine hundred and sixteen Reais) through the issue of 18,432,916
(eighteen million four hundred and thirty-two thousand nine hundred and sixteen)
new nominative common shares, without par value, at the issue price of R$1.00
(one Real) each share. The currently issued shares were totally subscribed and
paid up by Tevecap S.A., with credits held against the Corporation, according to
the enclosed Subscription Bulletin; the shareholders Leonardo Petrelli Neto and
Jose Augusto P. Moreira expressly waived their right of first refusal.
2. Consequently, the amendment to Article Five of the By-Laws was approved,
which shall henceforth be worded as follows: "Article Five - The capital stock
is R$18,432,916.00 (eighteen million four hundred and thirty-two thousand nine
hundred and sixteen Reais) divided into 18,432,916 (eighteen million four
hundred and thirty-two thousand nine hundred and sixteen) nominative common
shares, without par value."
TERMINATION: Having nothing further to discuss or to add, these minutes were
drawn up, approved and signed and the meeting was terminated. Curitiba, August
30, 1996 (signed)
Leonardo Petrelli Neto and Jose Augusto P. Moreira.
Conforms with original
(signed by Leonardo Petrelli Neto, Secretary)
Attorney: (signed by Silvia C.L. Bernardes, OAB/SP 74.256)
Board of Trade of the State of Parana
I certify registration on December 5, 1996
Under number 961994576
<PAGE>
(signed by Sidmar Antonio Cavet, Secretary General)
(enclosure)
TVA SUL PARTICIPACOES S.A.
CGC/MF No 01.201.577/0001-24
NIRE No 41300063451
LIST OF SHAREHOLDERS PRESENT
SPECIAL SHAREHOLDERS MEETING
HELD ON AUGUST 30, 1996
01 LEONARDO PETRELLI NETO, a Brazilian citizen, residing at Rua Clovis
Bevilaqua, 420 - apt. 701, Curitiba/PR, holder of 37,908 shares.
02 JOSE AUGUSTO PINTO MOREIRA, a Brazilian citizen, residing at Alameda
Argentina, 406, Alphaville II, Barueri-SP, holder of 1 share.
Total no of shares: 37,909.
CONFORMS WITH ORIGINAL
(signed by Leonardo Petrelli Neto, Secretary)
(Authenticity Seal)
(enclosure)
TVA SUL PARTICIPACOES S.A.
CGC/MF No 01.201.577/0001-24
NIRE No 41300063451
SUBSCRIPTION BULLETIN
SPECIAL SHAREHOLDERS MEETING
HELD ON AUGUST 30, 1996
EXHIBIT
Subscription of capital stock increase, resolved at the Special Shareholders
Meeting held on August 30, 1996. Issue of 18,432,916 nominative common shares,
without par value, subscribed and paid up on the date hereof.
NAME AND PARTICULARS SHARES PAID UP
OF SUBSCRIBER AMOUNT (R$)
- 2 -
<PAGE>
TEVECAP S.A., with its principal
place of business at Rua do Rocio,
313 - suite 101, Sao Paulo/SP,
enrolled with the Board of 18,432,916 18,432,916.00
Taxpayers CGC/MF under no
57.574.170/0001-05, registered
with the Board of Trade of
Sao Paulo under NIRE 35300139623,
herein represented by its
Directors, Jose Augusto P. Moreira
and Claudio Cesar D'Emilio.
(signatures for TEVECAP S.A.)
(signed for TVA SUL PARTICIPACOES S.A. by Jose Augusto P. Moreira and Leonardo
Petrelli Neto)
(Authenticity seal)
APPRAISAL REPORT
The undersigned:
Antonio Pereira dos Anjos, a Brazilian citizen, married, accountant, residing
and domiciled at Rua Josefina Arnoni, 141 - apt. 23, Sao Paulo/SP, CRC no
1SP134755/O-2 and CPF no 999.868.688-15;
Eduardo Soldi, a Brazilian citizen, married, accountant, residing and domiciled
at Alameda Safira, 520 - Alphaville IX, Barueri/SP, CRC no 1SP138610/O-3 and CPF
no 898.842.728-91;
Pietro Filomeno Pizzolante, a Brazilian citizen, married, accountant, residing
and domiciled at Rua Batista Cerruti, 194, Sao Paulo/SP, CRC no 1SP178092/O-0
and CPF no 074.455.328-89.
Experts appointed by the management of TVA SUL PARTICIPACOES S.A., with its
principal place of business at Rua Martha Kateiva de Oliveira, 49, room 4, in
the city of Curitiba - PR, enrolled with the Board of Taxpayers CGCMF under no
01.201.577/00011-24, registered with the Board of Trade of the State of Parana
under NIRE 41300063451, which appointment is to be ratified by said company's
partners, to proceed with the appraisal of TVA PARANA LTDA,'s net worth, with
its principal place of business at Rua Martha Kateiva de Oliveira, 49, room 4,
in the City of Curitiba - PR, enrolled with the Board of Taxpayers CGCMF under
no 84.938.786/0001-82, registered with the Board of Trade of the State of Parana
under NIRE 41202681240, in order to ascertain the value of the quotas which
shall be awarded to increase the capital of the Corporation TVA SUL
PARTICIPACOES, which appointment they accepted and hereby submit the result of
their work on the grounds of Exhibit I which is an integral part of this report.
- 3 -
<PAGE>
Once the necessary verifications and exams were carried out, on the basis of the
Balance Sheet closed on July 31, 1996, which is an integral part of this report
as Exhibit II, as adjusted by the relevant facts which took place from August 1
to 30, 1996, among them the company's capitalization, they concluded that TVA
PARANA LTDA.'s net worth for the purposes of appraising the value of the quotas
which will be used to pay up capital in assets of TVA SUL PARTICIPACOES, S.A.,
corresponds to R$6,009,000.90 (six million nine thousand Reais and ninety
cents), which amount complies with the "caput" of article 226 of Law no 6.404/76
and can therefore be used as a basis for the intended award.
The experts consider their work concluded and have signed this report in three
(3) typed counterparts, all of which have been duly initialed, and are at the
disposal of TVA SUL PARTICIPACOES S.A.'s shareholders for any clarifications
they deem necessary.
(signed by Antonio Pereira dos Anjos, Eduardo Soldi and Pietro Filomeno
Pizzolante)
CERTIFICATE: We certify that this document is an integral part of the process
filed under number 961994576 on 12.5.96 and cannot be used separately.
Curitiba - PR 12/05/1996.
(Authenticity seal)
APPRAISAL REPORT - EXHIBIT I
The undersigned, experts appointed by TVA SUL PARTICIPACOES S.A.'s management,
pursuant to the provisions of Article 8 of Law 6.404/76, hereby submit the
result of their work, on the grounds of this Exhibit to the report, the purpose
of which was to ascertain TVA PARANA LTDA.'s net worth in order to pay up
capital in assets of TVA SUL PARTICIPACOES S.A., as follows:
1. The work was begun by examining the books and accounting records of TVA
PARANA LTDA., including the Balance Sheet closed on July 31, 1996, as adjusted
by the relevant facts which took place from August 1 to 30, 1996, among them the
company's capitalization, all of which are in good order in accordance with
legal and tax formalities.
2. TVA PARANA LTDA.'s capital stock is R$19,121,518.05 (nineteen million one
hundred and twenty-one thousand five hundred and eighteen reais and five cents),
divided into 27,712,345 (twenty-seven million seven hundred and twelve thousand
three hundred and forty-five) quotas, in the par value of R$0.69 (sixty-nine
cents of one Real) each.
3. According to the Board of Director's proposal and justification, TVA PARANA
LTDA.'s Net Worth which shall be used to ascertain the value of the quotas which
will be used to pay up capital in assets, consists of the following assets and
liabilities.
- 4 -
<PAGE>
ASSETS R$
o Current 5,564,081.11
o Long-Term 100,921.76
o Fixed 6,097,423.24
-------------
o Total Assets 11,762,426.11
-------------
LIABILITIES R$
o Current 2,820,088.00
o Long-Term 2,933,337.21
-------------
o Total Liabilities 5,753,425.21
-------------
SUMMARY
Total Assets 11,762,426.11
Total Liabilities 5,753,425.21
-------------
Net Worth 6,009,000.90
-------------
4. The components of Assets and Liabilities of TVA PARANA LTDA.'s net worth,
indicated in item 3 above, were appraised according to the legal provisions
after a detailed examination of accounts and of the receipts which were used as
a basis for the above balance sheet, with the enforcement of the following
criteria:
ASSETS
Current
Cash and Banks represent immediate availability in currency and in view of the
fact they are monetary amounts, they were appraised for the values indicated in
the books.
The assets represented by clients' credits were appraised at their realization
value, i.e., deducted by the respective provision for doubtful debtors.
The assets booked as Stocks, were appraised by the criteria of purchase cost,
monetarily restated according to the legal indices.
The assets booked to Accounts Receivable from Affiliates are represented by
credits against affiliate companies.
The resources invested in Prepaid Expenses are indicated at their historical
value and coincide with the balances indicated in the books.
The assets booked as Other Accounts Receivable were appraised at their
realization value which, for the purposes of this report, coincides with the
balances indicated in the books.
- 5 -
<PAGE>
Long-Term Assets
The assets booked as Long-Term Assets, which are represented by deposits for
defenses and resources and credits against affiliate companies, have been
monetarily restated based on the legal indices.
Fixed Assets
The assets booked to this account, which basically refer to fixed assets, have
been appraised at their purchase cost, restated until the date of the balance
sheet based on legal indices, net of depreciation and amortization which have
also been restated on the same basis.
LIABILITIES
Current Liabilities
The liabilities booked as current are monetary in nature and coincide with the
balances indicated in the books.
Long-Term Liabilities
These refer to loan agreements with affiliate companies and have been appraised
at the value of the loans, monetarily restated on the basis of legal indices.
5. Consequently, after a detailed examination of the Accounting records and
receipts which were the basis for the Balance Sheet drawn up on July 31, 1996,
adjusted by the relevant facts which took place from August 1 to 30, 1996, among
which the capitalization of the company, the expert appraisers confirm that TVA
PARANA LTDA.'s net worth at R$6,009,000.90 (six million nine thousand Reais and
ninety cents) actually exists and its appraisal complied with all legal
provisions, including the provisions of the "caput" of Article 226 of Law
6.404/76.
To sum up, the undersigned declare that the independent and objective appraisal
of all the components results in actual values which coincide with the book
values and there is no reason for diversion thereof.
- 6 -
<PAGE>
We consider our work concluded and submit this exhibit to the appraisal report
in three typed counterparts, in four pages, duly initialed and signed.
Curitiba, August 30, 1996.
(signed by Antonio Pereira dos Anjos, Eduardo Soldi and Pietro Filomeno
Pizzolante)
(Authenticity seal)
(Enclosure)
- 7 -
<PAGE>
APPRAISAL REPORT - EXHIBIT II
TVA PARANA LTDA.
STATEMENT OF ASSETS AND LIABILITIES
as at 31 JULY 1996
Corporate Law
(values in Reais)
ASSETS
CURRENT
On hand 84,713.73
Accounts receivable 479,530.96
Stocks 4,559,771.24
Accounts Receivable from Affiliates 166,624.00
Prepaid Expenses 32,262.96
Other Accounts Receivable 241,178.22
-------------
Total Current Assets 5,564,081.11
LONG-TERM
Loans with Affiliates 87,127.32
Court Deposits 13,794.44
-------------
Total Long-Term Assets 100,921.76
FIXED
Real estate 423,764.75
Fixed 5,673,658.49
-------------
Total Fixed Assets 6,097,423.24
TOTAL ASSETS 11,762,426.11
-------------
- 8 -
<PAGE>
APPRAISAL REPORT - EXHIBIT II
TVA PARANA LTDA.
STATEMENT OF ASSETS AND LIABILITIES
as at 31 JULY 1996
Corporate Law
(values in Reais)
LIABILITIES
CURRENT
Suppliers 315,633.36
Taxes payable 151,611.48
Salaries and social contributions 427,135.11
Other Accounts Payable 1,915,708.05
--------------
LONG-TERM
Loans from affiliate companies 2,906,471.33
Loans from shareholders 26,865.88
--------------
Total Long-Term Liabilities 2,933,337.21
NET WORTH
Capital Stock 19,121,518.05
Monetary Restatement of Capital 120.35
Accrued Losses (13,112,637.50)
--------------
Total Net Worth 6,009,000.90
Total Liabilities and Net Worth 11,762,426.11
- 9 -
<PAGE>
Exhibit 3.6
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Articles of Incorporation of Comercial Cabo TV Sao
Paulo Ltda.
By: /s/DOUGLAS DURAN
----------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
COMERCIAL CABO TV SAO PAULO LTDA.
ARTICLES OF INCORPORATION
JOSE EDUARDO NICOLAU, a Brazilian citizen, married, attorney, residing in this
capital city at Rua Caconde no 472, apt. 21 - Jardim Paulista, bearer of ID Card
RG no 4.279.089 and enrolled with the Board of Taxpayers CIC no 413.119.068-00,
ELSA DE OLIVEIRA BARBOSA, a Brazilian citizen, separated, trader, residing and
domiciled in this capital city at Estrada do Pessego, no 98, Bloco 1, apt. 11,
District of ltaquera, bearer of ID Card RG no 16.118.400 and enrolled with the
Board of Taxpayers CIC no 810.560.798-00,
through this private instrument of Articles of Incorporation, have mutually
agreed to organize a limited liability quota company, which shall be governed by
the clauses and conditions set forth below:
CLAUSE ONE. The company's name shall be COMERCIAL CABO TV SAO PAULO LTDA., with
principal place of business and venue in this capital city of the State of Sao
Paulo, at Avenida Republica do Libano no 543, CEP 04501, Parque do Ibirapuera.
CLAUSE TWO. The company's objects are to trade with electronic devices, the
placement of Community Antennae and Performance of Services thereon, and
everything related to the transmission, distribution, radio link, reception and
processing of images, sounds, signals, and data via cable, optical fiber or any
other technological product or substitute thereof, apart from leasing video
films, video games and video disks under the conventional system and the system
known as Pay-per-View, or electronic lease, or further, any other that may be
developed by technology in the future.
CLAUSE THREE. The company has an indeterminate term of duration and may be
dissolved at any time at the discretion of its partners.
CLAUSE FOUR. The capital stock shall be Cr$3,000,000.00 (three million
cruzeiros) divided into 3,000,000 (three million) quotas of Cr$1.00 (one
cruzeiro) each, subscribed and paid up in Brazilian currency as follows:
a) Jose Eduardo Nicolau 2,700,000 quotas or Cr$2,700,000.00
b) Elsa de Oliveira Barbosa 300,000 quotas or Cr$300,000.00
--------- ---------------
3,000,000 quotas or Cr$3,000,000.00
<PAGE>
CLAUSE FIVE. Pursuant to the provisions of article 2, "in fine", of Decree 3.709
of January 18, 1919, each partner is liable for the full amount of the capital
stock.
CLAUSE SIX. The quotas are indivisible and may not be transferred or disposed of
to third parties under any heading without the consent of the other partners,
who shall be entitled a right of first refusal under equal conditions.
CLAUSE SEVEN. The partner wishing to transfer his quotas will notify the other
partner in writing, stating the price, manner and time limit of payment, to
allow the latter to exercise his right of first refusal within thirty days as of
the receipt of the notice. The admission of new partners will, however, be
subject to the consent of the controlling quotaholder.
CLAUSE EIGHT. The company shall be managed by the partner JOSE EDUARDO NICOLAU,
in the capacity of managing partner, who will use the company's name and
represent it as Plaintiff or Defendant, in or out of Court, being barred however
from employing the company's name under any heading or in any manner whatsoever
in operations or businesses which are alien to the corporate object, especially
the granting of collateral, securities, endorsements or guarantees in favor of
third parties. The company's name may be used in agreements in general,
including loan agreements, credit notes, checks and any other documents,
whatever their nature, which represent a liability for the company, being
further empowered to grant powers to an attorney-in-fact, or to two
attorneys-in-fact acting jointly.
Paragraph One. For the performance of day to day acts, forwarding mail,
issuing receipts and endorsing checks for deposit in the company's bank
accounts, only the individual signature of one partner or one attorney-in-fact
will be required.
Paragraph Two. The appointment of attorneys-in-fact in the company's name
as well as the extension of their powers will be made by the partners jointly.
CLAUSE NINE. As compensation for the services performed for the company the
managing partner will receive in the manner of Pro Labore an amount determined
from time to time, at the partners' unanimous consent, subject to the tax
limitations provided in the income tax legislation, which amount will be booked
to miscellaneous expenses.
CLAUSE TEN. In the event of death of any of the partners, his heirs will jointly
exercise the deceased partner's rights while the quotas remain unapportioned.
CLAUSE ELEVEN. The fiscal year will coincide with the calendar year and on
December 31 of each year the company's balance sheet will be drawn up, subject
to the applicable legal and technical provisions. The ascertained profits and
losses will be shared by each partner in the proportion of his holdings and
eventual profits may, at their discretion, be distributed or put aside as
reserves.
- 2 -
<PAGE>
CLAUSE TWELVE. The partners declare they are not liable for any of the crimes
provided by law which might prevent them from performing commercial activities.
In witness whereof, the parties have drawn up, dated and signed this instrument,
together with two witnesses, in three counterparts, one of which is certified
and filed with the Board of Trade of the State of Sao Paulo and the others, once
certified, will be used by the company and the partners. The partners elect the
central courts of the capital city of Sao Paulo, to settle eventual doubts
arising from this Agreement, with the exception of any others regardless of
possible privileges they may present.
Sao Paulo, February 4, 1991.
(signed by Jose Eduardo Nicolau and Elsa de Oliveira Barbosa)
Witnesses:
(signed by Laerte Antonio Palonio and Celio Durante)
COMERCIAL CABO TV SAO PAULO LTDA.
CGC/MF No 65.791.444/0001-38
NIRC 35210053959
AMENDMENT TO THE ARTICLES OF INCORPORATION
AND APPROVAL OF MERGER
The parties to this instrument are:
(a) INBRAC VISION LTDA., a corporation with its principal place of business at
Rua do Rocio, 313 - 8th floor, Sao Paulo-SP, enrolled with the Board of
Taxpayers CGC/MF under no 68.975.796/0001-31, having its Articles of
Incorporation filed with the Board of Trade of Sao Paulo, under NIRC no
35211210993, at the session of October 22, 1992, herein represented by its
Directors, Jose Augusto Pinto Moreira, a Brazilian citizen, married, economist,
bearer of ID Card RG no 2.944.700 and enrolled with the Board of Taxpayers CIC
under no 128.701.967-68, residing and domiciled at Alameda Argentina, 406,
Alphaville II, Barueri-SP and Claudio Cesar D'Emilio, a Brazilian citizen,
married, business administrator, bearer of ID Card RG no 4.493.895 and enrolled
with the Board of Taxpayers CIC under no 273.258.818-00, residing and domiciled
at Rua Padre Anibal Difrancia, 182, Sao Paulo-SP;
(b) TEVECAP S/A, with its principal place of business at Rua do Rocio, 313 -
suite 101, Sao Paulo - SP, enrolled with the Board of Taxpayers CGC/MF under no
57.574.170/0001-04, registered with the Board of Trade of Sao Paulo under NIRC
no 35300139623, herein represented by its Directors, Jose Augusto Pinto Moreira
and Claudio Cesar D'Emilio, whose particulars are given above, and, additionally
- 3 -
<PAGE>
INBRAC VISION LTDA.'s quotaholder,
(c) ROBERT CIVITA, a Brazilian citizen, married, publisher, bearer of ID Card RG
no 1.666.785 and enrolled with the Board of Taxpayers CIC under no
006.890.178-04, residing and domiciled at Rua Escocia, 253, apt. 11 - Sao
Paulo-SP.
The parties named and whose particulars are given in items (a) and (b) above are
the sole quotaholders of Comercial Cabo TV Sao Paulo Ltda., a corporation with
its principal place of business in this capital city, at Rua do Rocio, 313,
suite 111, enrolled with the Board of Taxpayers CGC/MF under no
65.791.444/0001-38, having its Articles of Incorporation filed with the Board of
Trade of Sao Paulo under NIRC no 35210053959, on April 12, 1991, and HAVE
RESOLVED:
1. To adapt the monetary expression of the capital stock to the new Brazilian
currency, the Real.
2. To amend the capital stock from R$1.09 (one Real and nine cents) to
R$10,500.00 (ten thousand five hundred Reais), through the incorporation of
R$10,498.91 (ten thousand four hundred and ninety-eight Reais and ninety-one
cents) which are part of the balance of the account "Paid Up Capital Monetary
Correction Reserve".
3. Consequently, to amend the par value of each quota to R$3.50 (three Reais and
fifty cents).
4. To resolve upon the merger, into the Company, of lnbrac Vision Ltda.,
pursuant to the terms and conditions set forth in the Protocol and Justification
of Merger, with the approval of the following:
4.1. The terms, and conditions of the Protocol and Justification of Merger
executed by this Company's Directors, dated November 30, 1994, with Inbrac
Vision Ltda., which shall be an integral part hereof. Said Protocol provides for
the transfer to this Company, through merger, of lnbrac Vision Ltda.'s net
worth, in the amount of R$1,784,303.50 (one million seven hundred and
eighty-four thousand three hundred and three Reais and fifty cents), which is to
be confirmed by an appraisal report;
4.2. The ratification of the appointment of the experts, Mauro Catucci, a
Brazilian citizen, married, accountant, CRC/SP 165.052 and enrolled with the
Board of Taxpayers CIC under no 088.826.118-76, residing and domiciled in this
capital city, at Rua Fortunato Simoes, 121; Jose Orlando Arthuzo Filho, a
Brazilian citizen, married, accountant, CRC/SP 165.783 and enrolled with the
Board of Taxpayers CIC under no 041.816.678-12, residing and domiciled in this
capital city, at Rua Angelina Ugolini, 76 and Antonio Pereira dos Anjos, a
Brazilian citizen, married, accountant, CRC/SP 134.755 and enrolled with the
Board of Taxpayers CIC under no 999.868.688-15, residing and domiciled
- 4 -
<PAGE>
in this capital city, at Rua Josefina Arnoni, 141 - apt. 23, to appraise Inbrac
Vision Ltda.'s net worth;
4.3. The Appraisal Report of lnbrac Vision Ltda.'s net worth, which will
be injected into the Company, prepared by the experts mentioned in the preceding
item, based on the balance sheet of November 30, 1994 and which was certified by
the Presiding Board and filed with the Company, and further which confirmed the
value of R$1,784,303.50 (one million seven hundred and eighty-four thousand
three hundred and three Reais and fifty cents) for said portion of the net
worth, which experts stated that this value complies with the "caput" of article
226 of Law 6.404/76 and may, therefore, be used as a basis for the merger;
4.4. The injection into this Company, by merger, of lnbrac Vision Ltda.'s
net worth, in the amount of R$1,784,303.50 (one million seven hundred and
eighty-four thousand three hundred and three Reais and fifty cents), thus
increasing the capital stock from R$10,500.00 (ten thousand five hundred Reais)
to R$1,794,803.50 (one million seven hundred and ninety-four thousand eight
hundred Reais and fifty cents), with the issue of 509,801 (five hundred and nine
thousand eight hundred and one) new quotas, which will be subscribed by the
quotaholders of Inbrac Vision Ltda., replacing the quotas they held in the
merged company and representing this Company's capital stock increase. The quota
replacement ratio will comply with the provisions set forth in the Protocol and
Justification of Merger. Consequently, Comercial Cabo TV Sao Paulo Ltda. will be
the successor of all of Inbrac Vision Ltda's rights and obligations, pursuant to
the law.
5. The Company's representatives are authorized to adopt all the necessary
measures to perfect the merger approved herein, including as regards
registrations, notices, recordals and other applicable actions.
6. To increase the capital stock from R$1,794,803.50 (one million seven hundred
and ninety-four thousand eight hundred Reais and fifty cents) to R$3,988,957.00
(three million nine hundred and eighty-eight thousand nine hundred and
fifty-seven Reais) by issuing 626,901 (six hundred and twenty-six thousand nine
hundred and one) quotas, in the par value of R$3.50 (three Reais and fifty
cents) each, which are hereby subscribed and paid up at the unit price of R$3.50
(three Reais and fifty cents) by the partner TEVECAP S.A., by using current
account credits, with the waiver by the partner CIVITA of his right of first
refusal.
7. In view of the measures approved above, as well as of other changes they
intend to make to the Articles of Incorporation, the quotaholders have resolved
to reword and restate the Articles of Incorporation, which shall henceforth be
worded as follows:
ARTICLES OF INCORPORATION
I
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<PAGE>
NAME, HEAD OFFICE, OBJECT AND DURATION
CLAUSE 1. The company's name shall be COMERCIAL CABO TV SAO PAULO LTDA.
CLAUSE 2. The company's principal place of business and venue is located in the
city of Sao Paulo/SP, at Rua do Rocio, 313 - 8th floor.
Sole Paragraph. The Company's Board of Directors may open and close
branches and offices anywhere in the Brazilian territory.
CLAUSE 3. The Company's objects are: (a) the exploitation, distribution,
transmission, radio links and operation of special cable television services,
through the reception and processing of images, sounds, signals and data and/or
the respective generation, through community antennae, by physical means,
including but not limited to cables, optical fiber, installation and maintenance
of heads, networks, trunk systems, distribution systems, user or subscriber
systems, in open or closed communities, preparation and/or placement of
projects, including on behalf or for the account of third parties, or the
utilization or the employment of any other means, systems, equipment, technical
or technological products, their equivalents or substitutes; electronic lease or
further any other means or system which technology or the state of the art might
develop in future; (b) import and export of goods, products, equipment or
services, directly or indirectly related to the corporate object, as well as the
performance of services and the representation of other domestic or foreign
corporations; and (c) participation in other corporations as partner,
shareholder, quotaholder or syndicated member.
CLAUSE 4. The Company has an indeterminate term of duration.
II
CAPITAL STOCK
CLAUSE 5. The capital stock is R$3,988,957.00 (three million nine hundred and
eighty-eight thousand nine hundred and fifty-seven Reais) divided into 1,139,702
(one million one hundred and thirty nine thousand seven hundred and two) quotas,
in the par value of R$3.50 (three Reais and fifty cents) each, distributed as
follows among the partners:
Quotaholders Quotas Value R$
Tevecap S.A. 1,139,685 3,988,897.50
Robert Civita 17 59.50
--------- ------------
Total 1,139,702 3,988,957.00
- 6 -
<PAGE>
Sole Paragraph. The partners' liability is limited, pursuant to the law,
to the full amount of capital stock.
III
MANAGEMENT
CLAUSE 6. The company shall be managed by the partners who may delegate its
powers to representatives who shall be designated Directors.
Paragraph 1. The Board of Directors, which is appointed for an
indeterminate term, shall be made up as follows: Administrative Director - Jose
Augusto Pinto Moreira and financial Director - Claudio Cesar D'Emilio, whose
particulars are given above, appointed by delegation of the quotaholders and who
will have full powers to manage the company's business.
Paragraph 2. The Company shall be represented:
(a) by two Directors jointly, as Plaintiff or Defendant, or by one
Director jointly with one attorney-in-fact or further by two attorneys-in-fact
with special powers.
(b) severally, by one Director or one attorney-in-fact with special powers
in the performance of day-to-day activities, forwarding of mail, issue of
receipts and endorsement of checks for deposit in the company's bank accounts.
Paragraph 3. The appointment of attorneys-in-fact will require the joint
signature of two Directors and the respective powers-of-attorney will
specifically list the acts they may perform. With the exception of those which
grant the powers of the "ad judicia" clause, all the other powers-of-attorney
granted by the Company will have a limited term of validity.
Paragraph 4. The Directors are barred from using the company name in third
party guarantees and business alien to the company's interest or acts which
imply an act of graciousness.
IV
ASSIGNMENT OR TRANSFER OF QUOTAS
CLAUSE 7. None of the partners may fully or partly assign its quotas to third
parties, without firstly offering them in writing, at least thirty days in
advance, to the other partner which, under equal conditions, will have a right
of first refusal to purchase them.
Paragraph 1. The assignment will be preceded by a notice with a written
offer to purchase by third parties in good faith, in order for the other partner
to exercise its right of first refusal within thirty days, if it wishes to do
so.
- 7 -
<PAGE>
Paragraph 2. Should the right of first refusal fail to be exercised, the
notifying partner may assign its quotas to the interested third parties within
ten days and subject to the conditions set forth in the notice; any assignment
beyond said ten day time limit and in disagreement with the initial offer will
be null and void.
V
AMENDMENT TO THE ARTICLES OF INCORPORATION
DISSOLUTION AND LIQUIDATION
CLAUSE 8. The controlling quotaholder may amend these articles, each quota
entitling its holder to one vote, the dissenting partner being entitled to
withdraw from the company with the reimbursement of the amount corresponding to
its stock, in accordance with the provisions of article eight, within six months
of the date of withdrawal.
CLAUSE 9. In the event of bankruptcy, death, incapacity, exclusion or removal of
one of the partners, the Company will not be dissolved. In any of these events,
the assets of the bankrupt, deceased, incapacitated, excluded or removed partner
will be ascertained on the basis of a special balance sheet, appraised at the
market price by a specialized company, taking into account for this purpose
tangible and intangible assets, as well as liabilities on the date of the event
and paid within six months.
Sole Paragraph. In the event of death or mental disability, the partner's
heirs may appoint a representative to remain in the Company, who will be
approved by the other partners.
VI
FISCAL YEAR, BALANCE SHEET AND PROFITS
CLAUSE 10. The fiscal year begins on January 1 and will end on December 31
whereupon the appropriate Balance Sheet and other financial statements will be
drawn up, in compliance with the applicable legal provisions. The company may
also draw up interim balance sheets and resolve upon the respective distribution
of profits. Ascertained net profits will be allocated in accordance with the
resolution of the partners. Ascertained losses will be borne by the partners
proportionately to their quotas.
VII
VENUE
CLAUSE 11. The parties elect the courts of Sao Paulo, SP, to settle any claims
arising from this Charter.
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<PAGE>
The partners and directors declare they are not liable for any of the crimes
provided by law which prevent them from performing commercial activities.
In witness whereof, the parties have executed this instrument in three
counterparts before two witnesses.
Sao Paulo, December 29, 1994.
TEVECAP S.A.
(signed by Jose Augusto P. Moreira and Claudio Cesar D'Emilio)
ROBERT CIVITA
(signature)
Witnesses:
(signed by Simone de Souza Salgado and Sandra A.S. Iopes)
Attest:
(signed by Silvia C.L. Bernardes, OAB/SP 74.256)
BOARD OF TRADE OF THE STATE OF SAO PAULO
I certify registration under number 15.035/95-5 (signed by Jose Edgard L. Gomes,
Secretary General)
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<PAGE>
Exhibit 3.7
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Articles of Incorporation of TVA Parana S.A.
By: /s/DOUGLAS DURAN
-------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
PRIVATE INSTRUMENT OF ARTICLES OF INCORPORATION
OF THE LIMITED LIABILITY QUOTA COMPANY
"TVA CURITIBA SERVICOS EM TELECOMUNICACOES LTDA."
By this private instrument and for all legal purposes, the undersigned, TEVECAP
- -COMERCIO E PARTICIPACOES LTDA., a company with its principal place of business
at Rua do Rocio, 313 - suite 114, in Sao Paulo - SP, enrolled with the Board of
Taxpayers under no 57.574.170/0001-05, herein represented by its Directors,
Messrs. Edgard de Silvio Faria, a Brazilian citizen, married, attorney, residing
and domiciled in Sao Paulo - State of Sao Paulo, at Rua Barao do Triunfo, 1415 -
apt. 41, bearer of ID Card RG no 1.824.058 and enrolled with the Board of
Taxpayers CPF under no 066.731.988-34 and Carlos Alberto Machline, a Brazilian
citizen, bachelor, stockbroker, residing and domiciled in Sao Paulo State of Sao
Paulo, at Rua Manoel de Goes, 157, bearer of ID Card RG no 8.471.136 and
enrolled with the Board of Taxpayers CPF under no 076.647.488-79; and LEONARDO
PETRELLI NETO, a Brazilian citizen, married, expert in telecommunications,
residing and domiciled in Curitiba - State of Parana, at Rua Pasteur, 780 - apt.
502, bearer of ID Card RG no 736.678 and enrolled with the Board of Taxpayers
CPF under no 401.596.049-15, have resolved to organize a limited liability quota
company, which shall be governed by the following clauses and conditions:
"NAME, HEAD OFFICE, OBJECT AND DURATION
CLAUSE ONE
The company's name shall be TVA CURITIBA SERVICOS EM TELECOMUNICACOES
LTDA., and its principal place of business and venue are located in the city of
Curitiba State of Parana, at Rua Martha Kateiva de Oliveira, 49.
CLAUSE TWO
The company's objects are: a. sale, purchase, placement, assembly, lease and
maintenance of telecommunications and radio broadcasting equipment and related
services; b. management, gathering and collection of subscriptions for special
television services; c. performance of advertising services; and d. all the
necessary and applicable acts for the enforcement of said objects.
CLAUSE THREE
The company has an indeterminate term of duration.
CAPITAL STOCK
<PAGE>
CLAUSE FOUR
The fully subscribed and paid up capital stock, in Brazilian currency, is
Cr$1,000,000.00 (one million cruzeiros), divided into 1,000,000 (one million)
quotas, in the par value of Cr$1.00 (one cruzeiro) each, distributed between the
partners as follows:
QUOTAHOLDERS QUOTAS VALUE Cr$
1. TEVECAP - COMERCIO E 800,000 800,000.00
PARTICIPACOES LTDA.
2. LEONARDO PETRELLI 200,000 200,000.00
--------- ------------
NETO
TOTAL 1,000,000 1,000,000.00
SOLE PARAGRAPH. The liability of the partners, pursuant to the law, is limited
to the full amount of the capital stock.
MANAGEMENT
CLAUSE FIVE
The company shall be managed by a Board of Directors consisting of three (3)
memb rs, with an indeterminate term of office, who will have full powers to
manage the company's business, two of which shall be appointed by the partner
TEVECAP - COMERCIO E PARTICIPACOES LTDA. and one position of Director to be
occupied by the partner LEONARDO PETRELLI NETO or upon his delegation.
Paragraph One. The Company shall be represented:
a. by two (2) Directors jointly, as Plaintiff or Defendant, including in
the acts, agreements or documents for the disposal or encumbrance of assets,
assumption or dismissal of liabilities and appointment of attorneys-in-fact.
When such acts taken separately represent a value in excess of Cr$50,000,000.00
(fifty million Cruzeiros), to be restated as of the date hereof according to the
IGPM index, one of the signatures must be by the Director upon delegation
appointed by the minority partner.
b. jointly, by one Director and one attorney-in-fact with special powers,
or by two attorneys-in-fact with special powers, in acts, agreements and
documents not covered by the preceding item and to open, operate and close bank
accounts;
- 2 -
<PAGE>
c. severally, by one Director or by one attorney-in-fact with special
powers, in day-to-day acts, forwarding of mail, issuing receipts and endorsing
checks for deposit in the Company's bank accounts; and
d. severally, by one attorney-in-fact with specific powers, in Court.
Paragraph Two. All powers-of-attorney must specify the granted powers and have a
limited term of validity, with the exception of powers-of-attorney for Court
purposes.
Paragraph Three. The employment of the company name is barred in sureties,
collateral, acceptances, endorsements and other documents which do not represent
acts in the Company's interest or imply mere graciousness.
Paragraph Four. The Directors are exempt from granting collateral and under the
heading of pro labore will be entitled to a monthly compensation which will be
determined by the quotaholders.
BANKRUPTCY, DEATH, DISABILITY OR WITHDRAWAL OF PARTNER
CLAUSE SIX
In the event of bankruptcy, death, incapacity, exclusion or removal of one of
the partners, the Company will not be dissolved. In any of these events, the
assets of the bankrupt, deceased, incapacitated, excluded or removed partner
will be ascertained on the basis of a special balance sheet, appraised at the
market price by a specialized company, taking into account for this purpose
tangible and intangible assets, as well as liabilities on the date of the event
and paid in twelve (12) equal, monthly and successive installments, accrued by
monetary restatement in accordance with the indexation of the Referential Rate
or any other which replaces it, plus interest of twelve percent (12%) per annum.
Paragraph One. In the event of death or mental disability, the partner's heirs
may appoint a representative to remain in the Company, who will be approved by
the quotaholders representing at least fifty per cent of the capital stock.
Paragraph Two. The partial dissolution of the company will take place, with the
exclusion of the minority shareholder, through the ascertainment of assets as
provided in the "caput" of this Clause, in the event of termination of the
Agreement for joint operation between TV DELTA DE CURITIBA LTDA. and TVA
RADIOENLACES LTDA., or in the event of disposal of the quotas which Mr. Leonardo
Petrelli Neto holds in TV DELTA DE CURITIBA LTDA., in which events the Company
will survive and the majority quotaholder will be entitled to invite other
partners within thirty days.
- 3 -
<PAGE>
ASSIGNMENT AND TRANSFER OF QUOTAS
CLAUSE SEVEN
Neither partner may fully or partly assign its quotas to third parties, without
firstly offering them in writing, at least thirty days in advance, to the other
partner which, under equal conditions, will have a right of first refusal to
purchase them.
Paragraph One. The assignment will be preceded by a notice with a written offer
to purchase by third parties in good faith, in order for the other partner to
exercise its right of first refusal within thirty days, if it wishes to do so.
Paragraph Two. Should the right of first refusal fail to be exercised, the
notifying partner may assign its quotas to the interested third parties within
ten days and subject to the conditions set forth in the notice; any assignment
beyond said ten day time limit and in disagreement with the initial offer will
be null and void.
FISCAL YEAR AND FINANCIAL STATEMENTS
CLAUSE EIGHT
The fiscal year begins on January 1 of each year and will end on December 31 of
the same year. At the end of each fiscal year the Balance Sheet and other
financial statements will be drawn up, in compliance with the applicable legal
provisions. Ascertained net profits will be allocated in accordance with the
resolution of the partners. Ascertained losses will be borne by the partners
proportionately to their quotas.
SOLE PARAGRAPH. The company may also draw up interim balance sheets for the
distribution of ascertained profits.
CONTRACTUAL AMENDMENTS
CLAUSE NINE
With the exception of the powers of and the manner in which the Directors Upon
Delegation will be appointed, as provided in Clause Five, for which a unanimous
vote will be required, the partners representing the majority of the capital
stock may amend this charter and the acts performed as a result of said
resolution will be legally binding.
Paragraph One. In the event of disagreement as regards a capital increase by
subscription, the partners agree to a commitment clause whereby they will
necessarily and legally submit themselves to arbitration, expressly waiving the
procurement of a solution by court proceedings.
- 4 -
<PAGE>
Paragraph Two. The partner which requests arbitration proceedings will clarify
the controversial matter, together with all its specifications, and the partners
hereby mutually appoint as arbitrator the Auditing Firm Coopers & Lybrand,
taxpayer's enrollment CGC no 44.038.248/0001-17, with its principal place of
business at Sao Paulo, and as Deputy the company Price Waterhouse, taxpayer's
enrollment CGC no 61.562.112/0001-20, with its principal place of business at
Sao Paulo, which shall submit, at the individual or joint request of the
partners, its arbitration report within fifteen days, indicating its decision as
regards the need, inconvenience, opportunity and equity justification for the
value of the proposed capital increase.
Paragraph Three. The arbitration ruling shall be final and conclusive and the
arbitrator shall be authorized to decide by equity, which decision shall be
entirely accepted by the partners as definitive and enforced without recourse to
the Judiciary Power, thus resulting in specific enforcement pursuant to the
provisions of article 641 of the Code of Civil Procedure.
Paragraph Four. Should one of the partners file a claim in Court against the
other partner without subjecting itself to the arbitration commitment provided
in this clause, it will be forced to pay to the other partner the predetermined
contractual fine of fifty percent of the value of the proposed capital increase.
Paragraph Five. The Company shall be liable for the payment of arbitration fees
and expenses.
BOARD OF DIRECTORS
CLAUSE TEN
The quotaholder TEVECAP COMERCIO E PARTICIPACOES LTDA. appoints as Directors
Messrs.: ROGER KARMAN, a Brazilian citizen, divorced, journalist, residing and
domiciled in Sao Paulo - State of Sao Paulo, at Rua dr. Franco da Rocha, 215 -
apt. 142, bearer of ID Card RG no 2.600.501 and enrolled with the Board of
Taxpayers CPF under no 007.346.168- 72; and Douglas Duran, a Brazilian citizen,
married, business administrator, residing and domiciled in Osasco - State of Sao
Paulo, at Rua Boninas, bearer of ID Card RG no 6.702.950 and enrolled with the
Board of Taxpayers CPF under no 541.326.068-72. The remaining Director will be
the quotaholder LEONARDO PETRELLI NETO, whose particulars are given above.
VENUE
CLAUSE ELEVEN
The central courts of the Administrative Region of Curitiba are hereby elected
to settle any matter arising from this Agreement.
- 5 -
<PAGE>
The partners and directors declare they are not liable for any of the crimes
provided by law which prevent them from performing commercial activities.
In witness whereof, the parties have executed this instrument in three
counterparts before two witnesses, for all legal purposes.
Curitiba, November 28, 1991
(signed for TEVECAP - COMERCIO E PARTICIPACOES LTDA. by edgard de Silvio
Faria and Carlos Alberto Machline)
(signed by LEONARDO PETRELLI NETO)
In using the company name, the Director Mr. Roger Karman will sign: TVA CURITIBA
SERVICOS EM TELECOMUNICACOES LTDA.
In using the company name, the Director Mr. Douglas Duran will sign: TVA
CURITIBA SERVICOS EM TELECOMUNICACOES LTDA.
In using the company name, the Director Mr. Leonardo Petrelli will sign:
TVA CURITIBA SERVICOS EM TELECOMUNICACOES LTDA.
Witnesses:
(signed by Rosa Amendola and Tayer Castro Oliveira)
- 6 -
<PAGE>
TVA PARANA LTDA.
CGCMF No 84-938.786/0001-82
NIRE 41202681240
7TH AMENDMENT TO THE ARTICLES OF INCORPORATION
AUGUST 30, 1996
By this private instrument:
TEVECAP S/A, with its principal place of business at Rua do Rocio, 313 - suite
101, Sao Paulo-SP, enrolled with the Board of Taxpayers CGC/MF under no
57.574.170/0001-04, registered with the Board of Trade of Sao Paulo under NIRC
no 35300139623, herein represented by its Directors, Jose Augusto Pinto Moreira,
a Brazilian citizen, married, economist, bearer of ID Card RG no 2.944.700 and
enrolled with the Board of Taxpayers CIC under no 128.701.967-68, residing and
domiciled at Alameda Argentina, 406, Barueri-SP and Claudio Cesar D'Emilio, a
Brazilian citizen, married, business administrator, bearer of ID Card RG no
4.493.895 and enrolled with the Board of Taxpayers CIC under no 273.258.818-00,
residing and domiciled at Rua Sicano, 110, Sao Paulo-SP;
Leonardo Petrelli Neto, a Brazilian citizen, married, expert in
telecommunications, residing and domiciled at Rua Clovis Bevilaqua, 420 - apt.
701, Curitiba/PR, ID Card RG no 736.678-7 and enrolled with the Board of
Taxpayers CPF under no 401.596.049-15;
sole quotaholders of the limited liability quota company TVA Parana Ltda., with
its principal place of business at Rua Marta Kateiva de Oliveira, 49, in the
city of Curitiba/PR, enrolled with the Board of Taxpayers CGC/MF under no
84.938.786/0001-82, having its Articles of Incorporation filed with the Board of
Trade of the State of Parana under no 41202681240, at the session of January 7,
1992,
and as a partner newly admitted to the Company
TVA SUL PARTICIPACOES S.A., with its principal place of business in Curitiba/PR,
at Rua Martha Kateiva de Oliveira, 49-room 4, enrolled with the Board of
Taxpayers CGCMF under no 01.201.577/0001-24, having its By-Laws filed with the
Board of Trade of the State of Parana, NIRE no 41300063451, herein represented
by its Directors Jose Augusto P. Moreira and Leonardo Petrelli Neto, whose
particulars are given above;
HAVE RESOLVED:
<PAGE>
1. To change the Company's name to TVA SUL PARANA LTDA.
2. To approve the transfer of 170,217 (one hundred and seventy thousand two
hundred and seventeen) free and unencumbered quotas by the partner Leonardo
Petrelli Neto to TVA Sul Participacoes S.A., in view of the fact that said
quotas were awarded to pay up the capital increase of TVA Sul Participacoes
S.A.;
3. To approve the assignment and transfer of 27,542,127 (twenty-seven million
five hundred and forty-two thousand one hundred and twenty-seven) free and
unencumbered quotas by the partner Tevecap S.A. to TVA Sul Participacoes S.A.,
for the price agreed by the parties, the Assignor granting the Assigning the
fullest, most general and unrestricted discharge;
4. In view of the measures approved above, as well as of other changes they
intend to make to the Articles of Incorporation, the quotaholders have resolved
to reword and restate the Articles of Incorporation, which shall henceforth be
worded as follows:
ARTICLES OF INCORPORATION
I
NAME, HEAD OFFICE, OBJECT AND DURATION
CLAUSE 1. The company's name shall be TVA SUL PARANA LTDA.
CLAUSE 2. The company's principal place of business and venue are located in
Curitiba/PR, at Rua Martha Kateiva de Oliveira, 49.
Sole Paragraph. The Company's Board of Directors may open and close
branches and offices anywhere in the Brazilian territory.
CLAUSE 3. The Company's objects are: (a) the exploitation, distribution,
transmission, radio links and operation of cable television services; the supply
of television signals by satellite repetition; production, distribution, import
and export of television programs; import of equipment and replacement parts,
for its own use; performance of other services related to television program
signal transmission, reception and distribution; exploitation of advertising in
all its formats, implications and modes; and participation in other
corporations.
CLAUSE 4. The Company has an indeterminate term of duration.
- 2 -
<PAGE>
II
CAPITAL STOCK
CLAUSE 5. The capital stock is R$19,121,518.05 (nineteen million one hundred and
twenty-one thousand five hundred and eighteen Reais and five cents) divided into
27,712,345 (twenty-seven million seven hundred and twelve thousand three hundred
and forty-five) quotas, in the par value of R$0.69 (sixty nine cents of one
Real) each, fully subscribed and paid up in Brazilian currency, distributed as
follows among the partners:
Partners Quotas Value R$
TVA - Sul Participacoes S.A. 27,712,344 19,121,517.36
Leonardo Petrelli Neto 1 0.69
Total 27,712,345 19,121,518.05
Sole Paragraph. The partners' liability is limited, pursuant to the law,
to the full amount of capital stock.
III
MANAGEMENT
CLAUSE 6. The company shall be managed by the quotaholders who will delegate
their management powers to three (03) representatives who will remain in office
for an indeterminate term and in the capacity of Directors shall have full
powers to carry on the company's business.
CLAUSE 7. The Company shall be represented:
(a) by two Directors jointly, in acts, agreements and documents which
represent a liability for the Company or a waiver of rights by the latter and in
the acts for the disposal or encumbrance of assets. When such acts, taken
separately, represent an amount in excess of R$100,000.00 (one hundred thousand
Reais) one of the signatures must be by the Director Leonardo Petrelli Neto.
(b) severally, by one Director or one attorney-in-fact with special powers
in the performance of day-to-day activities, forwarding of mail, issue of
receipts and endorsement of checks for deposit in the company's bank accounts.
Paragraph 1. The appointment of attorneys-in-fact will require the joint
signature of two Directors and the respective powers-of-attorney will
specifically list the acts they may
- 3 -
<PAGE>
perform. With the exception of those which grant the powers of the "ad judicia"
clause, all the other powers-of-attorney granted by the Company will have a
limited term of validity.
Paragraph 2. The Directors are barred from using the company name in third
party guarantees and business alien to the company's interest or acts which
imply an act of graciousness.
Paragraph 3. The Directors are exempt from granting collateral and will be
entitled to monthly compensation, under the heading of pro labore, determined by
the quotaholders.
IV
ASSIGNMENT OR TRANSFER OF QUOTAS
CLAUSE 8. None of the partners may fully or partly assign its quotas to third
parties, without firstly offering them in writing, at least thirty days in
advance, to the other partner which, under equal conditions, will have a right
of first refusal to purchase them.
Paragraph 1. The assignment will be preceded by a notice with a written
offer to purchase by third parties in good faith, in order for the other partner
to exercise its right of first refusal within thirty days, if it wishes to do
so.
Paragraph 2. Should the right of first refusal fail to be exercised, the
notifying partner may assign its quotas to the interested third parties within
ten days and subject to the conditions set forth in the notice; any assignment
beyond said ten day time limit and in disagreement with the initial offer will
be null and void.
Paragraph 3. The assignment of the company's quotas which imply a transfer of
the company's controlling power will be subject to prior authorization by the
Ministry of Communications.
V
AMENDMENT TO THE ARTICLES OF INCORPORATION,
DISSOLUTION AND LIQUIDATION
CLAUSE 9. Any amendment to these articles requires the prior consent of
controlling quotaholders.
CLAUSE 10. In the event of bankruptcy, death, incapacity, exclusion or removal
of one of the partners, the Company will not be dissolved. In any of these
events, the assets of the bankrupt, deceased, incapacitated, excluded or removed
partner will be ascertained on the basis of a special balance sheet and paid to
the partner or its heirs in twelve (12) monthly, equal, successive installments,
accrued by interest of twelve percent (12%) per annum.
- 4 -
<PAGE>
Sole Paragraph. In the event of death or mental disability, the partner's
heirs may appoint a representative to remain in the Company, who will be
approved by the other partners.
VI
FISCAL YEAR, BALANCE SHEET AND PROFITS
CLAUSE 11. The fiscal year will end on December 31 whereupon the appropriate
financial statements will be drawn up. The company may also draw up interim
balance sheets and resolve upon the respective distribution of profits. All
resolutions on the distribution of profits will require the unanimous consent of
the quotaholders.
VII
MISCELLANEOUS PROVISIONS
CLAUSE 12. The Company, through all its quotaholders, undertakes to strictly
comply with all the laws, decrees, regulations, rules and recommendations made
by the Awarding Public Powers.
VIII
VENUE
CLAUSE 13. The parties elect the courts of the Administrative Region of
Curitiba, State of Parana, to settle any claims arising from this Charter.
5. The quotaholders appoint as directors, Messrs. Jose Augusto Pinto Moreira, a
Brazilian citizen, married, economist, bearer of ID Card RG no 2.944.700 and
enrolled with the Board of Taxpayers CIC under no 128.701.967-68, residing and
domiciled at Alameda Argentina, 406, Barueri-SP; Douglas Duran, a Brazilian
citizen, married, business administrator, residing and domiciled at Alameda das
Rosas, 444, Barueri/SP, bearer of ID Card RG no 6.702.950 and enrolled with the
Board of Taxpayers CIC under no 541.326.068- 72, and LEONARDO PETRELLI NETO, a
Brazilian citizen, married, expert in telecommunications, residing and domiciled
at Rua Clovis Bevilaqua, 420 - apt. 701, Curitiba/PR, bearer of ID Card RG no
736.678-7 and enrolled with the Board of Taxpayers CPF under no 401.596.049-15;
The partners and directors declare they are not liable for any of the crimes
provided by law which prevent them from performing commercial activities.
In witness whereof, the parties have executed this instrument in three
counterparts before two witnesses.
Curitiba, August 30, 1996
- 5 -
<PAGE>
TEVECAP S.A.
(signed by Jose Augusto P. Moreira and Claudio Cesar D'Emilio)
TVA SUL PARTICIPACOES S.A.
(signed by Jose Augusto P. Moreira and Leonardo Petrelli Neto)
(signature)
LEONARDO PETRELLI NETO
Witnesses:
(signed by Leila Aparecida Alves and Aline Pereira Leite)
Attest:
(signed by Silvia C.L. Bernardes, OAB/SP 74.256)
BOARD OF TRADE OF THE STATE OF PARANA
I certify registration on December 05, 1996 under number
961860545
(signed by Sidmar Antonio Cavet, Secretary General)
- 6 -
<PAGE>
Exhibit 3.8
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Articles of Incorporation of TVA Alfa Cabo Ltda.
By: /s/DOUGLAS DURAN
-------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
T. SAGATTI ROGER & CIA. LTDA.
ARTICLES OF INCORPORATION
TEODOSIA SAGATTI ROGER, a Brazilian citizen, married, trader, residing and
domiciled in Foz do Iguacu, PR, at Rua Frederico Engel, no 478, Vila Yolanda,
bearer of CTPS no 56.115/00004, issued by DRT/PR and enrolled with the Board of
Taxpayers CPF under no 426.359.349/91 and VALDEMIRO SAGATI, a Brazilian citizen,
widower, trader, residing and domiciled in Curitiba, PR, at Rua Jose Taschner,
no 241, Vila Guilhermina, bearer of ID Card RG no 456.974, issued by II-PR on
September 29, 1963 and enrolled with the Board of Taxpayers CPF under no
117.833.979/34, have resolved through this private instrument to organize a
limited liability quota company which shall be governed by Laws nos 3.708 of
January 10, 1919 and 4.726 of July 14, 1965, and in the case of contingencies
not covered by same by the applicable legal provisions and by the following
clauses:
ONE. The company's name shall be T. SAGATTI ROGER & CIA. LTDA., with its
principal place of business and venue in Curitiba, at Rua Jose Taschner, no 128,
Vila Guilhermina, CEP 81500.
TWO. The company's object will be the exploitation of cable television video
lease services with retransmission of signals, placement and maintenance of
terminals and cable video electronic equipment, ancillary services to parabolic
antenna and other related services, as well as the import and export of cable
video electronic materials and equipment.
THREE. The capital stock is Cr$3,400,000.00 (three million four hundred thousand
cruzeiros) divided into 3,400 (three thousand four hundred) quotas in the par
value of Cr$1,000.00 (one thousand cruzeiros) each, hereby paid up in Brazilian
currency and distributed between the partners as follows:
PARTNERS % QUOTAS VALUE Cr$
Teodosia Sagatti Roger 90 3,060 3,060,000.00
Valdemiro Sagati 10 340 340,000.00
--- ----- -------------
TOTAL 100 3,400 3,400,000.00
FOUR. The partners declare they are not liable for any of the crimes provided by
law which would prevent them from performing commercial activities.
FIVE. The company has an indeterminate term of duration and is scheduled to
start up its activities on February 25, 1991.
<PAGE>
SIX. The partners' liability is limited to the full amount of capital stock,
pursuant to the provisions of Law 3.708/1919.
SEVEN. The company's quotas are indivisible and may not be transferred to or
disposed of under any heading to third parties without the other partner's
consent, who will have the right of first refusal, under equal conditions.
EIGHT. Corporation resolutions, even if they imply an amendment to these
articles, may be taken by the partners representing the majority of the capital
stock.
NINE. The partner who wishes to transfer his quotas will notify the other in
writing, stating the price, manner and time limit of payment, for the latter to
exercise or waive his right of first refusal, which he will do within sixty (60)
days, after which time the quotas may be freely transferred.
TEN. The fiscal year will coincide with the calendar year and at the end of each
fiscal year a Statement of Assets and Liabilities will be drawn up and revenues,
subject to the technical restrictions, will be distributed to the partners or
held as reserves in the company.
ELEVEN. The company will be managed by the partner TEODOSIA SAGATTI ROGER, who
is exempt from offering collateral and who will privately and individually use
the company's name, being barred however from employing the company's name under
any pretext and in any manner whatsoever in businesses or deals which are alien
to the corporate object, specially offering collateral, securities, endorsements
or guarantees in favor of third parties.
TWELVE. The managing partner will receive as compensation for his services to
the company a pro labore amount which will be determined by mutual agreement
within tax limits as provided in the income tax legislation.
In witness whereof, the parties hereto have executed this instrument in three
counterparts before two witnesses.
Curitiba, February 08, 1991.
(signed by Teodosia Sagatti Roger and Valdemiro Sagati)
(signed by witnesses Moacir J Stanguerlin and Valmirio Favassa)
- 2 -
<PAGE>
T. SAGATTI ROGER & CIA. LTDA.
CGC/MF No 82.429.374/0001-91
3RD AMENDMENT TO THE ARTICLES OF INCORPORATION
By this private instrument:
TEODOSIA SAGATTI ROGER, a Brazilian citizen, married, trader, residing and
domiciled in this capital city of Rua Alvaro de Andrade no 358, bearer of ID
Card RG no 56.115/00004, issued by DRT/PR and enrolled with the Board of
Taxpayers CPF under no 426.359.349/91;
VALDEMIRO SAGATTI, a Brazilian citizen, widower, trader, bearer of ID Card RG no
456.974-PR and enrolled with the Board of Taxpayers CPF under no 117.833.979/34,
residing and domiciled in this capital city at Rua Jose Taschner, no 241, Vila
Guilhermina,
sole quotaholders of the commercial corporation T. SAGATTI ROGER & CIA. LTDA., a
private law body corporate, with principal place of business in this capital
city at Rua Candido Hartmann, no 668, Bigorrilho district, having its Articles
of Incorporation duly filed with the Board of Trade at the State of Parana under
no 412.0250018-1 at the session of February 22, 1991 and its latest contractual
amendment filed under no 9.5034225.4 at the session of March 15, 1995;
and further as newly admitted partner
TVA SUL PARTICIPACOES S.A., a private law body corporate, with its principal
place of business in this capital city of Rua Martha Kateiva de Oliveira, 49 -
room 4, with its By-Laws currently being filed with the Board of Trade of the
State of Parana, herein represented by its attorney-in-fact LEONARDO PETRELLI
NETO, a Brazilian citizen, married, expert in telecommunications, bearer of ID
Card RG no 736.678-7 and enrolled with the Board of Taxpayers CPF under no
401.596.049-15, residing and domiciled at Rua Clovis Bevilaqua, 420 -
apt. 701, Curitiba/PR;
HAVE RESOLVED:
1. To change the company name to TV ALFA CABO LTDA.
2. To change the address of the company's principal place of business from Rua
Candido Hartmann, no 688 to Rua Marta Kateiva de Oliveira, no 49, in
Curitiba-PR;
3. To approve the assignment and transfer of 135.224 (one hundred and
thirty-five thousand two hundred and twenty-four) free and unencumbered quotas
by the partner Teodosia Sagatti
- 3 -
<PAGE>
Roger, whose particulars are given above, to the newly admitted partner TVA SUL
PARTICIPACOES S.A., whose particulars are given above, for the price agreed
between the parties, the Assignor granting the Assignee the fullest, most
general and unrestricted discharge, having nothing further to claim under any
heading.
4. To approve the assignment and transfer of 996 (nine hundred and ninety-six)
free and unencumbered quotas, detailed below, by the partner Valdemiro Sagatti,
whose particulars are given above, to the newly admitted partner TVA SUL
PARTICIPACOES S.A., whose particulars are given above, for the price agreed
between the parties, the Assignor granting the Assignee the fullest, most
general and unrestricted discharge, having nothing further to claim under any
heading.
5. As a result, the capital stock shall be R$278,000.00 (two hundred and
seventy-eight thousand Reais) divided into 278,000 (two hundred and
seventy-eight thousand) quotas, in the par value of R$1.00 (one Real) each,
distributed as follows between the partners:
Partners Quotas Value
Teodosia Sagatti Roger 140,743 R$ 140,743.00
Valdemiro Sagatti 1,037 R$ 1,037.00
TVA-Sul Participacoes S.A. 136,220 R$ 136,220.00
------- ---------------
TOTAL 278,000 R$ 278,000.00
6. To change the company's management and appoint the partner TVA - SUL
PARTICIPACOES S.A. which delegates its powers to its representatives Messrs.
Jose Augusto Pinto Moreira, a Brazilian citizen, married, economist, bearer of
ID Card RG no 2.944.700 and enrolled with the Board of Taxpayers CPF under no
128.701.967-68, residing and domiciled at Alameda Argentina no 406, Barueri, SP;
Douglas Duran, a Brazilian citizen, married, business administrator, bearer of
ID Card RG no 6.702.950 and enrolled with the Board of Taxpayers CIC under no
541.326.068-72, residing and domiciled at Alameda das Rosas, 444, Barueri/SP;
and Leonardo Petrelli Neto, a Brazilian citizen, married, expert in
telecommunications, bearer of ID Card no 736.678-7 and enrolled with the Board
of Taxpayers CPF under no 401.596.049- 15, residing and domiciled at Rua Clovis
Bevilaqua, 420 - apt. 701, Curitiba/PR, who shall occupy the position of Company
Directors.
7. In view of the measures approved above, as well as of other changes they
intend to make to the Articles of Incorporation, the quotaholders have resolved
to reword and restate the Articles of Incorporation, which shall henceforth be
worded as follows:
- 4 -
<PAGE>
ARTICLES OF INCORPORATION
I
NAME, HEAD OFFICE, OBJECT AND DURATION
CLAUSE 1. The company's name shall be TV ALFA CABO LTDA.
CLAUSE 2. The company's principal place of business is located at Rua Marta
Kateiva de Oliveira, no 49, in Curitiba, State of Parana.
Sole Paragraph. The Company's Board of Directors may open and close
branches and offices anywhere in the Brazilian territory.
CLAUSE 3. The Company's objects are: (a) the exploitation, distribution,
transmission, radio links and operation of special cable television services,
through the reception and processing of images, sounds, signals and data and/or
the respective generation, through community antennae, by physical means, heads,
networks, trunk system, distribution systems, user or subscriber systems, in
open or closed communities, preparation and/or placement of projects, including
on behalf or for the account of third parties, or the utilization or the
employment of any other means, systems, equipment, technical or technological
products, their equivalents or substitutes; electronic lease or further any
other means or system which technology or the state of the art might develop in
future; (b) import and export of goods, products, equipment or services,
directly or indirectly related to the corporate object, as well as the
performance of services and the representation of other domestic or foreign
corporations; and (c) participation in other corporations as partner,
shareholder, quotaholder or syndicated member.
CLAUSE 4. The Company has an indeterminate term of duration.
II
CAPITAL STOCK
CLAUSE 5. The capital stock is R$278,000.00 (two hundred and seventy-eight
thousand Reais) divided into 278,000 (two hundred and seventy-eight thousand)
quotas, in the par value of R$1.00 (one Real) each, fully subscribed and paid up
in Brazilian currency, distributed as follows between the partners:
- 5 -
<PAGE>
Partners Quotas Value
Teodosia Sagatti Roger 140,743 R$ 140,743.00
Valdemiro Sagatti 1,037 R$ 1,037.00
TVA-Sul Participacoes S.A. 136,220 R$ 136,220.00
--------- --------------
TOTAL 278,000 R$ 278,000.00
Sole Paragraph. The partners' liability is limited, pursuant to the law,
to the full amount of capital stock.
CLAUSE 6. The company shall be managed by the partner TVA Sul Participacoes
S.A., who hereby delegates its powers to representatives who shall be designated
Directors.
Paragraph 1. The Board of Directors, which is appointed for an
indeterminate term, shall be made up as follows: Jose Augusto Pinto Moreira, a
Brazilian citizen, married, economist, bearer of ID Card RG no 2.944.700 and
enrolled with the Board of Taxpayers CPF under no 128.701.967-68, residing and
domiciled at Alameda Argentina no 406, Barueri, SP; Douglas Duran, a Brazilian
citizen, married, business administrator, bearer of ID Card RG no 6.702.950 and
enrolled with the Board of Taxpayers CIC under no 541.326.068-72, residing and
domiciled at Alameda das Rosas, 444, Barueri/SP; and Leonardo Petrelli Neto, a
Brazilian citizen, married, expert in telecommunications, bearer of ID Card RG
no 736.678-7 and enrolled with the Board of Taxpayers CPF under no
401.596.049-15, residing and domiciled at Rua Clovis Bevilaqua, 420 - apt. 701,
Curitiba/PR, appointed by delegation of the partner TVA -SUL PARTICIPACOES S.A.,
who will have the powers to manage the company's business.
Paragraph 2. The Company shall be represented:
(a) by two Directors jointly, as Plaintiff or Defendant, or by one
Director jointly with one attorney-in-fact or further by two attorneys-in-fact
with special powers.
(b) severally, by one Director or one attorney-in-fact with special powers
in the performance of day-to-day activities, forwarding of mail, issue of
receipts and endorsement of checks for deposit in the company's bank accounts.
Paragraph 3. The appointment of attorneys-in-fact will require the joint
signature of two Directors and the respective powers-of-attorney will
specifically list the acts they may perform. With the exception of those which
grant the powers of the "ad judicia" clause, all the other powers-of-attorney
granted by the Company will have a limited term of validity of one year.
Paragraph 4. The Directors are barred from using the company name in third
party guarantees and business alien to the company's interest or acts which
imply an act of graciousness.
- 6 -
<PAGE>
Paragraph 5. The Directors are exempt from offering collateral and under
the heading of pro labore they will be entitled to a monthly compensation to be
determined by the quotaholders.
CLAUSE 7. None of the partners may fully or party assign its quotas to third
parties, without firstly offering them in writing, at least thirty days in
advance, to the other partner which, under equal conditions, will have a right
of first refusal to purchase them.
Paragraph 1. The assignment will be preceded by a notice with a written
offer to purchase by third parties in good faith, in order for the other partner
to exercise its right of first refusal within thirty days, if it wishes to do
so.
Paragraph 2. Should the right of first refusal fail to be exercised, the
notifying partner may assign its quotas to the interested third parties within
ten days and subject to the conditions set forth in the notice; any assignment
beyond said ten day time limit and in disagreement with the initial offer will
be null and void.
V
AMENDMENT TO THE ARTICLES OF INCORPORATION,
DISSOLUTION AND LIQUIDATION
CLAUSE 8. Any amendment to these articles requires the prior consent of all the
voting partners.
CLAUSE 9. In the event of bankruptcy, death, incapacity, exclusion or removal of
one of the partners, the Company will not be dissolved. In any of these events,
the assets of the bankrupt, deceased, incapacitated, excluded or removed partner
will be ascertained on the basis of a special balance sheet and paid to the
partner or its heirs in twelve (12) monthly, equal and successive installments,
accrued by monetary restatement at the legally permitted rate and interest of
twelve percent (12%) per annum.
Sole Paragraph. In the event of death or mental disability, the partner's
heirs may appoint a representative to remain in the Company, who will be
approved by the other partners.
- 7 -
<PAGE>
VI
FISCAL YEAR, BALANCE SHEET AND PROFITS
CLAUSE 10. The fiscal year will end on December 31 whereupon the appropriate
financial statements will be drawn up. The company may also draw up interim
balance sheets and resolve upon the respective distribution of profits. All
resolutions regarding distribution of profits require the unanimous approval of
the quotaholders.
VII
MISCELLANEOUS PROVISIONS
CLAUSE 11. The Company, through all its quotaholders, undertakes to strictly
comply with all the laws, decrees, regulations, rules and recommendations made
by the Awarding Public Powers.
VIII
VENUE
CLAUSE 14. The parties elect the courts of the Administrative Region of
Curitiba, State of Parana, to settle any claims arising from this Charter.
The undersigned partners and directors declare they are not liable for any of
the crimes provided by law which prevent them from performing commercial
activities.
In witness whereof, the parties have executed this instrument in three
counterparts before two witnesses, undertaking for themselves and their
successors to faithfully comply with its clauses.
Curitiba, March 21, 1996
(signed by Teodosia Sagatti Roger, Valdemiro Sagatti, and Leonardo Petrelli Neto
for TVA-Sul Participacoes S.A.)
(signed by Directors Jose Augusto Pinto Moreira, Douglas Duran, Leonardo
Petrelli Neto)
(signed by two witnesses)
ATTEST: (signed by Luis Carlos G. Balieiro)
- 8 -
<PAGE>
Board of Trade of the State of Parana I certify registration under no 961092297
(signed by Sidmar Antonio Cavet, Secretary General)
- 9 -
<PAGE>
Exhibit 3.9
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Articles of Incorporation of CCS Camboriu Cable
System de Telecomunicacoes Ltda.
By: /s/DOUGLAS DURAN
-------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
CCS - CAMBORIU CABLE SYSTEM DE TELECOMUNICACOES
LTDA.
ARTICLES OF INCORPORATION
NARBAL ANDRADE DE SOUZA, a Brazilian citizen, married, attorney, residing and
domiciled at Avenida Brasil no 855, Balneario Camboriu - SC, enrolled with the
Brazilian Bar Association under no OAB/SC 1805 and with the Board of Taxpayers
CPF under no 006.121.549-04; BASILE MOSCHOS, a naturalized Brazilian citizen,
legally separated, trader, residing and domiciled in Curitiba, in the State of
Parana, at Avenida Vicente Machado no 1.171, apt. 302, bearer of ID Card RG no
223.899-3, issued by II/PS and enrolled with the Board of Taxpayers CPF under no
010.372.189-49; JOAO LUIZ PIMENTEL NEIVA DE LIMA, a Brazilian citizen, married,
economist, residing and domiciled in Sao Jose dos Pinhais, State of Parana, at
Avenida Rui Barbosa no 4890, bearer of ID Card RG no 366.,479, issued by SSP/PR
and enrolled with the Board of Taxpayers CPF under no 008.645.289-49, and
FRANCISCO ARLY GEVAERD JUNIOR, a Brazilian citizen, legally separated,
industrialist, residing and domiciled in the town of Torres, in the State of Rio
Grande do Sul, at Avenida Independencia no 82, bearer of ID Card RG no 967.634,
SSP-PR and enrolled with the Board of Taxpayers CPF under no 232.226.209-97,
have mutually agreed to organize a limited liability commercial company which
shall be governed by laws no 3.708 of January 10, 1919 and 4726 of July 13, 1965
and in the event of contingencies not covered by same by the specific
legislation which governs such companies and by the following other clauses and
conditions:
CLAUSE ONE. The company shall be called CCS - CAMBORIU CABLE SYSTEM DE
TELECOMUNICACACOES LTDA., with its principal place of business and venue in the
town of Balneario Camboriu, State of Santa Catarina, at Avenida Brasil no 692,
suite 02.
CLAUSE TWO. The company's aims are the design, installation, operation and
maintenance of telecommunications and cable systems; promotion and sales of
participation quotas in audio, video and informatics systems or any other which
qualifies in this field of business.
CLAUSE THREE. The company has an indeterminate term of duration and shall start
up its activities on December 1, 1990.
CLAUSE FOUR. The capital stock is Cr$2,000,000.00 (two million cruzeiros),
divided into 2,000 (two thousand) quotas in the par value of Cr$1,000.00 (one
cruzeiro) each, hereby subscribed and paid up in Brazilian currency and
distributed as follows:
a) NARBAL ANDRADE DE SOUZA - 680 quotas totaling
Cr$680,000.00;
b) BASILE MOSCHOS - 528 quotas totaling Cr$528,000.00;
c) FRANCISCO A. GEVAERD JUNIOR - 528 quotas totaling
<PAGE>
Cr$528,000.00;
d) JOAO LUIZ P. NEIVA DE LIMA - 264 quotas totaling
Cr$264,000.00;
TOTAL - 2,000 quotas totaling Cr$2,000,000.00
CLAUSE FIVE. The quotaholders' liability is limited to the full amount of
capital stock, pursuant to the provisions of art. 2 of Law 3.708 of January 10,
1919.
CLAUSE SIX. The Company will be managed by the partners NARBAL ANDRADE DE SOUZA
and JOAO LUIZ PIMENTEL NEIVA DE LIMA, who will be responsible for all operations
and will represent the company as Plaintiff or Defendant, in or out of Court,
but will however be barred from using the Company's name in operations or
business deals which are alien to the company's object, specially granting of
collateral, sureties, endorsements or guarantees.
CLAUSE SEVEN. The company's name will be employed by its Directors exclusively
in negotiations undertaken by the company itself, signing always in pairs. Mr.
NARBAL ANDRADE DE SOUZA will be Director Superintendent and Mr. JOAO LUIZ
PIMENTEL NEIVA DE LIMA will be Administrative Director.
CLAUSE EIGHT. On December 31 of each year the balance sheet for the fiscal year
will be closed and the ascertained profits or losses will be distributed to or
borne by the quotaholders in the proportion of their stock.
Sole Paragraph. At the discretion of the quotaholders and in order to satisfy
the interests of the Company itself, all or part of the profits may be allocated
to profit reserves, subject to the provisions of Law no 6.494/76 or be put aside
as retained earnings for future allocation.
CLAUSE NINE. The Company's quotas are indivisible and may not be assigned or
transferred without the company's express consent. In the event any quotaholder
intends to sell his quotas the other quotaholders will have a right of first
refusal to purchase said quotas under equal price and conditions.
CLAUSE TEN. The company's directors will receive as compensation for the
services they perform, under the heading of pro labore, a monthly sum determined
by mutual agreement up to the tax limitations provided in the Income Tax
legislation.
CLAUSE ELEVEN. Should one of the quotaholders wish to withdraw from the company
he will notify the others in writing sixty (60) days in advance and his assets
will be reimbursed in a manner acceptable to both parties.
- 2 -
<PAGE>
CLAUSE TWELVE. The death of one of the partners will not operate to dissolve the
company and his heirs will be entitled to and liable for the rights and
obligations of the deceased. As long as their entitlement has not been divided
among them, such heirs may be represented vis-a-vis the company by one of them
duly appointed by the others.
CLAUSE THIRTEEN. Contingencies and doubts arising in connection with this
Charter will be covered or settled on the basis of Decree Law no 3.708 of
January 10, 1919 and the other applicable legal provisions.
CLAUSE FOURTEEN. The partners represent they are not liable for any of the
crimes provided by law which prevent them from operating a commercial company.
They execute this declaration for all legal purposes, acknowledging that in the
event of a misrepresentation the resulting act will be null and void before the
Trade Registry, without prejudice of the legal penalties to which he may be
subject.
CLAUSE FIFTEEN. The courts of this administrative region of the town of
Balneario Camboriu are elected to settle any claim arising herefrom.
CLAUSE SIXTEEN. The Company will have an Engineering Technical Department under
the responsibility of a Telecommunications Engineer duly enrolled with the Board
of Engineers and Architects - CREA.
In witness whereof, the parties undertake to comply with the provisions hereof
and have executed it before the two (2) undersigned witnesses in four (4)
counterparts, one of which will be filed with the Board of Trade of the State of
Santa Catarina.
Balneario Camboriu, November 23, 1990.
(signed by NARBAL ANDRADE DE SOUZA, BASILE MOSCHOS, JOAO LUIZ PIMENTEL
NEIVA DE LIMA, and FRANCISCO ARLY GEVAERD JUNIOR).
CONFORMS WITH ORIGINAL:
Date: 24 APR 1996.
(signature)
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<PAGE>
CCS - CAMBORIU CABLE SYSTEM DE TELECOMUNICACOES
LTDA.
CGS No 82.855.164/0001-65
NIRE 42201366252
6TH AMENDMENT TO THE ARTICLES OF INCORPORATION
By this private instrument:
NARBAL ANDRADE DE SOUZA, a Brazilian citizen, married, trader, residing and
domiciled at Avenida Brasil no 855, Balneario Camboriu - SC, enrolled with the
Brazilian Bar Association under no OAB/SC 1805 and with the Board of Taxpayers
CPF under no 006.121.549-04;
NARBAL BUSATO DE SOUZA, a Brazilian citizen, bachelor, of age, attorney,
residing and domiciled at Avenida Brasil no 855, Balneario Camboriu - SC, ID
Card RG no 4/R 2.552.728/SC and enrolled with the Board of Taxpayers CPF under
no 817.717.209-30;
CONSTRUTORA ENE ESSE LTDA., a private law body corporate enrolled with the Board
of Taxpayers CGC/MF under no 83.500.041.0001-74, having its articles of
incorporation filed with the Board of Trade of Santa Catarina under no
422.0044899.9, with its principal place of business at Avenida do Estado, no
1.555, in Balneario Camboriu-SC;
sole quotaholders of the limited liability quota company CCS - Camboriu Calbe
System de Telecomunicacoes Ltda., with its principal place of business at Av.
Brasil 802, Balneario Camboriu/SC, enrolled with the Board of Taxpayers CGC/MF
under no 82.855.164/0001-65, having its Articles of Incorporation filed with the
Board of Trade of the State of Santa Catarina under no 42201366252, at the
session of November 22, 1990 and its latest contractual amendment filed under no
(void), at the session of (void)
and further as newly admitted partner
TVA SUL PARTICIPACOES S.A., a private law body corporate, with its principal
place of business in this capital city at Rua Martha Kateiva de Oliveira, 49 -
room 4, having its By-Laws filed with the Board of Trade of the State of Parana,
NIRE no 41300063451 of March 28, 1996, pending enrollment with the Board of
Taxpayers (CGCMF), herein represented by its Directors Leonardo Petrelli Neto, a
Brazilian citizen, married, expert in telecommunications, residing and domiciled
at Rua Clovis Bevilaqua, 420 - apt. 701, Curitiba/PR, ID Card RG no 736.678-7
and enrolled with the Board of Taxpayers CPF under no 401.596.049-15 and Douglas
Duran, a Brazilian citizen, married, business administrator, residing and
domiciled at Alameda das Rosas, 444, Barueri/SP, ID Card RG no 6.702.950 and
enrolled with the Board of Taxpayers CIC under no 541.326.068-72.
<PAGE>
HAVE RESOLVED:
1. To approve the assignment and transfer of 625,826 (six hundred and
twenty-five thousand eight hundred and twenty-six) free and unencumbered quotas
by the partner Narbal Andrade de Souza, whose particulars are given above, to
Construtora Ene Esse Ltda., whose particulars are given above, for the price
agreed between the parties, the Assignor granting the Assignee the fullest, most
general and unrestricted discharge, having nothing further to claim under any
heading.
2. To approve the assignment and transfer of 268.211 (two hundred and
sixty-eight thousand two hundred and eleven) free and unencumbered quotas by the
partner Narbal Busator de Souza, whose particulars are given above, to
Construtora Ene Esse Ltda., whose particulars are given above, for the price
agreed between the parties, the Assignor granting the Assignee the fullest, most
general and unrestricted discharge, having nothing further to claim under any
heading.
3. To approve the assignment and transfer of 2,910,000 (two million nine hundred
and ten thousand) free and unencumbered quotas by the partner Construtora Ene
Esse ltda., whose particulars are given above, to TVA Sul Participacoes S.A.,
whose particulars are given above, for the price agreed between the parties, the
Assignor granting the Assignee the fullest, most general and unrestricted
discharge, having nothing further to claim under any heading.
4. As a result, the capital stock shall be R$4,850,000.00 (four million eight
hundred and fifty thousand Reais) divided into 4,850,000 (four million eight
hundred and fifty thousand) quotas, in the part value of R$1.00 (one Real) each,
fully subscribed and paid up in Brazilian currency, distributed as follows
between the partners:
Partners Quotas Value R$
Construtora Ene Esse Ltda. 1,940,000 1,940,000.00
TVA Sul Participacoes S.A. 2,910,000 2,910,000.00
5. To change the company's management, which shall be managed by a Board of
Directors consisting of three members, appointed by delegation of the partners,
two of which shall be appointed by the partner TVA Sul Participacoes S/A, which
delegates its powers to Messrs. Douglas Duran and Leonardo Petrelli Neto and the
remaining position of Director to be occupied by the partner Construtora Ene
Esse Ltda., represented by Narbal Andrade de Souza.
6. In view of the measures approved above, as well as of other changes they
intend to make to the Articles of Incorporation, the quotaholders have resolved
to reword and restate the Articles of Incorporation, which shall henceforth be
worded as follows:
ARTICLES OF INCORPORATION
I
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<PAGE>
NAME, HEAD OFFICE, OBJECT AND DURATION
CLAUSE 1. The company's name shall be CCS - CAMBORIU CABLE SYSTEM DE
TELECOMUNICACOES LTDA.
CLAUSE 2. The company's principal place of business is located at Avenida
Brasil, no 802, Balneario Camboriu, State of Santa Catarina.
Sole Paragraph. The Company's Board of Directors may open and close
branches and offices anywhere in the Brazilian territory.
CLAUSE 3. The Company's objects are: (a) the exploitation, distribution,
transmission, radio links and operation of special cable television services,
through the reception and processing of images, sounds, signals and data and/or
the respective generation, through community antennae, by physical means, heads,
networks, trunk system, distribution systems, user or subscriber systems, in
open or closed communities, preparation and/or placement of projects, including
on behalf or for the account of third parties, or the utilization or the
employment of any other means, systems, equipment, technical or technological
products, their equivalents or substitutes; electronic lease or further any
other means or system which technology or the state of the art might develop in
future; (b) import and export of goods, products, equipment or services,
directly or indirectly related to the corporate object, as well as the
performance of services and the representation of other domestic or foreign
corporations; and (c) participation in other corporations as partner,
shareholder, quotaholder or syndicated member.
CLAUSE 4. The Company has an indeterminate term of duration.
II
CAPITAL STOCK
CLAUSE 5. The capital stock is R$4,850,000.00 (four million eight hundred and
fifty thousand Reais) divided into 4,850,000 (four million eight hundred and
fifty thousand) quotas, in the par value of R$1.00 (one Real) each, fully
subscribed and paid up in Brazilian currency, distributed as follows between the
partners:
Partners Quotas Value R$
Construtora Ene Esse Ltda. 1,940,000 1,940,000.00
TVA Sul Participacoes S.A. 2,910,000 2,910,000.00
Total 4,850,000 4,850,000.00
Sole Paragraph. The partners' liability is limited, pursuant to the law,
to the full amount of capital stock.
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<PAGE>
CLAUSE 6. The partners will pay up capital, according to additional cash
requirements, in the proportion of their stockholdings. Failure to fully or
partly pay up a given amount by one partner will entitle the other partner to
pay up the missing portion, with the consequent dilution of the other non-paying
partner's holdings. In the event of disagreement as regards the need for
additional capital, the partners agree to a commitment clause whereby they will
necessarily and legally submit themselves to arbitration, expressly waiving the
procurement of a solution by court proceedings.
Paragraph 1. The partners hereby mutually appoint as arbitrator the
Auditing Firm Coopers & Lybrand, taxpayer's enrollment CGC no
44.038.248/0001-17, with its principal place of business at Sao Paulo, and as
Deputy the company Price Waterhouse, taxpayer's enrollment CGC no
61.562.112/0001-20, with its principal place of business at Sao Paulo, which
shall submit, at the individual or joint request of the partners, its
arbitration report within fifteen days, indicating its decision as regards the
need and justification for the capital injection.
Paragraph 2. The arbitration ruling shall be final and conclusive and the
arbitrator shall be authorized to decide by equity, which decision shall be
entirely accepted by the partners as definitive and enforced without recourse to
the Judiciary Power, thus resulting in specific enforcement pursuant to the
provisions of article 641 of the Code of Civil Procedure.
Paragraph 3. Should one of the partners file a claim in Court against the
other partner without subjecting itself to the arbitration commitment provided
in this clause, it will be forced to pay to the other partner the predetermined
contractual fine of ten percent of the value of its participation in the Capital
Stock.
Paragraph 4. The Company shall be liable for the payment of arbitration
fees and expenses.
III
MANAGEMENT
CLAUSE 7. The Company shall be managed by the partner TVA Sul Participacoes
S.A., who hereby delegates its powers to representatives who shall be designated
Directors.
Paragraph 1. The Board of Directors, which is appointed for an
indeterminate term, shall be made up as follows:
Douglas Duran, a Brazilian citizen, married, business administrator, residing
and domiciled at Alameda das Rosas, 444, Barueri/SP, ID Card RG no 6.702.950 and
enrolled with the Board of Taxpayers CIC under no 541.326.068-72 and Leonardo
Petrelli Neto, whose particulars are given above, appointed by delegation of the
partner TVA Sul Participacoes S.A. and Narbal Andrade de Souza, a Brazilian
citizen, married, trader, residing and domiciled at Avenida Basil no 855,
Balneario Camboriu - SC, enrolled with the Brazilian Bar Association under no
OAB/SC
- 7 -
<PAGE>
1805 and with the Board of Taxpayers CPF under no 006.121.549-04, appointed by
delegation of the partner Construtora Ene Esse Ltda., who will have general
powers to manage the corporate business.
Paragraph 2. The Company shall be represented:
(a) by two directors jointly, as Plaintiff or Defendant, or by one
Director jointly with one attorney-in-fact or further by two attorneys-in-fact
with special powers.
(b) severally, by one Director or one attorney-in-fact with special powers
in the performance of day-to-day activities, forwarding of mail, issue of
receipts and endorsement of checks for deposit in the company's bank accounts.
Paragraph 3. The appointment of attorneys-in-fact will require the joint
signature of two Directors and the respective powers-of-attorney will
specifically list the acts they may perform. With the exception of those which
grant the powers of the "ad judicia" clause, all the other powers-of-attorney
granted by the Company will have a limited term of validity of one year.
Paragraph 4. The Directors are barred from using the company name in third
party guarantees and business alien to the company's interest or acts which
imply an act of graciousness.
Paragraph 5. The Directors are exempt from offering collateral and under
the heading of pro labore they will be entitled to a monthly compensation to be
determined by the quotaholders.
IV
ASSIGNMENT OR TRANSFER OF QUOTAS
CLAUSE 8. Neither partner may fully or partly assign its quotas to third
parties, without firstly offering them in writing, at least thirty days in
advance, to the other partner which, under equal conditions, will have a right
of first refusal to purchase them.
Paragraph 1. The assignment will be preceded by a notice with a written
offer to purchase by third parties in good faith, in order for the other partner
to exercise its right of first refusal within thirty days, if it wishes to do
so.
Paragraph 2. Should the right of first refusal fail to be exercised, the
notifying partner may assign its quotas to the interested third parties within
ten days and subject to the conditions set forth in the notice; any assignment
beyond said ten day time limit and in disagreement with the initial offer will
be null and void.
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<PAGE>
Paragraph 3. The assignment of the company's quotas which imply a transfer
of the company's controlling power will be subject to prior authorization by the
Ministry of Communications.
V
AMENDMENT TO THE ARTICLES OF INCORPORATION,
DISSOLUTION AND LIQUIDATION
CLAUSE 9. Any amendment to these articles requires the prior consent of all the
partners. The consent of the defeated partner in an arbitration ruling in
connection with an amendment to the Articles of Incorporation for capital
increase, acknowledged by the arbitration court, will not be required.
CLAUSE 10. In the event of bankruptcy, death, incapacity, exclusion or removal
of one of the partners, the Company will not be dissolved. In any of these
events, the assets of the bankrupt, deceased, incapacitated, excluded or removed
partner will be ascertained on the basis of a special balance sheet and paid to
the partner or its heirs in twelve (12) monthly, equal and successive
installments, accrued by interest of twelve percent (12%) per annum.
Sole Paragraph. In the event of death or mental disability, the partner's
heirs may appoint a representative to remain in the Company, who will be
approved by the other partners.
VI
FISCAL YEAR, BALANCE SHEET AND PROFITS
CLAUSE 11. The fiscal year will end on December 31 whereupon the appropriate
financial statements will be drawn up. The company may also draw up interim
balance sheets and resolve upon the respective distribution of profits. All
resolutions regarding distribution of profits require the unanimous approval of
the quotaholders.
VII
MISCELLANEOUS PROVISIONS
CLAUSE 12. In the event of civil, labor, commercial, tax or other contingencies,
resulting from procedures adopted by the previous management and therefore prior
to the date of this contractual amendment, the full amount of the contingency
will be paid as follows:
a) fully by the partner Construtora Ene Esse Ltda.
b) the Company may pay the full amount and book a credit against the
partner Construtora Ene Esse Ltda. until the next fiscal year closing date and
profit distribution, at which time the Company will hold the portion
corresponding to said partner to settle its credit; or
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<PAGE>
c) in the event there are no distributable profits for the period, TVA Sul
Participacoes S.A. will pay the full amount of the contingency which will be
immediately construed as a capital increase in its name, with the consequent
dilution of the other partner's stockholdings.
CLAUSE 13. The Company, through all its quotaholders, undertakes to strictly
comply with all the laws, decrees, regulations, rules and recommendations made
by the Awarding Public Powers.
VIII
VENUE
CLAUSE 14. The parties elect the courts of the Administrative Region of
Balneario Camboriu, State of Santa Catarina, to settle any claims arising from
this Charter.
The undersigned partners and directors declare they are not liable for any of
the crimes provided by law which prevent them from performing commercial
activities.
In witness whereof, the parties have executed this instrument in three
counterparts before two witnesses.
Balnario Camboriu
(singed by Narbal Andrade de Souza, Narbal Busato de Souza, Construtora Ene Esse
Ltda., Douglas Duran and Leonardo Petrelli Neto for TVA Sul Participacoes S.A.)
(signed by Directors Douglas Duran, Leonardo Petrelli Neto and Narbal Andrade de
Souza)
(signed by two witnesses)
(copy duly certified by the 11th Registry Office of Deeds of Sao Paulo)
- 10 -
<PAGE>
Exhibit 3.10
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Articles of Incorporation of TCC TV a Cabo Ltda.
By: /s/DOUGLAS DURAN
-------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
ARTICLES OF INCORPORATION
ALBERTO CHICON MARTIN, a Brazilian citizen, legally separated, trader, residing
and domiciled at Rua Gal. Aristides Athaide Junior no 1.355, apt. 1.501,
District of Champagnat, in Curitiba, State of Parana, bearer of ID Card RG
792.456-9-PR and enrolled with the Board of Taxpayers CPF under no
161.133.309-15; MANUEL LOPEZ PICHEL, a Brazilian citizen, married, trader,
residing and domiciled at Rua Salustiano Cordeiro no 21, District of Agua Verde,
in Curitiba, State of Parana, bearer of ID Card RG 1.236.535-7 -PR and enrolled
with the Board of Taxpayers CPF under no 359.142.039-53 and SUNG JOON MOON, a
naturalized Brazilian citizen, married, trader, residing and domiciled at Rua
Des. Otavio do Amaral no 109, Merces, in Curitiba, State of Parana, bearer of ID
Card RG 3.626.250-PR and enrolled with the Board of Taxpayers CPF under no
007.040.948-00, HAVE RESOLVED through this private instrument of agreement, to
organize a limited liability commercial company, which shall be governed by Laws
no 3.708 of January 10, 1919 and 4.726 of July 13, 1965, by the other applicable
legal provisions and by the following clauses:
CLAUSE ONE. The company's name shall be TCC TV A CABO LTDA., with
principal place of business and venue in Curitiba, State of Parana, at Av. Nossa
Senhora Aparecida no 381, suite 02, District of Seminario.
CLAUSE TWO. The company's objects are to trade in Antennae, Video Films, Video
Disks and Video Games, the Performance of Cable Transmission Services, Placement
of Community Antennae and everything related to the Transmission, Distribution,
Radio Link, Reception and Processing of Images, Sounds, Signals and Data via
Cable, Optical Fiber or any other equivalent or substitute product and
technology. The company's objects also include the leasing of Video films, Video
Disks and Video Games under the conventional system and the system known as
Pay-Per-View, or electronic lease, or further any other system or technology
which may be developed in future.
CLAUSE THREE. The company has an indeterminate term of duration and will start
up its activities on February 1, 1991.
CLAUSE FOUR. The fully subscribed and paid up capital stock, as provided herein,
is Cr$2,100,000.00 (two million one hundred thousand cruzeiros), divided into
2,100,000 (two million one hundred thousand) quotas of Cr$1.00 (one cruzeiro)
each, distributed as follows among the partners:
1 - ALBERTO CHICON MARTIN hereby subscribes 700,000 (seven hundred thousand)
quotas in the amount of Cr$700,000.00 (seven hundred thousand cruzeiros),
Cr$100,000.00 (One hundred thousand cruzeiros) of which are paid up in Brazilian
currency and the remaining
<PAGE>
Cr$600,000-00 (six hundred thousand cruzeiros) will be paid up in six (06) equal
installments, the first of which will mature in March 1991, in currency.
2 - MANUEL LOPEZ PICHEL, hereby subscribes 700,000 (seven hundred thousand)
quotas in the amount of Cr$700,000.00 (seven hundred thousand cruzeiros),
Cr$100,000.00 (One hundred thousand cruzeiros) of which are paid up in Brazilian
currency and the remaining Cr$600,000.00 (six hundred thousand cruzeiros) will
be paid up in six (06) equal installments, the first of which will mature in
March 1991, in currency.
3 - SUNG JOON MOON, hereby subscribes 700,000 (seven hundred thousand) quotas in
the amount of Cr$700,000.00 (seven hundred thousand cruzeiros), Cr$100,000.00
(One hundred thousand cruzeiros) of which are paid up in Brazilian currency and
the remaining Cr$600,000.00 (six hundred thousand cruzeiros) will be paid up in
six (06) equal installments, the first of which will mature in March 1991, in
currency.
CLAUSE FIVE. The liability of the partners is limited to the full amount of the
capital stock, pursuant to the provisions of article 2 of Law 3.708 of January
10, 1919.
CLAUSE SIX. Company resolutions, even if they result in contractual amendments,
may be taken by the partners representing the absolute majority of the capital
stock, as permitted by article 62, paragraph 2, of Decree no 57.651, of January
19, 1966.
CLAUSE SEVEN. The Company's quotas are indivisible and may not be transferred or
disposed of to third parties without the unanimous consent of the remaining
partners, who will have the right of first refusal in their purchase.
CLAUSE EIGHT. The partner wishing to transfer his quotas will notify the company
in writing, stating the price, manner and time limit of payment, to allow the
remaining partners to exercise or waive their right of first refusal within
thirty days as of the receipt of the notice or within a longer period of time at
the discretion of the offering quotaholder. Once this time limit has elapsed
without the exercise of the right of first refusal, the quotas may be freely
transferred.
CLAUSE NINE. The company shall be managed by one partner in the capacity of
manager, who will use the company's name and represent it as Plaintiff or
Defendant, in or out of Court, being barred however from employing the company's
name under any heading or in any manner whatsoever in operations or businesses
which are alien to the corporate object, specially the granting of collateral,
securities, endorsements or guarantees in favor of third parties.
CLAUSE TEN. As compensation for the services performed for the company the
partners will receive in the manner of Pro Labore a monthly amount mutually
determined,
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<PAGE>
subject to the tax limitations provided in the income tax legislation, which
amount will be booked to administrative expenses.
CLAUSE ELEVEN. The partner ALBERTO CHICON MARTIN is hereby appointed manager and
is exempt from offering collateral.
CLAUSE TWELVE. The fiscal year will coincide with the calendar year and on
December 31 of each year the company's balance sheet will be drawn up, subject
to the applicable legal and technical limitations. Revenues shall be shared by
the partners in the proportion of their quotas and profits may, at the criteria
of the partners, be distributed or set aside as reserves.
CLAUSE THIRTEEN. The partners declare they are not liable for any of the crimes
provided by law which might prevent them from performing commercial activities.
CLAUSE FOURTEEN. The death of any partner will not necessarily dissolve the
company. The heirs and successors of the deceased partner will be vested in his
rights and obligations and may be represented, as long as their share remains
undivided, by one of them duly appointed by the others.
PARAGRAPH ONE. Once the assets of the deceased have been ascertained in a
balance sheet, they will be paid in ten (10) equal installments, the first of
which will mature thirty days after the court order which allows for the
perfection of the operation, also before the Registry of Trade, has been
submitted to the Company.
PARAGRAPH TWO. By mutual consent among the partners and heirs other payment
conditions may however be agreed, as long as they do not affect the company's
economic and financial condition.
PARAGRAPH THREE. By agreement of the surviving partners, the heirs may be
admitted to the company as long as there is no impediment as far as their legal
capacity is concerned.
In witness whereof, the parties have drawn up, dated and signed this instrument
together with two witnesses, in three counterparts duly initialled overleaf, the
provisions of which they undertake to comply with by themselves and their heirs.
Curitiba, January 20, 1991.
(signed by Alberto Chicon Martin, Manuel Lopez Pichel and Sung Joon Moon)
(signed by Witnesses)
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<PAGE>
TCC TV A CABO LTDA.
CGC/MF No 82.409.962/0001-63
6TH AMENDMENT TO THE ARTICLES OF INCORPORATION
By this private instrument:
MYONG JAE HAN, a naturalized Brazilian citizen, married, businessman, residing
and domiciled at Rua Saldanha Marinho, no 1971, bearer of ID Card RG
2.058.385-1/PR and enrolled with the Board of Taxpayers CPF under no
278.169.409-63;
SUNG JOON MOON, a naturalized Brazilian citizen, legally separated, trader,
bearer of ID Card RG 3.626.250-PR and enrolled with the Board of Taxpayers CPF
under no 007.040.948- 00, residing and domiciled in this capital city at Rua
otavio do Amaral, no 109;
sole quotaholders of the commercial corporation TCC TV A CABO LTDA. a private
law body corporate, with principal place of business in this capital city at Rua
Benjamin Lins, no 761, having its Articles of Incorporation duly filed with the
Board of Trade of the State of Parana under no 412.0249038 at the session of
January 31, 1991 and its latest contractual amendment filed under no 9.5058141-0
at the session of May 8, 1995
and further as newly admitted partner
TVA SUL PARTICIPACOES S.A., a private law body corporate, with its principal
place of business in this capital city at Rua Martha Kateiva de Oliveira, 49 -
room 4, with its By-Laws currently being filed with the Board of Trade of the
State of Parana, herein represented by its attorney-in-fact LEONARDO PETRELLI
NETO, a Brazilian citizen, married, expert in telecommunications, bearer of ID
Card RG no 736.678-7 and enrolled with the Board of Taxpayers CPF under no
401.596.049-15, residing and domiciled in this capital city at Rua Clovis
Bevilaqua, 420 - apt. 701;
HAVE RESOLVED:
1. To approve the assignment and transfer of 61,250 (sixty-one thousand two
hundred and fifty) free and unencumbered quotas by the partner Myong Jae Han,
whose particulars are given above, to the newly admitted partner TVA SUL
PARTICIPACOES S.A., whose particulars are given above, for the price agreed
between the parties, the Assignor granting the Assignee the fullest, most
general and unrestricted discharge, having nothing further to claim under any
heading.
2. To approve the assignment and transfer of 61,250 (sixty-one thousand two
hundred and fifty) free and unencumbered quotas, detailed below, by the partner
Sung Joon Moon, whose
<PAGE>
particulars are given above, to the newly admitted partner TVA SUL PARTICIPACOES
S.A., whose particulars are given above, for the price agreed between the
parties, the Assignor granting the Assignee the fullest, most general and
unrestricted discharge, having nothing further to claim under any heading.
3. As a result, the capital stock shall be R$250,000.00 (two hundred and fifty
thousand Reais) divided into 250,000 (two hundred and fifty thousand) quotas, in
the par value of R$1.00 (one Real) each, distributed as follows among the
partners:
Partners Quotas Value R$
MYONG JAE HAN 63,750 R$ 63.750.00
SUNG JOON MOON 63,750 R$ 63,750.00
TVA-Sul Participacoes S.A. 122,500 R$122,500.00
------- -----------
TOTAL 250,000 R$250,000.00
4. To change the company's management and appoint the partner TVA - SUL
PARTICIPACOES S.A. which delegates its powers to its representatives Messrs.
Jose Augusto Pinto Moreira, a Brazilian citizen, married, economist, bearer of
ID Card RG no 2.944.700 and enrolled with the Board of Taxpayers CPF under no
128.701.967-68, residing and domiciled at Alameda Argentina no 406, Barueri, SP;
Douglas Duran, a Brazilian citizen, married, business administrator, bearer of
ID Card RG no 6.702.950 and enrolled with the Board of Taxpayers CIC under no
541.326.068-72, residing and domiciled at Alameda das Rosas, 444, Barueri/SP;
and Leonardo Petrelli Neto, a Brazilian citizen, married, expert in
telecommunications, bearer of ID Card RG no 736.678-7 and enrolled with the
Board of Taxpayers CPF under no 401.596.049-15, residing and domiciled at Rua
Clovis Bevilaqua, 420 - apt. 701, Curitiba/PR, who shall occupy the position of
Company Directors
5. In view of the measures approved above, as well as of other changes they
intend to make to the Articles of Incorporation, the quotaholders have resolved
to reword and restate the Articles of Incorporation, which shall henceforth be
worded as follows:
ARTICLES OF INCORPORATION
I
NAME, HEAD OFFICE, OBJECT AND DURATION
CLAUSE 1. The company's name shall be TCC TV A CABO LTDA.
CLAUSE 2. The company's principal place of business is located at Rua Benjamin
Lins, no 761, in Curitiba, State of Parana.
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<PAGE>
Sole Paragraph. The Company's Board of Directors may open and close
branches and offices anywhere in the Brazilian territory.
CLAUSE 3. The Company's objects are: (a) the exploitation, distribution,
transmission, radio links and operation of special cable television services,
through the reception and processing of images, sounds, signals and data and/or
the respective generation, through community antennae, by physical means, heads,
networks, trunk system, distribution systems, user or subscriber systems, in
open or closed communities, preparation and/or placement of projects, including
on behalf or for the account of third parties, or the utilization or the
employment of any other means, systems, equipment, technical or technological
products, their equivalents or substitutes; electronic lease or further any
other means or system which technology or the state of the art might develop in
future; (b) import and export of goods, products, equipment or services,
directly or indirectly related to the corporate object, as well as the
performance of services and the representation of other domestic or foreign
corporations; and (c) participation in other corporations as partner,
shareholder, quotaholder or syndicated member.
CLAUSE 4. The Company has an indeterminate term of duration.
II
CAPITAL STOCK
CLAUSE 5. The capital stock is R$R$250,000.00 (two hundred and fifty thousand
Reais) divided into 250,000 (two hundred and fifty thousand) quotas, in the par
value of R$1.00 (one Real) each, fully subscribed and paid up in Brazilian
currency, distributed as follows among the partners:
Partners Quotas Value R$
MYONG JAE HAN 63,750 R$ 63.750.00
SUNG JOON MOON 63,750 R$ 63,750.00
TVA-Sul Participacoes S.A. 122,500 R$122,500.00
------- -----------
TOTAL 250,000 R$250,000.00
Sole Paragraph. The partners' liability is limited, pursuant to the law,
to the full amount of capital stock.
III
MANAGEMENT
CLAUSE 6. The company shall be managed by the partner TVA Sul Participacoes
S.A., who hereby delegates its powers to representatives who shall be designated
Directors.
- 3 -
<PAGE>
Paragraph 1. The Board of Directors, which is appointed for an
indeterminate term, shall be made up as follows: Jose Augusto Pinto Moreira, a
Brazilian citizen, married, economist, bearer of ID Card RG no 2.944.700 and
enrolled with the Board of Taxpayers CPF under no 128.701.967-68, residing and
domiciled at Alameda Argentina no 406, Barueri, SP; Douglas Duran, a Brazilian
citizen, married, business administrator, bearer of ID Card RG no 6.702.950 and
enrolled with the Board of Taxpayers CIC under no 541.326.068-72, residing and
domiciled at Alameda das Rosas, 444 Barueri/SP; and Leonardo Petrelli Neto, a
Brazilian citizen, married, expert in telecommunications, bearer of ID Card RG
no 736.678-7 and enrolled with the Board of Taxpayers CPF under no
401.596.049-15, residing and domiciled at Rua Clovis Bevilaqua, 420 - apt. 701,
Curitiba/PR, appointed by delegation of the partner TVA - SUL PARTICIPACOES
S.A., who will have the powers to manage the company's business.
Paragraph 2. The Company shall be represented:
(a) by two Directors jointly, as Plaintiff or Defendant, or by one
Director jointly with one attorney-in-fact or further by two attorneys-in-fact
with special powers.
(b) severally, by one Director or one attorney-in-fact with special powers
in the performance of day-to-day activities, forwarding of mail, issue of
receipts and endorsement of checks for deposit in the company's bank accounts.
Paragraph 3. The appointment of attorneys-in-fact will require the joint
signature of two Directors and the respective powers-of-attorney will
specifically list the acts they may perform. With the exception of those which
grant the powers of the "ad judicia" clause, all the other powers-of-attorney
granted by the Company will have a limited term of validity of one year.
Paragraph 4. The Directors are barred from using the company name in third
party guarantees and business alien to the company's interest or acts which
imply an act of graciousness.
Paragraph 5. The Directors are exempt from offering collateral and under
the heading of pro labore they will be entitled to a monthly compensation to be
determined by the quotaholders.
CLAUSE 7. None of the partners may fully or partly assign its quotas to third
parties, without firstly offering them in writing, at least thirty days in
advance, to the other partner which, under equal conditions, will have a right
of first refusal to purchase them.
Paragraph 1. The assignment will be preceded by a notice with a written
offer to purchase by third parties in good faith, in order for the other partner
to exercise its right of first refusal within thirty days, if it wishes to do
so.
- 4 -
<PAGE>
Paragraph 2. Should the right of first refusal fail to be exercised, the
notifying partner may assign its quotas to the interested third parties within
ten days and subject to the conditions set forth in the notice; any assignment
beyond said ten day time limit and in disagreement with the initial offer will
be null and void.
Paragraph 3. The assignment of the company's quotas which imply a transfer
of the company's controlling power will be subject to prior authorization by the
Ministry of Communications.
V
AMENDMENT TO THE ARTICLES OF INCORPORATION,
DISSOLUTION AND LIQUIDATION
CLAUSE 8. Any amendment to these articles requires the prior consent of all the
voting partners.
CLAUSE 9. In the event of bankruptcy, death, incapacity, exclusion or removal of
one of the partners, the Company will not be dissolved. In any of these events,
the assets of the bankrupt, deceased, incapacitated, excluded or removed partner
will be ascertained on the basis of a special balance sheet and paid to the
partner or its heirs in twelve (12) monthly, equal and successive installments,
accrued by monetary restatement at the legally permitted rate and interest of
twelve percent (12%) per annum.
Sole Paragraph. In the event of death or mental disability, the partner's
heirs may appoint a representative to remain in the Company, who will be
approved by the other partners.
VI
FISCAL YEAR, BALANCE SHEET AND PROFITS
CLAUSE 10. The fiscal year will end on December 31 whereupon the appropriate
financial statements will be drawn up. The company may also draw up interim
balance sheets and resolve upon the respective distribution of profits. All
resolutions regarding distribution of profits require the unanimous approval of
the quotaholders.
VII
MISCELLANEOUS PROVISIONS
CLAUSE 11. The Company, through all its quotaholders, undertakes to strictly
comply with all the laws, decrees, regulations, rules and recommendations made
by the Awarding Public Powers.
- 5 -
<PAGE>
VIII
VENUE
CLAUSE 14. The parties elect the courts of the Administrative Region of
Curitiba, State of Parana, to settle any claims arising from this Charter.
The undersigned partners and directors declare they are not liable for any of
the crimes provided by law which prevent them from performing commercial
activities.
In witness whereof, the parties have executed this instrument in three
counterparts before two witnesses, undertaking for themselves and their
successors to faithfully comply with its clauses.
Curitiba, March 21, 1996
(signed by Myong Jae Han, Sung Joon Moon and TVA Sul Participacoes S.A.)
(signed by Directors Jose Augusto Pinto Moreira, Douglas Duran, Leonardo
Petrelli Neto)
(signed by two witnesses)
ATTEST: (signed by Cicero Jose Zanetti de Oliveira)
Board of Trade of the State of Parana I certify registration under on August 7,
1996 under no 961092300 (signed by Sidmar Antonio Cavet, Secretary General)
- 6 -
<PAGE>
Exhibit 3.11
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Articles of Incorporation of TVA Sul Foz do Iguacu
Ltda.
By: /s/DOUGLAS DURAN
-------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
TV CABO IGUACU SOCIEDADE CIVIL LIMITADA
ARTICLES OF INCORPORATION
BERENICE FONSECA NAKAD, a Brazilian citizen, married, teacher, residing and
domiciled in this town and administrative region of Foz do lguacu, State of
Parana, at Rua Minas Gerais, no 861, Vila Maracana, bearer of ID Cad RG no
759.403-PR and enrolled with the Board of Taxpayers CPF/MF under no
500.133.439-04; FLAVIO DENI FONSECA NAKAD, a Brazilian citizen, bachelor,
student, residing and domiciled in this town and administrative region of Foz do
Iguacu, State of Parana, at Rua Minas Gerais, no 861, Vila Maracana, bearer of
ID Cad RG no 4.013.086-1 and enrolled with the Board of Taxpayers CPF/MF under
no 011.098.209-68, have resolved by this private instrument of articles of
incorporation to organize a limited liability civil company which shall be
governed by Laws 3.708 of January 10, 1919 and 4.726 of July 13, 1965 and by the
following clauses and conditions:
ONE. The company's name will be TV CABO IGUACU SOCIEDADE CIVIL LIMITADA, with
its principal place of business and venue in this town and administrative region
of Foz do Iguacu, State of Parana, at Rua Minas Gerais, no 861, Vila Maracana.
TWO. The company's objects are the placement of community antennae and
performance of services on same as well as everything related to the
transmission, distribution, radio links, reception and processing of images,
sounds, signals and data via cable, microwave, optical fiber or any other
equivalent or substitute product or technology. The company's objects shall also
include leasing video films, video disks, video games through the Pay-Per-View
system or electronic lease or, further, any other system which technology might
develop in future.
THIRD. The company's capital stock shall be Cr$100,000.00 (one hundred thousand
cruzeiros) divided into 100,000 (one hundred thousand) quotas in the par value
of Cr$1.00 (one cruzeiro) each, distributed and paid up in Brazilian currency,
as follows:
A) The partner BERENICE FONSECA NAKAD hereby subscribes 51,000 (fifty-one
thousand) quotas.
B) The partner FLAVIO DENI FONSECA NAKAD hereby subscribes 49,000 (forty-
nine thousand) quotas.
FOUR. The company has an indeterminate term of duration and
may be dissolved at any time at the criteria of its quotaholders.
FIVE. The liability of the partners is limited to the capital stock, pursuant
to the provisions of Article 2 of Law 3.708 of January 10, 1919. <PAGE>
SIX. The company's quotas are indivisible and may not be transferred to or
disposed of under any heading to third parties without the consent of the other
partner, who shall have the right of first refusal under equal conditions.
SEVEN. The partner wishing to transfer his quotas will notify the other partner
in writing, stating the price, manner and time limit of payment, for him to
exercise his right of first refusal to purchase within a maximum time limit of
thirty (30) days; however the admission of new partners will be made with the
consent of the controlling partner.
EIGHT. The company shall be managed by the partner BERENICE FONSECA NAKAD, in
the capacity of managing partner, who will use the company's name and represent
it as Plaintiff or Defendant, in or out of Court, being however barred from
using the company name under any pretext or manner in operations or businesses
which are alien to the company's object, specially granting securities,
collateral, endorsement of guarantees in favor of third parties; the managing
partner is empowered to use the company name in agreements in general, including
loans, credit notes, checks and any other documents, of any nature whatsoever,
which represent a liability for the company and may grant powers to an
attorney-in-fact or further to two attorneys-in-fact jointly.
PARAGRAPH ONE. To perform day to day activities, forward mail, issue
receipts and endorse checks for deposit in the company's bank account only the
individual signature of one partner or attorney-in-fact will be necessary.
PARAGRAPH TWO. The appointment of attorneys-in-fact as well as the
extension of their powers will be done by the partners jointly.
NINE. As compensation for the services performed by the managing partner, she
will receive under the heading of pro labore an amount which will be determined
from time to time, subject to the unanimous consent of the partners, within the
income tax limits, which shall be booked to miscellaneous expenditures.
TEN. In the event of death of any of the partners his heirs will jointly be
entitled to the deceased partner's rights, as long as the quotas are
indivisible.
ELEVEN. The fiscal year will coincide with the calendar year and on December 31
of each year the company's balance sheet will be drawn up, subject to the
applicable legal and technical provisions. The ascertained profits and losses
will be shared by each partner in the proportion of his holdings and eventual
profits may, at their discretion, be distributed or put aside as reserves.
TWELVE. The partners declare they are not liable for any of the crimes provided
by law which might prevent them from performing commercial activities.
- 2 -
<PAGE>
In witness whereof, the parties have drawn up, dated and signed this Instrument,
together with two witnesses, in three counterparts, duly initialled overleaf by
the partners who agree to be bound hereby for themselves and their successors
and to comply with all its provisions. The partners elect the courts of Foz do
Iguacu, State of Parana, to settle eventual doubts arising from this Agreement.
Foz do lguacu, February 5, 1991.
(signed by Berenice Fonseca Nakad and Flavio Deni Fonseca Nakad, whose
signatures are duly certified)
(signed by two witnesses)
- 3 -
<PAGE>
FIRST REGISTRY OFFICE
CERTIFICATE
I HEREBY CERTIFY and give witness that in reviewing the books existing in this
Civil Registry Office of Corporations, I have verified an entry in Book A/06,
pages 179 overleaf, 180, 180 overleaf and 181, under number 1361-3, as follows:
INSTRUMENT NUMBER: 1361-3. DATE OF REGISTRATION: July 16, 1996. Registration of
FOURTH AMENDMENT TO THE ARTICLES OF INCORPORATION submitted to me by TV CABO
IGUACU SOCIEDADE CIVIL LIMITADA, to wit: CGC MF no 81.502.543/0001- 35. TV CABO
IGUACU SOCIEDADE CIVIL LIMITADA. FOURTH AMENDMENT TO THE ARTICLES OF
INCORPORATION. By this private instrument BERENICE FONSECA NAKAD, a Brazilian
citizen, married, businesswoman, residing and domiciled at Rua Minas Gerais, no
861, Foz do Iguacu, State of Parana, bearer of ID Card RG no 759.403-PR and
enrolled with the Board of Taxpayers CPF/MF under no 500.133.439-04; FLAVIO DENI
FONSECA NAKAD, a Brazilian citizen, bachelor, businessman, residing and
domiciled at Rua Minas Gerais, no 861, Foz do Iguacu, State of Parana, bearer of
ID Card RG no 4.013.086-1 and enrolled with the Board of Taxpayers CPF/MF under
no 011.098.209-68, sole quotaholders of the limited liability civil corporation
TV Cabo Iguacu Sociedade Civil Limitada, with principal place of business at Rua
Carlos Sbaini no 410, Foz do Iguacu-PR, enrolled with the Board of Taxpayers
CGC/MF under no 81.502.543/0001-35, having its Articles of Incorporation filed
with the Registry Office of Titles and deeds of Foz do Iguacu under no 1361, at
page 18 overleaf of Book A/04, on March 5, 1991 and further as newly admitted
partner TVA SUL PARTICIPACOES S.A., a private law body corporate, with its
principal place of business in this capital city at Rua Martha Kateiva de
Oliveira, 49 - room 4, enrolled with the Board of Taxpayers under CGC/MF under
no 01.201.577/0001-24, filed with the Board of Trade of the State of Parana
under no NIRE 41300063451, herein represented by its directors LEONARDO PETRELLI
NETO, a Brazilian citizen, married, expert in telecommunications, residing and
domiciled at Rua Clovis Bevilaqua, 420 - apt. 701, Curitiba/PR, bearer of ID
Card RG no 736.678-7 and enrolled with the Board of Taxpayers CPF under no
401.596.049-15 and Douglas Duran, a Brazilian citizen, married, business
administrator, residing and domiciled at Alameda das Rosas, 444, Barueri/SP,
bearer of ID Card RG no 6.702.950 and enrolled with the Board of Taxpayers CIC
under no 541.326.068-72, HAVE RESOLVED: 1) To extend the company's object. 2) To
transform the company from a limited liability civil corporation into a limited
liability commercial corporation, thus amending the company name to TV Cabo
Iguacu Ltda. 3) To approve the assignment and transfer of all the free and
unencumbered quotas by the partners Berenice Fonseca Nakad and Flavio Deni
Fonseca Nakad, whose particulars are given above, to TVA SUL PARTICIPACOES S.A.,
whose particulars are given above, for the price agreed between the parties, the
Assignors granting the Assignee the fullest, most general and unrestricted
discharge, having nothing further to claim under any heading, the Assignors thus
withdrawing from the company. 4) To approve the assignment and transfer of one
(1) free and unencumbered quota by the partner TVA SUL PARTICIPACOES S.A., whose
particulars are given above, to Leonardo Petrelli Neto,
<PAGE>
whose particulars are given above, for the price agreed between the parties, the
Assignor granting the Assignee the fullest, most general and unrestricted
discharge, having nothing further to claim under any heading. 5) As a result,
the capital stock shall be R$5,000.00 (five thousand Reais) divided into 5,000
(five thousand) quotas, in the par value of R$1.00 (one Real) each, distributed
as follows among the partners:
Partners Quotas Value R$
Leonardo Petrelli Neto 1 1.00
TVA-Sul Participacoes S.A. 4,999 4,999.00
6) To change the company's management and appoint the partner TVA - SUL
PARTICIPACOES S.A. which delegates its powers to its representatives Messrs.
Jose Augusto Pinto Moreira, a Brazilian citizen, married, economist, residing
and domiciled at Alameda Argentina no 406, Barueri, SP, bearer of ID Card RG no
2.944.700 and enrolled with the Board of Taxpayers CPF under no 128.701.967-68,
Douglas Duran, a Brazilian citizen, married, business administrator, residing
and domiciled at Alameda das Rosas, 444, Barueri/SP, bearer of ID Card RG no
6.702.950 and enrolled with the Board of Taxpayers CIC under no 541.326.068-72,
and Leonardo Petrelli Neto, a Brazilian citizen, married, expert in
telecommunications, residing and domiciled at Rua Clovis Bevilaqua, 420 - apt.
701, Curitiba/PR, bearer of ID Card RG no 736.678-7 and enrolled with the Board
of Taxpayers CPF under no 401.596.049-15, who shall occupy the position of
Company Directors. 7) In view of the measures approved above, as well as of
other changes they intend to make to the Articles of Incorporation, the
quotaholders have resolved to reword and restate the Articles of Incorporation,
which shall henceforth be worded as follows: ARTICLES OF INCORPORATION. NAME,
HEAD OFFICE, OBJECT AND DURATION . CLAUSE 1. The company's name shall be TV CABO
IGUACU LTDA. CLAUSE 2. The company's principal place of business is located at
Rua Carlos Sbarini no 410, Foz do Iguacu, State of Parana. Sole Paragraph. The
Company's Board of Directors may open and close branches and offices anywhere in
the Brazilian territory. CLAUSE 3. The Company's objects are: (a) the
exploitation, distribution, transmission, ratio links and operation of special
cable television services, through the reception and processing of images,
sounds, signals and data and/or the respective generation, through community
antennae, by physical means, heads, networks, trunk system, distribution
systems, user or subscriber systems, in open or closed communities, preparation
and/or placement of projects, including on behalf or for the account of third
parties, or the utilization or the employment of any other means, systems,
equipment, technical or technological products, their equivalents or
substitutes; electronic lease or further any other means or system which
technology or the state of the art might develop in future; (b) import and
export of goods, products, equipment or services, directly or indirectly related
to the corporate object, as well as the performance of services and the
representation of other domestic or foreign corporations; and (c) participation
in other corporations as partner, shareholder, quotaholder or syndicated member.
CLAUSE 4. The Company has an indeterminate term of duration. II. CAPITAL STOCK.
CLAUSE 5. The capital stock is R$5,000.00 (five thousand Reais), divided into
- 2 -
<PAGE>
5,000 (five thousand) quotas, in the par value of R$1.00 (one Real) each, fully
subscribed and paid up in Brazilian currency, distributed as follows between the
partners:
Partners Quotas Value R$
Leonardo Petrelli Neto 1 1.00
TVA-Sul Participacoes S.A. 4,999 4,999.00
Total 5,000 5,000.00
Sole Paragraph. The partners' liability is limited, pursuant to the law, to the
full amount of capital stock. III. MANAGEMENT. CLAUSE 6. The company shall be
managed by the partner TVA Sul Participacoes S.A., which hereby delegates its
powers to representatives who shall be designated Directors. Paragraph 1. The
Board of Directors, which is appointed for an indeterminate term, shall be made
up as follows: Jose Augusto Pinto Moreira, a Brazilian citizen, married,
economist residing and domiciled at Alameda Argentina no 406, Barueri, SP,
bearer of ID Card RG no 2.944.700 and enrolled with the Board of Taxpayers CPF
under no 128.701.967-68; Douglas Duran, a Brazilian citizen, married, business
administrator, residing and domiciled at Alameda das Rosas, 444, Barueri/SP,
bearer of ID Card RG no 6.702.950 and enrolled with the Board of Taxpayers CIC
under no 541.326.068-72; and Leonardo Petrelli Neto, a Brazilian citizen,
married, expert in telecommunications, residing and domiciled at Rua Clovis
Bevilaqua, 420 - apt. 701, Curitiba/PR, bearer of ID Card RG no 736.678-7 and
enrolled with the Board of Taxpayers CPF under no 401.596.049-15, appointed by
delegation of the partner TVA - SUL PARTICIPACOES S.A., who will have the powers
to manage the company's business. Paragraph 2. The Company shall be represented:
(a) by two Directors jointly, as Plaintiff or Defendant, or by one Director
jointly with one attorney-in-fact or further by two attorneys-in-fact with
special powers. (b) severally, by one Director or one attorney-in-fact with
special powers in the performance of day-to-day activities, forwarding of mail,
issue of receipts and endorsement of checks for deposit in the company's bank
accounts. Paragraph 3. The appointment of attorneys-in-fact will require the
joint signature of two Directors and the respective powers-of-attorney will
specifically list the acts they may perform. With the exception of those which
grant the powers of the "ad judicia" clause, all the other powers-of-attorney
granted by the Company will have a limited term of validity of one year.
Paragraph 4. The Directors are barred from using the company name in third party
guarantees and business alien to the company's interest or acts which imply an
act of graciousness. Paragraph 5. The Directors are exempt from offering
collateral and under the heading of pro labore they will be entitled to a
monthly compensation to be determined by the quotaholders. IV. ASSIGNMENT OR
TRANSFER OF QUOTAS. CLAUSE 7. None of the partners may fully or partly assign
its quotas to third parties, without firstly offering them in writing, at least
thirty days in advance, to the other partner which, under equal conditions, will
have a right of first refusal to purchase them. Paragraph 1. The assignment will
be preceded by a notice with a written offer to purchase by third parties in
good faith, in order for the other partner to exercise its right of first
refusal within thirty days, if it wishes to do so. Paragraph 2. Should the right
of first refusal fail to be
- 3 -
<PAGE>
exercised, the notifying partner may assign its quotas to the interested third
parties within ten days and subject to the conditions set forth in the notice;
any assignment beyond said ten day time limit and in disagreement with the
initial offer will be null and void. Paragraph 3. The assignment of the
company's quotas which imply a transfer of the company's controlling power will
be subject to prior authorization by the Ministry of Communications. V.
AMENDMENT TO THE ARTICLES OF INCORPORATION, DISSOLUTION AND LIQUIDATION. CLAUSE
8. Any amendment to these articles requires the express consent of the majority
of the capital stock. CLAUSE 9. In the event of bankruptcy, death, incapacity,
exclusion or removal of one of the partners, the Company will not be dissolved.
In any of these events, the assets of the bankrupt, deceased, incapacitated,
excluded or removed partner will be ascertained on the basis of a special
balance sheet and paid to the partner or its heirs in twelve (12) monthly, equal
and successive installments, accrued by interest of twelve percent (12%) per
annum. Sole Paragraph. In the event of death or mental disability, the partner's
heirs may appoint a representative to remain in the Company, who will be
approved by the other partners. VI. FISCAL YEAR, BALANCE SHEET AND PROFITS.
CLAUSE 10. The fiscal year will end on December 31 whereupon the appropriate
financial statements will be drawn up. The company may also draw up interim
balance sheets and resolve upon the respective distribution of profits. All
resolutions regarding distribution of profits require the unanimous approval of
the quotaholders. VII. MISCELLANEOUS PROVISIONS. CLAUSE 11. The Company, through
all its quotaholders, undertakes to strictly comply with all the laws, decrees,
regulations, rules and recommendations made by the Awarding Public Powers. VIII.
VENUE. CLAUSE 14. The parties elect the courts of the Administrative Region of
Foz do lguacu, State of Parana, to settle any claims arising from this Charter.
The undersigned partners and directors declare they are not liable for any of
the crimes provided by law which prevent them from performing commercial
activities. In witness whereof, the parties have executed this instrument in
three counterparts before two witnesses. Illegible signatures. Stamp certifying
signatures by 2nd Registry Office of Deeds of this city and by Alfredo Braz 5th
notary public of Curitiba-PR. Nothing further. Conforms with original. Foz do
Iguacu, July 16, 1996. I, MARCELO ESTEVES SANTOS, Officer of the Civil Registry
Office of Corporations, have typed and signed it. That was the entire content of
said Instrument for which I have faithfully issued this certificate, of which I
give witness. Given In this town and Administrative Region of Foz do lguacu,
State of Parana, on the sixteenth day of the month of July of nineteen hundred
and ninety-six (16/07/1996)
CIVIL REGISTRY OFFICE OF CORPORATIONS
(signed by Marina Terezinha Vartha, Authorized Scrivener)
- 4 -
<PAGE>
TV CABO IGUACU LIMITADA
CGC MF no 81.502.543/0001-35
NIRE No 41203537363
5TH AMENDMENT TO THE ARTICLES OF INCORPORATION
By this private instrument:
TVA SUL PARTICIPACOES S.A., with its principal place of business in this capital
city at Rua Martha Kateiva de Oliveira, 49 - room 4, enrolled with the Board of
Taxpayers under CGC/MF under no 01.201.577/0001-24, filed with the Board of
Trade of the State of Parana under no NIRE 41300063451, herein represented by
its directors LEONARDO PETRELLI NETO, whose particulars are given below and
Douglas Duran, a Brazilian citizen, married, business administrator, residing
and domiciled at Alameda das Rosas, 444, Barueri/SP, bearer of ID Card RG no
6.702.950 and enrolled with the Board of Taxpayers CIC under no 541.326.068-72;
and
LEONARDO PETRELLI NETO, a Brazilian citizen, married, expert in
telecommunications, residing and domiciled at Rua Clovis Bevilaqua, 420 - apt.
701, Curitiba/PR, bearer of ID Card RG no 736.678-7 and enrolled with the Board
of Taxpayers CPF under no 401.596.049-15, sole quotaholders of the limited
liability quota company TV Cabo Iguacu Ltda., with its principal place of
business at Rua Carlos Sbarini no 410, Foz do Iguacu/PR, enrolled with the Board
of Taxpayers CGC/MF under no 81.502.643/0001-35, having its Articles of
Incorporation filed with the Board of Trade of the State of Parana under no
41203537363, HAVE RESOLVED:
1. To amend the company name to TVA SUL FOZ DO IGUACU LTDA.
2. Thus, Clause One of the Articles of Incorporation will be amended and will
henceforth be worded as follows:
"CLAUSE ONE. The company's name is TVA SUL FOZ DO IGUACU LTDA."
3. All the other clauses and conditions of the Articles of incorporation remain
unaltered and shall not be altered or expressly modified by this Instrument.
In witness whereof, the parties have executed this instrument before two
witnesses.
Foz do Iguacu, August 22, 1996.
<PAGE>
(signed by Leonardo Petrelli Neto and Douglas Duran for TVA SUL PARTICIPACOES
S.A. and by Leonardo Petrelli Neto)
Witnesses: (signed by Leila Aparecida Alves and Aline Pereira Leite)
ATTEST: (signed by Silvia C.L. Bernardes, OAB/SP 74.256)
Board of Trade of the State of Parana. I certify registration on October 8,
1996, under no 961739487 (signed by Sidmar Antonio Cavet, Secretary General)
- 2 -
<PAGE>
Exhibit 4.1
<PAGE>
Execution Copy
================================================================================
TEVECAP S.A.
12-5/8% Senior Notes due 2004
=========================================
INDENTURE
Dated as of November 26, 1996
=========================================
THE CHASE MANHATTAN BANK,
Trustee
CHASE TRUST BANK,
Principal Paying Agent
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1) .............................. 7.10
(a)(2) .............................. 7.10
(a)(3) .............................. N.A.
(a)(4) .............................. N.A.
(b) .............................. 7.8; 7.10
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 7.1
(b) .............................. 11.3
(c) .............................. 11.3
313(a) .............................. 7.6
(b)(1) .............................. N.A.
(b)(2) .............................. 7.6
(c) .............................. 7.6
(d) .............................. 7.6
314(a) .............................. 4.2
4.17; 11.2
(b) .............................. N.A.
(c)(1) .............................. 11.4
(c)(2) .............................. 11.4
(c)(3) .............................. N.A.
(d) .............................. N.A.
(e) .............................. 11.5
(f) .............................. 4.17
315(a) .............................. 7.1
(b) .............................. 7.5; 11.2
(c) .............................. 7.1
(d) .............................. 7.1
(e) .............................. 6.11
316(a)(last sentence)........................... 11.6
(a)(1)(A) .............................. 6.5
(a)(1)(B) .............................. 6.4
(a)(2) .............................. N.A.
(b) .............................. 6.7
317(a)(1) .............................. 6.8
(a)(2) .............................. 6.9
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(b) .............................. 2.8
318(a) .............................. 11.1
N.A. means Not Applicable.
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Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
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TABLE OF CONTENTS
Page
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ARTICLE I Definitions and Incorporation by Reference.................1
SECTION 1.1. Definitions.............................................1
SECTION 1.2. Other Definitions......................................25
SECTION 1.3. Incorporation by Reference of Trust Indenture Act......25
SECTION 1.4. Rules of Construction..................................26
ARTICLE II The Securities............................................26
SECTION 2.1. Title and Terms; Form..................................26
SECTION 2.2. Denominations..........................................28
SECTION 2.3. Execution, Authentication, Delivery and Dating.........28
SECTION 2.4. Temporary Securities...................................30
SECTION 2.5. Registration, Registration of Transfer and Exchange....31
SECTION 2.6. Mutilated, Destroyed, Lost and Stolen Securities.......34
SECTION 2.7. Payment of Interest; Interest Rights Preserved.........34
SECTION 2.8. Paying Agents; Discharge of Payment Obligations;
Indemnity of Holders................................36
SECTION 2.9. Persons Deemed Owners..................................37
SECTION 2.10. Cancellation...........................................37
SECTION 2.11. Computation of Interest................................38
SECTION 2.12. Legal Holidays.........................................38
SECTION 2.13. CUSIP and CINS Numbers.................................38
SECTION 2.14. Book-Entry Provisions for Global Securities............39
SECTION 2.15. Special Transfer Provisions............................41
SECTION 2.16. Money for Security Payments To be Held in Trust........44
SECTION 2.17 Securityholder Lists...................................46
SECTION 2.18 Outstanding Securities.................................46
ARTICLE III Redemption................................................47
SECTION 3.1. Notices to Trustee.....................................47
SECTION 3.2. Selection of Securities To Be Redeemed.................47
SECTION 3.3. Notice of Redemption...................................47
SECTION 3.4. Effect of Notice of Redemption.........................48
SECTION 3.5. Deposit of Redemption Price............................49
SECTION 3.6. Securities Redeemed in Part............................49
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ARTICLE IV Covenants.................................................49
SECTION 4.1. Payment of Securities..................................49
SECTION 4.2. SEC Reports............................................50
SECTION 4.3. Limitation on Indebtedness.............................51
SECTION 4.4. Limitation on Restricted Payments......................53
SECTION 4.5. Limitation on Restrictions on Distributions from
Restricted Subsidiaries.............................55
SECTION 4.6. Limitation on Sales of Assets and Subsidiary Stock.....56
SECTION 4.7. Limitation on Affiliate Transactions...................59
SECTION 4.8. Change of Control......................................60
SECTION 4.9. Limitation on Liens.................................61
SECTION 4.10. Limitation on Sales of Capital Stock of Restricted
Subsidiaries........................................62
SECTION 4.11. Limitation on Designations of Special Restricted
Subsidiaries........................................62
SECTION 4.12. Limitation on Designations of Unrestricted
Subsidiaries........................................63
SECTION 4.13. Limitations on Investments in Unrestricted
Subsidiaries........................................63
SECTION 4.14. Business of the Company; Restrictions on Transfers of
Existing Business...................................64
SECTION 4.15. Payment of Additional Amounts..........................64
SECTION 4.16. Shareholder Commitments................................67
SECTION 4.17. Compliance Certificate.................................68
SECTION 4.18. Further Instruments and Acts...........................68
SECTION 4.19. Maintenance of Office or Agency........................68
ARTICLE V Successor Company.........................................69
SECTION 5.1. When Company May Merge or Transfer Assets..............69
ARTICLE VI Defaults and Remedies.....................................71
SECTION 6.1. Events of Default......................................71
SECTION 6.2. Acceleration...........................................74
SECTION 6.3. Other Remedies.........................................74
SECTION 6.4. Waiver of Past Defaults................................74
SECTION 6.5. Control by Majority....................................75
SECTION 6.6. Limitation on Suits....................................75
SECTION 6.7. Rights of Holders to Receive Payment...................76
SECTION 6.8. Collection Suit by Trustee.............................76
SECTION 6.9. Trustee May File Proofs of Claim.......................76
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SECTION 6.10. Priorities.............................................76
SECTION 6.11. Undertaking for Costs..................................77
ARTICLE VII Trustee...................................................77
SECTION 7.1. Duties of Trustee......................................77
SECTION 7.2. Rights of Trustee......................................78
SECTION 7.3. Individual Rights of Trustee...........................79
SECTION 7.4. Trustee's Disclaimer...................................79
SECTION 7.5. Intentionally Omitted..................................79
SECTION 7.6. Reports by Trustee to Holders..........................79
SECTION 7.7. Compensation and Indemnity.............................80
SECTION 7.8. Replacement of Trustee.................................81
SECTION 7.9. Successor Trustee by Merger............................82
SECTION 7.10. Eligibility; Disqualification..........................82
SECTION 7.11. Preferential Collection of Claims Against Company......83
ARTICLE VIII Discharge of Indenture; Defeasance........................83
SECTION 8.1. Discharge of Liability on Securities; Defeasance.......83
SECTION 8.2. Conditions to Defeasance...............................84
SECTION 8.3. Application of Trust Money.............................86
SECTION 8.4. Repayment to Company...................................86
SECTION 8.5. Indemnity for U.S. Government Obligations..............86
SECTION 8.6. Reinstatement..........................................87
ARTICLE IX Amendments................................................87
SECTION 9.1. Without Consent of Holders.............................87
SECTION 9.2. With Consent of Holders................................88
SECTION 9.3. Compliance with Trust Indenture Act....................89
SECTION 9.4. Revocation and Effect of Consents and Waivers..........89
SECTION 9.5. Notation on or Exchange of Securities..................90
SECTION 9.6. Trustee To Sign Amendments.............................90
ARTICLE X Subsidiary Guarantee......................................90
SECTION 10.1. Subsidiary Guarantee...................................90
SECTION 10.2. Limitation on Liability................................92
SECTION 10.3. Successors and Assigns.................................93
SECTION 10.4. No Waiver..............................................93
SECTION 10.5. Right of Contribution..................................93
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SECTION 10.6. No Subrogation.........................................94
SECTION 10.7. Additional Subsidiary Guarantors.......................94
SECTION 10.8. Modification...........................................94
ARTICLE XI Miscellaneous.............................................95
SECTION 11.1. Trust Indenture Act Controls...........................95
SECTION 11.2. Notices................................................95
SECTION 11.3. Communication by Holders with other Holders............96
SECTION 11.4. Certificate and Opinion as to Conditions Precedent.....97
SECTION 11.5. Statements Required in Certificate or Opinion..........97
SECTION 11.6. When Securities Disregarded............................97
SECTION 11.7. Rules by Trustee, Paying Agent and Registrar...........98
SECTION 11.8. Legal Holidays.........................................98
SECTION 11.9. Governing Law..........................................98
SECTION 11.10. No Recourse Against Others.............................98
SECTION 11.11. Successors.............................................98
SECTION 11.12. Multiple Originals.....................................98
SECTION 11.13. Variable Provisions....................................99
SECTION 11.14. Qualification of Indenture.............................99
SECTION 11.15. Table of Contents; Headings............................99
SECTION 11.16. Agent for Service; Submission to Jurisdiction; Waiver
of Immunities.......................................99
SECTION 11.17. Currency of Account; Conversion of Currency;
Foreign Exchange Restrictions......................100
EXHIBIT A Form of Initial Security
EXHIBIT B Form of Exchange Security
EXHIBIT C Form of Certificate to be Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
EXHIBIT D Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S
EXHIBIT E Form of Certificate for Transfer from Offshore
Global Security to U.S. Global Security
- iv -
<PAGE>
INDENTURE, dated as of November 26, 1996, among TEVECAP S.A., a
sociedad anonima organized under the laws of the Federative Republic of Brazil
(the "Company"), the Subsidiary Guarantors (as defined herein), The Chase
Manhattan Bank, a New York banking corporation (the "Trustee") and Chase Trust
Bank, as Principal Paying Agent.
Each of the Company and the Subsidiary Guarantors agrees as follows
for the benefit of the other parties hereto and for the equal and ratable
benefit of the Holders of the Company's 125/8% Senior Notes due 2004 (the
"Initial Securities") and, if and when issued in exchange for Initial Securities
as provided in the Registration Rights Agreement (as hereinafter defined), the
Company's 125/8% Senior Notes due 2004 (the "Exchange Securities" and, together
with the Initial Securities, the "Securities"):
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Abril Credit Facility" means the Revolving Credit Facility, dated
December 6, 1995, between the Company and Abril S.A., as lender, as amended,
refinanced or replaced from time to time.
"Acquired Indebtedness" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such Person merges
with or into or consolidates with or becomes a Restricted Subsidiary of such
specified Person and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person, which Indebtedness was not incurred in
anticipation of, and was outstanding prior to, such merger, consolidation or
acquisition.
"Additional Amounts" shall have the meaning specified in Section
4.15(a) hereof.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Permitted Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Permitted Business.
<PAGE>
2
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.6 and 4.7, "Affiliate" shall also include any beneficial
owner of shares representing 10.0% or more of the total voting power of the
Voting Stock (on a fully diluted basis) of the Company or of rights or warrants
to purchase such Voting Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof, and for the purposes of Section 4.7 only, shall include
(i) Bell Canada, (ii) Canbras Communications Corp., (iii) Canbras Participacoes
Ltda., (iv) Canbras TVA Cabo Ltda., (v) TV Cabo Santa Branca Comercio Ltda. and
(vi) Galaxy Latin America.
"Asset Disposition" means any sale, lease, transfer, issuance or
other disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares), property,
services or other assets (each referred to for the purposes of this definition
as a "disposition") by the Company or any of its Restricted Subsidiaries
(including any disposition by means of a merger, consolidation or similar
transaction) other than (i) a disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly-Owned
Restricted Subsidiary, (ii) a disposition of inventory, services or accounts
receivable in the ordinary course of business consistent with market practice,
(iii) a disposition of obsolete or worn out equipment or equipment that is no
longer useful in the conduct of the business of the Company and its Subsidiaries
and that is disposed of in each case in the ordinary course of business, and
(iv) a disposition by Galaxy Brasil of up to 25.0% of its Capital Stock to
Hughes Communications GLA and Darlene Investments, a member of the Cisneros
Group, or their respective affiliates, pursuant to the Galaxy Latin America
Partnership Agreement as it exists on the Issue Date.
"Attributable Indebtedness" in respect of a Sale/ Leaseback
Transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Securities, compounded annually)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive
<PAGE>
3
scheduled principal payment of such Indebtedness or redemption or similar
payment with respect to such Preferred Stock multiplied by the amount of such
payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board of
Directors.
"Business Day" means each day which is not a Legal Holiday.
"California Broadcast Center" means the California Broadcast Center
LLC, the owner of an uplink center located in Long Beach, California, which
provides certain uplink services to Galaxy Latin America.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock and Disqualified Stock, but excluding any debt securities convertible into
such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP, and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date such lease may be terminated without penalty.
"Cash Equivalents" means, at any time, (i) any direct obligations
(or certificates representing an ownership interest in such obligations) of the
United States of America or the Federative Republic of Brazil (including any
agency or instrumentality thereof) for the payment of which the full faith and
credit of the United States of America or the Federative Republic of Brazil is
pledged and which are not callable or redeemable at the issuer's option, each
with a maturity of 180 days or less from the date of acquisition; (ii)
certificates of deposit, money market deposit accounts and acceptances with a
maturity of 180 days or less from the date of acquisition of any financial
institution that is a Brazilian regulated Bank or a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500.0 million (or the US dollar equivalent); and (iii) commercial
paper with a maturity of 180 days or less from the date of acquisition issued by
a corporation that is not an Affiliate of the Company or any of its Subsidiaries
and is organized under the laws of any state of the United States or the
District of Columbia whose debt rating, at the time as of which such investment
is made, is at least "A-1" by Standard & Poor's Corporation or at least "P-1" by
Moody's Investors Service, Inc. or rated
<PAGE>
4
at least an equivalent rating category of another nationally recognized
securities rating agency.
"Change of Control" means the occurrence of any of the following
events:
(i) an event or series of events by which any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one
or more Permitted Holders, is or becomes after the date of issuance of the
Securities the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act as in effect on the date of this Indenture), of more than 35.0% of
the total voting power of all Voting Stock of the Company outstanding;
(ii) (A) another corporation merges into the Company or the Company
consolidates with or merges into any other corporation or (B) the Company
conveys, transfers or leases all or substantially all its assets to any person
or group (other than any conveyance, transfer or lease between the Company and a
Wholly-Owned Subsidiary of the Company), in each case, in one transaction or a
series of related transactions with the effect that a person or group other than
one or more Permitted Holders becomes the "beneficial owner" of more than 35.0%
of all Voting Stock of the Company then outstanding;
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (or equivalent
governing body) of the Company (together with any new Directors (or equivalent
persons) whose election by the Company's Board of Directors (or equivalent
governing body), or whose nomination for election by such entity's shareholders,
was approved by a vote of a majority of the Directors (or equivalent persons)
then still in office who were either Directors (or equivalent persons) at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Directors (or equivalent persons) then in office; or
(iv) the Permitted Holders collectively shall fail to beneficially own at
least 35.0% of all Voting Stock of the Company then outstanding.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" or "SEC" means the United States Securities and
Exchange Commission, as from time to time constituted, or if at any time after
the execution of this Indenture such Commission is not existing and performing
the applicable duties now assigned to it, then the body or bodies performing
such duties at such time.
<PAGE>
5
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by any two of its Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer, President or a Vice
President or its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Consolidated Income Tax Expense" means, with respect to any Person,
for any period the aggregate of the federal, state, local and foreign income tax
expense of such Person and its Subsidiaries for such period, on a consolidated
basis as determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, (i) interest
expense attributable to Capitalized Lease Obligations, (ii) amortization of debt
discount, (iii) capitalized interest, (iv) non-cash interest expenses, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) the net costs associated with
Hedging Obligations (including amortization of fees), (vii) Preferred Stock
dividends in respect of all Preferred Stock of the Company or a Wholly-Owned
Restricted Subsidiary, (viii) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by the Company or any
Restricted Subsidiary and (ix) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income
(loss) of the Company and its consolidated Subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income: (i) any net income
(loss) of any Person if such Person is not a Restricted Subsidiary, except that
(A) subject to the limitations contained in clause (iv) below, the Company's
equity in the net income of any such Person for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net Income; (ii) any
net income (loss) of any person acquired by the Company or a Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
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6
to the limitations contained in (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the Company
or another Restricted Subsidiary as a dividend (subject, in the case of a
dividend that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the Company's equity in a net loss
of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income; (iv) any gain (but not loss) realized
upon the sale or other disposition of any assets of the Company or its
consolidated Subsidiaries which are not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss) realized upon the sale
or other disposition of any Capital Stock of any Person; (v) any extraordinary
gain or loss; and (vi) the cumulative effect of a change in accounting
principles.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii) paid
in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 450 West 33rd Street, 15th floor, New York, NY 10001-2697, Attention: Global
Trust Services - International Service Delivery.
"Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense from October 1, 1996 to the end of
the Company's most recently ended full fiscal quarter for which financial
statements are available prior to such date, taken as a single accounting
period.
"Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow from October 1, 1996 to the end of the
Company's most recently ended full fiscal quarter for which financial statements
are available prior to such date, taken as a single accounting period.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
<PAGE>
7
"CVM" means the Comissao de Valores Mobiliarios, the equivalent of
the Commission in Brazil.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock of such Person which 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 (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Securities.
"Equipment Agreements" means the Equipment Lease Agreement, dated as
of July 30, 1996, between Citibank N.A., as lessor, and Galaxy Brasil, as
lessee, and related agreements, and the Equipment Sale and Leaseback Agreement,
dated as of July 30, 1996, between Citibank N.A., as lessor, and Galaxy Brasil,
as lessee, and related agreements, as each such agreement may be amended,
supplemented or otherwise modified from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"EximBank Credit Agreement" mean the Credit Agreement to be entered
into among the Company, The Chase Manhattan Bank, as lender, and the
Export-Import Bank of the United States, as amended, supplemented or otherwise
modified from time to time.
"Fair Market Value" means, with respect to any asset, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under
compulsion to complete the transaction. The Fair Market Value of any asset or
assets shall be determined by the Board of Directors of the Company, acting in
good faith, and shall be evidenced by a resolution of such Board of Directors
provided to the Trustee; provided that, solely for purposes of Section 4.6(a)(i)
the Company shall be deemed not to have received Fair Market Value for an Asset
Disposition unless (a) in the event such Asset Disposition involves an aggregate
amount in excess of $2.0 million, the terms of such transaction have been
approved by a majority of the members of the Board of Directors of the Company
and by a majority of the members of such Board having no personal stake in such
Asset Disposition, if any, and (b) in the event such Asset
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8
Disposition involves an aggregate amount in excess of $20.0 million, the Company
has received a written opinion from an independent investment banking firm of
nationally recognized standing in the United States that such Asset Disposition
is fair to the Company or such Restricted Subsidiary, as the case may be, from a
financial point of view (except that no such opinion shall be required in
connection with a public offering of common stock of a Restricted Subsidiary
either (A) registered under the Securities Act and/or (B) registered with the
CVM and listed on the Sao Paulo Stock Exchange or Rio de Janeiro Stock
Exchange).
"Galaxy Brasil" means Galaxy Brasil S.A., a Restricted Subsidiary of
the Company on the Issue Date.
"Galaxy Brasil Subscribers" means, as of any date, the number of
subscribers to the pay television services offered by Galaxy Brasil, excluding
subscribers who have paid an installation fee to Galaxy Brasil at such date but
who are awaiting installation of such services.
"Galaxy Latin America" means Galaxy Latin America, a Delaware
general partnership in which the Company holds a 10% equity interest on the
Issue Date.
"Galaxy Latin America Partnership Agreement" means the Partnership
Agreement, dated February 13, 1995, as in effect on the Issue Date, among Galaxy
Brasil and a unit of Hughes Electronics, a member of the Cisneros Group and a
subsidiary of Grupo MVS.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, including those 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 approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP as in effect on the
Issue Date.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation of any other Person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term
<PAGE>
9
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Security Registrar's books.
"Incur" or "incur" means issue, assume, Guarantee, incur or
otherwise become liable for; provided, however, that any Indebtedness or Capital
Stock of a Person existing at the time such person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
incurred by such Subsidiary at the time it becomes a Subsidiary. The term
"Incurrence" when used as a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto), (iv) all obligations
of such Person to pay the deferred and unpaid purchase price of property or
services, which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations of such
Person and all Attributable Indebtedness of such Person, (vi) all Indebtedness
of other Persons secured by a Lien on any asset of such Person, whether or not
such Indebtedness is assumed by such Person, provided, however, that the amount
of Indebtedness of such Person shall be the lesser of (A) the fair market value
of such asset at such date of determination and (B) the amount of such
Indebtedness of such other Persons, (vii) all Indebtedness of other Persons to
the extent Guaranteed by such Person, (viii) the amount of all obligations of
such Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of the Company, any
Preferred Stock (but excluding, in each case, any accrued dividends) and (ix) to
the extent not otherwise included in this definition, Hedging Obligations of
such Person; provided, however, that in no event shall Indebtedness include
Trade Payables not overdue or being contested in good faith. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date.
<PAGE>
10
"Indebtedness to Annualized Operating Cash Flow Ratio" means, as of
any date of determination, the ratio of (i) the aggregate principal amount of
all outstanding Indebtedness of the Company and its Restricted Subsidiaries as
of such date plus, without duplication, the aggregate liquidation preference or
redemption amount of all Disqualified Stock of the Company (excluding any such
Disqualified Stock (x) held by the Company or a Wholly-Owned Restricted
Subsidiary of the Company or (y) outstanding on the Issue Date), to (ii)
Operating Cash Flow of the Company and its Restricted Subsidiaries for the most
recently ended fiscal quarter for which financial statements are available prior
to such date multiplied by four, determined on a pro forma basis (and after
giving pro forma effect to (A) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such period; (B) the
incurrence, repayment or retirement of any other Indebtedness by the Company and
its Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average balance of
such Indebtedness at the end of each month during such period); (C) in the case
of Acquired Indebtedness, the related acquisition as if such acquisition had
occurred at the beginning of such period; and (D) any acquisition or disposition
by the Company and its Restricted Subsidiaries (or by 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) of any
company or any business or any assets out of the ordinary course of business, or
any related repayment of Indebtedness, in each case since the first day of such
period, assuming such acquisition or disposition had been consummated on the
first day of such period). For purposes of this definition, whenever pro forma
effect is to be given to a transaction, the pro forma calculation shall be made
in good faith by a responsible financial or accounting officer of the Company.
"Indemnification Agreement" means the Indemnification Agreement to
be entered into among the Company, Galaxy Latin America, Hughes Communications
GLA and affiliates thereof, California Broadcast Center, TVA Communications
Ltd., Darlene Investments, Inversiones Divtel, D.T., C.A., Grupo Frecuencia
Modulada Television and Grupo MVS.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
<PAGE>
11
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of such Person) or
other extension of credit (including by way of Guarantee or similar arrangement,
but excluding any debt or extension of credit represented by a bank deposit
other than a time deposit) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person.
"Issue Date" means the date on which the Initial Securities are
originally issued.
"Legal Holiday" has the meaning ascribed in Section 11.8.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Minority Investment" means any Investment by the Company or any
Restricted Subsidiary in an entity or Person in which the Company or such
Restricted Subsidiary owns or controls 50.0% or less of the total voting power
of the Capital Stock or other equity interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees of any such entity or Person.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all Federal, state, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in
<PAGE>
12
accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to any Person
owning a beneficial interest in assets subject to sale or minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
assets disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary of the Company after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Newly-Licensed Service Area" means a service area in which (i) such
Special Restricted Subsidiary is licensed to provide any of Cable or MMDS
service and (ii) neither the Company nor any Restricted Subsidiary is then
licensed to provide such Cable or MMDS service in such service area on the Issue
Date.
"Non-U.S. person" means a person who is not a U.S. person, as
defined in Regulation S.
"Offering Memorandum" means the Offering Memorandum dated November
21, 1996 relating to the Initial Securities.
"Officer" means the President, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, any Vice President, the Treasurer or
the Secretary of the Company, as applicable.
"Officers' Certificate" means a certificate signed by two Officers.
"Offshore Global Security" shall have the meaning set forth in
Section 2.1 hereof.
"Offshore Physical Security" shall have the meaning set forth in
Section 2.1 hereof.
"Operating Cash Flow" means, for any period, the Consolidated Net
Income (Loss) of the Company and its Restricted Subsidiaries for such period,
plus, without
<PAGE>
13
duplication, (i) extraordinary net losses and net losses on sales of assets
outside the ordinary course of business during such period, to the extent such
losses were deducted in computing Consolidated Net Income (Loss), plus (ii)
Consolidated Income Tax Expense, and any provision for taxes utilized in
computing the net losses under clause (i) hereof, plus (iii) Consolidated
Interest Expense (income), net, plus (iv) Other nonoperating (expenses) income,
net (v) depreciation, amortization and all other non-cash charges, to the extent
such depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income (Loss) (including amortization of
goodwill and other intangibles) (other than non-cash charges which require an
accrual or reserve for cash charges in future periods), less (vi) non-cash items
increasing Consolidated Net Income (Loss) of such Person for such period
(excluding any items which represent the reversal of any accrual of, or cash
reserve for, anticipated cash charges in any prior period and excluding the
amortization of deferred sign-on and hook-up fee revenue).
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Paying Agent" means any person authorized by the Company to pay the
principal, premium, if any, interest (or Additional Amounts) on any Securities
on behalf of the Company. The Company may so authorize a principal Paying Agent
and one or more co-Paying Agents.
"Permitted Business" means (i) the delivery or distribution of
television, radio, paging or other telecommunications services in Latin America
and Portugal and (ii) any business or activity reasonably related thereto,
including, without limitation, any business conducted by the Company or any
Restricted Subsidiary on the Issue Date, the acquisition, holding or
exploitation of any license relating to the delivery of the services described
in clause (i) of this definition, the development or acquisition of rights to
programming for delivery or distribution in accordance with clause (i) of this
definition and any other business involving voice, data or video
telecommunications services.
"Permitted Holders" means each of Abril S.A., Falcon International
Communications LLC, Falcon International Communications L.P., Falcon
International Communications (Bermuda) L.P., The Hearst Corporation, ABC, Inc.
and Chase Manhattan International Finance Ltd. and any entity of which any of
the foregoing, individually or collectively, beneficially owns more than 50.0%
of the Voting Stock.
"Permitted Investment" means (i) an Investment by the Company or any
of its Restricted Subsidiaries in the Company or a Restricted Subsidiary of the
Company or a Person which will, upon making such Investment, become a Restricted
Subsidiary; provided,
<PAGE>
14
however, that the primary business of such Restricted Subsidiary is a Permitted
Business; (ii) any Investment in the California Broadcast Center by the Company
or a Restricted Subsidiary in an amount not to exceed $10.0 million and, upon
the repayment in full of such Investment by the California Broadcast Center to
the Company, the Investment of such amount in Galaxy Latin America; and (iii)
Temporary Cash Investments.
"Permitted Liens" means, (i) Liens for taxes, assessments or other
governmental charges not yet delinquent or which are being contested in good
faith and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or such Subsidiary, as the case may
be, in accordance with GAAP; (ii) carriers', warehousemen's, mechanics',
landlords', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business in respect of obligations which are not yet due or
which are bonded or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Company or such Restricted Subsidiary, as the case may be, in
accordance with GAAP; (iii) pledges or deposits in connection with workmen's
compensation, unemployment insurance and other social security legislation; (iv)
deposits to secure the performance of bids, tenders, trade or government
contracts (other than for borrowed money), leases, licenses, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (v) judgment or
attachment Liens against the Company or any of its Restricted Subsidiaries not
giving rise to an Event of Default; (vi) Liens arising by operation of law;
(vii) Liens in favor of the Company or any Wholly-Owned Restricted Subsidiary of
the Company; (viii) Liens securing Indebtedness Incurred by the Company in
compliance with Section 4.3(b)(i); (ix) Liens on property and assets (together
with accounts receivable arising from such property and assets) of Galaxy Brasil
acquired with the proceeds of Indebtedness Incurred by Galaxy Brasil in
compliance with Section 4.3(b)(viii) or with the proceeds of other Indebtedness
Incurred in compliance with this Indenture, provided that such Liens may not
secure Indebtedness exceeding an amount equal to the greater of (A) the amount
permitted to be Incurred pursuant to Section 4.3(b)(viii) and (B) an amount
equal to the Operating Cash Flow of Galaxy Brasil for the four most recent
fiscal quarters for which financial statements are available prior to the date
of Incurrence; (x) Liens on real or personal property of the Company or a
Restricted Subsidiary of the Company acquired, constructed or constituting
improvements made after the Issue Date to secure Purchase Money Indebtedness
Incurred after the Issue Date in compliance with the Indenture; provided, that
(A) such Liens do not extend to any assets other than the assets so acquired,
(B) such Liens shall be created no later than 10 days after the acquisition of
such assets and (C) the principal amount of such Indebtedness secured by such a
Lien does not exceed 80% of such purchase price or cost of construction or
improvement of the property subject to such Lien; (xi) Liens existing on the
Issue Date; (xii) the pledge by the Company (A) to the other members of Galaxy
Latin America of warrants and promissory notes it holds in the California
Broadcast Center to
<PAGE>
15
secure its obligations under the Equipment Agreements and the contribution
agreement to be entered into in connection with the SurFin Guarantee and the
pledge of such warrants and promissory notes, together with the equity interest
it holds of Galaxy Latin America, to secure its tax indemnity obligations under
the Indemnification Agreement and (B) to Falcon International of the shares of
Capital Stock of the Company purchased with Put Promissory Notes; and (xiii)
Liens to secure Indebtedness Incurred to extend, renew, refinance or refund (or
successive extensions, renewals, refinancings or refundings), in whole or in
part, Indebtedness secured by any Lien referred to in the foregoing clauses
(vii), (viii), (ix), (x) and (xi) so long as such Lien does not extend to any
other property and the principal amount of Indebtedness so secured is not
increased except as otherwise permitted under the definition of Refinancing
Indebtedness.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision hereof or any other entity.
"Physical Security" shall have the meaning set forth in Section 2.1
hereof.
"Predecessor Security" means, with respect to any particular
Security, every previous Security evidencing all or a portion of the same debt
as that evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 2.6 hereof in
exchange for a mutilated Security or in lieu of a lost, destroyed or stolen
Security shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Security.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security which is due or overdue or is to
become due at the relevant time.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of
the deferred purchase price of property, conditional sale obligations,
obligations under any title retention agreement and other purchase money
obligations, in each case where the maturity of such Indebtedness does not
exceed the anticipated useful life of the asset being financed, and (ii)
incurred to finance the acquisition by the Company or a Restricted Subsidiary of
such asset, including additions or improvements.
<PAGE>
16
"Put Promissory Notes" means any promissory notes which may be
issued by the Company to Falcon International pursuant to the Stockholders
Agreement, as amended, in the event the Indenture prohibits the Company from
purchasing shares of Capital Stock held by such stockholder; provided that (a)
such notes have been expressly subordinated in right of payment in full to the
Securities (including principal, interest and premium, if any, and as a
consequence of any repurchase, redemption, or other repayment of the Securities,
by way of optional redemption, Asset Sale Offer or Change of Control Offer to
the extent any applicable rights to repayment are exercised by the
Securityholders), (b) such notes are not Guaranteed by any of the Company's
Subsidiaries and are not secured by any Lien on any property or asset of the
Company or any Restricted Subsidiary (other than by the pledge of the shares of
Capital Stock of the Company purchased with Put Promissory Notes), (c) such
notes do not have a Stated Maturity of principal or any redemption or repurchase
or other similar provision (upon a default or otherwise) earlier than a date at
least one year after the final Stated Maturity of the Securities; and (d) such
notes bear interest at a rate consistent with the terms of the Stockholders
Agreement, as amended; provided, further, that payments of interest on such
notes may be made solely to the extent Restricted Payments in like amount may
then be made in accordance with Section 4.4, with any such interest payment
being included in the calculation of whether the conditions of Section 4.4(a)(z)
have been met with respect to any subsequent Restricted Payments.
"QIB" means any "qualified institutional buyer" (as defined under
the Securities Act).
"Redemption Date" means the date specified by the Company in a
notice delivered pursuant to Section 3.3 as the date on which the Company has
elected to redeem Securities pursuant to paragraph 5 or 6 of the Securities.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and "refinanced"
shall have a correlative meaning) any Indebtedness existing on the date of the
Indenture or Incurred in compliance with the Indenture (including Indebtedness
of the Company that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness, provided, however, that (i) in respect of Indebtedness
having a Stated Maturity after the Stated Maturity of the Securities, the
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being refinanced, (ii) in respect of Indebtedness
having a Stated Maturity prior to the Stated Maturity of the Securities, the
Refinancing Indebtedness bears an interest rate materially lower than that of
the Indebtedness being refinanced, (iii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is equal
to or greater than the Average Life of the Indebtedness being refinanced, (iv)
such Refinancing Indebtedness is
<PAGE>
17
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the sum of the
aggregate principal amount (or if issued with original issue discount, the
aggregate accredited value) then outstanding of the Indebtedness being
refinanced and (v) the Refinancing Indebtedness shall be subordinated or pari
passu (whichever is applicable) in right of payment to the Securities to the
same extent as the Indebtedness being refinanced is subordinated or pari passu
in right of payment to the Securities; provided, further, that Refinancing
Indebtedness shall not include Indebtedness of a Restricted Subsidiary which
refinances Indebtedness of the Company or Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary. Notwithstanding the foregoing, in the case of Indebtedness
represented by obligations described in clause (iv) of the definition of
"Indebtedness," the re-incurrence of such Indebtedness within 60 days after the
repayment thereof shall be deemed to be Refinancing Indebtedness for purposes of
this definition; provided, however, that it otherwise complies with the terms of
this definition and that the amount of such Indebtedness deemed to be
Refinancing Indebtedness hereunder shall not exceed $50.0 million at any one
time.
"Registered Exchange Offer" shall have the meaning set forth in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated November 26, 1996 among the Company, the Subsidiary
Guarantors, Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co. Inc. and Bozano, Simonsen Securities, Inc. (the
"Initial Purchasers").
"Regulation S" means Regulation S under the Securities Act.
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Person owning such property
transfers such property to another Person and leases it back from such Person.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
18
"Securities Custodian" means the custodian with respect to the
Global Securities (as appointed by the Depositary), or any successor Person
thereto and shall initially be the Trustee.
"Senior Credit Facility" means any senior credit facility (whether a
term or a revolving facility) as such credit facility may be amended, modified,
supplemented, restated or replaced from time to time.
"Shareholder Commitments" shall have the meaning specified in
Section 4.16 hereof.
"Shelf Registration Statement" has the meaning ascribed thereto in
the Registration Rights Agreement.
"Significant Equity Offering" means either (i) a public offering of
Common Stock of the Company either (A) registered under the Securities Act
and/or (B) registered with the CVM and listed on the Sao Paulo Stock Exchange or
Rio de Janeiro Stock Exchange or (ii) an offering on behalf of the Company
pursuant to Rule 144A under the Securities Act of Common Stock of the Company to
100 or more beneficial holders if such Common Stock is thereafter included for
trading privileges in the PORTAL trading system of Nasdaq.
"Special Restricted Subsidiary" means any Restricted Subsidiary of
the Company that has been designated by the Board of Directors, by a Board
Resolution delivered to the Trustee, as a Special Restricted Subsidiary and as
to which there has not been an effective revocation, in each case in accordance
with Section 4.11.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable.
"Stockholders Agreement" means the Stockholders Agreement dated
December 6, 1995, by and among the Company, Robert Civita, Abril S.A., Harpia
Holdings Limited, Curupia Holdings Limited, Falcon International Communications
Ltd., Hearst/ABC Video Services II and Cable Participacoes Ltda, as it has been
amended to date.
"Strategic Investor" means any Person engaged in a Permitted
Business that as of the date of determination has a Total Equity Market
Capitalization of at least $1.0 billion.
<PAGE>
19
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
"Subordinated Shareholder Loans" means Indebtedness of the Company
for money borrowed from a shareholder beneficially owning at least 5.0% of the
issued and outstanding shares of common stock of the Company (or any Affiliate
of such shareholder), provided that (A) such Indebtedness (and any refinancing
thereof) has been expressly subordinated in right of payment to the prior
payment in full of all Indebtedness (including principal, interest and premium,
if any, under the Securities and this Indenture) of the Company (including as a
consequence of any repurchase, redemption or other repayment of the Securities,
by way of optional redemption, Asset Sale Offer, or Change of Control Offer to
the extent any applicable rights to repayment are exercised by the
Securityholders), (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 Restricted Subsidiary, (C) such
Indebtedness (and any refinancing thereof) does not have a Stated Maturity of
principal or any redemption or repurchase or other similar provision (upon a
default or otherwise) earlier than a date at least one year after the final
Stated Maturity of the Securities and (D) such Indebtedness bears interest at a
rate consistent with prevailing market practice for subordinated loans (as
certified to the Trustee in an Officers' Certificate); provided further that
payments of interest on such Indebtedness (and any refinancing thereof) may be
made solely to the extent Restricted Payments in like amount may then be made in
accordance with Section 4.4, with any such interest payment being included in
the calculation of whether the conditions of Section 4.4(a)(z) have been met
with respect to any subsequent Restricted Payments.
"Subsidiary" of any Person means any corporation, association,
partnership, joint venture or other business entity (i) of which more than 50.0%
of the total voting power of shares of Capital Stock or other interests
(including partnership interests) 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 (A) such
Person, (B) such Person and one or more Subsidiaries of such Person or (C) one
or more Subsidiaries of such Person and (ii) which is controlled by such Person.
Unless otherwise specified herein, each reference to a Subsidiary shall refer to
a Subsidiary of the Company.
"Subsidiary Guarantors" means each Subsidiary of the Company in
existence on the Issue Date and each Restricted Subsidiary created or acquired
by the Company after the Issue Date and which becomes a party hereto pursuant to
Section 10.7.
<PAGE>
20
"Subsidiary Guarantee" means the Guarantee of the Securities by the
Subsidiary Guarantors set forth in Article X, a notation of which shall be
endorsed on the Securities in the form attached hereto as part of Exhibits A and
B.
"SurFin Guarantee" means the Guarantee, dated as of September 18,
1996, by the Company in favor of Citicorp USA, Inc. as such guarantee may be
amended, modified, supplemented or restated from time to time.
"Taxes" means any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto) imposed or levied by or on behalf of a Taxing Authority.
"Taxing Authority" means the government of the Federative Republic
of Brazil or of Japan or any state of the Federative Republic of Brazil or of
Japan or any political subdivision or territory or possession of the government
of the Federative Republic of Brazil or of Japan or any jurisdiction in which
the Company or a Subsidiary Guarantor is engaged in business for tax purposes or
is resident for withholding tax purposes or, in all such instances, any
authority or agency therein or thereof having power to tax.
"Temporary Cash Investments" means any of the following: (i) any
Investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (ii) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $250 million (or the foreign currency
equivalent thereof) and whose long-term debt, or whose parent holding company's
long-term debt, is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act), (iii) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with a bank meeting the qualifications described
in clause (ii) above, (iv) Investments in commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other than
an Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture.
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21
"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 in good
faith and evidenced by a resolution of the Board of Directors filed with the
Trustee.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person (including letters of credit issued in
respect thereof) arising in the ordinary course of business in connection with
the acquisition of either (x) current assets as characterized in accordance with
GAAP or (y) services which are currently expensed in accordance with GAAP.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the Restricted Securities legend set forth in Exhibit A hereof.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
(other than a Subsidiary Guarantor) designated as such pursuant to and in
compliance with Section 4.12 and (ii) any Subsidiary of an Unrestricted
Subsidiary.
"US Dollar Equivalent" means, with respect to any monetary amount in
a currency other than the US dollar at any one time for the determination
thereof, the amount of US dollars obtained by converting such foreign currency
involved in such computation into US dollars at the spot rate for the purchase
of US dollars with the applicable foreign currency as quoted by Reuters at
approximately 11:00 a.m. (New York time) on the date not more than two business
days prior to such determination. For purposes of determining whether any
Indebtedness can be incurred (including Permitted Indebtedness), any Investment
can be made and any Affiliate Transaction can be undertaken (a "Tested
Transaction"), the
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22
"US Dollar Equivalent" of such Indebtedness, Investment or Affiliate Transaction
shall be determined on the date incurred, made or undertaken and no subsequent
change in the US Dollar Equivalent shall cause such Tested Transaction to have
been incurred, made or undertaken in violation of the Indenture.
"U.S. Global Security" shall have the meaning set forth in Section
2.1 hereof.
"US Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"U.S. Physical Security" shall have the meaning set forth in Section
2.1 hereof.
"Voting Stock" of a corporation means all classes of Capital Stock
of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly-Owned Subsidiary" means a Subsidiary of the Company, at
least 95.0% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly-Owned Subsidiary of the
Company.
SECTION 1.2. Other Definitions.
Defined in
----------
Term Section
"Affiliate Transaction".................................. 4.7
"Agent Member"........................................... 2.14(a)
"Bankruptcy Law"......................................... 6.1
"covenant defeasance option"............................. 8.1(b)
"Custodian".............................................. 6.1
"Event of Default"....................................... 6.1
"Global Security"........................................ 2.1
"legal defeasance option"................................ 8.1(b)
"Restricted Payment"..................................... 4.4
"Security Register"...................................... 2.5
"Security Registrar"..................................... 2.5
"Successor Company"...................................... 5.1
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23
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee"
means the Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
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24
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE II
The Securities
SECTION 2.1. Title and Terms; Form. The aggregate principal amount
of Securities which may be authenticated and delivered under this Indenture is
limited to US$250,000,000 in aggregate principal amount of Initial Securities
and Exchange Securities, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 2.3, 2.4, 2.5, 2.6, 3.6, 4.6, 4.8 or 9.5.
The Securities shall be known and designated as the "125/8 Senior
Notes due 2004" of the Company. The final Stated Maturity of the Securities
shall be November 26, 2004, and the Securities shall bear interest at the rate
of 125/8% per annum (as adjusted pursuant to the Registration Rights Agreement)
from the Issue Date or from the most recent interest payment date to which
interest has been paid, as the case may be, payable semi-annually on May 26 and
November 26, in each year, commencing on May 26, 1997, until the principal
thereof is paid or duly provided for. Interest on any overdue principal,
interest (to the extent lawful) or premium, if any, shall be payable on demand.
The Exchange Securities may be issued only in exchange for a like
principal amount of Initial Securities pursuant to the Registered Exchange
Offer.
Initial Securities offered and sold in reliance on Rule 144A shall
be issued initially in the form of one or more global securities (the "U.S.
Global Security") and Initial Securities offered and sold in reliance on
Regulation S shall be issued initially in the form of one or more global
securities (the "Offshore Global Security" and together with the U.S. Global
Security, the "Global Securities"), each substantially in the form set forth in
Exhibit A hereof, deposited with the Trustee, as custodian of the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal
<PAGE>
25
amount of any Global Security may from time to time be increased or decreased by
adjustments made on the Register maintained by the Security Registrar, as herein
provided.
Initial Securities which are offered and sold to Institutional
Accredited Investors which are not QIBs (excluding Non-U.S. persons) shall be
issued in the form of permanent certificated Securities in registered form (the
"U.S. Physical Securities"). Securities issued pursuant to Section 2.14 in
exchange for interests in the U.S. Global Security shall be in the form of U.S.
Physical Securities. Securities issued in exchange for interests in the Offshore
Global Security pursuant to Section 2.14 shall be in the form of permanent
certificated Securities in registered form (the "Offshore Physical Securities"
and together with the U.S. Physical Securities, the "Physical Securities").
Physical Securities shall be in substantially the form set forth in
Exhibit A and Exhibit B hereof excluding the Global Securities Legend.
The principal of, premium, if any, and interest (and any Additional
Amounts) on Global Securities shall be payable to the Depositary or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Global Securities represented thereby. The principal of, premium, if any, and
interest on Physical Securities shall be payable at the office or agency of the
Company maintained for such purpose in The City of New York, or at such other
office or agency of the Company as may be maintained for such purpose; provided,
however, that at the option of the Company interest may be paid by check mailed
to the addresses of the persons entitled thereto as such addresses shall appear
on the Security Register.
During the period beginning on the later of the Issue Date and the
last date on which the Company or any Affiliate of the Company was the owner of
an Initial Security (or any Predecessor Security) and ending on the date three
years (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) from any such date, any
Initial Security issued or owned during the period set forth above, as the case
may be, and any Security issued upon registration of transfer of, or in exchange
for, or in lieu of, such Initial Security, shall be deemed a "Transfer
Restricted Security" and shall be subject to the restrictions on transfer
provided in the legend set forth on the face of the form of Initial Security in
Exhibit A; provided, however, that the term "Transfer Restricted Security" shall
not include (a) any Initial Security which is issued upon transfer of, or in
exchange for, any Security which is not a Transfer Restricted Security or (b)
any Initial Security as to which such restrictions on transfer have been
terminated in accordance with Section 2.5, (c) any Exchange Security issued
pursuant to the Registered Exchange Offer or (d) any Exchange Security covered
by a Shelf Registration Statement. Any Transfer Restricted Security shall bear
the legend set forth on the face of the Initial Security in Exhibit A (the
"Private Placement Legend").
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26
SECTION 2.2. Denominations. The Securities shall be issuable only in
registered form without coupons and only in denominations of US$1,000 and any
integral multiple thereof.
SECTION 2.3. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by the manual or facsimile
signature of any two of its Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, its President, one of its Executive Vice Presidents,
its Secretary, Assistant Secretary or General Counsel.
Securities bearing the manual or facsimile signature of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices on the date of such Securities.
At any time and from time to time upon or after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as
provided in this Indenture and not otherwise. On Company Order, the Trustee or
an authenticating agent shall authenticate for original issue Exchange
Securities in an aggregate principal amount not to exceed US$250,000,000;
provided that such Exchange Securities shall be issuable only upon the valid
surrender for cancellation of Initial Securities of a like aggregate principal
amount in accordance with the Registered Exchange Offer pursuant to the
Registration Rights Agreement. In each case, the Trustee shall be entitled to
receive an Officers' Certificate and an Opinion of Counsel of the Company that
it may reasonably request in connection with such authentication of Securities.
Such order shall specify the amount of Securities to be authenticated and the
date on which the original issue of Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
US$250,000,000 except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 2.1.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
A and Exhibit B hereto duly executed by the Trustee by manual signature of an
authorized representative, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder.
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27
In case the Company, pursuant to Article V, shall be consolidated,
amalgamated, merged with or into any other Person or shall convey, transfer or
lease substantially all of its properties and assets to any Person, and the
successor Person resulting from such consolidation, amalgamation or surviving
such merger, or into which the Company shall have been merged, or the Person
which shall have received a conveyance, transfer or lease as aforesaid, shall
have executed an indenture supplemental hereto with the Trustee pursuant to
Article V, any of the Securities authenticated or delivered prior to such
consolidation, amalgamation, merger, conveyance, transfer or lease may, from
time to time, at the request of the successor Person, be exchanged for other
Securities executed in the name of the successor Person with such changes in
terminology and form as may be appropriate, but otherwise in substance of like
tenor as the Securities surrendered for such exchange and of like principal
amount; and the Trustee, upon Company Order of the successor Person, shall
authenticate and deliver replacement Securities as specified in such request for
the purpose of such exchange. If such Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section 2.3 in exchange or substitution for or upon registration of
transfer of any Securities, such successor Person, at the option of the Holders
but without expense to them, shall provide for the exchange of all Securities at
the time Outstanding for Securities authenticated and delivered in such new
name.
The Trustee may appoint an authenticating agent to authenticate
Securities on behalf of the Trustee if directed to do so by a Company Order.
Each reference in this Indenture to authentication by the Trustee includes
authentication by each such agent. An authenticating agent has the same rights
as any Security Registrar or Paying Agent to deal with the Company and its
Affiliates.
If any of the Securities are to be issued in the form of one or more
Global Securities, then the Company shall execute and the Trustee shall
authenticate and deliver one or more Global Securities that (i) shall be in
minimum denominations of US$1,000 or integral multiples thereof, (ii) shall be
registered in the name of the Depositary for such Global Security or Securities
or the nominee of such Depositary, (iii) shall be delivered to the Trustee as
Securities Custodian for such Depositary and (iv) shall bear the Global
Securities legend in substantially the form set forth in Exhibit A and Exhibit
B.
SECTION 2.4. Temporary Securities. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities. Temporary
Securities may be printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as
<PAGE>
28
the Officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay but in no event
later than the date that the Registered Exchange Offer is consummated. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 4.19, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 2.5. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency designated pursuant to Section 4.19 being herein sometimes referred to as
the "Security Register") in which, subject to such reasonable regulations as the
Security Registrar may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee is hereby initially
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 4.19, the Company
shall, subject to the terms of this Indenture, execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denomination or
denominations, of a like aggregate principal amount.
At the option of the Holder, subject to the terms of this Indenture,
Securities in certificated form may be exchanged for other Securities of any
authorized denomination or denominations, of a like aggregate principal amount,
upon surrender of the Securities to be exchanged at such office or agency.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
If an Initial Security is a U.S. Physical Security, then as provided
in this Indenture and subject to the limitations herein set forth, the Holder,
provided it is a QIB, may exchange such Security for a book-entry security by
instructing the Trustee to arrange for such Initial Security to be represented
by a beneficial interest in a Global Security.
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29
All Securities issued upon any registration of transfer or exchange
of Securities including, without limitation, any exchange pursuant to the
Registered Exchange Offer, shall be the valid obligations of the Company,
evidencing the same indebtedness, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange and no such transfer or exchange shall constitute a repayment of any
obligation nor create any new obligations of the Company.
Every Security presented or surrendered for registration of
transfer, or for exchange or redemption shall (if so required by the Company or
the Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
Every Transfer Restricted Security shall be subject to the
restrictions on transfer set forth in Section 2.1 and Section 2.15 and shall
bear the Private Placement Legend and the Holder of each Transfer Restricted
Security, by such Holder's acceptance thereof, agrees to be bound by such
restrictions on transfer.
The restrictions imposed by Section 2.1 and Section 2.15 upon the
transferability of any particular Transfer Restricted Security shall cease and
terminate (a) in the case of an Offshore Global Security or an Offshore Physical
Security, on the 41st day after the Issue Date or (b) in the case of a U.S.
Global Security or a U.S. Physical Security, on (x) the later of November 26,
1999 or three years (or such shorter period of time as permitted by Rule 144(k)
under the Securities Act or any successor provision thereunder) after the later
of the Issue Date or the last date on which the Company or any Affiliate of the
Company was the owner of such Transfer Restricted Security (or any predecessor
of such Restricted Security) or (y) (if earlier) if and when such Restricted
Security has been sold pursuant to an effective registration statement under the
Securities Act or, unless the Holder thereof is an affiliate of the Company
within the meaning of Rule 144 (or such successor provision), transferred
pursuant to Rule 144 or Rule 904 under the Securities Act (or any successor
provision). Any Transfer Restricted Security as to which such restrictions on
transfer shall have expired in accordance with their terms or shall have
terminated may, upon surrender of such Transfer Restricted Security for exchange
to the Trustee or any transfer agent in accordance with the provisions of this
Section 2.5, be exchanged for a new Security, of like series, tenor and
aggregate principal amount, which shall not bear the restrictive legend required
hereby and shall thereafter be deemed not to be a Restricted Security for any
purpose under this Indenture. The Company shall inform the Trustee in writing of
the effective date of any registration statement registering any Transfer
Restricted Securities under the Securities Act.
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30
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 2.3, 2.4, 3.6, 4.6, 4.8 or
9.5 not involving any transfer.
The Company shall not be required (a) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of the Securities
selected for redemption under Section 3.2 and ending at the close of business on
the day of such mailing, or (b) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of Securities being redeemed in part.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Holder of
such Global Security (or its agent), and that ownership of a beneficial interest
in the Security shall be required to be reflected in a book-entry.
When Securities are presented to the Security Registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Securities of other authorized denominations, the Security Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met. To permit registrations of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Securities at the Security Registrar's request.
SECTION 2.6. Mutilated, Destroyed, Lost and Stolen Securities. If
(a) any mutilated Security is surrendered to the Trustee, or (b) the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Security, and there is delivered to the Company, each Subsidiary
Guarantor and the Trustee, such security or indemnity, in each case, as may be
required by them to save each of them harmless from any loss which any of them
may suffer if a Security is replaced, then, in the absence of notice to the
Company, any Subsidiary Guarantor or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and upon a Company
Order the Trustee shall authenticate and deliver, in exchange for any such
mutilated Security or in lieu of any such destroyed, lost or stolen Security, a
replacement Security of like tenor and principal amount, bearing a number not
contemporaneously outstanding.
Upon the issuance of any replacement Securities under this Section,
the Company may require the payment of a sum sufficient to cover any tax or
other
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31
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company and each Subsidiary Guarantor,
whether or not the destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and shall be entitled to all benefits of this Indenture
equally and proportionately with any and all other Securities duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.7. Payment of Interest; Interest Rights Preserved.
Interest, including any liquidated damages payable pursuant to the Registration
Rights Agreement relating to the Securities, on any Security (and any Additional
Amounts payable in respect thereof) which is payable, and is punctually paid or
duly provided for, on any interest payment date shall be paid to the person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the regular record date for such interest.
Any interest on any Security (and any Additional Amounts payable in
respect thereof) which is payable, but is not punctually paid or duly provided
for, on any interest payment date and interest (and any Additional Amounts
payable in respect thereof) on such defaulted interest at the then applicable
interest rate borne by the Securities, to the extent lawful (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
shall forthwith cease to be payable to the Holder on the regular record date;
and such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
special record date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of
<PAGE>
32
the persons entitled to such Defaulted Interest as provided in this
paragraph (a). Thereupon the Trustee shall fix a special record date for
the payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the proposed payment
and not less than 10 days after the receipt by the Trustee of the notice
of the proposed payment. The Trustee shall promptly notify the Company in
writing of such special record date. In the name and at the expense of the
Company, the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed,
first-class postage prepaid, to each Holder at its address as it appears
in the Security Register, not less than 10 days prior to such special
record date. Notice of the proposed payment of such Defaulted Interest and
the special record date therefor having been so mailed, such Defaulted
Interest shall be paid to the persons in whose names the Securities (or
their respective Predecessor Securities) are registered on such special
record date and shall no longer be payable pursuant to the following
subsection (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after written notice given
by the Company to the Trustee of the proposed payment pursuant to this
subsection (b), such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 2.8. Paying Agents; Discharge of Payment Obligations;
Indemnity of Holders. (a) The Company may from time to time appoint one or more
Paying Agents and may designate a Paying Agent as Principal Paying Agent under
this Indenture and the Securities. By its execution and delivery of this
Indenture, the Company hereby initially designates and appoints Chase Trust Bank
as Principal Paying Agent. Subject to Section 2.16, the Company may act as
Paying Agent.
(b) Unless the Company shall be acting as Paying Agent as provided
in Section 2.16, the Company shall, by 10:00 A.M. New York time, no later than
one Business Day prior to each interest payment date or principal payment date
on any Securities (whether on maturity, redemption or otherwise) (each, a
"Payment Date"), deposit with the Principal Paying Agent in immediately
available funds a sum sufficient to pay such principal, any premium, and
interest when so becoming due (including any Additional Amounts). The Company
shall cause the bank through which such payment is to be made to supply to the
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33
Principal Paying Agent by 10:00 A.M. (New York time) two Business Days prior to
the due date for any such payment an irrevocable confirmation (by tested telex
or authenticated SWIFT MT 100 Message) of its intention to make such payment.
The Principal Paying Agent shall arrange with all Paying Agents for the payment,
from funds furnished by the Company or any Subsidiary Guarantor to the Trustee
pursuant to this Indenture, of the principal, and premium, if any, and interest
(including Additional Amounts, if any) on the Securities and of the compensation
of such Paying Agents for their services as such. All Paying Agents will hold in
trust, for the benefit of Holders or the Trustee, all money held by such Paying
Agent for the payment of principal, or premium if any, of or interest on the
Securities and shall notify the Trustee of any default by the Company in making
any such payment. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed by it.
Upon complying with this Section 2.8 and the applicable provisions of Section
2.16, the Paying Agents shall have no further liability for the money delivered
to the Trustee.
(c) Any payment to be made in respect of the Securities or
Subsidiary Guarantees by the Company or any Subsidiary Guarantor to or to the
order of a Paying Agent shall be in satisfaction pro tanto of the obligations of
the Company under the Securities. The Company shall indemnify the Holders
against any failure on the part of any Paying Agent to pay any sum due in
respect of the Securities and shall pay such sum to the Trustee on demand. This
indemnity constitutes a separate and independent obligation from the other
obligations of the Company under the Securities, shall give rise to a separate
and independent cause of action, will apply irrespective of any waiver granted
by the Trustee and/or any holder of Securities and shall continue in full force
and effect despite any judgment, order, claim, or proof for a liquidated amount
in respect of any sum due under the Indenture, the Securities or any judgment or
order.
SECTION 2.9. Persons Deemed Owners. Prior to and at the time of due
presentment for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the person in whose name any Security is
registered in the Security Register as the owner of such Security for the
purpose of receiving payment of principal of, premium, if any, and (subject to
Section 2.7) interest on such Security and for all other purposes whatsoever,
whether or not such Security shall be overdue, and neither the Company, the
Trustee nor any agent of the Company or the Trustee shall be affected by notice
to the contrary.
SECTION 2.10. Cancellation. All Securities surrendered for payment,
redemption, registration of transfer or exchange shall be delivered to the
Trustee and, if not already cancelled, shall be promptly cancelled by it. The
Company and any Subsidiary Guarantor may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company or such Subsidiary Guarantor may
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34
have acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section 2.10,
except as expressly permitted by this Indenture. All cancelled Securities held
by the Trustee shall be destroyed and certification of their destruction
delivered to the Company unless by a Company Order the Company shall direct that
the cancelled Securities be returned to it. The Trustee shall provide the
Company a list of all Securities that have been cancelled from time to time as
requested by the Company.
SECTION 2.11. Computation of Interest. Interest on the Securities
shall be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 2.12. Legal Holidays. In any case where any interest payment
date, Redemption Date, date established for the payment of Defaulted Interest or
Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal, premium, if any, or interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the interest payment date, Redemption Date, date
established for the payment of Defaulted Interest or at the Stated Maturity, as
the case may be, and no interest shall accrue with respect to such payment for
the period from and after such interest payment date, Redemption Date, date
established for the payment of Defaulted Interest or Stated Maturity, as the
case may be, to the next succeeding Business Day.
SECTION 2.13. CUSIP and CINS Numbers. The Company in issuing the
Securities may use a "CUSIP" and/or a "CINS" number (if then generally in use),
and if so, the Trustee may use the CUSIP and CINS numbers in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP or CINS number printed in the notice or on the Securities,
and that reliance may be placed only on the other identification numbers printed
on the Securities. All Exchange Securities shall bear identical CUSIP numbers.
The Company shall promptly notify the Trustee in writing of any change in the
CUSIP or CINS number of either series of Securities.
SECTION 2.14. Book-Entry Provisions for Global Securities. (a) Each
Global Security shall (i) be registered in the name of the Depositary for such
Global Security or the nominee of such Depositary, (ii) be delivered to the
Trustee as Securities Custodian for such Depositary and (iii) bear the Global
Securities legend as set forth in Exhibit A and Exhibit B.
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35
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or shall impair, as between
the Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Security.
(b) Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the rules and procedures
of the Depositary and the provisions of Section 2.15. Beneficial owners may
obtain Physical Securities in exchange for their beneficial interests in a
Global Security upon request in accordance with the Depositary's and the
Security Registrar's procedures (x) in the case of the Offshore Global Security,
at any time on or after the 41st day following the Issue Date, and (y) in the
case of the U.S. Global Security, at any time. In addition, Physical Securities
shall be issued in exchange for a Global Security if (i) the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for a
Global Security or the Depositary ceases to be a "clearing agency" registered
under the Exchange Act and, in each case, a successor depository is not
appointed by the Company within 90 days of such notice or such cessation, as the
case may be or (ii) an Event of Default has occurred and is continuing with
respect to any Securities represented by a Global Security and Holders who hold
more than 25% in aggregate principal amount of the Securities at the time
outstanding represented by such Global Security advise the Trustee through the
Depositary in writing that the continuation of a book-entry system through the
Depositary (or a successor thereto) with respect to such Global Security is no
longer required and the Security Registrar has received a request from the
Depositary to issue Physical Securities.
(c) Any beneficial interest in one of the Global Securities that is
transferred to a person who takes delivery in the form of an interest in the
other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Security for as long as it remains such an interest.
(d) In connection with any transfer of a portion of the beneficial
interest in a Global Security to beneficial owners pursuant to subsection (b) of
this Section, the Security
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36
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of a Global Security in an amount equal to the principal amount
of the beneficial interest in a Global Security to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one or
more Physical Securities of like tenor and amount.
(e) In connection with the transfer of an entire Global Security to
beneficial owners thereof pursuant to subsection (b) of this Section, such
Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in such Global Security, an equal aggregate
principal amount of Physical Securities of authorized denominations.
(f) Any U.S. Physical Security delivered in exchange for an interest
in the U.S. Global Security pursuant to subsection (b) or subsection (d) of this
Section shall, except as otherwise provided by paragraph (a)(i)(x) or paragraph
(e) of Section 2.15, bear the Private Placement Legend.
(g) The registered holder of a Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
(h) QIBs that are beneficial owners of interests in a Global
Security may receive U.S. Physical Securities (which shall bear the Private
Placement Legend if required by Section 2.1) in accordance with the procedures
of the Depositary. In connection with the execution, authentication and delivery
of such Physical Securities, the Security Registrar shall reflect on its books
and records a decrease in the principal amount of the relevant Global Security
equal to the principal amount of the U.S. Physical Securities, and the Company
shall execute and the Trustee shall authenticate and deliver one or more U.S.
Physical Securities having an equal aggregate principal amount.
SECTION 2.15. Special Transfer Provisions. (a) Transfers to Non- QIB
Institutional Accredited Investors. The following provisions shall apply with
respect to the registration of any proposed transfer of a Transfer Restricted
Security to any Institutional Accredited Investor which is not a QIB (excluding
Non-U.S. persons):
(i) The Security Registrar shall register the transfer of any
Initial Security, whether or not such Security bears the Private Placement
Legend, if (x) the requested transfer is subsequent to a date which is
three years after the later of the Issue Date and the last date on which
the Company or any of its Affiliates was the
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37
owner of such Security or (y) the proposed transferee has delivered to the
Security Registrar a certificate substantially in the form of Exhibit C
hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security seeking to transfer a U.S.
Physical Security to another person, upon receipt by the Security
Registrar of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Security
Registrar's procedures therefor, the Security Registrar shall reflect on
its books and records the date and a decrease in the principal amount of
the U.S. Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S.
Physical Certificates of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Transfer Restricted
Security to a QIB (other than a Non-U.S. person);
(i) If the Security to be transferred consists of (x) U.S.
Physical Securities, the Security Registrar shall register the transfer if
such transfer is being made by a proposed transferor who has checked the
box provided for on the form of Initial Security stating, or has otherwise
advised the Company and the Security Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Initial Security stating, or has otherwise advised the Company and the
Security Registrar in writing, that it is purchasing the Initial Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account are QIBs within the
meaning of Rule 144A, and that it is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon the foregoing representations in
order to claim the exemption from registration provided by Rule 144A or
(y) an interest in the U.S. Global Security, the transfer of such interest
may be effected only through the book-entry system maintained by the
Depositary.
(ii) If the proposed transferee is an Agent Member, and the Initial
Security to be transferred consists of Physical Securities, upon receipt
by the Security Registrar of instructions given in accordance with the
Depositary's and the Security Registrar's procedures therefor, the
Security Registrar shall reflect on its books and records the date and an
increase in the principal amount of the U.S. Global Security
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38
in an amount equal to the principal amount of the Physical Securities to
be transferred, and the Trustee shall cancel the Physical Securities so
transferred.
(c) Transfers of Interests in the Offshore Global Security or
Offshore Physical Securities to U.S. Persons. The following provisions shall
apply with respect to any transfer of interests in the Offshore Global Security
or Offshore Physical Securities to U.S. Persons:
(i) prior to the removal of the Private Placement Legend from the
Offshore Global Security or Offshore Physical Securities pursuant to
Section 2.1 and Section 2.5, transfers by an owner of a beneficial
interest in the Offshore Global Security to a transferee who takes
delivery of such interest through the U.S. Global Security will be made
only upon receipt by the Trustee of a written certification from the
transferor in the form of Exhibit E to the effect that such transfer is
being made to a person who the transferor reasonable believes is a QIB
within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A; and
(ii) after such removal, the Security Registrar shall register the
transfer of any such Security without requiring any additional
certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Security to a
Non-U.S. Person:
(i) The Security Registrar shall register any proposed transfer to
any Non-U.S. Person if the Security to be transferred is a U.S. Physical
Security or an interest in the U.S. Global Security only upon receipt of a
certificate substantially in the form of Exhibit D from the proposed
transferor.
(ii) (x) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Security Registrar of (1) the documents required by paragraph (i) of this
paragraph (d) and (2) instructions in accordance with the Depositary's and
the Security Registrar's procedures, the Security Registrar shall reflect
on its books and records the date and a decrease in the principal amount
of the U.S. Global Security in an amount equal to the principal amount of
the beneficial interest in the U.S. Global Security to be transferred, and
(y) if the proposed transferee is an Agent Member, upon receipt by the
Security Registrar of instructions given in accordance with the
Depositary's and the Security Registrar's procedures, the Security
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the Offshore Global Security in an amount equal
to the principal amount of the U.S. Physical Securities or the U.S. Global
Security, as the case may be, to be transferred, and the Trustee shall
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39
cancel the Physical Security so transferred or decrease the principal
amount of the U.S. Global Security, as the case may be.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the Security
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Security Registrar shall deliver only Securities
that bear the Private Placement Legend unless either (i) the Private Placement
Legend is no longer required pursuant to Section 2.1 and Section 2.5, or (ii)
there is delivered to the Security Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(f) General. By its acceptance of any Security, or any beneficial
interest in any Global Security, bearing the Private Placement Legend, each
Holder of such Security or beneficial interest acknowledges the restrictions on
transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture. The Security Registrar shall not register a transfer of any
Security unless such transfer complies with the restrictions on transfer of such
Security set forth in this Indenture. In connection with any transfer of
Securities to an Institutional Accredited Investor, each such Holder or
beneficial owner agrees by its acceptance of the Securities to furnish the
Security Registrar or the Company such certifications, legal opinions or other
information as such Person may reasonably require to confirm that such transfer
is being made pursuant to an exemption from, or a transaction not subject to,
the registration requirements of the Securities Act; provided that the Security
Registrar shall not be required to determine (but may rely on a determination
made by the Company with respect to) the sufficiency of any such certifications,
legal opinions or other information.
The Security Registrar shall retain copies of all letters, notices
and other written communications received pursuant to Section 2.14 or this
Section 2.15. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Security Registrar.
SECTION 2.16. Money for Security Payments To be Held in Trust. If
the Company shall at any time act as its own Paying Agent, it shall, on or
before each due date of the principal of, premium, if any, or interest on, any
of the Securities, segregate and hold in trust for the benefit of the Holders
entitled thereto a sum sufficient to pay the principal, premium, if any, or
interest so becoming due until such sums shall be paid to such persons
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40
or otherwise disposed of as herein provided, and shall promptly notify the
Trustee of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company shall, on
the Business Day prior to each due date of the principal of, premium, if any, or
interest on, any Securities, deposit with a Paying Agent a sum in immediately
available funds sufficient to pay the principal, premium, if any, or interest so
becoming due in the manner set forth in Section 2.8, such sum to be held in
trust for the benefit of the Holders entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company shall
promptly notify the Trustee of such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company shall
cause each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee,
subject to the provisions of this Section 2.16, that such Paying Agent shall:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities in trust for the benefit of the
Holders entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company or any
Subsidiary Guarantors (or any other obligor upon the Securities) in the
making of any payment of principal of, premium, if any, or interest on the
Securities;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to their duties, rights and
liabilities of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such
Paying Agent shall be released from all further liability with respect to such
money.
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41
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Security and remaining unclaimed for two years after
such principal, premium, if any, or interest has become due and payable shall be
paid to the Company upon receipt of a Company Request therefor, or (if then held
by the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in 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 shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining shall be repaid to the Company.
SECTION 2.17 Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Security Registrar, the Company shall furnish to the Trustee, in writing 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 reasonably require of the names and addresses of
Securityholders.
SECTION 2.18 Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.6, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture, then on
and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
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42
ARTICLE III
Redemption
SECTION 3.1. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 or paragraph 6 of the Securities, it shall
notify the Trustee in writing of the redemption date and the principal amount of
Securities to be redeemed.
The Company shall give each notice to the Trustee provided for in
this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Company to the effect that such redemption will comply with
the conditions herein. If fewer than all the Securities are to be redeemed, the
record date relating to such redemption shall be selected by the Company and set
forth in the related notice given to the Trustee, which record date shall be not
less than 15 days after the date of such notice.
SECTION 3.2. Selection of Securities To Be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee shall
make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed. A copy of such notice shall be delivered to the Trustee.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
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(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to
be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed;
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities; and
(9) the paragraph of the Securities pursuant to which the Securities
are being redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.4. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date;
provided that if the redemption date is after a regular record date and on or
prior to the interest payment date, the accrued interest shall be payable to the
Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. By at least 10:00 a.m.
(New York City time) on the Business Day prior to the date on which any
principal of or interest on any Security is due and payable, the Company shall
deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying
Agent, shall segregate and hold in trust) money sufficient to pay the redemption
price of and accrued interest on all Securities to be redeemed on that date
other than Securities or portions of Securities called for redemption which are
owned by the Company or a Subsidiary and have been delivered by the Company or
such Subsidiary to the Trustee for cancellation.
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If the Company complies with the preceding paragraph, then, unless
the Company defaults in the payment of such redemption price, interest on the
Securities to be redeemed will cease to accrue on and after the applicable
redemption date, whether or not such Securities are presented for payment.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in a principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV
Covenants
SECTION 4.1. Payment of Securities. The Company shall promptly pay
the principal of and interest and any Additional Amounts payable in respect
thereof on the Securities on the dates and in the manner provided in the
Securities and in this Indenture. Principal and interest shall be considered
paid on the date due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture money sufficient to pay all principal, premium,
if any, and interest then due (and any Additional Amounts) and the Trustee or
the Paying Agent, as the case may be, is not prohibited from paying such money
to the Securityholders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law, deduct
or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.2. SEC Reports. (a) At its own expense, subject to Section
4.2(b), the Company shall supply without cost to each Holder of the Securities
and file with the Trustee within fifteen days after the Company is required to
file the same with the Commission, copies of the annual reports and quarterly
reports and of the information, documents and other reports which the Company
may be required to file with the Commission pursuant to Section 13(a), 13(c) or
15(d) of the Exchange Act. The Company shall also comply with the other
provisions of Section 314(a) of the Trust Indenture Act.
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(b) Whether or not the Company has a class of securities registered
under the Exchange Act, following any Exchange Offer or the effectiveness of any
Shelf Registration Statement, the Company shall furnish without cost to each
Holder of Securities and file with the Commission (whether or not the Company is
a public reporting company at the time), the Trustee and the Initial Purchasers:
(i) within 140 days after the end of each fiscal year of the Company, annual
reports on Form 20-F (or any successor form) containing the information required
to be contained therein (or required in such successor form); (ii) within 60
days after the end of each of the first three fiscal quarters of each fiscal
year, reports on Form 6-K (or any successor form) containing substantially the
same information required to be contained therein; and (iii) promptly from time
to time after the occurrence of an event required to be therein reported, such
other reports on Form 6-K (or any successor form) containing substantially the
same information required to be contained in Form 8-K (or required in any
successor form). Each of the reports shall be prepared in accordance with U.S.
GAAP consistently applied and shall be prepared in accordance with the
applicable rules and regulations of the Commission. Prior to the effectiveness
of the Exchange Offer Registration Statement (as defined in the Registration
Rights Agreement) with the Commission, the Company shall file with the Trustee
and provide the Initial Purchasers all of the information that would have been
required to have been filed with the Commission pursuant to clauses (i), (ii)
and (iii) of this Section 4.2(b). Each report pursuant to this Section 4.2(b)
shall be prepared in accordance with U.S. GAAP consistently applied, shall
include the amounts of EBITDA and adjusted EBITDA for all periods covered by
such report and shall be prepared in accordance with the applicable rules and
regulations of the Commission. The Company shall use its reasonable best efforts
to schedule, disseminate in a customary manner for public companies information
concerning, and conduct a conference call for Holders to discuss with
appropriate senior officers of the Company the results of operating and
financial conditions of the Company within 30 days of filing any reports
described in clause (i) and (ii) with the Commission.
(c) At any time when the Company is not subject to Section 13 or
15(d) of the Security Exchange Act of 1934, upon the request of a Holder of a
Security, the Company shall promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto) to such Holder or to a prospective
purchaser of such Security designated by such Holder, as the case may be, in
order to permit compliance by such Holder with Rule 144A under the Securities
Act.
SECTION 4.3. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness, and the Company shall not issue any
Disqualified Stock; provided, however, that the Company and any Restricted
Subsidiary may Incur Indebtedness, and the Company may issue shares of
Disqualified Stock, if on the date thereof the Indebtedness to Annualized
Operating Cash Flow Ratio of the Company would have been less than or equal to
(i) 6.5 to
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46
1.0 in the case of Indebtedness Incurred prior to November 26, 1999 and (ii) 6.0
to 1.0 in the case of Indebtedness Incurred on and after November 26, 1999, in
each case determined on a pro forma basis.
(b) Notwithstanding Section 4.3(a), the Company and its Restricted
Subsidiaries may Incur the following Indebtedness: (i) Indebtedness of the
Company or any Restricted Subsidiary under any Senior Credit Facility or the
Abril Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed $50.0 million; (ii) Indebtedness of the Company to any
Restricted Subsidiary and Indebtedness of a Restricted Subsidiary to the Company
or another Restricted Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to another Restricted Subsidiary) will be deemed,
in each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof; (iii) Indebtedness represented by the Securities (including the
Subsidiary Guarantees); (iv) Indebtedness outstanding on the Issue Date (other
than Indebtedness described in clause (i), (ii) or (iii) of this Section 4.3(b);
(v) Refinancing Indebtedness in respect of Indebtedness of the Company or any
Restricted Subsidiary Incurred pursuant to clauses (i) through (iv) above, this
clause (v), or clause (xiv) below in a principal amount (or, for original issue
discount Indebtedness, the accreted principal thereof) so refinanced; (vi)
Hedging Obligations consisting of Interest Rate Agreements and Currency
Agreements related to Indebtedness otherwise permitted to be Incurred pursuant
to this Indenture or otherwise entered into in the ordinary course of business,
provided that in each case the notional amount shall not exceed the underlying
obligations or assets; (vii) Guarantees by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the Incurrence of
such Indebtedness or obligations by such Restricted Subsidiary is permitted
under the terms of the Indenture; (viii) Indebtedness of Galaxy Brasil in an
aggregate principal amount at any one time outstanding not to exceed the lesser
of (A) an amount equal to the sum of (I) the product of (1) $480.0 multiplied by
(2) the number of Galaxy Brasil Subscribers at the date of Incurrence plus (II)
$20 million and (B) $130.0 million; (ix) Indebtedness of any Special Restricted
Subsidiary if, after giving effect to such Incurrence, the ratio of (A) the
aggregate principal amount of all Indebtedness of such Special Restricted
Subsidiary outstanding as of the date of determination to (B) the total
shareholders' equity (excluding any retained earnings or accumulated deficit) of
such Special Restricted Subsidiary as of the date of determination is less than
or equal to 2:1; (x) Indebtedness of the Company represented by Subordinated
Shareholder Loans in an aggregate principal amount at any one time outstanding
not to exceed $100.0 million; (xi) Indebtedness consisting of performance and
other similar bonds and reimbursement obligations Incurred in the ordinary
course of business securing the performance of contractual, franchise or license
obligations of the Company or a Restricted Subsidiary, or in respect of a letter
of credit obtained to secure such performance; (xii) Indebtedness arising from
agreements providing for indemnification,
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47
adjustment of purchase price or similar obligations, or from Guarantees or
letters of credit, surety bonds or performance bonds securing any obligations of
the Company or any Restricted Subsidiary pursuant to such agreements, Incurred
in connection with any Asset Disposition; (xiii) Indebtedness of the Company
represented by the SurFin Guarantee in an aggregate principal amount at any one
time outstanding not to exceed $25.0 million; (xiv) Indebtedness of TVA Sistema
under the EximBank Credit Agreement in an aggregate principal amount at any one
time outstanding not to exceed $30.0 million; (xv) Indebtedness of the Company
represented by the Put Promissory Notes; (xvi) Indebtedness of Galaxy Brasil in
an aggregate principal amount at any one time outstanding not to exceed $25.0
million; and (xvii) other Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of the Company then outstanding (other than
Indebtedness permitted by Section 4.3(a) or Section 4.3(b)(i) through (xvi))
does not exceed $50.0 million.
SECTION 4.4. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) except (1) dividends or
distributions payable in its Capital Stock (other than Disqualified Stock) and
(2) dividends or distributions payable solely to the Company or another
Restricted Subsidiary (and, if such Restricted Subsidiary is not a Wholly-Owned
Subsidiary, to its other stockholders on a pro rata basis), (ii) purchase,
redeem, retire or otherwise acquire for value any Capital Stock (including
options or warrants to acquire such Capital Stock) of the Company or any
Restricted Subsidiary, (iii) purchase, repurchase, redeem, prepay interest,
defease or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment, scheduled interest payment date or scheduled sinking fund
payment, any Subordinated Obligations, or make any cash interest payment on
Subordinated Shareholder Loans or (iv) make any Investment (other than a
Permitted Investment) in any Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement, interest
payment or Investment being herein referred to as a "Restricted Payment"), if at
the time the Company or such Restricted Subsidiary makes such Restricted
Payment: (x) after giving effect to such Restricted Payment, a Default shall
have occurred and be continuing (or would result therefrom); or (y) the Company
could not incur at least an additional $1.00 of Indebtedness under Section
4.3(a); or (z) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared (the amount so expended, if other than in cash, to
be determined in good faith by the Board of Directors, whose determination shall
be conclusive and evidenced by a resolution of the Board of Directors) or made
subsequent to the Issue Date would exceed the sum of: (A) an amount equal to the
Company's Cumulative Operating Cash Flow less 1.6 times the Company's Cumulative
Consolidated Interest Expense; plus (B) the aggregate Net Cash Proceeds received
by the Company from the issue or sale of its Capital Stock (other than
Disqualified Stock) or other cash contributions to its capital subsequent to the
Issue Date (other than an issuance or sale to
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48
a Subsidiary of the Company or an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries); plus (C) the amount by
which Indebtedness of the Company is reduced on the Company's balance sheet upon
conversion or exchange (other than by a Restricted Subsidiary of the Company)
subsequent to the Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash or other property distributed by the Company upon
such conversion or exchange); and plus (D) in the case of the disposition or
repayment of any Investment constituting a Restricted Payment other than an
Investment made pursuant to Section 4.4(b)(v) made after the Issue Date, an
amount equal to the lesser of the return of capital with respect to such
Investment and the cost of such Investment, in either case, less the cost of the
disposition of such Investment. For purposes of determining the amount expended
for Restricted Payments, cash distributed shall be valued at the face amount
thereof and property or services distributed or transferred other than cash
shall be valued at its Fair Market Value.
(b) So long as there is no Default or Event of Default continuing,
the provisions of Section 4.4(a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company or
Capital Stock of any Restricted Subsidiary made by exchange for, or out of the
Net Cash Proceeds from a substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, Capital Stock of the Company (other
than Disqualified Stock) or any purchase of Capital Stock made with Put
Promissory Notes; provided, however, that (A) such purchase or redemption shall
be excluded in the calculation of the amount of Restricted Payments and (B) the
Net Cash Proceeds from such sale shall be excluded from the calculation of
amounts under clause (B) of Section 4.4(a); (ii) any purchase or redemption of
Subordinated Obligations of the Company made by exchange for, or out of the
proceeds from a substantially concurrent sale of, Subordinated Obligations of
the Company; provided, however, that (A) the final maturity date of such
Subordinated Obligations, determined as of the date of Incurrence, occurs not
earlier than the Stated Maturity of the Securities and (B) the Average Life of
such Subordinated Obligations is equal to or greater than the Average Life of
the Subordinated Obligations being purchased or redeemed; and provided, further,
that such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments; (iii) dividends paid within 60 days after the
date of declaration if at such date of declaration such dividend would have
complied with this provision; provided, however, that such dividends shall be
included in the calculation of the amount of Restricted Payments; (iv)
Investments in Galaxy Latin America or its Affiliates made subsequent to the
Issue Date in an aggregate amount at any time outstanding not to exceed $15.0
million; (v) Investments in a Permitted Business financed with the net proceeds
of the offering of the Securities pursuant to the Offering Memorandum; and (vi)
Minority Investments made subsequent to the Issue Date constituting a Restricted
Payment by the Company or any Restricted Subsidiary in any
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49
Person that operates principally, or has been formed to operate principally, a
Permitted Business in an aggregate amount at any time outstanding not to exceed
$45.0 million.
SECTION 4.5. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, create or permit to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligation owed to the
Company or another Restricted Subsidiary of the Company, (ii) make any
Investment in the Company or another Restricted Subsidiary of the Company or
(iii) transfer any of its property or assets to the Company or another
Restricted Subsidiary of the Company; except: (A) any encumbrance or restriction
pursuant to an agreement in effect on the Issue Date; (B) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by a Restricted Subsidiary prior to the
date on which such Restricted Subsidiary was acquired by the Company (other than
Indebtedness Incurred as consideration in, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary was acquired
by the Company) and outstanding on such date; (C) any encumbrance or restriction
with respect to a Restricted Subsidiary pursuant to an agreement effecting a
refinancing of Indebtedness Incurred pursuant to an agreement referred to in
clauses (A) or (B) or this clause (C) or contained in any amendment to an
agreement referred to in clauses (A) or (B) or this clause (C); provided,
however, that the encumbrances and restrictions contained in any such
refinancing agreement or amendment are no less favorable to the Holders of the
Securities than encumbrances and restrictions contained in such agreements; (D)
any such customary encumbrance or restriction contained in a security document
creating a Lien permitted under this Indenture to the extent relating to the
property or asset subject to such Lien following a default in respect of the
applicable obligation; (E) in the case of clause (iii), any encumbrance or
restriction (1) that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is subject to a lease, license, or
similar contract, or (2) contained in security agreements securing Indebtedness
of a Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such security agreements; (F)
any restriction with respect to a Restricted Subsidiary imposed pursuant to an
agreement in effect for the sale or disposition thereof and the duration of
which does not exceed 60 days; or (G) any encumbrance or restriction contained
in an agreement pursuant to which Galaxy Brasil Incurs Indebtedness in
compliance with the terms of this Indenture, provided, however, that the terms
of such encumbrance or restriction are no more restrictive than those contained
in the Equipment Agreements as they exist on the Issue Date.
SECTION 4.6. Limitation on Sales of Assets and Subsidiary Stock. (a)
The Company shall not, and shall not permit any Restricted Subsidiary to, make
any Asset
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50
Disposition, unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the Fair Market Value of the shares
and assets subject to such Asset Disposition, (ii)(A) at least 75.0% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents or (B) at least 75.0% of the
consideration thereof received by the Company or such Restricted Subsidiary
consists of assets used in connection with a Permitted Business; and (iii) an
amount equal to 100.0% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such Restricted Subsidiary, as the case may be) (A)
first, to the extent the Company elects (or is required by the terms of any
senior Indebtedness of the Company or Indebtedness of a Restricted Subsidiary),
to prepay, repay or purchase such senior Indebtedness, or such Indebtedness of a
Restricted Subsidiary (in each case other than Indebtedness owed to the Company
or an Affiliate of the Company) within 365 days from the later of the date of
such Asset Disposition or the receipt of such Net Available Cash; (B) second, to
the extent of the balance of Net Available Cash after application in accordance
with clause (A), to the extent the Company or such Restricted Subsidiary elects,
to reinvest in Additional Assets (including by means of an Investment in
Additional Assets by a Restricted Subsidiary with Net Available Cash received by
the Company or another Restricted Subsidiary) within 365 days from the later of
the date of such Asset Disposition or the receipt of such Net Available Cash;
(C) third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B) ("Excess Proceeds"), to make
an offer ("Asset Sale Offer") to purchase Securities pursuant and subject to the
conditions of this Indenture to the Holders at a purchase price of 100.0% of the
principal amount thereof plus accrued and unpaid interest to the purchase date,
and (D) fourth, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), for general corporate
purposes. Notwithstanding the foregoing provisions, the Company and its
Restricted Subsidiaries shall not be required to apply any Net Available Cash in
accordance herewith except to the extent that the aggregate Net Available Cash
from all Asset Dispositions which are not applied in accordance with this
covenant at any time exceed $10 million. Upon completion of any Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
For the purposes of this covenant, the following will be deemed to
be cash or Cash Equivalents: (i) the assumption of Indebtedness (other than
Disqualified Stock) of the Company or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition and (ii) securities
received by the Company or any Restricted Subsidiary of the Company from the
transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash at its face value.
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51
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to Section 4.6(a)(iii)(C), the Company will be required
to purchase Securities tendered pursuant to an offer by the Company for the
Securities at a purchase price of 100.0% of their principal amount plus accrued
interest to the purchase date in accordance with the procedures (including
prorating in the event of oversubscription) set forth in Section 4.6(c). If the
aggregate purchase price of the Securities tendered pursuant to the offer is
less than the Net Available Cash allotted to the purchase of the Securities, the
Company will apply the remaining Net Available Cash in accordance with Section
4.6(a)(iii)(D).
(c) (1) Promptly, and in any event within 10 days after the Company
is required to make an Asset Sale Offer, the Company shall deliver to the
Trustee and send, by first-class mail to each Holder, a written notice stating
that the Holder may elect to have his Securities purchased by the Company either
in whole or in part (subject to prorating as hereinafter described in the event
the Asset Sale Offer is oversubscribed) in integral multiples of $1,000 of
principal amount, at the applicable purchase price. The notice shall specify a
purchase date not less than 30 days nor more than 60 days after the date of such
notice (the "Purchase Date").
(2) Not later than the date upon which such written notice of an
Asset Sale Offer is delivered to the Trustee and the Holders, the Company shall
deliver to the Trustee an Officers' Certificate setting forth (i) the amount of
the Asset Sale Offer (the "Offer Amount"), (ii) the allocation of the Net
Available Cash from the Asset Dispositions as a result of which such Asset Sale
Offer is being made and (iii) the compliance of such allocation with the
provisions of Section 4.6(a). Upon the expiration of the period (the "Offer
Period") for which the Asset Sale Offer remains open, the Company shall deliver
to the Trustee for cancellation the Securities or portions thereof which have
been properly tendered to and are to be accepted by the Company. The Trustee
shall, on the Purchase Date, mail or deliver payment to each tendering Holder in
the amount of the purchase price of the Securities tendered by such Holder to
the extent such funds are available to the Trustee.
(3) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice prior to the expiration of the
Offer Period. Each Holder will be entitled to withdraw its election if the
Trustee or the Company receives, not later than one Business Day prior to the
expiration of the Offer Period, a telegram, telex, facsimile transmission or
letter from such Holder setting forth the name of such Holder, the principal
amount of the Security or Securities which were delivered for purchase by such
Holder and a statement that such Holder is withdrawing his election to have such
Security or Securities purchased. If at the expiration of the Offer Period the
aggregate principal amount of
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52
Securities surrendered by Holders exceeds the Offer Amount, the Company shall
select the Securities to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Securities in
denominations of $1,000, or integral multiples thereof, shall be purchased).
Holders whose Securities are purchased only in part will be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(d) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.6. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.6, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.7. Limitation on Affiliate Transactions. (a) The Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, enter into or conduct any transaction (including the purchase, sale,
lease or exchange of any property, or the rendering of any service) with any
Affiliate (an "Affiliate Transaction") unless: (i) the terms of such Affiliate
Transaction are no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an Affiliate;
(ii) in the event such Affiliate Transaction involves an aggregate amount in
excess of $2.0 million, the terms of such transaction have been approved by a
majority of the members of the Board of Directors and by a majority of the
members of such Board having no personal stake in such Affiliate Transaction, if
any; and (iii) in the event such Affiliate Transaction involves an aggregate
amount in excess of $10.0 million, the Company has received a written opinion
from an independent investment banking firm of nationally recognized standing in
the United States that such Affiliate Transaction is fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial point of view;
provided that, in the case of an Affiliate Transaction described in clause (ii)
or (iii) of this Section 4.7(a), the Company shall promptly after consummation
thereof deliver an Officers' Certificate to the Trustee certifying as to the
compliance by the Company with clauses (i) and (ii) or (i) and (iii) as the case
may be, of this Section 4.7(a); and provided, further, that in the case of an
Affiliate Transaction with Galaxy Latin America, the Company or such Restricted
Subsidiary shall only be required to obtain the opinion described in clause
(iii) of this Section 4.7(a) if such Affiliate Transaction involves an aggregate
amount in excess of $20.0 million.
(b) The provisions of Section 4.7(a) will not apply to: (i)
transactions with or among the Company and/or any of the Restricted
Subsidiaries; provided in any such case, no officer, director or beneficial
holder of 5% or more of any class of Capital Stock of the
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53
Company shall beneficially own any Capital Stock of any such Restricted
Subsidiary, (ii) transactions between the Company and any Restricted Subsidiary
that are solely for the benefit of the Company or a Subsidiary Guarantor, (iii)
transactions between or among Unrestricted Subsidiaries, (iv) any dividend
permitted by Section 4.4, (v) directors' fees, indemnification and similar
arrangements, officers' indemnification, employee stock option or employee
benefit plans, employee salaries and bonuses or legal fees paid or created in
the ordinary course of business and (vi) transactions and arrangements pursuant
to agreements in existence on the Issue Date, including, without limitation, the
exercise of registration rights pursuant to the Stockholders' Agreement. In
addition, Section 4.7(a) shall not apply to: (x) Indebtedness Incurred by the
Company from Abril under the Abril Credit Facility or from shareholders pursuant
to Subordinated Shareholder Loans and (y) any transaction entered into in
connection with the reorganization of the Company's ownership structure pursuant
to which certain of the Company's stockholders have agreed to exchange all of
their respective shares in the Company for a corresponding number of shares of a
newly-formed Brazilian corporation which would become an 80% stockholder of the
Company and pursuant to which Hearst/ABC Video Services II would remain a 20%
stockholder of the Company, which would be reorganized as a Brazilian limitada.
SECTION 4.8. Change of Control. (a) Upon the occurrence of a Change
of Control, each Holder shall have the right to require that the Company
repurchase all or any part of such Holder's Securities at a purchase price in
cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of Holders of
record on the relevant record date to receive interest on the relevant interest
payment date), such repurchase to be made in accordance with Section 4.8(b).
(b) Within 30 days following any Change of Control, unless the
Company has mailed a redemption notice with respect to all the outstanding
Securities in connection with such Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on a record date to receive interest on the
relevant interest payment date);
(2) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(3) the procedures determined by the Company, consistent with this
Section, that a Holder must follow in order to have its Securities
purchased.
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54
(c) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Each Holder will be entitled to withdraw its
election if the Company receives, not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter from such
Holder setting forth the name of such Holder, the principal amount of the
Security or Securities which were delivered for purchase by such Holder and a
statement that such Holder is withdrawing his election to have such Security or
Securities purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section shall be delivered to the Trustee for cancellation, and the
Company shall pay the purchase price plus accrued and unpaid interest, if any,
to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.8. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.8, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 4.9. Limitation on Liens. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, create or permit to
exist any Lien, other than Permitted Liens, on any of its property or assets
(including Capital Stock of any Restricted Subsidiary), whether owned on the
Issue Date or thereafter acquired, securing any obligation, unless the
obligations due under this Indenture and the Securities and the Subsidiary
Guarantees are secured, on an equal and ratable basis (or on a senior basis, in
the case of Indebtedness subordinated in right of payment to the Securities or
the Subsidiary Guarantees), with the obligations so secured.
SECTION 4.10. Limitation on Sales of Capital Stock of Restricted
Subsidiaries. The Company will not (i) sell, and will not permit any Restricted
Subsidiary of the Company to issue, sell or transfer, any Capital Stock of a
Restricted Subsidiary or (ii) permit any Person (other than the Company or a
Wholly-Owned Restricted Subsidiary) to acquire Capital Stock of any Restricted
Subsidiary, if in either case as the result thereof such Restricted Subsidiary
would no longer be a Restricted Subsidiary of the Company, except for (A)
Capital Stock issued, sold or transferred to the Company or a Wholly-Owned
Restricted Subsidiary and (B) Capital Stock issued by a Person prior to the time
(1) such Person becomes a Restricted Subsidiary, (2) such Person merges with or
into a Restricted Subsidiary or (3) a Restricted Subsidiary merges with or into
such Person, provided, that such Capital Stock was not issued by such Person in
anticipation of the type of transaction contemplated
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55
by subclause (1), (2) or (3). This Section 4.10 shall not prohibit the Company
or any of its Restricted Subsidiaries from selling or otherwise disposing of all
of the Capital Stock of any Restricted Subsidiary; provided that any such sale
constitutes an Asset Disposition for purposes of, and the Net Cash Proceeds from
any such sale are applied in accordance with, Section 4.6.
SECTION 4.11. Limitation on Designations of Special Restricted
Subsidiaries. The Company may designate any Restricted Subsidiary as a "Special
Restricted Subsidiary" under this Indenture (a "Special Designation") if such
Special Restricted Subsidiary engages in, or will engage principally in, a
Permitted Business in a Newly-Licensed Service Area. Such Special Designation
may be revoked at any time if all Indebtedness of such Special Restricted
Subsidiary that is outstanding immediately following such revocation would, if
Incurred at such time, have been permitted to be Incurred for all purposes under
this Indenture. All Special Designations and revocations thereof must be
evidenced by Board Resolutions of the Company delivered to the Trustee
certifying compliance with the foregoing provisions. In any event, a Special
Restricted Subsidiary will remain a Restricted Subsidiary for all purposes of
this Indenture, except that a Special Restricted Subsidiary shall be treated as
an Unrestricted Subsidiary for purposes of calculating Operating Cash Flow,
Consolidated Income Tax Expense, Consolidated Interest Expense and Consolidated
Net Income.
SECTION 4.12. Limitation on Designations of Unrestricted
Subsidiaries. (a) The Board of Directors may designate any Subsidiary of the
Company (other than a Subsidiary Guarantor, but including any newly acquired or
newly formed Subsidiary) as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation;
(ii) the Company would be permitted under this Indenture to make an
Investment under all applicable provisions of Section 4.4 at the time of
Designation (assuming the effectiveness of such Designation) in an amount
(the "Designation Amount") equal to the Fair Market Value of such
Subsidiary on such date; and
(iii) such Subsidiary and its Subsidiaries own no Capital Stock or
Indebtedness of, and hold no Lien on any property of, the Company or any
other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
so designated.
(b) In addition, the Company may revoke any Designation of a
Subsidiary as an Unrestricted Subsidiary (a "Revocation") if:
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56
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
All Designations and Revocations shall be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
SECTION 4.13. Limitations on Investments in Unrestricted
Subsidiaries. The Company will not make, and will not permit its Restricted
Subsidiaries to make, any Investment in Unrestricted Subsidiaries if, at the
time thereof, such Investment, together with the aggregate amount of all
Investments previously made (other than Permitted Investments), would exceed the
amount of Restricted Payments then permitted to be made pursuant to Section 4.4.
Any Investments in Unrestricted Subsidiaries permitted to be made pursuant to
this covenant (i) will be treated as a Restricted Payment in calculating the
amount of Restricted Payments made by the Company and (ii) may be made in cash
or property.
SECTION 4.14. Business of the Company; Restrictions on Transfers of
Existing Business. The Company will not, and will not permit any of the
Restricted Subsidiaries to, be principally engaged in any business or activity
other than a Permitted Business. In addition, the Company and the Restricted
Subsidiaries will not be permitted to, directly or indirectly, transfer to any
Unrestricted Subsidiary (i) any of the licenses, permits or authorizations used
in the Permitted Business of the Company and the Restricted Subsidiaries on the
Issue Date or (ii) any material portion of the "property and equipment" (as such
term is used in the Company's consolidated financial statements) of the Company
or any Restricted Subsidiary used in the licensed service areas of the Company
and the Restricted Subsidiaries as they exist on the Issue Date; provided that
the Company and the Restricted Subsidiaries may make Asset Dispositions in
compliance with Section 4.6 and pledge property and assets to the extent
permitted by Section 4.9.
SECTION 4.15. Payment of Additional Amounts. (a) All payments made
by the Company or any Subsidiary Guarantor under or with respect to the
Securities or any Guarantee shall be made free and clear of and without
withholding or deduction for or on account of any present or future Taxes
imposed or levied by or on behalf of any Taxing Authority of the Federative
Republic of Brazil or of Japan, unless the Company or such Subsidiary Guarantor,
as the case may be, is required to withhold or deduct any amount for or on
account of Taxes by law or by the interpretation or administration thereof. If
the Company or any Subsidiary Guarantor is required to withhold or deduct any
amount for or on account of Taxes imposed by a Taxing Authority of the
Federative Republic of Brazil or
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57
of Japan from any payment made under or with respect to the Securities or any
Guarantee of such Subsidiary Guarantor, the Company or such Subsidiary
Guarantor, as the case may be, shall pay such additional amounts ("Additional
Amounts") as may be necessary so that the net amount received by each Holder of
Securities (including Additional Amounts) after such withholding or deduction
shall not be less than the amount the Holder would have received if such Taxes
had not been withheld or deducted. No such Additional Amounts shall be payable
with respect to a payment made to a Holder of Securities (an "Excluded Holder")
with respect to any Tax which would not have been imposed, payable or due: (i)
but for the fact that the Holder (or where the Holder is an estate, nominee,
trust, partnership or corporation, any fiduciary, settlor, beneficiary, member
or shareholder) is or was a domiciliary, national or resident of, engages in or
engaged in business in, maintains or maintained a permanent establishment or
physically present in, Brazil or Japan or otherwise has some present or former
connection with Brazil or Japan; (ii) but for the failure to comply with a
request by the Company or any Subsidiary Guarantor to satisfy any certification,
identification or other reporting requirements, whether imposed by statute,
treaty, regulation or administrative practices, concerning nationality,
residence or connection with Brazil or Japan; or (iii) if, where presentation is
required, the presentation for payment had occurred within 30 days after the
date such payment was due and payable or was provided for, whichever is later.
Notwithstanding the preceding sentence, the limitations on the Company's
obligation to pay Additional Amounts set forth in clause (ii) of the preceding
sentence shall not apply if a certification, identification, or other reporting
requirement described in clause (ii) would be materially more onerous, in form,
in procedure or in the substance of information disclosed, to such Holders or
beneficial owners (taking into account any relevant differences between U.S. and
Brazilian law, regulation or administrative practice) than comparable
information or other reporting requirements imposed under U.S. tax law,
regulation (including proposed regulations) and administrative practice or other
reporting requirements imposed as of the date of the Offering Memorandum under
U.S. tax law, regulation (including proposed regulations) and administration
practice (such as IRS Forms 1001, W-8 and W-9). The obligation to pay Additional
Amounts in respect of Taxes shall not apply to (a) any estate, inheritance,
gift, sales, transfer, personal property or any similar Tax or (b) any Tax which
is payable otherwise than by deduction or withholding from payments made under
or with respect to the Securities. The Company or the Subsidiary Guarantor, as
applicable, shall (i) make such withholding or deduction, (ii) remit the full
amount deducted or withheld to the relevant authority (the "Taxing Authority")
in accordance with applicable law, (iii) use their best efforts to obtain
certified copies of tax receipts evidencing the payment of any Taxes so deducted
or withheld from each Taxing Authority imposing such Taxes and (iv) in the event
that such certified copies of tax receipts are obtained, promptly send such
certified copies of tax receipts to the Paying Agent for prompt forwarding to
any holder that has made a written demand therefor of the Paying Agent. The
Company and the Subsidiary Guarantor, as applicable, shall use their best
efforts to obtain certified copies of tax receipts evidencing the payment of any
Taxes so
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58
deducted or withheld from each Taxing Authority imposing such Taxes. In the
event that such a receipt is obtained, a Holder may obtain such a certified copy
by providing written demand therefor to the Paying Agent. The Paying Agent shall
contact the Company or such Subsidiary Guarantor, which shall provide such
certified copy to the Paying Agent for prompt forwarding to the Holder, the
Company or the Subsidiary Guarantor and shall attach to each certified copy a
certificate stating (x) that the amount of withholding tax evidenced by the
certified copy was paid in connection with payments in respect of the principal
amount of Securities then outstanding and (y) the amount of such withholding tax
per U.S.$1,000 of principal amount of the Securities. If, notwithstanding the
Company's or such Subsidiary Guarantor's efforts to obtain such receipts, the
same are not obtainable, the Company or such Subsidiary Guarantor will provide
to the Paying Agent other evidence of such payments by the Company or such
Subsidiary Guarantor.
(b) The Company or such Subsidiary Guarantor, as the case may be,
shall indemnify and hold harmless each Holder of Securities (other than an
Excluded Holder) and upon written request of each holder of Securities (other
than an Excluded Holder), reimburse each such Holder, for the amount of (i) any
such Taxes so levied or imposed and paid by such Holder as a result of payments
made under or with respect to the Securities, (ii) any liability (including
penalties, interest and expenses) arising under or with respect to the foregoing
clause (i), and (iii) any Taxes so levied or imposed with respect to any
reimbursement under the foregoing clauses (i) or (ii), so that the net amount
received by such Holder after such reimbursement shall not be less than the net
amount the Holder would have received if Taxes on such reimbursement had not
been imposed, but excluding any Taxes on such Holder's net income. Neither
Additional Amounts nor amounts required to be reimbursed under the preceding
sentence shall be payable for or on account of (A) any estate, inheritance,
gift, sale, transfer, personal property or similar Taxes; or (B) any Taxes that
are imposed or withheld by reason of the failure by such holder to comply within
45 days of a written request of the Company or the Subsidiary Guarantor
addressed to such holder or (if it is not possible for the Company or the
Subsidiary Guarantor to furnish such request at a time that would allow at least
45 days for compliance) such shorter period reasonable in the circumstances as
may be necessary to enable the Company or the Subsidiary Guarantor to comply
with requests from any Taxing Authority: (x) to provide information concerning
the nationality, residence or identity of such holder; or (y) to make any
declaration or other similar claim or satisfy any information or reporting
requirement, which, in the case of either clause (x) or (y) above, is required
or imposed by statute, treaty, regulation or administrative practice of a Taxing
Authority as a precondition to exemption from all or any part of such Taxes.
(c) At least 30 days prior to each date on which any payment under
or with respect to the Securities is due and payable (unless such obligation to
pay Additional Amounts arises after the 30th day prior to such date, in which
case it shall be promptly
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59
thereafter), if the Company or any Subsidiary Guarantor shall be obligated to
pay Additional Amounts with respect to such payment, the Company or such
Subsidiary Guarantor shall deliver to the Trustee and each Paying Agent an
Officers' Certificate stating the fact that such Additional Amounts shall be
payable and shall specify by country the amounts to be payable and shall set
forth such other information necessary to enable the Trustee and each Paying
Agent to pay such Additional Amounts to Holders on the payment date. Each
Officers' Certificate shall be relied upon until receipt of a further Officers'
Certificate addressing such matters. The Company and any such Subsidiary
Guarantor shall indemnify the Trustee and any Paying Agent for, and hold them
harmless against, any loss, liability or expense reasonably incurred without
negligence or bad faith on their part arising out of or in connection with
actions taken or omitted by any of them in reliance on any Officers' Certificate
furnished pursuant to this Section. Whenever in this Indenture there is
mentioned, in any context, the payment of principal, premium, if any, interest
or any other amount payable under or with respect to any Security, such mention
shall be deemed to include mention of the payment of Additional Amounts provided
for in this Section 4.15, to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof pursuant to the
provisions of this Section 4.15 and express mention of the payment of Additional
Amounts in any provisions hereof shall not be construed as excluding Additional
Amounts in those provisions hereof where such express mention is not made.
(d) The obligations of the Company and the Subsidiary Guarantors
under this Section 4.15 shall survive the termination of this Indenture and the
payment of all other amounts under or with respect to the Securities.
SECTION 4.16. Shareholder Commitments. The Company shall maintain
enforceable written commitments (the "Shareholder Commitments") from each
shareholder of the Company agreeing that such shareholder will not exercise its
voting rights to receive mandatory statutory dividends (without limiting such
shareholder's right otherwise to receive dividends pursuant to and in compliance
with Section 4.4), provided that the Shareholder Commitments will cease to be
effective on the first to occur of (x) the date that shares of Capital Stock of
the Company are issued and listed on a Brazilian or United States securities
exchange in connection with a bona fide public offering of such shares or the
date that any shares of the Capital Stock of the Company are otherwise
effectively listed and traded on any Brazilian or United States securities
exchange, (y) the date that none of the Securities remain outstanding or (z) the
date that such commitment is no longer effective, enforceable or legal under
applicable Brazilian laws and regulations (including without limitation any
construction or interpretation thereof by CVM, any court or any other
governmental authority). The Company will obtain Shareholder Commitments in
connection with any future issuances of Capital Stock to the extent the
Shareholder Commitments would then be effective, enforceable and legal under the
terms of the foregoing proviso. Notwithstanding the foregoing, but provided it
would not render any of the other Shareholder Commitments
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60
unenforceable, the Company need not obtain and/or maintain Shareholder
Commitments from persons that are not shareholders of the Company on the Issue
Date or any Affiliate of any such shareholder to the extent it does not relate
to more than 10.0% of the outstanding shares of Capital Stock of the Company.
SECTION 4.17. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Company they would normally have
knowledge of any Default or Event of Default and whether or not the signers know
of any Default or Event of Default that occurred during such period. If they do,
the certificate shall describe the Default or Event of Default, its status and
what action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with TIA ss. 314(a)(4).
SECTION 4.18. Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.19. Maintenance of Office or Agency. The Company shall
maintain in The City of New York an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration or transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
office of the Trustee at its Corporate Trust Office shall be such office or
agency of the Company, unless the Company shall designate and maintain some
other office or agency for one or more of such purposes. The Company shall give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes, and may from time
to time rescind such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and any change in the location of any such other office or agency.
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61
ARTICLE V
Successor Company
SECTION 5.1. When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person and the Company will not
permit any of its Restricted Subsidiaries to enter into such a transaction if
such transaction, in the aggregate, would result in the conveyance or transfer
of all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole, to any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of
the Federative Republic of Brazil or any State or political subdivision
thereof and the Successor Company (if not the Company) shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of the
Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default or Event of
Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to Section 4.3(a);
(iv) immediately after giving effect to such transaction, the
Successor Company will have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction;
(v) each Subsidiary Guarantor shall have delivered a written
instrument in form satisfactory to the Trustee confirming its Subsidiary
Guarantee; and
(vi) the Company 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 this Indenture;
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62
provided, however, that clause (iii) shall not apply to the merger of Cable
Participacoes Ltda., or Hearst/ABC Video Services II, each an entity owned by
The Hearst Corporation and ABC, Inc., or Falcon International Communications
(Bermuda) L.P. with and into the Company in connection with the reorganization
of the Company's ownership structure pursuant to which certain of the Company's
stockholders have agreed to exchange all of their respective shares in the
Company for a corresponding number of shares of a newly-formed Brazilian
corporation which would become an 80% stockholder of the Company and pursuant to
which Hearst/ABC Video Services II would remain a 20% stockholder of the
Company, which would be reorganized as a Brazilian limitada.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but the
predecessor, the Company, in the case of a lease of all or substantially all its
assets shall not be released from the obligation to pay the principal of and
interest on the Securities.
Notwithstanding clauses (ii) and (iii) of the first sentence of this
Section 5.1: (1) any Subsidiary of the Company may consolidate with, merge into
or transfer all or part of its properties and assets to the Company; and (2) the
Company may merge with an Affiliate incorporated solely for the purpose of
reincorporating the Company in another jurisdiction to realize tax or other
benefits.
ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable and such default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal or premium,
if any, of any Security when the same becomes due and payable at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise;
(3) the Company or any Restricted Subsidiary fails to comply with
Section 5.1;
(4) the Company or any Restricted Subsidiary fails to comply with
Section 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15 or 4.16 (in each case other than a failure to repurchase
Securities when required pursuant to
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63
Section 4.6 or 4.8 which failure shall constitute an Event of Default
under Section 6.1(2)) and such failure continues for 45 days after the
notice specified below;
(5) the Company or any Restricted Subsidiary fails to comply with
any of its agreements in the Securities or this Indenture (other than
those referred to in (1), (2), (3) or (4) above) and such failure
continues for 45 days after the notice specified below;
(6) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after failure to pay when due or
is accelerated by the holders thereof because of a default and the total
amount of such unpaid or accelerated Indebtedness exceeds $10.0 million or
the US Dollar Equivalent;
(7) the Company or a Restricted Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Restricted
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Restricted Subsidiary;
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64
or any similar relief is granted under any foreign laws and the order,
decree or relief remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$10.0 million or the US Dollar Equivalent (to the extent not covered by
insurance as acknowledged in writing by the insurer) is rendered against
the Company or any Restricted Subsidiary and such judgment or decree
remains undischarged or unstayed for a period of 60 days after such
judgment becomes final and non-appealable;
(10) there shall have occurred any seizure, compulsory acquisition,
expropriation or nationalization of material assets of the Company and its
Subsidiaries; or
(11) any Subsidiary Guarantee fails to be in full force and effect
(except as contemplated by the terms thereof) or the denial or
disaffirmation by any Subsidiary Guarantor of its obligations under the
Indenture or any Subsidiary Guarantee if such default continues for 10
days, unless otherwise released from such Guarantee obligation pursuant to
the Indenture.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Decree Law No. 7661, of June 21,
1945, or any other Brazilian law relating to, or Title 11, United States Code,
or any similar United States Federal or state law relating to, bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization, "concordata"
or relief of debtors. The term "Custodian" means any receiver, trustee,
assignee, liquidator, custodian "sindico," "comissario" or similar official
under any Bankruptcy Law.
Notwithstanding the foregoing, a Default under clause (4) or (5) of
this Section 6.1 will not constitute an Event of Default until the Trustee or
the Holders of at least 25% in principal amount of the outstanding Securities
notify the Company of the Default and the Company does not cure such Default
within the time specified in said clause (4) or (5) after receipt of such
notice. Such notice must specify the Default, demand that it be remedied and
state that such notice is a "Notice of Default".
If a Default occurs and is continuing and is known to the Trustee,
the Trustee must mail to each holder notice of the Default within 90 days after
it occurs. Except in the case of a Default under clause (1) or (2) (including
Additional Amounts) of this Section 6.1,
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65
the Trustee may withhold notice if and so long as a committee of its Trust
Officers in good faith determines that withholding notice is in the interests of
the Securityholders. In addition, the Company is required to deliver to the
Trustee, within 120 days after the end of each fiscal year, a certificate
indicating whether the signers thereof know of any Default that occurred during
the previous year.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clauses (4), (5), (6), (9) or (11) of this Section
6.1.
SECTION 6.2. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.1(7), (8) or (10) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in outstanding principal amount of the Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
and unpaid interest on all the Securities (and all Additional Amounts payable
thereon) to be due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 6.1(7), (8) or (10) with respect to the Company occurs, the principal
of and accrued and unpaid interest on all the Securities (and any Additional
Amounts) shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholders. The
Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or Event of Default or impair any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default or
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Event of Default and its consequences except (i) a Default or Event of Default
in the payment of the principal of or interest on a Security or (ii) a Default
or Event of Default in respect of a provision that under Section 9.2 cannot be
amended without the consent of each Securityholder affected. When a Default or
Event of Default is waived, it is deemed cured, but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any consequent
right.
SECTION 6.5. Control by Majority. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.1, that the Trustee determines is unduly prejudicial to the
rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.6. Limitation on Suits. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in outstanding principal amount of
the Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of
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67
and interest on the Securities held by such Holder, on or after the respective
due dates expressed in the Securities, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may 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 and the Securityholders
allowed in any judicial proceedings relative to the Company, its Subsidiaries or
their respective creditors or properties and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest (including Additional Amounts),
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and interest,
respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such record
date, the Company shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment date and amount to be paid.
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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 Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more
than 10% in outstanding principal amount of the Securities.
ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) 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 certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
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(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(e) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(f) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. (a) The Trustee may rely and shall
be protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, note or other paper or 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 require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
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(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Security Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5. Intentionally Omitted.
SECTION 7.6. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of such May 15 that
complies with TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b).
The Trustee shall also transmit by mail all reports required by TIA ss. 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of--pocket expenses, disbursements and advances
incurred or made by it, including costs of collection, costs of preparing and
reviewing reports, certificates and other documents, costs of preparation and
mailing of notices to Securityholders and reasonable costs of counsel retained
by the Trustee in connection with the delivery of an Opinion of Counsel or
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71
otherwise, in addition to the compensation for its services. Such expenses shall
include the reasonable compensation and expenses, disbursements and advances of
the Trustee's agents, counsel, accountants and experts. The Company shall
indemnify the Trustee against any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder, including the costs
and expenses of enforcing this Indenture (including this Section 7.7) and of
defending itself against any claims (whether asserted by any Securityholder, the
Company or otherwise). The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee may have separate counsel and the Company
shall pay the fees and expenses of such counsel. The Company need not reimburse
any expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct, negligence or bad faith.
Any Paying Agent, Security registrar, co-registrar and co-paying agent shall
have the same rights as to compensation and indemnity as set forth for the
Trustee in this Section.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.1(7) or (8) with respect to
the Company, the expenses are intended to constitute expenses of administration
under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
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If the Trustee resigns or is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall, upon payment of its
charges, promptly transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring or removed Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
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SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $100 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.6) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III hereof
and the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities (other than Securities
replaced pursuant to Section 2.6), including interest thereon to maturity or
such redemption date, and if in either case the Company pays all other sums
payable hereunder by the Company, then this Indenture shall, subject to Section
8.1(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of the Company
(accompanied by an Officers' Certificate and an Opinion of Counsel stating that
all conditions precedent specified herein relating to the satisfaction and
discharge of this Indenture have been complied with) and at the cost and expense
of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture and
all obligations of the Subsidiary Guarantors under the Subsidiary Guarantee and
this Indenture ("legal defeasance option") or (ii) its obligations under
Sections 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14,
4.16, 5.1(iii), 5.1(iv), 5.1(v) and 5.1(vi) and the operation of Sections
6.1(4), 6.1(5), 6.1(6), 6.1(7) (but only with respect to a Restricted
Subsidiary), 6.1(8) (but only with respect to a Restricted Subsidiary), 6.1(9)
and 6.1(11) ("covenant
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defeasance option"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Sections 6.1(4), 6.1(5),
6.1(6), 6.1(7) (but only with respect to a Restricted Subsidiary), 6.1(8) (but
only with respect to a Restricted Subsidiary) and 6.1(9) or because of the
failure of the Company to comply with Section 5.1(iii), 5.1(iv), 5.1(v) and
5.1(vi).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding the provisions of Sections 8.1(a) and (b), the
Company's obligations in Sections 2.5, 2.6, 2.7, 2.8, 2.16, 2.17, 4.1, 4.15,
4.19, 7.7, 7.8, 8.4, 8.5 and 8.6 shall survive until the Securities have been
paid in full. For the purpose of applying Section 4.15, if the Trustee is
required by law or by the administration or interpretation thereof to withhold
or deduct any amount for or on account of Taxes from any payment made from a
defeasance trust, such payment shall be deemed to have been made by the Company
and the Company shall be deemed to have been so required to deduct or withhold
such amount. Thereafter, the Company's obligations in Sections 7.7, 8.4 and 8.5
shall survive.
SECTION 8.2. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal of, premium,
if any, and interest on the Securities (including any Additional Amounts
thereon) to maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
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(3) the Company shall have delivered to the Trustee an Opinion of
Counsel, subject to certain customary qualifications, to the effect that
(i) the funds so deposited will not be subject to any rights of any other
holders of Indebtedness of the Company, and (ii) the funds so deposited
will not be subject to avoidance under applicable Bankruptcy Law;
(4) the deposit does not constitute a default under any other
agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) 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 shall
confirm that, the Securityholders will not recognize income, gain or loss
for Federal income tax purposes as a result of such defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such legal defeasance had
not occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders 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;
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel in the United States, the Federative Republic of
Brazil and such other jurisdiction as the Trustee may request, each
stating that all conditions precedent to the defeasance and discharge of
the Securities and this Indenture as contemplated by this Article VIII
have been complied with; and
(9) The Company shall have delivered to the Trustee an Opinion of
Counsel in Brazil reasonably acceptable to the Trustee to the effect that
the Holders of the Outstanding Securities will not recognize income, gain
or loss for Brazilian federal or state income tax or other tax purposes as
a result of such defeasance or covenant defeasance, as applicable, and
will be subject to Brazilian federal and state income tax
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and other tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance or covenant
defeasance, as applicable, had not occurred. Notwithstanding anything to
the contrary in this Indenture, this condition may not be waived by any
Holder or the Trustee;
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.
SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them upon payment of all the obligations under this
Indenture.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal of or interest on the Securities that remains
unclaimed for two years, and, thereafter, Securityholders entitled to the money
must look to the Company for payment as general creditors.
SECTION 8.5. Indemnity for U.S. Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the obligations of the Company and the
Subsidiary Guarantors under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to this Article VIII
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with this Article VIII;
provided, however, that, if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
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ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to or consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the Securities or to secure
the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(7) to make any change that does not adversely affect the rights of
any Securityholder; or
(8) to provide for the issuance of the Exchange Securities, which
will have terms substantially identical in all material respects to the
Initial Securities (except that the transfer restrictions contained in the
Initial Securities will be modified or eliminated, as appropriate), and
which will be treated, together with any outstanding Initial Securities,
as a single issue of securities.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
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SECTION 9.2. With Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities. However, without the consent of each Securityholder
affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security or reduce any Additional Amounts in respect thereof;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption or repurchase of
any Security or change the time at which any Security may or shall be
redeemed or repurchased in accordance with this Indenture;
(5) make any Security payable in money other than that stated in the
Security;
(6) modify or amend in any manner adverse to the Holders the terms
and conditions of the obligation of the Company for the due and punctual
payment of the principal of or interest on Securities;
(7) modify or amend in any manner adverse to the Holders the terms
and conditions of the obligation of the Company for the due and punctual
payment of the principal of or interest on Securities;
(8) make any change in Section 6.4 or 6.7 or the second sentence of
this Section 9.2;
(9) release any Subsidiary Guarantor from any of its obligations
under its Subsidiary Guarantee or this Indenture; or
(10) amend or modify the provisions of Section 4.15.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such
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notice to all Securityholders, or any defect therein, shall not impair or affect
the validity of an amendment under this Section.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall become
valid or effective more than 120 days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee may, but need
not, sign any amendment authorized pursuant to this Article IX if the amendment
adversely affects the rights, duties, liabilities or immunities of the Trustee.
In signing any amendment the Trustee shall be entitled to receive indemnity
reasonably satisfactory to it and to receive, and (subject to Section 7.1) shall
be fully protected in relying upon, an Officers' Certificate
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and an Opinion of Counsel stating that such amendment is authorized or permitted
by this Indenture.
ARTICLE X
Subsidiary Guarantee
SECTION 10.1. Subsidiary Guarantee. The Subsidiary Guarantors
hereby, jointly and severally, unconditionally and irrevocably, Guarantee to
each Holder and to the Trustee and its successors and assigns, as a principal
obligor and not merely as a surety, (a) the full and punctual payment of
principal of and interest on the Securities when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Company under this Indenture (including obligations to the Trustee) and the
Securities and (b) the full and punctual performance within applicable grace
periods of all other obligations of the Company under this Indenture and the
Securities (all the foregoing being hereinafter collectively called the
"Obligations"). The Subsidiary Guarantors further agree that the Obligations may
be extended or renewed, in whole or in part, without notice or further assent
from the Subsidiary Guarantors, and that the Subsidiary Guarantors will remain
bound under this Article X notwithstanding any extension or renewal of any
Obligation.
The Subsidiary Guarantors waive presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waive notice
of protest for nonpayment. The Subsidiary Guarantors waive notice of any default
under the Securities or the Obligations. The obligations of the Subsidiary
Guarantors hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any
Obligation; (c) any rescission, waiver, amendment, modification or supplement of
any of the terms or provisions of this Indenture (other than this Article X),
the Securities or any other agreement; (d) the release of any security held by
any Holder or the Trustee for the Obligations or any of them; (e) the failure of
any Holder or Trustee to exercise any right or remedy against any other
guarantor of the Obligations; or (f) any change in the ownership of the Company.
The Subsidiary Guarantors further agree that their Guarantees herein
constitute a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waive any right to require that any resort be had
by any Holder or the Trustee to any security held for payment of the
Obligations.
<PAGE>
81
The obligations of the Subsidiary Guarantors hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense, setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of the Subsidiary Guarantors herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of the Subsidiary Guarantors or would
otherwise operate as a discharge of the Subsidiary Guarantors as a matter of law
or equity.
The Subsidiary Guarantors further agree that their Guarantees herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
Subsidiary Guarantors by virtue hereof, upon the failure of the Company to pay
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Obligation, the Subsidiary Guarantors hereby promise to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
principal amount of such Obligations, (ii) accrued and unpaid interest on such
Obligations (but only to the extent not prohibited by law) and (iii) all other
monetary Obligations of the Company to the Holders and the Trustee.
The Subsidiary Guarantors agree that, as between the Subsidiary
Guarantors, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article VI for the purposes of the Guarantee herein, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such Obligations as provided in Article VI, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Subsidiary Guarantors for the purposes of this Section.
<PAGE>
82
The Subsidiary Guarantors also agree to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
SECTION 10.2. Limitation on Liability. Any term or provision of this
Indenture to the contrary notwithstanding, the maximum, aggregate liability of
each Subsidiary Guarantor hereunder shall not exceed the maximum amount that can
be guaranteed by such Subsidiary Guarantor under applicable federal and state
laws relating to insolvency of debtors.
SECTION 10.3. Successors and Assigns. This Article X shall be
binding upon the Subsidiary Guarantors and their successors and assigns and
shall enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
(b) Notwithstanding the foregoing, all obligations of a Subsidiary
Guarantor under this Article X shall be automatically and unconditionally
released and discharged upon any sale, exchange or transfer to any Person which
is not a Subsidiary of the Company, of all or substantially all of the assets of
such Subsidiary Guarantor or all of the Capital Stock of such Subsidiary
Guarantor owned by the Company or any Subsidiary; provided that (i) such sale,
exchange or transfer is not prohibited by this Indenture and (ii) all
obligations of such Subsidiary Guarantor in respect of the Bank Indebtedness and
under all of its Guarantees of, and in respect of all liens on its assets
securing, Indebtedness of the Company are also released and discharged upon such
sale, exchange or transfer.
SECTION 10.4. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article X shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article X at law,
in equity, by statute or otherwise.
SECTION 10.5. Right of Contribution. Each Subsidiary Guarantor
hereby agrees that to the extent that a Subsidiary Guarantor shall have paid
more than its proportionate share of any payment made hereunder, such Subsidiary
Guarantor shall be entitled to seek and receive contribution from and against
any other Subsidiary Guarantor hereunder who has not paid its proportionate
share of such payment. Each Subsidiary
<PAGE>
83
Guarantor's right of contribution shall be subject to the terms and conditions
of Section 10.6. The provisions of this Section shall in no respect limit the
obligations and liabilities of any Subsidiary Guarantor to the Trustee and the
Securityholders and each Subsidiary Guarantor shall remain liable to the Trustee
and the Securityholders for the full amount guaranteed by such Subsidiary
Guarantor hereunder.
SECTION 10.6. No Subrogation. Notwithstanding any payment or
payments made by any of the Subsidiary Guarantors hereunder, no Subsidiary
Guarantor shall be entitled to be subrogated to any of the rights of the Trustee
or any Securityholder against the Company or any other Subsidiary Guarantor or
any collateral security or guarantee or right of offset held by the Trustee or
any Securityholder for the payment of the Obligations, nor shall any Subsidiary
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Company or any other Subsidiary Guarantor in respect of payments made by such
Subsidiary Guarantor hereunder, until all amounts owing to the Trustee and the
Securityholders by the Company on account of the Obligations are paid in full.
If any amount shall be paid to any Subsidiary 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 such Subsidiary Guarantor in trust
for the Trustee and the Securityholders, segregated from other funds of such
Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary
Guarantor, be turned over to the Trustee in the exact form received by such
Subsidiary Guarantor (duly indorsed by such Subsidiary Guarantor to the Trustee,
if required), to be applied against the Obligations.
SECTION 10.7. Additional Subsidiary Guarantors. Concurrently with
the creation or acquisition by the Company or any of its Restricted Subsidiaries
of any Restricted Subsidiary, the Company, such newly created or acquired
Restricted Subsidiary and the Trustee shall execute and deliver a supplement to
this Indenture providing that such Subsidiary will be a Subsidiary Guarantor
hereunder. Each such supplement shall be accompanied by an opinion of counsel
and each in a form reasonably satisfactory to the Trustee.
SECTION 10.8. Modification. No modification, amendment or waiver of
any provision of this Article X, nor the consent to any departure by the
Subsidiary Guarantors therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on the Subsidiary Guarantors in any case shall
entitle the Subsidiary Guarantors to any other or further notice or demand in
the same, similar or other circumstances.
SECTION 10.9. Waiver of Brazilian Law Benefits. Each Subsidiary
Guarantor hereby expressly waives all benefits set forth in the following
provisions of
<PAGE>
84
Brazilian law: articles 1491, 1494, 1498, 1499, 1500 and 1503 of the Brazilian
Civil Code, articles 261 and 262 of the Brazilian Commercial Code and article
595 of the Brazilian Civil Procedure Code.
ARTICLE XI
Miscellaneous
SECTION 11.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control.
SECTION 11.2. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or to the Subsidiary Guarantors:
Tevecap S.A.
Rua da Rocio, 313-11th
CEP 04552-904
Sao Paulo, SP
Brazil
Tel: 011-55-11-829-7049
Fax: 011-55-11-828-8770
Attention: Douglas Duran
with a copy to:
Tevecap S. A.
Av. Otaviano Alves da Lima 4-400
02901-00 (Freguesia do O)
Sao Paulo, SP
Brazil
Attention: Jose Augusto
P. Moreira
Tel: 011-55-11-256-3022
Fax: 011-55-11-231-1392
and
<PAGE>
85
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: Peter V. Darrow
Tel: 212-506-2500
Fax: 212-262-1910
if to the Trustee or the Paying Agent:
The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, New York 10001-2697
Attention: Global Trust Services --
International Service Delivery
if to the Principal Paying Agent:
Chase Trust Bank
13th floor, Akasaka Park Building
2-20 Akasaka 5-chome
Minato-Ku
Tokyo 107
Japan
Attention: Head of Administration
& Planning Group
The Company, any of the Subsidiary Guarantors, or the Trustee by
notice to the other may designate additional or different addresses for
subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Security Registrar and shall be sufficiently given
if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
<PAGE>
86
SECTION 11.3. Communication by Holders with other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Security Registrar and anyone else
shall have the protection of TIA ss. 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 or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.6. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities 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
<PAGE>
87
shall be disregarded and deemed not to be outstanding, except that, for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which the Trustee knows are
so owned shall be so disregarded. Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 11.7. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Security Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.8. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York, Tokyo, Japan or Sao Paulo, Brazil. If a payment date is a
Legal Holiday, payment shall be made on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening period. If a
regular record date is a Legal Holiday, the record date shall not be affected.
SECTION 11.9. Governing Law. This Indenture and the Securities shall
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.11. Successors. All agreements of the Company and the
Subsidiary Guarantors in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13. Variable Provisions. The Company initially appoints
the Trustee as Paying Agent and Security Registrar and custodian with respect to
any Global Securities.
<PAGE>
88
SECTION 11.14. Qualification of Indenture. The Company shall qualify
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not limited to, costs and
expenses of qualification of the Indenture and the Securities and printing this
Indenture and the Securities. The Trustee shall be entitled to receive from the
Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 11.15. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 11.16. Agent for Service; Submission to Jurisdiction; Waiver
of Immunities. By the execution and delivery of this Indenture or any amendment
or supplement hereto, each of the Company and each Subsidiary Guarantor, (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, currently located at 1633 Broadway, New York,
New York 10019, 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
Securities, this Indenture or any Subsidiary Guarantee (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 CT Corporation System 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 CT
Corporation System shall be deemed in every respect effective service of process
upon the Company or any such Subsidiary Guarantor, as the case may be, in any
such suit, action or proceeding. The Company and each Subsidiary Guarantor
further agree 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 CT Corporation System 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 CT
Corporation System 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 11.16 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 (x) counsel for the Company and the
Subsidiary Guarantors or (y) a corporate service company which acts as agent for
service of process for
<PAGE>
89
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 11.16. 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. Upon the request
of any Holder, 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 and the Subsidiary Guarantors appointed
and acting in accordance with this Section 11.16.
To the extent that the Company or any Subsidiary Guarantor 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 and each Subsidiary Guarantor hereby irrevocably
waives such immunity in respect of its obligations under this Indenture, the
Securities and the Subsidiary Guarantees, to the extent permitted by law.
SECTION 11.17. 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 and the Subsidiary Guarantors under
or in connection with the Securities, the Subsidiary Guarantees 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 and the Subsidiary Guarantors or otherwise) by any
Holder of the Securities in respect of any sum expressed to be due to it from
the Company and the Subsidiary Guarantors shall only constitute a discharge to
the Company and the Subsidiary Guarantors 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 dollar amount is less than the dollar amount
expressed to be due to the recipient under the Securities, the Company and the
Subsidiary Guarantors shall, jointly and severally, indemnify it against any
loss sustained by it as a result as set forth in Section 11.17(b). In any event,
the Company and the Subsidiary Guarantors shall, jointly and severally,
indemnify the recipient against the cost of making any such purchase. For the
purposes of this Section 11.17, it will be sufficient for the holder of a
Security 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).
The indemnities set forth in this 11.17 constitute separate and independent
cause of action, shall
<PAGE>
90
apply irrespective of any indulgence granted by any Holder of the Securities 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 Securities.
(b) The Company and each Subsidiary Guarantor covenants and agrees
that the following provisions shall apply to conversion of currency in the case
of the Securities, the Guarantees and this Indenture:
(i) (A) 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).
(B) 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
or the relevant Subsidiary Guarantor, as the case may be, 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.
(ii) In the event of the winding-up of the Company or any Subsidiary
Guarantor at any time while any amount or damages owing under the
Securities, the Subsidiary Guarantees and this Indenture, or any judgment
or order rendered in respect thereof, shall remain outstanding, the
Company or the relevant Subsidiary Guarantor, as the case may be, shall
indemnify and hold the Holders 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 Securities, the Subsidiary Guarantees
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 or the relevant Subsidiary Guarantor, as the
case may be, shall 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 or the
relevant Subsidiary Guarantor, as the case may be, may be ascertained for
such winding-up prior to payment by the liquidator or otherwise in respect
thereto.
<PAGE>
91
(iii) The obligations contained in Subsections (a), (b)(i)(B),
(b)(ii) and (b)(v) of this Section 11.17 shall constitute separate and
independent obligations from the other Indenture obligations of the
Company and the Subsidiary Guarantors, shall give rise to separate and
independent causes of action against the Company and each Subsidiary
Guarantor, shall apply irrespective of any waiver or extension granted by
any Holder 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 or any
Subsidiary Guarantor 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 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 relevant Subsidiary Guarantor 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 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
Securities or any Subsidiary Guarantee, any restrictions or prohibition of
access to the Brazilian foreign exchange market exists, the Company and each
Subsidiary Guarantor agrees to pay all amounts payable under the Securities and
the Guarantees in the currency of the Securities by means of any legal procedure
existing in Brazil (except commencing legal proceedings against the Central Bank
of Brazil), on any due date for payment under the Securities, for the purchase
of the currency of such Securities. All costs and taxes payable in connection
with the procedures referred to in this Section 11.17 shall be borne by the
Company and the Subsidiary Guarantors.
<PAGE>
92
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
<PAGE>
93
TEVECAP S.A.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
TVA SISTEMA DE TELEVISAO S.A.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
TVA COMMUNICATIONS LTD.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
GALAXY BRASIL S.A.
By: ______________________________
Name:
Title:
By: ______________________________
<PAGE>
94
Name:
Title:
<PAGE>
95
TVA SUL PARTICIPACOES S.A.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
COMERCIAL CABO TV SAO PAULO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA PARANA LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA ALPHA CABO LTDA.
By: ______________________________
Name:
Title:
<PAGE>
96
By: ______________________________
Name:
Title:
<PAGE>
97
CCS CAMBORIU CABLE SYSTEM DE
TELECOMUNICACOES LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TCC TV A CABO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA SUL FOZ DO IGUACU LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
98
THE CHASE MANHATTAN BANK
By: ______________________________
Name:
Title:
CHASE TRUST BANK
By: ______________________________
Name:
Title:
<PAGE>
99
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 The Chase Manhattan Bank, 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>
100
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 is the attorney-in-fact
of Chase Trust Bank, 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>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND
<PAGE>
2
THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QIB" AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN EACH CASE, ONLY IF A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE ISSUER AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
<PAGE>
No. [___] Principal Amount $[______________]
CUSIP NO.
12-5/8% Senior Note due 2004
Tevecap S.A., a sociedad anonima organized under the laws of the
Federative Republic of Brazil promises to pay to [___________], or registered
assigns, the principal sum of [__________________] Dollars on November 26, 2004
or such other amount as is shown on the Register on such date in respect of the
Notes.
Interest Payment Dates: May 26 and November 26.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: November 26, 1996 TEVECAP S.A.
By ______________________________________
Name:
Title:
By ______________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE CHASE MANHATTAN BANK
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
<PAGE>
2
by_____________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
12-5/8% Senior Note due 2004
1. Interest
Tevecap S.A., a sociedad anonima organized under the laws of the
Federative Republic of Brazil (such entity and its successors and assigns under
the Indenture hereinafter referred to, being herein called the "Company")
promises to pay interest on the principal amount of this Security at the rate
per annum shown above.
The Company will pay interest semiannually on May 26 and November 26
of each year, commencing on May 26, 1997. Interest on the Securities will accrue
from the most recent date to which interest has been paid on the Securities or,
if no interest has been paid, from November 26, 1996. The Company shall pay
interest on overdue principal or premium, if any, at the rate borne by the
Securities to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment
By at least 10:00 a.m. (New York City time) on the Business Day
prior to the date on which any principal of or interest on any Security is due
and payable, the Company shall irrevocably deposit with the Trustee or the
Paying Agent money sufficient to pay such principal, premium, if any, and/or
interest. The Company will pay interest (except defaulted interest) to the
Persons who are registered Holders of Securities at the close of business on the
May 1 or November 1 next preceding the interest payment date even if Securities
are cancelled, repurchased or redeemed after the record date and on or before
the interest payment date. Holders must surrender Securities to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address. Any such interest not punctually paid, or duly
provided for, and interest on such defaulted interest at the then applicable
interest rate borne by the Securities, to the extent lawful, shall forthwith
cease to be payable to the Holder on a regular record date, and may be paid to
the person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on a special record date for the payment
of such defaulted interest to be fixed by the Trustee, notice of which shall be
given to Holders of Securities not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by the
Depositary or any such clearing agency or exchange, all as
<PAGE>
2
more fully provided in such Indenture. In addition, the Company (i) will pay to
the Holder of this Security such Additional Amounts as may become payable under
Section 4.15 of the Indenture and (ii) may be obligated to pay liquidated
damages pursuant to certain provisions of the Registration Rights Agreement.
3. Paying Agent and Registrar
Initially, The Chase Manhattan Bank, a New York corporation
("Trustee"), will act as Paying Agent and Security Registrar. Initially, Chase
Trust Bank will act as Principal Paying Agent. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company may act as Paying Agent, Security Registrar or
co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
November 26, 1996 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), among the Company, the
Subsidiary Guarantors named therein (the "Subsidiary Guarantors") and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured senior obligations of the
Company limited to $250.0 million aggregate principal amount (subject to Section
2.6 of the Indenture). This Security is one of the Initial Securities referred
to in the Indenture. The Securities include the Initial Securities and any
Exchange Securities issued in exchange for the Initial Securities pursuant to
the Indenture and the Registration Rights Agreement. The Initial Securities and
the Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and its Subsidiaries, the payment of dividends and
other distributions on the Capital Stock of the Company and its Subsidiaries,
the purchase or redemption of Capital Stock of the Company and Capital Stock of
such Subsidiaries, certain purchases or redemptions of Subordinated Obligations,
the sale or transfer of assets and Capital Stock of Subsidiaries, the issuance
or sale of Capital Stock of Subsidiaries, the business activities and
investments of the Company and its Subsidiaries and transactions with
Affiliates. In addition, the Indenture limits the
<PAGE>
3
ability of the Company and its Subsidiaries to restrict distributions and
dividends from Subsidiaries.
To guarantee the due and punctual payment of the principal and
interest, if any, on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Subsidiary Guarantors have
unconditionally guaranteed such obligations on a senior basis pursuant to the
terms of the Indenture.
5. Optional Redemption
At any time or from time to time prior to November 26, 2000, the
Company may redeem in the aggregate up to $75.0 million principal amount of the
Securities with the proceeds of one or more (i) Significant Equity Offerings or
(ii) sales of the Company's Capital Stock to a Strategic Investor, at a
redemption price (expressed as a percentage of principal amount) of 112.625%
plus accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however, that after giving
effect to such redemption, at least $175.0 million principal amount of the
Securities remain outstanding.
6. Tax Redemption
The Securities may be redeemed at the option of the Company, in
whole but not in part, at any time prior to maturity if (A) there is any change
in or amendment to the Treaty to Avoid Double Taxation entered into between
Brazil and Japan, approved by Legislative Decree No. 43 dated November 23, 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, which has the effect of increasing
the rate of tax applicable under such treaty to a rate exceeding 15.0% of
interest payable; or (B) as the result of any change in or amendment to the
laws, regulations or rulings of Brazil or Japan or any political subdivision or
taxing authority thereof or therein, or any change in the application or
official interpretation of such laws, regulations or rulings (including the
holding of a court of competent jurisdiction), the Company or any Subsidiary
Guarantor has or will become obligated to pay Additional Amounts (excluding
interest and penalties) in excess of the Additional Amounts that the Company or
any Subsidiary Guarantor would be obligated to pay if Taxes (excluding interest
and penalties) were imposed with respect to such payments of interest at a rate
of 15.0% and such obligation cannot be avoided by the Company or the Subsidiary
Guarantors, as the case may be, taking reasonable measures available to them,
then the Company may, at its option,
<PAGE>
4
redeem or cause the redemption of the Securities, as a whole but not in part,
upon not more than 60 nor less than 30 days' notice given in the manner set
forth in Section 3.3 of the Indenture to the Holders (with copies to the Trustee
and each Paying Agent) at 100% of their principal amount, together with accrued
interest to (but excluding) the date fixed for redemption, plus any such
Additional Amounts payable with respect to such principal amount and interest.
Prior to the giving of notice of redemption of the Securities as described
herein and as a condition to any such redemption, the Company will deliver to
the Trustee an Officers' Certificate (together with a copy of a written Opinion
of Counsel to the effect that the applicable rate has so increased, or the
Company or any Subsidiary Guarantor has or will become so obligated to pay
Additional Amounts as a result of such change or amendment), stating that the
Company is entitled to effect such redemption and setting forth in reasonable
detail a statement of facts relating thereto. No notice of redemption shall be
given earlier than 90 days prior to the earliest date on which the Company or
any Subsidiary Guarantor would be obligated to pay such Additional Amounts were
a payment in respect of the Securities then due and, at the time such notice of
redemption is given, such obligation to pay such Additional Amounts remains in
effect.
7. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations of principal
amount larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued and
unpaid interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase as provided
in, and subject to the terms of, the Indenture.
<PAGE>
5
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Security Registrar may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Security Registrar need not
register the transfer of or exchange of any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of the Securities
selected for redemption and ending at the close of business on the day of such
mailing.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request. After any such payment, Holders entitled to the money
must look only to the Company and not to the Trustee for payment.
12. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Securities
and (ii) any default or noncompliance with any
<PAGE>
6
provision may be waived with the written consent of the Holders of a majority in
principal amount of the outstanding Securities. Subject to certain exceptions
set forth in the Indenture, without the consent of any Securityholder, the
Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or
the Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article 5 of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities or to secure the Securities, or to add
additional covenants or surrender rights and powers conferred on the Company for
the benefit of the Securityholders, or to comply with any requirements of the
SEC in connection with qualifying the Indenture under the Act, or to make any
change that does not adversely affect the rights of any Securityholder, or to
provide for the issuance of Exchange Securities.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon required repurchase, upon declaration or otherwise;
(iii) failure by the Company or any Restricted Subsidiary to comply with other
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after payment is due) of other indebtedness of the
Company or its Restricted Subsidiaries if the amount accelerated (or so unpaid)
exceeds $10.0 million or the US Dollar Equivalent; (v) certain events of
bankruptcy or insolvency with respect to the Company or any Restricted
Subsidiary; (vi) the seizure, compulsory acquisition, expropriation or
nationalization of material assets of the Company or its Subsidiaries; (vii) the
failure of any Subsidiary Guarantee to be in full force or the denial or
disaffirmation by any Subsidiary Guarantor of its obligation under the Indenture
or Guarantee; and (viii) certain final, non-appealable judgments or decrees for
the payment of money in excess of $10.0 million or the US Dollar Equivalent. If
an Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Securities may declare all the Securities
to be due and payable immediately (including all Additional Amounts thereon).
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing
<PAGE>
7
Default or Event of Default (except a Default or Event of Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.
15. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Securities or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
<PAGE>
8
19. CUSIP and CINS Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP and/or CINS
numbers to be printed on the Securities and has directed the Trustee to use such
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. Governing Law
This Security shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
21. Additional Amounts
The Company will pay to the Holders of Securities such Additional
Amounts as may become payable under Section 4.15 of the Indenture.
22. Conversion of Currency
U.S. dollars are the sole currency of account and payment for all
sums payable by the Company and the Subsidiary Guarantors under or in connection
with the Securities, the Subsidiary Guarantees or the Indenture, including
damages. The Company and each Subsidiary Guarantor have agreed that the
provisions of Section 11.17 of the Indenture shall apply to conversion of
currency in the case of the Securities, the Subsidiary Guarantees and the
Indenture. Among other things, Section 11.17 specifies that if there is a change
in the rate of exchange prevailing between the Business Day before the day on
which a judgment is given or an order or 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 or the relevant Subsidiary Guarantor, as the case may
be, 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. In the event that on any payment
date in respect of the Securities or any guarantee, any restrictions or
prohibition of access to the Brazilian foreign exchange market exists, the
Company and each Subsidiary Guarantor agrees to pay all amounts payable under
the Securities and the Subsidiary Guarantees in the
<PAGE>
9
currency of the Securities by means of any legal procedure existing in Brazil
(except commencing legal proceedings against the Central Bank of Brazil), on any
due date for payment under the Securities, for the purchase of the currency of
such Securities. All costs and taxes payable in connection with the procedures
referred to in this paragraph shall be borne by the Company and the Subsidiary
Guarantors.
23. Agent for Service; Submission to Jurisdiction; Waiver of Immunities
The Company and each Subsidiary Guarantor have appointed CT
Corporation System, currently located at 1633 Broadway, New York, New York
10019, 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
Security, the Indenture or any Subsidiary Guarantee (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 have agreed that there shall, at all time, be at least one agent
for service of process for the Company and the Subsidiary Guarantors appointed
and acting in accordance with the provisions of Section 11.16 of the Indenture
relating to agent for service of process. To the extent that the Company or any
Subsidiary Guarantor 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 and each
Subsidiary Guarantor have irrevocably waived such immunity in respect of its
obligations under the Indenture, this Security and the Subsidiary Guarantee, to
the extent permitted by law.
The Company will furnish to any Securityholder upon
written request and without charge to the Securityholder a copy of
the Indenture which has in it the text of this Security in larger
type.
Requests may be made to: Tevecap S.A.
Attention of Chief Financial Officer
<PAGE>
10
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
For value received, the undersigned hereby unconditionally guarantees, as
principal obligor and not merely as a surety, to the Holder of this Security,
the cash payments in United States dollars of principal, premium, if any, and
interest on this Security (and including Additional Amounts payable thereon) in
the amounts and at the times when due, together with interest on the overdue
principal, premium, if any, and interest, if any, on this Security, if lawful,
and the payment or performance of all other obligations of the Company under the
Indenture or the Securities, to the Holder of this Security and the Trustee, all
in accordance with and subject to the terms and conditions of this Security and
the Indenture, including Article X of the Indenture. Capitalized terms used but
not defined herein shall have the meanings ascribed to them in the Indenture,
dated as of November 26, 1996, among the Company, the Subsidiary Guarantors, The
Chase Manhattan Bank, as Trustee, and Chase Trust Bank, as Principal Paying
Agent, as amended or supplemented.
The obligations of the undersigned to the Holders of Securities and to the
Trustee are expressly set forth in Article X of the Indenture and reference is
hereby made to the Indenture for the precise terms of the Guarantee.
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this endorsement
to be duly executed.
November 26, 1996
TVA SISTEMA DE TELEVISAO S.A.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
TVA COMMUNICATIONS LTD.
By: ______________________________
Name:
<PAGE>
11
Title:
By: ______________________________
Name:
Title:
GALAXY BRASIL S.A.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA SUL PARTICIPACOES S.A.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
COMERCIAL CABO TV SAO PAULO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
12
TVA PARANA LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA ALPHA CABO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
13
CCS CAMBORIU CABLE SYSTEM DE
TELECOMUNICACOES LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TCC TV A CABO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA SUL FOZ DO IGUACU LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Date: ____________________ Your Signature: ___________________
Signature Guarantee: ______________________________________
(Signature must be guaranteed)
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), covering resales of this
Security (which effectiveness shall not have been suspended or terminated at the
date of the transfer) and (ii) the later of November 26, 1999, or the date three
years (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) after the later of the
date of issuance appearing on the face of this Security and the last date on
which the Company or an affiliate of the Company was the owner of this Security
(or any Predecessor Security), the undersigned confirms that it has not utilized
any general solicitation or general advertising in connection with the transfer
and that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
<PAGE>
2
[ ] (b) this Security is being transferred other than in accordance
with (a) above and documents, including a transferee certificate
substantially in the form attached hereto, are being furnished which
comply with the conditions of transfer set forth in this Security
and the Indenture.
If neither of the foregoing boxes is checked and, in the case of (b) above, if
the appropriate document is not attached or otherwise furnished to the Trustee,
the Trustee or Security Registrar shall not be obligated to register this
Security in the name of any person other than the Holder hereof unless and until
the conditions to any such transfer of registration set forth herein and in
Section 2.14 of the Indenture shall have been satisfied.
______________________________________________________________________________
Date:____________ Your signature: ______________________________________
(Sign exactly as your name appears on the
other side of this Security)
By:___________________________________
NOTICE: To be executed by an
executive officer
Signature Guarantee:________________________
TO BE COMPLETED BY PURCHASER IF (a) IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security 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 (including the information
specified in Rule 144A(d)(4)) 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
<PAGE>
3
[The Transferee Certificates (Exhibits C and D to the Indenture)
will be attached to the Initial Security]
<PAGE>
4
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, 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 IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
<PAGE>
6
No. [___] Principal Amount $[______________]
CUSIP NO.
12-5/8% Senior Note due 2004
Tevecap S.A., a sociedad anonima organized under the laws of the
Federative Republic of Brazil promises to pay to [___________], or registered
assigns, the principal sum of [__________________] Dollars on November 26, 2004
or such other amount as is shown on the Register on such date in respect of this
Note.
Interest Payment Dates: May 26 and November 26.
Record Dates: May 1 and November 1.
Additional provisions of this Security are set forth on the other
side of this Security.
Dated: November 26, 1996 TEVECAP S.A.
By ___________________________________
Name:
Title:
By ___________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE CHASE MANHATTAN BANK
as Trustee, certifies
<PAGE>
7
that this is one of
the Securities referred
to in the Indenture.
by_________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
12-5/8% Senior Note due 2004
1. Interest
Tevecap S.A., a sociedad anonima organized under the laws of the
Federative Republic of Brazil (such entity and its successors and assigns under
the Indenture hereinafter referred to, being herein called the "Company")
promises to pay interest on the principal amount of this Security at the rate
per annum shown above.
The Company will pay interest semiannually on May 26 and November 26
of each year, commencing on May 26, 1997. Interest on the Securities will accrue
from the most recent date to which interest has been paid on the Securities or,
if no interest has been paid, from November 26, 1996. The Company shall pay
interest on overdue principal or premium, if any, at the rate borne by the
Securities to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment
By at least 10:00 a.m. (New York City time) on the Business Day
prior to the date on which any principal of or interest on any Security is due
and payable, the Company shall irrevocably deposit with the Trustee or the
Paying Agent money sufficient to pay such principal, premium, if any, and/or
interest. The Company will pay interest (except defaulted interest) to the
Persons who are registered Holders of Securities at the close of business on the
May 1 or November 1 next preceding the interest payment date even if Securities
are cancelled, repurchased or redeemed after the record date and on or before
the interest payment date. Holders must surrender Securities to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address. Any such interest not punctually paid, or duly
provided for, and interest on such defaulted interest at the then applicable
interest rate borne by the Securities, to the extent lawful, shall forthwith
cease to be payable to the Holder on a regular record date, and may be paid to
the person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on a special record date for the payment
of such defaulted interest to be fixed by the Trustee, notice of which shall be
given to Holders of Securities not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by the
Depositary or any such clearing agency or exchange, all as
<PAGE>
2
more fully provided in such Indenture. In addition, the Company will pay to the
Holder of this Security such Additional Amounts as may become payable under
Section 4.15 of the Indenture.
3. Paying Agent and Registrar
Initially, The Chase Manhattan Bank, a New York corporation
("Trustee"), will act as Paying Agent and Security Registrar. Initially, Chase
Trust Bank will act as Principal Paying Agent. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company may act as Paying Agent, Security Registrar or
co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as of
November 26, 1996 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), among the Company, the
Subsidiary Guarantors named therein (the "Subsidiary Guarantors") and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured senior obligations of the
Company limited to $250.0 million aggregate principal amount (subject to Section
2.6 of the Indenture). This Security is one of the Initial Securities referred
to in the Indenture. The Securities include the Initial Securities and any
Exchange Securities issued in exchange for the Initial Securities pursuant to
the Indenture and the Registration Rights Agreement. The Initial Securities and
the Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the Incurrence of
Indebtedness by the Company and its Subsidiaries, the payment of dividends and
other distributions on the Capital Stock of the Company and its Subsidiaries,
the purchase or redemption of Capital Stock of the Company and Capital Stock of
such Subsidiaries, certain purchases or redemptions of Subordinated Obligations,
the sale or transfer of assets and Capital Stock of Subsidiaries, the issuance
or sale of Capital Stock of Subsidiaries, the business activities and
investments of the Company and its Subsidiaries and transactions with
Affiliates. In addition, the Indenture limits the ability of the Company and its
Subsidiaries to restrict distributions and dividends from Subsidiaries.
<PAGE>
3
To guarantee the due and punctual payment of the principal and
interest, if any, on the Securities and all other amounts payable by the Company
under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the
terms of the Securities and the Indenture, the Subsidiary Guarantors have
unconditionally guaranteed such obligations on a senior basis pursuant to the
terms of the Indenture.
5. Optional Redemption
At any time or from time to time prior to November 26, 2000, the
Company may redeem in the aggregate up to $75.0 million principal amount of the
Securities with the proceeds of one or more (i) Significant Equity Offerings or
(ii) sales of the Company's Capital Stock to a Strategic Investor, at a
redemption price (expressed as a percentage of principal amount) of 112.625%
plus accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however, that after giving
effect to such redemption, at least $175.0 million principal amount of the
Securities remain outstanding.
6. Tax Redemption
The Securities may be redeemed at the option of the Company, in
whole but not in part, at any time prior to maturity if (A) there is any change
in or amendment to the Treaty to Avoid Double Taxation entered into between
Brazil and Japan, approved by Legislative Decree No. 43 dated November 23, 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, which has the effect of increasing
the rate of tax applicable under such treaty to a rate exceeding 15.0% of
interest payable; or (B) as the result of any change in or amendment to the
laws, regulations or rulings of Brazil or Japan or any political subdivision or
taxing authority thereof or therein, or any change in the application or
official interpretation of such laws, regulations or rulings (including the
holding of a court of competent jurisdiction), the Company or any Subsidiary
Guarantor has or will become obligated to pay Additional Amounts (excluding
interest and penalties) in excess of the Additional Amounts that the Company or
any Subsidiary Guarantor would be obligated to pay if Taxes (excluding interest
and penalties) were imposed with respect to such payments of interest at a rate
of 15.0% and such obligation cannot be avoided by the Company or the Subsidiary
Guarantors, as the case may be, taking reasonable measures available to them,
then the Company may, at its option, redeem or cause the redemption of the
Securities, as a whole but not in part, upon not more than 60 nor less than 30
days' notice given in the manner set forth in Section 3.3 of the Indenture to
the Holders (with copies to the Trustee and each Paying Agent) at 100% of their
<PAGE>
4
principal amount, together with accrued interest to (but excluding) the date
fixed for redemption, plus any such Additional Amounts payable with respect to
such principal amount and interest. Prior to the giving of notice of redemption
of the Securities as described herein and as a condition to any such redemption,
the Company will deliver to the Trustee an Officers' Certificate (together with
a copy of a written Opinion of Counsel to the effect that the applicable rate
has so increased, or the Company or any Subsidiary Guarantor has or will become
so obligated to pay Additional Amounts as a result of such change or amendment,
stating that the Company is entitled to effect such redemption and setting forth
in reasonable detail a statement of facts relating thereto. No notice of
redemption shall be given earlier than 90 days prior to the earliest date on
which the Company or any Subsidiary Guarantor would be obligated to pay such
Additional Amounts were a payment in respect of the Securities then due and, at
the time such notice of redemption is given, such obligation to pay such
Additional Amounts remains in effect.
7. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered address. Securities in denominations of principal
amount larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued and
unpaid interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.
8. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right to cause the Company to repurchase all or any part of the Securities of
such Holder at a repurchase price equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase as provided
in, and subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture. The
Security Registrar may require a
<PAGE>
5
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Security Registrar need not register the transfer of or exchange
of any Securities selected for redemption (except, in the case of a Security to
be redeemed in part, the portion of the Security not to be redeemed) during a
period beginning at the opening of business 15 days before the mailing of a
notice of redemption of the Securities selected for redemption and ending at the
close of business on the day of such mailing.
10. Persons Deemed Owners
The registered holder of this Security may be treated as the owner
of it for all purposes.
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request. After any such payment, Holders entitled to the money
must look only to the Company and not to the Trustee for payment.
12. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the outstanding Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount of the
outstanding Securities. Subject to certain exceptions set forth in the
Indenture, without the consent of any Securityholder, the Company, the
Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities
to cure any ambiguity, omission, defect or inconsistency, or to comply with
Article 5 of the Indenture, or to provide for uncertificated
<PAGE>
6
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities or to secure the Securities, or to add
additional covenants or surrender rights and powers conferred on the Company for
the benefit of the Securityholders, or to comply with any requirements of the
SEC in connection with qualifying the Indenture under the Act, or to make any
change that does not adversely affect the rights of any Securityholder, or to
provide for the issuance of Exchange Securities.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon required repurchase, upon declaration or otherwise;
(iii) failure by the Company or any Restricted Subsidiary to comply with other
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after payment is due) of other indebtedness of the
Company or its Restricted Subsidiaries if the amount accelerated (or so unpaid)
exceeds $10.0 million or the US Dollar Equivalent; (v) certain events of
bankruptcy or insolvency with respect to the Company or any Restricted
Subsidiary; (vi) the seizure, compulsory acquisition, expropriation or
nationalization of material assets of the Company or its Subsidiaries; (vii) the
failure of any Subsidiary Guarantee to be in full force or the denial or
disaffirmation by any Subsidiary Guarantor of its obligation under the Indenture
or Guarantee; and (viii) certain final, non-appealable judgments or decrees for
the payment of money in excess of $10.0 million or the US Dollar Equivalent. If
an Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Securities may declare all the Securities
to be due and payable immediately (including all Additional Amounts thereon).
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Securities being due and payable immediately upon the occurrence
of such Events of Default.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of principal
or interest) if it determines that withholding notice is in their interest.
15. Trustee Dealings with the Company
<PAGE>
7
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or any Subsidiary Guarantor shall not have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Securities or
the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. Authentication
This Security shall not be valid until an authorized signatory of
the Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Security.
18. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
19. CUSIP and CINS Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP and/or CINS
numbers to be printed on the Securities and has directed the Trustee to use such
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
<PAGE>
8
20. Governing Law
This Security shall be governed by, and construed in accordance
with, the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the laws of
another jurisdiction would be required thereby.
21. Additional Amounts
The Company will pay to the Holders of Securities such Additional
Amounts as may become payable under Section 4.15 of the Indenture.
22. Conversion of Currency
U.S. dollars are the sole currency of account and payment for all
sums payable by the Company and the Subsidiary Guarantors under or in connection
with the Securities, the Subsidiary Guarantees or the Indenture, including
damages. The Company and each Subsidiary Guarantor have agreed that the
provisions of Section 11.17 of the Indenture shall apply to conversion of
currency in the case of the Securities, the Subsidiary Guarantees and the
Indenture. Among other things, Section 11.17 specifies that if there is a change
in the rate of exchange prevailing between the Business Day before the day on
which a judgment is given or an order or 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 or the relevant Subsidiary Guarantor, as the case may
be, 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. In the event that on any payment
date in respect of the Securities or any guarantee, any restrictions or
prohibition of access to the Brazilian foreign exchange market exists, the
Company and each Subsidiary Guarantor agrees to pay all amounts payable under
the Securities and the Subsidiary Guarantees in the currency of the Securities
by means of any legal procedure existing in Brazil (except commencing legal
proceedings against the Central Bank of Brazil), on any due date for payment
under the Securities, for the purchase of the currency of such Securities. All
costs and taxes payable in connection with the procedures referred to in this
paragraph shall be borne by the Company and the Subsidiary Guarantors.
23. Agent for Service; Submission to Jurisdiction; Waiver of Immunities
<PAGE>
9
The Company and each Subsidiary Guarantor have appointed CT
Corporation System, currently located at 1633 Broadway, New York, New York
10019, 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
Security, the Indenture or any Subsidiary Guarantee (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 have agreed that there shall, at all time, be at least one agent
for service of process for the Company and the Subsidiary Guarantors appointed
and acting in accordance with the provisions of Section 11.16 of the Indenture
relating to agent for service of process. To the extent that the Company or any
Subsidiary Guarantor 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 and each
Subsidiary Guarantor have irrevocably waived such immunity in respect of its
obligations under the Indenture, this Security and the Guarantee, to the extent
permitted by law.
The Company will furnish to any Securityholder upon
written request and without charge to the Securityholder a copy of
the Indenture which has in it the text of this Security in larger
type.
Requests may be made to: Tevecap S.A.
Attention of Chief Financial Officer
<PAGE>
10
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
For value received, the undersigned hereby unconditionally guarantees, as
principal obligor and not merely as a surety, to the Holder of this Security,
the cash payments in United States dollars of principal, premium, if any, and
interest on this Security (and including Additional Amounts payable thereon) in
the amounts and at the times when due, together with interest on the overdue
principal, premium, if any, and interest, if any, on this Security, if lawful,
and the payment or performance of all other obligations of the Company under the
Indenture or the Securities, to the Holder of this Security and the Trustee, all
in accordance with and subject to the terms and conditions of this Security and
the Indenture, including Article X of the Indenture. Capitalized terms used but
not defined herein shall have the meanings ascribed to them in the Indenture,
dated as of November 26, 1996, among the Company, the Subsidiary Guarantors, The
Chase Manhattan Bank, as Trustee, and Chase Trust Bank, as Principal Paying
Agent, as amended or supplemented.
The obligations of the undersigned to the Holders of Securities and to the
Trustee are expressly set forth in Article X of the Indenture and reference is
hereby made to the Indenture for the precise terms of the Guarantee.
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused this endorsement
to be duly executed.
November 26, 1996
TVA SISTEMA DE TELEVISAO S.A.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
TVA COMMUNICATIONS LTD.
By: ______________________________
Name:
<PAGE>
11
Title:
By: ______________________________
Name:
Title:
GALAXY BRASIL S.A.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA SUL PARTICIPACOES S.A.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
COMERCIAL CABO TV SAO PAULO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
12
TVA PARANA LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA ALPHA CABO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
13
CCS CAMBORIU CABLE SYSTEM DE
TELECOMUNICACOES LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TCC TV A CABO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA SUL FOZ DO IGUACU LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
________________________________________________________________________________
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: _______________ Your Signature ____________________
Signature Guarantee: ____________________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.6 or 4.8 of the Indenture, check the box:
|_|
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.6 or 4.8 of the Indenture, state the amount in
principal amount (must be integral multiple of $1,000): $
Date: _______________ Your
Signature: _________________________
(Sign exactly as your name appears on the other side of the
Security)
Signature
Guarantee: _______________________________________
(Signature must be guaranteed)
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
TEVECAP S.A.
THE CHASE MANHATTAN BANK
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001-2697
Attention: Global Trust Services --
International Service Delivery
Re: Tevecap S.A. (the "Company")
125/8% Senior Notes
due 2004 (the "Securities")
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $ principal
amount of the 12-5/8% Senior Notes due 2004 (the "Notes") of Tevecap, S.A. (the
"Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: ___________________________________
Address: ________________________________
Taxpayer ID Number: _____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
Act")) purchasing for our own account or for the account of such an
institutional "accredited investor," at least
C-1
<PAGE>
2
$250,000 principal amount of the Notes, and we are acquiring the Notes not with
a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risk of our investment in the Notes and invest in or purchase securities similar
to the Notes in the normal course of our business. We and any accounts for which
we are acting are each able to bear the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Notes to offer, sell or otherwise transfer
such Notes prior to the date which is three years after the later of the date of
original issue and the last date on which the Company or any affiliate of the
Company was the owner of such Notes (or any predecessor thereto) (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") that purchases for its own account or for the
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the
United States within the meaning of Regulation S under the Securities Act, (e)
to an institutional "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that is purchasing for its own account
or for the account of such an institutional "accredited investor", in each case
in a minimum principal amount of Notes of $250,000 or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Company and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring
such Notes for investment purposes and not for distribution in violation of the
Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Termination Date of the Notes pursuant to clauses (d), (e) or (f) above to
require the delivery of an opinion of counsel, certifications and/or other
information satisfactory to the Company and the Trustee.
TRANSFEREE:_____________________
C-2
<PAGE>
3
BY______________________________
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
TEVECAP S.A.
THE CHASE MANHATTAN BANK N.A.
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th floor
New York, NY 10001-2692
Attention: Corporate Trust Administration
Re: Tevecap S.A. (the "Company") 125/8%
Senior Notes due 2004 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of US$__________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a U.S. Person;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside in the
United States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
D-1
<PAGE>
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
In addition, if the sale is made during a restricted period and the provisions
of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we
confirm that such sale has been made in accordance with the applicable
provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
________________________________________
[Name of Transferor]
By:_____________________________________
Name:
Title:
Address:
Date:___________________________________
Upon transfer, the Notes should be registered in the name of the new beneficial
owner as follows:
Name:___________________________________________________________________________
Address_________________________________________________________________________
Taxpayer ID Number:_____________________________________________________________
<PAGE>
EXHIBIT E
FORM OF TRANSFER CERTIFICATE FOR
TRANSFER FROM OFFSHORE GLOBAL
SECURITY NOT BEARING A SECURITIES
ACT LEGEND TO U.S. GLOBAL BEARING A
SECURITIES ACT LEGEND (PRIOR TO
40TH DAY AFTER LATER OF COMMENCEMENT
OF OFFERING OF THE NOTES AND THE CLOSING DATE)
Tevecap S.A.
The Chase Manhattan Bank
c/o The Chase Manhattan Bank
450 West 33rd Street, 16th Floor
New York, New York 10001
Attention: Global Trust Services-
International Service Delivery
Re: Tevecap S.A. 125/8 Senior
Notes Due 2004 (the "Senior Notes")
Ladies & Gentlemen:
Reference is hereby made to the Indenture, dated November 26, 1996
(the "Indenture") among Tevecap S.A. (the "Company"), The Chase Manhattan Bank,
as Trustee and Chase Trust Bank, as Principal Paying Agent. Capitalized terms
used but not defined herein will have the meanings given to them in the
Indenture.
This letter relates to US$______ principal amount of Notes which are
held in the form of a beneficial interest in the Offshore Global Security (CINS
No. _______________) with the Depositary in the name of the undersigned.
The undersigned has requested transfer of such beneficial interest
in the Notes to a Person who will take delivery thereof in the form of a
beneficial interest in the U.S. Global Security (Cusip No.
_________________________). In connection with such transfer, the undersigned
does hereby confirm that such transfer has been effected in accordance with the
transfer restrictions set forth in the Indenture and the Notes and pursuant
<PAGE>
to and in accordance with Rule 144A under the U.S. Securities Act of 1933, as
amended, and accordingly, the undersigned represents that:
1. the Notes are being transferred to a transferee that the
undersigned reasonably believes is purchasing the Notes for its own
account or one or more accounts with respect to which the transferee
exercises sole investment discretion; and
2. the transferee and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in a transaction meeting the
requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States or any other jurisdiction.
[NAME OF UNDERSIGNED]
By:
Name:
Title:
Dated: ______________________
<PAGE>
Exhibit 4.2
FORMS OF NOTES
(Included in Exhibit 4.1)
<PAGE>
Exhibit 4.3
FORMS OF GUARANTEES
(Included in Exhibit 4.1)
<PAGE>
Exhibit 10.1
<PAGE>
Execution Copy
================================================================================
TEVECAP S.A.
12 5/8% Senior Notes due 2004
PURCHASE AGREEMENT
dated November 21, 1996
among
TEVECAP S.A.,
ITS SUBSIDIARIES LISTED ON
THE SIGNATURE PAGES HERETO
and
CHASE SECURITIES INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
and
BOZANO, SIMONSEN SECURITIES, INC.
================================================================================
<PAGE>
TEVECAP S.A.
$250,000,000
12 5/8% Senior Notes due 2004
PURCHASE AGREEMENT
November 21, 1996
CHASE SECURITIES INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BOZANO, SIMONSEN SECURITIES, INC.
c/o CHASE SECURITIES INC.
270 Park Avenue, 4th Floor
New York, New York 10017
Ladies and Gentlemen:
TEVECAP S.A., a sociedad anonima organized under the laws of the
Federative Republic of Brazil (the "Company"), proposes to issue and sell to
Chase Securities Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and Bozano, Simonsen Securities, Inc. (the "Initial
Purchasers") $250.0 million aggregate principal amount of its 12 5/8% Senior
Notes due 2004 (the "Notes"). The Notes will be issued pursuant to an Indenture
to be dated as of November 26, 1996 (the "Indenture") among the Company, the
Subsidiaries (as defined in Section 16) listed on the signature pages hereto
(collectively, the "Guarantors"), The Chase Manhattan Bank, as trustee (the
"Trustee") and Chase Trust Bank, as principal paying agent (the "Principal
Paying Agent"). Payment of principal and interest on the Notes will be
irrevocably guaranteed, on a senior basis (the "Guarantees"), by the Guarantors.
This is to confirm the agreement concerning the purchase of the Notes from the
Company by the Initial Purchasers.
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on an exemption therefrom. The Company has prepared a
preliminary offering memorandum dated October 31, 1996 (the "preliminary
offering memorandum"), and a final offering memorandum dated the date hereof
(such offering memorandum, in the form first furnished to the Initial Purchasers
for use in connection with the offering of the Notes, being hereinafter referred
to as the "Offering Memorandum"), setting forth information concerning the
Company, the Guarantors and the Notes. Copies of the preliminary offering
memorandum have been, and copies of the Offering Memorandum will be, delivered
by the Company and the Initial Purchasers pursuant to the terms of this
Agreement. Any references
<PAGE>
2
herein to the preliminary offering memorandum and the Offering Memorandum shall
be deemed to include all amendments and supplements thereto, unless otherwise
noted. The Company hereby confirms that it has authorized the use of the
preliminary offering memorandum and the Offering Memorandum in connection with
the offering and resale of the Notes by the Initial Purchasers in accordance
with Section 3 hereof.
The Initial Purchasers and their direct and indirect transferees
will be entitled to the benefits of the Exchange and Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Company will agree to
file with the Securities and Exchange Commission (the "Commission") (i) a
registration statement under the Securities Act (the "Exchange Offer
Registration Statement") registering an issue of a series of senior notes of the
Company (the "Exchange Notes") identical in all material respects to the Notes
(except that the Exchange Notes will not contain terms with respect to transfer
restrictions) to be offered in exchange for the Notes and (ii) under certain
circumstances, a shelf registration statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Each of the Company
and the Guarantors represents and warrants to and agrees with the Initial
Purchasers that:
(a) Each of the preliminary offering memorandum, as of its date, and
the Offering Memorandum, as of the date hereof and the Closing Date, contained
(or will contain) all information that, if requested by a prospective purchaser,
would be required to be provided to such purchaser pursuant to Rule 144A(d)(4)
under the Securities Act. The preliminary offering memorandum, as of its date,
did not, and the Offering Memorandum, as of the date hereof and as of the
Closing Date, did not (or will not), include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading; provided, however, that neither the
Company nor any Guarantor make any representation or warranty as to information
contained in or omitted from the preliminary offering memorandum or the Offering
Memorandum, as amended or supplemented, in reliance upon and in conformity with
written information furnished to the Company and the Guarantors by or on behalf
of the Initial Purchasers specifically for use in the preliminary offering
memorandum or the Offering Memorandum (the "Initial Purchasers' Information").
The parties acknowledge and agree that the Initial Purchasers' Information
consists solely of the last paragraph on the front cover page concerning the
terms of the offering by the Initial Purchasers, the first paragraph of the
legend on the inside front cover page concerning over-allotment and trading
activities and the statements relating to the Initial Purchasers in the third
and fifth paragraphs under the heading "Plan of Distribution" in the preliminary
offering memorandum and the Offering Memorandum.
<PAGE>
3
(b) The statements contained in the preliminary offering memorandum
and the Offering Memorandum relating to Brazil and its economy have been
extracted from publicly available information which the Company and the
Guarantors believe are reliable sources.
(c) Each of the preliminary offering memorandum and the Offering
Memorandum includes all information required by all applicable laws of the
Federative Republic of Brazil ("Brazil").
(d) Assuming the accuracy of each of the Initial Purchasers'
representations contained herein, and the Initial Purchasers' compliance with
their agreements hereunder, it is not necessary, in connection with the issuance
and sale of the Notes to the Initial Purchasers and the offer, resale and
delivery of the Notes in the manner contemplated by this Agreement and the
Offering Memorandum, to register the Notes under the Securities Act or to
qualify the Indenture in respect of the Notes under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act").
(e) The Company has been duly incorporated and is validly existing
as a sociedad anonima under the laws of Brazil, is duly qualified as a foreign
corporation for the transaction of business under the laws of each other
jurisdiction in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to so qualify
would not have, singularly or in the aggregate, a material adverse effect on the
financial condition, results of operations or business of the Company and its
Subsidiaries taken as a whole, and has all power and authority necessary to own
or hold its properties and to conduct the businesses in which it is engaged as
described in the Offering Memorandum.
(f) Each Subsidiary of the Company has been duly incorporated and is
validly existing as a corporation or a partnership under the laws of the
jurisdiction of its incorporation or organization, is duly qualified as a
foreign corporation for the transaction of business under the laws of each other
jurisdiction in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to so qualify
would not have, singularly or in the aggregate, a material adverse effect on the
financial condition, results of operations or business of the Company and its
Subsidiaries taken as a whole, and has all power and authority necessary to own
or hold its respective properties and to conduct the businesses in which it is
engaged as described in the Offering Memorandum. All issued and outstanding
shares of the capital stock of each of the Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
owns, directly or indirectly, 87%, 98%, 99.9% and 100%, respectively, of its
Subsidiaries TVA Sul, TVA Sistema, Commercial Cabo TV Sao Paulo Ltda., and
Galaxy Brasil S.A. and owns, directly or indirectly, 100% of each of its other
Subsidiaries, in each case, except as disclosed in the Offering Memorandum, free
and clear of any claim, lien, encumbrance, security interest, restriction upon
voting or transfer or any other claim of any third party; and the Company owns
36% and 14% of its Operating Ventures Canbras TVA and TV Filme, respectively;
50% and 33.3% of its Programming Ventures ESPN Brazil and HBO Partners,
respectively; 48.9% of Ype Radio e Televisao
<PAGE>
4
Ltda.; and 10% of Galaxy Latin America, in each case, except as disclosed in the
Offering Memorandum, free and clear of any claim, lien, encumbrance, security
interest or any other claim of any third party. The Company has no Subsidiaries
other than those listed on the signature pages hereto.
(g) The Company has an authorized capitalization as set forth in the
Offering Memorandum, and all of the issued and outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are fully
paid and non-assessable.
(h) The Company has full right, power and authority to execute and
deliver this Agreement, the Indenture, the Notes, the Registration Rights
Agreement, and the agreement with the Process Agent referred to in Section 21
(the "Agency Agreement") (collectively, the "Transaction Documents") and to
perform its obligations hereunder and thereunder; and all corporate action
required to be taken for the due and proper authorization, execution and
delivery of the Transaction Documents and the consummation of the transactions
contemplated thereby have been duly and validly taken.
(i) Each Guarantor has full right, power and authority to execute
and deliver this Agreement, the Indenture, the Registration Rights Agreement,
the Guarantees by the Guarantors endorsed on the Notes, and the Agency Agreement
and to perform its obligations hereunder and thereunder; and all corporate
action required to be taken by such Guarantor for the due and proper
authorization, execution and delivery of this Agreement, the Indenture, the
Registration Rights Agreement, the Guarantees and the Agency Agreement and the
consummation of the transactions contemplated thereby have been duly and validly
taken.
(j) This Agreement has been duly authorized, executed and delivered
by the Company and each Guarantor.
(k) The Indenture has been duly authorized by the Company and each
Guarantor, and when duly executed and delivered by the Company and each
Guarantor on the Closing Date, will constitute a valid and legally binding
agreement of the Company and each Guarantor enforceable against the Company and
each Guarantor, respectively, in accordance with its terms. At the Closing Date,
the Indenture will conform in all material respects to the requirements of the
Trust Indenture Act and the rules and regulations of the Commission applicable
to an indenture which is qualified thereunder, other than the Trustee being
qualified in accordance with the Trust Indenture Act.
(l) The Notes have been duly authorized by the Company, and, when
duly executed, authenticated, issued and delivered as provided in the Indenture
and paid for as provided herein, will be duly and validly issued and
outstanding, and will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms and
entitled to the benefits of the Indenture; the Guarantees have been duly
authorized by the Subsidiary Guarantors, and, when duly executed, issued and
delivered as provided in the Indenture, will be duly and validly issued, and
will constitute valid and
<PAGE>
5
legally binding obligations of the Subsidiary Guarantors, enforceable against
them in accordance with their terms and entitled to the benefits of the
Indenture.
(m) The Registration Rights Agreement has been duly authorized by
the Company and the Guarantors and, when duly executed and delivered by the
Company, the Guarantors and the Initial Purchasers on the Closing Date, will
constitute a valid and legally binding agreement of the Company and the
Guarantors, respectively, enforceable against them in accordance with its terms.
The Agency Agreement has been duly authorized by the Company and constitutes a
valid and legally binding agreement of the Company enforceable against it in
accordance with its terms.
(n) The Indenture, the Notes and the Registration Rights Agreement
conform in all material respects to the description thereof contained in the
Offering Memorandum.
(o) The execution, delivery and performance by the Company and each
Guarantor of the Transaction Documents to which it is a party, the performance
by the Guarantors of the Guarantees, the issuance, authentication, sale and
delivery of the Notes, and compliance with the terms thereof, and the
consummation by the Company of the transactions contemplated thereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its Subsidiaries pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
such subsidiary is a party or by which the Company or such subsidiary is bound
or to which any of the property or assets of the Company or such subsidiary is
subject, except where such conflict, breach, violation, default or creation
(singularly or in the aggregate) would not have a material adverse effect on the
financial condition, results of operations, business or prospects of the Company
and its Subsidiaries taken as a whole (a "Material Adverse Effect"), nor will
such actions result in any violation of the provisions of the estatutos (or
equivalent constituent document) of the Company or such Subsidiary or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or such subsidiary or any of their
respective properties or assets, except where such actions (singularly or in the
aggregate) would not have a Material Adverse Effect; and except for such
consents, approvals, authorizations, registrations or qualifications as may be
required under the applicable state securities laws in connection with the
purchase and resale of the Notes by the Initial Purchasers and under federal and
state securities laws in connection with the Exchange Notes and the Registration
Rights Agreement and from the Central Bank of Brazil (the "Central Bank"), no
consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the execution,
delivery and performance of the Transaction Documents by the Company or the
Guarantors, or for the performance by the Guarantors of the Guarantees, the
issuance, authentication, sale and delivery of the Notes, and compliance with
the terms thereof, or for the consummation by the Company of the transactions
contemplated hereby and thereby. On or prior to the Closing Date, all consents,
authorizations, registrations and qualifications referred to in the
<PAGE>
6
preceding sentence shall have been obtained, and the same shall be in full force
and effect on the Closing Date.
(p) The financial statements (including the related notes) included
in the preliminary offering memorandum and the Offering Memorandum comply in all
material respects with the requirements applicable to a registration statement
on Form F-1 (except that certain supporting schedules are omitted), present
fairly the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods indicated, and
have been prepared in conformity with generally accepted accounting principles
("US GAAP") applied on a consistent basis throughout the periods involved,
except as otherwise disclosed therein. The other historical financial and
statistical information and data included in the preliminary offering memorandum
and the Offering Memorandum are in all material respects accurately presented.
(q) Coopers & Lybrand are independent public accountants with
respect to the Company under Rule 101 of AICPA's Code of Professional Conduct
and its interpretations and rulings.
(r) Except as described in the Offering Memorandum under
"Business--Legal Proceedings," there are no legal or governmental proceedings to
which the Company or any of its Subsidiaries is a party or of which any property
or assets of the Company or such subsidiary is the subject which, singularly or
in the aggregate, if determined adversely to the Company or such subsidiary
would have a Material Adverse Effect; and to the best knowledge of the Company,
no such proceedings are threatened by governmental authorities or threatened by
others.
(s) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency or body
which prevents the issuance of the Notes or suspends the sale of the Notes in
any jurisdiction; no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued with respect to
the Company which would prevent or suspend the issuance or sale of the Notes, or
the use of the preliminary offering memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the best
knowledge of the Company, threatened against the Company or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official, domestic or foreign, which could reasonably be expected to interfere
with or adversely affect the issuance of the Notes or in any manner draw into
question the validity thereof or the validity or enforceability of any
Transaction Document or any action taken or to be taken pursuant thereto.
(t) Neither the Company nor any of its Subsidiaries (i) is in
violation of its estatuto or other constituent documents, (ii) is in default in
any material respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other material
<PAGE>
7
agreement or instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject or (iii) is in violation in any
material respect of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject, except any
violation or default under clauses (ii) or (iii) that would not have a Material
Adverse Effect.
(u) Each of the Company and its Subsidiaries possesses all material
licenses, certificates, authorizations or permits (including, without
limitation, all transmission and broadcast licenses) issued by, and has made all
declarations and filings with, the appropriate regulatory agencies or bodies
which are necessary or desirable for the ownership of its respective properties
or the conduct of its respective business as described in the Offering
Memorandum, except where the failure to possess or make the same would not have,
singularly or in the aggregate, a Material Adverse Effect, and neither the
Company nor any of its Subsidiaries has received notification of any revocation
or modification of any such license, certificate, authorization or permit,
except where such revocation or modification would not have a Material Adverse
Effect. The Company and each of its Subsidiaries are in compliance in all
material respects with the terms and conditions of all decisions, policies,
authorizations and licenses announced, rendered, granted or regulated, as the
case may be, by the Brazilian Ministry of Communications (the "Ministry"), and
the other governmental authorities having authority over services provided by
the Company or any of its Subsidiaries, in each case, with respect to the
operation of the businesses of the Company and its Subsidiaries.
(v) Neither the Company nor any subsidiary of the Company is (i) an
"investment company" or a company "controlled by" an investment company within
the meaning of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and the rules and regulations of the Commission thereunder or
(ii) a "holding company" or a "subsidiary company" of a holding company, or an
"affiliate" thereof within the Public Utility Holding Company Act of 1935, as
amended.
(w) Each of the Company and its Subsidiaries owns or possesses
adequate rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses and know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) necessary for the conduct of its respective business, except where
the failure to own or possess such rights would not have a Material Adverse
Effect, and has no reason to believe that the conduct of its respective business
will conflict with any such rights of others which might reasonably be expected
to have a Material Adverse Effect, and has not received any notice of any claim
of conflict with any such rights of others.
(x) Each of the Company and its Subsidiaries has good and marketable
title to, or has valid rights to lease or otherwise use, all items of real and
personal property which are material to its respective business, in each case
except as disclosed in the Offering Memorandum, free and clear of all liens,
encumbrances and defects that can reasonably be
<PAGE>
8
expected to cause a material adverse effect on the financial condition, results
of operations or business of the Company and its Subsidiaries taken as a whole.
(y) The indemnification and contribution provisions set forth in
Sections 10 and 11 of this Agreement do not contradict Brazilian law or public
policy.
(z) No labor disturbance by the employees of the Company or any of
its Subsidiaries exists, or, to the best knowledge of the Company, has been
threatened, which could reasonably be expected to have a material adverse effect
on the financial condition, results of operations or business of the Company and
its Subsidiaries taken as a whole.
(aa) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission, or other release of any kind
of toxic or other wastes or other hazardous substances by, due to, or caused by
the Company or any of its Subsidiaries (or, to the best knowledge of the
Company, any other entity for whose acts or omissions the Company or any of its
Subsidiaries is or may reasonably be expected to be liable) upon any of the
property now or previously owned or leased by the Company or any of its
Subsidiaries, or upon any other property (i) in violation of any Brazilian
federal or state statute or any Brazilian ordinance, rule, regulation, order,
judgment, decree or permit or (ii) which would, under any Brazilian federal or
state statute or any Brazilian ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any liability,
except in the case of both clauses (i) and (ii) for any violation or liability
which would not have, singularly or in the aggregate with all such violations
and liabilities, a material adverse effect on the financial condition, results
of operations or business of the Company and its Subsidiaries taken as a whole.
(bb) Neither the Company nor any of the Guarantors or their
respective Subsidiaries has sustained since the date of the latest audited
financial statements included in the Offering Memorandum any material loss or
interference with its business from fire, explosion, flood or other calamity,
regardless of whether covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Memorandum; and since September 30, 1996, there has
not been any change in the capital stock or long-term debt of the Company (other
than scheduled redemptions or payments) or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
management, financial position, stockholders' equity or results of operations of
the Company and its Subsidiaries otherwise than as set forth or contemplated in
the Offering Memorandum.
(cc) The Company has filed all Brazilian federal, state and local
income and franchise Tax Returns (as defined below) required to be filed through
the date hereof and has paid all material Taxes (as defined below) due, other
than those being contested in good faith and for which adequate reserves have
been provided or those currently payable without penalty or interest, and no Tax
deficiency has been determined adversely to the Company or its Subsidiaries
which has had (nor does the Company have any knowledge of any Tax deficiency
which, if determined adversely to the Company or its Subsidiaries could
<PAGE>
9
reasonably be expected to have) a Material Adverse Effect. For purposes of this
Agreement, the terms "Tax" and "Taxes" shall mean all Brazilian 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.
(dd) Since June 30, 1996, except as disclosed in the Offering
Memorandum, the Company has not (i) issued or granted any securities (other than
(A) under plans, agreements and arrangements disclosed in, and in effect on the
date of, the Offering Memorandum, (ii) incurred any liability or obligation,
direct or contingent, other than liabilities and obligations which were incurred
in the ordinary course of business and which would not reasonably be expected to
have a Material Adverse Effect, (iii) entered into any transaction not in the
ordinary course of business which could reasonably be expected to have a
Material Adverse Effect or (iv) declared or paid any dividend on its capital
stock.
(ee) There are no securities of the Company registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or listed on a
national securities exchange or quoted in a U.S. automated inter-dealer
quotation system. The Company has been advised that the Notes have been
designated as PORTAL securities in accordance with the rules and regulations of
the National Association of Securities Dealers, Inc. (the "NASD").
(ff) Neither the Company nor any of its affiliates (as defined in
Rule 501(b) of Regulation D under the Securities Act ("Regulation D")) has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the offering and sale of the
Notes in a manner that would require the registration of the Notes under the
Securities Act, (ii) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offering
of the Notes or (iii) engaged in any directed selling efforts within the meaning
of Rule 902 under the Securities Act in the United States in connection with the
Notes being offered and sold pursuant to Regulation S under the Securities Act;
provided, however, that with respect to clauses (i) and (ii) above, the Company
makes no representations or warranties as to the activities of the Initial
Purchasers.
(gg) Neither the Company nor any of its affiliates has taken, and
the Company will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Notes.
<PAGE>
10
(hh) No stamp duty, stock exchange tax, value-added tax or any other
similar tax or duty is payable in Brazil to any taxing authority thereof or
therein in connection with (i) the authorization, issuance, sale and delivery of
the Notes by the Company to the Initial Purchasers in the manner contemplated in
this agreement or (ii) the entry into, delivery of, or payments pursuant to, the
Guarantees.
(ii) Except for (i) the authorization of the Central Bank of the
terms and conditions of the Notes and of the payment of the fees and commissions
provided for in the Purchase Agreement, which has been obtained or will be
obtained prior to the Closing Date; (ii) the registration of the issue of the
Notes with the Central Bank which will be effected within 30 days of the Closing
Date by the Company obtaining a registration certificate (the "Registration
Certificate") from the Central Bank; and (iii) the approval by the Central Bank
to make any payment in U.S. dollars not set forth in the Registration
Certificate or to make any payment provided for therein later than 180 days
after the due date, which will be obtained by the Company as soon as practicable
after such approval is necessitated, no authorization, approval or consent of
any governmental authority or agency of or in Brazil is required to effect
payments in U.S. dollars on any of the Notes.
(jj) Each shareholder of the Company has executed and delivered an
enforceable written commitment in the form of an Amendment No. 2 to the
Stockholders Agreement among such shareholders and the Company (together, the
"Shareholder Commitments"), agreeing that such shareholder will not exercise its
voting rights to receive mandatory statutory dividends (dividendo minimo
obrigatorio), which conforms in all material respects to the description thereof
in the Offering Memorandum. Each Shareholder Commitment has been duly
authorized, executed and delivered by each party thereto and constitutes the
valid and binding obligation of the Company and each shareholder, enforceable
against the Company and each shareholder in accordance with its terms. The
Shareholder Commitments, taken together, are effective to preclude payment of
any mandatory statutory dividend.
(kk) None of (a) the Transaction Documents, (b) the issuance, sale
and delivery of the Notes to the Initial Purchasers upon payment therefor as
contemplated in this Agreement or (c) the issuance of the Exchange 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 imposed by Brazil or any political subdivision thereof.
(ll) Except as otherwise described in the Offering Memorandum, all
payments by the Company or any Guarantor in respect of the Notes, the Exchange
Notes, the Indenture, this Agreement, the Registration Rights Agreement (or by
any of the Guarantors upon default by the Company) will be made without
withholding or deduction for or on account of any present or future taxes,
duties, assessments or other governmental charges of whatsoever nature imposed
or levied by or on behalf of Brazil or Japan or any political subdivision or
authority thereof or therein having power to tax; provided, however, that if the
Notes or the Exchange Notes are redeemed for any reason prior to maturity, all
payments
<PAGE>
11
of interest, fees, commissions and original issue discount in respect of the
Notes or the Exchange Notes by the Company (or by any of the Guarantors upon
default by the Company) to holders of the Notes or the Exchange Notes (including
payments made prior to redemption) would be subject to withholding of Brazilian
income tax at a rate of 15 percent, which rate may be reduced to 12-1/2 percent
pursuant to the bilateral treaty aimed at avoiding double taxation entered into
between Brazil and Japan on January 24, 1967 and enacted in Brazil by
Presidential Decree No. 61,899 dated December 14, 1967 (as amended and
supplemented by a protocol dated March 23, 1976 and enacted in Brazil by
Presidential Decree No. 81,194 dated January 9, 1978) and, in accordance with
and subject to the Indenture, the Company will pay (and upon default by the
Company, the Guarantors will pay) such additional amounts as may be necessary in
order that the amounts received by the holder of any Note or Exchange Note after
such withholding or deduction shall equal the respective net amounts which would
have been receivable by such holder in the absence of such withholding imposed
by Brazil or by Japan or any political subdivision or taxing authority thereof
or therein.
(mm) Neither the Company nor any Subsidiary has any pension, profit
sharing, deferred compensation, bonus, retirement, stock option, stock purchase,
phantom stock or similar plan, including any agreement evidencing rights to
purchase securities of the Company or any Subsidiary, in each case which is
subject to ERISA or the Code.
(nn) None of the Company or its Subsidiaries nor any of their
properties or assets has any immunity from the jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, executing or otherwise) under the laws
of Brazil.
(oo) To ensure the legality, validity, enforceability or
admissibility into evidence of each of this Agreement, the Registration Rights
Agreement, the Agency Agreement, the Indenture, the Notes, the Guarantees, the
Exchange Notes or any other document to be furnished hereunder or thereunder in
Brazil it is not necessary that this Agreement, the Registration Rights
Agreement, the Agency Agreement, the Indenture, the Notes (including the
Guarantees), the Exchange Notes or any such other document be filed or recorded
with any court or other authority in Brazil or that any stamp or similar tax be
paid in Brazil, on or in respect of any of this Agreement, the Registration
Rights Agreement, the Agency Agreement, the Indenture, the Notes, the Exchange
Notes or any such other document, other than the translation into Portuguese by
a sworn translator and the consularization of this Agreement, the Registration
Rights Agreement and the Indenture at the Brazilian Consulate in New York which
will be effected by the Company as soon as reasonably practicable after
execution of such agreements.
2. PURCHASE OF THE NOTES BY THE INITIAL PURCHASERS. (a) On the basis
of the representations, warranties and agreements herein contained, and subject
to the terms and conditions set forth herein, the Company agrees to issue and
sell to each of the Initial Purchasers, severally and not jointly, and each of
the Initial Purchasers, severally and not jointly, agrees to purchase from the
Company, the principal amount of Notes set forth
<PAGE>
12
opposite the name of such Initial Purchaser in Schedule 1 hereto, at a purchase
price equal to 96.75% of the principal amount thereof plus accrued interest, if
any, from the Closing Date.
(b) The Company shall not be obligated to deliver any of the Notes,
except upon payment for all of the Notes to be purchased as provided herein.
3. SALE AND RESALE OF THE NOTES BY THE INITIAL PURCHASERS.
Each Initial Purchaser has advised the Company that it proposes to offer the
Notes for resale upon the terms and conditions set forth in this Agreement and
in the Offering Memorandum. Each Initial Purchaser hereby represents and
warrants to, and agrees with, the Company that it (i) is purchasing the Notes
pursuant to a private sale exempt from registration under the Securities Act,
(ii) has not solicited and will not solicit offers for, and has not offered or
sold and will not offer or sell, the Notes by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act and has not and will not
engage in any directed selling efforts within the meaning of Rule 902 under the
Securities Act in the United States in connection with the Notes being offered
and sold pursuant to Regulation S under the Securities Act, and (iii) has
solicited and will solicit offers for the Notes only from, and has offered, sold
and delivered and will offer, sell and deliver the Notes, as part of its initial
offering, only (A) to persons in the United States whom such Initial Purchaser
reasonably believes to be qualified institutional buyers ("Qualified
Institutional Buyers") as defined in Rule 144A under the Securities Act, as such
rule may be amended from time to time ("Rule 144A") or, if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each such
account is a Qualified Institutional Buyer to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A and, in each case,
in transactions under Rule 144A, (B) to a limited number of other "accredited
investors" as defined in Rule 501(a)(1)(2), (3) or (7) under Regulation D that
are institutional investors ("Institutional Accredited Investors") in private
sales exempt from registration under the Securities Act and (C) to non-U.S.
Persons outside the United States to whom the Initial Purchasers reasonably
believe offers and sales of the Notes may be made in reliance on Regulation S
under the Securities Act in transactions meeting the requirements of Regulation
S. Each Initial Purchaser represents and warrants that it is a Qualified
Institutional Buyer, with such knowledge and experience in financial and
business matters as is necessary to evaluate the merits and risks of an
investment in the Notes, and is acquiring its interest in the Notes not with a
view to the distribution or resale thereof, except resales in compliance with
the registration requirements or exemption provisions of the Securities Act and
that neither it, nor anyone acting on its behalf, will offer the Notes so as to
bring the issuance and sale of the Notes within the provisions of Section 5 of
the Securities Act. The Company acknowledges and agrees that each Initial
Purchaser may sell Securities to any affiliate of such Initial Purchaser and
that any such affiliate may sell Securities purchased by it to the Initial
Purchasers; provided, in each case, that such sales are made in accordance with
the provisions of this Section 3. Each Initial Purchaser agrees that, prior to
or simultaneously with the confirmation of sale by such Initial Purchaser to any
<PAGE>
13
purchaser of any of the Securities purchased by the Initial Purchasers from the
Company pursuant hereto, such Initial Purchaser shall furnish to that purchaser
a copy of the Offering Memorandum (and any amendment thereof or supplement
thereto that the Company shall have furnished to the Initial Purchasers prior to
the date of such confirmation of sale). In addition to the foregoing, each
Initial Purchaser agrees and understands that the Company and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Sections
6(c), 6(d) and 6(e) hereof, counsel to the Company and to the Initial
Purchasers, respectively, may rely upon the accuracy and truth of the foregoing
representations, warranties and covenants in this Section 3 and the Initial
Purchasers and the Company hereby consent to such reliance.
4. DELIVERY OF AND PAYMENT FOR THE NOTES. (a) Delivery of and
payment for the Notes shall be made at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York, or at such other place as
shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M.,
New York City time, on November 26, 1996 or at such other time or date, not
later than five full business days thereafter, as shall be agreed upon by the
Initial Purchasers and the Company (such date and time of payment and delivery
being herein called the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the Notes
shall be made to the Company by wire transfer of immediately available funds to
such account or accounts as the Company shall specify prior to the Closing Date
or by such other means as the parties hereto shall agree prior to the Closing
Date against delivery to the Initial Purchasers through the book-entry
facilities of The Depository Trust Company (the "Depositary") or otherwise of
the Notes. Upon delivery, the Notes sold to Qualified Institutional Buyers and
pursuant to Regulation S shall each be represented by a global note, registered
in the name of the Depositary or its nominee and Notes sold to Institutional
Accredited Investors shall be represented by physical Notes registered in the
names requested by the Initial Purchasers, in each case in such denominations as
the Initial Purchasers shall request in writing not less than two full business
days prior to the Closing Date. For the purpose of expediting the checking and
packaging of certificates evidencing the Notes, the Company agrees to make such
certificates available for inspection by the Initial Purchasers at least 24
hours prior to the Closing Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
Initial Purchasers:
(a) To furnish to the Initial Purchasers, without charge, as many
copies of the Offering Memorandum and any supplements and amendments thereto as
they may reasonably request.
(b) To advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes any
statement of a material fact made in the Offering Memorandum untrue or which
requires the making of any additions to or changes in the Offering Memorandum
(as amended or supplemented from time to time)
<PAGE>
14
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading and not to effect such amendment or
supplementation without the consent of the Initial Purchasers; to advise the
Initial Purchasers promptly of any order preventing or suspending the use of the
preliminary offering memorandum or the Offering Memorandum, of the suspension of
the qualification of the Securities for offering or sale in any jurisdiction and
of the initiation or threatening of any proceeding for any such purpose; and to
use best efforts to prevent the issuance of any such order preventing or
suspending the use of the preliminary offering memorandum or the Offering
Memorandum or suspending any such qualification and, if any such suspension is
issued, to obtain the lifting thereof at the earliest possible time.
(c) Prior to making any amendment or supplement to the Offering
Memorandum, the Company shall furnish a copy thereof to the Initial Purchasers
and counsel to the Initial Purchasers and will not effect any such amendment or
supplement to which the Initial Purchasers shall reasonably object by notice to
the Company after a reasonable period to review, which shall not in any case be
longer than five business days after receipt of such copy.
(d) If, at any time prior to completion of the distribution of the
Notes by the Initial Purchasers to other purchasers, any event shall occur or
condition exist as a result of which it is necessary, in the opinion of counsel
for the Initial Purchasers or counsel for the Company, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in light of the
circumstances existing at the time it is delivered to a purchaser, or if it is
necessary to amend or supplement the Offering Memorandum to comply with
applicable law, to promptly prepare such amendment or supplement as may be
necessary to correct such untrue statement or omission so that the Offering
Memorandum, as so amended or supplemented, will comply with applicable law and
to furnish to the Initial Purchasers such number of copies thereof as they may
reasonably request. The Initial Purchasers' delivery of any such amendment or
supplement shall not constitute a waiver of any of the conditions set forth in
Section 6 hereof.
(e) So long as the Notes are outstanding and are "Restricted
Securities" within the meaning of Rule 144(a)(3) under the Securities Act, to
furnish to holders of the Notes and prospective purchasers of Notes 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 the Company is then subject to and in compliance with
Section 13 or 15(d) of the Exchange Act.
(f) For a period of three years following the Closing Date, to
furnish to the Initial Purchasers copies of any annual reports and current
reports filed with the Commission on Forms 20-F, 6-K, or such other similar
forms as may be designated by the Commission under the Exchange Act or any rule
or regulation of the Commission thereunder and any
<PAGE>
15
compliance certificate or notice of default or event of default furnished by the
Company to the Trustee or to the holders of the Notes pursuant to the Indenture.
(g) To use its reasonable best efforts to qualify the Notes for sale
under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may reasonably designate and to continue such qualifications in
effect so long as reasonably required for the distribution of the Notes. The
Company will also arrange for the determination of the eligibility for
investment of the Notes under the laws of such jurisdictions as the Initial
Purchasers may reasonably request. Notwithstanding the foregoing, the Company
and its Subsidiaries shall not be obligated to register or qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which they are
not so registered or qualified, to file a general consent to service of process
in any jurisdiction or to subject themselves to taxation in any jurisdiction if
they are not otherwise so subject.
(h) To promptly advise the Initial Purchasers of the receipt by the
Company or the Guarantors of any notification with respect to the suspension of
the qualification of the Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
(i) To comply with the Registration Rights Agreement.
(j) To assist the Initial Purchasers in arranging to cause the Notes
to be designated Private Offerings, Resales and Trading through Automated
Linkages Market ("PORTAL") securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
relating to trading in the PORTAL Market and the Notes to be eligible for
clearance and settlement through the Depository Trust Company (the "DTC"), the
Euroclear System and Cedel Bank, societe anonyme.
(k) Not to, and will cause its affiliates (as such term is defined
in Rule 501(b) under the Securities Act) 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) which could be integrated with the sale of the Notes in a
manner which would require the registration of the Notes under the Securities
Act.
(l) Except following the effectiveness of the Exchange Offer or the
Shelf Registration Statement, as the case may be, not to, and will cause its
affiliates (as such term is defined in Rule 501(b) under the Securities Act) not
to, and will not authorize or knowingly permit any person acting on its behalf
to, solicit any offer to buy or offer to sell the Notes by means of any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or by means of any directed selling
efforts (as defined in Rule 902 under the Securities Act) in the United States
in connection with the Notes being offered and sold pursuant to Regulation S or
in any manner involving a public offering within the meaning of Section 4(2) of
the Securities Act.
<PAGE>
16
(m) To apply the net proceeds from the sale of the Notes as set
forth in the Offering Memorandum under the caption "Use of Proceeds".
(n) For a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose
of, directly or indirectly, or file a registration statement for, or announce
any offer, sale, contract for sale of or other disposition of any debt
securities issued or guaranteed by the Company (other than the Notes or the
Exchange Notes) without the prior written consent of the Initial Purchasers,
which consent shall not be unreasonably withheld.
(o) In connection with the offering, until the Initial Purchasers
shall have notified the Company of the completion of the resale of the Notes,
neither the Company nor any of its affiliated purchasers (as defined in Rule
10b-6 under the Exchange Act), either alone or with one or more other persons,
will bid for or purchase, for any account in which it or any of its affiliated
purchasers has a beneficial interest, any Notes, or attempt to induce any person
to purchase any Notes, except as contemplated by the Exchange Offer; and neither
it nor any of its affiliated purchasers will make bids or purchase for the
purpose of creating actual, or apparent, active trading in or of raising the
price of the Notes, except as contemplated by the Exchange Offer.
(p) Promptly, and in any event not more than 30 days after the
Closing Date, (i) make application to the Central Bank for the Registration
Certificate and thereafter do all things reasonably necessary to obtain the
Registration Certificate and provide evidence thereof to the Initial Purchasers
and (ii) do all things reasonably necessary to obtain the approval of the
Central Bank, as soon as practicable after such approval is necessitated, to
make any payment in dollars not set forth in the Registration Certificate or to
make any payment provided for therein earlier than its originally scheduled date
for payment.
(q) Promptly after their execution and delivery, procure the
notarization and consularization of this Agreement, the Registration Rights
Agreement and the Indenture.
6. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
respective obligations of the several Initial Purchasers hereunder are subject
to the accuracy, on the date hereof and on the Closing Date, of the
representations and warranties of the Company and the Guarantors contained
herein, to the accuracy of the statements of the Company made in any
certificates delivered pursuant to provisions hereof, to the performance by the
Company and the Guarantors of their obligations hereunder, and to each of the
following additional terms and conditions:
(a) All consents, waivers and approvals necessary for the
consummation of the transactions contemplated by the Transaction Documents shall
have been obtained and shall be in full force and effect on the Closing Date.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of each of the Transaction Documents, the
Notes and the
<PAGE>
17
Offering Memorandum, and all other legal matters relating to the Transaction
Documents and the transactions contemplated thereby shall be reasonably
satisfactory in all material respects to counsel for the Initial Purchasers, and
the Company shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.
(c) Mayer, Brown & Platt, U.S. counsel to the Company and the
Guarantors, shall have furnished to the Initial Purchasers their written opinion
addressed to the Initial Purchasers and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers, substantially to
the effect set forth in Exhibit B hereto.
(d) (i) Basch & Rameh, Brazilian counsel to the Company and the
Guarantors organized under the laws of Brazil, shall have furnished to the
Initial Purchasers their written opinion addressed to the Initial Purchasers and
dated the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers, substantially to the effect set forth in Exhibit C-1 hereto;
(ii) Carlos Baliero Esq., General Counsel of the Company, shall have furnished
to the Initial Purchasers his written opinion addressed to the Initial
Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, substantially to the effect set forth in
Exhibit C-2 hereto; and (iii) Harney, Westwood & Riegels, British Virgin Islands
counsel to TVA Communications Ltd., shall have furnished to the Initial
Purchasers their written opinion addressed to the Initial Purchasers and dated
the Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, substantially to the effect set forth in Exhibit C-3 hereto.
(e) The Initial Purchasers shall have received from Simpson Thacher
& Bartlett, counsel for the Initial Purchasers, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Initial Purchasers may
reasonably require, and the Company shall have furnished to such counsel such
documents and information as they reasonably request for the purpose of enabling
them to pass upon such matters.
(f) The Initial Purchasers shall have received from Machado, Meyer,
Sendacz e Opice, Brazilian counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date, with respect to such matters as the Initial
Purchasers may reasonably require, and the Company shall have furnished to such
counsel such documents and information as they reasonably request for the
purpose of enabling them to pass upon such matters.
(g) With respect to the letter of Coopers & Lybrand delivered to the
Initial Purchasers concurrently with the execution of this Agreement (the
"initial letter"), the Company shall have furnished to the Initial Purchasers a
letter (the "bring-down letter") from Coopers & Lybrand addressed to the Initial
Purchasers and dated the Closing Date (1) confirming that it is an independent
public accountant with respect to the Company under rule 101 of the American
Institute of Certified Public Accountants' Code of Professional Conduct, and its
interpretations and rulings and (ii) confirming, as of the date of the
bring-down letter (or, with respect to matters involving changes or developments
since the date as of which specified financial information is given in the
Offering Memorandum, as of
<PAGE>
18
a date not more than five business days prior to the date of the bring-down
letter), the conclusions and findings of the firm with respect to the financial
information and other matters covered by the initial letter are accurate. In
addition, the Company shall have received letters from Coopers & Lybrand to the
effect that the Company may use, in connection with the offering and sale of the
Notes, the audited financial statements of the Company prepared by such
accountants and included in the Offering Memorandum.
(h) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, of its President and its chief financial
officer stating that (A) such officers have carefully examined the Offering
Memorandum, (B) in their opinion, as of the date hereof, the Offering Memorandum
did not include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and since the date hereof, no event has
occurred which should have been set forth in a supplement or amendment to the
Offering Memorandum and (C) to the best of their knowledge after reasonable
investigation, as of the Closing Date, the representations and warranties of the
Company and the Guarantors in this Agreement are true and correct, the Company
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and subsequent
to the date of the most recent financial statements in the Offering Memorandum,
there has been no material adverse change in the financial position or results
of operation of the Company and its Subsidiaries or any event or development
that would be reasonably likely to result in a Material Adverse Effect, except
as set forth in the Offering Memorandum.
(i) The Initial Purchasers shall have received on the date hereof
the Registration Rights Agreement and the Agency Agreement executed and
delivered by a duly authorized officer of the Company.
(j) The Notes shall have been approved by the NASD for trading in
the PORTAL Market.
(k) The Indenture shall have been duly executed and delivered by the
Company, the Guarantors and the Trustee and the Notes shall have been duly
executed and delivered by the Company and duly authenticated by the Trustee.
(l) If any event shall have occurred that requires the Company under
Section 5(d) hereof to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the Initial
Purchasers shall have been given a reasonable opportunity to comment thereon,
and copies thereof shall have been delivered to the Initial Purchasers
reasonably in advance of the Closing Date.
(m) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed withdrawal
of any rule or regulation under the Securities Act or the Exchange Act by the
Commission or any amendment or proposed amendment thereof by the Commission
which in the judgment of the
<PAGE>
19
Initial Purchasers would materially impair the ability of the Initial Purchasers
to purchase, hold or effect resales of the Notes as contemplated hereby.
(n) At the Closing Date, after giving effect to the consummation of
the transactions contemplated by the Transaction Documents, there shall exist no
default or event of default under the Indenture.
(o) Neither the Company nor any of the Guarantors or their
respective Subsidiaries has sustained since the date of the latest audited
financial statements included in the Offering Memorandum any material loss or
interference with its business from fire, explosion, flood or other calamity,
regardless of whether covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as set forth or
contemplated in the Offering Memorandum; and since September 30, 1996, except
for the transactions contemplated by the Offering Memorandum (exclusive of any
amendment or supplement), there shall not have been any change in the capital
stock or long-term debt of the Company or any event or development involving a
prospective change that would be reasonably likely to result in a change in the
general affairs, management, financial condition, results of operations,
business or prospects of the Company and its Subsidiaries the effect of which,
in any such case described above, is, in the judgment of the Initial Purchasers,
so material and adverse as to make it impracticable or inadvisable to proceed
with the sale or delivery of the Notes on the terms and in the manner
contemplated in the Offering Memorandum (exclusive of any amendment or
supplement).
(p) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Notes or any of
the Company's or its Subsidiaries, other debt securities 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, and (ii) no such organization shall have
publicly announced that it has under surveillance or review (other than an
announcement with positive implications of a positive upgrading) its rating of
the Notes or any of the Company's or its Subsidiaries, other debt securities.
(q) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange, the Sao
Paolo Stock Exchange, the Rio de Janeiro Stock Exchange or the over-the-counter
market, shall have been suspended or limited, or minimum prices shall have been
established on any such exchange or such market by the Comissao de Valores
Mobiliarios, the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, or trading in any securities of the
Company on any exchange or in the over-the-counter market shall have been
suspended or, (ii) a general moratorium on commercial banking activities shall
have been declared by United States Federal or New York State or Brazilian
authorities, or (iii) an outbreak or escalation of hostilities or a declaration
by the United States or Brazil of a national emergency or war, (iv) a change or
development involving a prospective change in Brazilian or Japanese taxation
adversely affecting the Company, the Notes, the Guarantees or the
<PAGE>
20
transfer thereof or the imposition of exchange controls by Brazil; or (v) a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States or Brazil shall be such) the effect of which, in the case of this
clause (v), is, in the judgment of the Initial Purchasers, so material and
adverse as to make it impracticable or inadvisable to proceed with the sale or
delivery of the Notes on the terms and in the manner contemplated by this
Agreement and the Offering Memorandum (exclusive of any amendment or
supplement).
(r) The Initial Purchasers shall have received evidence reasonably
satisfactory to them that the appointment of CT Corporation System as agent for
service of process of the Company and the Guarantors pursuant to Section 21
hereof and pursuant to the Indenture has been accepted by such agent.
(s) The Initial Purchasers shall have received a copy of the letter
from Central Bank in form and substance satisfactory to them, approving the
transactions contemplated by the Offering Memorandum.
(t) No action shall have been taken and no United States, Brazilian
or other statute, rule, regulation or order shall have been enacted, adopted or
issued by any United States or Brazilian governmental agency which would, as of
the Closing Date, prevent the issuance or sale of the Notes; and no injunction,
restraining order or order of any other nature by a United States, Brazilian or
other federal or state court of competent jurisdiction shall have been issued as
of the Closing Date which would prevent the issuance or sale of the Notes.
(u) Prior to the Closing Date, the Company and the Guarantors shall
have furnished to the Initial Purchasers such further information, certificates,
opinions and documents as it may reasonably request.
(v) The Shareholder Commitments shall have been executed and
delivered and shall be in full force and effect.
(w) The Company and Galaxy Brasil shall have entered into an
amendment to the Galaxy Brasil Leasing Facility (as defined in the Offering
Memorandum) to allow the Guarantee of the Notes by Galaxy Brasil as described in
the Offering Memorandum.
All opinions, letters and certificates mentioned above or elsewhere
in this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Initial Purchasers.
7. TERMINATION. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Notes if, prior to that time, any of the conditions described in Section 6
shall not have been satisfied.
<PAGE>
21
8. DEFAULTING INITIAL PURCHASERS. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for the
purchase of the Notes that would have been purchased by such defaulting Initial
Purchaser by other persons satisfactory to the Company 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, the Company or the Guarantors, except
that the Company and the Guarantors will continue to be liable for the payment
of expenses to the extent set forth in Sections 9 and 13 and except that the
provisions of Sections 10 and 11 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 1 hereto who, pursuant to this Section 8, purchases 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 for damages caused by its default. If
other purchasers agree to purchase the Notes of a defaulting Initial Purchaser,
either the non-defaulting Initial Purchasers or the Company 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 the Company or counsel for the Initial
Purchasers may be necessary in the Offering Memorandum, the Transaction
Documents or in any other document or arrangement, and the Company agrees to
file promptly any amendment or supplement to the Offering Memorandum that
effects any such changes.
9. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES.
Notwithstanding anything to the contrary contained herein, if (a) this Agreement
shall have been terminated pursuant to Section 7, (b) the Company shall fail to
tender the Notes for delivery to the Initial Purchasers for any reason permitted
under this Agreement or (c) the Initial Purchasers shall decline to purchase the
Notes for any reason permitted under this Agreement, the Company and the
Guarantors shall reimburse the Initial Purchasers for the fees and expenses of
their counsel and for such other out-of-pocket expenses as shall have been
reasonably incurred by them in connection with this Agreement and the proposed
purchase of the Notes. If this Agreement is terminated pursuant to Section 8 by
reason of the default of one or more of the Initial Purchasers, the Company and
the Guarantors shall not be obligated to reimburse any defaulting Initial
Purchaser on account of such expenses.
10. INDEMNIFICATION. (a) The Company and each Guarantor, jointly and
severally, shall indemnify and hold harmless each of the Initial Purchasers,
their respective affiliates, and their respective officers, directors,
employees, representatives and agents, and each person, if any, who controls any
of the Initial Purchasers within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 10 and
Section 11 as the Initial Purchasers) from and against any loss, claim, damage,
expense or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, expense, liability or
action relating to purchases and sales of Notes), to which the Initial
Purchasers may become subject, under the Securities Act, the Exchange Act or any
other foreign, federal or state statutory law or regulation, at common
<PAGE>
22
law or otherwise, insofar as such loss, claim, damage, expense, liability or
action arises out of, or is based upon, (i) 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 or supplement thereto
or any information provided by the Company pursuant to Section 5(d) hereof or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and shall
reimburse the Initial Purchasers promptly upon demand for any legal or other
expenses reasonably incurred by the Initial Purchasers in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, expense,
liability or action as such expenses are incurred; provided, however, that the
Company and the Guarantors shall not be liable in any such case to the extent
that any such loss, claim, damage, expense, liability or action arises out of,
or is based upon, an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with the Initial Purchasers' Information; and provided further that
with respect to any such untrue statement or omission made in the preliminary
offering memorandum, the indemnity agreement contained in this Section 10(a)
shall not inure to the benefit of any Initial Purchaser, to the extent that the
sale to the person asserting any such loss, claim, damage, expense, liability or
action was an initial resale by such Initial Purchaser and any such loss, claim,
damage, liability or action of such Initial Purchaser is a result of the fact
that both (i) a copy of the Offering Memorandum was not sent or given to such
person at or prior to the written confirmation of the sale of such Notes to such
person and (ii) the untrue statement or omission in the preliminary offering
memorandum was corrected in the Offering Memorandum unless, in either case, such
failure to deliver the Offering Memorandum was a result of non-compliance by the
Company with Section 5(d).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Company and each Guarantor, their respective
affiliates, and their respective officers, directors, employees, representatives
and agents, and each person, if any, who controls the Company or Guarantor
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 10 and Section 11 as the Company), from
and against any loss, claim, damage, expense or liability, joint or several, or
any action in respect thereof, to which the Company may become subject, under
the Securities Act, the Exchange Act or any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
expense, liability or action arises out of, or is based upon, (i) 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
or supplement thereto or (ii) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with such Initial Purchaser's Information, and shall
reimburse the Company promptly upon demand for any legal or other expenses
reasonably incurred by the Company or any Guarantor in connection with
<PAGE>
23
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 10 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent that such
indemnifying party has been materially prejudiced by such failure and, provided
further, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have to an indemnified party otherwise than
under this Section 10. If any such claim or action shall be brought against an
indemnified party, it shall notify the indemnifying party thereof, and the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 10 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that each indemnified party shall
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based on advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel for the indemnified party will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 10(a) and 10(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment in favor of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
<PAGE>
24
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnification is or
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
The obligations of the Company, each Guarantor and each Initial
Purchaser in this Section 10 and in Section 11 are in addition to any other
liability which the Company, any Guarantor or any Initial Purchaser, as the case
may be, may otherwise have, including in respect of any breaches of
representations, warranties and agreements made herein by any such party.
11. CONTRIBUTION. If the indemnification provided for in Section 10
is unavailable or insufficient to hold harmless an indemnified party under
Section 10(a) or 10(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (1) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and the Guarantors on the
one hand and to each Initial Purchaser on the other from the offering of the
Notes or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Guarantors on the one hand and each Initial Purchaser on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Guarantors on the one hand and each Initial Purchaser on the other with
respect to such offering shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Notes purchased under this Agreement
(before deducting expenses) received by the Company and the Guarantors bear to
the total discounts and commissions received by each Initial Purchaser with
respect to the Notes purchased under this Agreement, in each case as set forth
in the table on the cover page of the Offering Memorandum. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company and the
Guarantors on the one hand or the Initial Purchasers' Information on the other,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company, the Guarantors and the Initial Purchasers agree that it would not be
just and equitable if contributions pursuant to this Section 11 were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 11 shall be deemed to include, for purposes of this Section 11, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this
<PAGE>
25
Section 11, an Initial Purchaser shall not be required to contribute any amount
in excess of the amount by which the total price at which the Notes sold and
distributed by it was offered to purchasers exceeds the amount of any damages
which such Initial Purchaser has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Each Initial
Purchaser's obligation to contribute as provided in this Section 11 are several
in proportion to their respective purchase obligations and not joint.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Company,
the Guarantors and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 10 and 11 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Company, the
Guarantors and the Initial Purchasers and in Section 5(e) with respect to
holders and prospective purchasers of the Notes. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 12, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
13. EXPENSES. The Company agrees with the Initial Purchasers to pay
(a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Notes and any taxes payable in that connection, (b) the costs
incident to the preparation and printing of any preliminary offering memorandum,
the Offering Memorandum and any amendments or supplements thereto, (c) the costs
of distributing any preliminary offering memorandum, the Offering Memorandum and
any amendments or supplements thereto, (d) the costs of printing, reproducing
and distributing the Transaction Documents, (e) the costs incident to the
preparation, printing and delivery of the certificates representing the Notes,
including stamp duties and transfer taxes, if any, payable upon issuance of any
of the Notes, (f) the fees and disbursements of the Company's counsel (g) the
fees and disbursements of accountants for the Company, (h) any fees charged by
rating agencies for rating the Notes, (i) the fees and expenses of qualifying
the Notes under securities laws of the several jurisdictions as provided in
Section 5(g) and of preparing, printing and distributing a Blue Sky memorandum
(including related reasonable fees and expenses of Simpson Thacher & Bartlett,
counsel to the Initial Purchasers), (j) the fees and expenses of the Trustee and
any paying agent (including related fees and expenses of any counsel for such
parties), (k) all expenses and listing fees incurred in connection with the
application for quotation of the Notes on the PORTAL Market and the clearance of
the Notes for book-entry transfer through the Depository Trust Company, the
Euroclear System and Cedel Bank, societe anonyme, and (1) all other reasonable
costs and expenses incident to the performance of the Company's obligations
hereunder which are not otherwise specifically provided for in this Section;
provided, however, that except as provided in this Section 13 and Section 9, the
Initial Purchasers shall pay the first $500,000 of their own aggregate costs and
expenses, including the costs and expenses of their regular and local counsels
and any transfer taxes on the Notes
<PAGE>
26
which they may sell, and the Company shall pay or reimburse any such costs and
expenses to the extent such costs and expenses exceed $500,000, subject to a
maximum of $500,000 payable or reimbursable hereunder.
14. SURVIVAL. The respective indemnities, rights of contribution,
representations, warranties and agreements and statements of the Company, the
Guarantors and the Initial Purchasers contained in this Agreement or in any
certificate delivered pursuant to this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement or in any certificate delivered
pursuant to this Agreement, shall survive the delivery of and payment for the
Notes and shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement or any investigation made by or on behalf of
any of them or any person controlling any of them.
15. NOTICES. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to any of the Initial Purchasers, shall be delivered or
sent by mail or facsimile transmission to Chase Securities Inc., 270
Park Avenue, New York, New York 10017, Attention: Stephanie Cuskley
(Fax: 270-0994);
(b) if to the Company or the Guarantors, shall be delivered or
sent by mail or facsimile transmission to the address of the Company
set forth in the Offering Memorandum, Attention: Douglas Duran (Fax:
011-55-11-821- 8770);
with a copy by mail or facsimile transmission to Mayer, Brown &
Platt, 1675 Broadway, New York, New York 10019, Attention: Peter V.
Darrow (Fax: 262-1910).
provided, however, that any notice to the Initial Purchasers pursuant to Section
10(c) shall also be delivered or sent by mail to the Initial Purchasers at Chase
Securities Inc., 270 Park Avenue, 39th Floor, New York, New York 10017,
Attention: Legal Department. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
16. DEFINITION OF TERMS. For purposes of this Agreement, "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading and "Subsidiary" has the meaning ascribed thereto in the Offering
Memorandum.
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
<PAGE>
27
19. AMENDMENTS. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
20. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to the affect the meaning
or interpretation of, this Agreement.
21. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE;
CURRENCY INDEMNITY. (a) To the fullest extent permitted by applicable law, the
Company and each Guarantor irrevocably submit 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. The Company and each Guarantor irrevocably and fully waive the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company and each Guarantor hereby irrevocably designate and appoint CT
Corporation System, 1633 Broadway, New York, New York 10019, U.S.A. (the
"Process Agent"), as the authorized agent of the Company and each Guarantor upon
whom process may be served in any such suit or proceeding, it being understood
that the designation and appointment of CT Corporation System as such authorized
agent shall become effective immediately without any further action on the part
of the Company or any Guarantor. The Company and each Guarantor represent to the
Initial Purchasers that they have notified the Process Agent of such designation
and appointment and that the Process Agent has accepted the same in writing. The
Company and each Guarantor hereby irrevocably authorize and direct the Process
Agent to accept such service. The Company and each Guarantor further agree that
service of process upon the Process Agent and written notice of said service to
the Company or such 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 Company or such Guarantor 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. The Company and each Guarantor further agree
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 or any Guarantor have any outstanding obligations under this Agreement,
the Notes, the Indenture, the Guarantees or any other Transaction Document. To
the extent that the Company or any Guarantor have 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 each Guarantor hereby irrevocably waive such immunity in respect of
their obligations under this Agreement, to the extent permitted by law.
<PAGE>
28
(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 Agreement.
22. JOINT AND SEVERAL LIABILITY. Each subsidiary of the Company, by
its execution and delivery of a counterpart to this Agreement, agrees that it
shall be joint and severally liable for all obligations an liabilities of the
Company.
<PAGE>
29
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument will become a binding agreement between the Company, the
Guarantors and the several Initial Purchasers in accordance with its terms.
Very truly yours,
TEVECAP S.A.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
TVA SISTEMA DE TELEVISAO S.A.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
TVA COMMUNICATIONS LTD.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
30
GALAXY BRASIL S.A.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA SUL PARTICIPACOES S.A.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
COMERCIAL CABO TV SAO PAULO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
31
TVA PARANA LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA ALPHA CABO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
CCS CAMBORIU CABLE SYSTEM DE
TELECOMUNICACOES LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TCC TV A CABO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
32
TVA SUL FOZ DO IGUACU LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
33
Accepted:
CHASE SECURITIES INC.
By: _________________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By: _________________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: _________________________________
Name:
Title:
BOZANO, SIMONSEN SECURITIES, INC.
By: _________________________________
Name:
Title:
<PAGE>
34
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 Chase 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.
_____________________________________________
[NOTARIAL SEAL]
<PAGE>
35
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 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.
_____________________________________________
[NOTARIAL SEAL]
<PAGE>
36
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 Donaldson, Lufkin & Jenrette 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.
_____________________________________________
[NOTARIAL SEAL]
<PAGE>
37
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 Bozano, Simonsen 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.
_____________________________________________
[NOTARIAL SEAL]
<PAGE>
SCHEDULE 1
Principal
Amount
Initial Purchasers of Securities
Chase Securities Inc..................................... $162,500,000
Donaldson, Lufkin & Jenrette Securities Corporation...... $ 43,750,000
Bear, Stearns & Co. ........................ $ 35,750,000
Bozano, Simonsen Securities, Inc......................... $ 8,000,000
------------
Total.................................................... $250,000,000
============
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT B
FORM OF OPINION OF MAYER, BROWN & PLATT
(i) Assuming that this Agreement has been duly authorized,
executed and delivered by the Company and each Subsidiary Guarantor under
the laws of Brazil, this Agreement has been duly executed and delivered by
the Company and each Subsidiary Guarantor under the laws of the State of
New York;
(ii) Assuming that each of the Registration Rights Agreement
and the Agency Agreement has been duly authorized, executed and delivered
by the Company and each Subsidiary Guarantor under the laws of Brazil,
each of the Registration Rights Agreement and the Agency Agreement has
been duly executed and delivered by the Company and each Subsidiary
Guarantor under the laws of the State of New York and constitutes a valid
and legally binding agreement of the Company and each Subsidiary Guarantor
enforceable against the Company and each such Subsidiary Guarantor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(iii) Assuming that the Indenture has been duly authorized,
executed and delivered by the Company and each Subsidiary Guarantor under
the laws of Brazil, the Indenture has been duly executed and delivered by
the Company and each Subsidiary Guarantor under the laws of the State of
New York and (assuming due execution and delivery thereof by the Trustee
and the Paying Agent) constitutes a valid and legally binding agreement of
the Company and each such Subsidiary Guarantor enforceable against the
Company and each such Subsidiary Guarantor in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law);
(iv) The Notes are in the form contemplated by the Indenture
and, assuming the Notes have been duly authorized, executed and delivered
by the Company under the laws of Brazil, the Notes have been duly executed
and delivered by the Company, and (assuming due execution by the Trustee,
authentication by the Trustee, and payment therefor as provided herein)
have been duly and validly issued under the laws of the State of New York
and constitute valid and legally binding obligations of the Company
entitled to the benefits of the Indenture and enforceable in accordance
with their terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
<PAGE>
(v) The execution, delivery and performance of each of the
Transaction Documents (as defined in the Purchase Agreement), the
issuance, authentication, sale and delivery of the Notes, compliance with
the terms thereof, and consummation by the Company and each subsidiary of
the Company of the transactions contemplated thereby, will not result in
any violation of any applicable U.S. Federal or New York State statute or
any order, rule or regulation of any U.S. Federal or New York State court
or governmental agency or body having jurisdiction over the Company or any
subsidiary of the Company or any of their properties or assets; and,
except for such consents, approvals, authorizations, registrations or
qualifications as may be required under New York State securities laws in
connection with the purchase and distribution of the Notes by the Initial
Purchasers, no consent, approval, authorization or order of, or filing or
registration with, any such U.S. Federal or New York State court or
governmental agency or body is required for the execution, delivery and
performance of the Transaction Documents by the Company and each
subsidiary of the Company party to one or more of the Transaction
Documents, the issuance, authentication, sale and delivery of the Notes
and compliance with the terms thereof or the consummation of the
transactions contemplated thereby;
(vi) Each of the Transaction Documents conforms in all
material respects to the description thereof contained in the Offering
Memorandum;
(vii) Neither the Company nor any subsidiary of the Company is
an "investment company" or a company "controlled by" an investment company
within the meaning of the Investment Company Act and the rules and
regulations of the Commission thereunder; no registration of the Company
under the Investment Company Act is required in connection with the
issuance, offer, sale or delivery of the Notes in the United States;
(viii) Assuming the Notes are issued, sold and delivered under
the circumstances contemplated by the Offering Memorandum and this
Agreement, that the representations and warranties and covenants of the
Initial Purchasers contained in Section 3 hereof are true, correct and
complete, and that the Initial Purchasers comply with their covenants in
Section 3 hereof, (A) registration under the Securities Act of the Notes
or qualification of the Indenture in respect of the Notes under the Trust
Indenture Act is not required in connection with the offer and sale of the
Notes to the Initial Purchasers in the manner contemplated by the Offering
Memorandum or this Agreement, and (B) initial resales of the Notes by the
Initial Purchasers on the terms and in the manner set forth in the
Offering Memorandum and Section 3 hereof are exempt from the registration
requirements of the Securities Act.
(ix) The descriptions in the Offering Memorandum of contracts
and other documents are accurate in all material respects and fairly
present, as to such contracts and other documents described therein, the
information that would be required to be presented with respect thereto if
the Offering Memorandum were a prospectus included in a registration
statement on Form S-1 under the Securities Act; and the statements in the
Offering Memorandum under the caption "Income Tax
<PAGE>
Considerations", insofar as such statements purport to summarize federal
laws of the United States referred to thereunder, fairly summarize such
laws in all material respects;
(x) As of its date, the Preliminary Offering Memorandum did,
and on the Closing Date, the Final Offering Memorandum will (except for
financial statements, the notes thereto and other financial and
statistical data included therein, as to which no opinion need be
expressed) comply on its face as to form in all material respects with
that which would be required by the Securities Act and the rules and
regulations of the Commission thereunder applicable to a definitive
prospectus forming part of a registration statement on Form F-1 under the
Securities Act;
(xi) Under the laws of the State of New York relating to
submission to jurisdiction, the Company has validly and irrevocably
submitted to the jurisdiction of any U.S. Federal or New York state courts
located in the Borough of Manhattan in The City of New York, New York and
has validly and irrevocably appointed CT Corporation as its authorized
agent for the purposes set forth in paragraph 21 of this Agreement and
Section 11.16 of the Indenture; and
(xii) The Warrant pursuant to which the Company may acquire an
additional 2.7% of TV Filme at a nominal exercise price is irrevocable and
constitutes a valid and legally binding agreement of TV Filme, enforceable
against it in accordance with its terms.
Such counsel shall also state that they have participated in
conferences with representatives of the Company and with representatives of its
independent accountants at which conferences the contents of the Offering
Memorandum, any amendment thereof and supplement thereto and related matters
were discussed, and, although such counsel has not independently verified and is
not passing upon and assumes no responsibility for the factual accuracy,
completeness or fairness of the statements contained in the Offering Memorandum,
except for those referred to in paragraphs (vi) and (ix) above, such counsel has
no reason to believe that the Offering Memorandum (except for the financial
statements and related schedules or other financial or statistical data included
in the Offering Memorandum, as to which such counsel need express no opinion) or
any amendment thereof or supplement thereto contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
<PAGE>
EXHIBIT C-1
FORM OF OPINION OF BASCH & RAMEH
(i) Each of the Company and each Subsidiary of the Company
organized under the laws of Brazil has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
Brazil, is duly qualified as a foreign corporation to do business in every
Brazilian jurisdiction, and has all power and authority necessary to own
or hold its properties and to conduct the businesses in which it is
engaged;
(ii) The Company has the authorized capitalization set forth
under the caption "Capitalization" in the Offering Memorandum, and all of
the issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Offering Memorandum;
all of the issued shares of capital stock of each Subsidiary of the
Company organized under the laws of Brazil have been duly and validly
authorized and issued and are fully paid and non-assessable; and the
Service Agreement, pursuant to which Televisao Show Time Ltda. and TVA
Brasil Radioenlances Ltda. have agreed to transfer the licenses held by
them to the Company at nominal cost is irrevocable and constitutes a valid
and legally binding agreement of Televisao Show Time Ltda. and TVA Brasil
Radioenlances Ltda., enforceable against them in accordance with its
terms;
(iii) Each of the Company and each Subsidiary of the Company
organized under the laws of Brazil party to one or more of the Transaction
Documents (as defined in the Purchase Agreement) has full right, power and
authority to execute and deliver each of the Transaction Documents to
which it is a party and to perform its obligations thereunder; and all
corporate action required to be taken by the Company and each such
Subsidiary for the due and proper authorization, execution and delivery of
each of the Transaction Documents and the consummation of the transactions
contemplated by each of the Transaction Documents has been duly and
validly taken;
(iv) This Agreement has been duly authorized, executed and
delivered by the Company and each Subsidiary of the Company organized
under the laws of Brazil signatory hereto;
(v) Each of the Registration Rights Agreement and the Agency
Agreement has been duly authorized, executed and delivered by the Company
and each Subsidiary Guarantor organized under the laws of Brazil and,
assuming that each of the Registration Rights Agreement and the Agency
Agreement constitutes a valid and binding agreement under New York state
law, constitutes a valid and legally binding agreement of the Company and
each Subsidiary Guarantor organized under the laws
<PAGE>
of Brazil enforceable against the Company and each such Subsidiary
Guarantor in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(vi) The Indenture has been duly authorized, executed and
delivered by the Company and each Subsidiary Guarantor organized under the
laws of Brazil and (assuming due execution and delivery thereof by the
Trustee and the Paying Agent) assuming that the Indenture constitutes a
valid and binding agreement under New York state law, constitutes a valid
and legally binding agreement of the Company and each such Subsidiary
Guarantor enforceable against the Company and each such Subsidiary
Guarantor in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(vii) The Notes have been duly authorized and executed by the
Company, (assuming due execution by the Trustee, authentication by the
Trustee and payment therefor as provided herein) have been duly and
validly issued and outstanding, and, assuming that the Notes constitute
valid and binding obligations under New York state law, constitute valid
and legally binding obligations of the Company entitled to the benefits of
the Indenture and enforceable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law);
(viii) The Guarantees have been duly authorized and executed
by the Subsidiary Guarantors, have been duly and validly issued and,
assuming that the Guarantees constitute valid and binding obligations
under New York state law, constitute valid and legally binding obligations
of the Subsidiary Guarantors entitled to the benefits of the Indenture and
enforceable in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(ix) The execution, delivery and performance of each of the
Transaction Documents, the issuance, authentication, sale and delivery of
the Notes and the Guarantees, compliance with the terms thereof, and
consummation by the Company and each Subsidiary of the Company of the
transactions contemplated thereby, will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of its
<PAGE>
Subsidiaries pursuant to, any material indenture, mortgage, deed of trust,
loan agreement or other material agreement or instrument known to such
counsel or identified to such counsel as being material to which the
Company or any Subsidiary of the Company is a party or by which the
Company or any Subsidiary of the Company is bound or to which any of the
property or assets of the Company or any Subsidiary of the Company is
subject, nor will such actions result in any violation of the provisions
of the charter or by-laws (or equivalent constitutive documents) of the
Company or any Subsidiary of the Company or any Brazilian statute or any
order, rule or regulation of any Brazilian court or governmental agency or
body having jurisdiction over the Company or any Subsidiary of the Company
or any of their properties or assets; and no consent, approval,
authorization or order of, or filing or registration with, any such
Brazilian court or governmental agency (including, without limitation, the
Comissao de Valores Mobiliaros) or body or stock exchange is required for
the execution, delivery and performance of the Transaction Documents by
the Company and each Subsidiary of the Company party to one or more of the
Transaction Documents, the issuance, authentication, sale and delivery of
the Notes and compliance with the terms thereof or the consummation of the
transactions contemplated thereby, except for (a) the certificate of prior
authorization of the Central Bank that has previously been obtained and is
in full force and effect, (b) the issuance by the Central Bank of the
Certificate of Registration permitting the Company to make remittances
from Brazil in U.S. dollars of the principal, interest and other amounts
in respect of the Notes (which such counsel has no reason to believe will
not be issued as a matter of formality promptly after the Company makes
proper application therefor), (c) the approval of the Central Bank for the
Company 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 and (d) the ratification of the
Certificate of Registration for the Company to make any payment provided
therein later than 180 days after the due date thereof;
(x) the Shareholder Commitments have been duly authorized by
all requisite corporate action on the part of the shareholders party
thereto and the Company and constitute the valid and binding obligation of
each of them, enforceable against them in accordance with their terms;
(xi) The prior authorization of the Notes and Exchange Notes
have been obtained from the Central Bank; to the knowledge of such counsel
after due inquiry, there is no reason that the Registration Certificate
should not be issued by the Central Bank in due course;
(xii) The issuance, delivery and sale to the Initial
Purchasers of the Notes as contemplated by this Agreement or the issuance
of the Exchange Notes as contemplated by the Registration Rights Agreement
are not subject to any tax imposed by any tax authority under the laws of
Brazil or any political subdivision thereof;
(xiii) Payments of interest, principal and premium in respect
of the Notes or Exchange Notes are not subject under the laws of Brazil or
any political subdivision
<PAGE>
thereof to any withholding or similar charges or deductions, except as set
forth in the Offering Memorandum;
(xiv) None of the Notes, the Exchange Notes nor any of the
other Transaction Documents nor any of the documents or instruments
entered into in connection therewith are subject to any registration tax,
stamp duty or similar tax or duty imposed by Brazil or any political
subdivision thereof;
(xv) The choice of law provisions set forth in paragraph 17 of
this Agreement, Section 11.9 of the Indenture and Paragraph 20 of the
Notes will be recognized by the courts of Brazil; each of the Company and
the Subsidiary Guarantors organized under the laws of Brazil can sue and
be sued in its own name; under the laws of Brazil, the submission of the
Company and the Subsidiary Guarantors organized under the laws of Brazil
to the non-exclusive jurisdiction of U.S. Federal and New York state
courts in the Borough of Manhattan in The City of New York is legal, valid
and binding; and any judgment obtained in such court arising out of or
relating to the obligations of the Company and such Subsidiary Guarantors
under the Transaction Documents or the transactions contemplated hereby or
thereby will be recognized in Brazil without reconsideration of the merits
upon confirmation of that judgment by the Brazilian Federal Supreme Court;
and such confirmation will 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, in the opinion of such counsel, none of the
provisions of any of the Transaction Documents is or would be against
Brazilian national sovereignty, public policy or morality);
(xvi) Each of the Transaction Documents is in proper form
under Brazilian law for the enforcement thereof against the Company and
any Subsidiary Guarantor organized under the laws of Brazil party thereto;
and it is not necessary to ensure the legality, validity, enforceability
or admissibility in evidence of any of the Transaction Documents in
Brazil, 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 the Transaction Documents
signing 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/or each of this Agreement, the Registration Rights
Agreement and the Indenture shall have been registered with the
appropriate Registry of Deeds and Documents in
<PAGE>
Brazil and (b) each of the Transaction Documents shall have been
translated into Portuguese by a sworn translator;
(xvii) The Company, each Subsidiary Guarantor organized under
the laws of Brazil party thereto and their respective obligations under
the Transaction Documents, are subject to civil and commercial law and to
suit and neither they nor any of their properties or material assets have
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 their respective obligations, liabilities or any
other matter arising out of or relating to the Transaction Documents;
(xviii) Except as disclosed in the Offering Memorandum, the
Company and its Subsidiaries possess adequate licenses, certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such license, certificate, authority or permit that,
if determined adversely to the Company or any of its Subsidiaries, would
individually or in the aggregate have a material adverse effect on the
Company and its Subsidiaries taken as a whole;
(xix) The statements under the captions "Enforceability of
Civil Liabilities", "Risk Factors--MMDS Transmission Issues", "Risk
Factors-- Regulation", "Risk Factors--Transactions with Related Parties;
Rights to Put the Company's Stock", "Risk Factors--Ownership of Future
Cable Television Licenses", "Risk Factors-- Dividends to Shareholders",
"Risk Factors--Rights to DIRECTV Programming", "Risk Factors--Limited
Assets of Tevecap and Dependence on Subsidiaries for Repayment of Notes,"
"Risk Factors--Fraudulent Conveyance Considerations", "Risk
Factors--Enforceability of Judgments", "Risk Factors--Controls and
Restrictions on US Dollar Remittances", "Business-Regulatory
Framework--MMDS Regulations-- Cable Regulation--Cable Related Service
Regulation--Satellite Service Regulation", "Business--Legal Proceedings",
"Management", "Principal Shareholders", "Certain Transactions with Related
Parties", "Description of Certain Indebtedness", "Description of
Notes--Enforceability of Judgments with respect to the Notes and
Subsidiary Guarantees", "Description of Notes--Certain Bankruptcy Law
Considerations" and "Income Tax Considerations", to the extent that they
constitute matters of Brazilian law or legal conclusions, are complete and
accurate in all material respects;
Such counsel shall also state that they have participated in
conferences with representatives of the Company and with representatives of its
independent accountants at which conferences the contents of the Offering
Memorandum, any amendment thereof and
<PAGE>
supplement thereto and related matters were discussed, and, although such
counsel has not independently verified and is not passing upon and assumes no
responsibility for the factual accuracy, completeness or fairness of the
statements contained in the Offering Memorandum, except for those referred to in
paragraphs (ix) and (xvii) above, such counsel has no reason to believe that the
Offering Memorandum (except for the financial statements and related schedules
or other financial or statistical data included in the Offering Memorandum, as
to which such counsel need express no opinion) or any amendment thereof or
supplement thereto contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
<PAGE>
EXHIBIT C-1
FORM OF OPINION OF CARLOS BALIERO, ESQ.
(i) Each of the Company and each Subsidiary of the Company
organized under the laws of Brazil has been duly incorporated and is
validly existing as a corporation under the laws of Brazil, is duly
qualified as a foreign corporation to do business in every Brazilian
jurisdiction, and has all power and authority necessary to own or hold its
properties and to conduct the businesses in which it is engaged.
(ii) The Company has the authorized capitalization set forth
under the caption "Capitalization" in the Offering Memorandum, and all of
the issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Offering Memorandum;
all of the issued shares of capital stock of each Subsidiary of the
Company organized under the laws of Brazil have been duly and validly
authorized and issued and are fully paid and non-assessable; the Company
owns, directly or indirectly, 87%, 98%, 99.9% and 100% of its Subsidiaries
TVA Sul, TVA Sistema, Commercial Cabo TV Sao Paulo Ltda., and Galaxy
Brasil S.A. and owns, directly or indirectly, 100% of each of its other
Subsidiaries, in each case, except as disclosed in the Offering
Memorandum, free and clear of any claim, lien, encumbrance, security
interest, restriction upon voting or transfer or any other claim of any
third party; and the Company owns 36% and 14% of its Operating Ventures
Canbras TVA and TV Filme, respectively; 50% and 33.3% of its Programming
Ventures ESPN Brazil and HBO Partners, respectively; 48.9% of Ype Radio e
Televisao Ltda.; and 10% of Galaxy Latin America, in each case, except as
disclosed in the Offering Memorandum or otherwise specified in such
opinion, and to the knowledge of such counsel, free and clear of any
claim, lien, encumbrance, security interest, restriction on voting or
transfer or any other claim of any third party.
(iii) Each of the Company and each Subsidiary of the Company
organized under the laws of Brazil party to one or more of the Transaction
Documents (as defined in the Purchase Agreement) has full right, power and
authority to execute and deliver each of the Transaction Documents to
which it is a party and to perform its obligations thereunder; and all
corporate action required to be taken by the Company and each such
Subsidiary for the due and proper authorization, execution and delivery of
each of the Transaction Documents and the consummation of the transactions
contemplated by each of the Transaction Documents has been duly and
validly taken;
(iv) The execution, delivery and performance of each of the
Transaction Documents, the issuance, authentication, sale and delivery of
the Notes, compliance with the terms thereof, and consummation by the
Company and each Subsidiary of the Company of the transactions
contemplated thereby, will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under,
<PAGE>
or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its Subsidiaries
pursuant to, any material indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which the Company
or any Subsidiary of the Company is a party or by which the Company or any
Subsidiary of the Company is bound or to which any of the property or
assets of the Company or any Subsidiary of the Company is subject, nor
will such actions result in any violation of the provisions of the
estatutos (or equivalent constitutive documents) of the Company or any
Subsidiary of the Company or any Brazilian statute or any order, rule or
regulation of any Brazilian court or governmental agency or body having
jurisdiction over the Company or any Subsidiary of the Company or any of
their properties or assets; and no consent, approval, authorization or
order of, or filing or registration with, any such Brazilian court or
governmental agency (including, without limitation, the Comissao de
Valores Mobiliaros) or body or stock exchange is required for the
execution, delivery and performance of the Transaction Documents by the
Company and each Subsidiary of the Company party to one or more of the
Transaction Documents, the issuance, authentication, sale and delivery of
the Notes and compliance with the terms thereof or the consummation of the
transactions contemplated thereby, except for (a) the certificate of prior
authorization of the Central Bank that has previously been obtained and is
in full force and effect, (b) the issuance by the Central Bank of the
Certificate of Registration permitting the Company to make remittances
from Brazil in U.S. dollars of the principal, interest and other amounts
in respect of the Notes (which such counsel has no reason to believe will
not be issued as a matter of formality promptly after the Company makes
proper application therefor), (c) the approval of the Central Bank for the
Company 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 and (d) the ratification of the
Certificate of Registration for the Company to make any payment provided
therein later than 180 days after the due date thereof.
(v) Except as set forth in the Offering Memorandum, there are
no legal or governmental proceedings pending to which the Company or any
Subsidiary of the Company is a party or of which any property or assets of
the Company or any Subsidiary of the Company is subject which either (A)
questions the validity or enforceability of any Transaction Document or
any action taken or required to be taken pursuant thereto or in connection
therewith or (B) if determined adversely to the Company or any Subsidiary
of the Company, are reasonably likely to have a Material Adverse Effect;
and, to the best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.
(vi) Neither the Company nor any Subsidiary of the Company
organized under the laws of Brazil (i) is in violation of its estatutos
(or equivalent constitutive documents), (ii) is in default in any material
respect, and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other agreement or
<PAGE>
instrument known to such counsel to which it is a party or by which it is
bound or to which any of its properties or assets is subject or (iii) to
the best of such counsel's knowledge, is in violation in any respect of
any Brazilian law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject.
(vii) Except as disclosed in the Offering Memorandum, the
Company and its Subsidiaries have good and marketable title to all
material real properties and all other material properties and assets
owned by them, in each case free from liens, encumbrances and defects that
would materially affect the value thereof or materially interfere with the
use made or to be made thereof by them; and, except as disclosed in the
Offering Memorandum, the Company and its Subsidiaries hold all material
leased real or personal property under valid and enforceable leases with
no exceptions that would materially interfere with the use made or to be
made thereof by them.
<PAGE>
EXHIBIT C-3
FORM OF OPINION OF HARNEY, WESTWOOD & REIGELS
(i) TVA Communications Ltd. (the "Company") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the British Virgin Islands and has all power and
authority necessary to own or hold its properties and to conduct the
businesses in which it is engaged;
(ii) The Company has full right, power and authority to
execute and deliver each of the Transaction Documents (as defined in the
Purchase Agreement) to which it is a party and to perform its obligations
thereunder; and all corporate action required to be taken by the Company
for the due and proper authorization, execution and delivery of each of
such Transaction Documents and the consummation of the transactions
contemplated by each of such Transaction Documents has been duly and
validly taken;
(iii) Each of this Agreement, the Registration Rights
Agreement, the Indenture and the Guarantee by the Company of the Notes has
been duly authorized, executed and delivered by the Company; and
(iv) The execution, delivery and performance of each of the
Transaction Documents to which the Company is a party, the issuance of the
Guarantee by the Company of the Notes, compliance with the terms thereof,
and consummation by the Company of the transactions contemplated thereby,
will not result in any violation of the provisions of the charter or
by-laws (or equivalent constitutive documents) of the Company or any
British Virgin Islands statute or any order, rule or regulation of any
British Virgin Islands court or governmental agency or body having
jurisdiction over the Company or any of its properties or assets; and no
consent, approval, authorization or order of, or filing or registration
with, any such British Virgin Islands court or governmental agency or body
or stock exchange is required for the execution, delivery and performance
of such Transaction Documents by the Company, the issuance of the
Guarantees and compliance with the terms thereof or the consummation of
the transactions contemplated thereby.
<PAGE>
Exhibit 10.2
<PAGE>
Execution Copy
TEVECAP S.A.
$250,000,000
12-5/8% Senior Notes due 2004
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
November 26, 1996
CHASE SECURITIES INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BOZANO, SIMONSEN
SECURITIES, INC.
c/o
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
TEVECAP S.A., a company organized under the laws of the Federative
Republic of Brazil (the "Company"), proposes to issue and sell to you (the
"Initial Purchasers"), upon the terms set forth in a purchase agreement dated
November 21, 1996 (the "Purchase Agreement"), $250,000,000 aggregate principal
amount of its 12-5/8% Senior Notes due 2004 (the "Notes") which Securities shall
be guaranteed on a senior basis (the "Subsidiary Guarantees" and, together with
the Notes, the "Securities") by each subsidiary of the Company on November 26,
1996 (the "Issue Date") and each subsidiary of the Company acquired thereafter
(collectively, the "Subsidiary Guarantors"). Capitalized terms used but not
specifically defined herein have the respective meanings ascribed thereto in the
Purchase Agreement. As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to your obligations
thereunder, the Company and the Subsidiary Guarantors each agree with each of
you, for the benefit of the holders of the Securities (including the Initial
Purchasers, the "Holders"), as follows:
1. Registered Exchange Offer. The Company and the Subsidiary
Guarantors shall use their best efforts to prepare and, not later than 90 days
following the Issue Date, shall use their best efforts to file with the
Commission a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act
<PAGE>
2
with respect to a proposed offer (the "Registered Exchange Offer") to the
Holders to issue and deliver to such Holders, in exchange for the Securities, a
like aggregate principal amount of debt securities of the Company (the "Exchange
Notes") unconditionally guaranteed on a senior basis by the Subsidiary
Guarantees (the "Exchange Guarantors" and, together with the Exchange Notes, the
"Exchange Securities") identical in all material respects to the Securities,
except for the transfer restrictions relating to the Securities, shall use its
best efforts to cause the Exchange Offer Registration Statement to become
effective under the Securities Act no later than 150 days after the Issue Date
and to be consummated no later than 180 days after the Issue Date, and shall
keep the Exchange Offer Registration Statement effective for not less than 30
days (or longer, if required by applicable law) after the date notice of the
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period"). The Exchange Securities will be issued under the
Indenture or an indenture (the "Exchange Securities Indenture") between the
Company, the Subsidiary Guarantors and the Trustee or such other bank or trust
company reasonably satisfactory to you, as trustee (the "Exchange Securities
Trustee"), such indenture to be identical in all material respects to the
Indenture except for the transfer restrictions relating to the Securities (as
described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company and the Subsidiary Guarantors shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder electing to exchange Securities for Exchange Securities
(assuming that such Holder (a) is not (i) an affiliate of the Company or the
Subsidiary Guarantors within the meaning of the Securities Act or (ii) an
Exchanging Dealer (as defined below) not complying with the requirements of the
next sentence, (b) acquires the Exchange Securities in the ordinary course of
such Holder's business and (c) has no arrangements or understandings with any
person to participate in the distribution of the Exchange Securities) and to
trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States. The Company, the Subsidiary Guarantors, each Initial Purchaser and each
Exchanging Dealer (as defined below) acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
(i) each Holder which is a broker-dealer electing to exchange Securities,
acquired for its own account as a result of market making activities or other
trading activities, for Exchange Securities (an "Exchanging Dealer"), is
required to deliver a prospectus containing the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, and in Annex C hereto
in the "Plan of Distribution" section of such prospectus in connection with a
sale of any such Exchange Securities received by such Exchanging Dealer pursuant
to the Registered Exchange Offer and (ii) if any Initial Purchaser elects to
sell Exchange Securities acquired in exchange for Securities constituting any
portion of an unsold allotment it is required to deliver a prospectus containing
the information required by Items 507 or 508 of Regulation S-K under the
Securities Act, as applicable, in connection with such a sale.
<PAGE>
3
In connection with the Registered Exchange Offer, the Company and
the Subsidiary Guarantors shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days after the date notice of the Exchange Offer is mailed to the Holders
(or longer if required by applicable law);
(c) utilize the services of a Depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws applicable to the
Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer, the Company and the Subsidiary Guarantors shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the
case may be, promptly to authenticate and deliver to each Holder of
Securities, Exchange Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
Each of the Company and the Subsidiary Guarantors shall make
available for a period of 90 days after the consummation of the Registered
Exchange Offer, a copy of the prospectus forming part of the Exchange Offer
Registration Statement to any broker-dealer for use in connection with any
resale of any Exchange Securities.
Interest on each Exchange Security issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which interest
was paid on the Securities surrendered in exchange therefor or, if no interest
has been paid on the Securities, from the date of original issue of the
Securities.
<PAGE>
4
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act, and (iii) such Holder is not an affiliate of the Company or
a Subsidiary Guarantor within the meaning of the Securities Act or if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company and the
Subsidiary Guarantors will ensure that (i) any Exchange Offer Registration
Statement and any amendment thereto and any prospectus forming part thereof and
any supplement thereto complies in all material respects with the Securities Act
and the rules and regulations thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
and (iii) any prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such prospectus, does not include, as of the
consummation of the Registered Exchange Offer, an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company and
the Subsidiary Guarantors determine that they are not permitted to effect the
Registered Exchange Offer as contemplated by Section 1 hereof or (ii) any Holder
(including any Initial Purchaser but excluding any Exchanging Dealer) either (A)
is not eligible to participate in the Registered Exchange Offer or (B)
participates in the Registered Exchange Offer and does not receive freely
transferrable Exchange Securities in exchange for tendered Securities (in each
case under this clause (ii) other than as a result of applicable interpretations
of the Commission's staff or applicable law in effect as of the Issue Date) or
(iii) if the Company so elects, then the following provisions shall apply:
(a) The Company and the Subsidiary Guarantors shall use all
reasonable efforts to as promptly as practicable file with the Commission and
thereafter shall use their best efforts to cause to be declared effective a
shelf registration statement on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Securities (as defined
below) by the Holders from time to time in accordance with the methods of
distribution set forth in such registration statement (hereafter, a "Shelf
Registration Statement" and, together with any Exchange Offer Registration
Statement, a "Registration Statement"); provided, however, that no Holder of
Securities or Exchange Securities (other than the Initial Purchasers) shall be
entitled to have Securities or Exchange Securities held by it covered by such
Shelf Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder.
<PAGE>
5
(b) The Company and the Subsidiary Guarantors shall use their best
efforts to keep the Shelf Registration Statement continuously effective in order
to permit the prospectus forming part thereof to be usable by Holders for a
period of three years from the Issue Date or such shorter period that will
terminate when all the Securities and Exchange Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement or pursuant to Rule 144 under the Securities Act (in any such case,
such period being called the "Shelf Registration Period"). The Company and the
Subsidiary Guarantors shall be deemed not to have used their best efforts to
keep the Shelf Registration Statement effective during the requisite period if
any of them voluntarily takes any action that would result in Holders of
Securities or Exchange Securities covered thereby not being able to offer and
sell such Securities or Exchange Securities during that period, unless such
action is required by applicable law.
(c) Notwithstanding any other provisions hereof, the Company and the
Subsidiary Guarantors will ensure that (i) any Shelf Registration Statement and
any amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any Shelf Registration Statement and any
amendment thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written information
furnished to the Company by or on behalf of any Holder specifically for use
therein (the "Holders' Information")) does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any prospectus forming part of any Shelf Registration
Statement, and any supplement to such prospectus (in either case, other than
with respect to Holders' Information), does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Securities will suffer damages if the Company or the Subsidiary Guarantors
fail to fulfill their obligations under Section 1 or Section 2, as applicable,
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the applicable Registration Statement is not filed with the
commission on or prior to 90 days after the Issue Date, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective and the Exchange Offer is not consummated within 180
days after the Issue Date, or as the case may be, the Shelf Registration
Statement is not declared effective within 150 days after the Issue Date, (iii)
the Shelf Registration Statement is filed and declared effective within 150 days
after the Issue Date but shall thereafter cease to be effective (at any time
that the Company is obligated to maintain the effectiveness thereof) without
being succeeded within 60 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iii), a
"Registration Default"), the Company will generally be obligated to pay
liquidated damages to each holder of Transfer Restricted Securities (as defined
below), during the period of such Registration Default, in an amount equal to
$0.192 per week per $1,000 principal amount of the
<PAGE>
6
Securities constituting Transfer Restricted Securities held by such holder until
the applicable Registration Statement is filed or declared effective, the
Registered Exchange Offer is consummated or the Shelf Registration Statement
again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease. "Transfer
Restricted Securities" means each Security or Exchange Security until (i) the
date on which such Security or Exchange Security has been exchanged for a freely
transferrable Exchange Security in the Registered Exchange Offer, (ii) the date
on which such Security or Exchange Security has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) the date on which such Security or Exchange
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is salable pursuant to Rule 144(k) under the Securities Act.
Notwithstanding anything to the contrary in this Section 3(a), the Company shall
not be required to pay liquidated damages to the holder of Transfer Restricted
Securities if such holder: (a) failed to comply with its obligations to make the
representations in the penultimate paragraph of Section 1; or (b) failed to
provide the information required to be provided by it, if any, pursuant to
Section 4(n).
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on each
interest payment date specified by the Indenture to the record holder entitled
to receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by holders of Transfer
Restricted Securities by reason of the failure of the Shelf Registration
Statement or the Exchange Offer Registration Statement, as the case may be, to
be filed, to be declared effective or to remain effective, or the Exchange Offer
to be consummated, as the case may be, to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to you, prior to the filing
thereof with the Commission, a copy of the Registration Statement and each
amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that any Initial Purchaser (with respect to any
portion of an unsold allotment from the original offering) is participating in
the Registered Exchange Offer or the Shelf Registration, shall use reasonable
efforts to reflect in each such document, when so filed with the Commission,
such comments as you reasonably may propose; (ii) if applicable, include the
information set forth in Annex
<PAGE>
7
A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C hereto in
the "Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement, and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; and (iii) if requested by the Initial Purchasers, include the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in the prospectus forming a part of the Exchange Offer
Registration Statement.
(b) The Company shall advise you and the Holders (if applicable),
and, if requested by you or any such Holder, confirm such advice in writing
(which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite changes
have been made):
(i) when any Registration Statement and any amendment thereto has
been filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements
to any Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of any Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Securities or the Exchange
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus so that, as of
such date, the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(c) The Company and the Subsidiary Guarantors will use reasonable
efforts to obtain the withdrawal of any order suspending the effectiveness of
any Registration Statement at the earliest possible time.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits (including those
incorporated by reference).
<PAGE>
8
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company and the Subsidiary Guarantors each
consents to the use of the prospectus or any amendment or supplement thereto by
each of the selling Holders of Transfer Restricted Securities in connection with
the offering and sale of the Transfer Restricted Securities covered by the
prospectus or any amendment or supplement thereto.
(f) The Company will furnish to each Exchanging Dealer or each
Initial Purchaser, as applicable, which so requests, without charge, at least
one copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Exchanging Dealer or Initial Purchaser, as applicable, so requests in writing,
all exhibits (including those incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period,
promptly deliver to each Exchanging Dealer or each Initial Purchaser, as
applicable, without charge, as many copies of the prospectus included within the
coverage of Exchange Offer Registration Statement and any amendment or
supplement thereto as such Exchanging Dealer or Initial Purchaser, as
applicable, may reasonably request for delivery by (i) such Exchanging Dealer in
connection with a sale of Exchange Securities received by it pursuant to the
Registered Exchange Offer or (ii) each Initial Purchaser in connection with a
sale of Exchange Securities received by it in exchange for Securities
constituting any portion of an unsold allotment; and the Company and the
Subsidiary Guarantors each consents to the use of the prospectus or any
amendment or supplement thereto by any such Exchanging Dealer or each Initial
Purchaser, as applicable, as aforesaid.
(h) Prior to any public offering of Securities or Exchange
Securities pursuant to any Registration Statement, the Company and the
Subsidiary Guarantors each will use their best efforts to register or qualify or
cooperate with the Holders of Securities included therein and its counsel in
connection with the registration or qualification of such securities for offer
and sale under the securities or blue sky laws of such jurisdictions as any such
Holder reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions of the
Securities or Exchange Securities covered by such Registration Statement;
provided, however, that neither the Company nor the Subsidiary Guarantors will
not be required to register or qualify generally to do business in any
jurisdiction where it is not then so registered or qualified or deal in
securities in any jurisdiction where it would not otherwise be required to
register or qualify or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not then
so subject.
(i) The Company and the Subsidiary Guarantors each will cooperate
with the Holders of Securities or Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities or Exchange
Securities to be sold pursuant to
<PAGE>
9
any Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request in writing
prior to sales of Securities or Exchange Securities pursuant to such
Registration Statement.
(j) If any event contemplated by paragraphs (b)(ii) through (v)
above occurs during the period in which the Company and the Subsidiary
Guarantors are required to maintain an effective Registration Statement, the
Company and the Subsidiary Guarantors will promptly prepare a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus or file any other required document so that, as thereafter delivered
to purchasers of the Securities or purchasers of Exchange Securities from a
Holder, the prospectus will not 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 were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities or
Exchange Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities or Exchange Securities, as the case may
be, in a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and
regulations of the Commission and will make generally available to its security
holders as soon as practicable after the effective date of the applicable
Registration Statement an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act; provided that in no event shall such
earnings statement be delivered later than 45 days after the end of a 12- month
period (or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective date
of the applicable Registration Statement, which statements shall cover such
12-month period.
(m) The Company and the Subsidiary Guarantors will cause the
Indenture or the Exchange Securities Indenture, as the case may be, to be
qualified under the Trust Indenture Act as required by applicable law in a
timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the distribution of such
Transfer Restricted Securities as the Company may from time to time reasonably
require for inclusion in such Registration Statement, and the Company may
exclude from such registration the Transfer Restricted Securities of any Holder
that fails to furnish such information within a reasonable time after receiving
such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v) hereof, such
Holder will discontinue disposition of such Transfer
<PAGE>
10
Restricted Securities until such Holder's receipt of copies of the supplemental
or amended prospectus contemplated by Section 4(j) hereof, or until advised in
writing (the "Advice") by the Company that the use of the applicable prospectus
may be resumed. If the Company shall give any notice under Section 4(b)(ii)
through (v) during the period that the Company is required to maintain an
effective Registration Statement (the "Effectiveness Period"), such
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each seller of Transfer Restricted Securities covered by such
Registration Statement shall have received (x) the copies of the supplemental or
amended prospectus contemplated by Section 4(j) (if an amended or supplemental
prospectus is required) or (y) the Advice (if no amended or supplemental
prospectus is required).
5. Registration Expenses. The Company and the Subsidiary Guarantors
(i) will bear all expenses incurred in connection with the performance of its
obligations under Sections 1, 2, 3 and 4 hereof and the Company and the
Subsidiary Guarantors, jointly and severally, will reimburse the Initial
Purchasers and the Holders for the reasonable fees and disbursements of one firm
of attorneys (in addition to local counsel) chosen by the Holders of a majority
in aggregate principal amount of the Securities and the Exchange Securities to
be sold pursuant to each Registration Statement (the "Special Counsel") acting
for the Initial Purchasers or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Exchanging Dealer or the Initial Purchasers,
as applicable, the Company and the Subsidiary Guarantors, jointly and severally,
shall indemnify and hold harmless each Holder, its directors, officers, agents
and employees and each person, if any, who controls such Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and the directors, officers, agents and employees of such controlling persons as
follows:
(i) against any and all loss, liability, claim and damage
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; and
(ii) against any and all expense (including, subject to Section 6(c)
hereof, the fees and disbursements of counsel chosen by the indemnified
party), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental or regulatory agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission;
<PAGE>
11
provided, however, that (i) this indemnity shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with Holders' Information, (ii) this indemnity with
respect to any untrue statement or alleged untrue statement or omission or
alleged omission in any related preliminary prospectus shall not inure to the
benefit of any indemnified party from whom the person asserting any such loss,
claim, damage or liability received Securities or Exchange Securities if such
persons did not receive a copy of the final prospectus at or prior to the
confirmation of the sale of such Securities or Exchange Securities to such
person in any case where such delivery is required by the Securities Act and the
untrue statement or omission of material fact contained in the related
preliminary prospectus was corrected in the final prospectus unless such failure
to deliver the final prospectus was a result of noncompliance by the Company or
the Subsidiary Guarantors with Sections 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder
agrees to indemnify and hold harmless the Company and the Subsidiary Guarantors,
each of their respective directors, officers, agents and employees and each
person, if any, who controls the Company and the Subsidiary Guarantors within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act and the directors, officers, agents and employees of such controlling
persons against any and all loss, liability, claim, damage and expense described
in the indemnity contained in Section 6(a) hereof, as incurred, arising out of
or based upon any untrue statements or omissions, or alleged untrue statements
or omissions, made in the Registration Statement (or any amendment or supplement
thereto) in reliance on and in conformity with Holders' Information furnished to
the Company or the Subsidiary Guarantors by such Holder; provided, however, that
no such Holder shall be liable for any indemnity claims hereunder in excess of
the amount of net proceeds received by such Holder from the sale of Securities
or Exchange Securities pursuant to the Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any claim or action
commenced against it in respect of which indemnity may be sought hereunder;
provided, however, that failure to so notify an indemnifying party shall not
relieve such indemnifying party from any obligation that it may have pursuant to
this Section except to the extent that it has been materially prejudiced
(through the forfeiture of substantive rights or defenses) by such failure;
provided further, however, that the failure to notify an indemnifying party
shall not relieve it from any liability that it may have to an indemnified party
otherwise than on account of this Section. If any such claim or action shall be
brought against an indemnified party, the indemnified party shall notify the
indemnifying party thereof, and the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof;
<PAGE>
12
provided, however, that an indemnified party will have the right to employ its
own counsel in any such action, but the fees, expenses and other charges of such
counsel will be at the expense of such indemnified party unless (1) the
employment of counsel by the indemnified party has been authorized in writing by
the indemnifying party, (2) the indemnified party has reasonably concluded
(based on the written advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on the written advice of counsel to the
indemnified party) between the indemnified party and indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel for the indemnified party will be at the expense of the indemnifying
party or parties. It is understood that the indemnifying party or parties shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
of more than one separate firm of attorneys (in addition to any local counsel)
at any one time for all such indemnified party or parties. Each indemnified
party, as a condition of the indemnity agreements contained in Sections 6(a) and
6(b), shall use all reasonable efforts to cooperate with the indemnifying party
in the defense of any such action or claim. No indemnifying party shall be
liable for any settlement of any such action effected without its written
consent, but if settled with its written consent or if there be a final judgment
of the plaintiff in any such action, the indemnifying party agrees to indemnify
and hold harmless any indemnified party from and against any loss or liability
by reason of such settlement or judgment. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If a claim by an indemnified party for indemnification under
this Section 6 is found unenforceable in a final judgment by a court of
competent jurisdiction (not subject to further appeal or review) even though the
express provisions hereof provide for indemnification in such case, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in connection
with the actions, statements or omissions that resulted in such losses as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The
<PAGE>
13
amount paid or payable by a party as a result of any losses shall be deemed to
include, subject to the limitations set forth in Section 6(c) herein, any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section, an indemnifying party that is a
holder of Transfer Restricted Securities or Exchange Securities shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Transfer Restricted Securities or Exchange Securities sold by
such indemnifying party and distributed to the public were offered to the public
exceeds the amount of any damages that such indemnifying party would have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to any contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of Holders of a majority in aggregate principal
amount of the Securities and the Exchange Securities, taken as a single class.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of the
Holders of Securities or Exchange Securities whose Securities or Exchange
Securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of a majority in aggregate principal amount of the Securities or
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 7(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to Chase Securities Inc.;
(2) if to you, initially at your address set forth in the Purchase
Agreement; and
(3) if to the Company or the Subsidiary Guarantors, initially at the
addresses of the Company set forth in the Purchase Agreement.
<PAGE>
14
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopies) 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.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Submission to Jurisdiction; Appointment of Agent for Service;
Currency Indemnity. (1) To the fullest extent permitted by applicable law, the
Company and each Subsidiary Guarantor irrevocably submit 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. The Company and each Subsidiary Guarantor
irrevocably and fully waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company and each Subsidiary
Guarantor hereby irrevocably designate and appoint CT Corporation System, 1633
Broadway, New York, New York 10019, U.S.A. (the "Process Agent"), as the
authorized agent of the Company and each Subsidiary Guarantor upon whom process
may be served in any such suit or proceeding, it being understood that the
designation and appointment of CT Corporation System as such authorized agent
shall become effective immediately without any further action on the part of the
Company or any Subsidiary Guarantor. The Company and each Subsidiary Guarantor
represent to the Initial Purchasers that they have notified the Process Agent of
such designation and appointment and that the Process Agent has accepted the
same in writing. The Company and each Subsidiary Guarantor hereby irrevocably
authorize and direct the Process Agent to accept such service. The Company and
each Subsidiary Guarantor further agree that service of process upon the Process
Agent and written notice of said service to the Company or such Subsidiary
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 Company or such Subsidiary Guarantor 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. The Company and each Subsidiary
Guarantor further agree 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 or any Subsidiary Guarantor has any outstanding
<PAGE>
15
obligations under this Agreement, the Notes, the Guarantees, the Indenture or
any Transaction Document. To the extent that the Company or any Subsidiary
Guarantee 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 each Subsidiary Guarantor
hereby irrevocably waive such immunity in respect of their obligations under
this Agreement, to the extent permitted by law.
(2) 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.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) No Inconsistent Agreements. Neither the Company nor the
Subsidiary Guarantors has nor shall the Company or the Subsidiary Guarantors, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the holders of Transfer Restricted
Securities in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor the Subsidiary Guarantor has previously entered into any
agreement which remains in effect granting any registration rights with respect
to any of its debt securities to any person. Without limiting the generality of
the foregoing, without the written consent of the holders of a majority in
aggregate principal amount of the then outstanding Transfer Restricted
Securities, neither the Company nor the Subsidiary Guarantors shall grant to any
person the right to request the Company or the Subsidiary Guarantors to register
any debt securities of the Company or the Subsidiary Guarantor under the
Securities Act unless the rights so granted are not in conflict or inconsistent
with the provisions of the Agreement.
(i) No Piggyback on Registrations. None of the Company, the
Subsidiary Guarantors nor any of their respective security holders (other than
the holders of Transfer Restricted Securities in such capacity) shall have the
right to include any securities of the
<PAGE>
16
Company or the Subsidiary Guarantors in any Shelf Registration or Registered
Exchange Offer other than Transfer Restricted Securities.
(j) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(k) Joint and Several Liability. Each subsidiary of the Company, by
its execution and delivery of a counterpart to this Agreement, agrees that it
shall be jointly and severally liable for all obligations and liabilities of the
Company hereunder.
<PAGE>
17
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Subsidiary Guarantors and each of you.
Very truly yours,
TEVECAP S.A.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
TVA SISTEMA DE TELEVISAO S.A.
By: ____________________________
Name:
Title:
By: ____________________________
Name:
Title:
TVA COMMUNICATIONS LTD.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
GALAXY BRASIL S.A.
By: ______________________________
Name:
Title:
<PAGE>
18
By: ______________________________
Name:
Title:
TVA SUL PARTICIPACOES S.A.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
COMERCIAL CABO TV SAO PAULO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA PARANA LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA ALPHA CABO LTDA.
By: ______________________________
Name:
Title:
<PAGE>
19
By: ______________________________
Name:
Title:
CCS CAMBORIU CABLE SYSTEM DE
TELECOMUNICACOES LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TCC TV A CABO LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
TVA SUL FOZ DO IGUACU LTDA.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
<PAGE>
20
Accepted:
CHASE SECURITIES INC.
By: _________________________________
Name:
Title:
BEAR, STEARNS & CO. INC.
By: _________________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: _________________________________
Name:
Title:
BOZANO, SIMONSEN SECURITIES, INC.
By: _________________________________
Name:
Title:
<PAGE>
21
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 Chase 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.
__________________________________________
[NOTARIAL SEAL]
<PAGE>
22
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 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.
__________________________________________
[NOTARIAL SEAL]
<PAGE>
23
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 Donaldson, Lufkin & Jenrette 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.
__________________________________________
[NOTARIAL SEAL]
<PAGE>
24
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this ____ day of November, 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 Bozano, Simonsen 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.
__________________________________________
[NOTARIAL SEAL]
<PAGE>
25
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
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 Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. Each of the Company and
the Subsidiary Guarantors has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
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 Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. Each of the
Company and the Subsidiary Guarantors has agreed that, for a period of 90 days
after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until _______________, 199_, all dealers effecting
transactions in the Exchange Securities may be required to deliver a
prospectus.1
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Registered 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
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and the Subsidiary Guarantors have
jointly and severally agreed to pay all expenses incident to the Registered
Exchange Offer (including the expenses of one counsel for the Holders of the
Securities) other than commissions or concessions of any broker-dealers and will
indemnify the Holders of the Securities (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
- ----------
1 In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name: ___________________________________________
Address: ________________________________________
________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 10.3
<PAGE>
- --------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT
among
TEVECAP S.A.,
MR. ROBERT CIVITA,
ABRILCAP COMERCIO E PARTICIPACOES LTDA.,
HARPIA HOLDINGS LIMITED,
CURUPIRA HOLDINGS LIMITED,
FALCON INTERNATIONAL COMMUNICATIONS LTD.,
HEARST/ABC VIDEO SERVICES II
and
TVA PARTICIPACOES LTDA.
DATED DECEMBER 6, 1995
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Clause 1. DEFINITIONS...................................................2
Clause 2. SHARES SUBJECT TO THIS AGREEMENT.............................10
Clause 3. SUBSCRIPTION AND PAYMENT FOR THE COMPANY'S
CAPITAL STOCK................................................10
Clause 4. TRANSFER OF SHARES...........................................11
Clause 5. NEW ISSUANCES OF SHARES......................................18
Clause 6. HARPIA AND CURUPIRA PUT OPTION...............................20
Clause 7. FALCON'S PUT OPTIONS.........................................26
Clause 7A. THE INVESTOR ENTITIES' PUT OPTION............................31
Clause 8. PUT COORDINATION.............................................35
Clause 9. PUT POSTPONEMENT.............................................36
Clause 10. CALL OPTIONS.................................................43
Clause 11. THE COMPANY'S BOARD OF DIRECTORS.............................51
Clause 12. RESOLUTIONS OF THE BOARD OF DIRECTORS AND
STOCKHOLDERS.................................................53
Clause 13. GENERAL MEETING RESOLUTIONS..................................59
Clause 14. RIGHT TO ATTENDANCE, TO INFORMATION AND TO
INSPECTION...................................................61
Clause 15. ADVISORY BOARD...............................................63
Clause 16. STOCKHOLDERS' AND THE COMPANY'S OTHER
COVENANTS....................................................64
Clause 17. TAG ALONG RIGHTS.............................................66
Clause 18. REGISTRATION RIGHTS..........................................68
<PAGE>
Page
----
Clause 19. NON-COMPETE PROVISIONS.......................................77
Clause 20. CONFIDENTIALITY..............................................82
Clause 21. DURATION OF THE AGREEMENT....................................83
Clause 22. MISCELLANEOUS PROVISIONS.....................................83
<PAGE>
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered into as
of the 6th day of December, 1995, by and among:
(1) TEVECAP S.A., a corporation organized under the laws of the Federative
Republic of Brazil, with its principal place of business in Sao Paulo, SP,
Brazil, at Rua do Rocio 313, Cj. 101 (parte) CGCMF Nr. 57.574.170/0001-05
(the "Company");
(2) Mr. ROBERT CIVITA, a Brazilian citizen, married, editor, bearer of the ID
Card Nr. 1.666.785 and CPF Nr. 006.890.178-04, domiciled in Sao Paulo, SP,
Brazil, at Rua Escocia, 253, apt. 11, Brazil ("Mr. Civita");
(3) ABRILCAP COMERCIO PARTICIPACOES LTDA., a limited liability company
organized under the laws of the Federative Republic of Brazil, with its
principal place of business in Sao Paulo, SP, Brazil, at Rua do Rocio,
313, Cj. 101 (parte), CGCMF Nr. 00.156.494/0001-06 (part) ("Abrilcap");
(4) HARPIA HOLDINGS LIMITED, a company duly organized and validity existing in
accordance with the laws of the Cayman Islands, having its registered
office at c/o Maples & Calder, Attorneys-at-Law, P.O. Box 309, George
Town, Grand Cayman, Cayman Islands, British West Indies ("Harpia");
(5) CURUPIRA HOLDINGS LIMITED, a company duly organized and validly existing
in accordance with the laws of the Cayman Islands, having its registered
office at c/o Maples & Calder, Attorneys-at-Law, P.O. Box 309, George
Town, Grand Cayman, Cayman Islands, British West Indies ("Curupira");
(6) FALCON INTERNATIONAL COMMUNICATIONS LTD., a company limited by shares duly
organized and validly existing in accordance with the laws of Bermuda,
having its registered office in Bermuda ("Falcon");
(7) HEARST/ABC VIDEO SERVICES II, a general partnership organized under the
laws of Delaware, with its principal place of business at 959 Eighth
Avenue, New York, NY 10019 ("Hearst/ABC Video"); and
(8) TVA PARTICIPACOES LTDA., a limited liability company organized under the
laws of the Federative Republic of Brazil, with its principal place of
business in Sao Paulo, SP, Brazil, at Rua do Rocio 313, CGCMF Nr.
00921404/0001-18 ("Hearst/ABC Limitada" and, collectively with Hearst/ABC
Video, the "Investor Entities" and individually an "Investor Entity").
WHEREAS, prior to July 22, 1994, Mr. Civita and Abrilcap were the only
holders of the Company's equity;
<PAGE>
2
WHEREAS, pursuant to a Stock Subscription Agreement dated July 22, 1994
(the "Subscription Agreement"), Harpia and Curupira subscribed for certain
Shares (as defined herein);
WHEREAS, on August 24, 1995, pursuant to a Stock Purchase Agreement among
the Company, Mr. Civita, Abrilcap, Harpia, Curupira and Falcon Parent (as
defined below) (the "Old Stock Purchase Agreement"), Falcon Parent agreed to
subscribe for certain Shares directly or through an affiliate;
WHEREAS, simultaneously with the execution hereof, the Company is issuing
and Hearst/ABC Video is subscribing for and purchasing certain Shares pursuant
to the terms of the Stock Purchase Agreement (as defined below);
WHEREAS, simultaneously with the execution hereof, Harpia is agreeing to
sell and Hearst/ABC Limitada is agreeing to purchase certain Shares pursuant to
the terms of the HC Stock Purchase Agreement (as defined below); and
WHEREAS, upon such subscription, Mr. Civita, Abrilcap, Harpia, Curupira,
Falcon and the Investor Entities (collectively, together with holders of Shares
that from to time become parties hereto, referred to as "Stockholders" and
individually as a "Stockholder") are the holders of all of the outstanding
shares of capital stock of the Company (except as set forth in Clause 11.5
below),
NOW, THEREFORE, the Stockholders having resolved to execute this
Stockholders Agreement in accordance with the requirements of Article 118 of Law
No. 6.404, of December 15, 1976, other applicable legislation and the following
terms and conditions, do agree as follows:
Clause 1. DEFINITIONS
In this Agreement, any reference to:
"Abril Agreement" means the letter agreement dated of even date herewith
between Abril S.A. and the parties hereto regarding the assumption by
Abril S.A. of certain put obligations of the Company;
"Abril Credit Agreement" means the credit agreement dated of even date
herewith between Abril S.A. and the Company;
"Advisory Services Agreement" means the Advisory Services Agreement dated
the date hereof among the Company, Hearst and CCABC;
"Affiliates" bears the meaning ascribed to it in Clause 4.8;
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3
the "Board" means the Company's Board of Directors as duly elected from
time to time;
"Brazilian GAAP" bears the meaning ascribed to it in Clause 14.2;
the "Business" means (i) pay television distribution activities
(including, but not limited to, MMDS, LMDS, DTH, direct wire transmission
(including but not limited to coaxial or fiber optic cable), VHF, UHF or
other over-the-air transmission or broadcasting), (ii) all activities
(whether creation, development, production, purchase, sale, licensing,
distribution or otherwise) relating to programming susceptible to any
means of television distribution, (iii) all activities authorized by the
Permits (including activities relating to pay television or not) belonging
to or required hereby to be transferred to the Company, its Subsidiaries,
and the License Holders, including any extensions or modifications of such
Permits, and (iv) telephony, in each case as transacted by the Company or
its Subsidiaries now or at any time in the future, provided that the
Business shall expressly exclude MTV Brasil unless and until MTV Brasil is
incorporated into the Company in accordance with the terms of the MTV
Option set forth in the Stock Purchase Agreement or otherwise;
"Business Day" means any day on which banks in New York City and Sao Paulo
are not authorized or required to be closed;
"Business Plan" means a business plan approved by the Board, for the
Company and its Subsidiaries collectively, and shall include the annual
operating and capital budget for the Company for the fiscal year in
question;
"Call Notice" bears the meaning ascribed to it in Clause 10.2;
"Call Option" bears the meaning ascribed to it in Clause 10.1;
"Call Price" bears the meaning ascribed to it in Clause 10.4;
"Call Purchaser" bears the meaning ascribed to it in Clause 10.1;
"Call Seller" bears the meaning ascribed to it in Clause 10.1;
"CCABC" means Capital Cities/ABC, Inc., a Delaware corporation having an
office at 77 West 66th Street, New York, New York 10023;
"CCABC Partner" means Brazil Cable Investments, Inc., a Delaware
corporation having an office at 77 West 66th Street, New York, New York
10023 and an indirect wholly-owned subsidiary of CCABC;
"Chase" bears the meaning ascribed to it in Clause 19.1;
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4
"Commission" bears the meaning ascribed to it in Clause 18.1(ii);
"Controlling Stockholder" means, with respect to any entity at any
particular time, any other person that directly, or indirectly through one
or more subsidiaries, controls or has the power to control the affairs and
policies of such entity, whether by ownership of share capital, contract,
ability to appoint a controlling number of board members or otherwise
(which shall not include, in itself, an individual acting as an officer or
director or, in the case of a limited liability company, a manager of such
entity, unless such individual otherwise exercises control, whether
through ownership of share capital, contract, ability to appoint a
controlling number of board members or otherwise, and does not simply
manage, such entity).
"Cumulative Dividends" bears the meaning ascribed to it in Clause 9.3;
"Date of the Event Put Payment" bears the meaning ascribed to it in Clause
9.1;
"Date of the Falcon Put Payment" bears the meaning ascribed to it in
Clause 7.3(i);
"Date of the HC Put Payment" bears the meaning ascribed to it in Clause
6.9;
"Date of the Investor Put Payment" bears the meaning ascribed to it in
Clause 7A.3;
"Date of Transfer" bears the meaning ascribed to it in Clause 10.3;
"Demand Registration Statement" bears the meaning ascribed to it in Clause
18.1(ii);
"Disney" bears the meaning ascribed to it in Clause 19.7;
"Earnings" bears the meaning ascribed to it in Clause 6.3;
"ESPN Brazil Agreements" bears the meaning ascribed to it in Clause 19.7;
"Event Put" bears the meaning ascribed to it in Clause 9.1;
"Event Put Party" bears the meaning ascribed to it in Clause 9.1;
"Event Put Price" bears the meaning ascribed to in Clause 6.3;
"Excluded Agreements" bears the meaning ascribed to it in Clause 19.7;
"Falcon Call Option" bears the meaning ascribed to it in Clause 10.1;
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5
"Falcon Event Put Option" bears the meaning ascribed to it in Clause
7.1(i)(B);
"Falcon Parent" bears the meaning ascribed to in Clause 7.1;
"Falcon Parent Investors" bears the meaning ascribed to it in Clause
7.1(i).
"Falcon Put Notice" bears the meaning ascribed to it in Clause 7.3;
"Falcon Put Party" bears the meaning ascribed to it in Clause 7.1;
"Falcon Put Shares" bears the meaning ascribed to it in Clause 7.1(i)(A);
"Falcon Time Put Option" bears the meaning ascribed to it in Clause
7.1(i)(A);
"Falcon Triggering Event" bears the meaning ascribed to it in Clause 7.2;
"Fixed Assets" means, as to any person, any assets owned by such person
other than (a) cash, (b) cash equivalents, and (c) readily marketable
securities (other than securities of issuers for which a public offering
has occurred after the time that such person acquired such securities);
"Foreign Stockholder" means Falcon, the Investor Entities or an Affiliate
or a transferee of any of them;
"Funding Date" bears the meaning ascribed to it in Clause 10.10(ii);
"HC Call Option" bears the meaning ascribed to it in Clause 10.1;
"HC Entities" shall mean Harpia and Curupira or an Affiliate of either;
"HC Put Notice" bears the meaning ascribed to it in Clause 6.4;
"HC Put Option" bears the meaning ascribed to it in Clause 6.1;
"HC Put Party" bears the meaning ascribed to it in Clause 6.1;
"HC Put Shares" bears the meaning ascribed to it in Clause 6.1;
"HC Stock Purchase Agreement" bears the meaning ascribed to it in Clause
7A.1;
"HC Triggering Event" bears the meaning ascribed to it in Clause 6.2;
"Hearst" means The Hearst Corporation, a Delaware corporation having an
office at 959 Eighth Avenue, third floor, New York, New York 10019;
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6
"Hearst Partner" means Hearst Brazil, Inc., a Delaware corporation having
an office at 959 Eighth Avenue, third floor, New York, New York 10019 and
a wholly-owned subsidiary of Hearst;
"Institutional Investor" means an institutional or financial investor
(such as a venture capital firm or fund, pension plan, financial or
governmental institution or the like) which purchases or holds equity
interests in Falcon or Falcon Parent (or any Affiliate of Falcon that is
then a Stockholder) principally for investment purposes;
"Investor Programming Agreement" means the Programming Agreement dated as
of the date hereof among Hearst, CCABC and the Company;
"Investor Put Notice" bears the meaning ascribed to it in Clause 7A.3;
"Investor Put Option" bears the meaning ascribed to it in Clause 7A.1;
"Investor Put Party" bears the meaning ascribed to it in Clause 7A.1;
"Investor Put Shares" bears the meaning ascribed to it in Clause 7A.3;
"Investor Triggering Event" bears the meaning ascribed to it in Clause
7A.2;
"License Holders" means Televisao Showtime Ltda., TVA Brasil Radioenlaces
Ltda. and Abril S.A. (for so long as Abril S.A. shall hold any of the
Permits or assets listed in Schedules 3.12(i) and 4.11 of the Stock
Purchase Agreement, respectively, or any Permit acquired by Abril S.A.
pursuant to the terms of Clause 6.1(b) of the Stock Purchase Agreement);
"Mandatory Dividend" bears the meaning ascribed to it in Clause 9.5;
"MMDS", "DTH" "VHF", "LMDS" AND "UHF" mean the following technologies
respectively: (i) Multi-Channel Multi-Point Distribution System; (ii)
Direct-to-Home satellite program delivery (whether by C-band, Ku-band or
other frequency); (iii) Very High Frequency transmission, (iv) Local
Multipoint Distribution System; and (v) Ultra High Frequency transmission;
"MTV Brasil" means from time to time all of the combined interest of Mr.
Civita and Abrilcap and their Affiliates in Music Television Network
business operated under a license or licenses granted by MTV Networks, a
division of Viacom International, Inc., whether distributed by UHF or
otherwise, and all assets (including transmission and broadcasting
equipment) and rights used or held in connection therewith that are not
otherwise used or held in part in connection with the Business and all
duties and liabilities pertaining to such business (including those that
also pertain to the Business), but excludes any permit or license issued
by the
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7
Government of Brazil (or any subdivision or ministry thereof) for public
broadcasting (radio difusao);
"Old Stock Purchase Agreement" bears the meaning ascribed to it in the
preamble first above;
"Option Agreement" bears the meaning ascribed to it in Clause 4.11;
"Participant Purchase Price" means the product of (A) the Event Put Price
times (B) a fraction the numerator of which is that number of Put Shares
that the Participating Stockholder purchases and the denominator of which
is the total number of Put Shares;
"Participating Stockholder" means a Stockholder which acquires HC Put
Shares pursuant to Clause 6.11, Falcon Put Shares pursuant to Clause 7.5
or Investor Put Shares pursuant to Clause 7A.4;
"Permits" means licenses, permits, consents, authorizations, franchises,
ordinances, registrations, certificates, agreements or other rights or
applications filed with, granted by or entered into by any governmental or
regulatory authority;
"Permitted Disclosee" bears the meaning ascribed to it in Clause 20;
"person" means any natural person, partnership, association, trust,
corporation or other entity whatsoever;
"Potential Purchasers" bears the meaning ascribed to it in Clause 4.2;
"Potential Subscription Purchasers" bears the meaning ascribed to it in
Clause 5.2;
"Preferred Voting Shares" bears the meaning ascribed to it in Clause 9.3;
"Proposed Price" bears the meaning ascribed to it in Clause 4.2;
"Proposed Subscription Price" bears the meaning ascribed to in Clause 5.2;
"Pro Rata Share" bears the meaning ascribed to it in Clause 4.4(ii);
"Public Offering" means a bona fide offering of securities to the public
in connection with which such securities are registered under the U.S.
Securities Act of 1933, as amended.
"Put Postponement" bears the meaning ascribed to it in Clause 9.1;
<PAGE>
8
"Put Shares" means HC Put Shares, Falcon Put Shares or Investor Put
Shares, as the context requires;
"Real" or "Reais" means, from time to time, the official currency of
Brazil;
"Reais Equivalent" means the amount in Brazilian currency equivalent to
U.S. Dollars as determined by the application of the selling rate divulged
by the Central Bank of Brazil under the SISBACEN Data System, Transaction
PTAX-800, Option 5, Currency 220, or any successor to such rate divulged
by the Central Bank of Brazil;
"Securities Act" bears the meaning ascribed to it in Clause 18.1(v)(b);
"Service Agreement" means the agreement entered into on July 22, 1994, as
amended on August 24, 1995 and the date hereof, between the License
Holders and the Company providing for the irrevocable transfer to the
Company and its Subsidiaries of all rights, powers and monopolies granted
by or inherent to the Permits, including those described in Schedule
3.12(i) to the Stock Purchase Agreement and the unrestricted right to use
the assets listed in Schedule 4.11 to the Stock Purchase Agreement, in
each case free of charge, such Service Agreement having been filed with
the 3rd Public Registry of Titles and Documents in the City of Sao Paulo;
"Share Equivalents" means securities of any kind issued by an entity which
are convertible into or exchangeable for any shares of any class of such
entity's securities or options, warrants or other rights granted by such
entity to purchase or subscribe for any shares of any class of such
entity's securities or securities convertible into or exchangeable for
shares of any class of such entity's securities and shall also include any
contractual or other interest providing for an equity-like payment,
irrespective of whether such contractual or other interest constitutes an
ownership interest;
"Shareholder Group" bears the meaning ascribed to it in Clause 12.3(ii);
"Shares" bears the meaning ascribed to it in Clause 2;
"Special Preferred Shares" bears the meaning ascribed to it in Clause 9.3;
"Stock Purchase Agreement" means the Stock Purchase Agreement dated
concurrently herewith among the Company, Mr. Civita, Abrilcap, Hearst/ABC
Video, Harpia, Curupira, Falcon and Falcon Parent;
"Stockholder" or "Stockholders" bears the meaning ascribed to it in the
preamble first above;
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9
"Stockholder Parent Company" means, with respect to a Stockholder, any
person (a) which directly, or indirectly through one or more subsidiaries,
owns or controls the majority of the voting capital stock or equivalent
ownership of such Stockholder or otherwise has the right to control the
management of such Stockholder and (b) 50% or more of the fair market
value of the Fixed Assets of such person consist of, either directly or
through one or more subsidiaries, Shares owned by such Stockholder or any
other Stockholder of which such person is a Stockholder Parent Company;
provided that (i) Falcon Parent shall not be deemed to be a Stockholder
Parent Company of Falcon after the Funding Date if, on the Funding Date,
U.S.$50,000,000 is less than one-half of the total capital commitments
(including previously made contributions) made by Falcon Parent Investors
in Falcon Parent and (ii) in no event shall any Falcon Parent Investor or
other holder of equity in Falcon Parent (or, with respect to such Falcon
Parent Investor or other holder of equity, any person described in clause
(a) of this definition) be or be deemed to be a Stockholder Parent
Company.
"Subject Shares" bears the meaning ascribed to it in Clause 18.1(i)(a);
"Subscription Rights" bears the meaning ascribed to it in Clause 5.1;
"Subscription Transfer Notice" bears the meaning ascribed to it in Clause
5.2;
"Subsidiary" means, with respect to any person at any particular time, any
other person whose affairs and policies such person, directly or
indirectly, controls or has the power to control, whether by ownership of
share capital, contract, ability to appoint board members or otherwise;
"Target Effective Date" bears the meaning ascribed to it in Clause
18.1(ii)(a);
"Target Effective Period" bears the meaning ascribed to it in Clause
18.1(ii)(a);
"Target Filing Date" bears the meaning ascribed to it in Clause
18.1(ii)(a);
"Terms of Offer" bears the meaning ascribed to it in Clause 4.2;
"Third Appraiser" bears the meaning ascribed to it in Clause 6.5;
"Time Put Decision Period" shall have the meaning ascribed to it in Clause
9.7(i);
"Time Put Price" bears the meaning ascribed to it in Clause 7.3(i);
"Total Time Put Shares" bears the meaning ascribed to it in Clause 9.8(i);
"Transfer Notice" bears the meaning ascribed to it in Clause 4.2;
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10
"U.S. Dollars" or "Dollars" or "US$" means from time to time the official
currency of the United States of America; and
"U.S. GAAP" bears the meaning ascribed to it in Clause 6.3(b).
Clause 2. SHARES SUBJECT TO THIS AGREEMENT
All shares of the Company's capital stock (the "Shares") owned by the
Stockholders on the date hereof or which may be owned by the Stockholders
in the future, including, without limitation, by means of subscription,
acquisition, bonus, distribution, split or reverse split shall be subject
to this Agreement, unless otherwise expressly excluded in the context.
Shares held by directors of the Company and their alternates in accordance
with Clause 11.5 shall be considered Shares held by the respective
Stockholder that appointed each director or alternate. In addition, as
provided in Clause 18.1(i)(b) below, Subject Shares that are registered
and publicly sold shall not be entitled to the benefits of, or subject to
the obligations in, this Agreement.
Clause 3. SUBSCRIPTION AND PAYMENT FOR THE COMPANY'S CAPITAL STOCK
3.1 The capital stock of the Company, in the amount of R$______________, is
divided into and represented by 196,712,853 Shares, all of them comprising
registered common stock, without par value and with equal voting rights;
each Share is entitled to one vote.
3.2 As of the date hereof:
Mr. Robert Civita holds 1 Share;
Abrilcap holds 111,075,321 Shares representing 56.47% (rounded to
the second decimal) of the voting capital stock of the Company;
Harpia holds 11,496,328 Shares representing 5.84% (rounded to the
second decimal) of the voting capital stock of the Company and, upon
consummation of the closing under the HC Stock Purchase Agreement,
Harpia will hold 6,867,792 Shares representing 3.49% (rounded to the
second decimal) of the voting capital stock of the Company;
Curupira holds 11,496,328 Shares representing 5.84% (rounded to the
second decimal) of the voting capital stock of the Company;
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11
Falcon holds 27,930,827 Shares representing 14.20% (rounded to the
second decimal) of the voting capital stock of the Company;
Hearst/ABC Video holds 34,714,029 Shares representing 17.65%
(rounded to the second decimal) of the voting capital stock of the
Company;
Hearst/ABC Limitada holds no Shares and, upon consummation of the
closing under the HC Stock Purchase Agreement, Hearst/ABC Limitada
will hold 4,628,538 Shares representing 2.35% (rounded to the second
decimal) of the voting capital stock of the Company; and
each of the following persons holds one Share in accordance with
Clause 11.5:
Victor Civita;
Jose Augusto Pinto Moreira;
Valter Pasquini;
Robert Hefley Blocker;
Peter John Trevor Grant Anderson;
John Peter Harper;
Francisco S.C. Pinheiro;
Giancarlo Francesco Civita;
Sergio Vladimirschi, Jr.;
Viviane Vladimirschi;
Jose L.S. Freire; Nina Farina;
Fatima Ahmad Ali;
Jorge Fernando Koury Lopes;
Naum Rotenberg; Altamira Boscali; and
Rogerio Cruz Themudo Lessa.
3.3 For purposes of this Agreement, Hearst/ABC Limitada shall not be
a Stockholder, and shall not have the benefit of any of the rights
granted by, or be subject to any of the obligations imposed by, this
Agreement until it purchases Shares pursuant to the HC Stock
Purchase Agreement or otherwise. Until such time as Hearst/ABC
Limitada becomes a Stockholder, all references to the Investor
Entities throughout this Agreement shall refer solely to Hearst/ABC
Video.
Clause 4. TRANSFER OF SHARES
4.1 (i) No Stockholder may sell or in any way transfer to third parties or
to other Stockholders, whether signatories or not to this Agreement,
any Shares held by such Stockholder, in whole or in part, (a) unless
permitted by applicable
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12
law and (b) except as specifically provided in Clauses 4.8 and 4.11
hereof, without first offering them to the Company and to all other
Stockholders (other than Stockholders that are Affiliates of the
offering Stockholder), who shall have the right to accept such offer
for the acquisition thereof. Such offer shall be effected in
compliance with the procedure set forth in this Clause 4.
(ii) No Stockholder, other than Falcon or any Affiliate of Falcon that is
then a Stockholder (to which this restriction shall not apply),
shall permit any holder of an equity interest in such Stockholder or
any holder of an equity interest in any Stockholder Parent Company
of such Stockholder to sell directly or indirectly or in any way
transfer to third parties or to other Stockholders, whether
signatories or not to this Agreement, any equity interest in such
Stockholder or Stockholder Parent Company, (a) unless permitted by
applicable law and (b) except as specifically provided in Clauses
4.8 and 4.11 hereof, without first offering such equity interest to
the Company and to all other Stockholders (other than Stockholders
that are Affiliates of the offering Stockholder), who shall have the
right to accept such offer for the acquisition thereof. Such offer
shall be effected in compliance with the procedure set forth in this
Clause 4. For purposes of this Clause 4 only, any such equity
interest shall be referred to as Shares.
(iii) Neither HC Entity nor any Affiliate of them that is a Stockholder
shall permit any person who is a Controlling Stockholder of either
HC Entity or such Affiliate to sell or in any way transfer any
equity interest (the "Controlling Transfer") in any other
Controlling Stockholder of either HC Entity or such Affiliate if
such transfer would result in The Chase Manhattan Corporation or any
successor thereto no longer being a Controlling Stockholder of such
other person unless (a) such other person is a Stockholder Parent
Company with respect to either HC Entity or such Affiliate, or (b)
the selling person first offers to the Company and all other
Stockholders (other than the HC Entities and such Affiliates), all
of either, at the discretion of the selling person, (1) the Shares
held by the HC Entities or such Affiliates or (2) the equity
interests (the "Offered Interests") in (x) any entity (or entities)
that is (or are) controlled by such other person and is (or are)
then a Stockholder or (y) any entity that is a Stockholder Parent
Company with respect to such Stockholder(s). For purposes of this
Clause 4.1(iii) only, the Proposed Price shall equal 100% of the
Event Put Price of such Shares or, if Offered Interests are offered,
of all Shares held by any Stockholder of which such person referred
to in sub-clause (x) or (y) is a Controlling Stockholder, such Event
Put Price being determined according to the procedures set forth in
Clause 6, mutatis mutandis, except as modified in this Clause
4.1(iii). Such offer shall be effected in compliance with the
procedures set forth in this Clause 4, except that for purposes of
this Clause 4 only, (a) if Offered Interests are offered,
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13
the Offered Interests shall be treated as if they were Shares for
all purposes other than the calculation of the Proposed Price
therefor, (b) the Transfer Notice shall, in lieu of the Terms of
Offer, describe the Shares or the Offered Interests, as the case may
be, and include the name of the appraiser for purposes of item (a)
in Clause 6.3 and provide the Event Put Price calculated according
to the method contemplated in item (b) of Clause 6.3, (c) the time
period in Clauses 4.3 to 4.5 shall run from the date the Event Put
Price calculated according to the method contemplated in item (a) of
Clause 6.3 is finally determined, and (d) replacing Clause 4.5 with
the following: If after the 21 (twenty-one) Business Day period
referred to in Clause 4.3 above has elapsed, none of the Company or
the other Stockholders has exercised its right to accept the Terms
of Offer to purchase all of the Shares or the Offered Interests, as
the case may be, then the selling person may effect the Controlling
Transfer to any person during the six subsequent months, at the
price and other terms of such selling person's choice.
(iv) If a sale or transfer of an equity interest in an HC Entity or any
of their Affiliates that are then Stockholders (or in any
Stockholder Parent Company of an HC Entity or any such Affiliates)
results in The Chase Manhattan Corporation, or any successor
thereto, no longer being a Controlling Stockholder of the HC
Entities or such Affiliates thereof (or such Stockholder Parent
Company thereof), then the HC Entities and such Affiliates (1) shall
forfeit immediately all rights granted under this Agreement to the
HC Entities and such Affiliates that would not be transferable with
the Shares owned by the HC Entities or such Affiliates, and shall
immediately cease to be bound by all of their obligations under this
Agreement that would not be transferred with the Shares owned by
them (including the obligations in connection with the HC Call
Option), in each case as if a transfer of such Shares had occurred
by the HC Entities or such Affiliates, and (2) shall forfeit
immediately all rights to indemnification under Clauses 7.3(a) and
(b) of the Old Stock Purchase Agreement and Clause 6.3 of the Stock
Purchase Agreement other than in respect of claims for
indemnification that are then pending.
4.2 The offer referred to in this Clause shall be effected by means of written
notices (each, a "Transfer Notice") to be delivered to the Chairman of the
Board and to each other Stockholder (not including Stockholders that are
Affiliates of the offering Stockholder) containing the following
information: (i) the number of Shares offered for sale, (ii) their type
and class, (iii) a proposed price (the "Proposed Price") in cash expressed
in U.S. Dollars, and, if applicable and known to the offering Stockholder,
any non-cash consideration and the value thereof in cash expressed in U.S.
Dollars, (iv) the other material conditions (other than the form of
consideration to be paid for such Shares) of the proposed sale or
transfer, and (v) if the offering Stockholder is Falcon, the Investor
Entities, Abrilcap or an Affiliate of any of them,
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14
a list of potential purchasers of such Shares (the "Potential Purchasers")
(collectively, the "Terms of Offer").
4.3 During the 21 (twenty-one) Business Days following the receipt of a
Transfer Notice, the Company or such other Stockholders, as the case may
be, shall inform the offering Stockholder in writing of its or their
decision(s) as to whether to exercise the right to accept the Terms of
Offer.
(i) At any time during such 21 (twenty-one) Business Day period, such
other Stockholders (acting unanimously) shall be entitled to make a
counter-offer for all such offered Shares which the offering
Stockholder may, but shall not be required to, accept.
(ii) Any exercise of the right to accept the Terms of Offer by the
Company and/or any of the Stockholders, as applicable, shall be for
the acquisition of the entire amount of the offered Shares.
(iii) Once the Terms of Offer are accepted by the Company and/or the
Stockholders, as applicable, or such counter-offer is accepted by
the offering Stockholder, the offered Shares shall be acquired in
accordance with Clause 4.7 hereof and/or such counter-offer, as
applicable, and transferred to the Company and/or to the other
Stockholders no more than 40 Business Days from the date of the
receipt by the offering Stockholder of notice from the Company
and/or the other Stockholders informing of its or their decision to
exercise their right to accept the Terms of Offer or the date of
receipt of the offering Stockholder's notice of acceptance of such
counter-offer, as the case may be.
4.4 The Chairman of the Board shall promptly call a meeting of the Board for a
date not more than 14 Business Days after receipt of a Transfer Notice for
the purpose of considering whether the Company should, (i) in the event
that the offering Stockholder is Falcon, the Investor Entities, Abrilcap
or an Affiliate of any of them, approve any or all of the Potential
Purchasers listed in such Terms of Offer, and (ii) in any case, exercise
its right to accept the Terms of Offer. In the event that the offering
Stockholder is Falcon, the Investor Entities, Abrilcap or an Affiliate of
any of them, the decision identified in sub-clause (i) above shall be
taken first and shall, subject to applicable quorum requirements, be by
majority vote of the Board excluding the directors appointed by the
offering Stockholder and its Affiliates. Each Stockholder entitled, alone
or with its Affiliates, to appoint a member of the Board hereby agrees to
cause such member (a) not to vote against a Potential Purchaser unless the
Potential Purchaser (1) is of undesirable character, (2) lacks financial
capacity, (3) competes with the Company or its Subsidiaries in Brazil or
(4) the nature of the Potential Purchaser would provoke a change of the
business practices of the Company and (b) in any case to provide an
explanation at such meeting of any vote against a Potential Purchaser. Any
disapproval by the Board of
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15
a Potential Purchaser shall be considered a binding veto and the proposed
sale of Shares may not be made to such vetoed party. If the Board
disapproves of all of the Potential Purchasers, the offering Stockholder
may withdraw the Transfer Notice at any time prior to the transfer of the
offered Shares. The decision identified in sub-clause (ii) above shall be
taken by unanimous vote of all directors other than the directors
appointed by the offering Stockholder and its Affiliates and the
independent director.
(i) The Company shall have priority over the other Stockholders in the
acquisition of the offered Shares.
(ii) If the Company does not exercise its right to accept the Terms of
Offer, the offered Shares shall be apportioned to the other
Stockholders who wish to participate in the exercise of the right to
accept the Terms of Offer according to the ratios of their
respective equity interests in the Company on the date of such
acquisition (each participating Stockholder's share of such right,
as so determined, its "Pro Rata Share"). For purposes of
establishing such ratio, the equity held by the offering
Stockholder, its Affiliates and Stockholders who do not wish to
participate shall be excluded.
(iii) In the event that a Foreign Stockholder is not permitted to purchase
all or any portion of such Foreign Stockholder's Pro Rata Share of
such Shares being offered for purchase due to Brazilian legal
restrictions upon foreign ownership or other Brazilian legal
limitations, such Foreign Stockholder may designate a third party to
make such purchase, provided that such third party agrees to execute
this Agreement and to become bound by the terms hereof and that: (a)
such third party is identified in a notice given to each other
Stockholder (not including the offering Stockholder, its Affiliates,
the affected Foreign Stockholder and its Affiliates) within 5 (five)
Business Days after receipt of the related Transfer Notice, and (b)
each such Stockholder shall have approved such third party in
writing, such approval not to be unreasonably withheld.
4.5 If, after the 21 (twenty-one) Business Day period referred to in Clause
4.3 above has elapsed, none of the Company or the other Stockholders has
exercised its or their right to accept the Terms of Offer to purchase all
of the offered Shares, then the offering Stockholder may sell the offered
Shares to any person; provided, however, that each of the following
conditions is complied with: (i) all such offered Shares must be sold
simultaneously during the six subsequent months; (ii) if the offering
Stockholder is Falcon, the Investor Entities, Abrilcap or an Affiliate of
any of them, then such Shares must be sold to a Potential Purchaser that
has not been vetoed in accordance with Clause 4.4; (iii) the provisions of
Clause 4.9 below must becomplied with; (iv) the consideration for the sale
of such Shares must have an aggregate fair value equal to at least ninety
percent (90%) of the Proposed Price,
<PAGE>
16
and the sale must be upon other conditions not substantially more
favorable to the purchaser than the conditions set forth in the Terms of
Offer; and (v) promptly after the consummation of such sale, the offering
Stockholder must provide all of the other Stockholders with a notice
containing a description of the sales price for such Shares, the form of
consideration paid and all other material terms of such sale.
4.6 After the six month term referred to in the previous Clause has elapsed
without a sale having taken place, if the offering Stockholder wishes
again to dispose of or transfer its Shares, it shall be subject to the
procedure set forth herein.
4.7 To exercise their right to accept the Terms of Offer provided for in this
Clause 4, the Company and/or the Stockholders, as the case may be, wishing
to exercise such right collectively must offer to purchase all the offered
Shares in accordance with the Terms of Offer and must consummate such
purchase within the time period set forth in Clause 4.3(iii), unless the
offering Stockholder has agreed to a counter-offer which contains other
terms and conditions. In the event that the acquiring Stockholder is
Harpia or Curupira or an Affiliate thereof, they may exercise such right
only for the maximum amount of Shares permitted by applicable laws, rules
and regulations then in force. If the right to accept the Terms of Offer
is sought to be exercised by other Stockholders, the number of Shares to
be purchased by Harpia, Curupira and their Affiliates shall be limited to
the lesser of such permitted amount and their Pro Rata Share.
4.8 (i) Neither the Company nor the other Stockholders shall be entitled to
the right provided in this Clause 4 in relation to (A) sales,
transfers and assignments of Shares effected by any Stockholder to:
(a) any entity, other than a partnership, in which the transferring
or assigning Stockholder directly or indirectly owns or controls a
majority of the voting capital or equivalent ownership interest, or
any partnership in which the transferring or assigning Stockholder
both (1) is, directly or through another Affiliate, a general
partner, and (2) owns, directly or indirectly, a majority of the
economic interest (any such entity or partnership, for purposes of
this Clause 4.8, a "subsidiary"); or (b) any entity that directly,
or indirectly through one or more subsidiaries, owns or controls the
majority of the voting capital stock or equivalent ownership
interest of the assigning Stockholder (any such entity, for purposes
of this Clause 4.8, a "holding company"); or (c) any entity that is
a subsidiary of any of such Stockholder's holding companies; or (d)
in the case of Mr. Civita, any of the following individuals: Edgard
de Silvio Faria, Angelo Silvio Rossi, Maria Ines Romana Rossi,
Giancarlo Francesco Civita, Victor Civita and Roberta Anamaria
Civita; or (e) in the case of the Investor Entities, Hearst Parent
or CCABC Parent, any of Hearst, CCABC or any subsidiary or holding
company of Hearst or CCABC (collectively, "Affiliates"), or (B)
sales, transfers and assignments of any equity interest in a
Stockholder, a Stockholder Parent Company or a Controlling
Stockholder of such Stockholder to any person that, immediately
prior to such sale, transfer or assignment, was an Affiliate of such
<PAGE>
17
Stockholder or a Person that had as a Controlling Stockholder any of
such Stockholder's Controlling Stockholders.
(ii) In addition, any Stockholder may permit any of its Affiliates to
purchase any of the Shares such Stockholder would itself be
permitted to purchase upon its exercise of the right to accept the
Terms of Offer. Each Stockholder that transfers Shares to an
Affiliate and each Stockholder that causes an Affiliate to purchase
Shares in exercise of the right to accept the Terms of Offer under
this Clause 4.8 hereby agrees with each other Stockholder that such
transferred Shares shall at all times be held by an Affiliate of
such transferring Stockholder, unless transferred to another person
(other than an Affiliate of such transferring party) pursuant to the
provisions of this Clause 4. Each Stockholder hereby undertakes to
cause its Affiliates that are, from time to time, Stockholders, to
act in compliance with the terms of this Clause 4.8.
4.9 Notwithstanding any provision to the contrary herein, any transfer or
assignment of Shares (or any right to acquire Shares under Clause 4.8) by
any form to a person that is not a signatory of this Agreement (including
to an Affiliate), shall be valid and effective only if the transferee or
assignee or acquiror fully and without restrictions becomes a party to
this Agreement, all as if it had been an original party hereto, and each
Stockholder agrees not to transfer Shares by any means whatsoever unless
such transfer is permitted by applicable law; provided, however that this
Clause 4.9 shall not apply to a transfer described in Clauses 4.1(ii) or
(iii) above.
4.10 Except with the consent of all other Stockholders of the Company, no
Stockholder shall create any liens or encumbrances on the Shares or
otherwise enter into any agreement or arrangement which in any way limits
or imposes restrictions on the free ownership of the Shares. Transfers of
Shares or of securities convertible into Shares or, further, the creation
of any lien or encumbrance upon them in contravention of the provisions of
this Agreement shall not be valid, and the Company shall refrain from
registering them on its stock transfer books.
4.11 The provisions of this Clause 4 shall not apply to transfers of Shares
that are the subject of the HC Put Option (as defined in Clause 6.1
below), the Falcon Event Put Option (as defined Clause 7.1 below), the
Falcon Time Put Option (as defined in Clause 7.1 below), the Investor Put
Option (as defined in Clause 7A.1 below), the Call Options, any of the put
rights granted in the Abril Agreement or the Option Agreement or to the
Shares referred to in Clause 11.5. Further, the provisions of this Clause
4 shall not apply to any transfer that any Stockholder may be entitled to
make pursuant to Clause 4.8 or 17 hereof, to Shares which are sold in a
public registration pursuant to Clause 18 hereof, or to the Shares subject
to the Put Option granted under the Amended and Restated Option Agreement
dated as of the date
<PAGE>
18
hereof among Abril S.A., Harpia and Curupira (the "Option Agreement") or
to transfers of Shares pursuant to the Abril Agreement. The Company and
the Stockholders acknowledge that, pursuant to the terms of the Option
Agreement, Harpia, Curupira and their Affiliates that are from time to
time Stockholders may assign some or all of their option rights, subject
to some or all of their obligations, under the Option Agreement to any
other Stockholder or group of Stockholders that are Affiliates (other than
Mr. Civita, Abrilcap and any Affiliates thereof) which have received, by
transfer from Harpia, Curupira or any Affiliate thereof, at least five
percent (5%) of the Company's voting Shares.
Clause 5. NEW ISSUANCES OF SHARES
5.1 The Stockholders shall have preference over all other persons or entities
to subscribe for new issuances of capital stock by the Company in the
proportion which the Shares they hold bear to all Shares subject to this
Agreement (such preference rights in new capital increases being
hereinafter referred to as "Subscription Rights"). New issuances of
capital stock by the Company shall be effected in proportion to the
existing classes and series of the Company's outstanding capital stock,
and each Stockholder may exercise its Subscription Rights only with
respect to Shares identical to those already owned by it.
5.2 (i) The transfer by any Stockholder of its Subscription Rights shall be
subject (except for any transfer to an Affiliate of such
Stockholder), to the requirement that such Subscription Rights first
be offered to the other Stockholders (other than Stockholders that
are Affiliates of the offering Stockholder). Such a transfer must be
effected in accordance with the following terms: (a) within ten (10)
Business Days from the date on which the Stockholders authorize, by
resolution, the issuance of additional capital stock by the Company,
the offering Stockholder shall give notice (a "Subscription Transfer
Notice") to all such other Stockholders, containing the number of
Shares that are the subject of the Subscription Rights being
offered, a proposed price (the "Proposed Subscription Price") in
cash expressed in U.S. Dollars, the other material conditions of the
proposed sale and, if the offering Stockholder is Falcon, the
Investor Entities, Abrilcap or an Affiliate of any of them, a list
of potential purchasers of such Subscription Rights (the "Potential
Subscription Purchasers"); (b) if the offering Stockholder is
Falcon, the Investor Entities, Abrilcap or an Affiliate of any of
them, no more than five Business Days after receipt of the
Subscription Transfer Notice, the offeree Stockholders representing
a majority of the Company's voting capital stock not held by the
offering Stockholder and its Affiliates, by notice to the offering
Stockholder, may disapprove any of the Potential Subscription
Purchasers, which disapproval shall not be unreasonable and shall be
explained in such notice; (c) no more than seven Business Days after
receipt of the Subscription Transfer Notice,
<PAGE>
19
the other Stockholders may exercise the right to acquire such
Subscription Rights, on the basis of the ratio of their respective
interest in the equity capital of the Company on the date of such
offer (excluding, for the purposes of verification of such ratio,
the equity held by the offering Stockholder and its Affiliates), for
the price and on the other material conditions described in the
Subscription Transfer Notice; and (d) no more than three Business
Days after the election is made by the offeree Stockholders to
acquire such Subscription Rights, the acquisition of all offered
Subscription Rights shall occur. Once the 7-day period set forth in
(c) has elapsed without the Stockholders who received the offer
having given notice that they will exercise their rights to acquire
such Subscription Rights, such rights may be assigned to any person
or entity up to and including the date on which the exercise period
for the Subscription Rights terminates; provided, however, that each
of the following conditions shall have been complied with: (1) all
of such Subscription Rights must be assigned to the same person or
entity; (2) if the offering Stockholder is Falcon, the Investor
Entities, Abrilcap or an Affiliate of any of them, then such
Subscription Rights must be sold to a Potential Subscription
Purchaser that has not been vetoed in accordance with this
paragraph; (3) the provisions of Clause 5.3 below shall have been
complied with; (4) the consideration for the sale of such
Subscription Rights must have an aggregate fair value equal to at
least the Proposed Subscription Price, and the assignment must be
consummated upon other conditions not substantially more favorable
to the assignee than the conditions set forth in the Subscription
Transfer Notice; and (5) promptly after the consummation of such
assignment, the offering Stockholder shall have provided all of the
other Stockholders with a notice containing a description of the
sale price for such Subscription Rights, the form of consideration
paid and all other material terms of such assignment.
(ii) Notwithstanding the foregoing, in the event that any Foreign
Stockholder is not permitted to purchase all or any portion of such
Foreign Stockholder's Pro Rata Share of such Subscription Rights
being offered for purchase due to Brazilian legal restrictions upon
foreign ownership or other Brazilian legal limitations, such Foreign
Stockholder may designate a third party to take such purchase,
provided that (a) such third party is identified in a notice given
to each other Stockholder within two Business Days after receipt of
the related Subscription Transfer Notice, and (b) each such
Stockholder shall have approved such third party in writing, such
approval not to be unreasonably withheld.
5.3 Notwithstanding any Provision to the contrary herein, any transfer or
assignment of Subscription Rights by any form to a person that is not a
signatory of this Agreement, including to an Affiliate, shall be valid and
effective only if the
<PAGE>
20
transferee or assignee fully and without restrictions becomes a party to
this Agreement, all as if it had been an original party hereto.
5.4 After the date on which the exercise period of Subscription Rights
expires, the remaining Shares which have not been subscribed for in the
exercise of such Subscription Rights or by the third party assignees of
such Subscription Rights as provided for in Clauses 5.2 and 5.3 above,
shall be offered to the other Stockholders pro rata according to the
amounts subscribed for by them as of such date. In the event that the
other Stockholders do not wish to subscribe for the remaining Shares, they
may, irrespective of the vote or consent of the Stockholder who did not
exercise its Subscription Rights, elect to cancel the Shares which have
not been subscribed for.
5.5 Each Stockholder agrees not to transfer any Subscription Rights unless
such transfer is permitted by applicable law.
Clause 6. HARPIA AND CURUPIRA PUT OPTION
6.1 So long as the Shares owned by the HC Entities are not publicly
registered, listed or traded (other than pursuant to (x) a registration
initiated by the Company pursuant to Clause 13.1(ii) hereof to satisfy its
indemnification obligations as described therein, (y) a registration
initiated pursuant to Clause 18.1 hereof or (z) the exercise of its
piggyback registration rights pursuant to Clause 18.2 hereof) and Harpia
or Curupira and their Affiliates, considered together, at such time hold
at least five percent (5%) of the Company's voting Shares, or any other
Stockholder or group of Stockholders that are Affiliates, other than Mr.
Civita, Abrilcap and any Affiliates thereof) which have received, by
transfer from Harpia, Curupira or any Affiliate thereof, and at such time
hold, at least five percent (5%) of the Company's voting Shares, then upon
the occurrence of an HC Triggering Event (as defined in Clause 6.2 below),
and during the continuance thereof as described in the last paragraph of
Clause 6.2 below, Harpia, Curupira, and their Affiliates, or such other
Stockholder or Stockholders, as the case may be (the "HC Put Party"),
shall be entitled to demand that the Company buy, in whole or in part, the
Shares subscribed for by Harpia or Curupira pursuant to the Subscription
Agreement then held by the HC Put Party (the Shares designated as being
subject to such exercise of the HC Put Option are referred to as the "HC
Put Shares") at the Event Put Price (as defined below), on the terms and
conditions set forth in this Clause 6 (the "HC Put Option"). The rights of
any HC Put Party under this Clause 6 are in addition to any other rights,
remedies or actions which may be available to it hereunder, under any
other agreement or by operation of law, except that the HC Put Option
shall not be exercisable with respect to any HC Triggering Event (as
defined below) for which Harpia, Curupira and their Affiliates shall have
received indemnification in full for all amounts claimed and owing under
Clause 7.3(a) or (b) of the Old Stock Purchase
6.2 "HC Triggering Event" means any of the following events:
<PAGE>
21
Agreement and, to the extent applicable, Sections 6.3(h) and (i) of the
Stock Purchase Agreement.
(i) Any date upon which either (a) Harpia's, Curupira's or their
Affiliates' investment in the Shares exceeds the amounts allowed
under legal restrictions to which it or any of its Affiliates is
subject, or otherwise Harpia, Curupira or their Affiliates are no
longer allowed to hold such Shares, under any law, rule or
regulation applicable to it or any of its Affiliates or (b) legal
restrictions are imposed on Harpia, Curupira or other Affiliates,
that may turn the title of such Shares or a portion thereof illegal
or unduly burdensome in the context of applicable banking law or
regulation;
(ii) Any breach or violation by Mr. Civita or Abrilcap, any of their
respective Affiliates or the Company of any representation,
warranty, covenant or duty made or owed (a) by the Company, Mr.
Civita or Abrilcap or any of their respective Affiliates to Harpia
or Curupira or any of their respective Affiliates pursuant to this
Agreement, the Old Stock Purchase Agreement or the Stock Purchase
Agreement, (b) by any party thereto, pursuant to the Service
Agreement (including the powers of attorney in connection therewith)
or (c) by Abril S.A., pursuant to the Abril Credit Agreement;
provided, that in the case of (1) breaches or defaults of Clause
14.2 hereof, no HC Triggering Event shall occur unless such breach
or default is not cured on or before the 30th (thirtieth) Business
Day following such breach or default; and (2) any breach or
violation of a representation or warranty contained in Clause 3 or 4
of the Old Stock Purchase Agreement that is curable, no HC
Triggering Event shall occur if such breach or violation is cured in
full within 60 days after it occurred;
(iii) Mr. Civita ceases, in a transaction not approved in writing by all
Stockholders who then are entitled to the veto rights set forth in
Clause 13.1 hereof, to: (a) directly or indirectly hold voting
Shares of the Company representing more than 31.258% of the voting
Shares of the Company, (b) directly or indirectly control the voting
of voting Shares of the Company held by his Affiliates representing
more than 50% (fifty percent) of the Voting Shares of the Company,
or (c) directly or indirectly hold 31.258% of the Company's total
capital stock, whether voting or nonvoting; provided that in the
event of Mr. Civita's death, there shall be no HC Triggering Event
unless and until the individuals listed in the definition of
Affiliates herein (together with Mr. Civita's estate) cease,
directly or indirectly, to hold more than: (1) 50% of the voting
Shares of the Company and (2) 31.258% of the Company's total capital
stock, whether voting or nonvoting;
<PAGE>
22
(iv) The Service Agreement ceases for any reason to be valid and
effective or its challenged as to its validity and effectiveness by
any of the parties thereto, Mr. Civita or Abrilcap or any Affiliate
of any of them;
(v) If (a) in the case of any of the License Holders other than Abril
S.A., at any time when it holds any license or permit which is the
subject of the Service Agreement or any license, permit or asset
that is part of the Business, or (b) in the case of Abril S.A., at
any time, such License Holder or Abril S.A. is liquidated or
dissolved or makes or files voluntarily, or has filed against it
involuntarily any petition in bankruptcy; or
(vi) The giving of a Falcon Put Notice or an Investor Put Notice
hereunder except with respect to the Falcon Triggering Event listed
in Clause 7.2(i) or (ii) or the Investor Triggering Event listed in
Clause 7A.2(i).
Any HC Triggering Event listed in sub-clauses (ii) through (vi) shall
continue until the earlier of (x) the first anniversary of receipt by each
HC Put Party of notice from the Company, Mr. Civita or Abrilcap, as the
case may be, stating that an HC Triggering Event has occurred and
providing a detailed description thereof or (y) to the extent curable, the
cure of the event which gave rise to the HC Triggering Event or, with
respect to clause (vi), the withdrawal of a Falcon Put Notice or an
Investor Put Notice (which withdrawal shall not prejudice any right of the
HC Put Parties to exercise an HC Put Option pursuant to clauses (ii)
through (v) above), provided that an HC Triggering Event may not be
terminated pursuant to clause (y) above more than twice, and once an HC
Put Party has given an HC Put Notice, the HC Triggering Event may not be
terminated pursuant to clause (y) above. The HC Triggering Event listed in
sub-clause (i) shall continue only for as long as the events described
therein continue.
6.3 The price of Shares (the "Event Put Price") subject to the HC Put Option
shall be equal to (i) the fraction represented by the number of HC Put
Shares divided by the total number of issued and outstanding Shares of the
Company, multiplied by (ii) the higher value of the business of the
Company and its Subsidiaries obtained with the application of the
following methods:
(a) Fair Market Method: The fair market value of the business of the
Company and its Subsidiaries shall be determined by an independent
recognized valuation expert paid for by the Company and/or the HC
Put Party in accordance with the procedure set out below in this
Clause 6. The valuation will be determined assuming that such
business is sold to an independent third party as a going concern
with no discount for minority ownership or non-liquidity of any
assets or interests held by the Company or its Subsidiaries and on
the assumption that the Company and its Subsidiaries have and will
continue to have unrestricted use of licenses, permits and other
rights which they hold directly or which are the subject of
<PAGE>
23
the Services Agreement; provided that, to the extent that capital
stock of the Company is publicly traded on a national securities
market and if there is an active and viable trading market in such
capital stock, as reasonably determined by the appraiser, the
appraiser may consider the trading price of such capital stock as a
reference point in the methodology of its consideration of the fair
market value of the business of the Company and its Subsidiaries,
but such public market price shall not be determinative of said fair
market value, it being the intent of the parties that such valuation
of the Company and its Subsidiaries shall be made using the private
market value of the sale of the business of the Company and its
Subsidiaries determined as set forth above.
(b) Earnings Multiple Method: The earnings multiple method of valuing
the business of the Company and its Subsidiaries uses the sum of
Clause (1) and Clause (2), defined as follows: Clause 1 shall be
defined as the difference between (A) the product of twelve (12)
times Earnings (as defined below) for the most recently completed
quarter multiplied by four and (B) the sum of interest-bearing
senior debt and subordinated debt, including any accrued interest
thereon, and preferred stock, as reflected on the balance sheet of
the Company as of the end of the most recently completed quarter.
Clause 2 shall be defined as non-operating assets and excess cash as
reflected on the balance sheet of the Company as of the end of the
most recently completed quarter. The earnings multiple method shall
be calculated on the most recent quarterly report of the Company as
reviewed by its auditors and reconciled with U.S. generally accepted
accounting principles ("U.S. GAAP").
"Earnings", for this purpose, shall be defined as earnings before
interest, taxes, depreciation and amortization of the Company and
its Subsidiaries, determined in accordance with U.S. GAAP, adjusted
for non-cash gains and losses, and extraordinary items.
Each of the valuations referred to in this Clause 6.3 shall be
expressed in U.S. Dollars according to the foreign exchange
conversion rate from Brazilian currency used in the Company's
financial statements for the most recently completed fiscal quarter.
6.4 At any time when an HC Triggering Event shall have occurred and be
continuing, any HC Put Party shall be entitled to deliver written notice
(each, an "HC Put Notice") to each of the Stockholders (except the HC Put
Party and its Affiliates) and the Chairman of the Board. Such notice shall
include the name of the appraiser the HC Put Party intends to propose for
the purposes of item (a) in Clause 6.3 above, the number of HC Put Shares
which are the subject of the HC Put Notice, as well as the HC Put Price
calculated according to the method contemplated in item (b) of the same
Clause 6.3 above. In the event the HC Put Notice is given at a time when
<PAGE>
24
there is more than one potential HC Put Party, such other HC Put Party
shall have five (5) Business Days to join the potential exercise of the HC
Put Option by giving written notice to each person that was required to
receive the related HC Put Notice, in which case the term HC Put Party
shall be deemed to include such other HC Put Party, which shall be deemed
to accept selection of an appraiser by the HC Put Party that gave the HC
Put Notice. Thereafter, such parties shall be required to act unanimously
except in exercising the HC Put Option pursuant to Clause 6.9 below.
Neither the election of a potential HC Put Party under this Clause 6.4 not
to join an HC Put Party that gave an HC Put Notice nor the election by any
HC Put Party not to exercise the HC Put Option after an HC Put Notice has
been given shall waive any rights to give an HC Put Notice or exercise the
HC Put option at any later time in accordance with this Clause 6.
6.5 No longer than five (5) Business Days from the receipt by the Chairman of
the HC Put Notice, the Board shall inform, in writing, the HC Put Party
and the other Stockholders whether it accepts the appraiser proposed by
the HC Put Party in such notice. If the Board rejects the appraiser
proposed by the HC Put Party it shall, in the same notice, propose an
appraiser acceptable to it. The HC Put Party shall have five (5) Business
Days to inform, in writing, the Board and the other Stockholders whether
it accepts the appraiser proposed by the Board. If the HC Put Party
accepts the appraiser proposed by the Board, such appraiser shall be
promptly retained by the Company to proceed with the appraisal provided
for in item (a) of Clause 6.3. In the event the HC Put Party does not
accept the appraiser proposed by the Board, the appraiser originally
proposed by the HC Put Party and the appraiser proposed by the Board shall
have ten (10) Business Days from the rejection informed by the HC Put
Party to jointly and irrespective of acceptance by the HC Put Party or the
Board, suggest a third appraiser (the "Third Appraiser") who will be
promptly retained by the Company to proceed with the appraisal under
reference. Subject to Clause 6.6 below, all costs and expenses incurred in
the performance of the appraisal shall be borne (i) by the HC Put Party if
such appraisal is performed by the appraiser proposed by it; (ii) by the
Company if performed by the appraiser proposed by its Board; and equally
borne by the HC Put Party and the Company if performed by the Third
Appraiser. All decisions of the Board regarding selection of an appraiser
for purposes of computing the HC Put Price shall be taken by a majority of
the directors not appointed by any HC Put Party or its Affiliates.
6.6 If the Board or the appraiser proposed by it do not comply with the
procedure set forth in the previous Clause, the HC Put Party shall retain
the appraiser proposed in its HC Put Notice, and the Company shall
reimburse the HC Put Party for the costs and expenses incurred in the
performance of the appraisal promptly after required upon presentation of
the respective evidencing documents. In the event there shall be costs or
expenses of an appraiser retained under this Clause 6.6 and it is finally
determined or the HC Put Party concedes that no Triggering Event occurred,
then all costs and expenses shall be for the account of the HC Put Party.
<PAGE>
25
6.7 The appraiser shall have no longer than 45 (forty-five) calendar days from
its appointment to notify the Board and the HC Put Party in writing of the
result of the appraisal accomplished based on the criteria set forth in
item (a) of Clause 6.3 above, as of the date on which the appraisal is
delivered and expressed in U.S. Dollars according to the conversion
criteria referred to in Clause 6.4 above, which result shall be considered
final and shall not be challenged by any party hereto.
6.8 The Company undertakes to, and the Stockholders agree to cause the Company
to, cooperate fully so that the appraisal provided for in Clause 6.3 above
or in the Option Agreement be effected within the term established therein
and the Company shall deliver all the information and documents requested
by the appraiser for the purposes of this Clause.
6.9 Any participating HC Put Party shall be entitled to exercise the HC Put
Option by giving written notice to the Board and each Stockholder within
10 days following receipt of the appraiser's notice referred to in Clause
6.7 above. If the HC Put Option is so exercised, by 11:30 a.m. on the 45th
day (the "Date of the HC Put Payment") from the date the result of the
appraisal mentioned in Clause 6.3 above is delivered, or if such day is
not a Business Day, on the next following Business Day, the Company shall
pay the Event Put Price for the HC Put Shares to the HC Put Party in Reais
Equivalent on the Date of the HC Put Payment, and the HC Put Party shall
transfer to the Company the HC Put Shares subject to the HC Put Option,
free and clear of all liens, claims, charges, restrictions and
encumbrances caused by or suffered to exist by any HC Put Party or its
Affiliates, other than as provided in this Agreement. Any election by an
HC Put Party not to exercise the HC Put Option shall not waive its right
to give any HC Put Notice or exercise the HC Put Option on the basis
thereof at any time (subject to the time limit in Clause 6.2 above)
thereafter.
6.10 Upon the occurrence of an HC Triggering Event under Clause 6.2(i) above,
related to any U.S. legal restrictions and if there shall occur a Put
Postponement (as defined in Clause 9 below), the HC Put Parties shall
consult with Mr. Civita and Abrilcap concerning the exercise of their
rights available under Clause 9.3 below to convert their HC Put Shares to
Special Preferred Shares (as defined in Clause 9.3 below); provided,
however, that any failure so to consult shall not affect the HC Put
Parties' rights hereunder or subject the HC Put Parties to any claims for
breach of contract or any other damages.
6.11 In the event that any HC Put Party exercises any HC Put Option
contemplated by this Clause 6, prior to the purchase by the Company of the
HC Put Shares as described below, the Stockholders, other than the HC Put
Parties and their Affiliates, shall be entitled, but not obligated, to
purchase such number of HC Put Shares at the Participant Purchase Price as
is designated by the Participating Stockholder(s) by delivering a written
notice to such effect to the Company and each of the Stockholders (except
the Participating Stockholder and its Affiliates) within 10
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26
days following receipt of such HC Put Notice; provided that if a
Stockholder exercises such option, then (i) subject to clause (iv) below,
the Company shall only be obligated to purchase those HC Put Shares not so
purchased by the Participating Stockholder(s) at a price equal to the
Event Put Price minus the aggregate of the Participant Purchase Price(s),
(ii) if the Participating Stockholder(s) in the aggregate elect to
purchase more than the total number of HC Put Shares being offered, then
each Participating Stockholder shall be entitled to purchase that number
of HC Put Shares equal to the product of (A) the total number of HC Put
Shares times (B) a fraction, the numerator of which is that number of HC
Put Shares which such Participating Stockholder elected to purchase and
the denominator of which is the total number of HC Put Shares which all
Participating Stockholders elected to purchase, (iii) the closing of the
purchase of such HC Put Shares by the Participating Stockholder(s) shall
occur on the Date of the HC Put Payment, at which time each Participating
Stockholder shall pay its Participant Purchase Price in Reais Equivalent,
and the HC Put Party shall transfer to each Participating Stockholder the
HC Put Shares that such Participating Stockholder is purchasing, free and
clear of all liens, claims, charges, restrictions and encumbrances caused
by or suffered to exist by the HC Put Party or its Affiliates, other than
as provided in this Agreement and (iv) if any Participating Stockholder
does not satisfy its obligation to acquire its portion of the HC Put
Shares, the Company shall be required to do so at such closing.
6.12 Other than as set forth in Clause 6.11 above, nothing in this Clause 6
shall confer any rights upon any person other than the HC Put Parties and
nothing in this Clause 6 shall impose any obligations on any person other
than the HC Put Parties and the Company.
Clause 7. FALCON'S PUT OPTIONS
7.1 (i) Unless (a) the Shares owned by Falcon or its Affiliates shall have
been publicly registered, listed or traded (other than pursuant to
(x) a registration initiated by the Company pursuant to Clause
13.1(ii) hereof to satisfy its indemnification obligations as
described therein, (y) (1) with respect to a Falcon Time Put Option,
a registration initiated by a Stockholder other than Falcon or its
Affiliates pursuant to Clause 18.1 hereof and (2) with respect to a
Falcon Event Put Option, a registration initiated pursuant to Clause
18.1 hereof or (z) the existence of its piggyback registration
rights pursuant to Clause 18.2 hereof), (b) at the time of the
exercise of the Falcon Put Option both (1) at least 50% of the
initial aggregate ownership interests of the initial equity holders
(the "Falcon Parent Investors") of Falcon International
Communications LLC ("Falcon Parent") (such initial ownership
interests and initial equity holders calculated after Falcon parent
shall have been fully organized and the initial issuance of
ownership interests to investors other than Hellman & Friedman
Capital Partners III,
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27
L.P. ("Hellman & Friedman") and/or entities related thereto shall
have been completed) shall then have become publicly registered,
listed or traded and shall be freely tradeable without any
restrictions imposed by applicable securities laws, and (2) at least
50% of all of the ownership interests of Falcon Parent shall then
have become publicly traded or (c) Falcon together with its
Affiliates at such time collectively hold less than 5% (five
percent) of the Company's voting Shares, then upon the occurrence of
a Falcon Triggering Event (as defined below in Clause 7.2) and
during the continuance thereof as described in the last paragraph of
Clause 7.2 below, Falcon and its Affiliates shall be entitled to
demand that the Company buy:
(A) in the case of a Falcon Triggering Event referred to in Clause
7.2(i) below, all but not less than all of the Shares acquired
by Falcon pursuant to the Old Stock Purchase Agreement then
held by Falcon and its Affiliates (as used with respect to the
Falcon Time Put Option, the "Falcon Put Shares") at the Time
Put Price, on the terms and conditions set forth in this
Clause 7 (such option being hereinafter referred to as the
"Falcon Time Put Option"), or
(B) in the case of all other Falcon Triggering Events, all or a
portion of the Shares acquired by Falcon pursuant to the Old
Stock Purchase Agreement then held by Falcon and its
Affiliates or transferees described in Clause 7.1(ii) below
(as used with respect to the Falcon Event Put Option, the
number of Shares designated as being subject to such exercise
of the Falcon Event Put Option are referred to as the "Falcon
Put Shares") at the Event Put Price, on the terms and
conditions set forth in this Clause 7 (such option hereinafter
referred to as the "Falcon Event Put Option"), except that the
Falcon Event Put Option shall not be exercisable with respect
to any Falcon Triggering Event for which Falcon and its
Affiliates shall have received indemnification in full for all
amounts claimed and owing under Section 7.3(a) or (b) of the
Old Stock Purchase Agreement and, to the extent applicable,
Sections 6.3(h) and (i) of the Stock Purchase Agreement.
Falcon hereby agrees, promptly after completion of the initial
issuance of ownership interests in Falcon Parent to investors other
than Hellman & Friedman and/or entities related thereto, to provide
the Board with a list of the Falcon Parent Investors.
(ii) No Stockholder other than Falcon or a Stockholder that is an
Affiliate of Falcon shall be entitled to exercise the Falcon Time
Put Option. Notwithstanding Clause 7.1(i)(b) or (c) above, any
Stockholder or group of
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28
Stockholders that are Affiliates (other than Mr. Civita, Abrilcap
and any Affiliates thereof) which have received, by transfer from
Falcon or any Affiliate thereof, and at such time hold, at least 5%
(five percent) of the Company's voting Shares, shall be entitled to
exercise the Falcon Event Put Option in respect of their Falcon Put
Shares. Any person entitled to exercise a Falcon Time Put Option or
a Falcon Event Put Option at a particular time shall be a "Falcon
Put Party" at such time with respect to such option.
(iii) Except as stated in Clause 7.1(i)(B) above (where Falcon and its
Affiliates have received indemnification in full), the rights of any
Falcon Put Party under this Clause 7 are in addition to any other
rights, remedies or actions which may be available to them
hereunder, under any other agreement or by operation of law.
7.2 "Falcon Triggering Event" means any of the following events:
(i) Any date between September 22, 2002 and September 22, 2005;
(ii) Any date upon which either: (a) Falcon's or its Affiliates,
investment in the Shares exceeds the amounts allowed under legal
restrictions to which it or any of its Affiliates is subject, or
otherwise Falcon or any of its Affiliates is no longer allowed to
hold such Shares, under any law, rule or regulation applicable to it
or any of its Affiliates, or (b) legal restrictions are imposed on
Falcon or its Affiliates that may turn the title of such Shares or a
portion thereof illegal;
(iii) Any breach or violation by Mr. Civita or Abrilcap, any of their
respective Affiliates or the Company, of any representation,
warranty, covenant or duty made or owed (a) by the Company, Mr.
Civita or Abrilcap or any of their respective Affiliates to Falcon
or any of its Affiliates pursuant to this Agreement, the Old Stock
Purchase Agreement or the Stock Purchase Agreement, (b) by any party
thereto, pursuant to the Service Agreement (including the powers of
attorney in connection therewith) or (c) by Abril S.A., pursuant to
the Abril Credit Agreement; provided, that in the case of (1)
breaches or defaults of Clause 14.2 hereof, no Falcon Triggering
Event shall occur unless such breach or default is not cured on or
before the 30th (thirtieth) Business Day following such breach or
default, and (2) any breach or violation of a representation or
warranty contained in Article 3 or 4 of the Old Stock Purchase
Agreement that is curable, no Falcon Triggering Event shall occur if
such breach or violation is cured in full within 60 days after it
occurred;
(iv) Mr. Civita ceases, in a transaction not approved in writing by all
Stockholders who then are entitled to the veto rights set forth in
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29
Clause 13.1 hereof, to: (a) directly or indirectly hold voting
Shares of the Company representing more than 31.258% of the voting
Shares of the Company, (b) directly or indirectly control the voting
of voting Shares of the Company held by his Affiliates representing
more than 50% (fifty percent) of the voting Shares of the Company,
or (c) directly or indirectly hold 31.258% of the Company's total
capital stock, whether voting or nonvoting; provided that in the
event of Mr. Civita's death, there shall be no Falcon Triggering
Event unless and until the individuals listed in the definition of
Affiliates herein (together with Mr. Civita's estate) cease,
directly or indirectly, to hold more than: (i) 50% of the voting
Shares of the Company and (2) 31.258% of the Company's total capital
stock, whether voting or nonvoting,
(v) The Service Agreement ceases for any reason to be valid and
effective or is challenged as to its validity and effectiveness by
any of the parties thereto, Mr. Civita or Abrilcap or any Affiliate
of any of them;
(vi) If (a) in the case of any of the License Holders other than Abril
S.A., at any time when it holds any license or permit which is the
subject of the Service Agreement or any license, permit or asset
that is part of the Business, or (b) in the case of Abril S.A., at
any time, such License Holder or Abril S.A. is liquidated or
dissolved or makes or files voluntarily, or has filed against it
involuntarily any petition in bankruptcy; or
(vii) The giving of an HC Put Notice or an Investor Put Notice hereunder
except with respect to the HC Triggering Event listed in Clause
6.2(i) or the Investor Triggering Event listed in Clause 7A.2(i).
Any Falcon Triggering Event listed in sub-clauses (iii) through (vii)
above shall continue until the earlier of (x) the first anniversary of
receipt by each Falcon Put Party of notice from the Company, Mr. Civita or
Abrilcap, as the case may be, stating that a Falcon Triggering Event has
occurred and providing a detailed description thereof or (y) to the extent
curable, the cure of the event which gave rise to the Falcon Triggering
Event or, with respect to clause (vii), the withdrawal of an HC Put Notice
or an Investor Put Notice (which withdrawal shall not prejudice any right
of the Falcon Put Parties to exercise a Falcon Put Option pursuant to
clauses (iii) through (vi) above), provided that a Falcon Triggering Event
may not be terminated pursuant to clause (y) above more than twice, and
once a Falcon Put Party has given a Falcon Put Notice, the Falcon
Triggering Event may not be terminated pursuant to clause (y) above. The
Falcon Triggering Event listed in (a) sub-clause (i) above shall continue
for the duration described therein and (b) sub-clause (ii) above shall
continue only for as long as the event described therein continues.
<PAGE>
30
7.3 (i) The price of the Falcon Put Shares subject to the Falcon Time Put
Option (the "Time Put Price") shall correspond to the calculation of
the price of the Shares using the fair market value of the Company
and its Subsidiaries as determined according to Clause 6.3(a) above
only and including the last paragraph of Clause 6.3 (except that for
this purpose the term HC Put Party in such Clause shall mean Falcon
Put Party) and the Falcon Time Put option shall be triggered and
exercised according to Clauses 6.4 through 6.11 above (except that
for these purposes (a) the terms HC Put Option, HC Put Party, HC Put
Notice, Event Put Price, HC Put Shares, HC Triggering Event and Date
of the HC Put Payment shall mean, respectively, Falcon Time Put
option, Falcon Put Party, Falcon Put Notice, Time Put Price, Falcon
Put Shares, Falcon Triggering Event and Date of the Falcon Put
Payment, as appropriate; (b) the Falcon Put Notice shall not contain
any entry relating to Clause 6.3(b); and (c) payment as set forth in
Clause 6.9 above shall be subject to the provisions of Clause 9.7
below). For provisions regarding payment settlement (in lieu of the
payment and settlement provisions set forth in Clause 6.9 above but
not other provisions thereof) of the Falcon Time Put Option, see
Clauses 9.7 to 9.10 below. In addition, the related Falcon Put
Notice shall contain a certification that the Falcon Put Party is
eligible to trigger the Falcon Time Put Option because the
circumstances referred to in Clause 7.1(i)(b) above have not
occurred.
(ii) Notwithstanding the provisions of Clause 6.9 above to the effect
that election not to exercise put rights at a particular time does
not waive future rights of a put party to commence the put process
or ultimately exercise such rights, in the case of the Falcon Time
Put Option, (a) the Falcon Put Parties shall be limited to 4 (four)
Falcon Put Notices; (b) if the Falcon Time Put Option is not
exercised on the basis of the fourth such Falcon Put Notice in
respect of the Falcon Time Put Option, the Falcon Time Put Option
shall expire and (c) in the event two or more Falcon Put Notices in
respect of the Falcon Time Put Option are given within a one-year
period, the Falcon Put Parties shall be responsible to pay all of
the costs of the appraiser retained in connection with the
determination of the Time Put Price in respect of the second or more
of such Falcon Put Notices.
7.4 The price of the Falcon Put Shares subject to the Falcon Event Put Option
shall be the Event Put Price as determined according to Clause 6.3(a) or
(b) above and including the last paragraph of Clause 6.3 above (except
that for this purpose the term HC Put Party in such Clause shall mean
Falcon Put Party), and the Falcon Event Put Option shall be triggered and
exercised according to Clauses 6.4 through 6.11 above (except that for
these purposes the terms HC Put Option, HC Put Party, HC Put Notice, HC
Put Shares, HC Triggering Event and Date of the HC Put Payment shall mean,
respectively, Falcon Event Put Option, Falcon Put Party, Falcon Put
Notice, Falcon Put Shares, Falcon Triggering Event and Date of the Falcon
Put Payment, as appropriate). In addition, the related Falcon Put Notice
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31
shall contain a certification that the Falcon Put Party (other than a
transferee pursuant to Clause 7.1(ii) above that is not an Affiliate of
Falcon, which shall not be required to provide such certification) is
eligible to trigger the Falcon Event Put Option because the circumstances
referred to in Clause 7.1(i)(b) above have not occurred.
7.5 In the event that any Falcon Put Party exercises any Falcon Event Put
Option contemplated by this Clause 7, prior to the purchase by the Company
of the Falcon Put Shares as described below, the Stockholders, other than
the Falcon Put Parties and their Affiliates, shall be entitled, but not
obligated, to purchase such number of Falcon Put Shares at the Participant
Purchase Price as is designated by the Participating Stockholder(s) by
delivering a written notice to such effect to the Company and each of the
Stockholders (except the Participating Stockholder and its Affiliates)
within 10 days following receipt of such Falcon Put Notice; provided that
if a Stockholder exercises such option, then (i) subject to clause (iv)
below, the Company shall only be obligated to purchase those Falcon Put
Shares not so purchased by the Participating Stockholder(s) at a price
equal to the Event Put Price minus the aggregate of the Participant
Purchase Price(s), (ii) if the Participating Stockholder(s) in the
aggregate elect to purchase more than the total number of Falcon Put
Shares being offered, then each Participating Stockholder shall be
entitled to purchase that number of Falcon Put Shares equal to the product
of (A) the total number of Falcon Put Shares times (B) a fraction, the
numerator of which is that number of Falcon Put Shares which such
Participating Stockholder elected to purchase and the denominator of which
is the total number of Falcon Put Shares which all Participating
Stockholders elected to purchase, (iii) the closing of the purchase of
such Falcon Put Shares by the Participating Stockholder(s) shall occur on
the Date of the Falcon Put Payment, at which time each Participating
Stockholder shall pay its Participant Purchase Price in Reais Equivalent,
and the Falcon Put Party shall transfer to each Participating Stockholder
the Falcon Put Shares that such Participating Stockholder is purchasing,
free and clear of all liens, claims, charges, restrictions and
encumbrances caused by or suffered to exist by the Falcon Put Party or its
Affiliates, other than as provided in this Agreement and (iv) if any
Participating Stockholder does not satisfy its obligation to acquire its
portion of the Falcon Put Shares, the Company shall be required to do so
at such closing.
Clause 7A. THE INVESTOR ENTITIES' PUT OPTION
7A.1 So long as the Shares owned by the Investor Entities are not publicly
registered, listed or traded (other than pursuant to (x) a registration
initiated by the Company pursuant to Clause 13.1(ii) hereof to satisfy its
indemnification obligations as described therein, (y) a registration
initiated pursuant to Clause 18.1 hereof or (z) the exercise of its
piggyback registration rights pursuant to Clause 18.2 hereof) and the
Investor Entities and their Affiliates, considered together, at such time
hold at least 5% (five percent) of the Company's voting shares, or any
other Stockholder or
<PAGE>
32
group of Stockholders that are Affiliates (other than Mr. Civita, Abrilcap
and any Affiliates thereof) which have received, by transfer from the
Investor Entities or any Affiliate thereof, and at such time hold at least
5% (five percent) of the Company's voting Shares, then upon the occurrence
of an Investor Triggering Event (as defined in Clause 7A.2 below), and
during the continuance thereof as described in the last paragraph of
Clause 7A.2 below, the Investor Entities and their Affiliates, or such
other Stockholder or Stockholders, as the case may be (the "Investor Put
Party"), shall be entitled to demand that the Company buy, in whole or in
part, the Shares purchased by the Investor Entities pursuant to the Stock
Purchase Agreement or the stock purchase agreement among Hearst/ABC
Limitada, Harpia and Curupira (the "HC Stock Purchase Agreement") then
held by the Investor Put Party (the number of Shares designated as being
subject to such exercise of the Investor Put Option are referred to as the
"Investor Put Shares"), at the Event Put Price, on the terms and
conditions set forth in this Clause 7A (the "Investor Put Option"). The
rights of any Investor Put Party under this Clause 7A are in addition to
any other rights, remedies or actions which may be available to it
hereunder, under any other agreement or by operation of law, except that
the Investor Put Option shall not be exercisable with respect to any
Investor Triggering Event for which the Investor Entities and their
Affiliates shall have received indemnification in full for all amounts
claimed and owing under Clause 6.3(a) or (b) of the Stock Purchase
Agreement.
7A.2 "Investor Triggering Event" means any of the following events:
(i) Any date upon which either: (a) the Investor Entities' or their
Affiliates' investment in the Shares exceeds the amounts allowed
under legal restrictions to which it or any of its Affiliates is
subject, or otherwise the Investor Entities or any of their
Affiliates is no longer allowed to hold such Shares, under any law,
rule or regulation applicable to it or any of its Affiliates, or (b)
legal restrictions are imposed on the Investor Entities or their
Affiliates that may turn the title of such Shares or a portion
thereof illegal;
(ii) Any breach or violation by Mr. Civita or Abrilcap, any of their
respective Affiliates or the Company, of any representation,
warranty, covenant or duty made or owed (a) by the Company, Mr.
Civita or Abrilcap or any of their respective Affiliates to the
Investor Entities or any of their Affiliates pursuant to this
Agreement or the Stock Purchase Agreement, (b) by any party thereto,
pursuant to the Service Agreement (including the powers of attorney
in connection therewith) or (c) by Abril S.A., pursuant to the Abril
Credit Agreement; provided, that in the case of (1) breaches or
defaults under Clause 14.2 hereof, no Investor Triggering Event
shall occur unless such breach or default is not cured on or before
the 30th (thirtieth) Business Day following such breach or default,
and (2) any breach or violation of a representation or warranty
contained in Clause 3 or 4 of the Stock Purchase
<PAGE>
33
Agreement that is curable, no Investor Triggering Event shall occur
if such breach or violation is cured in full within 60 days after it
occurred;
(iii) Mr. Civita ceases, in a transaction not approved in writing by all
Stockholders who then are entitled to the veto rights set forth in
Clause 13.1 hereof, to: (a) directly or indirectly hold voting
Shares of the Company representing more than 31.258% of the voting
Shares of the Company, (b) directly or indirectly control the voting
of voting Shares of the Company held by his Affiliates representing
more than 50% (fifty percent) of the voting Shares of the Company,
or (c) directly or indirectly hold 31.258% of the Company's total
capital stock, whether voting or nonvoting; provided that in the
event of Mr. Civita's death, there shall be no Investor Triggering
Event unless and until the individuals listed in the definition of
Affiliates herein (together with Mr. Civita's estate) cease,
directly or indirectly, to hold more than: (1) 50% of the voting
Shares of the Company and (2) 31.258% of the Company's total capital
stock, whether voting or nonvoting;
(iv) The Service Agreement ceases for any reason to be valid and
effective or is challenged as to its validity and effectiveness by
any of the parties thereto, Mr. Civita or Abrilcap or any Affiliate
of any of them;
(v) If (a) in the case of any of the License Holders other than Abril
S.A., at any time when it holds any license or permit which is the
subject of the Service Agreement or any license, permit or asset
that is part of the Business, or (b) in the case of Abril S.A., at
any time, such License Holder or Abril S.A. is liquidated or
dissolved or makes or files voluntarily, or has filed against it
involuntarily any petition in bankruptcy; or
(vi) The giving of an HC Put Notice or a Falcon Put Notice hereunder
except with respect to the HC Triggering Event listed in Clause
6.2(i) or the Falcon Triggering Event listed in Clause 7.2(i) or
(ii).
Any Investor Triggering Event listed in sub-clauses (ii) through (vi)
above shall continue until the earlier of (x) the first anniversary of
receipt by each Investor Put Party of notice from the Company, Mr. Civita
or Abrilcap, as the case may be, stating that an Investor Triggering Event
has occurred and providing a detailed description thereof or (y) to the
extent curable, the cure of the event which gave rise to the Investor
Triggering Event or, with respect to clause (vi), the withdrawal of an HC
Put Notice or a Falcon Put Notice (which withdrawal shall not prejudice
any right of the Investor Put Parties to exercise an Investor Put Option
pursuant to clauses (ii) through (v) above), provided that an Investor
Triggering Event may not be terminated pursuant to clause (y) above more
than twice, and once an Investor Put Party has given an Investor Put
Notice, the Investor Triggering Event may not be terminated pursuant to
clause (y) above. The Investor Triggering Event
<PAGE>
34
described in sub-clause (i) above shall continue only for as long the
event described therein continues.
7A.3 The price of the Investor Put Shares subject to the Investor Put Option
shall be the Event Put Price as determined according to Clause 6.3 (a) or
(b) above and including the last paragraph of Clause 6.3 (except that for
this purpose the term HC Put Party in such Clause means Investor Put
Party), and the Investor Put Option shall be triggered and exercised,
according to Clauses 6.4 through 6.11 above (except that for these
purposes the terms HC Put Option, HC Put Party, HC Put Notice, HC Put
Shares, HC Triggering Event and Date of the HC Put Payment shall mean,
respectively, Investor Put Option, Investor Put Party, Investor Put
Notice, Investor Put Shares, Investor Triggering Event and Date of the
Investor Put Payment, as appropriate).
7A.4 In the event that any Investor Put Party exercises any Investor Put Option
contemplated by this Clause 7A, prior to the purchase by the Company of
the Investor Put Shares as described below, the Stockholders, other than
the Investor Put Parties and their Affiliates, shall be entitled, but not
obligated, to purchase such number of Investor Put Shares at the
Participant Purchase Price as is designated by the Participating
Stockholder(s) by delivering a written notice to such effect to the
Company and each of the Stockholders (except the Participating Stockholder
and its Affiliates) within 10 days following receipt of such Investor Put
Notice; provided that if a Stockholder exercises such option, then (i)
subject to clause (iv) below, the Company shall only be obligated to
purchase those Investor Put Shares not so purchased by the Participating
Stockholder(s) at a price equal to the Event Put Price minus the aggregate
of the Participant Purchase Price(s), (ii) if the Participating
Stockholder(s) in the aggregate elect to purchase more than the total
number of Investor Put Shares being offered, then each Participating
Stockholder shall be entitled to purchase that number of Investor Put
Shares equal to the product of (A) the total number of Investor Put Shares
times (B) a fraction, the numerator of which is that number of Investor
Put Shares which such Participating Stockholder elected to purchase and
the denominator of which is the total number of Investor Put Shares which
all Participating Stockholders elected to purchase, (iii) the closing of
the purchase of such Investor Put Shares by the Participating
Stockholder(s) shall occur on the Date of the Investor Put Payment, at
which time each Participating Stockholder shall pay its Participant
Purchase Price in Reais Equivalent, and the Investor Put Party shall
transfer to each Participating Stockholder the Investor Put Shares that
such Participating Stockholder is purchasing, free and clear of all liens,
claims, charges, restrictions and encumbrances caused by or suffered to
exist by the Investor Put Party or its Affiliates, other than as provided
in this Agreement and (iv) if any Participating Stockholder does not
satisfy its obligation to acquire its portion of the Investor Put Shares,
the Company shall be required to do so at such closing.
<PAGE>
35
Clause 8. PUT COORDINATION
8.1 [HC TRIGGERS; EFFECT ON INVESTOR ENTITIES & FALCON] In the event that any
HC Put Notice is given, and either an Investor Triggering Event or a
Falcon Triggering Event, as appropriate, has also occurred and is
continuing, any Investor Put Party may (but shall not be required to)
trigger the Investor Put Option (but not the exercise thereof, which
exercise shall be subject to the applicable provisions hereof) and any
Falcon Put Party may (but shall not be required to) trigger the Falcon
Event Put Option (but not the exercise thereof, which exercise shall be
subject to the applicable provisions hereof) simultaneously with such
trigger of the HC Put Option by giving an Investor Put Notice or a Falcon
Put Notice, as the case may be, no later than 10 (ten) Business Days after
its receipt of such HC Put Notice, to all persons required to receive such
Investor Put Notice or Falcon Put Notice.
8.2 [FALCON TRIGGERS; EFFECT ON HC AND INVESTOR ENTITIES] In the event that
any Falcon Put Notice is given with respect to a Falcon Event Put Option
and either an HC Triggering Event or an Investor Triggering Event, as
appropriate, has occurred and is continuing, any HC Put Party may (but
shall not be required to) trigger the HC Put Option (but not the exercise
thereof, which exercise shall be subject to the applicable provisions
hereof) and any Investor Put Party may (but shall not be required to)
trigger the Investor Put Option (but not the exercise thereof, which
exercise shall be subject to the applicable provisions hereof)
simultaneously with such trigger of the Falcon Event Put Option by giving
an HC Put Notice or an Investor Put Notice, as the case may be, no later
than 10 (ten) Business Days after its receipt of such Falcon Put Notice,
to all persons required to receive such HC Put Notice or Investor Put
Notice.
8.3 [INVESTOR ENTITIES TRIGGERS; EFFECT ON HC AND FALCON] In the event that
any Investor Put Notice is given with respect to the Investor Put Options
and an HC Triggering Event or a Falcon Triggering Event, as appropriate,
has occurred and is continuing, any HC Put Party may (but shall not be
required to) trigger the HC Put Option (but not the exercise thereof,
which exercise shall be subject to the applicable provisions hereof) and
any Falcon Put Party may (but shall not be required to) trigger the Falcon
Event Put Option (but not the exercise thereof, which exercise shall be
subject to the applicable provisions hereof) simultaneously with such
trigger of the Investor Put Option by giving an HC Put Notice or a Falcon
Put Notice, as the case may be, no later than 10 (ten) Business Days after
its receipt of such Investor Put Notice, to all persons required to
receive such HC Put Notice or Falcon Put Notice.
8.4 (A) [NON-EXERCISE NOT A WAIVER] Any election by an HC Put Party not to
trigger the HC Put Option simultaneously with the Falcon Event Put Option
or Investor Put Option, or not to exercise the HC Put Option for any
reason, shall not waive any right of any HC Put Party to trigger or
exercise the HC Put Option at a
<PAGE>
36
later date, in accordance with Clause 6 above. Any election by an Investor
Put Party not to trigger the Investor Put Option simultaneously with the
HC Put Option or Falcon Event Put Option, or not to exercise the Investor
Put Option for any reason, shall not waive any right of any Investor Put
Party to trigger or exercise the Investor Put Option at a later date, in
accordance with Clause 7A above. Any election by a Falcon Put Party not to
trigger the Falcon Event Put Option simultaneously with the HC Put Option
or Investor Put Option, or not to exercise the Falcon Event Put Option for
any reason, shall not waive any right of any Falcon Put Party to trigger
or exercise the Falcon Event Put Option at a later date, in accordance
with Clause 7 above.
(B) [PRIORITY, POSS. PRORATION OF PUT RIGHTS] Unless the HC Put Option,
the Investor Put Option and/or the Falcon Event Put Option are triggered
simultaneously as contemplated by Clauses 8.1, 8.2 and/or 8.3 above, the
respective HC Put Parties, the Investor Put Parties and the Falcon Put
Parties shall have priority as against the Company in the order that the
HC Put Options, the Investor Put Options and/or the Falcon Event Put
Options are exercised. If such options are triggered simultaneously and
subsequently exercised, the HC Put Parties, the Investor Put Parties and
the Falcon Put Parties shall be entitled to payment pro rata, in the
proportion that the aggregate amount of each party's put price bears to
the aggregate put price for all such parties. To the extent that any HC
Put Party, Investor Put Party or Falcon Put Party receives a payment in
respect of its Put Shares which is disproportionately greater than the
payments received by other parties who have simultaneously triggered their
options, such party shall pay to such other parties an amount necessary to
cause all such parties to receive their proportionate share of the
aggregate payments made to all such parties.
8.5 [APPRAISAL FEE SHARING] In the event the HC Put Option, the Investor Put
Option and/or the Falcon Event Put Option are exercised simultaneously as
contemplated by Clauses 8.1, 8.2 and/or 8.3 above, the put party that
first gives its put notice shall control all decisions of the HC Put
Parties, the Investor Put Parties and the Falcon Put Parties as to the
appraisers required to determine fair market value of the Shares, but the
HC Put Parties, the Investor Put Parties and the Falcon Put Parties shall
equally prorate any appraisal costs not borne by the Company.
Clause 9. PUT POSTPONEMENT
9.1 In the event that on the Date of the HC Put Payment, the Date of the
Investor Put Payment, or the Date of the Falcon Put Payment with respect
to any Falcon Event Put Option, as the case may be (the "Date of the Event
Put Payment"), by reason of inadequate retained earnings or reserves
pursuant to Article 30 of Law No. 6.404/76, the Company is unable to
purchase the Shares subject to the HC Put Option, the Investor Put Option
or the Falcon Event Put Option, as the case may be (the "Event Put"), in
whole or in part, and in the event that the HC Put Party, the
<PAGE>
37
Investor Put Party or the Falcon Put Party, as the case may be (the "Event
Put Party"), does not expressly waive its Event Put (provided that any
such waiver shall be without prejudice to the right of the Event Put Party
to reinstate such Event Put Option in accordance with Clause 6, 7 or 7A
above, as applicable), the Company shall establish, in writing, the amount
in U.S. Dollars corresponding to the Event Put Price of Shares not
acquired on the Date of the Event Put Payment as verified pursuant to
Clause 6, 7 or 7A above, which shall not be subject to any variation
(except foreign exchange variation), irrespective of the Company's
operating results or the value of the Shares after the Date of the Event
Put Payment, and the closing date of the Event Put with respect to such
remaining Shares shall be extended pursuant to this Clause ("Put
Postponement"). This Clause 9.1 shall not limit or be interpreted as
limiting the Company's obligation under the Event Put to buy the maximum
possible amount of Shares, including on the Date of the Event Put Payment.
9.2 In the event of a Put Postponement, the Company shall continue to use its
best efforts to increase its ability to legally purchase the remaining
Shares subject to the Event Put, pursuant to its terms, including by
obtaining credit and/or the necessary consent of its creditors, if
applicable. The Event Put Price of each Share to be purchased shall be
paid to the Event Put Party in Reais Equivalent on the date of such
payment.
9.3 Any Shares not purchased by the Company on the Date of the Event Put
Payment may be converted by the Event Put Party, at its exclusive
discretion, into classes of the Company's Preferred Shares ("Special
Preferred Shares") entitled to a minimum fixed and cumulative dividend to
be determined on the basis of the aggregate Event Put Price for such
unpurchased Shares, multiplied by the one-year LIBOR rate as quoted by the
London branch of The Chase Manhattan Bank, N.A. prevailing on the Date of
the Event Put Payment, plus 4% per annum ("Cumulative Dividends"), payable
semiannually from the Date of the Event Put Payment through the date such
Special Preferred Shares are purchased by the Company pursuant to the
Event Put. The Event Put Party shall be entitled to elect, in its sole
discretion, to receive shares of voting (the "Preferred Voting Shares") or
non-voting Special Preferred Shares, or any combination thereof. For
purposes of this Agreement and the Company's By- Laws, the Preferred
Voting Shares shall be deemed to be included in the definition of "Shares"
and all of the rights of the Stockholders hereunder with respect to the
Shares held by them shall continue so long as they hold the Preferred
Voting Shares.
9.4 The Stockholders undertake to exercise the voting rights of their Shares
in order to amend the Company's By-Laws so as to create the Special
Preferred Shares whenever so required according to provisions set forth
herein.
9.5 In addition to the Cumulative Dividends, the Special Preferred Shares
shall be entitled to any minimum dividend
<PAGE>
38
required by law to be paid by the Company ("Mandatory Dividend").
9.6 After the payment of the Cumulative Dividend and of the Mandatory
Dividend, any remaining profit or reserve (other than mandatory legal
reserves) verified by the Company shall be used to buy the highest
possible amount of Shares (including the Special Preferred Shares) subject
to the Event Put Option. All dividend payments and all other distributions
to Stockholders and all redemptions or repurchases of any capital stock
from any holder of capital stock in the Company, with the exception of the
Cumulative Dividend on Special Preferred Shares then outstanding and of
the Mandatory Dividend, are and shall be expressly subject and subordinate
to the acquisition of all of the Shares subject to the Event Put in the
event they have not been purchased from the Event Put Party. All
Cumulative Dividends, and all repurchases of Shares (including the Special
Preferred Stock) subject to the Event Put Option, shall be made on a
pro-rata basis in favor of all Stockholders that exercised an Event Put
simultaneously under Clause 8.1 or 8.2 or 8.3 above; otherwise, the rights
of any Event Put Parties under this Clause 9 and under any Special
Preferred Shares issued hereunder shall be ranked according to the
respective Dates of the Event Put Payment on which such rights arose.
9.7 (i) In the event a Falcon Put Notice in respect of the Falcon Time Put
Option has been delivered, and, pursuant to Clauses 7.3 and 6.9
above, Falcon has decided to exercise the Falcon Time Put Option,
then, during the 30-day period immediately following receipt of the
appraiser's notice referred to in Clause 6.7 above (the "Time Put
Decision Period"), the Company shall, by action of a majority of the
members of its Board not appointed by any Falcon Put Party or its
Affiliates, make the following determinations in sequence, promptly
(but in any event within the Time Put Decision Period) notify the
Falcon Put Parties of such determinations and take the following
actions as determined thereby:
(a) If the Company, acting in good faith and in a commercially
reasonable manner, determines that it has cash available
which, together with borrowings available to the Company on
commercially reasonable terms, is sufficient to pay the entire
Time Put Price, then the Company shall pay the Time Put Price
to the Falcon Put Parties by 11:30 a.m. on the 90th day after
the end of the Time Put Decision Period, in cash in Reais
Equivalent on such day of payment, and the Falcon Put Parties
shall transfer to the Company all of the Falcon Put Shares
free and clear of all liens, claims, charges, restrictions and
encumbrances caused by or suffered to exist by any Falcon Put
Party or its Affiliates, other than as provided in this
Agreement; provided it is understood that the Company shall be
subject to an obligation to use its best efforts to obtain any
necessary borrowings on a commercially reasonable basis to
satisfy
<PAGE>
39
the Falcon Time Put Option in cash on the Date of the Falcon
Put Payment; provided, however, that if on such 90th day, the
Company is unable to satisfy the cash payment required
hereunder, the provisions of Clause 9.7(ii) shall be
applicable;
(b) if after use of the efforts described in (a) above the Company
determines that such cash and borrowings described in (a)
above are not available but instead determines, acting in good
faith and in a commercially reasonable manner, that it will
have cash available which, together with borrowings available
to the Company on commercially reasonable terms, will be
sufficient to pay the Time Put Price in three installments as
described in Clause 9.8 below, then the Company and the Falcon
Put Parties shall take the actions described in Clause 9.8
below, it being understood and agreed that the Company shall
be subject to an obligation to use its best efforts to obtain
any necessary borrowings on a commercially reasonable basis to
satisfy all such installments; and
(c) if the Company, acting in good faith and in a commercially
reasonable manner, determines that such cash and borrowings
described in (a) and (b) above are not available, then the
Company and the Falcon Put Parties shall take the actions
described in Clause 9.9 below.
(ii) If, at the end of the 90-day period referred to in Clause 9.7(i)(a),
the Company, after having used its best efforts to obtain any necessary
borrowings on a commercially reasonable basis to satisfy the entire Time
Put Price, is unable to pay the entire Time Put Price, the Company shall,
on such 90th day, be entitled to and shall elect one of the alternatives
set forth in Clause 9.7(i)(b) or (c) above, and in such event the parties
shall be governed by the procedures set forth in Clause 9.8 or 9.9 below,
as the case may be, depending upon the alternative elected, and the other
applicable provisions of this Agreement.
9.8 (i) In case of a determination described in Clause 9.7(i)(b) above or
where such alternative is chosen pursuant to Clause 9.7(ii) above,
the Falcon Put Parties shall transfer to the Company their Falcon
Put Shares (the "Total Time Put Shares"), free and clear of all
liens, claims, charges, restrictions and encumbrances caused by or
suffered to exist by any Falcon Put Party or its Affiliates, other
than as provided in this Agreement, at the times and under the
circumstances as described in this Clause 9.8 and shall retain all
rights they may have, and continue to be subject to all obligations,
under this Agreement based on their stockholdings until such
transfers are completed in accordance with the terms hereof, subject
to the provisions of Clause 9.12 below. On the first anniversary of
the Company's receipt of
<PAGE>
40
the related Falcon Put Notice, the Company shall pay 1/3 (one-third)
of the Time Put Price, in Reais Equivalent on such day and the
Falcon Put Parties shall transfer to the Company 1/3 (one-third) of
the Total Time Put Shares, free and clear of all liens, claims,
charges, restrictions, and encumbrances caused by or suffered to
exist by any Falcon Put Party or its Affiliates, other than as
provided in this Agreement. The Falcon Put Parties and the Company
shall cause the same appraiser that determined the Time Put Price to
make a second determination of the Time Put Price, but recalculated
and valued as of such first anniversary of the Company's receipt of
the related Falcon Put Notice and delivered to the Board within 45
(forty-five) days thereof. On the second anniversary of the
Company's receipt of the related Falcon Put Notice, the Company
shall pay 1/3 (one-third) of such Time Put Price, as recalculated as
of the first anniversary thereof, in Reais Equivalent on such second
anniversary, and the Falcon Put Parties shall transfer to the
Company 1/3 (one-third) of the Total Time Put Shares, free and clear
of all liens, claims, charges, restrictions, and encumbrances caused
by or suffered to exist by any Falcon Put Party or its Affiliates,
other than as provided in this Agreement. The Falcon Put Parties and
the Company shall cause the same appraiser that determined the first
two Time Put Prices to make a third determination of the Time Put
Price, but recalculated and valued as of such second anniversary of
the Company's receipt of the related Falcon Put Notice and delivered
to the Board within 45 (forty-five) days thereof. On the third
anniversary of the Company's receipt of the related Falcon Put
Notice, the Company shall pay 1/3 (one-third) of such Time Put
Price, as recalculated as of the second anniversary thereof, in
Reais Equivalent on such third anniversary, and the Falcon Put
Parties shall transfer to the Company 1/3 (one-third) of the Total
Time Put Shares, free and clear of all liens, claims, charges,
restrictions, and encumbrances caused by or suffered to exist by any
Falcon Put Party or its Affiliates, other than as provided in this
Agreement.
(ii) In the event that after using its best efforts to obtain sufficient
cash and/or borrowings on commercially reasonable terms to satisfy
its payment obligations under paragraph (i) above on such first or
second anniversary, the Company shall not have available cash or
borrowings on commercially reasonable terms available to meet its
payment obligations under paragraph (i) above on such first or
second anniversary, then the Company shall, against transfer to it
of 1/3 (one-third) of the Total Time Put Shares, free and clear of
all liens, claims, charges, restrictions, and encumbrances caused by
or suffered to exist by any Falcon Put Party or its Affiliates,
other than as provided in this Agreement, issue on such date a
promissory note or promissory notes, denominated in U.S. Dollars, to
the Falcon Put Parties, in the aggregate principal amount equal to
its payment obligation on such anniversary prior to conversion to
Reais Equivalent and on the other terms described in Clause 9.10
below.
<PAGE>
41
9.9 In case of a determination described in Clause 9.7 (i)(c) above, not later
than 11:30 a.m. on the 15th day after the end of the Time Put Decision
Period, each of the Falcon Put Parties shall transfer to the Company all
of their Falcon Put Shares, free and clear of all liens, claims, charges,
restrictions, and encumbrances caused by or suffered to exist by any
Falcon Put Party or its Affiliates, other than as provided in this
Agreement, against issuance by the Company on such date of a promissory
note or promissory notes, denominated in U.S. Dollars, to the Falcon Put
Parties, in the aggregate principal amount equal to the Time Put Price and
on the other terms described in Clause 9.10 below. In the case of a
determination described in Clause 9.7(ii) above to elect the alternative
described in Clause 9.7(i)(c) above, no later than 11:30 a.m. on the 90th
day after the end of the Time Put Decision Period, each of the Falcon Put
Parties shall transfer to the Company all of its Falcon Put Shares, free
and clear of all liens, claims, charges, restrictions, and encumbrances
caused by or suffered to exist by any Falcon Put Party or its Affiliates,
other than as provided in this Agreement, against issuance by the Company
on such date of a promissory note or promissory notes, denominated in U.S.
Dollars, to the Falcon Put Parties, in the aggregate principal amount
equal to the Time Put Price and on the other terms described in Clause
9.10 below.
9.10 All promissory notes referred to in Clauses 9.8 and 9.9 above shall have
the following terms and shall also be subject to the provisions of Clause
9.11 below: (i) all such promissory notes shall be notas promissorias and
shall be accompanied by an agreement setting forth all terms relating
thereto; (ii) all such promissory notes shall mature on the third
anniversary of the Company's receipt of the related Falcon Put Notice;
(iii) principal shall be payable at maturity subject to optional
prepayment and the mandatory prepayments described below; (iv) interest
from the date of issuance on the unpaid principal amount shall be payable
quarterly in arrears at a fixed rate of interest equal at the time of
issuance of such notes to the interest rate on U.S. Treasury obligations
of similar maturity, plus a spread taking into account the type of
obligor, the Company's creditworthiness and Brazilian risk; provided that
if the parties cannot agree on the above rate it will be decided by such
third party investment banker as may be mutually agreed by both parties;
(v) such notes shall be full recourse to the Company and shall be secured
by the pledge, in the case of notes described in Clause 9.8 below, of the
related 1/3 (one-third) of the Total Time Put Shares, and in the case of
those described in Clause 9.9 above, of all the related Falcon Put Shares;
(vi) while any notes described in Clause 9.8 or 9.9 above remain
outstanding, the Company shall not pay any dividends or other
distributions, or make any redemptions or repurchases whatsoever on or
relating to any of its capital stock, except for those required by law,
but shall continue to pay all Cumulative Dividends on then outstanding
Special Preferred Shares; (vii) while any notes described in Clause 9.8
above only remain outstanding, the Company shall, subject to the
repurchases of Special Preferred Shares then outstanding provided for in
Clause 9.6 above, use all excess cash to prepay such notes in whole or in
part on a quarterly basis; (viii) in the case of notes described in Clause
9.8 above issued on such first anniversary, to the extent the Company has
cash and borrowings available
<PAGE>
42
to meet its payment obligations on such second anniversary, such cash and
borrowings shall be applied first to prepay such note to the fullest
extent possible before meeting such other payment obligations; (ix) the
Company will be required to use its best efforts on a continuing basis to
obtain borrowings on a commercially reasonable basis to satisfy to the
fullest extent possible and as soon as possible any promissory notes
issued pursuant to Clauses 9.8 or 9.9 above; and (x) such other terms and
conditions as are normal and customary in international capital markets
and transactions of this nature, including, without limitation, defaults
and acceleration for failure to pay interest and restrictions on related
party transactions shall be included in such notes and/or the related
agreements.
9.11 (i) Notwithstanding anything to the contrary contained herein, to the
extent the Company fails to perform any of its obligations under the
promissory notes referred to in Clause 9.8 or 9.9 above or the
related agreements, including payment of interest currently, the
Falcon Put Parties shall have ail rights and remedies available
hereunder, under the promissory notes or as provided by law or
equity.
(ii) If, at the end of the 90-day period referred to in Clause 9.7(i)(a)
above, the Company has not paid the entire Time Put Price in cash,
then, notwithstanding the Company's election of one of the
alternatives specified in Clause 9.7(ii) above, and notwithstanding
the provisions of Clause 4 hereof, the Falcon Put Parties shall be
free for a period of six months after such date (but in any event
not exceeding one year from the date of the Falcon Put Notice), to
sell all of the Falcon Put Shares hereunder free of any of the right
of first offer restrictions set forth in Clause 4 hereof or any
other provision hereof, and the purchaser of such Shares shall be
entitled to all of the rights and obligations of the Falcon Put
Parties hereunder; provided, that the Falcon Put Parties may not
sell the Falcon Put Shares to any person included in the list of
categories of disqualified purchasers, which list shall be provided
by the Company within the 90-day period referred to in Clause
9.7(i)(a) above and shall be reasonable and only include persons
such as direct competitors or undesirable persons. In the event of
such sale, (a) if any promissory notes have been issued, upon
consummation of such sale, the promissory notes shall be cancelled
and neither the Company nor the Falcon Put Parties shall have any
claim against the other for any deficiency between the amount of the
sale price and the amount of the Note; and (b) immediately prior to
the consummation of such sale, any Shares that the Falcon Put
Parties have transferred to the Company in connection with its
exercise of one of the alternatives shall be returned and/or
re-issued, as appropriate, to the Falcon Put Parties, and shall be
duly and validly issued and authorized, fully paid and
non-assessable, and shall be free of any pre- emptive rights or any
liens, claims, charges, restrictions or encumbrances caused by or
suffered to exist by the Company or its Affiliates, other than as
provided in this Agreement.
<PAGE>
43
(iii) Without limiting the foregoing, and notwithstanding the provisions
of Clause 4 hereof or any other provision hereof, if the Company
defaults on any payment (whether of principal, interest or
otherwise) under any promissory note issued under Clause 9.8 or 9.9
above or any related agreement, and within six months of such
default such default has not been cured in full, then in either case
the Falcon Put Parties shall be free to sell all or any portion of
the Falcon Put Shares hereunder (or subject to the pledge), free of
any of the right of first offer restrictions set forth in Clause 4
hereof or any other provision hereof, and the purchaser of such
Shares shall be entitled to all of the rights and obligations of the
Falcon Put Parties hereunder; provided, that the Falcon Put Parties
may not sell the Falcon Put Shares to any person included in the
list of categories of disqualified purchasers, which list shall be
provided by the Company at the time of the issuance of the notes and
shall be reasonable and only include persons such as direct
competitors or undesirable persons.
9.12 In the event that any action by the Company for the purpose of permitting
the Company to meet any of its payment obligations to the Falcon Put
Parties under any of Clauses 9.7 through 9.9 above would otherwise require
a vote at a general meeting of the Company or of the Board,
notwithstanding anything herein to the contrary, none of the Falcon Put
Parties shall be entitled to a veto through holdings of Shares or through
any director they may have appointed, and any such vote, for purposes of
quorum and voting, shall be taken exclusive of the Falcon Put Parties'
holdings of Shares and the participation of any director appointed by
them, and the Falcon Put Parties hereby agree to waive any preemptive
rights they may have with respect to any such action by the Company.
Clause 10. CALL OPTIONS
10.1 So long as the Shares owned by Harpia or Curupira or their Affiliates are
not publicly registered, listed or traded (other than pursuant to a
registration initiated by the HC Entities or their Affiliates) and in any
case not earlier than July 22, 2000, Harpia and Curupira grant and give
Mr. Civita, Abrilcap, and the Affiliates of each (other than the Company
and any Subsidiary thereof) that are then Stockholders (the "Call
Purchaser") an option to acquire (the "HC Call Option"), and so long as
the Shares owned by Falcon or its Affiliates are not publicly registered,
listed or traded (other than pursuant to a registration initiated by
Falcon or its Affiliates) and in any case not earlier than September 22,
2003, Falcon grants and gives the Call Purchaser an option to acquire (the
"Falcon Call Option" and, together with the HC Call Option, as the case
may be, the "Call Option"), in each case under the conditions set forth in
this Clause, all of the Shares (and not a portion thereof) held by Harpia
and Curupira and their Affiliates or Falcon and its Affiliates, as the
case may be (the "Call Seller"), on the date of the exercise of the Call
Option. Subject to Section 10.3(ii) below, the Call Options are personal
to Mr. Civita and Abrilcap
<PAGE>
44
and their Affiliates that are from time to time Stockholders, and shall
not be transferred in any case to third parties. The only Shares subject
to the Call Options are (i) Shares held by Harpia, Curupira and their
Affiliates at the time a Call Notice (as defined below) is given to them
with respect to the HC Call Option, and (ii) Shares held by Falcon and its
Affiliates at the time a Call Notice is given to them with respect to the
Falcon Call Option; no other Shares shall be subject to any Call Option.
10.2 At any time permitted by Clause 10.1 above, the Call Purchaser shall be
entitled to deliver written notice (a "Call Notice") to each Call Seller
and, in the case of the HC Call Option, to Falcon and the Investor
Entities and each of their respective Affiliates that are then
Stockholders and in the case of a Falcon Call Notice, to the HC Entities
and the Investor Entities and their Affiliates that are then Stockholders.
Upon the delivery of the Call Notice, the Call Purchaser shall be entitled
to demand that the Call Seller transfer all its Shares, free and clear of
any liens, claims, charges, restrictions or encumbrances caused by or
suffered to exist by the Call Seller or its Affiliates, other than as
provided in this Agreement, to the Call Purchaser or as the Call Purchaser
may direct, as provided for herein, against payment of the Call Price, as
defined below.
10.3 (i) The Call Purchaser shall be entitled to exercise the Call Option by
giving a Call Notice to each Call Seller (and to the other
Stockholders), within 10 (ten) days following the date on which the
Call Price has been ascertained. if the Call Option is so exercised,
on the third Business Day following such exercise (the "Date of
Transfer"), the Call Seller shall transfer, against the payment of
the Call Price, all Shares, free and clear of all liens, claims,
charges, restrictions and encumbrances caused by or suffered to
exist by the Call Seller or its Affiliates, other than as provided
in this Agreement, owned by it to Abrilcap, or such other person(s)
as Abrilcap shall have directed not less than 2 (two) Business Days
prior to the Date of Transfer, by means of the execution of the
proper entry of the Transfers of Nominative Shares Book of the
Company. Any election by the Call Purchaser not to exercise a Call
Option shall not waive its right to give any Call Notice or exercise
a Call Option at any time thereafter, except that in respect of the
Falcon Call Option, the Call Purchaser may not issue more than one
Call Notice in any given calendar year.
(ii) To determine the Call Price, the terms and conditions established in
Clause 6 above shall be applicable in the case of the HC Call Option
and the terms and conditions established in Clause 7.3 above shall
be applicable in the case of the Falcon Call Option, in each case
mutatis mutandis. For so long as (x) the Investor Entities, Falcon
or the Affiliates of any of them holding any voting Shares of the
Company, each such holder shall have the right, by notice to
Abrilcap within ten (10) Business Days after receipt of a Call
Notice with respect to an HC Call Option, to participate with the
Call
<PAGE>
45
Purchaser in the exercise of such HC Call Option in the proportion
that its Shares bear to the Shares then held by Mr. Civita, Abrilcap
and their Affiliates and (y) the Investor Entities or their
Affiliates holding any voting shares of the Company, each such
holder shall have the right, by notice to Abrilcap within ten (10)
Business Days after receipt of a Call Notice with respect to a
Falcon Call Option, to participate with the Call Purchaser in the
exercise of such Falcon Call Option in the proportion that its
Shares bear to the Shares then held by Mr. Civita, Abrilcap and
their Affiliates; provided, however, that (a) the Investor Entities,
Falcon and the Affiliates of any of them shall be bound by all
decisions of Mr. Civita, Abrilcap and their Affiliates with respect
to any appraiser involved in ascertaining the Call Price for such HC
Call Option or Falcon Call Option, as the case may be, (b) with
respect to any such appraiser's costs that would otherwise be borne
by Mr. Civita, Abrilcap or their Affiliates, the Investor Entities,
Falcon and the Affiliates of any of them shall bear their
aforementioned proportion, as applicable, (c) no election by the
Investor Entities, Falcon or the Affiliates of any of them to
participate in the exercise of such HC Call Option shall in any way
affect the rights of Harpia, Curupira or their Affiliates against
Mr. Civita, Abrilcap or their Affiliates with respect thereto and
(iv) no election by the Investor Entities or their Affiliates to
participate in the exercise of such Falcon Call Option shall in any
way affect the rights of Falcon or its Affiliates against Mr.
Civita, Abrilcap or their Affiliates with respect thereto.
10.4 The purchase price of Shares acquired by the Call Purchasers as a result
of the exercise of the Call Option is herein referred to as the "Call
Price". The Call Price for the HC Call Option shall correspond to:
================================================================================
DATE OF EXERCISE OF THE CALL CALL PRICE
OPTION
- --------------------------------------------------------------------------------
From July 22, 2000 to July 21, 2001 110% of the HC Put Price
- --------------------------------------------------------------------------------
From July 22, 2001 to July 21, 2002 105% of the HC Put Price
- --------------------------------------------------------------------------------
On or after July 22, 2002 100% of the HC Put Price
================================================================================
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46
The Call Price for the Falcon Call Option shall correspond to:
================================================================================
DATE OF EXERCISE OF THE CALL CALL PRICE
OPTION
- --------------------------------------------------------------------------------
From September 22, 2003 to September 21, 2004 110% of the Falcon Time Put Price
- --------------------------------------------------------------------------------
From September 22, 2004 to September 21, 2005 105% of the Falcon Time Put Price
- --------------------------------------------------------------------------------
On or after September 22, 2005 100% of the Falcon Time Put Price
================================================================================
10.5 The Call Price, calculated in U.S. Dollars pursuant to the preceding
Clause, shall be paid on the Date of Transfer concurrently with the
transfer of the applicable Call Seller's Shares, free and clear of all
liens, claims, charges, restrictions and encumbrances caused by or
suffered to exist by the Call Seller or its Affiliates, other than as
provided in this Agreement, to the Call Purchaser or as it may direct, in
Reais Equivalent on the Date of Transfer. The transfer of Shares and the
payment of the Call Price shall take place at the head office of the
Company, at 11:30 a.m., on the Date of Transfer.
10.6 In the event that within the 12-month period after payment of the Call
Price to a Call Seller, 5% (five percent) or more of the voting Shares of
the Company are sold, or any of the Company's Shares are placed in the
market by a public offering, such Call Seller shall receive an amount
equal to the excess, on a per-share basis, of the price that such Call
Seller would have received if its Shares had been included in such sale or
public offering at the price obtained in such sale or public offering over
the Call Price. If the Investor Entities, Falcon or the Affiliates of any
of them have elected to participate in the HC Call Option pursuant to
Clause 10.3 above, any such party shall reimburse the Call Purchaser for
its proportionate share of any such excess paid to the Call Seller.
10.7 For so long as CCABC Partner or any of its Affiliates is a Stockholder or
a holder of equity interests in any Investor Entity, in the event that (x)
unless and until Disney becomes a Controlling Stockholder of CCABC, CCABC,
or (y) from and after Disney becoming a Controlling Stockholder of CCABC,
at least one of CCABC or Disney, is not the Controlling Stockholder of (A)
CCABC Partner or (B) any Affiliate of CCABC Partner that is then a
Stockholder or a holder of an equity interest in any Investor Entity that
is then a Stockholder, then (i) unless all of the equity interests which
have been transferred and give rise to the Call Option set forth in this
Clause 10.7 have been offered according to the procedures set forth in
Clause 4 above, each of the Call Purchaser, the H/C Entities and Falcon
will have a Call Option with respect to all of the Shares held by the
Investor Entities, CCABC Partner, any of CCABC Partner's Affiliates or any
Stockholder in which CCABC Partner or any of its Affiliates holds any
equity, exercisable for six months
<PAGE>
47
following the discovery by the Call Purchaser, the H/C Entities or Falcon
of such event and otherwise in accordance with the procedures set forth in
this Clause 10 (except that (a) the Call Price for purposes of this Clause
10.7 shall correspond to the calculation of the price of the Shares using
the fair market value of the Company and its Subsidiaries as determined
according to Clause 6.3(a) only and including the last paragraph of Clause
6.3 and (b) any of the Call Purchaser, the H/C Entities or Falcon may
initiate such Call Option by the delivery of a Call Notice), and (ii)
whether or not such equity interests have been offered in accordance with
the procedures in Clause 4 hereof or such Call Option is exercised, the
Investor Entities, CCABC Partner, any of CCABC Partner's Affiliates and
any Stockholder in which CCABC Partner or any of its Affiliates holds any
equity, upon such cessation (1) shall immediately forfeit all rights
granted under this Agreement to the Investor Entities and such Affiliates
that would not be transferable with the Shares owned by the Investor
Entities or such Affiliates, and shall immediately cease to be bound by
all of their obligations under this Agreement that would not be
transferred with the Shares owned by them, in each case as if a transfer
of such Shares had occurred by the Investor Entities or such Affiliates
and (2) shall immediately forfeit all rights to indemnification under
Clause 6.3 of the Stock Purchase Agreement other than in respect of claims
for indemnification that are then pending. Notwithstanding the foregoing,
the provisions of this Clause 10.7 shall not apply to any transfer of any
equity interest in any Investor Entity, CCABC Partner, any of CCABC
Partner's Affiliates or any Stockholder in which CCABC Partner or any of
its Affiliates holds any equity, to any Affiliate.
10.8 For so long as Hearst Partner or any of its Affiliates is a Stockholder or
a holder of equity interests in any Investor Entity, in the event that
Hearst is not the Controlling Stockholder of (A) Hearst Partner or (B) any
Affiliate of Hearst Partner that is then a Stockholder or a holder of an
equity interest in any Investor Entity that is then a Stockholder, then
(i) unless all of the equity interests which have been transferred and
give rise to the Call Option set forth in this Clause 10.8 have been
offered according to the procedures set forth in Clause 4 above, each of
the Call Purchaser, the H/C Entities and Falcon will have a Call Option
with respect to all of the Shares held by the Investor Entities, Hearst
Partner, any of Hearst Partner's Affiliates or any Stockholder in which
Hearst Partner or any of its Affiliates holds any equity, exercisable for
six months following the discovery by the Call Purchaser, the H/C Entities
or Falcon of such event and otherwise in accordance with the procedures
set forth in this Clause 10 (except that (a) the Call Price for purposes
of this Clause 10.8 shall correspond to the calculation of the price of
the Shares using the fair market value of the Company and its Subsidiaries
as determined according to Clause 6.3(a) only and including the last
paragraph of Clause 6.3 and (b) any of the Call Purchaser, the H/C
Entities or Falcon may initiate such Call Option by the delivery of a Call
Notice), and (ii) whether or not such equity interests have been offered
in accordance with the procedures in Clause 4 hereof or such Call Option
is exercised, the Investor Entities, Hearst Partner, any of Hearst
Partner's Affiliates and any Stockholder in which Hearst Partner or any of
its Affiliates holds any equity, upon
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48
such cessation (1) shall immediately forfeit all rights granted under this
Agreement to the Investor Entities and such Affiliates that would not be
transferable with the Shares owned by the Investor Entities or such
Affiliates, and shall immediately cease to be bound by all of their
obligations under this Agreement that would not be transferred with the
Shares owned by them, in each case as if a transfer of such Shares had
occurred by the Investor Entities or such Affiliates and (2) shall
immediately forfeit all rights to indemnification under Clause 6.3 of the
Stock Purchase Agreement other than in respect of claims for
indemnification that are then pending. Notwithstanding the foregoing, the
provisions of this Clause 10.8 shall not apply to any transfer of any
equity interest in any Investor Entity, Hearst Partner, any of Hearst
Partner's Affiliates or any Stockholder in which Hearst Partner or any of
its Affiliates holds any equity, to any Affiliate.
10.9 For so long as Hearst Partner or any of its Affiliates or CCABC Partner or
any of its Affiliates hold equity interests in an Investor Entity or other
jointly held entity (whether between Hearst Partner or any of its
Affiliates and CCABC Partner or any of its Affiliates or with another
third party) that is then a Stockholder, in the event that (x) unless and
until Disney becomes a Controlling Stockholder of CCABC, CCABC, or (y)
from and after Disney becoming a Controlling Stockholder of CCABC, at
least one of CCABC or Disney, on the one hand, and Hearst on the other
hand, either individually or jointly is or are not the Controlling
Stockholder of such jointly held Investor Entity or other jointly held
entity, then (i) unless all of the equity interests which have been
transferred and give rise to the Call Option set forth in this Clause 10.9
have been offered according to the procedures set forth in Clause 4 above,
each of the Call Purchaser, the H/C Entities and Falcon will have a Call
Option with respect to all of the Shares held by such Investor Entity or
other jointly held entity, exercisable for six months following the
discovery by the Call Purchaser, the H/C Entities or Falcon of such event
and otherwise in accordance with the procedures set forth in this Clause
10 (except that (a) the Call Price for purposes of this Clause 10.9 shall
correspond to the calculation of the price of the Shares using the fair
market value of the Company and its Subsidiaries as determined according
to Clause 6.3(a) only and including the last paragraph of Clause 6.3 and
(b) any of the Call Purchaser, the H/C Entities or Falcon may initiate
such Call Option by the delivery of a Call Notice), and (ii) whether or
not such equity interests have been offered in accordance with the
procedures in Clause 4 hereof or such Call Option is exercised, upon such
cessation such Investor Entity or other jointly held entity (1) shall
immediately forfeit all rights granted under this Agreement to such
Investor Entity or other jointly held entity that would not be
transferable with the Shares owned by such Investor Entity or other
jointly held entity, and shall immediately cease to be bound by all of its
obligations under this Agreement that would not be transferred with the
Shares owned by it, in each case as if a transfer of such Shares had
occurred by such Investor Entity or other jointly held entity and (2)
shall immediately forfeit all rights to indemnification under Clause 6.3
of the Stock Purchase Agreement other than in respect of claims for
indemnification that are then pending. Notwithstanding the foregoing, the
provisions
<PAGE>
49
of this Clause 10.9 shall not apply to any transfer of any equity interest
in such Investor Entity or other jointly held entity to any Affiliate.
10.10 (i) Subject to Clause 10.10(ii) below, for so long as Falcon or any of
its Affiliates is a Stockholder, in the event that (a) after the
Funding Date, at least one of Falcon Parent or an Affiliate thereof
is not the Controlling Stockholder of any of Falcon or any Affiliate
of Falcon or Falcon Parent that is then a Stockholder, or (b) equity
interests in Falcon or any Affiliate of Falcon or Falcon Parent that
is then a Stockholder (or in any Stockholder Parent Company of
Falcon or any such Affiliate) are sold or transferred to persons
other than Institutional Investors (or to individuals providing
services as employees and consultants to Falcon or Falcon Parent or
their Affiliates or to an employee plan for their benefit), then (i)
unless all of the equity interests which have been transferred and
give rise to the Call Option set forth in this Clause 10.10 have
been offered according to the procedures set forth in Clause 4 above
(although neither Falcon nor Falcon Parent is required to offer such
equity interests pursuant to such clause, they may elect to do so),
each of the Call Purchaser, the H/C Entities and the Investor
Entities will have a Call Option with respect to all of the Shares
held by Falcon or any Affiliates of Falcon exercisable for six
months following the discovery by the Call Purchaser, the H/C
Entities or the investor Entities of such event and otherwise
according to the procedures set forth in this Clause 10 (except that
(a) the Call Price for purposes of this Clause 10.10 shall
correspond to the calculation of the price of the Shares using the
fair market value of the Company and its Subsidiaries determined
according to Clause 6.3(a) only and including the last paragraph of
Clause 6.3 and (b) any of the Call Purchaser, the H/C Entities or
the Investor Entities may initiate such Call Option by the delivery
of a Call Notice), and (ii) whether or not such equity interests
have been offered in accordance with the procedures in Clause 4
hereof or such Call Option is exercised, Falcon and any of its
Affiliates (1) shall immediately forfeit all rights granted under
this Agreement to Falcon and such Affiliates that would not be
transferable with the Shares owned by Falcon or such Affiliates, and
shall immediately cease to be bound by all of their obligations
under this Agreement that would not be transferred with the Shares
owned by them (including the obligations in connection with the
Falcon Call Option), in each case as if a transfer of such Shares
had occurred by Falcon or such Affiliates and (2) shall immediately
forfeit all rights to indemnification under Clauses 7.3(a) and (b)
of the Old Stock Purchase Agreement and Clause 6.3 of the Stock
Purchase Agreement other than in respect of claims for
indemnification that are then pending, and upon such a forfeiture,
the Shares held by Falcon and such Affiliates shall no longer be
subject to the Falcon Call Option.
<PAGE>
50
(ii) Notwithstanding Clause 10.10(i) above, the other Stockholders
referred to in Clause 10.10(i) above shall not be entitled to the
right provided therein (and neither Falcon nor any of its Affiliates
that are then Stockholders shall forfeit any of the rights referred
to therein) in relation to any of the following sales, transfers or
assignments of equity interests (a) in Falcon or Falcon Parent made
on or before June 5, 1996 (or such earlier date as Falcon provides
the Board with a list of Falcon Parent Investors as provided in
Clause 7.1(i) above) (such date, the "Funding Date"), provided that
any such sale, transfer or assignment is made either to (x) an
Institutional Investor or individuals (or an employee plan for such
individuals) providing services, as employees or consultants, to
Falcon, Falcon Parent or their Affiliates, (y) Falcon Parent, or (z)
any other person, provided that on the Funding Date not more than
25% of the total equity interests in Falcon and in Falcon Parent are
held by persons other than Falcon Parent or Institutional Investors
or the individuals or plans referred to above, (b) in connection
with a Public Offering of interests in Falcon or Falcon Parent,
provided that any Falcon Parent Investor or combination thereof
remains in control of Falcon and/or Falcon Parent, as applicable,
following such Public Offering, (c) in Falcon Parent made after the
Funding Date, provided that on the Funding Date, no more than 25% of
the total equity interests in Falcon Parent are owned by persons
other than Institutional Investors or the individuals or plans
referred to above and on such date Falcon Parent is not a
Stockholder Parent Company of Falcon, (d) in Falcon or a Stockholder
Parent Company of Falcon provided that following such transfer or
assignment not more than 25% of the total equity interests in Falcon
or such Stockholder Parent Company are held by persons other than
Falcon Parent (or an Affiliate thereof), Institutional Investors or
the individuals or plans referred to above, or (e) in any of Falcon,
any of Falcon's Affiliates or any Stockholder in which Falcon or any
of its Affiliates holds any equity, to any Affiliate.
10.11 In the event that any sale or transfer described in Clauses 4.1(ii) or
(iii) occurs in violation thereof, each of the Stockholders, other than
the Stockholder which violated such Clauses and its Affiliates which are
then Stockholders, will have a Call Option with respect to all of the
Shares held by the violating Stockholder and its Affiliates which are then
Stockholders, exercisable for six months following the discovery by the
other Stockholders of such event and otherwise in accordance with the
procedures set forth in this Clause 10 (except that (a) the Call Price for
purposes of this Clause 10.11 shall correspond to the calculation of the
price of the Shares using the fair market value of the Company and its
Subsidiaries as determined according to Clause 6.3(a) only and including
the last paragraph of Clause 6.3 and (b) any of the Stockholders who are
granted such Call Option may initiate such Call Option by the delivery of
a Call Notice), and (ii) whether or not such Call Option is exercised,
upon such violation the violating Stockholder and its Affiliates which are
then Stockholders (1) shall immediately forfeit all rights granted under
<PAGE>
51
this Agreement to the violating Stockholder and such Affiliates that would
not be transferable with the Shares owned by the violating Stockholder or
such Affiliates, and shall immediately cease to be bound by all of their
obligations under this Agreement that would not be transferred with the
Shares owned by them, in each case as if a transfer of such Shares had
occurred by the violating Stockholder or such Affiliates and (2) shall
immediately forfeit all rights to indemnification under Clauses 7.3(a) and
(b) of the Old Stock Purchase Agreement and Clause 6.3 of the Stock
Purchase Agreement other than in respect of claims for indemnification
that are then pending.
10.12 In the event that Mr. Civita ceases to be the Controlling Stockholder of
any of his Affiliates which are then Abrilcap and such Affiliates shall
Stockholders, then immediately forfeit all rights granted under this
Agreement to Abrilcap and its Affiliates that would not be transferable
with the Shares owned by Abrilcap or such Affiliates if a transfer of such
Shares had occurred by Abrilcap or such Affiliates; provided that in the
event of Mr. Civita's death, there shall be no such forfeiture of rights
unless and until the individuals listed in the definition of Affiliates
herein (together with Mr. Civita's estate) cease, directly or indirectly,
to hold more than: (1) 50% of the voting Shares of the Company and (2)
31.258% of the Company's total capital stock, whether voting or nonvoting.
10.13 Notwithstanding the other provisions of this Clause 10, neither of the
Call Options may be exercised at any time after an HC Put Notice or a
Falcon Put Notice has been given until either (i) the corresponding HC Put
Option, Falcon Time Put Option or Falcon Event Put Option has been
exercised (and in the event of exercise, the Call Option shall be
terminated) or (ii) the exercise period for such option terminates without
such option being exercised.
Clause 11. THE COMPANY'S BOARD OF DIRECTORS
11.1 The Board shall be composed of 11 (eleven) effective members and 11
(eleven) alternate members.
(i) Harpia and Curupira acting together shall be entitled to appoint one
effective member and his respective alternate member of the Board so
long as Harpia, Curupira or any of their Affiliates, jointly hold at
least 5% (five percent) of the issued and outstanding voting Shares
of the Company.
(ii) Falcon shall be entitled to appoint two of the effective members and
two of the alternate members of the Board so long as it (considered
together with its Affiliates) holds at least 13% (thirteen percent)
of the issued and outstanding voting Shares of the Company, and (1)
one effective member and (1) one alternate member of the Board if
the percentage of such shares held by Falcon (considered together
with its Affiliates), is less than 13%
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52
(thirteen percent) but at least 6% (six percent) of the issued and
outstanding voting Shares.
(iii) Mr. Civita and Abrilcap acting together shall be entitled to appoint
five of the effective members and five of the alternate members of
the Board so long as they and their Affiliates jointly hold a
majority of the issued and outstanding voting Shares of the Company.
(iv) The Investor Entities acting together shall be entitled to appoint
two of the effective members and two of the alternate members of the
Board so long as they (considered together with their Affiliates)
jointly hold at least 13% (thirteen percent) of the issued and
outstanding voting Shares of the Company, and one effective member
and one alternate member of the Board if the percentage of such
shares jointly held by the Investor Entities (considered together
with their Affiliates) is less than 13% (thirteen percent) but at
least 6% (six percent) of the issued and outstanding voting Shares
of the Company.
(v) One of the effective members and one of the alternate members of the
Board shall at all times be independent of each of the Stockholders.
For so long as they and their Affiliates jointly hold a majority of
the voting Shares of the Company, Mr. Civita and Abrilcap acting
together shall be entitled to nominate such member(s), who shall be
subject to the approval of each of the other Stockholders that then
are entitled to appoint a director in its own right.
(vi) In the event that Harpia and Curupira (considered together with
their Affiliates) lose their right to appoint an effective and an
alternate member of the Board due to a decrease in the percentage of
Shares they hold, or either Falcon (considered together with its
Affiliates) or the Investor Entities (considered together with their
Affiliates) loses the right to elect one or two effective and
alternate members of the Board due to a decrease in the percentage
of Shares held by either of them, or Mr. Civita and Abrilcap
(considered together with their Affiliates) lose their right to
appoint five effective and alternate members of the Board due to a
decrease in the percentage of Shares they (considered together with
their Affiliates) hold, then such members shall be required promptly
to resign and thereafter such member or members of the Board shall
be elected by the Stockholders at a general meeting.
(vii) The foregoing rights with respect to appointment, nomination and
approval of members of the Board are personal to Harpia and
Curupira, Falcon, the Investor Entities, Mr. Civita and Abrilcap and
their respective Affiliates that are from time to time Stockholders,
and may not be transferred under any circumstances to third parties.
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53
11.2 The Stockholders undertake to exercise their voting rights so that such
effective members and alternates are elected in accordance with Clause
11.1 above.
11.3 The Stockholders hereby undertake to use their best efforts so that the
effective members appointed by them or their respective alternate members
are present at all meetings of the Board and the boards of directors of
any of its Subsidiaries. In the event of absence or impediment of any of
the effective members, such member shall be mandatorily substituted by his
alternate member who shall vote on behalf of the effective member as if he
was present at the meeting.
11.4 In the event of resignation or permanent impediment of any member during
the term of office to which he was elected, his substitute shall, subject
to Clause 11.1(vi) above, be appointed by the Stockholders that had
appointed the replaced member.
11.5 In accordance with the requirements of Brazilian law, each Stockholder
shall assign and transfer one Share of which it is the owner to each
effective and each alternate member appointed by it pursuant to this
Clause 11.5. The Shares assigned to the members of the Board shall be
considered, for the purposes hereof, as the property of the Stockholder
which had assigned them. Each Stockholder agrees to obtain or has obtained
from each Board member appointed by it the full power to exercise the
voting right attached to such assigned Shares, as well as the power to
transfer such Shares to itself in the event that the assigned member
ceases, for any reason, to be a Board member.
11.6 The term of office of the members of the Board shall be 2 (two) years, and
the term of each director shall be automatically extended until his duly
elected successor takes office. Indefinite re-election of directors shall
be permitted subject to the provisions of the Company's By-Laws.
Clause 12. RESOLUTIONS OF THE BOARD OF DIRECTORS AND STOCKHOLDERS
12.1 All resolutions of the Board shall be taken by the quorums and majorities
required by Brazilian law, except for the additional requirements
specified herein. For so long as Harpia, Curupira and their Affiliates
(considered together) are entitled to appoint at least one member of the
Board in accordance with the provisions of Clause 11.1 above, the
following matters shall require, for their approval, the affirmative vote
of such member; for so long as Falcon and its Affiliates (considered
together) are entitled to appoint at least one member of the Board in
accordance with the provisions of Clause 11.1 above, the following matters
shall require, for their approval, the affirmative vote of such member;
and for so long as the Investor Entities and their Affiliates (considered
together) are entitled to appoint at least one member of the Board in
accordance with the provisions of Clause 11.1 above, the following matters
shall require, for their approval, the affirmative vote of such member; in
each case, such
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54
member by himself or represented pursuant to Article 14 of the Company's
By-Laws, except that, in each case, the matters set forth in clause (vii)
below shall require for their approval the vote set forth in that clause:
(i) the acquisition or subscription by the Company or any Subsidiary
thereof of an ownership interest in other companies (except for
those acquired or subscribed in non-permanent character according to
ordinary cash management practices);
(ii) any acquisitions or dispositions of or liens, charges or
encumbrances on equity in other companies, and any acquisitions or
dispositions of, or liens, charges or encumbrances on, real
properties, equipment, trademarks, patents, licenses and franchises
or other similar assets and rights, except for: (a) acquisitions,
dispositions, liens, charges or encumbrances in the ordinary course
of business of the Company and its Subsidiaries, (b) acquisitions
outside the ordinary course of the business of the Company and its
Subsidiaries aggregating less than US$500,000 (or the Reais
Equivalent thereof) in any calendar year, (c) dispositions outside
the ordinary course of the business of the Company and its
Subsidiaries aggregating less than US$500,000 (or the Reais
Equivalent thereof) in any calendar year and (d) liens, charges and
encumbrances outside the ordinary course of the business of the
Company and its Subsidiaries aggregating less than US$500,000 (or
the Reais Equivalent thereof) in any calendar year;
(iii) the incurrence of any indebtedness of the Company or any Subsidiary
thereof, or the guarantee of any indebtedness of any other person or
entity, with a maturity of less than 365 days but in excess of the
Reais Equivalent to US$1,000,000 outstanding aggregate amount for
all such indebtedness;
(iv) the incurrence of any indebtedness of the Company or any Subsidiary
thereof or the guarantee of any indebtedness of any other person or
entity, with a maturity equal to or longer than 365 (three hundred
sixty-five) days, except trade indebtedness incurred in the ordinary
course of the business of the Company and its Subsidiaries in a
single transaction or series of related transactions with an
aggregate value of less than US$500,000;
(v) the making of loans or advance payments by the Company or any
Subsidiary thereof (but not including loans or advances made by the
Company to its Subsidiaries, by its Subsidiaries to the Company or
between Subsidiaries of the Company) except for loans or advances to
members of the Board, officers or employees in the ordinary course
of the business of the Company and its Subsidiaries;
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55
(vi) the issuance by the Company or any Subsidiary thereof of
non-financial guarantees of any nature, except non-financial
guarantees totaling, singly or in the aggregate, the Reais
Equivalent to US$100,000 or less;
(vii) any transactions or agreements, or modifications or termination of,
or waivers of rights or defaults under existing agreements, between
the Company or any Subsidiary of the Company on the one hand, and
any Stockholder or Affiliate of such Stockholder on the other hand,
unless a majority of the members of the Company's Board of
Directors, exclusive of the independent director referred to in
Clause 11.1(v) (but only in the case of a transaction involving Mr.
Civita, Abrilcap or their Affiliates other than the Company and its
Subsidiaries) and any directors appointed by the Stockholder who has
a direct or indirect interest in such action, determines that such
action is on an arms-length basis and on terms that would be
obtained with an independent third party; and
(viii) any modification or termination of the Services Agreement and any
waiver of rights or waiver of any default thereunder.
12.2 The Stockholders, by a majority vote, subject to the voting rights of
Falcon and the Investor Entities or their Affiliates set forth below,
shall approve the annual Business Plans for the Company and its
Subsidiaries collectively no later than 30 (thirty) days prior to the end
of each prior fiscal year; provided that with respect to the Business Plan
for the Company and its Subsidiaries for 1996, such Business Plan shall be
presented to the Stockholders no later than December 15, 1995 and approved
no later than January 31, 1996. Business Plans shall include the annual
budget for the Company for the fiscal year in question. The Company hereby
agrees to conduct its business at all times in accordance with its
Business Plan then in effect. For so long as the Investor Entities
(together with their Affiliates) maintain no less than 8% (eight percent)
of the issued and outstanding voting Shares, resolutions of the
Stockholders approving Business Plans may be approved by the Stockholders
only with the affirmative vote of the Investor Entities or their
Affiliates who hold Shares from time to time. For so long as Falcon
(together with its Affiliates) maintains no less than 8% (eight percent)
of the issued and outstanding voting Shares, resolutions of the
Stockholders approving Business Plans may be approved by the Stockholders
only with the affirmative vote of Falcon or its Affiliates who hold Shares
from time to time.
(i) In the event that the Stockholders are unable to approve an annual
Business Plan for any fiscal year, for any reason whatsoever, the
Business Plan for such year shall be the same as the Business Plan
for the prior year, except that the budget for each operating
expense item in the Business Plan of such prior year shall be
increased by 10% (ten percent); provided, that (x) until such time
as the Stockholders approve the Business Plan for 1996, or (y) in
the event the Stockholders are unable to approve the Business Plan
for
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56
1996, the Business Plan for 1996 shall be the same as the draft
Business Plan for 1996 as circulated to the Stockholders.
(ii) Amendments or modifications to Business Plans may be approved by the
Stockholders. For so long as the Investor Entities (together with
their Affiliates) maintain no less than 8% (eight percent) of the
issued and outstanding voting Shares, resolutions of the
Stockholders approving amendments or modifications to Business
Plans, including approval of unbudgeted capital expenditures, may be
approved by the Stockholders only with the affirmative vote of the
Investor Entities or their Affiliates who hold Shares from time to
time. For so long as Falcon (together with its Affiliates) maintains
no less than 8% (eight percent) of the issued and outstanding voting
Shares, resolutions of the Stockholders approving amendments or
modifications to Business Plans, including approval of unbudgeted
capital expenditures, may be approved by the Stockholders only with
the affirmative vote of Falcon or its Affiliates who hold Shares
from time to time.
(iii) The Business Plan of the Company for the calendar year 1995 in
effect at the Closing shall be considered approved by the
Investor Entities and Falcon and may be amended only in
accordance with the terms of sub-part (ii) above.
(iv) Transferees of Shares of the Investor Entities and/or their
Affiliates shall, provided the transfers of Shares are accomplished
in compliance with the terms of this Agreement, acquire the rights
of the Investor Entities and their Affiliates as set out in this
Clause 12.2 provided such transferees (together with their
Affiliates) acquire, from time to time, no less than 8% (eight
percent) of the issued and outstanding voting Shares of the Company;
and such transferees shall maintain such rights under this Clause
12.2 for so long as such transferees maintain no less than 8% (eight
percent) of the issued and outstanding voting Shares of the Company.
Transferees of Shares of Falcon and/or its Affiliates shall not
acquire the rights of Falcon and its Affiliates as set out in this
Clause 12.2.
12.3 (i) [INVESTOR ENTITIES ALONE] For so long as the Investor Entities'
holdings (together with their Affiliates) aggregate at least 8% (eight
percent) of the issued and outstanding voting Shares:
(a) the Company and its Subsidiaries may enter into, modify or amend
contracts involving rights and/or obligations in excess of the Reais
Equivalent of US$1,000,000 only after such contract, amendment or
modification has been approved by the Investor Entities or their
Affiliates;
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57
(b) Any purchaser of Shares or Subscription Rights proposed by Falcon,
the Investor Entities, Abrilcap or an Affiliate of any of them
pursuant to Clause 4.2(v) or 5.2(i) above shall only be approved if
such proposed purchaser has been approved by the Board with the
affirmative vote of at least one member appointed by the Investor
Entities or their Affiliates, by himself or represented pursuant to
Article 14 of the Company's By-Laws; provided that such approval by
a member appointed by the Investor Entities shall only be withheld
if the proposed purchaser (1) is of undesirable character, (2) lacks
financial capacity, (3) competes with the Company or its
Subsidiaries in Brazil or (4) the nature of the purchaser would
provoke a change of the business practices of the Company; and
(c) Neither the Company nor any of its Subsidiaries may introduce any
new programming service, or make any material decision concerning
relevant characteristics of an existing programming service,
particularly in its overall format or content without approval of
such introduction or decision by the Board with the affirmative vote
of at least one member appointed by the Investor Entities or their
Affiliates, by himself or represented Pursuant to Article 14 of the
Company's By-Laws; provided that the refusal of such a member to
vote affirmatively may not be and shall not be exercised to block
programming competitive to that of the Investor Entities, Hearst,
CCABC or their respective Subsidiaries or to require selection of
programming of the Investor Entities or any of their Affiliates, and
provided further that when such a member refuses to vote
affirmatively, a reason shall be given for such refusal.
Transferees of Shares of the Investor Entities and/or their Affiliates, shall,
provided the transfers of Shares are accomplished in compliance with the terms
of this Agreement, acquire the rights of the Investor Entities and their
Affiliates as set out in Clause 12.3(i)(a), provided such transferees (together
with their Affiliates) acquire, from time to time, no less than 8% (eight
percent) of the voting Shares of the Company, and such transferees shall
maintain such rights under Clause 12.3(i)(a) for so long as such transferees
maintain no less than 8% (eight percent) of the voting Shares of the Company.
Transferees of Shares of the Investor Entities and/or their Affiliates shall not
acquire the rights of the Investor Entities and their Affiliates as set out in
Clauses 12.3(i)(b) and (c).
(ii) [FALCON ALONE] For so long as Falcon's holdings (together with its
Affiliates) aggregate at least 8% (eight percent) of the issued and
outstanding voting stock of the Company:
(a) the Company and its Subsidiaries may enter into, modify or amend
contracts involving rights and/or obligations in excess of the Reais
Equivalent of US$1,000,000 only after such contract, amendment or
modification has been approved by Falcon or its Affiliates who hold
Shares from time to time; and
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(b) Any purchaser of Shares or Subscription Rights proposed by Falcon,
the Investor Entities, Abrilcap or an Affiliate of any of them
pursuant to Clause 4.2(v) or 5.2(i) above shall only be approved if
such proposed purchaser has been approved by the Board with the
affirmative vote of at least one member appointed by Falcon or its
Affiliates who hold Shares from time to time, by himself or
represented pursuant to Article 14 of the Company's By- Laws;
provided that such approval shall only be withheld if the proposed
purchaser (1) is of undesirable character, (2) lacks financial
capacity, (3) competes with the Company or its Subsidiaries in
Brazil or (4) the nature of the purchaser would provoke a change of
the business practices of the Company.
Transferees of Shares of Falcon and/or its Affiliates shall not acquire
the rights of Falcon and its Affiliates as set out in this Clause
12.3(ii).
(iii) [INVESTOR ENTITIES/FALCON/HC ENTITIES] For so long as each of the
Investor Entities, considered together, Falcon, and the HC Entities,
considered together (and their respective Affiliates) (each referred
to as a "Shareholder Group") owns at least 8% of the issued and
outstanding voting Shares of the Company, the following matters
shall require the affirmative vote of at least two of the
Shareholder Groups, and if there are two or fewer Shareholder Groups
each owning at least 8% of the issued and outstanding voting Shares
of the Company, then such matters shall require the affirmative vote
of each such Shareholder Group other than the HC Entities
Shareholder Group:
(a) the settlement or initiation of any litigation or
administrative proceeding involving an amount in excess of the
Reais Equivalent of $500,000 (five hundred thousand dollars)
or where the result could have a material adverse affect on
the business and operation of the Company;
(b) the hiring, renewal, or termination of the Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer
of the Company (including setting compensation for such
officers); and
(c) any amendment to or waiver of the dividend policy set forth in
Clause 16.4 hereof.
Transferees of Shares of a Shareholder Group shall, provided the transfers
of Shares are accomplished in compliance with the terms of this Agreement,
acquire the rights of such Shareholder Group as set out in Clause
12.3(iii)(c), provided such transferees (together with their Affiliates)
acquire, from time to time, no less than 8% (eight percent) of the voting
Shares of the Company, and such transferees shall
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59
maintain such rights under Clause 12.3(iii)(c) for so long as such
transferees maintain no less than 8% (eight percent) of the voting Shares
of the Company. Transferees of Shares of a Shareholder Group shall not
acquire the rights of such Shareholder Group as set out in Clauses
12.3(iii)(a) and (b).
12.4 The Shareholder Group(s) which own at least 8% of the issued and
outstanding voting Shares of the Company, acting unanimously, may require
the Company to draw funds under the Abril Credit Agreement in the amount
so requested by such Shareholder Group(s), for purposes of funding
customary business operations of the Company and/or capital expenditures
of the Company as contemplated by the Business Plan, subject to the terms
of the Abril Credit Agreement.
Clause 13. GENERAL MEETING RESOLUTIONS
13.1 Resolutions of the Stockholders taken at General Meetings shall be taken
by the quorum and majorities required by Brazilian law, with the exception
of the following actions, which actions may not be taken by the Company
without the approval of (i) Harpia, Curupira and their Affiliates for so
long as their holdings aggregate at least 8% (eight percent) of the issued
and outstanding voting Shares; (ii) the Investor Entities and their
Affiliates, for so long as its or their holdings aggregate at least 8%
(eight percent) of the issued and outstanding voting Shares; and (iii)
Falcon and its Affiliates, for so long as its or their holdings aggregate
at least 8% (eight percent) of the issued and outstanding voting Shares:
(i) any restructuring, corporate reorganization, merger, consolidation,
amalgamation, spin-off, liquidation, dissolution, stock split,
division, combination or consolidation of assets of the Company or
its Subsidiaries;
(ii) the commencement of any public offering of Shares of the Company,
other than a public offering of Shares of the Company by one or more
Stockholders pursuant to Clause 18.1 below, or any issuance or
resale by the Company or its Subsidiaries of any Share Equivalents
or securities, including but without limitation, debentures,
warrants, founders' shares, options to buy or subscribe for shares
and other similar rights other than the Special Preferred Shares in
connection with a Put Postponement, provided that if the Company
proposes to effect any of the foregoing on commercially reasonable
terms for purposes of satisfying its indemnification obligations to
the Stockholders under the Old Stock Purchase Agreement or the Stock
Purchase Agreement after the Company has determined acting in a
commercially reasonable manner that it is not able to satisfy such
obligations through borrowings available to the Company on
commercially reasonable terms, and such registration would not
prejudice the Stockholders' rights under this Agreement or the
rights to indemnification under the Stock Purchase Agreement or the
Old Stock Purchase Agreement
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60
or the rights of Harpia, Curupira or any of their Affiliates or
transferees under the Option Agreement, the Stockholders will not
unreasonably withhold their consent thereto;
(iii) any purchase or redemption by the Company or its Subsidiaries of
Shares except as provided by the HC Put Option, the Investor Put
Option, the Falcon Event Put Option or the Falcon Time Put Option;
(iv) any change in the business conducted by the Company or its
Subsidiaries from the Business;
(v) amendment of the By-Laws of the Company or its Subsidiaries as in
force on the date of this Agreement; and
(vi) establishment of any business or Subsidiary in the United States of
America.
13.2 Transferees of Shares of Harpia, Curupira and/or their Affiliates shall,
provided the transfers of Shares are accomplished in compliance with the
terms of this Agreement, acquire the rights of Harpia, Curupira and their
Affiliates as set out in Clause 13.1 above provided such transferees
(together with their Affiliates) acquire, from time to time, no less than
8% (eight percent) of the voting Shares of the Company; and such
transferees shall maintain such rights under Clause 13.1 above for so long
as such transferees maintain no less than 8% (eight percent) of the voting
Shares of the Company.
13.3 Transferees of Shares of the Investor Entities and/or their Affiliates
shall, provided the transfers of Shares are accomplished in compliance
with the terms of this Agreement, acquire the rights of the Investor
Entities and their Affiliates as set out in Clause 13.1 above provided
such transferees (together with their Affiliates) acquire, from time to
time, no less than 8% (eight percent) of the voting Shares of the Company;
and such transferees shall maintain such rights under Clause 13.1 above
for so long as such transferees maintain no less than 8% (eight percent)
of the voting Shares of the Company.
13.4 Transferees of Shares of Falcon and/or its Affiliates shall, provided the
transfers of Shares are accomplished in compliance with the terms of this
Agreement, acquire the rights of Falcon and its Affiliates as set out in
Clause 13.1 above provided such transferees (together with their
Affiliates) acquire, from time to time, no less than 8% (eight percent) of
the voting Shares of the Company; and such transferees shall maintain such
rights under Clause 13.1 above for so long as such transferees maintain no
less than 8% (eight percent) of the voting Shares of the Company.
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Clause 14. RIGHT TO ATTENDANCE, TO INFORMATION AND TO INSPECTION
14.1 The Stockholders shall have attendance rights at meetings of the Board and
General Meetings of the Company and of its Subsidiaries. The Company
agrees promptly to review the constitutive documents of each of the
Subsidiaries and to cause them to be changed, as necessary, to conform to
the provisions of Clauses 12 and 13 above. Without prejudice to
formalities set forth by law and in the Company's By-Laws, the Company's
General Meetings and meetings of the Board shall be called upon written
notice (unless waived in writing) sent to each Stockholder at least 10
(ten) Business Days in advance, which shall (unless waived in writing)
include the matters to be discussed. Resolutions taken in connection with
matters not expressly referred to in the notice calling such meeting shall
not be valid. Regardless of the formalities provided for in this Clause
14.1, the General Meeting and the meeting at which all the Stockholders
and Board members, respectively, are present shall be considered regular.
14.2 The Company shall give and send the following information and documents
relating to the Company and its Subsidiaries to (i) Harpia, Curupira and
their Affiliates, so long as Harpia, Curupira and their Affiliates have,
collectively, 5% (five percent) of the issued and outstanding voting
Shares, (ii) the Investor Entities and their Affiliates, so long as the
Investor Entities and their Affiliates hold 6% (six percent) of the voting
Shares, and (iii) Falcon and its Affiliates, so long as Falcon and its
Affiliates hold 6% (six percent) of the issued and outstanding voting
Shares (provided that if either Harpia, Curupira or any Affiliate thereof,
the Investor Entities or any Affiliate thereof or Falcon or any Affiliates
thereof holds any Shares, the Company shall give and send items (i), (ii)
and (iii) below to such Stockholder):
(i) English and Portuguese versions of quarterly unaudited financial
statements prepared in accordance with (a) U.S. GAAP applied
consistently with the past practice of the Company and (b) generally
accepted accounting principles in Brazil ("Brazilian GAAP")
consistently applied with the past practice of the Company and
annual audited U.S. GAAP financial statements and audited Brazilian
GAAP financial statements, in each case consistently applied with
the past practice of the Company;
(ii) copies of all representations, applications and reports, if any,
filed with any stock exchange or securities and exchange commission;
(iii) copies of all financial statements, reports, vote representations
and other communications delivered to any Stockholder of the Company
and/or its Subsidiaries, other than those identified in clause (iv)
below;
(iv) monthly management reports comparing actual results to budget, which
shall include English and Portuguese versions of monthly unaudited
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62
financial statements prepared in accordance with (a) U.S. GAAP
applied consistently with the past practice of the Company and (b)
Brazilian GAAP consistently applied with the past practice of the
Company;
(v) English and Portuguese versions of budgets, forecasts, segment or
product reports or other information reports prepared by or for
managers of the Company or of its Subsidiaries, including ten-year
projections to be delivered not later than January 31 of each year,
in each case expressed in U.S. Dollars;
(vi) copies of the minutes of all general meetings of Stockholders,
meetings of the Board and of the Board of Officers of the Company
and its Subsidiaries;
(vii) copies of all information relating to legal matters from which
potential liabilities outside the ordinary course of the business of
the Company and its Subsidiaries may result to the Company or to its
Subsidiaries;
(viii) copies of all information relating to regulatory matters which may
affect the licenses, permits, operations or Business of the Company
and its Subsidiaries;
(ix) copies of all information relating to technical and operational
matters that may have a material adverse effect on the business
condition (financial or otherwise), operations, prospects,
properties, assets or liabilities of the Company and its
Subsidiaries; (x) copies of all information relating to the
insurance coverage of the Company and its Subsidiaries;
(xi) copies of all information relating to the Company's Subsidiaries and
which are sent to members of the Board of Directors of such
Subsidiaries; and
(xii) such other information as Harpia, Curupira, the Investor Entities or
Falcon may reasonably request.
Such information rights are personal to Harpia and Curupira, the Investor
Entities and Falcon, and their respective Affiliates that are from time to
time Stockholders, and shall not be transferred in any case to third
parties, except in the case of the right to receive items (i), (ii) and
(iii), which shall be transferable provided the transferees (together with
their Affiliates) (a) of Harpia and Curupira and their Affiliates acquire,
from time to time, and continue to hold, no less than 5% (five percent) of
the Company's voting Shares, or (b) of the Investor Entities or Falcon or
their Affiliates acquire, from time to time, and continue to hold, no less
than 6% (six percent) of the Company's voting Shares.
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In the event Harpia or Curupira or any of Harpia's or Curupira's
Affiliates is or becomes a creditor to the Company or to the Company's
Affiliates, Harpia and Curupira and their respective Affiliates shall be
entitled to exchange information available to them as the Company's
Stockholder with the corresponding credit areas, notwithstanding any
contrary provision determining confidentiality obligations herein or in
other documents.
14.3 The Company shall, upon reasonable notice during normal business hours,
permit each Stockholder and its agents, including counsel, to inspect its
properties, examine its books and records and to discuss with management
the business and affairs of the Company and its Subsidiaries.
Clause 15. ADVISORY BOARD
15.1 In addition to the Board, the Company shall have an Advisory Board
(Conselho Consultivo). The Advisory Board shall advise the Stockholders
and the Board with respect to the business of the Company, in accordance
with applicable laws, the Company's By-laws and this Agreement.
15.2 The Advisory Board shall consist of 11 (eleven) members, who may, but need
not be, residents of Brazil, and who may, but need not be, Stockholders.
15.3 The Stockholders shall elect the members of the Advisory Board at a
general meeting of stockholders. The Stockholders undertake to exercise
their voting rights in favor of the effective members and alternates
nominated in accordance with the terms of Clause 11.1 above.
15.4 The term of office of the members of the Advisory Board shall be 2 (two)
years, and in respect of each member shall be automatically extended until
his duly elected successor takes office. Indefinite re-election of members
of the Advisory Board shall be permitted.
15.5 The Advisory Board shall maintain a Book of Minutes to record its
deliberations.
15.6 Each member of the Advisory Board may have an alternate, who shall be
elected in the same manner as the principal member. The alternates shall
substitute their respective principal members in the absence or incapacity
of the principal member. If there is a vacancy in the Advisory Board for
which no alternate has been elected, the Stockholders shall elect a new
member within 30 (thirty) days after the vacancy; and the Stockholder who
appointed and elected the member to be replaced shall appoint the new
member.
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15.7 The Stockholders shall cause the Company to pay for or reimburse, as the
case may be, the members of the Advisory Board (or their respective
alternates) for all reasonable travel and accommodation expenses they
incur in order to convene.
15.8 The Advisory Board shall hold an ordinary meeting at the end of each
period of three months and a special meeting whenever called by any two
members of the Advisory Board by means of a fifteen day prior notice to
all Advisory Board members, which notice period may be waived by consent
of all Advisory Board members, or which consent shall be deemed
automatically waived if all Advisory Board members attend the meeting.
15.9 Any member of the Advisory Board may authorize another member, by letter,
facsimile, telegram or telex, to represent him or her at any meeting of
the Advisory Board, either to constitute a quorum or for the taking of a
vote. Similarly, members may vote by letter, facsimile, telegram or telex
received at the Company's head office by the scheduled time for the
meeting.
15.10 The presence of at least six members, either in person, by proxy, or by
submitting a vote in writing before the meeting shall constitute a quorum
for the holding of a valid meeting of the Advisory Board.
15.11 The Advisory Board shall be consulted on any such matters as the Board or
the Stockholders may refer to the Advisory Board. The Board may not
delegate to the Advisory Board any of the Board's authority to make any
decision on behalf of the Company.
15.12 Resolutions of the Advisory Board shall require the affirmative vote of at
least six of its Members.
Clause 16. STOCKHOLDERS' AND THE COMPANY'S OTHER COVENANTS
16.1 The Stockholders undertake to cause the Company and its Subsidiaries, and
the Company undertakes for itself and its Subsidiaries to:
(i) retain as their regular auditors an independent auditing company
which is internationally renowned for expertise in international
transactions and commercial/corporate relationships, is able to
render services both in Portuguese and English language, and is able
to reconcile Brazilian GAAP with U.S. GAAP;
(ii) retain as their regular legal counsel an independent law firm which
is internationally renowned for expertise in international
transactions and commercial/corporate relationships, and is able to
render services both in the Portuguese and English languages; and
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65
(iii) hold stockholders meetings at least annually.
16.2 (i) In the event that the independent auditors of the Company are to be
changed and the new firm of auditors is not any of the firms listed
in the following sentence (or any successor to any of such firms),
then appointment of the new firm of auditors shall be subject to the
approval of the Investor Entities for so long as the Investor
Entities and their Affiliates collectively hold at least 8% (eight
percent) of the issued and outstanding voting Shares of the Company.
The pre-approved firms of independent auditors are: Coopers &
Lybrand, Price Waterhouse, KPMG-Peat Marwick, Deloitte Touche &
Ross, Arthur Andersen, Ernst & Young, or the respective Brazilian
associated branches thereof. Transferees of Shares of the Investor
Entities and/or their Affiliates who hold at least 8% (eight
percent) of the issued and outstanding voting Shares, shall,
provided the transfers of Shares are accomplished in compliance with
the terms of this Agreement, acquire the rights of the Investor
Entities and their Affiliates as set out in this Clause 16.2(i).
(ii) In the event that the independent auditors of the Company are to be
changed and the new firm of auditors is not any of the firms listed
in the following sentence (or any successor to any of such firms),
then appointment of the new firm of auditors shall be subject to the
approval of Falcon for so long as Falcon and its Affiliates
collectively hold at least 8% (eight percent) of the issued and
outstanding voting Shares of the Company. The pre- approved firms of
independent auditors are: Coopers & Lybrand, Price Waterhouse,
KPMG-Peat Marwick, Deloitte Touche & Ross, Arthur Andersen, Ernst &
Young, or the respective Brazilian associated branches thereof.
16.3 The Stockholders shall use their best efforts, upon the request of Harpia,
Curupira, Falcon or the Investor Entities or any of their Affiliates, to
make such amendments to this Agreement and the By-Laws of the Company as
may be necessary to enable Harpia, Curupira, Falcon, the Investor Entities
or any of their Affiliates to comply with any legal restrictions on its
ownership of stock or rights under this Agreement, or to make such
restrictions less burdensome, provided that the rights of the other
Stockholders are not materially adversely affected by such amendments.
16.4 Unless amended or waived in accordance with Clause 12.3(iii)(c) hereof,
during each calendar year or within 3 (three) months thereafter, the
Company shall, with respect to its operations for such year, and to the
extent it has funds legally available therefor, pay dividends to holders
of its Shares, which dividends shall in the aggregate not be less than the
"net cash flow" of the Company and its Subsidiaries during such year,
provided that there shall first be made a provision for projected cash
requirements of the Company and its Subsidiaries as reflected in the
Business Plan for such fiscal year for the subsequent (12) twelve month
period.
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Notwithstanding the foregoing, the Stockholders agree that, except as
expressly provided in Clauses 9.3 or 9.5 above, the Company shall
distribute not less than 25% (twenty-five percent) of its net consolidated
profits as defined in the Brazilian corporation law.
Clause 17. TAG ALONG RIGHTS
17.1 If Abrilcap or Mr. Civita or any Affiliate of either shall sell, exchange
or otherwise transfer any Shares to a person that is not one of their
Affiliates, by private sale (subject in each case to the provisions of
Clause 4 above), such selling, exchanging or transferring Stockholder
shall give at least 21 (twenty-one) Business Days' prior notice, setting
forth in such notice the same information as would be required in a
Transfer Notice as described in Clause 4.2 above, to Harpia, Curupira,
Falcon, the Investor Entities and the respective Affiliates of each that
are Stockholders, who shall be entitled simultaneously with any sale,
exchange or transfer by such selling, exchanging or transferring
Stockholder to sell, exchange or transfer a ratable portion of their
Shares and require that such third party purchaser acquire or require the
selling, exchanging or transferring Stockholder to acquire such Shares,
all at the same price and on the same other terms; provided, however, that
notwithstanding the foregoing, Stockholders other than the selling,
exchanging or transferring Stockholder and its Affiliates shall not be
required to accept joint and several liability with respect to
representations, warranties or covenants (including indemnification
obligations) of other Stockholders, it being agreed that any agreement
relating to such sale, exchange or transfer shall provide that the
liability of such other Stockholder in connection with such sale, exchange
or transfer shall be several only and shall not in any event exceed either
such Stockholder's pro rata share of any liability or such Stockholder's
proceeds from such sale. Any sale, exchange or transfer shall be made in a
manner that does not discriminate in any adverse manner against other
Stockholders as compared to the selling, exchanging or transferring
Stockholder. Compliance with the provisions of this Clause 17.1 shall be a
condition precedent to a sale of Shares by any Stockholder whose Shares
are subject to this Clause 17.1.
17.2 At any time until July 22, 1998, if the investor Entities or any Affiliate
thereof shall sell, exchange or otherwise transfer any Shares to a person
that is not one of their Affiliates by private sale (subject in each case
to the provisions of Clause 4 above), the Investor Entities and any such
Affiliate shall give at least 21 (twenty-one) Business Days' prior notice,
setting forth in such notice the same information as would be required in
a Transfer Notice as described in Clause 4.2 above, to Harpia and Curupira
and their Affiliates that are Stockholders who shall be entitled
simultaneously with any sale, exchange or transfer by the Investor
Entities or any such Affiliate to sell, exchange or transfer a ratable
portion of their collective Shares and require that such third party
purchaser acquire or require the Investor Entities and/or their Affiliate
to acquire such Shares, all at the same price and on the same
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67
other terms; provided, however, that notwithstanding the foregoing, Harpia
and Curupira and their Affiliates shall not be required to accept joint
and several liability with the Investor Entities and their Affiliates with
respect to representations, warranties or covenants (including
indemnification obligations) of the Investor Entities and their
Affiliates, it being agreed that any agreement relating to such sale,
exchange or transfer shall provide that the liability of Harpia and
Curupira and their Affiliates in connection with such sale, exchange or
transfer shall be several only in relation to the Investor Entities and
their Affiliates and shall not in any event exceed either Harpia's,
Curupira's or their Affiliate's pro rata share of any liability or their
proceeds from such sale. Any sale, exchange or transfer shall be made in a
manner that does not discriminate in any adverse manner against Harpia,
Curupira and/or their Affiliates as compared to the Investor Entities and
their Affiliates. Compliance with the provisions of this Clause 17.2 shall
be a condition precedent to a sale of Shares by any Stockholder whose
Shares are subject to this Clause 17.2.
17.3 At any time until July 22, 1998, if Falcon or any Affiliate thereof shall
sell, exchange or otherwise transfer any Shares to a person that is not
one of their Affiliates by private sale (subject in each case to the
provisions of Clause 4 above), Falcon and any such Affiliate shall give at
least 21 (twenty-one) Business Days' prior notice, setting forth in such
notice the same information as would be required in a Transfer Notice as
described in Clause 4.2 above, to Harpia and Curupira and their affiliates
that are Stockholders who shall be entitled simultaneously with any sale,
exchange or transfer by Falcon or any such Affiliate to sell, exchange or
transfer a ratable portion of their collective Shares and require that
such third party purchaser acquire or require Falcon and/or its Affiliates
to acquire such Shares, all at the same price and on the same other terms;
provided, however, that notwithstanding the foregoing, Harpia and Curupira
and their Affiliates shall not be required to accept joint and several
liability with Falcon and its Affiliates with respect to representations,
warranties or covenants (including indemnification obligations) of Falcon
and its Affiliates, it being agreed that any agreement relating to such
sale, exchange or transfer shall provide that the liability of Harpia and
Curupira and their Affiliates in connection with such sale, exchange or
transfer shall be several only in relation to Falcon and its Affiliates
and shall not in any event exceed either Harpia's, Curupira's or their
Affiliate's pro rata share of any liability or their proceeds from such
sale. Any sale, exchange or transfer shall be made in a manner that does
not discriminate in any adverse manner against Harpia, Curupira and/or
their Affiliates as compared to Falcon and its Affiliates. Compliance with
the provisions of this Clause 17.3 shall be a condition precedent to a
sale of Shares by any Stockholder whose Shares are subject to Clause 17.3.
17.4 The rights set out in Clause 17.1 hereof shall be acquired by transferees
of any Shares of Harpia, Curupira and their Affiliates provided such
transfers of Shares to such transferee are made in accordance with the
provisions of this Agreement. The rights of Harpia, Curupira and their
Affiliates set out in Clauses 17.2 and 17.3 above are personal and shall
not be transferable with such person's Shares. The
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rights set out in Clause 17.1 above shall be acquired by transferees of
Shares of the Investor Entities, Falcon and the Affiliates of any of them
provided such transfers of Shares to such transferee are made in
accordance with the provisions of this Agreement and provided further that
the transferee acquires (together with its Affiliates) at least 4% (four
percent) of the Company's issued and outstanding voting Shares from time
to time. No such third party transferee of Shares from the Investor
Entities, Falcon or the Affiliates of any of them will be subject to tag
along obligations under this Clause 17.
Clause 18. REGISTRATION RIGHTS
18.1 (i) [DEMAND] (a) Subject to the conditions set forth in this
Agreement, at any time after the second anniversary of this Agreement, the
Investor Entities, considered together, the HC Entities, considered
together, or Falcon may request that the Company effect the registration
of any or all of the Shares held by the requesting Stockholder or any of
its Affiliates (the "Subject Shares") in accordance with the terms hereof.
Notwithstanding the foregoing, the Company shall not effect (1) more than
one registration requested by a Stockholder or any of its Affiliates
pursuant to this Clause 18.1 in any 12 month period, (2) more than three
registrations requested by a Stockholder or any of its Affiliates pursuant
to this Clause 18.1 in total, or (3) a registration requested by a
Stockholder pursuant to this Clause 18.1 for less than 50% of the
aggregate Shares held by such Stockholder and its Affiliates with respect
to the initial effective demand registration for such Stockholder and its
Affiliates, or less than the lesser of 4,500,000 Shares or 100% of the
aggregate Shares held by such Stockholder and its Affiliates with respect
to a subsequent request for registration. Such request will specify (x)
the number of Subject Shares proposed to be sold, (y) the jurisdiction in
which the Subject Shares are to be distributed and (z) the intended method
of distribution.
(b) Notwithstanding clause (a) above but subject to clause (c)
below, it is the agreement of the parties that the exercise by a
Stockholder of its rights set forth in clause (a) above and the
registration and/or offering of its Subject Shares will not adversely
impair or invalidate this Stockholders Agreement or the Option Agreement
or any of the rights of the other Stockholders hereunder or thereunder
(other than with respect to the Subject Shares that are registered and
publicly sold, which Subject Shares shall not be entitled to any of the
benefits provided by, or be subject to the obligations imposed by, this
Stockholders Agreement) and, in any case, would not legally prohibit the
exercise of the put rights set forth in this Stockholders Agreement or the
Option Agreement. If any Stockholder asserts in writing to the Company and
the other Stockholders within forty-five (45) days of receipt of a request
pursuant to clause (a) above that the registration and/or offering of the
requesting Stockholder's Subject Shares would have such an effect, then
each of the Stockholders and the Company shall negotiate in good faith and
on an expedited basis to implement a structure and/or amendment to this
Agreement and the
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Company which would permit the requesting Stockholder to effect such a
registration and offering without adversely impairing or invalidating this
Stockholders Agreement or the Option Agreement or the rights of the other
Stockholders hereunder or thereunder and, in any case, without legally
prohibiting the exercise of the put rights set forth in this Stockholders
Agreement or the Option Agreement. During such good faith negotiations,
the Company and the Stockholders shall use commercially reasonable efforts
to amend the provisions of this Agreement in order to (i) preserve the put
rights of the Stockholders hereunder and under the Option Agreement
without adverse change and the other rights of the Stockholders hereunder
in substantially the form they exist on the date hereof and (ii) permit
the Company to effect the registration of the requesting Stockholder's
Subject Shares. Without limiting the foregoing, the parties hereto hereby
agree that any amendment to this Agreement to effect the following shall
not adversely impair or invalidate their rights hereunder, which
amendments may include (i) the expansion of the Board to accommodate any
director that the holder of any Subject Share may be entitled to elect
under Brazilian law, provided that (x) such expansion does not impair the
veto and supermajority voting rights granted to the Stockholders hereunder
and (y) after such expansion, if they have maintained their right to
appoint Board members as provided under Clause 11.1(iii) hereof, Mr.
Civita and Abrilcap shall be entitled to appoint such number of members of
the expanded Board such that such members, together with the independent
director nominated by Mr. Civita and Abrilcap, shall constitute a majority
of the members of the Board, and (ii) the elimination of any right of the
Company to purchase Shares pursuant to Clause 4 hereof to the extent such
purchase would not be permitted under Brazilian law for a company with
publicly registered and/or traded shares. If the parties are unable to
agree upon the implementation of such a structure and/or the adoption of
such an amendment pursuant to the standards set forth above, the
requesting Stockholder may conclusively resolve any such dispute in its
favor by (i) obtaining approval from the appropriate regulatory authority
that the existence of this Stockholders Agreement and the Option Agreement
and the rights of the other Stockholders hereunder and thereunder would be
valid and enforceable in all respects after the consummation of the
registration and offering pursuant to the restructuring and/or amendment
hereof agreed to above or (ii) the delivery to the Company and such other
Stockholders of an executed opinion from any of the law firms listed in
Exhibit A hereto, provided that such firm does not, and has not,
represented the requesting Stockholder in connection with its investment
in the Company, other than for purposes of obtaining the opinion
contemplated by this Clause 18.1(i)(b) (or such other law firm as shall be
reasonably acceptable to the parties), in substantially the form attached
hereto as Exhibit B, which opinion shall (x) pursuant to the Terms of
Demand attached thereto, at the time of the delivery of the opinion
accurately describe the proposed terms of the public offering, including
any proposed conversion of capital stock, and (y) be required to be
restated as of and at the time of the public offering of the requesting
Stockholder's Subject Shares on the basis of the offering documents, if
any, in lieu of the Terms of Demand, as a condition to the consummation of
the public offering; provided, however, that if a
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Stockholder is not able to deliver such an opinion with respect to the
registration and offering of Shares, but would be able to deliver such
opinion with respect to the registration and offering of a different class
of capital stock of the Company, upon the request of the Stockholder
exercising its rights pursuant to clause (a) above, the Company (subject
to applicable law) shall be required to convert, effective upon
consummation of the public offering, such number of Shares of such
Stockholder as such Stockholder shall request into an equivalent amount of
such other class of capital stock of the Company, provided that such
conversion may only take place if (A) it would not adversely impair or
invalidate this Stockholders Agreement or the Option Agreement or the
rights of the other Stockholders hereunder or thereunder and, in any case,
would not legally prohibit the exercise of the put rights set forth in
this Stockholders Agreement or the Option Agreement and (B) the rights of
such class would be substantially equivalent to and/or less favorable than
the rights associated with the Shares (such as voting or governance
rights, rights to distributions upon liquidation, preference as to
dividends or otherwise), such that they would simply represent a class
convertible for registration, the other Stockholders shall reasonably
cooperate with respect to such conversion, and for purposes of this Clause
18.1, the shares of such other class of capital stock of the Company held
by the Stockholder shall be deemed to be Subject Shares.
(c) If, pursuant to clause (b) above, a good faith dispute exists
and the requesting Stockholder is not able to obtain the regulatory
approval or opinion described above, the Company shall not effect the
requested registration. Notwithstanding the foregoing, if any of the
Investor Entities or their Affiliates is the requesting Stockholder and in
accordance with the terms of clause (b) above such requesting Stockholder
is able to conclusively resolve after the restructuring and/or amendment
agreed to above are effected (i.e., conclusively resolve by opinion or
ruling as provided in (b) above), that this Stockholders Agreement, the
Option Agreement and the rights of the other Stockholders would only be
impaired or invalidated with respect to the exercise of the HC Put Option,
the Falcon Time Put Option, the Falcon Event Put Option and/or the
Investor Put Option, then such requesting Stockholder shall provide the
Company, the other Stockholders and Abril S.A. with notice to such effect,
the Company shall effect the requested registration and the Company shall
be relieved from its obligations set forth in this Stockholders Agreement
with respect to the HC Put Option, the Falcon Time Put Option, the Falcon
Event Put Option and/or the Investor Put Option, as applicable, so long as
the Abril Agreement is at that time valid and enforceable.
(ii) [FILING; EFFECTIVENESS] (a) Upon receipt of a request as
contemplated in the preceding paragraph, the Company and the requesting
Stockholder shall consult with the other Stockholders for a period of 45
days regarding the proposed registration of the Subject Shares. Unless the
requesting Stockholder specifies in writing otherwise, upon the conclusion
of such consultation period, but subject to Clause 18.1(b) above, the
Company shall use its best efforts to effect such a registration as soon
as practicable and in any event shall file within 90
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71
days of the conclusion of such consultation period (the "Target Filing
Date") a registration statement (the "Demand Registration Statement")
under the securities laws of the jurisdiction(s) designated by the
requesting Stockholder and on the form designated by the requesting
Stockholder covering the Subject Shares and use its best efforts to (1)
cause such Demand Registration Statement to be declared effective by the
U.S. Securities and Exchange Commission (the "Commission") and under such
other securities or blue sky laws of such jurisdictions in the United
States as the requesting Stockholder may reasonably request (provided that
the Company shall not be required to qualify generally to do business in
any such jurisdiction where it would not otherwise be required to qualify,
subject itself to taxation in any such jurisdiction or consent to general
service of process in any such jurisdiction), if registration is sought in
the United States, or the analogous governmental agencies and/or
securities market authorities of the relevant jurisdiction, if
registration is sought outside the United States, for such Subject Shares
as soon as practicable thereafter and in any event within 60 days of
filing such Demand Registration Statement (the "Target Effective Date")
and (2) keep the Demand Registration Statement continuously effective
until the date on which the requesting Stockholder no longer holds any
Shares registered under the Demand Registration Statement (such period,
the "Target Effective Period"). If a Stockholder requests a registration
to be made at the same time for the same number of Subject Shares in more
than one jurisdiction, such request shall be treated as one registration
for purposes of Clauses 18.1(i)(a)(1) and (2). Notwithstanding the
foregoing, (x) if the Company shall furnish to the Stockholder a
certificate signed by its Chairman or President stating that in his good
faith judgment it would be detrimental or otherwise disadvantageous to the
Company or its Stockholders for such a Demand Registration Statement to be
filed as expeditiously as practicable, the Company shall have a period of
not more than 90 days after delivery of such a certificate within which to
file such Demand Registration Statement, and (y) the Company shall not be
obligated to file a registration statement pursuant to this Clause 18.1
during the 90 day period following the effectiveness of any registration
statement filed by the Company in connection with an underwritten primary
offering of its securities. If the managing underwriter selected by the
requesting Stockholder (or by the Company in accordance with the terms of
Clause 18.1(iv) below) determines (upon request of the Company or any
Stockholder) that any of the provisions of this Clause 18.1(ii) are not
customary in transactions of this nature (including the time periods set
forth in this Clause 18.1(ii)(a) being unreasonably long or short), then
such provisions shall be modified in accordance with the determination of
such managing underwriter.
(b) The Company agrees, if necessary, to supplement or amend the
Demand Registration Statement, as required by the registration form used
by the Company for such Demand Registration Statement or by applicable
securities laws and regulations or as requested (which request shall
result in the filing of a supplement or amendment) by the requesting
Stockholder (but only to the extent that such request relates to
information with respect to the requesting Stockholder), and
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72
the Company agrees to furnish to the requesting Stockholder, its counsel
and any managing underwriter, such number of copies of the Demand
Registration Statement and any such supplement(s) or amendment(s) thereto
(in each case including all exhibits thereto and documents incorporated by
reference therein) and the prospectus included therein as the requesting
Stockholder or its underwriter(s) may reasonably request prior to the use
or filing of the same with the Commission or analogous governmental agency
and/or securities market authorities and during the period in which the
Company is required to cause the Demand Registration Statement to remain
effective. The requesting Stockholder shall be permitted to withdraw all
or any part of the Subject Shares from a Demand Registration Statement at
any time prior to the effective date of such Demand Registration Statement
(regardless of whether one or more Stockholders have elected to exercise
their "piggyback" registration rights pursuant to Clause 18.2 below, and
if all of the Subject Shares are so withdrawn, such registration shall be
terminated with respect to the Stockholders exercising their "piggyback"
registration rights unless one or more of such Stockholders elects to
exercise its "demand" registration rights with respect to such
registration). Notwithstanding such a withdrawal by a requesting
Stockholder, such request shall be treated as a registration for purposes
of Clauses 18.1(i)(a)(1) and (2) if the requesting Stockholder (x)
withdraws less than all of the Subject Shares, or (y) withdraws all of the
Subject Shares after the conclusion of the consultation period described
in Clause 18.1(ii)(a) above for any reason other than a material adverse
change in the Company or its Subsidiaries or in market conditions from the
time of the request made for registration.
(c) The Company will enter into customary agreements and take such
other actions as are reasonably required in order to expedite or
facilitate the sale of the Subject Shares. In connection therewith, the
Company will furnish to the requesting Stockholder and each of its
managing underwriter(s) a signed counterpart, addressed to the requesting
Stockholder and such underwriter(s), of (i) an opinion or opinions of
counsel to the Company and (ii) a comfort letter or comfort letters from
the Company's independent public accountants, each in customary form and
covering such matters of the type customarily covered by opinions or
comfort letters, as the case may be, as the requesting Stockholder or such
underwriter(s) reasonably requests.
(iii) [EFFECTIVE REGISTRATION] A registration will not be deemed to
have been effected as a Demand Registration unless the Demand Registration
Statement with respect thereto has been declared effective by the
Commission or analogous governmental agency and/or securities market
authorities and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided, however,
that if after it has been declared effective, the offering of the Subject
Shares pursuant to a Demand Registration Statement is interfered with by
any stop order, injunction or other order or requirement of the Commission
or any other governmental agency or court and/or securities market
authorities, such Demand Registration Statement will be deemed
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not to have become effective during the period of such interference until
the offering of the Subject Shares pursuant to such Demand Registration
Statement may legally resume. If a registration requested pursuant to this
Clause 18.1 is deemed not to have been effected, then the Company shall
continue to be obligated to effect a registration pursuant to this Clause
18.1.
(iv) [SELECTION OF UNDERWRITER] If the requesting Stockholder so
elects, the offering of the Subject Shares pursuant to a Demand
Registration Statement shall be in the form of an underwritten offering.
If it so elects, the requesting Stockholder shall select one or more
nationally recognized firms of investment bankers to act as the managing
underwriter or underwriters in connection with such offering; provided
that such selection shall be subject to the consent of the Company, which
consent shall not be unreasonably withheld. If the requesting Stockholder
does not select a managing underwriter in connection with such offering,
the Company may select one or more nationally recognized firms of
investment bankers to act as the managing underwriter or underwriters in
connection with such offering; provided that such selection shall be
subject to the consent of the requesting Stockholder, which consent shall
not be unreasonably withheld.
(v) [INDEMNIFICATION]
(a) (BY THE COMPANY] The Company will indemnify and hold harmless each
participating Stockholder and each underwriter of the Subject Shares
being sold by such Stockholder, and each controlling person of such
Stockholder and underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained or incorporated by reference in any registration
statement relating to such Subject Shares or any preliminary or
final prospectus included therein (or in any related registration
statement, notification or the like) or any omission (or alleged
omission) to state or incorporate by reference therein a material
fact required to be stated or incorporated by reference therein or
necessary to make the statements made or incorporated by reference
therein, in light of the circumstances under which they were made,
not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company
in connection with any such registration, qualification or
compliance, and the Company will reimburse each such Stockholder and
each such underwriter and controlling person for any legal or any
other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action and
will enter into an indemnification agreement with each such
Stockholder and underwriter containing customary provisions,
including provisions for contribution, as any Stockholder
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or underwriter shall reasonably request; provided, however, that the
Company will not be liable to such Stockholder or underwriter in any
such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by
such Stockholder or underwriter, respectively, and stated to be
specifically for use therein.
(b) (BY THE STOCKHOLDERS] Each participating Stockholder shall indemnify
and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement and each person,
if any, who controls the Company within the meaning of Section 5 of
the U.S. Securities Act of 1933, as amended (the "Securities Act")
or any other applicable securities laws, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of
a material fact contained or incorporated by reference in any
registration statement relating to such Stockholder's Shares or any
preliminary or final prospectus included therein (or in any related
registration statement, notification or the like) or any omission
(or alleged omission) to state or incorporate by reference therein a
material fact required to be stated or incorporated by reference
therein or necessary to make the statements made or incorporated by
reference therein, in light of the circumstances under which they
were made, not misleading, and such participating Stockholder will
reimburse the Company and each such director, officer or controlling
person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss,
damage, liability or action and will enter into an indemnification
agreement with the Company and each participating Stockholder
containing customary provisions, including provisions for
contribution, as the Company or each such Stockholder shall
reasonably request; provided, however, that no Stockholder will be
liable in any such case except to the extent that any claim, loss,
damage or liability arises out of or is based on any untrue
statement or omission based upon written information furnished to
the Company by such Stockholder and stated to be specifically for
use therein; and provided, further, that no Stockholder will be
liable under this subsection for any losses, costs, damages or
expenses exceeding in the aggregate the proceeds to such Stockholder
in such offering.
(c) [OTHER INDEMNIFICATION] Indemnification similar to that specified in
the preceding paragraphs of this Clause 18.1 (with appropriate
modifications) shall be given by the Company and each participating
Stockholder with respect to any required registration or other
qualification of securities under any federal or state law or
regulation of governmental authority other than the Securities Act.
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(d) If any claim or proceeding (herein, the "Claim") is hereafter made
or instituted which might result in a right to indemnification
hereunder, the party seeking indemnification (the "Indemnified
Party") may make a demand for indemnification hereunder by giving
written notice to the party from whom indemnification is sought (the
"Indemnifying Party"), stating in reasonable detail the nature of
the Claim so far as known to it. Such notice shall be given within a
reasonable time after the Indemnified Party shall become aware of
the Claim. The Indemnified Party shall permit the Indemnifying Party
to assume the defense of any such Claim or any litigation resulting
therefrom (and to prosecute by way of counterclaim or complaint any
claim arising out of or relating to such Claim), provided that
counsel selected to conduct the defense of such Claim or litigation
shall be reasonably satisfactory to the Indemnified Party. After
such assumption of the defense by the Indemnifying Party, the
Indemnifying Party shall not be liable under this Clause 18.1 for
any legal or other expenses subsequently incurred by the Indemnified
Party in connection with such defense, other than reasonable costs
of investigation, but the Indemnified Party may participate in such
defense at its expense. The refusal so to permit the Indemnifying
Party to assume such defense by such counsel shall relieve the
Indemnifying Party of its indemnification obligations hereunder in
respect of such Claim. No settlement of any Claim or litigation
defended by the Indemnified Party shall be made without the express
written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld. The Indemnifying Party shall not, except
with the written consent of the Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of an unconditional release from
all liability in respect of such Claim or litigation.
(e) If the indemnity and reimbursement obligation provided for in this
Clause 18.1 is unavailable or insufficient to hold harmless an
Indemnified Party in respect of any Claim referred to therein, then
(unless, and except to the extent that, such unavailability or
insufficiency results from defenses or limitations provided by this
Clause 18.1) the Indemnifying Party shall contribute to the amount
paid or payable by the Indemnified Party as a result of such Claim
in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and the Indemnified Party
on the other hand in connection with statements or omissions which
resulted in such Claim, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The
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parties hereto agree that it would not be just and equitable if
contributions pursuant to this paragraph were to be determined by
pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in the
first sentence of this paragraph. The amount paid by an Indemnified
Party as a result of the Claims referred to in this Clause 18.1
shall be deemed to include any legal and other expenses reasonably
incurred by such Indemnified Party in connection with investigating
or defending any Claim which is the subject of this Clause 18.1.
(vi) [SPECIFIC PERFORMANCE] The Company and each of the Stockholders
acknowledges that a breach of the Company's obligations relating to
registration rights requested pursuant to Clause 18.1(i) will cause
irreparable harm to the requesting Stockholder, and any Stockholder
which exercises its rights under Clause 18.2 above, that will be
difficult to quantify and for which money damages would be
inadequate. As a result, the Company agrees that, in the event of
such a breach or threat of such a breach, the requesting or
piggybacking Stockholder may, in addition to any other legal or
equitable remedies it may have, enforce its rights by an action for
specific performance (to the extent permitted by applicable law),
without the necessity of posting a bond.
18.2 [PIGGYBACK] If the Company at any time proposes for any reason to publicly
register or list any Shares under the securities laws of any jurisdiction,
it shall promptly give written notice to each Stockholder of its intention
so to register such shares, and by such notice shall offer to each such
Stockholder (other than Abrilcap and its Affiliates which are then
Stockholders) the opportunity to register or list such number of Shares as
each such Stockholder may request in writing within 20 (twenty) Business
Days after receipt of such notice from the Company, specifying the number
of Shares proposed to be included in such registration or listing. Upon
receipt of such written request, the Company shall cause all such Shares
to be included in such registration or listing on the same terms and
conditions as the Shares otherwise being sold pursuant to such
registration or listing, and such Stockholder shall be entitled to such
documents and information as is described in Clause 18.1(b) above.
Notwithstanding the foregoing, if the managing underwriter(s) of an
offering delivers a written opinion to the Company that the size of the
offering is such that the success of the offering would be materially and
adversely affected, then the amount of Subject Shares to be offered for
the account of any Stockholder pursuant to this Clause 18.2 shall be
reduced to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount recommended by such managing
underwriter(s); provided that if securities are being offered for the
account of more than one Stockholder pursuant to this Clause 18.2, then
the proportion by which the amount of the securities intended to be
offered for the account of any Stockholder pursuant to this Clause 18.2 is
reduced shall not exceed the proportion by which the amount of securities
intended
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to be offered for the account of any other Stockholder pursuant to this
Clause 18.2 is reduced. For purposes of this Clause 18.2, if the Company
proposes to convert Shares to a different class of capital stock of the
Company and to publicly register or list such different class of capital
stock, then subject to Clause 18.1(b) above, each Stockholder shall have
the right to convert its Shares into an equivalent amount of such
different class of capital stock, and for purposes of this Clause 18.2,
the shares of such other class of capital stock of the Company held by the
Stockholder shall be deemed to be Shares.
18.3 [REGISTRATION EXPENSES] Any and all expenses whatsoever incident to the
Company's performance of or compliance with this Clause 18 shall be borne
by the Company whether or not the offering of Shares to which such
expenses relate is consummated; provided, however, that the Company shall
not be required to bear underwriting discounts and commissions or transfer
taxes, if any, relating to the sale or disposition of Shares, and the
Company shall only be obligated to pay for the fees and expenses of
counsel and independent certified public accountants for the Company.
18.4 Transferees of Shares from a Stockholder shall not acquire the rights of
the transferring Stockholder as set out in this Clause 18; provided that
all transferees of Shares from a Stockholder who are Affiliates of such
Stockholder shall acquire, if such transfers are accomplished in
compliance with the terms of this Agreement, the rights and obligations of
such Stockholder as set forth in this Clause 18.
Clause 19. NON-COMPETE PROVISIONS
19.1 (i) For the benefit of Abrilcap and Mr. Civita and their Affiliates
(other than the Company and its Subsidiaries) only, Harpia and
Curupira hereby agree on behalf of themselves, The Chase Manhattan
Corporation and its direct and other indirect majority-owned
subsidiaries (collectively, "Chase") that, for so long as Harpia and
Curupira, together with their Affiliates, hold at least 5% (five
percent) of the issued and outstanding voting Shares, none of
Harpia, Curupira, any Affiliate of either, or (to the extent Harpia,
Curupira or any Affiliate thereof that is a Stockholder remains an
Affiliate of Chase or any successor thereto) Chase shall, except
through the Company, hold more than 10% (ten percent) of the total
equity of any business organization that engages directly, nor more
than 50% (fifty percent) of the voting equity of any business
organization that engages indirectly through one or more
subsidiaries or other business organizations, in the Business in
Brazil; provided, however, that the covenants set forth in this
Clause 19.1 shall not apply (i) to any equity acquired by Chase or
any successor thereto, as a result of (a) the merger of Chase or any
such successor with Chemical Banking Corporation or any other Person
(a "Merger Party") who directly or indirectly holds such equity at
the time such merger is consummated (the
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"Merger Date"), or (b) the statutory, contractual, preemptive or
other rights that such Merger Party or any Affiliate thereof may
have, as of the Merger Date, to acquire such equity or to exchange
securities for such equity, regardless of whether such rights are
contingent or vested or inchoate or fixed as of the Merger Date, or
(ii) from and after the Merger Date, to any Person that engages
primarily in venture capital or merchant banking activities
(including, to the extent such covenants might otherwise apply,
Chemical Venture Partners) or to any equity for which any such
Person (or its personnel) has functional management responsibility,
regardless of where such equity is booked.
(ii) The parties hereto recognize that Chase may provide various
financial services to individuals, corporations and other entities
that may be engaged or that may intend to engage, directly or
indirectly, in the Business, including but not limited to: (a)
conducting or participating in the sale, placement or underwriting
of securities for such individuals or entities, (b) providing loans
or other credit arrangements to such individuals or entities, which
loans or arrangements may be secured by, among other things, the
pledge to Chase of voting or other securities, and Chase may receive
fees in connection with such loans or arrangements which may include
stock, warrants or other equity securities, (c) engaging in
fiduciary or other relationships whereby Chase may control or
exercise voting power over securities of various entities and (d)
providing financial advice and other commercial and investment
banking services, and further recognize that none of these
activities shall constitute a violation of this Clause 19 nor shall
any equity securities acquired by Chase in connection with any of
these activities count towards the percentages set forth in the
first sentence of this Clause 19. In particular, nothing in this
Clause 19 shall prohibit Chase from exercising its rights with
respect to any securities pledged for its benefit or foreclosing on,
receiving in compromise of obligations, holding or otherwise dealing
with any such securities, or exercising its rights as a creditor of
any person, including without limitation by receiving equity
securities in compromise of obligations or in a bankruptcy,
insolvency, receivership or similar proceeding or as part of a
workout or other restructuring of debt, and in such case, such
equity securities shall not count towards the percentages set forth
in the first sentence of this Clause 19.
19.2 For the benefit of Harpia, Curupira and their Affiliates so long as they
collectively own 5% (five percent) or more of the issued and outstanding
voting Shares, Mr. Civita and Abrilcap agree on behalf of themselves and
their Affiliates that, except through the Company (and, to the extent
necessary to comply with the provisions hereof and of the Old Stock
Purchase Agreement and the Service Agreement, the License Holders),
neither of them nor any person directly or indirectly controlled by either
of them shall, in any geographic area, directly or
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indirectly engage in any business, or be interested (whether as a
principal, stockholder, lender, employee, officer, director, partner,
venturer, advisor, consultant or otherwise) in any business organization
that engages in any business, substantially of the same type as the
Business or as any business the Company or any Subsidiary may conduct.
Without limiting the foregoing provisions hereof, except to the extent
expressly set forth herein, Mr. Civita and Abrilcap agree that they shall
not directly or indirectly through any Affiliate (except for the Company
and its Subsidiaries), engage in or be interested in (whether as a
principal, stockholder, lender, employee, officer, director, partner,
venturer, advisor, consultant or otherwise) in the telephony business.
Notwithstanding the foregoing sentence, however, so long as it does not
create or pose a conflict of interest with the business of the Company
and/or its Subsidiaries, Mr. Civita and Abrilcap may, directly or through
Affiliates, hold passive, minority, or noncontrolling interests in persons
engaged in telephony; provided that in the event such interest does create
or pose a conflict of interest with the business of the Company and/or its
Subsidiaries, Mr. Civita and Abrilcap shall, as soon as practicable,
effect one of the following alternatives, at their option: (i) merge such
interest into the Business of the Company and its Subsidiaries (subject to
compliance with the provisions of Clauses 12 and 13 above); (ii) sell,
transfer, or otherwise dispose of such interest; or (iii) transfer such
interest to a "blind trust" or equivalent device under Brazilian law,
pursuant to which Mr. Civita shall have solely an economic interest, but
pursuant to which he will receive no information regarding such interest
and shall have no decision making role with respect thereto.
19.3 For so long as Falcon, together with its Affiliates, owns 2% (two percent)
or more of the issued and outstanding voting Shares, Falcon hereby agrees
for the benefit of Abrilcap and Mr. Civita and their Affiliates (other
than the Company and its Subsidiaries) only that, except through the
Company, neither it nor any of its Affiliates shall within the territory
of the Federative Republic of Brazil (i) directly or indirectly engage in
the Business, or (ii) be interested (whether as a principal, stockholder,
lender, employee, officer, director, partner, venturer, advisor,
consultant or otherwise) in any business organization that engages
primarily in the Business within the territory of the Federative Republic
of Brazil or any business conducted primarily within the Federative
Republic of Brazil that is either substantially of the same type as the
Business or any other business the Company or any Subsidiary may conduct
or that is otherwise competitive with any business that the Company or any
Subsidiary may conduct; provided, however, that nothing in this Clause
19.3 shall prohibit Falcon or any Affiliate thereof from owning less than
5% (five percent) of the voting capital or total capital stock or other
ownership interest of any public company which it does not control.
19.4 For so long as Falcon, together with its Affiliates, owns 2% (two percent)
or more of the issued and outstanding voting Shares, Falcon hereby agrees
for the benefit of Abrilcap and Mr. Civita and their Affiliates (other
than the Company and its Subsidiaries) that neither it nor any of its
Affiliates shall directly or indirectly own
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80
or control a majority of the voting equity of any business organization
other than a partnership, or directly or indirectly act as a general
partner of any partnership, that engages primarily in any business
relating to pay television delivered by KU-band satellite distribution in
any of the countries of South America, Central America, in the Caribbean
Sea, or the United States of Mexico (including countries that become
sovereign in the current territory of the aforesaid countries).
19.5 For so long as Falcon, together with its Affiliates, owns 2% (two percent)
or more of the issued and outstanding voting Shares or the Investor
Entities, together with their Affiliates, owns 2% (two percent) or more of
the issued and outstanding voting Shares, Abrilcap and Mr. Civita hereby
agree for the benefit of Falcon or the Investor Entities, as the case may
be, in each case on behalf of themselves and their Affiliates, that,
except through the Company (and, to the extent necessary to comply with
the provisions hereof and of the Stock Purchase Agreement and the Services
Agreement, neither of them nor any person directly or indirectly
controlled by either of them or under common control with either of them
shall, within the territory of the Federative Republic of Brazil directly
or indirectly engage in the Business, or be interested (whether as a
principal, stockholder, lender, employee, officer, director, partner,
venturer, advisor, consultant or otherwise) in any business organization
that engages in any business that is either substantially of the same type
as the Business or any other business the Company or any Subsidiary
conducts or that is otherwise competitive with any business that the
Company or any Subsidiary may conduct. Without limiting the foregoing
provisions hereof, except to the extent expressly set forth herein, Mr.
Civita and Abrilcap agree that they shall not directly or indirectly
through any Affiliate (except for the Company and its Subsidiaries),
engage in or be interested in (whether as a principal, stockholder,
lender, employee, officer, director, partner, venturer, advisor,
consultant or otherwise) in the telephony business. Notwithstanding the
foregoing sentence, however, so long as it does not create or pose a
conflict of interest with the business of the Company and/or its
Subsidiaries, Mr. Civita and Abrilcap may, directly or through Affiliates,
hold passive, minority, or non-controlling interests in persons engaged in
telephony; provided that in the event such interest does create or pose a
conflict of interest with the business of the Company and/or its
Subsidiaries, Mr. Civita and Abrilcap shall, as soon as practicable,
effect one of the following alternatives, at their option: (i) merge such
interest into the Business of the Company and its Subsidiaries (subject to
compliance with the provisions of Clauses 12 and 13); (ii) sell, transfer,
or otherwise dispose of such interest; or (iii) transfer such interest to
a "blind trust" or equivalent device under Brazilian law, pursuant to
which Mr. Civita shall have solely an economic interest, but pursuant to
which he will receive no information regarding such interest and shall
have no decision making role with respect thereto.
19.6 Except through their respective investments in Tevecap, for so long as
Falcon, together with its Affiliates, owns 2% (two percent) or more of the
issued and outstanding voting Shares or the Investor Entities, together
with their Affiliates, owns 2% (two percent) or more of the issued and
outstanding voting Shares,
<PAGE>
81
Abrilcap and Mr. Civita hereby agree for the benefit of Falcon or the
Investor Entities, as the case may be, in each case on behalf of
themselves and their Affiliates that neither of them nor any person
directly or indirectly controlled by either of them shall, in any of the
countries of South America, Central America, in the Caribbean Sea, or the
United States of Mexico (including countries that become sovereign in the
current territory of the aforesaid countries), directly or indirectly
engage in any business, or be interested (whether as a principal,
stockholder, lender, employee, officer, director, partner, venturer,
advisor, consultant or otherwise) in any business organization that
engages in any business relating to pay television delivered by KU-band
satellite distribution.
19.7 The Investor Entities hereby agree on behalf of (a) themselves, (b) Hearst
and Hearst's Subsidiaries, but only for so long as Hearst, directly or
through the Investor Entities or Affiliates of the Investor Entities, owns
2% (two percent) or more of the issued and outstanding voting Shares and
(c) CCABC and CCABC's Subsidiaries, but only for so long as CCABC,
directly or through the Investor Entities or Affiliates of the Investor
Entities, owns 2% (two percent) or more of the issued and outstanding
voting Shares, for the benefit of Abrilcap and Mr. Civita and their
Affiliates, that none of the parties listed in clauses (a), (b), or (c)
above, to the extent applicable, shall own an interest in any entity
principally engaged in the business of non- standard television general
entertainment service and the ownership and operation of facilities
related thereto which competes with the Company in Brazil, except for
interests representing not more than 10% of the total equity of such an
entity, it being understood that nothing contained herein shall prohibit
the Investor Entities, Hearst, CCABC or any of their Subsidiaries from
engaging in any activity in which they are currently engaged or from
acquiring an interest in Galaxy Latin America. The parties hereto
expressly acknowledge and agree that nothing in this Agreement or any
other agreement entered into in connection with the Investor Entities'
purchase of Shares (this Agreement and such other agreements collectively,
"Excluded Agreements") shall be deemed to apply to any entity controlling
CCABC. In particular, but without limiting the foregoing, the parties
expressly acknowledge and agree that a transaction is pending between
CCABC and The Walt Disney Company ("Disney") and, should such transaction
be consummated, no provision of any Excluded Agreement shall apply to
Disney or any of its Subsidiaries, other than CCABC and its Subsidiaries.
However, if Disney or any of its Subsidiaries transfers any of its
business operations to a CCABC Subsidiary after the consummation of the
pending transaction, the provisions of the Excluded Agreements shall not
apply to any such CCABC Subsidiary. Similarly, the provisions of the
Excluded Agreements shall not apply to Disney and its Subsidiaries
notwithstanding any transfers of businesses from CCABC and its
Subsidiaries to Disney and its Subsidiaries. Further, the parties
expressly acknowledge and agree that ESPN, Inc. (and/or affiliates
thereof) are currently parties to various agreements with the Company
(and/or Affiliates thereof) relating to the establishment and management
of the ESPN Brazil programming service (the "ESPN Brazil Agreements") and
that the ESPN Brazil Agreements shall not be subject to, or
<PAGE>
82
affected in any way by, any term of any Excluded Agreement and that, if
any conflict exists between any ESPN Brazil Agreement and any Excluded
Agreement, the terms of such ESPN Brazil Agreement shall govern. In
addition, the parties expressly acknowledge and agree that no provisions
of any Excluded Agreement shall apply to the activities of the following
persons, except for activities not within the ordinary course of business
of such persons as determined in good faith by the governing bodies of
such persons: The A&E Television Networks, Lifetime and ESPN, Inc.
19.8 Transferees of Shares of Falcon and its Affiliates shall acquire the
rights of Falcon and its Affiliates set out in Clauses 19.5 and 19.6
above, and shall become bound by the same obligations as Falcon and its
Affiliates set out in Clauses 19.3 and 19.4 above, provided such
transferees (together with their Affiliates) acquire, from time to time,
and continue to hold, no less than 5% (five percent) of the voting Shares
of the Company. Transferees of Shares of the Investor Entities and their
Affiliates shall acquire the rights of the Investor Entities and their
Affiliates set out in Clauses 19.5 and 19.6 above, and shall become bound
by the same obligations as the Investor Entities and their Affiliates set
out in Clause 19.7 above, provided such transferees (together with their
Affiliates) acquire, from time to time, and continue to hold, no less than
5% (five percent) of the issued and outstanding voting Shares of the
Company. No other rights or obligations of any other party under this
Clause 19 shall be transferable.
Clause 20. CONFIDENTIALITY
Each of the Stockholders and the Company agrees that it will not, without
the mutual agreement of all parties to this Agreement, disclose to any
third party any information reasonably designated by the Company as
confidential and obtained in connection with this Agreement, except to the
extent that: (i) such disclosure is required by applicable law, regulation
or legal process; (ii) such information becomes publicly known other than
as a result of any breach by any of the parties hereto of its obligations
set forth in this Clause 20; (iii) such disclosure is requested or
required by any bank or other regulatory authority having jurisdiction
over such party hereto; (iv) such disclosure is to such Stockholder's
Affiliates or to the officers, directors, employees, auditors and
professional advisors of such Stockholder and its Affiliates who, in each
case, have a need to know such information; or (v) such disclosure is to
such Stockholder's partners (or stockholders that are not Affiliates of
such Stockholder) or, if required to obtain credit or pursuant to an
executed credit agreement or similar document, to any financial
institution lender to such Stockholder or its Affiliates or, in the case
of Falcon, to the owners from time to time of any equity interest in
Falcon Parent (each such person to whom a Stockholder is permitted to
disclose such confidential
<PAGE>
83
information under this subclause (vi) above being referred to as a
"Permitted Disclosee"); provided, however, that to the extent a
Stockholder discloses such confidential information to a Permitted
Disclosee and such Permitted Disclosee discloses such confidential
information otherwise than as permitted by this Clause 20, such
Stockholder shall be responsible for such disclosure as if it had itself
breached this Clause 20 and shall be liable to the Company for any damage
arising from such wrongful disclosure.
Clause 21. DURATION OF THE AGREEMENT
21.1 This Agreement shall take effect as of the date hereof and shall remain in
effect for a period of 25 (twenty-five) years from such date.
21.2 In the event that no Stockholder informs to the others upon written notice
of its lack of interest in extending this Agreement beyond such initial
term of 25 (twenty-five) years or any subsequent term, at least 4 (four)
months in advance, this Agreement shall continually extend for successive
two year periods.
Clause 22. MISCELLANEOUS PROVISIONS
22.1 This Agreement is irrevocable and shall be binding on the Stockholders and
the Company and their heirs and successors and assigns for all purposes.
The Company, the Stockholders and their heirs or successors or assigns
shall fully comply with the obligations undertaken herein, including,
without limitation, voting their respective Shares in strict compliance
with provisions herein. The parties hereto are aware that their respective
obligations as set out herein are subject to specific enforcement,
pursuant to applicable law.
22.2 All notifications, communications and notices required or permitted
pursuant to this Agreement shall be effected in writing and delivered to
each party through facsimile, telex or registered letter, return receipt
requested, as follows:
If to Mr. Civita:
Av. Otaviano Alves de Lima, 4400
02901-000 (Freguesia do O) Sao Paulo, SP
Fax: (011) 875-9456
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84
If to Abrilcap:
Av. Otaviano Alves de Lima, 4400
02901-000 (Freguesia do O) Sao Paulo, SP
Fax: (011) 875-9456
Attn: Mr. Jose Augusto Pinto Moreira
If to Harpia or Curupira:
c/o Chase Manhattan Overseas Banking Corporation
802 Delaware Avenue - 13th Floor
Wilmington, Delaware 19801 - U.S.A.
Fax: (302) 429-0456
Attn: Mr. Warren Leonard
with a copy to:
The Chase Manhattan Bank, N.A.
Media and Telecommunications
One Chase Manhattan Plaza, 4th Floor
New York, New York 10081 - U.S.A.
Fax: (212) 552-0259
Attn: Mr. Fernando J. Viana
If to Falcon:
c/o Hellman & Friedman Capital Partners III, L.P.
One Maritime Plaza, 12th Floor
San Francisco, California 94111 - U.S.A.
Fax: (415) 788-0176
Attn: Mr. Joseph Niehaus
<PAGE>
85
with a copy to
Falcon International Communications LLC
10900 Wilshire Boulevard
Los Angeles, California 90024 - U.S.A.
Fax: (310) 824-4824
Attn: Mr. Stanley Iskowitch
If to the Company:
Av. Otaviano Alves de Lima, 4400
02901-000 (Freguesia do O) Sao Paulo, SP
Telex: (011) 22115
Fax: (011) 875-9456
Attn: Mr. Jose Augusto Pinto Moreira
If to the Investor Entities:
The Hearst Corporation
959 8th Avenue
New York, New York 10019
Attention: Victor F. Ganzi, Esq.
Fax: (212) 246-3630
Attn: Mr. Ray Joslin
Fax: (212) 245-2306
Capital Cities/ABC, Inc.
77 West 66th Street
New York, New York 10023
Attn: Larry M. Loeb, Esq.
Fax: (212) 456-6565
with copies to:
Capital Cities/ABC, Inc.
77 West 66th Street
New York, New York 10023
Attn: Jerry Sullivan
Fax: (212) 456-7570
<PAGE>
86
22.3 Clause Headings and other headings herein contained are simply for
reference purposes, and shall not affect the meaning or construction
thereof.
22.4 Except for the Option Agreement, the Abril Agreement and the two letter
agreements dated of even date herewith among the parties hereto, this
Stockholders Agreement constitutes the entire agreement among the parties
hereto respecting the matters described herein and supersedes all prior
agreements and undertakings, oral or written, among the parties hereto
with respect to the subject matter hereof.
22.5 No amendment to this Agreement shall be valid unless it is made in writing
and signed by all parties hereto.
22.6 No term or toleration granted by any of the parties to the others, in
relation to the terms of this Agreement, shall affect in any way this
Agreement or any of the rights and obligations of the parties, except in
strict compliance with the terms of the granted toleration.
22.7 This Agreement shall be filed at the Company's head office pursuant to and
for the purposes of Article 118 of Law No. 6.404, of 12.15.76. the
Company's Registered Share Registrar, on the margin of the Share
registration, and the certificates representing the Shares, if issued,
shall bear the following text: "The voting and transfer rights inherent to
the shares of stock represented by this Certificate (or registry),
including the creation of any lien for any purpose, is bound and subject
to the Stockholders Agreement dated December 6, 1995."
22.8 This Agreement shall be governed and construed in accordance with the laws
of the Federative Republic of Brazil.
22.9 Each of the parties hereto irrevocably agrees that any action or
proceeding against it arising out of this Agreement may be brought (i) in
a New York State Court sitting in the City of New York, or the United
States District Court for the Southern District of New York (or, if such
courts do not have subject matter jurisdiction over such dispute, in any
other state or federal court located in the State of New York),
preserving, however, all rights of removal to a federal court under 28
U.S.C. Section 1441 or (ii) the Courts of the City of Sao Paulo, State of
Sao Paulo. The foregoing submission to jurisdiction shall be deemed
non-exclusive and shall not prevent any party from instituting any action
or proceeding in any other court of competent Jurisdiction.
Until this Agreement shall have terminated:
(i) each of the Company, Mr. Civita and Abrilcap does hereby irrevocably
designate, appoint and empower CT Corporation System, with offices
currently at 1633 Broadway, New York, NY 10019, as its lawful agent
to
<PAGE>
87
receive for and on its behalf service of process in the State of New
York in any such proceedings;
(ii) each of Harpia and Curupira does hereby irrevocably designate,
appoint and empower The Chase Manhattan Bank, N.A., or any successor
thereto, with offices currently at 1 Chase Manhattan Plaza, New
York, NY 10081, Attention: Fernando Viana, 4th Floor, as its lawful
agent to receive for and on its behalf service of process in the
State of New York in any such proceedings;
(iii) Falcon does hereby irrevocably designate, appoint and empower CT
Corporation System, with offices currently at 1633 Broadway, New
York, NY 10019, as its lawful agent to receive for and on its behalf
service of process in the State of New York in any such proceedings;
(iii) Hearst/ABC Limitada does hereby irrevocably designate, appoint and
empower The Hearst Corporation, with offices currently at 959 Eighth
Avenue, New York, New York 10019, Attention: General Counsel, as its
lawful agent to receive for and on its behalf service of process in
the State of New York in any such proceedings,
(iii) any service made on such agent or its successor shall be effective
when delivered regardless of whether notice thereof is given to the
affected party hereto;
(iv) if any person designated as an agent under this Clause 22.9 shall
cease to be located in the State of New York or shall no longer
serve as agent of a party hereto to receive service of process in
the State of New York, the party so affected shall be obligated to
ensure that an agent or successor agent is appointed and each of the
other parties is notified of the same in writing, service upon the
last designated agent shall be good and effective;
(v) the foregoing provisions hereof shall not affect or limit the right
of any party to, or prevent any party from, serving process in any
other manner permitted by applicable law; and (vi) the Company and
those Stockholders who have designated, appointed and empowered CT
Corporation System to act as its agent as described above shall
promptly (but in no event later than sixty (60) days from the date
hereof) deliver to the other Stockholders written confirmation from
CT Corporation System accepting such designation, appointment and
empowerment.
<PAGE>
88
IN WITNESS WHEREOF, the parties herein have executed this instrument in
five identical counterpart originals of equal content in the presence of the two
undersigned witnesses.
___________________________________
HARPIA HOLDINGS LIMITED
___________________________________
CURUPIRA HOLDINGS LIMITED
___________________________________
ROBERT CIVITA
___________________________________
ABRILCAP COMERCIO E PARTICIPACOES
LTDA.
___________________________________
TEVECAP S.A.
___________________________________
FALCON INTERNATIONAL
COMMUNICATIONS LTD.
HEARST/ABC VIDEO SERVICES II
By: Hearst Brazil, Inc., its partner
___________________________________
By: Brazil Cable Investments, Inc., its partner
___________________________________
TVA PARTICIPACOES LTDA.
By: Hearst Brazil, Inc., its partner
___________________________________
By: Brazil Cable Investments, Inc., its partner
___________________________________
<PAGE>
89
WITNESSES:
1.____________________
2.____________________
<PAGE>
AMENDMENT NO. 2
TO THE STOCKHOLDERS AGREEMENT
This Amendment No. 2, dated as of October 15, 1996 ("Amendment No. 2"), to
the Stockholders Agreement dated as of December 6, 1995, as amended by Amendment
No. 1 dated as of February 12, 1996 (as so amended, the "Stockholders
Agreement"), is made by and among:
1. TEVECAP S.A., a corporation organized under the laws of the Federative
Republic of Brazil, with its principal place of business in Sao Paulo, SP,
Brazil, at Rua do Rocio 313, Cj. 101 (parte) CGC MF Nr. 57.574.170/0001-05
(the "Company");
2. Mr. Robert Civita, a Brazilian citizen, married, editor, bearer of the ID
Card Nr. 1.666.785 and CPF Nr. 006.890.178-04, domiciled in Sao Paulo, SP,
Brazil, at Rua Escocia, 253, apt. 11, Brazil ("Mr. Civita");
3. ABRIL S.A., a corporation organized under the laws of the Federative
Republic of Brazil, with its principal place of business in Sao Paulo, SP,
Brazil, at Av. Otaviano Alves de Lima 4400, Sao Paulo, Brazil, CGC/MF Nr.
44.597.052/0001-62 ("Abril") (as successor in interest to Abrilcap
Comercio e Participacoes Ltda.);
4. HARPIA HOLDINGS LIMITED, a company duly organized and validly existing in
accordance with laws of the Cayman Islands, having its registered office
at c/o Maples & Calder, Attorneys-at-Law, P.O. Box 309, George Town, Grand
Cayman, Cayman Islands, British West Indies ("Harpia");
5. CURUPIRA HOLDINGS LIMITED, a company duly organized and validly existing
in accordance with the laws of the Cayman Islands, having its registered
office at c/o Maples & Calder, Attorneys-at-Law, P.O. Box 309, George
Town, Grand Cayman, Cayman Islands, British West Indies ("Curupira");
6. FALCON INTERNATIONAL COMMUNICATIONS (BERMUDA) L.P., a limited partnership
organized and validly existing in accordance with the laws of Bermuda,
having its registered office in Bermuda ("Falcon");
7. HEARST/ABC VIDEO SERVICES II, a general partnership organized under the
laws of Delaware, with its principal place of business at 959 Eighth
Avenue, New York, NY 10019 ("Hearst/ABC Video"); and
8. CABLE PARTICIPACOES LTDA. (formerly TVA PARTICIPACOES LTDA.), a limited
liability company organized under the laws of the Federative Republic of
Brazil, with its principal place of business in Sao Paulo, SP, Brazil Rua
do Rocio 313, CGC MF Nr. 00921404/0001-18 ("Hearst/ABC Limitada").
WHEREAS, the parties (including their respective nominees) are the holders
of 100% of the issued and outstanding capital stock of the Company;
<PAGE>
WHEREAS, the parties entered into the Stockholders Agreement governing
certain of their respective rights and obligations in the Company;
WHEREAS, the Company plans to issue high yield senior notes in the United
States in the principal amount of $225,000,000 (the "Notes");
WHEREAS, the Notes will be issued under an indenture (the "Indenture")
among the Company, the Company's subsidiaries named therein, The Chase Manhattan
Bank, as trustee, and Chase Manhattan Trust & Banking Co. (Japan) Ltd., as
paying agent;
WHEREAS, the Indenture will contain certain covenants relating to the
actions and conduct of the Company and the Company's subsidiaries;
WHEREAS, to provide for the issuance of the Notes, the undersigned parties
have agreed to amend the Stockholders Agreement in accordance with the terms
hereof.
NOW THEREFORE, the Stockholders, having resolved to amend the Stockholders
Agreement in accordance with the requirements of Article 118 of Law No. 6.404,
of December 15, 1976, other applicable legislation and the following terms and
conditions, hereby agree to amend the Stockholders Agreement as follows:
1. The following definitions shall be added to Section 1 of the Stockholders
Agreement:
"Indenture" shall mean the Indenture among the Company, the
Company's subsidiaries named therein, The Chase Manhattan Bank, as
trustee, and Chase Manhattan Trust & Banking Co. (Japan) Ltd., as
paying agent, to be entered into in connection with the issuance of
the Notes.
"Notes" shall mean $225,000,000 aggregate principal amount of senior
notes due 2004 to be issued by the Company pursuant to the
Indenture.
2. Each of Sections 6.1, 7.1(i) and 7A.1 shall be deleted and replaced by the
following:
6.1 So long as the Shares owned by the HC Entities are not publicly
registered, listed or traded (other than pursuant to (x) a
registration initiated by the Company pursuant to Clause 13.1(ii)
hereof to satisfy its indemnification obligations as described
therein, (y) a registration initiated pursuant to Clause 18.1 hereof
or (z) the exercise of its piggyback registration rights pursuant to
Clause 18.2 hereof) and Harpia or Curupira and their Affiliates,
considered together, at such time hold at least five percent (5%) of
the Company's voting Shares, or any other Stockholder or group of
Stockholders that are Affiliates (other than Mr. Civita, Abril and
any Affiliates thereof) which have received, by transfer from
Harpia, Curupira or any Affiliate thereof, and at such time hold, at
least five percent (5%) of the Company's voting Shares, then upon
the occurrence of an HC Triggering Event (as defined in Clause 6.2
below) , and during the continuance thereof as described in the last
paragraph of Clause 6.2 below, Harpia, Curupira, and their
Affiliates, or such other Stockholder or
-2-
<PAGE>
Stockholders, as the case may be (the "HC Put Party"), shall be
entitled to demand that the Company buy, in whole or in part, the
Shares subscribed for by Harpia or Curupira pursuant to the
Subscription Agreement then held by the HC Put Party (the Shares
designated as being subject to such exercise of the HC Put Option
are referred to as the "HC Put Shares") at the Event Put Price (as
defined below), on the terms and conditions set forth in this Clause
6 (the "HC Put Option"); provided, however, that if the terms of the
Indenture set forth in the Section entitled "Limitation on
Restricted Payments," prohibit the Company from purchasing the HC
Put Shares, in whole or in part, the Company shall not be obligated
to purchase the HC Put Shares to the extent it is so restricted, but
the Company shall have the obligation, if so elected by the HC Put
Party as the Event Put Party as provided for in Clause 9.3 hereof,
to issue the Special Preferred Shares pursuant to Clause 9.3 hereof;
provided further, however, that the Company shall purchase the HC
Put Shares for cash: (i) if such purchase is not restricted by the
terms of the Indenture, (ii) to the fullest extent permitted under
the terms of the Indenture and (iii) as soon as such purchase is not
restricted by the terms of the Indenture. The rights of any HC Put
Party under this Clause 6 are in addition to any other rights,
remedies or actions which may be available to it hereunder, under
any other agreement or by operation of law, except that the HC Put
Option shall not be exercisable with respect to any HC Triggering
Event (as defined below) for which Harpia, Curupira and their
Affiliates shall have received indemnification in full for all
amounts claimed and owing under Clause 7.3(a) or (b) of the Old
Stock Agreement and, to the extent applicable, Sections 6.3(h) and
(i) of the Stock Purchase Agreement.
7.1(i) Unless
(a) the Shares owned by Falcon or its Affiliates shall have been
publicly registered, listed or traded (other than pursuant to:
(x) a registration initiated by the Company pursuant to Clause
13.1(ii) hereof to satisfy its indemnification obligations as
described therein, (y) (1) with respect to a Falcon Time Put
Option, a registration initiated by a Stockholder other than
Falcon or its Affiliates pursuant to Clause 18.1 hereof and
(2) with respect to a Falcon Event Put Option, a registration
initiated pursuant to Clause 18.1 hereof or (z) the exercise
of its piggyback registration rights pursuant to Clause 18.2
hereof),
(b) at the time of the exercise of the Falcon Put Option both (1)
at least 50% of the initial aggregate ownership interests of
the initial equity holders (the "Falcon Parent Investors") of
Falcon International Communications L.P. ("Falcon Parent")
(such initial ownership interests and initial equity holders
calculated after Falcon Parent shall have been fully organized
and the initial issuance of ownership interests to investors
other than Hellman & Friedman Capital Partners III, L.P.
("Hellman & Friedman") and/or entities related thereto shall
have been completed) shall then have become publicly
registered, listed or traded
-3-
<PAGE>
and shall be freely tradable without any restrictions imposed
by applicable securities laws, and (2) at least 50% of all of
the ownership interests of Falcon Parent shall then have
become publicly traded or
(c) Falcon together with its Affiliates at such time collectively
hold less than 5% (five percent) of the Company's voting
Shares,
then upon the occurrence of a Falcon Triggering Event (as defined
below in Clause 7.2) and during the continuance thereof as described
in the last paragraph of Clause 7.2 below, Falcon and its Affiliates
shall be entitled to demand that the Company buy:
(A) in the case of a Falcon Triggering Event referred to in Clause
7.2(i) below, all but not less than all of the Shares acquired
by Falcon pursuant to the Old Stock Purchase Agreement then
held by Falcon and its Affiliates (as used with respect to the
Falcon Time Put Option, the "Falcon Put Shares") at the Time
Put Price, on the terms and conditions set forth in this
Clause 7 and Clause 9 (such option being hereinafter referred
to as the "Falcon Time Put Option"), or
(B) in the case of all other Falcon Triggering Events, all or a
portion of the Shares acquired by Falcon pursuant to the Old
Stock Purchase Agreement then held by Falcon and its
Affiliates or transferees described in Clause 7.1(ii) below
(as used with respect to the Falcon Event Put Option, the
number of Shares designated as being subject to such exercise
of the Falcon Event Put Option are referred to as the "Falcon
Put Shares") at the Event Put Price, on the terms and
conditions (including the proviso set forth below) set forth
in this Clause 7 and Clause 9 (such option hereinafter
referred to as the "Falcon Event Put Option"), except that the
Falcon Event Put Option shall not be exercisable with respect
to any Falcon Triggering Event for which Falcon and its
Affiliates shall have received indemnification in full for all
amounts claimed and owing under Section 7.3(a) or (b) of the
Old Stock Purchase Agreement and, to the extent applicable,
Sections 6.3 (h) and (i) of the Stock Purchase Agreement;
provided, however, that if the terms of the Indenture set forth in
the Section entitled "Limitation of Restricted Payments," thereof
prohibit the Company from purchasing the Falcon Put Shares that are
subject to a Falcon Event Put Option, in whole or in part, the
Company shall not be obligated to purchase the Falcon Put Shares to
the extent it is so restricted, but the Company shall have the
obligation, if so elected by Falcon as the Event Put Party as
provided for in Clause 9.3 hereof, to issue the Special Preferred
Shares pursuant to Clause 9.3 hereof; provided further, however,
that the Company shall purchase the Falcon Put Shares for cash: (i)
if such purchase is not restricted by the terms of the Indenture,
(ii) to the fullest extent permitted under the
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<PAGE>
terms of the Indenture and (iii) as soon as such purchase is not
restricted by the terms of the Indenture.
Falcon hereby agrees, promptly after completion of the initial
issuance of ownership interests in Falcon Parent to investors other
than Hellman & Friedman and/or entities related thereto, to provide
the Board with a list of the Falcon Parent Investors.
7A.1 So long as the Shares owned by the Investor Entities are not
publicly registered, listed or traded (other than pursuant to: (x) a
registration initiated by the Company pursuant to Clause 13.1(ii)
hereof to satisfy its indemnification obligations as described
therein, (y) a registration initiated pursuant to Clause 18.1 hereof
or (z) the exercise of its piggyback registration rights pursuant to
Clause 18.2 hereof) and the Investor Entities and their Affiliates,
considered together, at such time hold at least 5% (five percent) of
the Company's voting shares, or any other Stockholder or group of
Stockholders that are Affiliates (other than Mr. Civita, Abril and
any Affiliates thereof) which have received, by transfer from the
Investor Entities or any Affiliate thereof, and at such time hold at
least 5% (five percent) of the Company's voting Shares, then upon
the occurrence of an Investor Triggering Event (as defined in Clause
7A.2 below), and during the continuance thereof as described in the
last paragraph of Clause 7A.2 below, the Investor Entities and their
Affiliates, or such other Stockholder or Stockholders, as the case
may be (the "Investor Put Party"), shall be entitled to demand that
the Company buy, in whole or in part, the Shares purchased by the
Investor Entities pursuant to the Stock Purchase Agreement or the
stock purchase agreement among Hearst Limitada, Harpia and Curupira
(the "HC Stock Purchase Agreement") then held by the Investor Put
Party (the number of Shares designated as being subject to such
exercise of Put Option are referred to as the "Investor Put
Shares"), at the Event Put Price, on the terms and conditions set
forth in this Clause 7A (the "Investor Put Option"); provided,
however that if the terms of the Indenture set forth in the Section
entitled "Limitation of Restricted Payments," thereof prohibit the
Company from purchasing the Investor Put Shares, in whole or in
part, the Company shall not be obligated to purchase the Investor
Put Shares to the extent it is so restricted, but the Company shall
have the obligation, if so elected by the Investor Entities as the
Event Put Party as provided for in Clause 9.3 hereof, to issue the
Special Preferred Shares pursuant to Clause 9.3 hereof; provided
further, however, that the Company shall purchase the Investor Put
Shares for cash: (i) if such purchase is not restricted by the terms
of the Indenture, (ii) to the fullest extent permitted under the
terms of the Indenture and (iii) as soon as such payment is not
restricted by the terms of the Indenture. The rights of any Investor
Put Party under this Clause 7A are in addition to any other rights,
remedies or actions which may be available to it hereunder, under
any other agreement or by operation of law, except that the Investor
Put Option shall not be exercisable with respect to any Investor
Triggering Event for which the Investor Entities and their
Affiliates shall have received
-5-
<PAGE>
indemnification in full for all amounts claimed and owing under
Clause 6.3(a) or (b) of the Stock Purchase Agreement.
3. Each of Sections 9.1, 9.2, 9.3, 9.5, 9.6 and 9.7 shall be deleted and
replaced by the following:
9.1 In the event that on the Date of the HC Put Payment, the Date of the
Investor Put Payment, or the Date of the Falcon Put Payment with
respect to any Falcon Event Put Option, as the case may be (the
"Date of the Event Put Payment"), by reason of inadequate retained
earnings or reserves pursuant to Article 30 of Law No. 6.404/76 or
by reason of a restriction set forth in the Indenture in the Section
entitled "Limitation on Restricted Payments", the Company is unable
to purchase the Shares subject to the HC Put Option, the Investor
Put Option or the Falcon Event Put Option, as the case may be (the
"Event Put"), in whole or in part, and in the event that the HC Put
Party, the Investor Put Party or the Falcon Put Party, as the case
may (the "Event Put Party"), does not expressly further waive its
Event Put (provided that any such waiver shall be without prejudice
to the right of the Event Put Party to reinstate such Event Put
Option in accordance with Clause 6, 7 or 7A above, as applicable),
the Company shall establish, in writing, the amount in U.S. Dollars
corresponding to the Event Put Price of Shares not acquired on the
Date of the Event Put Payment as verified pursuant to Clause 6, 7 or
7A above, which shall not be subject to any variation (except
foreign exchange variation), irrespective of the Company's operating
results or the value of the Shares after the Date of the Event Put
Payment, and the closing date of the Event Put with respect to such
remaining Shares shall be extended pursuant to this Clause ("Put
Postponement"). This Clause 9.1 shall not limit or be interpreted as
further limiting the Company's obligation (subject to the terms
hereof), under the Event Put to buy the maximum possible amount of
Shares, including on the Date of the Event Put Payment.
9.2 In the event of a Put Postponement, the Company shall continue to
use its best efforts to increase its ability, to legally purchase
the remaining Shares subject to the Event Put, pursuant to its
terms, and in each case subject to the restrictions set forth in the
Indenture in the Section entitled "Limitation on Restricted
Payments" and the Section entitled "Limitation on Indebtedness" for
so long as the Notes are outstanding, by obtaining credit and/or the
necessary consent of its creditors other than the holders of the
Notes or the trustee under the Indenture, if applicable. The Event
Put Price of each Share to be purchased shall be paid to the Event
Put Party in Reais Equivalent on the date of such payment.
9.3 Any Shares not purchased by the Company on the Date of the Event Put
Payment may be converted by the Event Put Party, at its exclusive
discretion, into classes of the Company's Preferred Shares ("Special
Preferred Shares") entitled to a minimum fixed and cumulative
dividend to be determined on the basis of the aggregate Event Put
Price for such unpurchased Shares, multiplied
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<PAGE>
by the one-year LIBOR rate as quoted by the London branch of The
Chase Manhattan Bank prevailing on the Date of the Event Put
Payment, plus 4% per annum ("Cumulative Dividends"), payable
semiannually from the Date of the Event Put Payment through the date
such Special Preferred Shares are purchased by the Company pursuant
to the Event Put; provided, however, if due to restrictions set
forth in the Indenture in the Section entitled "Limitation on
Restricted Payments," the Company may not make payment of the
Cumulative Dividends at any time, the Company shall not be obligated
to make payment of such Cumulative Dividends to the extent
restricted by the terms of the Indenture; provided further however
that in such event, (i) such dividends shall continue to accumulate;
and (ii) the Company shall make payment of such dividends (including
any accumulated and unpaid dividends) as soon as permitted by
applicable law and as soon as such payment is not restricted by the
terms of the Indenture. The Event Put Party shall be entitled to
elect, in its sole discretion, to receive shares of voting (the
"Preferred Voting Shares") or non-voting Special Preferred Shares,
or any combination thereof. For purposes of this Agreement and the
Company's By-Laws, the Preferred Voting Shares shall be deemed to be
included in the definition of "Shares" and all of the rights of the
Stockholders hereunder with respect to the Shares held by them shall
continue so long as they hold the Preferred Voting Shares.
9.4 The Stockholders undertake to exercise the voting rights of their
Shares in order to amend the Company's By-Laws so as to create the
Special Preferred Shares whenever so required according to
provisions set forth herein.
9.5 In addition to the Cumulative Dividends, the Special Preferred
Shares shall be entitled to any minimum dividend required by law to
be paid by the Company ("Mandatory Dividend"), provided, however, if
due to restrictions set forth in the Indenture in the Section
entitled "Limitation on Restricted Payments," and in accordance with
the waiver set forth in Clause 16.4 hereof, the Company may not make
payment of the Mandatory Dividend in cash at any time, the Company
shall not be obligated to make payment of such Mandatory Dividend in
cash to the extent restricted by the terms of the Indenture;
provided further, however, that in such event, (i) such dividends
shall continue to accumulate; and (ii) the Company shall make
payment of such dividends (including any accumulated and unpaid
dividends) as soon as permitted by applicable law and as soon as
such payment is not restricted by the terms of the Indenture.
9.6 After the payment of the Cumulative Dividend and of the Mandatory
Dividend, any remaining profit or reserve (other than mandatory
legal reserves) verified by the Company shall be used to buy the
highest possible amount of Shares (including the Special Preferred
Shares) subject to the Event Put Option, provided, however, if due
to restrictions set forth in the Indenture in the Section entitled
"Limitation on Restricted Payments," the Company may not purchase
any shares pursuant to this Clause 9.6 at any time, the Company
-7-
<PAGE>
shall not be obligated to make such purchase, provided further,
however, that in such event the Company shall make such purchase as
soon as permitted by applicable law and as soon as not restricted by
the terms of the Indenture. All dividend payments and all other
distributions to Stockholders and all redemptions or repurchases of
any capital stock from any holder of capital stock in the Company,
with the exception of the Cumulative Dividend on Special Preferred
Shares then outstanding and of the Mandatory Dividend, are and shall
be expressly subject and subordinate to the acquisition of all of
the Shares subject to the Event Put in the event they have not been
purchased from the Event Put Party. All Cumulative Dividends, and
all repurchases of Shares (including the Special Preferred Shares)
subject to the Event Put Option, shall be made on a pro-rata basis
in favor of all Stockholders that exercised an Event Put
simultaneously under Clause 8.1 or 8.2 or 8.3 above; otherwise, the
rights of any Event Put Parties under this Clause 9 and under any
Special Preferred Shares issued hereunder shall be ranked according
to the respective Dates of the Event Put Payment on which such
rights arose.
9.7 (i) In the event a Falcon Put Notice in respect of the Falcon Time
Put Option has been delivered, and, pursuant to Clause 7.3 and 6.9
above, Falcon has decided to exercise the Falcon Time Put Option,
then, during the 30-day period immediately following receipt of the
appraiser's notice referred to in Clause 6.7 above (the "Time Put
Decision Period"), the Company shall, by action of a majority of the
members of its Board not appointed by any Falcon Put Party or its
Affiliates, make the following determinations in sequence, promptly
(but in any event within the Time Put Decision Period) notify the
Falcon Put Parties of such determinations and take the following
actions as determined thereby:
(a) If the Company, acting in good faith and in a commercially
reasonable manner, determines that it has, subject to the
restrictions set forth in the Indenture in Section entitled
"Limitation on Indebtedness", and subject to the restrictions
set forth in the Indenture in the Section entitled,
"Limitation on Restricted Payments," cash available which,
together with borrowings available to the Company on
commercially reasonable terms, is sufficient to pay the entire
Time Put Price, then the Company shall pay the Time Put Price
to the Falcon Put Parties by 11:30 a.m. on the 90th day after
the end of the Time Put Decision Period, in cash in Reais
Equivalent on such day of payment, and the Falcon Put Parties
shall transfer to the Company all of the Falcon Put Shares
free and clear of all liens, claims, charges, restrictions and
encumbrances caused by or suffered to exist by any Falcon Put
Party or its Affiliates, other than as provided in this
Agreement; provided it is understood that the Company shall be
subject to an obligation to use its best efforts, subject so
long as the Notes are outstanding to the restrictions set
forth in the Indenture in the Section entitled "Limitation on
Indebtedness," to obtain any necessary borrowings on a
commercially reasonable basis to satisfy the Falcon Time Put
Option in
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<PAGE>
cash on the Date of the Falcon Put Payment; provided, however,
that if on such 90th day, the Company is unable to satisfy the
cash payment required hereunder, the provisions of Clause
9.7(ii) shall be applicable;
(b) If after use of the efforts described in (a) above the Company
determines that such cash and borrowings described in (a)
above are not available but instead determines, acting in good
faith, in a commercially reasonable manner and, for so long as
the Notes are outstanding, subject to the restrictions set
forth in the Indenture in the Section entitled "Limitation on
Restricted Payments," that it will have cash available which,
together with borrowings available to the Company on
commercially reasonable terms and, for so long as the Notes
are outstanding, in accordance with the restrictions set forth
in the Indenture in the Section entitled "Limitation on
Indebtedness" will be sufficient to pay the Time Put Price in
three installments as described in Clause 9.8 below, then the
Company and the Falcon Put Parties shall take the actions
described in Clause 9.8 below, it being understood and agreed
that the Company shall be subject to an obligation to use its
best efforts, subject for so long as the Notes are outstanding
to the restrictions set forth in the Indenture in the Section
entitled "Limitation on Indebtedness," to obtain any necessary
borrowings on a commercially reasonable basis to satisfy all
such installments; and
(c) if the Company, acting in good faith and in a commercially
reasonable manner, determines that such cash and borrowings
described in (a) and (b) above are not available, then the
Company and the Falcon Put Parties shall take the actions
described in Clause 9.9 below.
(ii) If, at the end of the 90-day period referred to in Clause 9.7(i)(a),
the Company, after having used its best efforts to obtain any
necessary borrowings on a commercially reasonable basis and for so
long as the Notes are outstanding in accordance with the
restrictions set forth in the Indenture in the Section entitled
"Limitation on Indebtedness," to satisfy the entire Time Put Price,
is unable to pay the entire Time Put Price, the Company shall, on
such 90th day, be entitled to and shall elect one of the
alternatives set forth in Clause 9.7(i)(b) or (c) above, and in such
event the parties shall be governed by the procedures set forth in
Clause 9.8 or 9.9 below, as the case may be, depending upon the
alternative elected, and the other applicable provisions of this
Agreement.
4. The following Clause 9.13 shall be added to the end of Clause 9:
9.13 Notwithstanding the provisions of Clauses 9.8 and 9.10 hereof, each
of the parties to the Stockholders Agreement agrees as follows:
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<PAGE>
(i) If as a result of the restrictions set forth in the Indenture
in the Section entitled "Limitation on Restricted Payments,"
the Company is not able to make a cash payment required under
Clause 9.8(i) on the first or second anniversary of the
Company's receipt of the related Falcon Put Notice, the
Company shall not be required to make such payment in cash on
such dates, but shall be required to deliver the promissory
note or promissory notes referred to in Clause 9.8(ii). The
payment required on the third anniversary shall not be subject
to any restrictions.
(ii) If as a result of the restrictions set forth in the Indenture
in the Section entitled "Limitation on Restricted Payments,"
the Company is not able to make a cash interest payment
required under any promissory note or notes issued hereunder,
the Company shall not be required to make such cash payment at
such time; provided, however, that: (i) any accrued and unpaid
interest shall accumulate (and if necessary under applicable
law, be added to principal) and interest on such unpaid amount
shall be compounded quarterly and shall be paid in accordance
with the other provisions of the promissory notes applicable
to payment of interest; (ii) the Company shall make such
payments of interest as soon as permitted under the terms of
the Indenture or as soon as such payment is no longer
restricted under the terms of the Indenture; and (iii) all
accrued and unpaid interest shall be due and payable on the
maturity of the promissory notes and interest shall continue
to accrue until payment in full.
(iii) Payment of the principal and interest (without restricting
interest payments permitted under the terms of the Indenture),
on the promissory notes shall be subordinated to the prior
payment in full of the Notes, pursuant to language customary
in transactions of this nature and consistent with the terms
hereof, provided that nothing herein nor in such subordination
language shall affect the relative rights against the Company
of Falcon and creditors of the Company other than holders of
the Notes, or prevent Falcon from exercising all remedies
under the notes issued to Falcon pursuant to Clauses 9.8 or
9.9, and otherwise permitted by applicable law, on default
under any such notes, subject to the rights, if any, of the
holders of the Notes to receive payment in full on the Notes
prior to the payment of such principal and interest on such
promissory notes issued to Falcon.
(iv) In determining the interest rate on the promissory notes under
Clause 9.10 (iv)), including without limitation, the spread
referred to in Clause 9.10(iv), the subordination of payment
to the Notes and the other restrictions imposed pursuant to
the Indenture shall be taken into account.
(v) Except as expressly limited by the terms of this Stockholders
Agreement, as amended, all rights and remedies of Falcon in
respect of
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<PAGE>
the Falcon Time Put as set forth in the Stockholders Agreement
shall remain unimpaired and unaffected by the Indenture. With
respect to any amendment, change or modification to the
Indenture or the Notes which requires the consent of the
Company the Company shall not provide such consent, unless (i)
Falcon, if Falcon, or any Affiliate thereof (other than Mr.
Civita, Abril and any Affiliates thereof) continues to own at
least 5% (five percent) of the Company's voting Shares, has
given prior written consent to such amendment, change or
modification and (ii) the Investor Entities, or any Affiliates
thereof (other than Mr. Civita, Abril and any Affiliate
thereof), continues to own at least 5% (five percent) of the
Company's voting Shares have given prior written consent to
such amendment, change or modification. The limitations agreed
to herein by Falcon and the Investor Entities shall apply only
to the Indenture and Notes and no other indebtedness of the
Company, including any refinancing, replacement or
substitution of the Notes.
5. Section 16.4 of the Stockholders Agreement shall be replaced by the
following:
16.4 (A) Unless amended or waived in accordance with Clause 12.3(iii)(c)
hereof, during each calendar year or within 3 (three) months
thereafter, the Company shall (subject to the other provisions of
Section 16.4 below), with respect to its operations for such year,
and to the extent it has funds legally available therefor, pay
dividends to the holders of its Shares, which dividends shall in the
aggregate not be less than the "net cash flow" of the Company and
its Subsidiaries during such year, provided that there shall first
be made a provision for projected cash requirements of the Company
and its Subsidiaries as reflected in the Business Plan for such
fiscal year for the subsequent (12) twelve month period.
Notwithstanding the foregoing, the Stockholders agree that, except
as expressly provided in Clauses 9.3 or 9.5 above or the terms of
Clause 16.4(B), the Company shall distribute not less than 25%
(twenty-five percent) of its net consolidated profits as defined in
the Brazilian corporation law.
(B) Notwithstanding the foregoing paragraph, the Company and the
Stockholders agree that the Company will distribute dividends in
accordance with the foregoing paragraph only if permitted in
accordance with the restrictions set forth in the Indenture in the
Section entitled "Limitation on Restricted Payments".
(C) If distribution of such dividends as contemplated by the first
paragraph hereof is restricted by the section of the Indenture
entitled "Limitation on Restricted Payments", the Company shall make
payment of such dividends (including any accumulated and unpaid
dividends) as soon as permitted by applicable law and as soon as
such payment is not restricted by the terms of the Indenture.
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<PAGE>
(D) In addition, each Stockholder hereby agrees that it will not
exercise its voting rights or rights hereunder to receive dividends
required by Brazilian corporate law, provided, however that such
agreement shall cease to be effective on the earliest to occur of
(x) the date that shares of Stock of the Company are issued on a
Brazilian or United States securities exchange in connection with a
bona fide public offering of such shares or the date that any shares
of the capital stock of the Company are otherwise effectively listed
and traded on any Brazilian or United States securities exchange,
(y) the date that none of the Notes remain outstanding or (z) the
date that such agreement is no longer effective, enforceable or
legal under applicable Brazilian laws and regulations (including
without limitation any construction or interpretation thereof by
Comissao de Valores Mobiliarios, any court or any other governmental
authority); provided, further, that such agreement shall not affect
the Company's ability to pay, or the Stockholders, right to receive,
any other dividends to the extent such dividends are permitted by
the Indenture in the Section entitled "Limitation on Restricted
Payments."
(E) Further, the amount of any dividends required by applicable
Brazilian corporate law, which would otherwise have been paid but
for the agreement set forth herein shall accumulate and shall be
paid by the Company on the earliest to occur of the events described
in clauses (x), (y), and (z) above. For the avoidance of doubt, the
Stockholders hereby confirm that:
E POR ESTAREM ASSIM JUSTAS E CONTRATADAS, as partes, por seus respectivos
representantes devidamente autorizados, resolvem assinar este Aditamento na
primeira data acima escrita.
___________________________________
HARPIA HOLDINGS LIMITED
___________________________________
CURUPIRA HOLDINGS LIMITED
___________________________________
ROBERT CIVITA
___________________________________
ABRIL S.A.
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<PAGE>
___________________________________
TEVECAP S.A.
___________________________________
FALCON COMMUNICATIONS
(BERMUDA) L.P.
___________________________________
HEARST/ABC VIDEO SERVICES II
By: Hearst Brazil, Inc., its partner
___________________________________
By: Brazil Cable Investments, Inc., its
partner
___________________________________
CABLE PARTICIPACOES LTDA.
By: Hearst Brazil, Inc., its partner
___________________________________
By: Brazil Cable Investments, Inc., its
partner
-13-
<PAGE>
Exhibit 10.4
<PAGE>
December 6, 1995
Hearst/ABC Video Services II and
TVA Participacoes Ltda.
c/o The Hearst Corporation
959 Eighth Avenue, 2nd Floor
New York, New York 10019
Re: Tevecap, S.A.
Dear Sirs:
We understand that you are contemplating entering into a Stock
Purchase Agreement, dated the date hereof (the "Stock Purchase Agreement"), with
the undersigned and a Stockholders Agreement, also dated the date hereof (the
"Stockholders Agreement"), with the undersigned. Terms used herein which are not
defined herein shall have the meanings given to them in the Stockholders
Agreement. We also understand that you desire that the ownership interest in
Tevecap S.A. (the "Company") be reorganized as described below (the "Proposed
Reorganization") to the extent reasonably feasible and consistent with the terms
and conditions set forth herein.
As an inducement to each of the parties hereto entering into the
Stock Purchase Agreement and Stockholders Agreement, the undersigned hereby
agree that subject to the terms and conditions herein set forth, on or prior to
December 31, 1995, (a) each of the undersigned which is a Stockholder will
contribute all of the Shares that it owns in the Company to a newly-formed
Brazilian corporation (hereinafter called "Newco") in exchange for a
corresponding number of shares of Newco such that the undersigned which are
Stockholders will become the sole holders of shares of Newco and Newco will own
approximately 80% of the outstanding Shares of Company (it is understood that a
nominal number of shares in the Company will be held by directors, and that a
nominal number of shares in Newco will be held by you provided that your
economic interest in Newco and Tevecap will equal your economic interest in
Tevecap immediately prior to the Proposed Reorganization), and (b) each of the
undersigned will enter into (i) a new stockholders agreement (hereinafter called
the "New Stockholders Agreement") with you which will supersede the Stockholders
Agreement and which will provide the undersigned and you with functionally
equivalent rights (including, without limitation, as to valuation of ownership
interests, priority of ownership interests, and voting and governance rights)
with respect to their and your respective interests in Newco and the Company as
the undersigned and you have under the Stockholders Agreement with respect to
ownership of shares of the Company and which shall also govern the operations of
Newco and the Company and (ii) to the extent reasonably required to provide you
and the undersigned with functionally equivalent rights as provided therein,
amendments to the Stock Purchase Agreement, the "Old Stock Purchase Agreement"
and "Option Agreement" defined therein (to the extent the undersigned are
<PAGE>
Hearst/ABC Video Services II 2 December 6, 1995
TVA Participacoes Ltda.
parties thereto) and any other agreements delivered in connection with the
Closings under the Stock Purchase Agreement and the Old Stock Purchase Agreement
(collectively, the "Transaction Documents"); provided, however, that Falcon
International Communications Ltd., Harpia Holdings Limited and Curupira Holdings
Limited shall have the option to retain some or all of their Shares as part of
the Proposed Reorganization, and not contribute such Shares to Newco; and
provided, further, that the undersigned shall not have any obligation to make
such contribution nor shall the undersigned or you have any obligation to enter
into the New Stockholders Agreement if;
(i) any of the undersigned advise you in writing that making the
contribution will have an adverse effect on it or the Company and if you
do not thereafter mutually agree with such person to compensate it for
such adverse effect (it being understood that you and the undersigned
will, during the period prior to the contribution, consult with each other
with respect to the possible effect of the Proposed Reorganization on the
future operations and structure of Newco and the Company); or
(ii) you and the undersigned, after having used reasonable good
faith efforts to do so, are unable to reach mutual agreement as to the
terms of the New Stockholders Agreement and the amendments to the other
Transaction Documents.
As to paragraph (i) above, (a) Robert Civita, Tevecap, S.A. and
Abrilcap Comercio E Participacoes Ltda acknowledge that they have considered the
possible effect on them, for Brazilian tax or regulatory purposes, of the
Proposed Reorganization and have not identified any such adverse affect on any
of them and (b) each of Harpia Holdings Limited, Curupira Holdings Limited and
Falcon International Communications, Ltd. acknowledges that, although it has not
had an opportunity to fully consider the possible effect on it of the Proposed
Reorganization, as of the date hereof it has not identified any adverse effect
on it for U.S. tax purposes.
You agree that, to the extent the Company incurs any costs or
expenses in consummating the Proposed Reorganization, you will pay or reimburse
the Company for such costs and expenses.
<PAGE>
You agree, by your execution hereof, to reasonably cooperate with
the undersigned in connection with the matters referred to herein.
Very truly yours,
HARPIA HOLDINGS LIMITED
By:___________________________
Name: Warren R. Leonard
Title: Director
CURUPIRA HOLDINGS LIMITED
By:___________________________
Name: Warren R. Leonard
Title: Director
______________________________
ROBERT CIVITA
ABRILCAP COMERCIO E PARTICIPACOES
LTDA.
By:___________________________
Name:
Title:
TEVECAP S.A.
By:___________________________
Name:
Title:
<PAGE>
You agree, by your execution hereof, to reasonably cooperate with
the undersigned in connection with the matters referred to herein.
Very truly yours,
HARPIA HOLDINGS LIMITED
By:___________________________
Name:
Title:
CURUPIRA HOLDINGS LIMITED
By:___________________________
Name:
Title:
______________________________
ROBERT CIVITA
ABRILCAP COMERCIO E PARTICIPACOES
LTDA.
By:___________________________
Name: Robert Civita /
Jose Augusto Pinto Moreira
Title: Presidente / Director Financeiro
TEVECAP S.A.
By:___________________________
Name: Jose Augusto Pinto Moreira /
Claudio Cesar D'Emilio
Title: Director / Director
<PAGE>
FALCON INTERNATIONAL
COMMUNICATIONS LTD.
By:______________________
Name:
Title:
Accepted and Agreed:
HEARST/ABC VIDEO SERVICES II
By: Hearst Brazil Inc., a partner
By: _________________________
Name:
Title:
By: Brazil Cable Investments, Inc., a partner
By: _________________________
Name:
Title:
TVA PARTICIPACOES LTDA.
By: Hearst Brazil Inc., a quotaholder
By: _________________________
Name:
Title:
By: Brazil Cable Investments, Inc., a quotaholder
By: _________________________
Name:
Title:
<PAGE>
FALCON INTERNATIONAL
COMMUNICATIONS LTD.
By:______________________
Name:
Title:
Accepted and Agreed:
HEARST/ABC VIDEO SERVICES II
By: Hearst Brazil Inc., a partner
By: _________________________
Name:
Title:
By: Brazil Cable Investments, Inc., a partner
By: _________________________
Name: Ronald J. Doerfler
Title: Vice President
TVA PARTICIPACOES LTDA.
By: Hearst Brazil Inc., a quotaholder
By: _________________________
Name:
Title:
By: Brazil Cable Investments, Inc., a quotaholder
By: _________________________
Name: Ronald J. Doerfler
Title: Vice President
<PAGE>
FALCON INTERNATIONAL
COMMUNICATIONS LTD.
By:______________________
Name: Joseph Niehaus
Title: Vice President
Accepted and Agreed:
HEARST/ABC VIDEO SERVICES II
By: Hearst Brazil Inc., a partner
By: _________________________
Name:
Title:
By: Brazil Cable Investments, Inc., a partner
By: _________________________
Name:
Title:
TVA PARTICIPACOES LTDA.
By: Hearst Brazil Inc., a quotaholder
By: _________________________
Name:
Title:
By: Brazil Cable Investments, Inc., a quotaholder
By: _________________________
Name:
Title:
<PAGE>
Exhibit 10.5
<PAGE>
DATED 1995
- ------------------------------------------------------------------------------
(1) TEVECAP S.A.
as Borrower
(2) ABRIL S.A.
as Lender
REVOLVING CREDIT FACILITY
Index
Clause No.
1. Definitions
2. Available Credit and Funding Options
3. Drawdown
4. Interest
5. Repayment and Prepayment
6. Representations and Warranties
7. Conditions Precedent
8. Events of Default
9. Fees
10. Miscellaneous
11. Notices
12. Applicable Law and Jurisdiction
<PAGE>
THIS REVOLVING CREDIT AGREEMENT is celebrated this 6th day of December, 1995
BETWEEN:
(1) Tevecap S.A of Rua do Rocio, No. 313, 04552-904 Sao Paulo, SP, Brazil
("Borrower"); and
(2) Abril S.A. of Av. Otaviano Alves de Lima, No. 4400, 02909-900 Sao Paulo,
SP, Brazil ("Lender")
RECITALS:
A. The majority shareholder of Lender indirectly controls Borrower.
B. On December 6, 1995 the majority stockholder in Lender entered into a
Stock Purchase Agreement relating to the issuance and sale of certain
shares of Borrower to Hearst/ABC Video Services II;
C. A condition to the purchase of shares mentioned in "B" above was that
Lender make available to Borrower a line of credit in accordance with the
terms hereof.
NOW THEREFORE, THE UNDERSIGNED PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions: In this Agreement the following words and expressions have,
except where the context otherwise requires, the respective meanings: -
Available Credit: the maximum aggregate principal amount of $60,000,000
(Sixty million Dollars) to be advanced by Lender pursuant to this
Agreement or so much thereof as is not outstanding from time to time;
Business Day: a day on which banks are open for the transaction of
business of the nature required by this Agreement in Sao Paulo;
$ and Dollars: the lawful currency of the United States of America and, in
relation to all payments in dollars to be made under this Agreement, same
day funds;
Drawdown Date: the date on which a drawing is made available to the
Borrower;
Drawings: shall bear the meaning ascribed to it in Clause 3.1.
Event of Default: any event set out in Clause 8.1 or which may with
passage of time or the giving of notice or a determination under the
relevant clause be such an event;
Final Availability Date: the date falling 36 months from the date hereof;
<PAGE>
Interest Payment Date: the last day of any Interest Period;
Interest Period: in the case of Dollar borrowings, each successive
three-month period, commencing on the date hereof and terminating on the
Final Availability Date and in the case of Reais borrowings each
successive one month period, commencing on the date hereof and terminating
on the Final Availability Date;
Interest Rate: (i) in the case of Lender lending funds directly to
Borrower through Lender's own working capital, for each Interest Period
that the Loan is outstanding the rate of interest certified by Lender to
be the average rate at which loans for amounts in Dollars or Reais (as
applicable) equivalent to the Outstanding Balance are offered to Lender
during such Interest Period in question, which rate shall be adjusted to
compensate Lender for any taxes (including, without limitation, any
foreign exchange or similar tax that may be imposed on Lender in the
raising of funds to finance the Loan) and/or reserve requirements that may
be imposed on Lender when borrowing such funds (ii) in the case of a
Pass-Through Loan, the same rate of interest charged to Lender by the
provider of funds to Lender;
Loan: the loan to be made by Lender to Borrower in accordance with the
terms hereof;
Outstanding Indebtedness: all moneys from time to time owing (whether
actually or contingently) from Borrower to Lender;
Pass-Through Loan: a loan Lender contracts from a third party whose
proceeds are then passed by Lender to Borrower;
Reais: the lawful currency of the Federative Republic of Brazil;
Reais Equivalent: the amount in Brazilian currency equivalent to U.S.
Dollars as determined by the application of the selling rate divulged by
the Central Bank of Brazil under the SISBACEN Data System, Transaction
PTAX-800, Option 5, Currency 220, or any successor to such rate divulged
by the Central Bank of Brazil.
1.2 Month: A reference to a "month" shall mean a period beginning in one
calendar month and ending on the numerically corresponding day in the next
calendar month provided that (a) if such period started on the last
Business Day in a calendar month, or if there is no such numerically
corresponding day, such period shall end on the last Business Day in the
next calendar month and (b) if such numerically corresponding day is not a
Business Day, such period shall end on the next following Business Day in
the same calendar month, or if there is no such Business Day, such period
shall end on the Business Day next preceding such numerically
corresponding Business Day.
1.3 Interpretation: Any documents referred to in this Agreement include the
same as varied from time to time, together with all additions, supplements
and replacements thereto including assignments and novations thereof.
Headings are for ease of
-2-
<PAGE>
reference only and do not form a part of this Agreement. Where the context
so admits, the singular includes the plural and vice versa. References to
persons include bodies corporate and unincorporate. References to clauses
are to clauses of this Agreement unless otherwise specified.
2. AVAILABLE CREDIT AND FUNDING OPTIONS
2.1 Available Credit: Lender, relying on the representations and warranties in
Clause 6 and subject to the terms and provisions in this Agreement, agrees
to make the Available Credit available to Borrower.
2.2 Maximum Amount: The maximum aggregate principal amount which at any time
remains outstanding in respect of the Loan shall not exceed $60,000,000.
2.3 Availability: Lender shall be under no liability to advance the Loan or
any part thereof after the Final Availability Date.
2.4 Funding Options Available to Lender: Lender may, in its sole discretion,
fund the Loan (i) through working capital available to Lender or (ii)
through a Pass-Through Loan.
2.5 Currency of the Loan: The Loan shall be disbursed in Reais but, in case of
a Pass-Through Loan, will be repaid in Reais Equivalent to the Dollar
amount of the Loan if Lender has funded in Dollars.
2.6 Lender's Efforts to obtain lowest Interest Rate: Lender shall use its
reasonable commercial efforts to obtain the lowest possible interest rates
for the Loan.
3. DRAWDOWN
3.1 Drawdown: The Loan shall be made available to Borrower provided no Event
of Default has occurred when (a) the conditions precedent referred to in
Clause 7 have been satisfied and (b) Lender has received written notice
from the Borrower at least thirty (30) days prior to each drawing (which
once given shall be irrevocable).
(a) Each drawing (a "Drawing") shall be for an amount not less than the
Reais Equivalent of $100,000.
(b) Borrower shall request all Drawings of the Loan in Dollars or Reais
and Lender shall use reasonable commercial efforts to comply with
Borrower's request, subject to availability of required funds to
Lender. Drawings requested in Reais shall be disbursed in Reais and
repaid in Reais. Drawings requested in Dollars shall, subject to the
foregoing limitations, be contracted by Lender in Dollars and
passed-through to Borrower in Reais, provided, however, that such
Drawings shall be accounted for in Dollars.
-3-
<PAGE>
4. INTEREST
4.1 Interest: Borrower shall pay interest on the Loan or relevant part thereof
at the Interest Rate on each Interest Payment Date.
4.2 360-day year: Interest will accrue from day to day and will be calculated
for the actual number of days which have elapsed on the basis of a 30-day
month and 360- day year.
4.3 Default interest: If Borrower fails to pay any amount on the due date
(whether of principal, interest or otherwise) under this Agreement,
Borrower shall pay interest on any such sum from the due date up to and
until the date of actual payment (as well after as before judgment) at the
rate per annum determined by Lender to be the aggregate of (a) three per
cent, and (b) and the Interest Rate. Interest shall be compounded at the
end of each period for which an interest rate is determined.
5. REPAYMENT AND PREPAYMENT
5.1 Repayment: The Outstanding Indebtedness will be repaid by Borrower to
Lender in full on the Final Availability Date.
5.2 Prepayment: Borrower may on giving Lender not less than seven Business
Days notice in writing repay without penalty the Outstanding Indebtedness
(or any part thereof being an integral multiple of $100,000) together with
all interest accrued thereon at the end of any Interest Period.
5.3 Redrawing: Any amount of the Loan prepaid shall be available for
redrawing.
5.4 Currency: All payments to be made hereunder in respect of Pass-Through
Loans contracted by Lender in Dollars shall be calculated in Dollars, but
made in Reais at the Reais Equivalent on the date of payment, and other
Drawings shall be calculated and repaid in Reais.
6. REPRESENTATIONS AND WARRANTIES
6.1 Representations: Borrower represents and warrants to Lender the following.
(a) Consents: Borrower has obtained all necessary corporate authority
and third party consents for the execution, delivery and performance
of its obligations hereunder.
(b) Legal validity: This Agreement constitutes legal, valid and binding
obligations of Borrower enforceable in accordance with its terms
except to the extent that such enforceability may be limited by
bankruptcy, insolvency or similar laws respecting creditors' rights
generally or by the availability of
-4-
<PAGE>
specific performance or other equitable remedies being at the
discretion of the court and the execution, delivery and performance
thereof do not contravene any applicable law or regulation or
generally accepted interpretation thereof existing at the date
hereof or any contractual constitutional or other restriction
binding on it.
(c) Pari passu: The obligations of Borrower hereunder rank at least
equally and rateably (pari passu) in point of priority and security
with all other unsecured obligations of Borrower;
(d) No default: No Event of Default or default exists and no event has
occurred which with notice or lapse of time or both will constitute
a default under any other agreement, undertaking or instrument to
which Borrower is a party or by which it may be bound or to which
any of its assets may be subject and which is reasonably likely to
affect its ability to perform its obligations under this Agreement.
6.2 Repeated: The representations and warranties set out in Clause 6.1 are
made as at the date of this Agreement and shall be deemed repeated on each
Drawdown Date and at the commencement of each Interest Period (updated
mutatis mutandis to each such date).
7. CONDITIONS PRECEDENT
7.1 Conditions precedent: Lender shall not be obliged to advance any drawing
unless and until Lender has received in such form and content and upon
terms and conditions reasonably acceptable to it:-
(a) representations and warranties: evidence that each of the
representations and warranties of Borrower will be true at the time
of drawdown;
(b) corporate documentation: evidence that the Shareholder Group(s) (as
that term is defined in the Stockholders Agreement dated as of
December 5, 1995 among Tevecap S.A., Mr. Robert Civita, Aprilcap
Comercio e Participacoes Ltda., Harpia Holdings Limited, Curupira
Holdings Limited, Falcon International Communications Ltd.,
Hearst/ABC Video Services II and TVA Participacoes Ltda.), which own
at least 8% of the issued and outstanding voting Shares of the
Borrower, acting unanimously, have resolved that the Borrower draw
funds hereunder;
(c) consents: copies of all governmental and other consents, licenses,
approvals and authorizations for the making, performance, validity
and enforceability of this Agreement.
7.2 Waiver: If Lender permits drawdown of the Available Credit notwithstanding
that certain of the conditions specified in Clause 7.1 have not been
fulfilled, Borrower
-5-
<PAGE>
shall fulfill such conditions as soon as possible and in any event within
ten Business Days of the Drawdown Date.
8. EVENTS OF DEFAULT
8.1 The occurrence of any of the following events (save with the prior written
consent of Lender) shall constitute an Event of Default, whatever the
reason for such occurrence:
(a) non-payment: Lender does not receive any payment under this
Agreement on its respective due date;
(b) other breach: Borrower is in breach of any of the other covenants,
conditions, terms or obligations contained herein and (in the case
of a breach which in the sole reasonable determination of Lender, is
capable of remedy) such breach is not remedied within thirty days of
written notification from Lender;
(c) misrepresentation: any representation or warranty made by Borrower
to Lender in this Agreement or in connection herewith or any
certificate, statement or document delivered hereunder proves to be
incorrect, inaccurate or misleading in any material respect when
made or deemed to be repeated;
(d) liquidation: a bona fide petition is filed, an order made or an
effective resolution passed for the compulsory or voluntary
winding-up of Borrower (otherwise than for the purpose of
amalgamation or reconstruction in respect of which the prior written
approval of Lender has first been obtained), or Borrower becomes
insolvent or is deemed unable to pay its debts within the meaning of
applicable insolvency law or Borrower becomes unable to pay its
debts as they fall due or Borrower stops or threatens to stop making
payments generally or declares or threatens to declare a moratorium
or suspension of payments with respect to all or any part of its
debts or enters into any composition, scheme, compromise or other
arrangement with its creditors generally (or any class of them), or
any meeting of Borrower is convened or any other preparatory or
other steps are taken for the purpose of considering an application
for an administration order ("concordata") in relation to Borrower
or such an administration order is made by a court, or Borrower does
or threatens to suspend payment, or ceases to carry on its business
or makes any special arrangement or composition with its creditors,
or Borrower becomes insolvent or is deemed unable to pay its debts
as they fall due, or any preparatory or other steps are taken to
appoint a receiver or similar official of Borrower or any of its
assets, or anything analogous to or having a substantially similar
effect to any of the events specified above happens under the laws
of any applicable jurisdiction;
(e) consents: any government or other license, authorization, consent or
approval at any time necessary to enable Borrower to comply with its
obligations under
-6-
<PAGE>
this Agreement is revoked, withheld, materially modified or
otherwise fails to remain in full force and effect;
(f) seizure: all or a material part of the undertakings, assets, rights
or revenues of, or shares or other ownership interests in, Borrower
are seized, nationalized, expropriated or compulsorily acquired by
or under the authority of any government;
(g) unlawfulness: it becomes unlawful at any time (to an extent
considered material by Lender) for Borrower to perform all or any of
the covenants or its obligations under this Agreement, or for Lender
to exercise the rights or any of them vested in it under this
Agreement;
(h) repudiation: Borrower repudiates this Agreement, or does or causes
or permits to be done any act evidencing an intention to repudiate
this Agreement;
(i) enforceability: any act or matter is done or omitted to be done by
Borrower which, in the reasonable opinion of Lender, materially
affects the validity or enforceability of this Agreement or any
event occurs which renders it unlawful or impossible for Borrower to
perform its obligations or for Lender to exercise any of its rights
and remedies hereunder; provided, however, that no act or omission
of the Borrower undertaken by or with the approval of the Lender
shall constitute an Event of Default under this Section 8.1(i).
8.2 Lender's rights: Upon the occurrence of an Event of Default Lender shall
be entitled (but not obliged) to notify Borrower that the Outstanding
Indebtedness is immediately due and payable whereupon Lender shall have no
further obligation to advance or maintain the Loan, and the Outstanding
Indebtedness shall become immediately repayable to Lender.
9. FEES
9.1 Fees: Borrower shall pay to Lender on demand any fees directly and
reasonably incurred by Lender in connection with funding Lender's
obligations hereunder.
10. MISCELLANEOUS
10.1 Payments: All payments by Borrower to Lender shall be made on the due date
no later than 14:00 hours Sao Paulo time, in accordance with the terms of
Clause 5.4 in immediately available cleared funds to such account or bank
as may from time to time be designated by Lender. If any payment falls due
on a non-Business Day payment shall be made on the next succeeding
Business Day unless the next succeeding Business Day falls in the next
calendar month in which event payment shall be made on the preceding
Business Day.
-7-
<PAGE>
10.2 Taxes: All payments to be made by Borrower shall be made without set-off
or counterclaim, free and clear of and without deduction for or on account
of any present or future taxes, mortgages, levies, imposts, duties or
withholding. If Borrower is required to make any deduction or withholding
from any amount payable by Borrower to Lender the sum payable by Borrower
in respect of which such deduction or withholding is required to be made
shall be increased to the extent necessary to ensure that, after the
making of such deduction or withholding, Lender receives and retains (free
from any liability in respect of such deduction or withholding) a net
amount equal to the amount which it would have received and so retained
had no such deduction or withholding been made.
10.3 Waiver: Time shall be of the essence in respect of all obligations of
Borrower under this Agreement. No delay or omission by Lender to exercise
any right or power vested in it hereunder or by law shall impair such
right or power or be construed as a waiver of or as acquiescence in any
default by Borrower and, if Lender on any occasion agrees to waive any
such right or power, such waiver shall not in any way prejudice or affect
the powers conferred upon Lender hereunder or the right of Lender
thereafter to act strictly in accordance with the terms of this Agreement.
The remedies provided herein are cumulative and are not exclusive of any
remedies provided by law. Any waiver by Lender of any provision of this
Agreement, or any consent or approval given by Lender hereunder, shall
only be effective if given in writing and then only for the purpose and
upon the terms for which it is given.
10.4 Further assurance: Borrower will from time to time, upon reasonable demand
from Lender and at the expense of Borrower sign, perfect, do, execute and
register all and every such further assurances, documents acts as in the
opinion of Lender may be necessary or desirable in connection with this
Agreement.
10.5 Assignment: This Agreement shall be binding upon, and enure to the benefit
of, Borrower and Lender and their respective successors and permitted
assigns. Lender may, in its reasonable discretion, assign or transfer any
of its rights (but not its obligation) hereunder to any party upon
providing written notice thereof to Borrower. Borrower may not assign or
transfer any of its rights or obligations hereunder.
10.6 Illegal provisions: If any provision of this Agreement is or becomes
prohibited or unenforceable in any jurisdiction, such prohibition or
unenforceability shall not invalidate the remaining provisions thereof or
affect the validity or enforceability of such provisions in any other
jurisdiction. Where however the provisions of any such applicable law may
be waived they are hereby waived by the parties hereto to the full extent
permitted by law with the object that this Agreement shall be deemed to
contain a valid and binding agreement between the parties hereto
enforceable in accordance with its terms. Where the provisions may not be
waived or may only be waived in part the parties agree to substitute legal
and enforceable terms so as to implement the intentions of the parties to
the extent that this is legally possible.
10.7 Total agreement: This Agreement sets out the total agreement between the
parties in connection with the subject matter of this Agreement, and it
consequently supersedes
-8-
<PAGE>
all other agreements (if any) between the parties in connection with the
said subject matter. Consequently neither Borrower nor Lender shall be
entitled to rely on any change in any provision unless the same is in
writing and has been approved by a duly authorized officer of and Lender
and the Board of Borrower.
10.8 Loan account: Lender will open and maintain on its books in accordance
with its customary procedures a loan account or accounts in the name of
Borrower showing the advances, the computation and payment of interest and
the payment of all other sums due hereunder. Borrower's obligations to
repay the Loan and to pay interest thereon and to pay all other sums due
hereunder shall be evidenced by the entries from time to time made in the
accounts opened and maintained under this Clause which entries will be
conclusive and binding on Borrower.
10.9 Calculations: All calculations of the Outstanding Balance made hereunder
shall be made by the Lender and shall be deemed conclusive and correct,
absent manifest error.
10.10 Use of Funds: The proceeds of the Loan shall be used by the Borrower for
purposes of funding customary business operations of the Borrower and/or
capital expenditures of the Borrower as contemplated by Business Plans
approved by the appropriate corporate bodies of the Borrower in accordance
with its corporate governance documents.
11. NOTICES
11.1 Notices: All notices, demands or other communications to be given or made
hereunder shall be in writing and may be given or made by telefax or
letter and addressed
(a) in the case of Lender, at
Av. Ontaviano Alves de Lima, No. 4400
02909-900 Sao Paulo, SP
Brazil
Fax: (+55-11) 877-1840
(b) in the case of Borrower, at
Rua do Rocio, No. 313
04552-904 Sao Paulo, SP
Brazil
Fax: (+55-11) 821-8770
11.2 Change of Address: If either Lender or Borrower wishes to change its
address for communication, it shall give the other not less than ten
Business Days notice in writing of the change desired.
-9-
<PAGE>
11.3 Receipt: Every notice or demand shall be deemed to have been received in
the case of a telefax upon telephone or written confirmation of receipt
and, in the case of a letter, upon actual receipt by the addressee.
12. APPLICABLE LAW AND JURISDICTION
12.1 Law and Jurisdiction: This Agreement shall be governed by and construed in
accordance with the laws of Brazil. In relation to any dispute arising out
of or in connection with this Agreement, and for the exclusive benefit of
Lender, Borrower hereby irrevocably and unconditionally submits to the
jurisdiction of the Courts of the City of Sao Paulo and waives any
objection to proceedings with respect to this Agreement in such Courts on
the grounds of venue or inconvenient forum.
/s/ JOSE AUGUSTO P. MOREIRA
/s/ CLAUDIO CESAR D'EMILIO
-----------------------------------------
TEVECAP S.A.
/s/ ROBERT CIVITA
/s/ JOSE AUGUSTO P. MOREIRA
-----------------------------------------
ABRIL S.A.
Witnesses:
1. /s/ PRISCILA CASSOLI SARTORI
-------------------------------------
PRISCILA CASSOLI SARTORI
2. /s/ JULIANA BONAZZA TEIXEIRA
-------------------------------------
JULIANA BONAZZA TEIXEIRA
-10-
<PAGE>
Exhibit 10.6
<PAGE>
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
dated as of [December 9, 1996]
among
TVA SISTEMA DE TELEVISAO S.A.,
as Borrower,
TEVECAP S.A.
as Guarantor,
THE CHASE MANHATTAN BANK,
as Lender,
and
EXPORT-IMPORT BANK OF THE UNITED STATES
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
BACKGROUND.................................................................. 1
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION...................... 1
1.01 Defined Terms................................................... 1
1.02 Principles of Construction...................................... 7
SECTION 2. THE CREDIT; DISBURSEMENTS....................................... 7
2.01 Amount.......................................................... 7
2.02 Availability.................................................... 7
2.03 Disbursements................................................... 8
2.04 Ancillary Services.............................................. 8
SECTION 3. GUARANTEE TO LENDER AND EXIMBANK BY GUARANTOR................... 8
3.01 Guarantor Guarantee............................................. 8
3.02 Guarantee Continuing and Unconditional.......................... 8
3.03 Reinstatement................................................... 9
3.04 Endorsement of Note(s).......................................... 9
SECTION 4. EXIMBANK GUARANTEE REQUIREMENTS................................. 10
4.01 Eligibility for Eximbank Guarantee.............................. 10
4.02 Coverage of Eximbank Guarantee.................................. 11
SECTION 5. TERMS OF THE CREDIT............................................. 11
5.01 Principal Repayment............................................. 11
5.02 Interest Payment................................................ 11
5.03 Alternative Interest Rate....................................... 12
5.04 Prepayment...................................................... 13
5.05 Recapture....................................................... 13
5.06 Evidence of Debt................................................ 14
SECTION 6. CONDITIONS PRECEDENT............................................ 14
6.01 Conditions Precedent to First Utilization....................... 14
6.02 Condition Precedent to Each Utilization......................... 16
SECTION 7. FEES AND EXPENSES............................................... 17
7.01 Fees............................................................ 17
7.02 Taxes........................................................... 18
7.03 Expenses........................................................ 19
7.04 Additional or Increased Costs................................... 19
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
SECTION 8. PAYMENTS........................................................ 20
8.01 Method of Payment............................................... 20
8.02 Application of Payments......................................... 20
SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS....................... 21
9.01 Representations and Warranties of the Borrower.................. 21
9.02 Affirmative Covenants of the Borrower........................... 24
9.03 Negative Covenants of the Borrower.............................. 25
9.04 Representations and Warranties of the Guarantor................. 26
9.05 Affirmative Covenants of the Guarantor.......................... 29
9.06 Negative Covenants of the Guarantor............................. 30
SECTION 10. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT................. 30
10.01 Cancellation by the Borrower................................... 30
10.02 Suspension and Cancellation by Eximbank........................ 31
10.03 Events of Default.............................................. 31
SECTION 11. GOVERNING LAW AND JURISDICTION................................. 34
11.01 Governing Law.................................................. 34
11.02 Submission of Jurisdiction..................................... 34
11.03 Service of Process............................................. 34
11.04 Waiver of Immunity............................................. 35
11.05 Waiver of Security Requirements................................ 35
11.06 No Limitation.................................................. 36
SECTION 12. MISCELLANEOUS.................................................. 36
12.01 Computations................................................... 36
12.02 Notices........................................................ 36
12.03 Disposition of Indebtedness.................................... 36
12.04 Benefit of Agreement........................................... 37
12.05 Termination of Eximbank Guarantee.............................. 37
12.06 Disclaimer..................................................... 37
12.07 No Waiver; Remedies Cumulative................................. 37
12.08 Entire Agreement............................................... 37
12.09 Amendment or Waiver............................................ 37
12.10 Counterparts................................................... 37
12.11 Judgment Currency.............................................. 37
12.12 English Language............................................... 38
12.13 Severability................................................... 38
-ii-
<PAGE>
Annexes
Annex A - Form of Floating Rate Note
Annex B - Utilization Procedures
Annex C - Form of Opinion of Borrower's Counsel
Annex D - Form of Opinion of Guarantor's Counsel
Exhibit 1 - Request for Reimbursement to Borrower's Account
Exhibit 1(a) - Itemized Statement of Payments
Exhibit 2 - Supplier's Certificate
Exhibit 2(a) - Supplier's Certificate (L/C Application)
Exhibit 2(b) - Supplier's Certificate (Special Ancillary Services)
Exhibit 3 - Certificate Authorizing Reimbursement
Exhibit 4 - Request for Letter of Credit Approval
Exhibit 4(a) - Request for Approval of Amendment to Letter of Credit
Exhibit 5 - Certificate Approving Letter of Credit
Exhibit 5(a) - Certificate Approving Amendment to Letter of Credit
-iii-
<PAGE>
Eximbank Guarantee No. AP 069910XX - Brazil
Term Sheet
1. Lender: The Chase Manhattan Bank
2. Borrower: TVA Sistema de Televisao S.A.
3. Guarantor(s): Tevecap S.A.
4. Borrower's Country: Brazil
5. Financed Portion: $29,349,780
6. Exposure Fee (per U.S.$100.00
of Financed Portion): U.S.$1,215,081
( ) financed (x) not financed
7. Credit Amount: U.S.$29,349,780
8. Guarantee Commitment Fee: one-eighth of one percent (1/8%) per annum on the
uncancelled and undisbursed amount of the Credit, accruing from August 5,
1996 to the Final Disbursement Date, and payable on each October 15 and
April 15 of each year, beginning on April 15, 1997.
9. Principal Repayment:
Tranche One - Nine (9) semi-annual installments, due and payable:
Tranche Amount Payment Dates
-------------- -------------
$11,400,000 October 15 and April 15,
beginning April 15, 1997
Tranche Two - Ten (10) semi-annual installments, due and payable:
Tranche Amount Payment Dates
-------------- -------------
$17,949,780 October 15 and April 15,
beginning October 15, 1997
10. Required Operative Date: December 9, 1996
<PAGE>
11. Except as otherwise provided in the Agreement, all notices shall be directed
to the respective parties in accordance with the following:
To the Borrower
Address: TVA Sistema de Televisao S.A.
Rua do Rocio, 313-V. Olimpia
Sao Paulo - SP, Brazil CEP 04552-904
Attention: Mr. Douglas Duran
Fax: 011-55-11-821-8770
Telephone: 011-55-11-821-8554
To the Guarantor
Address: Tevecap S.A.
Rua do Rocio, 313-V. Olimpia
Sao Paulo - SP, Brazil CEP 04552-904
Attention: Mr. Douglas Duran
Fax: 011-55-11-821-8770
Telephone: 011-55-11-821-8554
To the Lender
Address: The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Anna Astriab, 16th Floor
Fax: (212) 552-3559
Telephone: (212) 552-4716
To Eximbank
Address: Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571
Attention: Unless otherwise specified herein, Vice President -
Americas Division
Fax: (202) 565-3420 (Americas Division)
(202) 565-3380 (Bank-wide)
Telephone: (202) 565-3400
Telex: (TRT) 197681 EXIM UT
<PAGE>
THIS AGREEMENT dated as of [December 9, 1996], is made by and among TVA
Sistema de Televisao S.A., a corporation organized and existing under the laws
of the Republic of Brazil (the "Borrower"), Tevecap S.A., a corporation
organized and existing under the laws of the Republic of Brazil (the
"Guarantor"). The Chase Manhattan Bank, a banking corporation organized and
existing under the laws of the State of New York (the "Lender"), and the
Export-Import Bank of the United States, an agency of the United States of
America ("Eximbank"). Capitalized terms used herein shall be defined as provided
in Section 1.
BACKGROUND
WHEREAS:
(A) by this Agreement, the Lender has established an export financing
credit (the "Credit") in the amount of U.S.$29,349,780, pursuant to which the
Lender shall extend financing to the Borrower for the purchase of Items in the
United States for export to the Borrower's Country;
(B) pursuant to the terms of this Agreement, the Guarantor has agreed to
guarantee the payment in full when due (whether at stated maturity, by reason of
acceleration or otherwise) of all amounts due by the Borrower to the Lender or
Eximbank, respectively, under this Agreement or the Note(s);
(C) the establishment of the Credit will facilitate exports from the
United States to the Borrower's Country;
(D) a condition to the Lender's extension of the Credit under this
Agreement is the availability of the Eximbank Guarantee pursuant to the terms
and conditions of the Master Guarantee Agreement dated as of November 3, 1995
between the Lender and Eximbank (the "Master Guarantee Agreement"); and
(E) the Credit may be utilized by the Borrower in accordance with the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.01 Defined Terms. For the purposes of this Agreement, unless otherwise
defined herein, the following terms shall have the meanings specified below.
"Acquisition List" shall mean the list furnished pursuant to Section
6.01(g).
<PAGE>
"Agreement" shall mean this Credit Agreement, including any Annex,
Exhibit, Schedule, Term Sheet and other attachment thereto, as amended or
otherwise modified from time to time.
"Ancillary Services" shall mean all Banking Services, Financial Advisor
Services, Technical Consultant Services and Legal Services.
"Banking Services" shall mean the services of the Lender in its capacity
as a lender guaranteed by Eximbank where such services are provided in
connection with the Credit.
"Borrower" shall have the meaning set forth in the preamble to this
Agreement.
"Borrower Documents" shall mean this Agreement, any Note and all other
documents and instruments to be executed and delivered by the Borrower under
this Agreement.
"Borrower Financial Statements" shall mean the financial statements of the
Borrower at December 31, 1995 furnished to the Lender and Eximbank prior to the
date of this Agreement.
"Borrower's Country" shall mean the Republic of Brazil.
"Business Day" shall mean any day on which dealings in Dollar deposits are
carried on in the London interbank market and on which commercial banks in
London and New York City are open for domestic and foreign exchange business.
"Cash Payment" shall have the meaning set forth in Section 4.01 (a).
"Contract Price" shall mean, with respect to any Item, the invoice amount
of such Item as appearing in the Supplier's invoice therefor.
"Credit" shall have the meaning set forth in Whereas clause (A).
"Debarment Regulations" shall have the meaning set forth in Section 9.01
(a)(xiv).
"Disbursement" shall mean either a Reimbursement or an L/C Payment.
"Disbursement Date" shall mean, in relation to any Disbursement, the
Business Day on which the Lender shall make such Disbursement.
"Disposition of Indebtedness" shall have the meaning set forth in Section
12.03.
"Dollars," "U.S. Dollars," "U.S.D.," "U.S. $" or "$" shall mean the lawful
currency of the United States of America.
"Event of Default" shall have the meaning set forth in Section 10.03(a).
"Eximbank" shall have the meaning set forth in the preamble to this
Agreement.
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<PAGE>
"Eximbank Approval" shall mean an "Eximbank Approval" (as such term is
defined in the Master Guarantee Agreement), identified by reference to the
Transaction Number.
"Eximbank Guarantee" shall mean the guarantee provided by Eximbank under
the Master Guarantee Agreement and the Eximbank Approval with respect to the
Credit.
"Exposure Fee" shall have the meaning set forth in Section 7.01(a)(ii).
"Final Disbursement Date" shall have the meaning set forth in Section
2.02.
"Financed Amount" shall mean the amount equal to the Financed Portion.
"Financed Portion" shall mean the portion of the respective Contract
Prices of the Items that may be covered under the Eximbank Guarantee in
accordance with Section 4.02(a).
"Financial Advisor Service" shall mean the services of a financial
intermediary or advisor, provided that such Person has been retained by the
Borrower, the Lender or Eximbank and such services relate to assisting the
Borrower in obtaining, structuring and/or meeting the financial requirements of
the Credit or assisting Eximbank in its analysis of the Credit, any underlying
project and/or the business of the Borrower.
"Floating Rate Note" shall mean a Note in the form of Annex A.
"Foreign Cost" shall mean, with respect to any Item, the cost to the
Supplier of any component of such Item if such component was produced or
manufactured outside the United States. Eximbank shall determine what does and
does not constitute Foreign Cost, and such determination, in the absence of
manifest error, shall be conclusive and binding for all purposes.
"Governmental Authority" shall mean the government or any political
subdivision of the government of the Borrower's Country and the Guarantor's
Country, any agency, department or any other administrative authority or
instrumentality thereof, including, without limitation, any local or other
governmental agency or other authority within the Borrower's Country or the
Guarantor's Country.
"Guarantee Certificate" shall mean, with respect to a Utilization,
Eximbank's Certificate Authorizing Reimbursement in the form of Exhibit 3 to
Annex B or Eximbank's Certificate Approving Letter of Credit in the form of
Exhibit 5 to Annex B, whichever is appropriate.
"Guarantee Commitment Fee" shall have the meaning set forth in Section
7.01(a)(i).
"Guarantor" shall have the meaning set forth in the preamble to this
Agreement.
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<PAGE>
"Guarantor Financial Statements" shall mean the financial statements of
the Guarantor at December 31, 1995 furnished to the Lender and Eximbank prior to
the date of this Agreement.
"Guarantor Guarantee" shall mean the guarantee set forth in Section 3.
"Guarantor's Country" shall mean the Republic of Brazil.
"Interest Payment Date" shall mean April 15 and October 15 of each year,
beginning on April 15, 1997.
"Interest Period" shall mean, with respect to any Disbursement, (a) the
period commencing on the Disbursement Date and extending up to, but not
including, the next Interest Payment Date; provided, however, that if the
Disbursement Date is within forty-five (45) days of such Interest Payment Date,
the Interest Period shall end on the next succeeding Interest Payment Date; and
(b) thereafter the period commencing on each Interest Payment Date and extending
up to, but not including, the next Interest Payment Date.
"Items" shall have the meaning set forth in Section 4.01(a).
"L/C Bank" shall have the meaning set forth in Part III of Annex B.
"L/C Payment" shall have the meaning set forth in Section 2.03.
"Legal Services" shall mean the services of attorneys engaged by the
Borrower, the Guarantor, the Lender or Eximbank where such services are provided
in connection with the Credit.
"Letter of Credit" shall mean any irrevocable documentary sight letter of
credit (in compliance with the requirements of the Uniform Customs and Practices
for Documentary Credits (International Chamber of Commerce Publication 500), as
the same may be amended from time to time) for which Eximbank has issued a
Guarantee Certificate under this Agreement which shall, in any event, have an
expiration date no later than the date (2) two weeks prior to the Final
Disbursement Date.
"LIBOR" shall mean, in relation to any Interest Period, the rate of
interest per annum (rounded upward, if necessary, to the nearest 1/16 of 1%)
quoted by the principal London office of the Lender or an affiliate of the
Lender designated by the Lender at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for the offering to
leading banks in the London interbank market of U.S. Dollar deposits for a
period and in an amount comparable to such Interest Period and the principal
amount upon which interest is to be paid during such Interest Period. Promptly
after determining the applicable interest rate for an Interest Period, the
Lender shall give notice by telex or telecopy to the Borrower of such rate,
which rate, absent manifest error, shall be final, conclusive and binding on the
Borrower.
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<PAGE>
"Lien" shall mean any lien, lease, mortgage, pledge, hypothecation,
preferential arrangement relating to payments, or other encumbrance or security
interest.
"MARAD" shall have the meaning set forth in Section 4.01(b).
"Master Guarantee Agreement" shall have the meaning set forth in Whereas
clause (D).
"Note" shall have the meaning set forth in Section 5.06(a).
"Other Governmental Authority" shall mean any government or any political
subdivision of a government, any agency, department or any other administrative
authority or instrumentality thereof, including, without limitation, any local
or other governmental agency or other authority.
"Payment Date" shall mean April 15 and October 15 of each year, beginning
on April 15, 1997 for Tranche One and October 15, 1997 for Tranche Two.
"Payment Default Date" shall have the meaning set forth in Section
5.02(b)(iii).
"Permitted Lien" shall have the meaning set forth in Section 9.03(a).
"Person" shall mean an individual corporation, partnership, trust,
unincorporated organization or any other enterprise, or a Governmental Authority
or Other Governmental Authority.
"Principals" shall have the meaning set forth in Section 9.01(a)(xiv).
"Production Cost" shall mean, with respect to any Item, the sum of (i)
direct material and component costs, (ii) direct labor costs and (iii) indirect
costs that can reasonably be attributed to the production of such Item. Eximbank
shall determine what does and does not constitute Production Cost, and such
determination, in the absence of manifest error, shall be conclusive and binding
for all purposes.
"Progress Payment" shall have the meaning set forth in Section 6.01(h).
"Purchase Contract" shall mean either (a) any contract between the
Borrower and a Supplier or any purchase order signed by the Borrower for the
purchase of goods and/or services in the United States for export to the
Borrower's Country, including, without limitation, Ancillary Services that are
not Special Ancillary Services or (b) any contract between the Borrower and a
Supplier for the purchase of Special Ancillary Services.
"Regulatory Change" shall have the meaning set forth in Section 7.04(c).
"Reimbursement" shall have the meaning set forth in Section 2.03.
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<PAGE>
"Special Ancillary Services" shall mean Ancillary Services that fall
within one of the categories described in the proviso to Section 2.04(a).
"Special LIBOR" shall mean, with respect to any Interest Period, the rate
of interest per annum specified as the Dollar LIBOR Interbank fixing rate in the
Financial Times under the table entitled "Money Rates", in effect on the day two
Business Days prior to the first day of the relevant Interest Period for a term
similar to the term of such Interest Period. If no rate is specified for such
day, the applicable rate shall be the rate specified for the immediately
preceding day for which a rate is specified, and if more than one rate is
specified, the applicable rate shall be the highest of all such rates. In the
event the Financial Times either completely ceases publication or discontinues
publication of the Dollar LIBOR Interbank fixing rate, then Eximbank shall
determine Special LIBOR by reference to a financial publication with a similar
international or U.S. circulation, which publication shall be selected by
Eximbank in its sole discretion.
"Supplier" shall mean the Person who issues a Supplier's Certificate.
"Supplier's Certificate" shall mean a certificate of a Supplier in the
form of Exhibit 2, or Exhibit 2(a) or Exhibit 2(b) to Annex B, whichever is
appropriate.
"Taxes" shall mean any taxes, fees, levies, imposts, duties or charges of
whatsoever nature (whether imposed by withholding or deduction or otherwise)
imposed by any Governmental Authority (including, without limitation, any taxing
authority), or by any other jurisdiction from which payments required hereunder
or under the Note(s) are made.
"Technical Consultant Services" shall mean services of an advisor or
consultant with respect to technical matters (including engineering consultants,
yield consultants and insurance advisors) where: (a) Eximbank has required that
such a consultant be retained in order to assist Eximbank in its analysis of the
Credit and/or the business operations of the Borrower; (b) the services of such
consultant relate to the Credit; and (c) the experience, expertise and overall
competence of such consultant is satisfactory to Eximbank (in its sole and
absolute discretion).
"Tranche One" shall have the meaning set forth in Section 2.02.
"Tranche Two" shall have the meaning set forth in Section 2.02.
"Transaction Number" shall have the meaning set forth in the Master
Guarantee Agreement.
"Unpaid Amount" shall have the meaning set forth in Section 5.02(a)(ii).
"U.S." or "United States" shall mean the United States of America.
"U.S. Content" shall mean, with respect to any Item, the Contract Price of
such Item less the Foreign Cost associated with such Item, if any. Eximbank
shall determine
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<PAGE>
what does and does not constitute U.S. Content, and such determination, in the
absence of manifest error, shall be conclusive and binding for all purposes.
"U.S. Treasury Rate" shall have the meaning set forth in Section
5.02(b)(iii).
"Utilization" shall mean either: (i) the making of a Reimbursement in
accordance with the Reimbursement Procedure set forth in Section II of Annex B;
or (ii) the issuance of a Letter of Credit in accordance with the Letter of
Credit Procedure set forth in Section III of Annex B.
1.02 Principles of Construction.
(a) The meanings set forth for defined terms in Section 1.01 or elsewhere
in this Agreement shall be equally applicable to both the singular and plural
forms of the terms defined.
(b) Unless otherwise specified, all references in this Agreement to
Sections, Term Sheets, Annexes, Exhibits and Schedules are to Sections, Term
Sheets, Annexes, Exhibits and Schedules in or to this Agreement.
(c) The headings of the Sections in this Agreement are included for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.
SECTION 2. THE CREDIT; DISBURSEMENTS
2.01 Amount. The Lender hereby establishes the Credit, upon the terms and
conditions set forth in this Agreement, in favor of the Borrower in the amount
of U.S.$29,349,780 to enable the Borrower to finance the Financed Portion of the
costs incurred on or after September 30, 1995 by the Borrower for purchase of
the Items in the United States and their export to the Borrower's Country
(provided that Items which are Ancillary Services need not be purchased in the
United States if the requirements of the proviso to Section 2.04(a) are
satisfied).
2.02 Availability. Subject to the terms and conditions provided herein,
including, without limitation, the conditions set forth in Section 6,
Disbursements under the Credit may be made up to and including the Final
Disbursement Date. "Final Disbursement Date" shall mean either November 15, 1996
for the first tranche in the amount of U.S.$11,400,000 ("Tranche One") and
August 15, 1997 for the second tranche in the amount of U.S.$17,949,780
("Tranche Two") or, if earlier, the date on which the relevant tranche is
canceled by either (i) the Borrower in accordance with Section 10.01, or (ii)
Eximbank in accordance with Section 10.02. Notwithstanding anything herein to
the contrary, Disbursements under Tranche One may be made only in connection
with Items shipped to the Borrower's Country between September 30, 1995 and July
31, 1996, and Disbursements under Tranche Two may be made only in connection
with Items shipped to the Borrower's Country between August 1, 1996 and June 30,
1997.
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<PAGE>
2.03 Disbursements. Upon satisfaction of the conditions set forth in
Section 6, the Credit may be disbursed under the tranche applicable to such
Disbursement in the manner described in, and subject to the conditions of, Annex
B. Disbursements may be made: (a) through drawings by a Supplier under a Letter
of Credit ("L/C Payments") and/or (b) by advances from the Lender to the
Borrower reimbursing the Borrower for payments to a Supplier and/or Eximbank
("Reimbursements"). For the avoidance of doubt, as described in Annex B, the
term "Disbursements" shall include payments made under the Credit in respect of
the Exposure Fee.
2.04 Ancillary Services.
(a) Ancillary Services relating to the Credit shall be treated in the same
manner as any other services (including, without limitation, the requirements
set forth in Section 4 of this Agreement); provided that the Foreign Cost
associated with any such Ancillary Services shall be deemed to be zero if either
(i) Eximbank requires that the Borrower or another Person pay for the provision
of such Ancillary Services by a Supplier selected by Eximbank or (ii) Eximbank
in its sole determination finds that such Ancillary Services are both necessary
in order for the underlying transaction to go forward and cannot be reasonably
obtained in the United States.
(b) Utilizations for Ancillary Services may be made under the Credit only
after there have been one or more Utilizations with respect to Items financed by
such Credit that are not Ancillary Services.
SECTION 3. GUARANTEE TO LENDER AND EXIMBANK BY GUARANTOR
3.01 Guarantor Guarantee. The Guarantor hereby unconditionally and
irrevocably guarantees to the Lender and Eximbank the full, prompt and complete
payment when due (whether at stated maturity, by acceleration or otherwise) of
the principal of and interest on the Credit, together with any and all other
amounts payable by the Borrower to the Lender or Eximbank under this Agreement
or the Note(s). If the Borrower shall fail to pay when due any or all sums
hereby guaranteed (whether at stated maturity, by acceleration or otherwise),
the Guarantor shall forthwith pay, without any demand or notice, the full amount
due and payable by the Borrower in U.S. Dollars at the place and in the manner
required by this Agreement or the Note(s). This is a guarantee of payment and
not merely of collection, and shall remain in full force and effect until all
the obligations of the Borrower hereby guaranteed are paid in full. To the
extent permitted by applicable law, the Guarantor waives all defenses of a
surety or guarantor to which it may be entitled by statute or otherwise.
3.02 Guarantee Continuing and Unconditional.
(a) The Guarantor Guarantee is a continuing, absolute and unconditional
guarantee of payment as primary obligor and not merely as surety, and shall
apply to all obligations of the Borrower under this Agreement and the Note(s)
whenever arising. Without limiting the
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<PAGE>
generality of the foregoing, the Guarantor Guarantee shall not be released,
discharged or otherwise affected by: (i) the lack of genuineness, legality,
validity, regularity or enforceability of this Agreement or the Note(s) or any
other agreement or document contemplated hereby; (ii) the surrender, release,
exchange, substitution, taking of any additional collateral, or impairment of
any collateral; (iii) failure by the Borrower to comply with any of the terms of
this Agreement or the Note(s); (iv) any change in the name, authorized
activities, capital stock, corporate existence, structure, personnel or
ownership of the Borrower; (v) any insolvency, bankruptcy, reorganization or
other similar proceeding affecting the Borrower or its assets; or (vi) any other
act or omission to act or delay of any kind by the Borrower, the Guarantor, the
Lender or Eximbank or any other Person, or any other circumstance whatsoever
that might, but for the provisions of this Section 3.02, constitute a legal or
equitable discharge or defense to the Guarantor's obligations hereunder.
(b) The Guarantor hereby irrevocably and expressly waives all diligence,
presentments, demands, protests and notices of any kind whatsoever, including,
without limitation, notices of nonperformance or nonpayment, notices of default,
notices of protest, notices of dishonor, notices of acceptance of this Guarantor
Guarantee, and notices of the existence, creation or incurring of new or
additional obligations by the Borrower under this Agreement or the Note(s).
(c) The Guarantor consents that, without notice to the Guarantor and
without the necessity for any additional endorsement, consent or guarantee by
the Guarantor, the liabilities of the Borrower hereby guaranteed may, from time
to time, be renewed, extended, increased, accelerated, modified (including
without limitation any change in interest rate or a switch from a floating to
fixed rate of interest), amended, compromised, waived, released or discharged by
the Lender or Eximbank, and any security which is or in the future may be held,
or any other guarantee issued for, the payment of the indebtedness of the
Borrower under this Agreement or the Note(s) may be exchanged, sold or
surrendered by the Lender or Eximbank, all without impairing or affecting in any
way the obligation of the Guarantor hereunder. Neither the Lender nor Eximbank
shall be obliged to enforce any remedies against the Borrower or any guarantee
or security which it may hold before being entitled to payment from the
Guarantor of the obligations hereby guaranteed.
3.03 Reinstatement. The Guarantor Guarantee shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of the Borrower in respect of obligations hereby guaranteed is recovered from or
repaid by the Lender, Eximbank or any other party as a result of any proceeding
in bankruptcy, insolvency, reorganization or otherwise.
3.04 Endorsement of Note(s). To evidence further the Guarantor Guarantee
contained in this Section 3, the Guarantor agrees to endorse and execute its
guarantee legend, in the form specified in Annex A, immediately below the
signature of the duly authorized officer(s) of the Borrower on each Note issued
by the Borrower hereunder, including any replacement Note issued pursuant to
Section 5.06.
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<PAGE>
SECTION 4. EXIMBANK GUARANTEE REQUIREMENTS
4.01 Eligibility for Eximbank Guarantee.
(a) "Items" shall mean (i) goods exported from the United States under a
Purchase Contract and (ii) services performed under a Purchase Contract
(including, without limitation, Ancillary Services), all of which goods and
services shall be specified on the Acquisition List and shall have been approved
by Eximbank as eligible under the Eximbank Guarantee and thus eligible for
financing under the Credit. Eximbank shall determine what does and does not
constitute an Item, and such determination, in the absence of manifest error,
shall be conclusive and binding for all purposes. The Foreign Cost associated
with each Item shall be less than fifty percent (50%) of the Production Cost of
such Item; and the Borrower shall have made or caused to be made a cash payment
("Cash Payment") for the purchase of such Item in an amount equal to not less
than fifteen percent (15%) of the Contract Price of such Item.
(b) To be eligible for the Eximbank Guarantee, all Items that are to be
financed under the Credit and that are to be exported by ocean vessel must be
transported from the United States in vessels of U. S. registry, as required by
46 U.S.C. ss. 1241-1 (Public Resolution No. 17 of the 73rd Congress of the
United States, as amended), except to the extent that a waiver of this
requirement is obtained from the U. S. Maritime Administration ("MARAD"), as
described in Annex B. Notwithstanding Section 4.01(a), if any Items are shipped
on vessels of non-U.S. registry without a MARAD waiver, or contrary to the
provisions of a MARAD waiver, such Items will not be eligible under the Eximbank
Guarantee and thus will not be eligible for financing under the Credit.
(c) If an Item is shipped on ocean vessels or aircraft of U.S. registry,
the cost of shipment may be included in the U.S. Content of the Item. If an Item
is shipped on ocean vessels or aircraft of non-U.S. registry, the cost of
shipment may be part of the Foreign Cost associated with such Item if such cost
has been included in the Contract Price of the Item and, in the case of ocean
vessels, a MARAD waiver has been obtained. So long as the applicable pooling
agreement with MARAD remains in full force and effect, the cost of ocean freight
for shipment of Items from the United States to the Borrower's Country on an
ocean vessel registered in such Borrower's Country ("Foreign Freight Costs") may
be deemed U.S. Content, provided that the Foreign Freight Costs are included in
the respective Contract Prices of the Items.
(d) The Borrower shall obtain or cause to be obtained insurance against
marine and transit hazards on all shipments of the Items in an amount not less
than the amount of the Disbursements that have been or are to be made with
respect to those shipments. United States insurers shall be given a
non-discriminatory opportunity to bid for such insurance business related to the
Items. The cost of the premiums for such insurance may be included in the U. S.
Content of the insured Item if: (i) the insurance is placed in the United States
with U.S. companies; and (ii) the premiums are paid in the United States in
Dollars. In all other cases, the cost of the premiums maybe included in the
Foreign Cost associated with the Item if such cost has been included in the
Contract Price of the Item.
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<PAGE>
4.02 Coverage of Eximbank Guarantee. Subject to the terms and conditions
of this Agreement and the Master Guarantee Agreement, a Disbursement made with
respect to an Item shall be covered by the Eximbank Guarantee up to the
following maximum amount:
(a) an amount equal to the lesser of (i) eighty-five percent (85%) of the
Contract Price of such Item, or (ii) one hundred percent (100%) of the U.S.
Content of such Item; plus
(b) an amount equal to one hundred percent (100%) of the applicable
Exposure Fee.
SECTION 5. TERMS OF THE CREDIT
5.01 Principal Repayment. The Borrower shall repay all amounts disbursed
under (a) Tranche One of the Credit in nine (9) approximately equal, successive
semi-annual installments, with each such installment to be payable on a Payment
Date, and (b) Tranche Two of the Credit in ten (10) approximately equal,
successive semi-annual installments, with each such installment to be payable on
a Payment Date; provided that, on the last Payment Date, the Borrower shall
repay in full the principal amount of the Credit then outstanding.
5.02 Interest Payment.
(a) To the Lender
(i) On each Interest Payment Date, the Borrower shall pay interest
on all amounts disbursed and outstanding from time to time under the Credit,
calculated at an interest rate per annum equal to the sum of(x) 0.25 percent per
annum, and (y) LIBOR for the applicable Interest Period(s).
(ii) If all or any part of principal, accrued interest, fees or
other amounts owing to the Lender under this Agreement or any Note is not paid
in full when due (an "Unpaid Amount") whether at stated maturity, by
acceleration or otherwise, the Borrower shall pay to the Lender on demand
interest on the unpaid amount (to the extent permitted by applicable law) for
the period from the date such amount was due until such amount shall have been
paid in full at an interest rate per annum equal to (x) 1 % per annum above the
interest rate then applicable under Section 5.02(a)(i) until the end of the then
current Interest Period, and (y) thereafter (A) with to any amount of the Credit
evidenced by a Floating Rate Note, 1.25% per annum above the rate per annum
(rounded upwards to the nearest 1/16 of 1%) at which U.S. Dollar deposits are
offered to the office of the Lender in the eurodollar market in which such
office of the Lender customarily deals at 11:00 A.M., local time of such office
of the Lender, for successive interest periods selected by the Lender in its
sole discretion, two Business Days prior to the first day of each such interest
period, for the number of days of each such interest period and in an amount
equal to the aggregate principal amount of the Credit outstanding on the first
day of each such interest period. Any interest which shall have accrued under
this Section 5.02(a)(ii) in respect of an Unpaid Amount shall be due and payable
and shall be paid by the Borrower on demand on such dates as the Lender may
specify by written notice to the Borrower.
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(b) To Eximbank
(i) Notwithstanding Section 5.02(a)(i), if Eximbank shall have made
a claim payment to the Lender with respect to any Floating Rate Note, then,
beginning on the date of such claim payment, the definition of Special LIBOR
shall apply to each such Floating Rate Note (in place of the definition of LIBOR
contained in each such Floating Rate Note) for all purposes, including, without
limitation, Section 5.02(b)(ii).
(ii) Notwithstanding Section 5.02(a)(ii), if Eximbank shall have
made a claim payment to the Lender with respect to any Note, then, beginning on
the date of such claim payment, if any amount of principal of or accrued
interest on any Note then owing to Eximbank is not paid in full when due,
whether at stated maturity, by acceleration or otherwise, the Borrower shall pay
to Eximbank on demand interest on such unpaid amount (to the extent permitted by
applicable law) for the period from the date such amount was due to Eximbank
until such amount shall have been paid in full at an interest rate per annum
equal to one percent (1%) per annum above the interest rate then applicable
under Section 5.02(a)(i) (as modified, if required, by 5.02(b)(i)).
(iii) Except as otherwise provided in 5.02(b)(ii) with respect to
amounts of principal and accrued interest, if, at any time, any amount owing to
Eximbank under this Agreement or any Note is not paid in full when due, the
Borrower shall pay to Eximbank on demand interest on such unpaid amount for the
period from the date such amount was due ("Payment Default Date") until such
amount shall have been paid in full at an interest rate per annum equal to one
percent (1%) per annum above the U.S. Treasury Rate. The "U.S. Treasury Rate"
shall mean the interest rate specified in the Federal Reserve Statistical
Release H.15 (519) Selected Interest Rates for six-month (180 days) Treasury
Bills under the category entitled "Treasury Bills, Auction Average (Investment)"
(or, if not included under such category, the category entitled "Treasury
Constant Maturities"), which is in effect on the Payment Default Date.
5.03 Alternative Interest Rate.
(a) If the Lender shall have determined in its reasonable discretion
(which determination shall be conclusive and binding for all purposes, absent
manifest error), prior to the commencement of any Interest Period that: (i)
Dollar deposits of sufficient amount and maturity for funding a Disbursement are
not available to the Lender in the London interbank market in the ordinary
course of business; or (ii) by reason of circumstances affecting the relevant
market, adequate and fair means do not exist for ascertaining the rate of
interest to be applicable to a Disbursement; or (iii) the relevant rate of
interest referred to in the definition of LIBOR which is to be used to determine
the rate of interest for a Disbursement does not cover the funding cost to the
Lender of making or maintaining the Disbursement, then the Lender and the
Borrower, during the next 30-day period, shall negotiate in good faith with a
view toward agreeing upon an alternative basis for determining the applicable
interest rate. Retroactively from the beginning of such Interest Period, the
interest rate for such Interest Period shall be equal to (i) such interest rate
as may be agreed upon as aforesaid or (ii) if no such rate is agreed upon within
such 30-day period, such rate, if any, other than LIBOR, as is reasonably
determined by the Lender in good faith to be that interest
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rate generally being applied by major U.S. and European banks as a substitute
base interest rate for loans which would otherwise be based upon London
interbank rates for U.S. Dollar deposits for the relevant period, plus 0.25%.
The Lender shall promptly notify the Borrower of any rate so determined pursuant
to clause (ii) of the immediately preceding sentence, which determination shall
be final, conclusive and binding in the absence of manifest error.
(b) If, in the Lender's reasonable judgment, it becomes unlawful at any
time for the Lender to make or maintain Disbursements based upon LIBOR, the
Lender, and the Borrower, during the next 30-day period, shall negotiate in good
faith with a view toward agreeing upon an alternative basis for determining the
applicable interest rate. Retroactively from the beginning of such Interest
Period, the interest rate for such Interest Period shall be equal to (i) such
interest rate as may be agreed upon as aforesaid or (ii) if no such rate is
agreed upon within such 30-day period, such rate, if any, other than LIBOR, as
is reasonably determined by the Lender in good faith to be that interest rate
generally being applied by major U.S. and European banks as a substitute base
interest rate for loans which would otherwise be based upon London interbank
rates for U.S. Dollar deposits for the relevant period, plus 0.25%. The Lender
shall promptly notify the Borrower of any rate so determined pursuant to clause
(ii) of the immediately preceding sentence, which determination shall be final,
conclusive and binding in the absence of manifest error.
5.04 Prepayment. The Borrower may from time to time prepay, without
premium or penalty, on any Interest Payment Date all or part of the principal
amount of the Credit, provided that: (i) any partial prepayment shall be in a
minimum principal amount of U.S.$5,000,000 and integral multiples of $1,000,000
in excess thereof, or if less, the aggregate unpaid principal amount of the
Credit; (ii) the Borrower shall have given the Lender and Eximbank at least
fifteen (15) days' prior written notice of the prepayment (which notice shall be
irrevocable); and (iii) the Borrower shall have paid in full all amounts due
under the Credit as of the date of such prepayment, including interest which has
accrued to the date of prepayment on the amount prepaid. Prepayments shall be
applied to the installments of principal of the Credit in the inverse order of
their maturity, and, in cases where more than one Note is outstanding, pro rata
to each Note.
5.05 Recapture. The Borrower shall pay to the Lender, upon the written
request of the Lender, such amounts as shall be sufficient (in the reasonable
judgment of the Lender) to compensate the Lender for any loss, expense or
liability (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or redeployment of deposits from third
parties or in connection with obtaining funds to make or maintain any
Disbursement) which the Lender reasonably determines is attributable to:
(a) any payment or prepayment of the Credit other than in accordance with
Section 5.01 or 5.04 (including, without limitation, by reason of acceleration);
or
(b) any failure by the Borrower to borrow any advance that has been
requested in a Request for Reimbursement (as provided in Annex B).
The Lender shall deliver to the Borrower a statement specifying the amount of
any claim pursuant to this Section 5.05 and the method of calculation thereof.
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5.06 Evidence of Debt.
(a) The Borrower agrees that to evidence further its obligation to repay
all amounts disbursed under the Credit, with interest accrued thereon, it shall
not later than the date of the first Utilization hereunder issue and deliver to
the Lender, in accordance with the written instructions of the Lender, one
promissory note in the face amount of $11,400,000 to evidence Tranche One
Disbursements and one promissory note in the face amount of $17,949,780 to
evidence Tranche Two Disbursements (each such promissory note, or any
replacement promissory note issued pursuant to Section 5.06(b) or Section
5.06(c), a "Note"). Each Note shall be in the form of Annex A or as otherwise
agreed upon by the parties hereto, shall bear the Guarantor's guarantee
endorsement, and shall be valid and enforceable as to its principal amount at
any time only to the extent of the aggregate amounts then disbursed and
outstanding under the Credit, and, as to interest, only to the extent of the
interest accrued thereon. Any notations by the Lender on any Note regarding
payments made on account of the principal thereof, in absence of manifest error,
shall be conclusive and binding.
(b) If requested by the Lender, within ten (10) days after the Final
Disbursement Date, the Borrower shall issue and deliver to the Lender a new
Note(s) in exchange for the Note(s) previously issued and delivered in
accordance with Section 6.01(j), whereupon the Lender shall surrender such
previously issued Note(s) for cancellation to the Borrower through Eximbank. The
principal amount of such new Note(s) shall equal in the aggregate the principal
amount of the Credit then disbursed and outstanding.
(c) If requested by the Lender or Eximbank pursuant to Section
7.02(b)(ii), the Borrower shall issue and deliver to the Lender a new Note(s) in
exchange for the Note(s) previously issued and delivered in accordance with this
Agreement, whereupon the Lender shall surrender such previously issued Note(s)
for cancellation to the Borrower through Eximbank.
(d) If any Note is mutilated, lost, stolen or destroyed, the Borrower
shall issue and deliver a new Note of the same date, maturity and denomination
as the Note so mutilated, lost, stolen or destroyed; provided that, in the case
of any mutilated Note, such mutilated Note shall be returned to the Borrower
after examination by Eximbank, and, in the case of any lost, stolen or destroyed
Note, the Borrower and Eximbank shall have first received evidence of such loss,
theft or destruction as shall reasonably be considered satisfactory to each of
them.
SECTION 6. CONDITIONS PRECEDENT
6.01 Conditions Precedent to First Utilization. The obligation of the
Lender to permit the first Utilization of the Credit shall be subject to the
delivery to the Lender and Eximbank of the documents indicated below (each in
form and substance satisfactory to the Lender and Eximbank) and to the
fulfillment (in a manner satisfactory to the Lender and Eximbank) of the
conditions set forth below:
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(a) This Agreement. This Agreement fully executed by the parties hereto,
which shall be in full force and effect (with, if applicable, evidence that this
Agreement has been registered with the appropriate authorities in the Borrower's
Country and the Guarantor's Country).
(b) Existence. Evidence that (i) the Borrower is duly organized and
validly existing under the laws of the Borrower's Country, with full power,
authority and legal right to own its property and carry on its business as now
conducted, including, without limitation, a copy of any applicable enabling
legislation and (ii) the Guarantor is duly organized and validly existing under
the laws of the Guarantor's Country, with full power, authority and legal right
to own its property and carry on its business as now conducted, including,
without limitation, a copy of any applicable enabling legislation.
(c) Authority. Evidence of(i) the authority of the Borrower to execute,
deliver, perform and observe the terms and conditions of this Agreement, any
Note and any other Borrower Documents that the Borrower is or will be a party
to, (ii) authority (including specimen signatures) for each Person who, on
behalf of the Borrower, signed this Agreement, will sign any Note and/or signed
or will sign any other Borrower Documents that the Borrower is or will be a
party to, or will otherwise act as the Borrower's representative in the
operation of the Credit, (iii) the authority of the Guarantor to execute,
deliver, perform and observe the terms and conditions of the Borrower Documents
that the Guarantor is or will be a party to, and (iv) the authority (including
specimen signatures) for each person who, on behalf of the Guarantor, signed
this Agreement, will endorse the Guarantor's Guarantee on any Note, and/or
signed or will sign any other Borrower Documents that the Guarantor is a party
to, or will otherwise act as the Guarantor's representative in the operation of
the Credit.
(d) Government Authorizations. Copies, certified as true copies by a duly
authorized officer of the Borrower or Guarantor, as the case may be, of each
consent, license, authorization or approval of, and exemption by, any
Governmental Authority and any Other Governmental Authority, which are necessary
or advisable: (i) for the execution, delivery, performance and observance by the
Borrower and the Guarantor of the Borrower Documents that each is a party to,
including, without limitation, all approvals relating to the availability and
transfer of Dollars required to make all payments due under this Agreement and
any Note; (ii) for the validity, binding effect and enforceability of the
Borrower Documents; and (iii) for the execution, delivery and performance of any
Purchase Contract and the importation and use of the Items in the Borrower's
Country.
(e) Legal Opinions. Opinions of legal counsel acceptable to the Lender and
Eximbank in the Borrower's Country and the Guarantor's Country in substantially
the forms of Annexes C and D, respectively, and, if requested by Eximbank or the
Lender, an opinion from independent legal counsel selected by Eximbank or the
Lender as to such matters relating to this Agreement or the transaction
contemplated hereby as specified by Eximbank or the Lender.
(f) Appointment of Process Agent. Evidence that (i) each of the Borrower
and the Guarantor has irrevocably appointed as its agent for service of process
the Person or Persons
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so specified in Section 11.03(a), and (ii) each such agent has accepted the
appointment and has agreed to forward forthwith to the Borrower or the
Guarantor, as the case may be, all legal process addressed to the Borrower or
the Guarantor, as the case may be, received by such agent.
(g) Acquisition List. A list of the Items, containing with respect to each
Item: a brief description, the quantity, estimated invoice cost, estimated date
of shipment, Supplier's DUNS Numbers (if available) and product SIC Codes.
(h) Purchase Contract(s). With respect to the first Utilization of the
Credit for Tranche One, copies of all applicable Purchase Contract(s) for the
shipments corresponding to such tranche. If any Purchase Contract provides for
payments to a Supplier prior to completion and delivery of any Item ("Progress
Payments"), the schedule for such Progress Payments, in Eximbank's reasonable
judgment, must be reasonable and consistent with industry and financial
standards.
(i) Master Guarantee Agreement. The fully executed Master Guarantee
Agreement, and a fully executed Eximbank Approval, each of which shall be in
full force and effect.
(j) Note. The Note(s) in the aggregate principal amount of the Credit
shall have been fully executed by the Borrower, endorsed by the Guarantor, and
delivered to the Lender, with a copy to Eximbank.
(k) Registration. Evidence that the Borrower Documents have been
registered at the Public Registry of Titles and Documents in the City of Sao
Paulo.
(l) Outside Counsel. Evidence that the reasonable fees and out-of-pocket
expenses due and payable to counsel to the Lender and Eximbank have been fully
paid.
(m) No Event of Default. No Event of Default and no event which but for
the giving of notice or the lapse of time or both would constitute an Event of
Default exists at the time all the foregoing conditions have been satisfied or
waived.
6.02 Condition Precedent to Each Utilization. The obligation of the Lender
to permit any Utilization, including the first Utilization, shall be subject to
the delivery to the Lender and Eximbank of the documents indicated below (each
in form and substance satisfactory to the Lender and Eximbank) and to the
fulfillment, as of the date of such Utilization (in a manner satisfactory to the
Lender and Eximbank) of the conditions set forth below:
(a) This Agreement, Guarantor Guarantee and Master Guarantee Agreement.
This Agreement, the Guarantor Guarantee described in Section 3, the Master
Guarantee Agreement and the Eximbank Approval each shall each continue to be in
fall force and effect.
(b) No Restrictions. No law, regulation, ruling or other action of any
Governmental Authority or Other Governmental Authority shall be in effect or
shall have occurred, the
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effect of which would be to prevent any party to this Agreement from fulfilling
its obligations.
(c) Utilization Documents. The Lender and Eximbank shall have received the
documents required under Annex B with respect to the requested Utilization,
including, without limitation, invoices, Suppliers' Certificates and bills of
lading, if applicable.
(d) Legal Opinions. If, since the date of the legal opinion furnished
pursuant to Section 6.01(e), there has been a change in circumstances that could
have a material adverse effect on the ability of the Borrower or the Guarantor,
as the case may be, to perform its obligations hereunder or under any Note, then
Eximbank or the Lender may request supplemental legal opinions with respect to
the possible consequences of such changed circumstances. Such supplemental
opinions shall be dated as of the date on which the Utilization was requested,
be addressed and delivered to Eximbank and the Lender and be in form and
substance satisfactory to Eximbank and the Lender.
(e) Fees and Expenses. Eximbank shall have been paid the Exposure Fee. All
other fees and expenses then due and payable under Section 7 shall have been
paid.
(f) Guarantee Certificate. Eximbank shall have issued a Guarantee
Certificate with respect to the requested Utilization.
(g) Utilization by way of Letter of Credit. If the Utilization is by way
of a letter of credit such letter of credit shall be in form and substance
satisfactory to the Agent and Eximbank.
(h) Purchase Contract(s). For each Utilization of the Credit relating to
Tranche Two, the Lender and Eximbank shall have received copies of all
applicable Purchase Contract(s) for the shipments being financed by such
Utilization.
(i) Other Documents. Such other documents, certificates, instruments or
information relating to this Agreement or any Note or the transactions
contemplated hereby as either the Lender or Eximbank may have reasonably
requested shall have been delivered in form and substance satisfactory to
Eximbank and the Lender.
(j) No Event of Default. No Event of Default and no event which but for
the giving of notice or the lapse of time or both would constitute an Event of
Default exists or will exist after giving effect to the requested Utilization.
SECTION 7. FEES AND EXPENSES
7.01 Fees.
(a) The Borrower shall pay or cause to be paid to Eximbank the following
fees:
(i) a guarantee commitment fee ("Guarantee Commitment Fee") of
one-eighth of one percent (1/8%) per annum on the uncancelled and undisbursed
balance from time to
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time of the Credit, computed on the basis of the actual number of days elapsed
(including the first day but excluding the last), using a 360-day year, accruing
from August 5, 1996 to the Final Disbursement Date, and payable on October 15
and April 15 of each year, beginning on April 15, 1997; and
(ii) no later than each Disbursement Date, an exposure fee (an
"Exposure Fee") equal to 4.14% of the amount of such Disbursement that
represents the Financed Portion of the Items.
For the avoidance of doubt, the parties hereto acknowledge and agree that the
Guarantee Commitment Fee shall continue to accrue and become due and payable as
described above during any period in which Utilizations are suspended as
described in Section 10.02(a).
(b) The Borrower shall pay or cause to be paid to the Lender fees in
accordance with the fee letter dated as of the date hereof.
7.02 Taxes.
(a) The Borrower and the Guarantor each agrees to pay all amounts owing by
it under this Agreement or any Note free and clear of and without deduction or
withholding for or on account of any Taxes.
(b) The Borrower and the Guarantor each further agrees:
(i) that, if the Borrower or the Guarantor, as the case may be, is
prevented by operation of law from paying any such Taxes or any such Taxes are
required to be deducted or withheld, then the interest, fees or expenses
required to be paid under this Agreement or any Note shall, on an after-tax
basis, be increased by the amount necessary to yield to the Lender or Eximbank,
as the case may be, interest, fees or expenses in the amounts provided for in
this Agreement or such Note after the provision for the payment of all such
Taxes;
(ii) that the Borrower and/or the Guarantor shall, at the request of
either the Lender or Eximbank, execute and deliver to the Lender or Eximbank, as
the case may be, such further instruments as may be necessary or desirable to
effect the payment of the increased amounts as provided for in subsection (i)
above, including new Note(s) to be issued by the Borrower and endorsed by the
Guarantor in exchange for any Note(s) previously issued;
(iii) that the Borrower and the Guarantor shall hold the Lender and
Eximbank harmless from and against any liabilities with respect to any Taxes
(whether or not properly or legally asserted); and
(iv) that, at the request of either the Lender or Eximbank, the
Borrower or the Guarantor, as the case may be, shall provided the Lender and
Eximbank, within the later of thirty (30) days after such request or thirty (30)
days after the actual payment of such Taxes, with the original or a certified
copy of evidence of the payment of any Taxes by the Borrower or the Guarantor,
or, if no Taxes have been paid, provide the Lender and
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Eximbank, at the request of either the Lender or Eximbank, with a certificate
from the appropriate taxing authority or an opinion of counsel acceptable to the
Lender and Eximbank stating that no Taxes are payable.
(c) Notwithstanding anything to the contrary contained herein, the
agreements in this Section 7.02 shall survive the termination of this Agreement
and the payment of the Note(s) and all other amounts due hereunder.
7.03 Expenses. The Borrower agrees, whether or not the transactions hereby
contemplated shall be consummated, to pay, or reimburse the Lender and Eximbank,
respectively, promptly upon demand for the payment of all reasonable and duly
documented costs and expenses arising in connection with the preparation,
printing, execution, delivery, registration, implementation, modification of or
waiver or consent under, the Borrower Documents and the Master Guarantee
Agreement, including, without limitation, the reasonable and duly documented
out-of-pocket expenses of the Lender and Eximbank (incurred in respect of
telecommunications, mail or courier service, travel and the like), the fees and
expenses of counsel for the Lender and/or Eximbank, and all Taxes (including,
without limitation, interest and penalties, if any) which may be payable in
respect of the Borrower Documents and the Master Guarantee Agreement. The
Borrower shall also pay all of the costs and expenses (including, without
limitation, the fees and expenses of counsel and all Taxes) incurred by or
charged to the Lender or Eximbank in connection with the amendment or
enforcement of any of the Borrower Documents or the protection or preservation
of any right or claim of the Lender or Eximbank arising out of any of the
Borrower Documents, All amounts payable by the Borrower pursuant to this Section
7.03 shall be paid by the Borrower in the currency in which the same has been
incurred and is payable by the Lender or Eximbank, as the case may be.
7.04 Additional or Increased Costs.
(a) If, due to any Regulatory Change that: (i) changes the basis of
taxation of any amounts payable to the Lender (other than taxes imposed on the
overall net income of the Lender or of the office out of which it is acting
hereunder); (ii) imposes or modifies any reserve, special deposit, deposit
insurance or assessment affecting the Lender; or (iii) imposes any other
condition affecting this Agreement or any Note, there shall be any increase in
the cost to the Lender of agreeing to make or making, funding or maintaining any
Utilization, then the Borrower shall from time to time, upon demand by the
Lender, pay to the Lender additional amounts sufficient to compensate the Lender
for such increased cost.
(b) Without duplication of Section 7.04(a), if the Lender, in its
reasonable judgment, determines at any time that any Regulatory Change will have
the effect of increasing the amount of capital required or expected to be
maintained by the Lender (which term, for purposes of this Section 7.04(b),
shall include any corporation controlling the Lender) based on the existence of
the Lender's obligations hereunder, then the Borrower shall pay to the Lender,
upon demand by the Lender, such additional amounts as shall be required to
compensate the Lender for the increased cost to the Lender as a result thereof
(which compensation shall include, without limitation, an amount equal to any
reduction in return on
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assets or equity of the Lender to a level below that which it could have
achieved but for such Regulatory Change, taking into account the Lender's
policies as to capital adequacy).
(c) "Regulatory Change" shall mean the introduction or change after the
date of this Agreement of or in United States or foreign national, state,
municipal laws or regulations or in the interpretation or administration
thereof, or the adoption or making after such date of any directives or requests
(whether or not having the force of law) by any United States or foreign
national, state, or municipal court or monetary authority, or other Governmental
Authority or Other Governmental Authority.
(d) The Lender shall take such reasonable steps as it shall determine in
its sole discretion to minimize amounts demanded under this Section 7.04. In the
event that the Lender transfers the booking office of the Credit to minimize
amounts demanded under this Section 7.04, any costs and expenses incurred in
such transfer shall be paid by the Borrower on demand by the Lender.
(e) Each demand for payment by the Lender under this Section 7.04 shall be
accompanied by a certificate showing in reasonable detail the basis for the
calculation of the amounts demanded, which certificate, in the absence of
manifest error, shall be conclusive and binding for all purposes.
SECTION 8. PAYMENTS
8.01 Method of Payment
(a) All payments to be made by the Borrower or the Guarantor under this
Agreement and any Note shall be made without set-off or counterclaim in Dollars
in immediately available and freely transferable funds no later than 11:00 A.M.
(New York City time) on the date on which due (as applicable):
(i) to the Lender at The Chase Manhattan Bank, 4 Chase Metrotech
Center, Brooklyn, New York 11245 for credit to the Lender's New York
International Banking Facility account no. 544748148, ABA No. 021000021; and
(ii) to Eximbank at the Federal Reserve Bank of New York for credit
to Eximbank's account: U.S. Treasury Department 021030004 TREAS NYC/CTR/BNF=/AC-
4984 OBI=Export-Import Bank Due ________ on EIB Guarantee No. AP 069910XX
- -Brazil from TVA Sistema de Televisao S.A.
(b) Except as otherwise provided herein, whenever any payment would
otherwise fall due on a day which is not a Business Day, the due date for
payment shall be the immediately succeeding Business Day and interest and fees
shall be computed in accordance with Section 12.01.
8.02 Application of Payments. The Lender and Eximbank shall each apply
payments received by it under this Agreement or any Note (whether at stated
maturity, by reason of acceleration, prepayment or otherwise), including without
limitation any payments under the
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Guarantor Guarantee, in the following order of priority: (a) interest due
pursuant to Section 5.02(a)(ii), but only to the extent such amounts are
included in the "Guaranteed Amount" as such term is defined in the Master
Guarantee Agreement; (b) Guarantee Commitment Fees, Exposure Fees and all other
amounts due to Eximbank under this Agreement and not otherwise provided for
under this Section 8.02; (c) interest due pursuant to Section 5.02(a)(i); (d)
installments of principal due; and (e) all other amounts due under this
Agreement and not otherwise provided for in this Section 8.02. Payments with
respect to the Note(s) shall be applied pro rata to each Note in accordance with
the above priorities.
SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS
9.01 Representations and Warranties of the Borrower.
(a) The Borrower represents and warrants to the Lender and Eximbank that:
(i) Existence and Authority. The Borrower is duly organized and
validly existing under the laws of the Borrower's Country, with full power,
authority and legal right to own its property and carry on its business as now
conducted, and has taken all actions necessary or advisable to authorize it to
execute, deliver, perform and observe the terms and conditions of the Borrower
Documents that the Borrower is a party to.
(ii) Government Authorizations. All consents, licenses,
authorizations and approvals of, and exemptions by, any Governmental Authority
and any Other Governmental Authority that are necessary or advisable: (A) for
the execution, delivery, performance and observance by the Borrower of the
Borrower Documents that the Borrower is a party to, including, without
limitation, approvals relating to the availability and transfer of Dollars
required to make all scheduled payments due under this Agreement and any Note;
(B) for the validity, binding effect and enforceability of the Borrower
Documents; (C) for the execution, delivery and performance of any Purchase
Contract and the importation and use of the Items in the Borrower's Country,
have been obtained and are in full force and effect.
(iii) Recordation. To ensure the legality, validity, enforceability,
priority or admissibility in evidence in the Borrower's Country of any of the
Borrower Documents, it is not necessary that any of the Borrower Documents be
registered, recorded, enrolled or otherwise filed with any court or other
Governmental Authority (other than registration of the Borrower Documents at the
Public Registry of Titles and Documents in the City of Sao Paulo), or be
notarized, or that any documentary, stamp or other similar tax, imposition or
charge of any kind be paid on or in respect of any of the Borrower Documents.
(iv) Restrictions. The execution, delivery and performance or
observance by the Borrower of the terms of, and consummation by the Borrower of
the transactions contemplated by, each of the Borrower Documents that the
Borrower is a party to does not and will not conflict with or result in a breach
or violation of: (A) the charter, by-laws or similar documents of the Borrower;
(B) any law of the Borrower's Country or any other ordinance, decree,
constitutional provision, regulation or other requirement of any Governmental
Authority (including, without limitation, any restriction on interest that may
be paid by the Borrower); or (C) any order, writ, injunction, judgment or decree
of any court
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or other tribunal. Further, the execution, delivery and performance or
observance by the Borrower of the terms of, and consummation by the Borrower of
the transactions contemplated by, each of the Borrower Documents that the
Borrower is a party to does not and will not conflict with or result in a breach
of any agreement or instrument to which the Borrower is a party, or by which it
or any of its revenues, properties or assets may be subject, or result in the
creation or imposition of any Lien upon any of the revenues, properties or
assets of the Borrower pursuant to any such agreement or instrument.
(v) Binding Effect. This Agreement and the other Borrower Documents
that the Borrower is a party to which have been executed on or before the date
hereof have been duly executed and delivered by the Borrower. Each of the
Borrower Documents that the Borrower is a party to which has been executed and
delivered constitutes, and each such Borrower Document which may hereafter be
executed and delivered will constitute, a direct, general and unconditional
obligation of the Borrower which is legal, valid and binding upon the Borrower
and enforceable against the Borrower in accordance with its respective terms,
except as such enforceability may be limited by applicable insolvency,
reorganization, liquidation, moratorium, readjustment of debt or other similar
laws affecting the enforcement of creditors' rights generally and by the
application of general principles of equity regardless of whether such
enforceability is considered in a proceeding at law or in equity. The Borrower's
payment obligations under this Agreement rank, and under any Note, when issued,
will rank, in all respects at least pari passu in priority of payment and in
right of security with all other unsecured debt of the Borrower, except, in the
case of the bankruptcy or liquidation of the Borrower, for debts of the Borrower
related to taxes or wages.
(vi) Choice of Law. Under the conflict of laws principles in the
Borrower's Country, the choice of law provisions of this Agreement and the
Note(s) are valid, binding and not subject to revocation by the Borrower, and,
in any proceedings brought in the Borrower's Country for enforcement of any of
the Borrower Documents, the choice of the law of the State of New York as the
governing law of such documents will be recognized and such law will be applied,
provided that the applicable provisions of New York law are not in conflict with
Brazilian public policy, good customs or national sovereignty.
(vii) Commercial Activity. The Borrower Documents that the Borrower
is a party to and the transactions contemplated thereby constitute commercial
activities (rather than governmental or public activities) of the Borrower, and
the Borrower is subject to private commercial law with respect thereto.
(viii) Legal Proceedings. No legal proceedings are pending or, to
the best of the Borrower's knowledge, threatened before any court, Governmental
Authority or any Other Governmental Authority which might: (A) materially and
adversely affect the Borrower's financial condition, business or operations; (B)
restrain or enjoin or have the effect of restraining or enjoining the
performance or observance of the terms and conditions of any of the Borrower
Documents; or (C) in any other manner question the validity, binding effect or
enforceability of any of the Borrower Documents.
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(ix) Purchase Contract(s). No applicable law of the Borrower's
Country is or will be violated by either any Purchase Contract or the Borrower's
performance of its obligations under any Purchase Contract.
(x) Use of Items. The Items will be used for lawful purposes.
(xi) Borrower Financial Statements. The Borrower Financial
Statements present fairly the financial condition of the Borrower at the date of
such statements and the results of the operations of the Borrower for such
fiscal year. The Borrower Financial Statements have been prepared in accordance
with generally accepted accounting principles in the Borrower's Country
consistently applied. Except as fully reflected in the Borrower Financial
Statements, there are no liabilities or obligations with respect to the Borrower
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) for the period to which the Borrower Financial Statements
relate that, either individually or in the aggregate, would be material to the
Borrower. Since the date of the Borrower Financial Statements, there has been no
material adverse change in the financial condition, business, prospects or
operations of the Borrower.
(xii) No Taxes. There is no Tax imposed on or in connection with:
(A) the execution, delivery or performance of any of the Borrower Documents; (B)
the enforcement of any of the Borrower Documents, other than applicable court
costs and filing fees; or (C) on any payment to be made to the Lender or
Eximbank under any of the Borrower Documents.
(xiii) No Delinquency on Amounts Due to the United States. To the
best of the Borrower's knowledge and belief after due diligence, the Borrower is
not delinquent on any amounts due and owing to any Other Governmental Authority
of the United States as of the date of this Agreement.
(xiv) Suspension and Debarment, etc. On the date of this Agreement,
neither the Borrower nor its Principals are (A) debarred, suspended, proposed
for debarment with a final determination still pending, declared ineligible or
voluntarily excluded (as such terms are defined in any of the Debarment
Regulations) from participating in procurement or nonprocurement transactions
with any United States federal government department or agency pursuant to any
of the Debarment Regulations or (B) indicted, convicted or had a civil judgment
rendered against the Borrower or any of its Principals for any of the offenses
listed in any of the Debarment Regulations. Unless authorized by Eximbank, the
Borrower will not knowingly enter into any transactions in connection with the
Items with any person who is debarred, suspended, declared ineligible or
voluntarily excluded from participation in procurement or nonprocurement
transactions with any United States federal government department or agency
pursuant to any of the Debarment Regulations. The Borrower will provide
immediate written notice to Eximbank if at any time it learns that the
certification set forth in this Section 9.01(a)(xiv) was erroneous when made or
has become erroneous by reason of changed circumstances. For the purposes
hereof, (1) "Principals", with respect to the Borrower or the Guarantor, as the
case may be, shall mean any officer, director, owner, partner, key employee, or
other Person with primary management or supervisory responsibilities with
respect to the Borrower or Guarantor, as the case may be, or any other
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Person (whether or not an employee) who has critical influence on or substantive
control over the transaction covered by this Agreement and (2) the "Debarment
Regulations" shall mean (x) the Governmentwide Debarment and Suspension
(Nonprocurement) regulations (Common Rule), 53 Fed. Reg. 19204 (May 26, 1988),
(y) Subpart 9.4 (Debarment, Suspension, and Ineligibility) of the Federal
Acquisition Regulations, 48 C.F.R. 9.400-9.409 and (z) the revised
Governmentwide Debarment and Suspension (Nonprocurement) regulations (Common
Rule), 60 Fed. Reg. 33037 (June 26, 1995).
(b) The representations and warranties of the Borrower set forth in
Section 9.01 (a) shall be deemed repeated as of the date of each Utilization,
with the same force and effect as if made on such date.
9.02 Affirmative Covenants of the Borrower. The Borrower covenants and
agrees that until all amounts owing under this Agreement and the Note(s) have
been paid in full, the Borrower will, unless the Lender and Eximbank shall have
consented in writing:
(a) Notice of Defaults. Promptly but in no event later than ten (10) days
after the occurrence of an Event of Default or of any event which but for the
giving of notice or the lapse of time or both would constitute an Event of
Default notify the Lender and Eximbank by telecopier or hand delivery of the
particulars of such occurrence and the corrective action proposed to be taken by
the Borrower with respect thereto.
(b) Financial Reports. Beginning with the fiscal year in which this
Agreement is executed and continuing until all amounts owing under this
Agreement and the Note(s) have been paid in full, the Borrower shall furnish to
the Lender and Eximbank, within 180 days after the end of its fiscal year, a
copy of its annual consolidated financial statements, including its balance
sheet, statement of income, and statement of cash flow, for that fiscal year,
all of which shall have been audited by an independent accounting firm
acceptable to Eximbank. All financial reports to be submitted to the Lender or
Eximbank shall be prepared in accordance with generally accepted accounting
principles in the Borrower's Country consistently applied, shall be in the
English language (or accompanied by an accurate English translation), shall
include the auditor's opinion and any accompanying notes, and shall fairly
present the financial condition of the Borrower and the results of its
operations for the periods covered. The Borrower agrees to submit to the Lender
and Eximbank such additional financial reports and other data and information
regarding its financial condition, business and operations as the Lender or
Eximbank may reasonably request.
(c) Inspections. Permit representatives of the Lender and Eximbank to make
reasonable inspections during commercial business hours of the project using or
incorporating the Items and of the Borrower's books and records in connection
with this Agreement and the transactions contemplated hereby (including, without
limitation, records regarding the use of the Items), and cause the Borrower's
officers and employees to give full cooperation and assistance in connection
therewith.
(d) Notice of Disputes. Promptly give written notice to the Lender and
Eximbank of any material dispute which may exist between the Borrower and (i)
the Guarantor or any
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Governmental Authority, (ii) any Other Governmental Authority, or (iii) any
international financial institutions.
(e) Government Authorizations. Promptly obtain and maintain all consents,
licenses, authorizations and approvals of, and exemptions by, any Governmental
Authority and any Other Governmental Authority that are necessary or advisable:
(i) for the execution, delivery, performance and observance by the Borrower of
the Borrower Documents that the Borrower is a party to, including, without
limitation, all approvals relating to the availability and transfer of Dollars
required to make all payments due under this Agreement and any Note; (ii) for
the validity, binding effect and enforceability of the Borrower Documents; and
(iii) for the execution, delivery and performance of any Purchase Contract and
the importation and use of the Items in the Borrower's Country.
(f) Pari Passu. Ensure that its payment obligations under this Agreement
and any Note will at all times constitute the direct, general and unconditional
obligations of the Borrower and rank in all respects at least pari passu in
priority of payment and in right of security with all other unsecured debt of
the Borrower, except, in the case of the bankruptcy or liquidation of the
Borrower, for debts of the Borrower related to taxes or wages.
(g) Acquisition List. Obtain the prior written consent of the Lender and
Eximbank to any material alteration of the Acquisition List.
(h) Purchase Contract(s). Obtain the prior written consent of the Lender
and Eximbank to any assignment of the Borrower's rights or obligations under any
Purchase Contract or to any material modification to or cancellation of any
Purchase Contract.
(i) Other Acts. From time to time, do and perform any and all acts and
execute any and all documents as may be necessary or as reasonably requested by
the Lender or Eximbank in order to effect the purposes of this Agreement and to
protect the interests of the Lender and Eximbank in the Note(s) and the
interests of the Lender in the Eximbank Guarantee.
9.03 Negative Covenants of the Borrower. The Borrower covenants and agrees
that until all amounts owing under this Agreement and the Note(s) have been paid
in full, it will not, without the prior written consent of the Lender and
Eximbank:
(a) Liens on Items. Create, assume, permit or suffer to exist any Liens on
any of the Items, except the following (each, a "Permitted Lien"):
(i) Liens for taxes, assessments or governmental charges or levies
if the same shall not at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by appropriate
proceedings.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than thirty (30) days past
due or which are being contested in good
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faith by appropriate proceedings and for which adequate reserves shall have been
set aside on its books.
(iii) Liens granted to a bank in connection with the issuance of a
Letter of Credit, which liens shall be released automatically when such bank is
reimbursed for payments made under such Letter of Credit.
(b) Sale, Lease or Transfer of Items. Sell, lease or otherwise transfer,
or agree to sell, lease or otherwise transfer, any Item or a component of any
Item, except for leases of decoders and other equipment entered into between the
Borrower and its subscribers.
(c) Use of the Items. Use, or permit the use of, the Items outside the
Borrower's Country.
(d) Change in Business. Make any substantial change in the scope or nature
of its business or operations.
(e) Merger, Consolidation, Dissolution and Sale. (i) Merge or consolidate
with any other entity (other than a merger or consolidation with an entity that
is controlled by or is under common control with the Borrower; provided that (a)
the Borrower is the corporation surviving such merger or consolidation and (b)
no material adverse effect on the business condition (financial or otherwise) or
operations of the Borrower or on the ability of the Borrower to perform its
obligations under this Agreement or any Note results therefrom); (ii) dissolve
or terminate its legal existence; (iii) sell, lease, transfer or otherwise
dispose of any substantial part of its properties or any of its properties
essential to the conduct of its business or operations, as now or hereafter
conducted, except for leases of decoders and other equipment entered into
between the Borrower and its subscribers; or (iv) enter into any agreement to do
any of the foregoing.
9.04 Representations and Warranties of the Guarantor. (a) The Guarantor
represents and warrants to the Lender and Eximbank that:
(i) Existence and Authority. The Guarantor is duly organized and
validly existing under the laws of the Guarantor's Country, with full power,
authority and legal right to own its property and carry on its business as now
conducted. The Guarantor has taken all actions necessary or advisable to
authorize it to execute, deliver, perform and observe the terms and conditions
of the Borrower Documents that the Guarantor is a party to.
(ii) Government Authorizations. All consents, licenses,
authorizations and approvals of, and exemptions by, any Governmental Authority
and any Other Governmental Authority that are necessary or advisable: (A) for
the execution, delivery, performance and observance by the Guarantor of the
Borrower Documents that the Guarantor is a party to, including, without
limitation, approvals relating to the availability and transfer of Dollars
required to make all scheduled payments due under this Agreement and the
Note(s); and (B) for the validity, binding effect and enforceability of the
Borrower Documents, have been obtained and are in full force and effect.
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(iii) Recordation. To ensure the legality, validity, enforceability,
priority or admissibility in evidence in the Guarantor's Country of any of the
Borrower Documents, it is not necessary that any of the Borrower Documents be
registered, recorded, enrolled or otherwise filed with any court or other
Governmental Authority (other than registration of the Borrower Documents at the
Public Registry of Titles and Documents in the City of Sao Paulo), or be
notarized, or that any documentary, stamp or other similar tax, imposition or
charge of any kind be paid on or in respect of this Agreement or the Note(s).
(iv) Restrictions. The execution, delivery and performance or
observance by the Guarantor of the terms of, and consummation by the Guarantor
of the transactions contemplated by, each of the Borrower Documents that the
Guarantor is a party to, does not and will not conflict with or result in a
breach or violation of: (A) the charter, by-laws or similar documents of the
Guarantor; (B) any law of the Guarantor's Country or any other ordinance,
decree, constitutional provision, regulation or other requirement of any
Governmental Authority (including, without limitation, any restriction on
interest that may be paid); or (C) any order, writ, injunction, judgment or
decree of any court or other tribunal. Further, the execution, delivery and
performance or observance by the Guarantor of the terms of the Borrower
Documents that the Guarantor is a party to does not and will not conflict with
or result in a breach of any agreement or instrument to which the Guarantor is a
party, or by which it or any of its revenues, properties or assets may be
subject, or result in the creation or imposition of any Lien upon any of the
revenues, properties or assets of the Guarantor pursuant to any such agreement
or instrument.
(v) Binding Effect. This Agreement and the other Borrower Documents
that the Guarantor is a party to which have been executed on or before the date
hereof have been, and the Notes when executed will be, duly executed and
delivered by the Guarantor. Each of the Borrower Documents that the Guarantor is
a party to which has been executed and delivered constitutes, and each such
Borrower Document which may hereafter be executed and delivered will constitute,
a direct, general and unconditional obligation of the Guarantor which is legal,
valid and binding upon the Guarantor and enforceable against the Guarantor in
accordance with its respective terms, except as such enforceability may be
limited by applicable insolvency, reorganization, liquidation, moratorium,
readjustment of debt or other similar laws affecting the enforcement of
creditors' rights generally and by the application of general principles of
equity regardless of whether such enforceability is considered in a proceeding
at law or in equity. The Guarantor's payment obligations under this Agreement
rank, and under any Note, when issued, will rank, in all respects at least pari
passu in priority of payment and in right of security with all other unsecured
debt of the Guarantor, except, in the case of the bankruptcy or liquidation of
the Guarantor, for debts of the Guarantor related to taxes or wages.
(vi) Choice of Law. Under the conflict of laws principles in the
Guarantor's Country, the choice of law provisions of this Agreement and the
Note(s) are valid, binding and not subject to revocation by the Guarantor, and,
in any proceedings brought in the Guarantor's Country for enforcement of any of
the Borrower Documents, the choice of the law of the State of New York as the
governing law of such documents will be recognized and such law will be applied,
provided that the applicable provisions of New York law are not in conflict with
Brazilian public policy, good customs or national sovereignty.
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(vii) Commercial Activity. The Borrower Documents that the Guarantor
is a party to and the transactions contemplated thereby constitute commercial
activities (rather than governmental or public activities) of the Guarantor, and
the Guarantor is subject to private commercial law with respect thereto.
(viii) Legal Proceedings. No legal proceedings are pending or, to
the best of the Guarantor's knowledge, threatened before any court, Governmental
Authority or Other Governmental Authority which might: (A) restrain or enjoin or
have the effect of restraining or enjoining the performance or observance of the
terms and conditions of any of the Borrower Documents; or (B) in any other
manner question the validity, binding effect or enforceability of any of the
Borrower Documents; or (C) materially or adversely affect the Guarantor's
financial condition, business or operations.
(ix) Guarantor Financial Statements. The Guarantor Financial
Statements present fairly the financial condition of the Guarantor at the date
of such statements and the results of the operations of the Guarantor for such
fiscal year. The Guarantor Financial Statements have been prepared in accordance
with generally accepted accounting principles in the Guarantor's Country
consistently applied. Except as fully reflected in the Guarantor Financial
Statements, there are no liabilities or obligations with respect to the
Guarantor of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) for the period to which the Guarantor
Financial Statements relate that, either individually or in the aggregate, would
be material to the Guarantor. Since the date of the Guarantor Financial
Statements, there has been no material adverse change in the financial
condition, business, prospects or operations of the Guarantor.
(x) No Taxes. There is no Tax imposed on or in connection with: (A)
the execution, delivery or performance of any of the Borrower Documents; (B) the
enforcement of any of the Borrower Documents, other than applicable court costs
and filing fees; or (C) on any payment to be made to the Agent or Eximbank under
any of the Borrower Documents.
(xi) Suspension and Debarment, etc. On the date of this Agreement
neither the Guarantor nor its Principals are (A) debarred, suspended, proposed
for debarment with a final determination still pending, declared ineligible or
voluntarily excluded (as such terms are defined any of the Debarment
Regulations) from participating in procurement or nonprocurement transactions
with any United States federal government department or agency pursuant to any
of the Debarment Regulations or (B) indicted, convicted or had a civil judgment
rendered against the Guarantor or any of its Principals for any of the offenses
listed in any of the Debarment Regulations. Unless authorized by Eximbank, the
Guarantor will not knowingly enter into any transactions in connection with the
Items with any person who is debarred, suspended, declared ineligible or
voluntarily excluded from participation in procurement or nonprocurement
transactions with any United States federal government department or agency
pursuant to any of the Debarment Regulations. The Guarantor will provide
immediate written notice to Eximbank if at any time it learns that the
certification set forth in this Section 9.04(a)(xii) was erroneous when made or
has become erroneous by reason of changed circumstances.
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(b) The representations and warranties of the Guarantor set forth in this
Section 9.04 shall be deemed repeated as of the date of each Utilization, with
the same force and effect as if made on such date.
9.05 Affirmative Covenants of the Guarantor. The Guarantor covenants and
agrees that until all amounts owing under this Agreement and the Note(s) have
been paid in full, the Guarantor will, unless the Lender and Eximbank shall have
consented in writing:
(a) Notice of Defaults. Promptly but in no event later than ten (10) days
after the occurrence of an Event of Default, or of any event which but for the
giving of notice or the lapse of time or both would constitute an Event of
Default, notify the Lender and Eximbank by telecopier or hand delivery of the
particulars of such occurrence and the corrective action proposed to be taken by
the Guarantor with respect thereto.
(b) Financial Reports. Beginning with the fiscal year in which this
Agreement is executed and continuing until all amounts owing under this
Agreement and the Note(s) have been paid in full, the Guarantor shall furnish to
the Lender and Eximbank, within 180 days after the end of its fiscal year, a
copy of its annual consolidated financial statements, including its balance
sheet, statement of income, and statement of cash flow, for that fiscal year,
all of which shall have been audited by an independent accounting firm
acceptable to Eximbank. All financial reports to be submitted to the Lender or
Eximbank shall be prepared in accordance with generally accepted accounting
principles in the Guarantor's Country consistently applied, shall be in the
English language (or accompanied by an accurate English translation), shall
include the auditor's opinion and any accompanying notes, and shall fairly
present the financial condition of the Guarantor and the results of its
operations for the periods covered. The Guarantor agrees to submit to the Lender
and Eximbank such additional financial reports and other data and information
regarding its financial condition, business and operations as the Lender or
Eximbank may reasonably request.
(c) Inspections. Permit representatives of the Lender and Eximbank to make
reasonable inspections during commercial business hours of the Guarantor's books
and records in connection with this Agreement, and cause the Guarantor's
officers and employees to give full cooperation and assistance in connection
therewith.
(d) Notice of Disputes. Promptly give written notice to the Lender and
Eximbank of any material dispute which may exist between the Guarantor and (i)
the Borrower, (ii) any Governmental Authority or (iii) any international
financial institutions.
(e) Government Authorizations. Promptly obtain and maintain all consents,
licenses, authorizations and approvals of and exemptions by, any Governmental
Authority and any Other Governmental Authority that are necessary or advisable:
(i) for the execution, delivery, performance and observance by the Guarantor of
the Borrower Documents that the Guarantor is a party to, including, without
limitation, approvals relating to the availability and transfer of dollars
required to make all payments due under this Agreement and any Note; and (ii)
for the validity, binding effect and enforceability of the Borrower Documents.
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(f) Pari Passu. Ensure that its payment obligations under this Agreement
and the Note(s) will at all times constitute the direct, general and
unconditional obligations of the Guarantor and rank in all respects at least
pari passu in priority of payment and in right of security with all other
unsecured debt of the Guarantor, except, in the case of the bankruptcy or
liquidation of the Guarantor, for debts of the Guarantor related to taxes or
wages.
(g) Other Acts. From time to time, do and perform any and all acts and
execute any and all documents as may be necessary or as reasonably requested by
the Lender or Eximbank in order to effect the purposes of this Agreement and to
protect the interests of the Lender and Eximbank in the Note(s) and the
interests of the Lender in the Eximbank Guarantee.
9.06 Negative Covenants of the Guarantor. The Guarantor covenants and
agrees that until all amounts owing under this Agreement and the Note(s) have
been paid in full, it will not, without the prior written consent of the Lender
and Eximbank
(a) Interference. Take any action which would prevent or interfere with
the observance and performance by the Borrower of any covenant, agreement or
obligation of the Borrower set forth in any of the Borrower Documents.
(b) Subrogation. Exercise any rights of subrogation which it may acquire
due to its payment of the Borrower's obligations pursuant to the Guarantor
Guarantee unless and until all sums payable under this Agreement and the Note(s)
have been paid in full, and if any payment shall be made to the Guarantor on
account of such rights of subrogation, it shall promptly pay such amount to the
Lender.
(c) Change in Business. Make any substantial change in the scope or nature
of its business or operations.
(d) Merger, Consolidation, Dissolution and Sale. (i) Merge or consolidate
with any other entity (other than a merger or consolidation with an entity that
is controlled by or is under common control with the Guarantor; provided that
(a) the Guarantor is the corporation surviving such merger or consolidation and
(b) no material adverse effect on the business condition (financial or
otherwise) or operations of the Guarantor or on the ability of the Guarantor to
perform its obligations under this Agreement or any Note results therefrom);
(ii) dissolve or terminate its legal existence; (iii) sell, lease, transfer or
otherwise dispose of any substantial part of its properties or any of its
properties essential to the conduct of its business or operations, as now or
hereafter conducted, except for leases of decoders and other equipment entered
into between the Guarantor and its subscribers; or (iv) enter into any agreement
to do any of the foregoing.
SECTION 10. CANCELLATION, SUSPENSION AND EVENTS OF DEFAULT
10.01 Cancellation by the Borrower. The Borrower may cancel at any time
all or any part of the undisbursed and uncancelled amount of the Credit for
which Letters of Credit have not been issued, advised or confirmed, provided
that thirty (30) days' prior written notice
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is given to the Lender and Eximbank. In the event of a cancellation of all or
part of the Credit by the Borrower, the Borrower, on or before the proposed date
of cancellation, shall pay (a) to Eximbank all Guarantee Commitment Fees accrued
and unpaid under Section 7.01(a) and all other amounts due and payable to
Eximbank under this Agreement as of the proposed date of cancellation and (b) to
the Lender any commitment fees accrued and unpaid under Section 7.01(b) and all
other amounts due and payable to the Lender under this Agreement as of the
proposed date of cancellation.
10.02 Suspension and Cancellation by Eximbank.
(a) If an Event of Default should occur and be continuing, Eximbank, by
written notice to the Lender, the Borrower and the Guarantor, may: (i) suspend
further Utilizations of the Credit until Eximbank is satisfied that the cause of
such suspension has been removed; or (ii) cancel the unutilized and uncancelled
amount of the Credit, provided, however, that Eximbank shall not suspend or
cancel any portion of the Credit for which Letters of Credit have been issued,
advised or confirmed. In the event of a cancellation of all or part of the
Credit by Eximbank, the Borrower shall pay (1) to Eximbank all Guarantee
Commitment Fees accrued and unpaid under Section 7.01 (a) and all other amounts
due and payable to Eximbank under this Agreement as of the date of cancellation
and (2) to the Lender any commitment fees accrued and unpaid under Section
7.01(b) and all other amounts due and payable to the Lender under this Agreement
as of the date of cancellation.
(b) If all of the conditions precedent to the first Utilization, as
described in Section 6, are not fulfilled to the satisfaction of Eximbank (in
its sole discretion) on or prior to the "Required Operative Date" specified on
the Term Sheet hereof, then, after taking into account the circumstances of such
failure, Eximbank may, by written notice to the Lender and the Borrower, cancel
the Credit.
10.03 Events of Default. (a) Each of the following events or conditions
shall be an "Event of Default" under this Agreement:
(i) any failure by the Borrower to pay when due any amount owing
under this Agreement or any Note;
(ii) any failure by the Borrower or the Guarantor to comply with its
obligations under Sections 9.02(a) or 9.05(a), respectively;
(iii) any representation or warranty made or deemed made by the
Borrower or the Guarantor in this Agreement or in connection herewith, or any
statement made in any certificate, report or financial statement furnished by
the Borrower or the Guarantor to the Lender or Eximbank or any statement made in
the legal opinions of the Borrower or the Guarantor concerning facts relating to
the Borrower or the Guarantor, as the case may be, or the transactions
contemplated hereby, has proven to have been false or misleading in any material
respect when made;
(iv) any failure by the Borrower or the Guarantor to perform or
comply with any of the covenants or provisions set forth in this Agreement
(exclusive of any events
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specified as an Event of Default in any other subsection of this Section
10.03(a)), which failure, if capable of being cured, remains uncured for a
period of thirty (30) days after written notice thereof has been given to the
Borrower or the Guarantor, as the case may be, by the Lender or Eximbank;
(v) except for payments in all cases described below not exceeding
in the aggregate the amount of U.S.$10,000,000 or its equivalent, any failure by
the Borrower to pay when due, including any period of grace provided to the
Borrower with respect thereto, any amounts payable under any other agreement or
instrument providing for the payment by the Borrower of borrowed money or for
the deferred purchase price of property or services received, or any such amount
has, prior to the stated maturity thereof, become due, or any event specified in
any such agreement or instrument shall occur the effect of which event is to
cause, or (with the giving of notice or lapse of time or both) to permit any
Person to cause, such amounts to become due, or to be repaid in full, prior to
their stated maturity;
(vi) except for payments in all cases described below not exceeding
in the aggregate the amount of U.S.$10,000,000 or its equivalent, any failure by
the Guarantor to pay when due, including any period of grace provided to the
Guarantor with respect thereto, any amounts payable under any other agreement or
instrument providing for the payment by the Guarantor of borrowed money or for
the deferred purchase price of property or services received, or any such amount
has, prior to the stated maturity thereof, become due, or any event specified in
any such agreement or instrument shall occur the effect of which event is to
cause, or (with the giving of notice or lapse of time or both) to permit any
Person to cause, such amounts to become due, or to be repaid in full, prior to
their stated maturity;
(vii) either the Borrower or the Guarantor shall be unable to pay
its debts as they fall due or shall admit in writing its inability to pay its
debts as they fall due or shall become insolvent; or the Borrower or the
Guarantor shall apply for or consent to the appointment of any liquidator,
receiver, trustee or administrator for all or a substantial part of its
business, properties, assets or revenues; or a liquidator, receiver, trustee or
administrator shall be appointed for the Borrower or the Guarantor and such
appointment shall continue undismissed, undischarged or unstayed for a period of
thirty (30) days; or the Borrower or the Guarantor shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, arrangement,
readjustment of debt, dissolution, liquidation or similar executory or judicial
proceeding; or a bankruptcy, arrangement, readjustment of debt, dissolution,
liquidation or similar executory or judicial proceeding shall be instituted
against the Borrower or the Guarantor and shall remain undismissed, undischarged
or unstayed for a period of thirty (30) days;
(viii) any involuntary Lien other than Permitted Liens shall have
been created upon the property of the Borrower or the Guarantor in an amount
that, in the reasonable judgment of Eximbank, if the Borrower or the Guarantor,
as the case may be, were required to pay such amount, would affect materially
and adversely the ability of the Borrower or the Guarantor, as the case may be,
to pay its indebtedness under this Agreement or any Note, and such Lien has not
been removed or discharged for a period of thirty (30) days from the date of its
creation;
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(ix) any judgment against the Borrower or the Guarantor shall have
been entered on a claim not covered by insurance in an amount which, in the
reasonable judgment of Eximbank, if the Borrower or the Guarantor, as the case
may be, were required to pay such amount, would affect materially and adversely
the ability of the Borrower or the Guarantor, as the case may be, to pay its
indebtedness under this Agreement or any Note, and such judgment has remained
unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of
thirty (30) days from the date of its entry;
(x) any Governmental Authority or Other Governmental Authority shall
have: (A) condemned, seized or expropriated all or substantially all of the
property of the Borrower or the Guarantor; or (B) taken any action which, in the
reasonable judgment of Eximbank, would affect materially and adversely the
ability of the Borrower or the Guarantor to pay its indebtedness under this
Agreement or any Note;
(xi) any authorization, approval, consent, license, exemption,
filing, registration, notarization or other requirement of any governmental,
judicial or public body or authority necessary to enable each of the Borrower or
the Guarantor to comply with its obligations hereunder or under any Note shall
have been revoked, rescinded, suspended, held invalid or otherwise limited in
effect in a manner that would affect materially and adversely the Borrower's or
the Guarantor's respective ability to perform its obligations hereunder or under
any Note; or any law, rule or regulation, decree or directive of any competent
authority shall be enacted or issued that shall impair materially and adversely
the ability or the right of the Borrower or the Guarantor, as the case may be,
to perform such obligations; or it shall become unlawful for the Borrower or the
Guarantor to perform any such obligations;
(xii) any Purchase Contract, or the performance by any party thereto
of such party's obligations under any Purchase Contract, in the reasonable
judgment of Eximbank, contravenes any applicable law;
(xiii) the Guarantor repudiates the Guarantor Guarantee or the
Guarantor Guarantee ceases for any reason to be in full force and effect; and
(xiv) any other event occurs or any other circumstance arises which,
in the reasonable judgment of Eximbank, is likely materially and adversely to
affect the ability of the Borrower or the Guarantor to perform all or any of its
obligations under this Agreement or under any Note.
(b) Upon the occurrence of any Event of Default, and at any time
thereafter, if such event is continuing, Eximbank, by written notice to the
Borrower, the Guarantor and the Lender, may declare immediately due and payable
(i) all or any portion of the principal amount of the Credit and any Note then
outstanding, including accrued interest thereon to the date of payment, and (ii)
all other amounts owing under this Agreement. Except as expressly provided in
Section 10.03(a), presentment, demand, protest and all other notices of any kind
are hereby expressly waived. The aforementioned right to accelerate is in
addition to and not a substitute for any other rights and remedies available to
the Lender and/or Eximbank under this Agreement and any Note and under
applicable laws.
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SECTION 11. GOVERNING LAW AND JURISDICTION
11.01 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, U.S.A.
11.02 Submission of Jurisdiction. The Borrower and the Guarantor hereby
each irrevocably agrees that any legal suit, action or proceeding arising out of
or relating to any of the Borrower Documents, or any of the transactions
contemplated thereby, may be instituted by the other parties hereto or any party
to any Borrower Document in the Courts of the State of New York or the Federal
Courts sitting in the Borough of Manhattan, City of New York, State of New York.
Each of the Borrower and the Guarantor hereby irrevocably waives, to the fullest
extent permitted by law, any objection which the Borrower or the Guarantor, as
the case may be, may have now or hereafter to the laying of the venue or any
objection based on forum non conveniens, or based on the grounds of jurisdiction
with respect to any such legal suit, action or proceeding, and irrevocably
submits generally and unconditionally to the jurisdiction of any such court in
any such suit, action or proceeding. The Borrower and the Guarantor each agrees
that a judgment in any such action or proceeding may be enforced in any other
jurisdiction, including without limitation the Borrower's Country and the
Guarantor's Country, by suit upon such judgment, a certified copy of which shall
be conclusive evidence of the judgment.
11.03 Service of Process.
(a) In the case of the Courts of the State of New York or of the Federal
Courts sitting in the State of New York, the Borrower and Guarantor each hereby
designates, appoints and empowers CT Corporation, 1633 Broadway, New York, New
York 10019, as its respective authorized agents to accept, receive and
acknowledge, for and on behalf of the Borrower and the Guarantor, respectively,
its properties and revenues, service of any and all process which may be served
in any action, suit or proceeding of the nature referred to above in the State
of New York, which appointment shall be irrevocable until the appointment and
acceptance of a successor authorized agent pursuant to the provisions of Section
11.03(d).
(b) The Borrower and the Guarantor each further agrees that such service
of process may be made personally or by mailing or delivering a copy of the
summons and complaint or other legal process in any such legal suit, action or
proceeding to the Borrower or the Guarantor, as the case may be, in care of its
respective agent designated above at the aforesaid address, and each such agent
is hereby authorized, respectively, to accept, receive and acknowledge the same
for and on behalf of the Borrower or the Guarantor, as the case may be, and to
admit service with respect thereto. Service upon each such agent shall be deemed
to be personal service on the Borrower or the Guarantor, as the case may be, and
shall be legal and binding upon the Borrower and the Guarantor, as the case may
be, for all purposes notwithstanding any failure to mail copies of such legal
process to the Borrower or the Guarantor, as the case may be, or any failure on
the part of the Borrower or the Guarantor, as the case may be, to receive the
same, and shall be deemed completed upon the delivery thereof to such agent
whether or not such respective agent shall give notice
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thereof to the Borrower or the Guarantor, as the case may be, or upon the
earliest other date permitted by applicable law (including, without limitation,
the United States Foreign Sovereign Immunities Act of 1976, as amended).
(c) To the extent permitted by applicable law, including, without
limitation, treaties by which the United States and the Borrower's Country or
the Guarantor's Country, as the case may be, are bound, the Borrower and the
Guarantor each further irrevocably agrees to the service of process of any of
the aforementioned courts in any suit, action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, return receipt requested, to
the Borrower or the Guarantor, as the case may be, at the address referenced in
Section 12.02, such service to be effective upon the date indicated on the
postal receipt returned from the Borrower or the Guarantor, as the case may be.
(d) The Borrower and the Guarantor each agrees that it will at all times
continuously maintain an agent to receive service of process in the State of New
York on behalf of itself and its properties and revenues, and, in the event that
for any reason its agent designated above shall not serve as agent for the
Borrower or the Guarantor, as the case may be, to receive service of process in
the State of New York on its behalf, the Borrower or the Guarantor, as the case
may be, shall promptly appoint a successor satisfactory to the Lender and
Eximbank so to serve, advise the Lender and Eximbank thereof, and deliver to the
Lender and Eximbank evidence in writing of the successor agent's acceptance of
such appointment. The foregoing provisions constitute, among other things, a
special arrangement for service between the parties to this Agreement for the
purposes of 28 U.S.C, ss. 1608.
11.04 Waiver of Immunity. The Borrower and the Guarantor hereby each
irrevocably agrees that, to the extent that the Borrower or the Guarantor, as
the case may be, or any of its assets has or may hereafter acquire any right of
immunity, whether characterized as sovereign immunity or otherwise, from any
legal proceedings, whether in the United States, the Borrower's Country, the
Guarantor's Country or elsewhere, to enforce or collect upon the Credit or any
Note or any other liability or obligation of the Borrower or the Guarantor
related to or arising from the transactions contemplated by any of the Borrower
Documents, including, without limitation, immunity from service of process,
immunity from jurisdiction or judgment of any court or tribunal, immunity from
execution of a judgment, and immunity of any of its property from attachment
prior to any entry of judgment, or from attachment in aid of execution upon a
judgment, the Borrower and the Guarantor each hereby expressly and irrevocably
waives any such immunity and agrees not to assert any such right or claim in any
such proceeding, whether in the United States, the Borrower's Country the
Guarantor's Country or elsewhere.
11.05 Waiver of Security Requirements. To the extent the Borrower and the
Guarantor may, in any action or proceeding arising out of or relating to any of
the Borrower Documents brought in the Borrower's Country, the Guarantor's
Country or elsewhere, be entitled under applicable law to require or claim that
the Lender or Eximbank post security for costs or take similar action, the
Borrower and the Guarantor hereby each irrevocably waives and agrees not to
claim the benefit of such entitlement.
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11.06 No Limitation. Nothing in this Section 11 shall affect the right of
the Lender or Eximbank to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against the Borrower or the
Guarantor in the Borrower's Country, the Guarantor's Country or in any other
jurisdiction.
SECTION 12. MISCELLANEOUS
12.01 Computations. Each determination of an interest rate or fee by the
Lender or Eximbank pursuant to any provision of this Agreement or any Note, in
the absence of manifest error, shall be conclusive and binding on the Borrower
and the Guarantor. All computations of interest and fees hereunder and under any
Note shall be made on the basis of a year of 360 days and actual days elapsed.
All such calculations shall include the first day and exclude the last day of
the period of calculation.
12.02 Notices. Except as otherwise specified, all notices given hereunder
shall be in writing in the English language, shall include the applicable
Transaction Number and shall be given by mail, telecopier, tested telex or
personal delivery and shall be deemed to be given for the purposes of this
Agreement on the day that such notice is received by the intended recipient
thereof, except for notices given by Eximbank pursuant to Section 10, which
shall be deemed given on the earlier of: (a) the day on which such notice is
received by the intended recipient; or (b) the day on which such notice is
deposited in the mail or sent by telecopier, tested telex or personal delivery.
Unless otherwise specified in a notice delivered in accordance with this Section
12.02, all notices shall be delivered to the parties hereto at their respective
addresses indicated on the Term Sheet.
12.03 Disposition of Indebtedness. The Lender may sell, assign, transfer,
pledge, negotiate, grant participations in or otherwise dispose of all or any
part of its interest in all or any part of the Borrower's indebtedness under
this Agreement and any Note) to any party (collectively, a "Disposition of
Indebtedness"), and any such party shall enjoy all the rights and privileges of
the Lender under this Agreement and each Note that is the subject of such
Disposition of Indebtedness; provided, however, that such Disposition of
Indebtedness shall not, without the prior written consent of Eximbank, relieve
the Lender of its duties under this Agreement or the Master Guarantee Agreement.
The Borrower and the Guarantor shall, at the request of the Lender, execute and
deliver to the Lender, or to any party that the Lender may designate, any such
further instruments as may be necessary or desirable to give full force and
effect to a Disposition of Indebtedness by the Lender. Notwithstanding anything
to the contrary contained herein, neither the Borrower nor the Guarantor may
assign or otherwise transfer any of its debts or obligations under this
Agreement or any Note without the prior written consent of Eximbank and the
Lender. The Lender and Eximbank acknowledge that any Disposition of Indebtedness
(other than from the Lender to Eximbank) must be registered with the Central
Bank of the Borrower's Country (the "Central Bank") in order for the Borrower or
the Guarantor to be authorized to make payments due under this Agreement or any
Note. The Lender shall promptly notify the Borrower and the Guarantor of any
Disposition of Indebtedness, and the Borrower shall register such Disposition of
Indebtedness with the Central Bank within ten (10) days of receipt of such
notice. The Borrower and the Guarantor each hereby appoints the Lender or any of
its affiliates or assigns as the Borrower's and the Guarantor's agent and
attorney-in-fact to apply for the
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registration with the Central Bank of any Disposition of Indebtedness if the
Borrower or the Guarantor has not done so within such ten (10) day period.
12.04 Benefit of Agreement. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
12.05 Termination of Eximbank Guarantee. In the event the Eximbank
Guarantee terminates in its entirety pursuant to terms and conditions of the
Master Guarantee Agreement, as of the date of termination, the rights of
Eximbank under Section 10 shall automatically be deemed to have been assigned to
the Lender.
12.06 Disclaimer. Neither Eximbank nor the Lender shall be responsible in
any way for the performance of any Purchase Contract, and no claim against the
Supplier or any other person with respect to the performance of any Purchase
Contract will affect the obligations of the Borrower or the Guarantor under any
of the Borrower Documents.
12.07 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Lender or Eximbank in exercising any right, power or privilege under this
Agreement or the Note(s) and no course of dealing between or among the Borrower,
the Guarantor, the Lender and/or Eximbank shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under the Note(s) preclude any other right, power or privilege hereunder or
thereunder. The rights and remedies expressly provided herein are cumulative and
not exclusive of any rights or remedies which the Lender or Eximbank would
otherwise have. No notice to or demand on the Borrower or the Guarantor in any
case shall entitle the Borrower or the Guarantor, as the case may be, to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Lender or Eximbank to any other or
further action in any circumstances without notice or demand.
12.08 Entire Agreement. This Agreement (together with the Borrower
Documents) contains the entire agreement among the parties hereto regarding the
Credit except for the Master Guarantee Agreement and any agreements between or
among the Lender, the Borrower and the Guarantor regarding obligations of the
Borrower and/or the Guarantor not covered by the Eximbank Guarantee.
12.09 Amendment or Waiver. This Agreement may not be changed, discharged
or dated without the written consent of the parties hereto, and no provision
hereof may be waived without the written consent of the party to be bound
thereby.
12.10 Counterparts. This Agreement may be signed in separate counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
12.11 Judgment Currency. All payments of principal, interest, fees or
other amounts due hereunder and under any Note shall be made in Dollars,
regardless of any law, rule, regulation or statute, whether now or hereafter in
existence or in effect in any jurisdiction, which affects or purports to affect
such obligations. The obligation of the
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Borrower and the Guarantor in respect of any amount due under this Agreement or
any Note, notwithstanding any payment in any other currency (whether pursuant to
a judgment or otherwise), shall be discharged only to the extent of the amount
in Dollars that the Person entitled to receive that payment may, in accordance
with normal banking procedures, purchase with the sum paid in that other
currency (after any premium and costs of exchange) on the Business Day
immediately succeeding the day on which that Person receives that payment. If
the amount in Dollars that may be so purchased for any reason falls short of the
amount originally due, the Borrower and the Guarantor shall pay such additional
amounts, in Dollars, to compensate for the shortfall. Any obligation of the
Borrower or the Guarantor not discharged by that payment shall be continued to
be due as a separate and independent obligation and shall accrue interest in
accordance with Section 5.02 until discharged as provided herein.
12.12 English Language. All documents to be delivered by any party hereto
pursuant to the terms hereof shall be in the English language or, if originally
written in another language, shall be accompanied by an accurate English
translation upon which the other parties hereto shall have the right to rely for
all purposes under this Agreement and any Note.
12.13 Severability. To the extent permitted by applicable law, the
illegality or unenforceability of any provision of this Agreement shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Credit
Agreement to be duly executed and delivered as of the date first written.
TVA SISTEMA DE TELEVISAO S.A., as Borrower
By: ______________________________________
(Signature)
Name: ____________________________________
(Print)
Title: ___________________________________
(Print)
TEVECAP S.A., as Guarantor
By: ______________________________________
(Signature)
Name: ____________________________________
(Print)
Title: ___________________________________
(Print)
THE CHASE MANHATTAN BANK, as Lender
By: ______________________________________
(Signature)
Name: ____________________________________
(Print)
Title: ___________________________________
(Print)
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EXPORT-IMPORT BANK OF THE UNITED STATES
By: ______________________________________
(Signature)
Name: ____________________________________
(Print)
Title: ___________________________________
(Print)
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Annex A
TVA SISTEMA DE TELEVISAO, S.A.
PROMISSORY NOTE
U.S.$ ____________________ ___________________,19__
FOR VALUE RECEIVED, TVA Sistema de Televisao S.A., 313 V. Olimpia, Sao
Paulo, Brazil Cep 04552-904 (the "Maker") by this promissory note (this "Note")
hereby unconditionally promises to pay to the order of The Chase Manhattan Bank
(the "Lender") at 1 Manhattan Plaza, Brooklyn, New York 10081 the principal sum
of __________________________________ Dollars (U.S.$________) in installments as
hereinafter provided and to pay interest on the principal balance hereof from
time to time outstanding, as hereinafter provided, at the rate of 0.25 percent
(0.25 %) per annum above LIBOR. Beginning on the Eximbank Claim Payment Date
(hereinafter defined), the definition of Special LIBOR shall apply for all
purposes, including, without limitation, the fifth paragraph hereof, in place of
the definition of LIBOR. All capitalized terms not defined herein have the
meanings assigned to them in the Credit Agreement (hereinafter defined).
The principal hereof shall be paid in ______ (______) installments, the
first of which shall be in the sum of __________________________________ Dollars
(U.S.$________) and shall be due and payable on ____________ 15, 19__. The
remaining installments shall each be in the sum of Dollars (U.S.$________) and
shall be due and payable semi-annually thereafter on ____________ 15 and
____________ 15 of each year (each, a "Payment Date"), provided that on the last
Payment Date, the Maker shall repay in full the principal amount hereof then
outstanding.
Interest on this Note is payable on each Payment Date, beginning on
____________ 15, 19__. Interest will be calculated on the basis of the actual
number of days elapsed (including the first day, but excluding the last day)
over a year of 360 days.
In the event that any amount of the principal hereof or accrued interest
on this Note is not paid in full when due (whether at stated maturity, by
acceleration or otherwise), the Maker shall pay to the Lender on demand interest
on such unpaid amount (to the extent permitted by applicable law) for the period
from the date such amount was due until such amount shall have been paid in full
at an interest rate per annum equal to (x) 1% per
A-1
<PAGE>
annum above the interest rate then applicable under first paragraph hereof until
the end of the then current Interest Period, and (y) thereafter 1.25% per annum
above the rate per annum (rounded upward, if necessary, to the nearest 1/16 of
1%) at which U.S. Dollar deposits are offered to the office of the Lender in the
eurodollar market in which such office of the Lender customarily deals at 11:00
a.m., local time of such office of the Lender, for successive interest periods
selected by the Lender in its sole discretion, two Business Days prior to the
first day of such interest period, for the number of days of each such interest
period and in an amount equal to the aggregate principal amount of the Credit
evidenced by Floating Rate Notes outstanding on the first day of each such
interest period.
Notwithstanding the fourth paragraph hereof, beginning on the date on
which Eximbank shall have made a claim payment to the Lender under the Master
Guarantee Agreement ("Eximbank Claim Payment Date"), in the event any amount of
principal of or accrued interest on this Note owing to Eximbank is not paid in
full when due (whether at stated maturity, by acceleration or otherwise), the
Maker shall pay to Eximbank on demand interest on such unpaid amount (to the
extent permitted by applicable law) for the period from the date such amount was
due until such amount shall have been paid in full at an interest rate per annum
equal to one percent (1%) per annum above the interest rate then applicable
under the first paragraph hereof.
This is one of the Notes referenced in Section 5.6 of the Credit Agreement
dated as of [____________], 19__ (the "Credit Agreement") by and among the
Maker, the Guarantor, the Lender and the Export-Import Bank of the United
States. This Note is entitled to the benefits of, and is governed in all
respects by, the terms of the Credit Agreement, which Credit Agreement, among
other things, contains provisions for the payment of principal and interest
(including default interest) hereon without set-off, counterclaim, deduction,
withholding on account of taxes levied or imposed under the laws of the
Government of Brazil, restrictions and conditions of whatever nature, and for
acceleration of the maturity hereof upon the happening of certain stated events.
The principal amount hereof may be prepaid in accordance with terms of the
Credit Agreement. All payments received hereunder shall be applied in accordance
with the order of priority set forth in Section 8.02 of the Credit Agreement.
The Maker hereby waives demand, diligence, presentment, protest and notice
of every kind, and warrants to the holder that all actions and approvals
required for the execution and delivery hereof as a legal, valid and binding
obligation of the undersigned, enforceable in accordance with the terms hereof,
have been duly taken and obtained.
A-2
<PAGE>
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK, U.S.A.
TVA SISTEMA DE TELEVISAO, S.A.
By: ____________________________
(Signature)(2)
Name: __________________________
(Print)
Title: _________________________
(Print)
Promissory Note No. ________
- ----------
(2) Personal makers should sign in their personal capacities only. Corporate
makers should sign only in their corporate capacities with proper reference to
their corporate titles.
A-3
<PAGE>
GUARANTEE
FOR VALUE RECEIVED, the undersigned, as primary obligor, hereby
unconditionally and irrevocably guarantees the full, prompt and complete payment
when due (whether at scheduled maturity, by reason of acceleration or otherwise)
of the principal of and the interest on the foregoing promissory note, and
hereby waives acceptance, diligence, presentment, demand, protest or notice of
any kind whatsoever (including notice of default or non-payment), as well as any
requirements that the holder exhaust any right or take any action against the
maker of the foregoing promissory note, and hereby consents to any extension of
time or renewal or other modification thereof. This is a continuing, absolute
and unconditional guarantee of payment and not merely of collection. To the
extent permitted by applicable law, the undersigned hereby waives all defenses
of a surety or guarantor to which it may be entitled by statute or otherwise.
This Guarantee is issued pursuant to the terms of the Credit Agreement,
and is subject to the terms and is entitled to the benefits thereof.
TEVECAP S.A.
By: __________________________________
(Signature)
Name: ________________________________
(Print)
Title: _______________________________
(Print)
A-4
<PAGE>
UTILIZATION PROCEDURES A-5 (CA)
FOR LONG-TERM CREDITS GUARANTEED BY EXIMBANK Annex B
I. Introduction
In order to be guaranteed by Eximbank, funds must be disbursed under the Credit
in accordance with the "Reimbursement Procedure" and/or the "L/C Procedure,"
both of which are described below. No other disbursement methods are permitted.
II. Reimbursement Procedure
The Borrower may from time to time request that Disbursements be made by the
Lender to the Borrower's account at a commercial bank in the United States
selected by the Borrower and acceptable to the Lender and Eximbank to: (i)
reimburse the Borrower for the Financed Portion of any payments made by the
Borrower to the Supplier(s) or Special Ancillary Supplier(s) and (ii) charge the
Borrower for the related Exposure Fee due to Eximbank.
To obtain Disbursements under the Reimbursement Procedure:
A. The Borrower shall deliver to the Lender for submission to Eximbank copies
of the following documents (collectively, the "Reimbursement Documents"),
all of which must be satisfactory in form and substance to the Lender and
Eximbank:
1. The original Request for Reimbursement to Borrower's Account, in the
form of Exhibit 1, signed by an authorized representative of the
Borrower, accompanied by an Itemized Statement of payments, in the
form of Exhibit 1(a).
2. Copies of the invoice(s) for the Items to be financed under the
requested Disbursement, bearing or accompanied by evidence that the
Supplier(s) or Special Ancillary Supplier(s) thereof has been paid.
Evidence of payment may be any of the following: (a) a "paid" stamp
on the invoice signed by the Supplier or Special Ancillary Supplier;
(b) a copy of a U.S. commercial bank's "Advice of Payment" to the
Supplier or Special Ancillary Supplier; (c) a copy of both sides of
a cancelled check made payable to the Supplier or Special Ancillary
Supplier; or (d) a letter from the Supplier or Special Ancillary
Supplier acknowledging payment.
3. The original Supplier's Certificate(s) in the form of Exhibit 2,
signed by an authorized representative of the Supplier, with
paragraph 3(b) (Production Cost
B-1
<PAGE>
- Item) checked, either clause (a) or (b) of paragraph 8 (Suspension
and Debarment, etc.) checked (with the attachment required by clause
(b) provided if such clause is checked) and paragraphs 2 (Origin),
6(f) (Other Payments) and 6(g) (Barter agreements, etc.) each
completed "None" or in a manner otherwise satisfactory to Eximbank;
or, with respect to Special Ancillary Services, the original Special
Ancillary Supplier's Certificate in the form of Exhibit 2(b), signed
by an authorized representative of the Special Ancillary Supplier,
with either clause (a) or (b) of paragraph 5 (Suspension and
Debarment, etc.) checked (with the attachment required by clause (b)
provided if such clause is checked).
4. Copies of clean on-board ocean, airway, railway or other bills of
lading evidencing shipment of the Items from the United States to
the Borrower's Country (or, in the case that the Borrower's Country
is either Canada or Mexico, a destination in the United States which
is a point of importation into Canada or Mexico, respectively).
Ocean bills of lading must either show shipment on vessels of U.S.
registry or be accompanied by an appropriate MARAD waiver (as
described in Section IV below). Bills of lading are not required for
cases that do not involve the transportation of goods.
5. Such other documents, statements, certificates, information and
evidence as Eximbank may from time to time reasonably request (e.g.,
in aircraft financings: FAA certificates of airworthiness, insurance
certificates and certificates of acceptance by the Borrower.)
Eximbank may receive copies of the Reimbursement Documents, except for the
Supplier's Certificate and any Special Ancillary Supplier's Certificate,
which shall be the original document.
B. Upon approval of the Reimbursement Documents, Eximbank shall issue
to the Lender a Certificate Authorizing Reimbursement, in the form
of Exhibit 3.
C. Upon receipt of the Certificate Authorizing Reimbursement, the
Lender will reimburse the Borrower for the Financed Portion of the
Items as approved by Eximbank in the Certificate, and will
simultaneously pay to Eximbank the Exposure Fee that is due on such
Financed Portion, in accordance with the terms of the Agreement. The
sum of the amounts so reimbursed to the Borrower and so paid to
Eximbank shall constitute a Disbursement under the Credit.
B-2
<PAGE>
III. L/C Procedure
The Borrower may request a commercial bank located in the United States that is
acceptable to the Lender and Eximbank ("L/C Bank") to issue, confirm or advise
letters of credit ("Letters of Credit") in favor of the Supplier(s) and Special
Ancillary Supplier(s). (For the avoidance of doubt, the Lender may also be the
L/C Bank if the Lender is a commercial bank located in the U.S.) The Letters of
Credit may be drawn down by the Supplier(s) or Special Ancillary Supplier(s) as
payments come due under the Purchase Contract(s). Efforts should be made to
avoid a large number of letters of credit. Whenever possible all Items to be
purchased from one Supplier or Special Ancillary Supplier should be covered
under a single Letter of Credit.
To obtain Disbursements under the L/C Procedure:
A. The Borrower shall cause the L/C Bank to submit to Eximbank copies
of the following documents (collectively, the "L/C Documents"), all
of which must be satisfactory in form and substance to the L/C Bank,
the Lender and Eximbank:
1. The original Request for Letter of Credit Approval, in the
form of Exhibit 4, signed by an authorized representative of
the Borrower.
2. Three (3) copies of the proposed letter of credit in favor of
the Supplier or Special Ancillary Supplier, complete in all
respects, except for date and signature by the L/C Bank and
accompanied by a copy of the related pro forma invoice. The
Borrower's instructions to the L/C Bank with respect to the
proposed letter of credit shall provide that the documents to
be presented for drawings under such letter of credit meet the
documentary requirements of the Agreement, including the
submission of invoices, Supplier's Certificates in the form of
Exhibit 2 (or Special Ancillary Supplier's Certificates in the
form of Exhibit 2(b)) and bills of lading, in form and
substance as specified in Section II above, except that
invoices need not be accompanied by evidence of payment.
3. The original Supplier's Certificate (L/C Application) in the
form of Exhibit 2(a), signed by an authorized representative
of the Supplier or Special Ancillary Supplier.
4. Such other documents, statements, certificates, information
and evidence as Eximbank may from time to time reasonably
request.
B-3
<PAGE>
B. Upon approval of the L/C Documents, Eximbank shall issue to the L/C
Bank, with a copy to the Lender, a Certificate Approving Letter of
Credit, in the form of Exhibit 5.
C. Upon receipt of the Certificate Approving Letter of Credit, the L/C
Bank shall issue, advise or confirm the Letter of Credit.
D. If the Exposure Fee is included in the Letter of Credit, before any
drawings are permitted under the Letter of Credit, the L/C Bank
shall have received from the beneficiary of such letter of credit
its irrevocable instructions, in form and substance satisfactory to
the Lender, L/C Bank and Eximbank, to: (i) deduct from the amount of
each payment under the Letter of Credit an amount equal to the
Exposure Fee payable to Eximbank; and (ii) to pay such amount
directly to Eximbank.
E. The L/C Bank will pay the Supplier or Special Ancillary Supplier
under the Letter of Credit upon presentation of the documents
required by the Letter of Credit ("Drawing Documents"), and will
simultaneously pay to Eximbank the applicable Exposure Fee. A
Disbursement shall be deemed to occur when the L/C Bank makes
payment of a draft drawn under the Letter of Credit ("L/C Payment").
The sum of the amounts so paid to the beneficiary and to Eximbank
shall constitute the amount of the Disbursement.
F. Promptly after the date of an L/C Payment, the Lender shall deliver,
or cause the L/C Bank to deliver, to Eximbank copies of the Drawing
Documents related to such L/C Payment, except the Supplier's
Certificate and a Special Ancillary Supplier's Certificate, each of
which shall be a manually signed original.
Any amendments to a Letter of Credit must be approved by Eximbank, as well as
the Lender(s) and the L/C Bank. The Borrower's request for Eximbank's approval
of an amendment shall be made in the form of Exhibit 4(a), completed and signed
by an authorized representative of the Borrower, accompanied by any relevant
documents. If Eximbank approves the proposed amendment, it shall issue to the
L/C Bank, with a copy to the Lender, a Certificate Approving Amendment of Letter
of Credit, in the form of Exhibit 5(a).
IV. Ocean Transportation - MARAD Waivers
If any of the Items are to be exported on ocean vessels that are not
vessels of U.S. registry, the Borrower must obtain a waiver from the provisions
of 46 U.S.C. ss. 1241-1 (Public Resolution No. 17 of the 73rd Congress of the
United States, as amended). An
B-4
<PAGE>
application for waiver must be submitted to the U.S. Maritime Administration
("MARAD") at the following address: Director, Office of Market Development, Room
7207, Maritime Administration, Department of Transportation, 400 7th Street,
S.W., Washington, DC 20590 (with a copy to Eximbank). There are two types of
waivers available for shipment on non-U.S. vessels. A general waiver permits
ocean vessels of the Borrower's Country to carry up to fifty percent (50%) of
the cargo exported and may be obtained if the country does not discriminate in
any way against U.S. flag shipping. This type of waiver is granted for the life
of the Credit and is subject to submission of reports showing continued
compliance with its terms. A statutory waiver may be granted if the applicant
can establish and document to the satisfaction of MARAD that the applicant has
made a reasonable, timely and bona fide effort to arrange for shipment on ocean
vessels of U.S. registry, and that such vessels are not available or are not
available at reasonable rates. A statutory waiver must be obtained for each
separate shipment, and each application for such waiver must be submitted to
MARAD sufficiently in advance of the intended shipping date in order to allow
MARAD adequate opportunity to process the application. If any Items are shipped
on ocean vessels of non-U.S. registry without a MARAD waiver, or contrary to the
provisions of a MARAD waiver, such Items will not be eligible for financing
under the Credit.
Exhibits to Annex B:
1 - Request for Reimbursement to Borrower's Account
1(a) - Itemized Statement of Payments
2 - Supplier's Certificate
2(a) - Supplier's Certificate (L/C Application)
2(b) - Special Ancillary Supplier's Certificate
3 - Certificate Authorizing Reimbursement
4 - Request for Letter of Credit Approval
4(a) - Request for Approval of Amendment to Letter of Credit
5 - Certificate Approving Letter of Credit
5(a) - Certificate Approving Amendment to Letter of Credit
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The following is included for informational purposes only, and is not part of
the Agreement:
Because the Supplier, any Special Ancillary Supplier and the L/C Bank is a party
to the Agreement, the Borrower and Lender will need to take the following steps
to ensure that the Credit is disbursed in a timely fashion:
B-5
<PAGE>
1. The Borrower should advise each Supplier and Special Ancillary Supplier
of the provisions of this Agreement that will require their cooperation,
including, without limitation, the requirement that the Supplier's Certificate
or Special Ancillary Supplier's Certificate, as applicable, be completed and
attached to the invoice to which it relates.
2. If the Borrower would like to use the L/C Procedure, the Borrower must
make appropriate arrangements with the L/C Bank regarding the issuance,
confirmation or advice of the letters of credit and the payment of any fees that
the L/C Bank may charge. The Lender and the L/C Bank must enter into a
reimbursement agreement with respect to the L/C Payments, which reimbursement
agreement, along with Eximbank's Certificate Approving Letter of Credit, will be
conditions precedent to the issuance, confirmation or advice of a letter of
credit by the L/C Bank.
B-6
<PAGE>
REIMBURSEMENT PROCEDURE A-5(CA)
Annex B
Exhibit 1
REQUEST FOR REIMBURSEMENT TO BORROWER'S ACCOUNT
_______________, 19__
[NAME OF LENDER]
[ADDRESS OF LENDER]
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571
Attention: Credit Administration Division
Subject: Eximbank Guarantee No. - [Country]
[Name of Borrower] ("Borrower")
Request for Disbursement No.
Ladies and Gentleman:
In accordance with the terms and conditions of the Credit Agreement
("Agreement"), dated as of ____________, 199_, by and among the Borrower, [names
of other parties to the agreement], and the Export-Import Bank of the United
States ("Eximbank"), we hereby request the Lender(s) to make a Disbursement
under the Credit thereby established in the amount set forth below, with the
Reimbursement amount thereof being paid to the account of (identify the
Borrower's account as it is carried on the books of the payee bank) (complete
name and address of the payee bank)[.] [, and with the Exposure Fee amount
thereof being paid to Eximbank.]
Reimbursement amount U.S.$_______________
[[Exposure Fee amount U.S.$_______________
TOTAL U.S.$_______________]]
B1-1
<PAGE>
We enclose our Itemized Statement of Payments No. __, dated ____________, 199_.
We hereby certify with respect to the payments made by us for the goods
and services specified in Itemized Statement of Payments No. __ that:
1. All such payments were made exclusively for the purchase (a) in the
United States of goods and services of U.S. origin or manufacture (except as
disclosed in the enclosed Supplier's Certificate(s)) or (b) Special Ancillary
Services, and in either case that these goods and services will be used for
lawful purposes in accordance with the terms of the Agreement.
2. We have not previously requested Disbursements on account of these
payments.
3. Copies of invoices and bills of lading with attached Supplier's
Certificate(s) or Special Ancillary Supplier's Certificate, as applicable
(accompanied by evidence that the Suppliers or Special Ancillary Suppliers have
been paid) and other documents required by Eximbank's "Utilization Procedures"
(set forth in Annex B to the Agreement) relating to the goods and services
specified in Itemized Statement of Payments No. ___ are submitted herewith.
4. All of those goods which have been or will be transported to [insert
name of country] on ocean vessels have been or will be shipped on vessels of
U.S. registry, except to the extent that a waiver of this requirement has been
obtained from the U.S. Maritime Administration.
We further certify that: (i) we have paid the exact amounts set forth in
Itemized Statement of Payments No. ___ for the goods and services specified
therein, and, in connection with the acquisition of such goods and services, we
have not received or agreed to receive any discount, allowance, rebate,
commission, fee or other payment except as disclosed in the enclosed Supplier's
Certificate(s); (ii) in connection with the sale of or the obtaining of any
contract to sell such goods and services or with the establishment or operation
of the Eximbank-supported financing (including any letter of interest or
preliminary commitment relating thereto issued by Eximbank), we have not (a)
paid or agreed to pay any commission, fee or other payment or (b) entered into
any barter, buyback, countertrade or offset agreement or other similar agreement
and, to the best of our knowledge and belief, no Supplier has (x) granted, paid
or agreed to grant or pay any discount, allowance, rebate, commission, fee or
other payment or (y) entered into any barter, buyback, countertrade or offset
agreement or other similar agreement, other than as disclosed in the enclosed
Supplier's Certificate(s); (iii) as of the date of this request, no event has
occurred and is continuing which constitutes, or but for the requirement of
giving notice or lapse of time, or both, would constitute, an Event of Default
under the provisions of the Agreement; and (iv) as of the date of this request,
the representations and warranties made by us in the Agreement are true.
B1-2
<PAGE>
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned thereto in the Agreement.
Very truly yours,
[BORROWER]
By: _______________________________
(Signature)(1)
Name: _____________________________
(Print)
Title: ____________________________
(Print)
Enclosures
Itemized Statement of Payments
and supporting documents
- ----------
(1) May only be signed by one of the authorized representatives designated by
the Borrower pursuant to Section 6.01(c) of the Agreement.
B1-3
<PAGE>
REIMBURSEMENT PROCEDURE A-5 (CA)
Annex B
Exhibit 1(a)
ITEMIZED STATEMENT OF PAYMENTS
__________, 199_
Page __ of __
Eximbank Guarantee No. __________
Itemized Statement of Payments No. _________
(Attachment to Request for Reimbursement No. _______,
Covering period from _____ to _____ 199_
<TABLE>
<CAPTION>
Name and
Item Acquisition List Invoice Date of Amount of Address of Brief Description Bill of Lading
No.(1) Reference No. No. Payment Payment(2) Supplier(3) of Items(4) Date No. Remarks
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S.$
TOTAL U.S.$________
________
________
</TABLE>
(1) Number each item starting with 1, on each separate Itemized Statement.
(2) If the amount of payment is not for the total invoice value, explain in
Remarks.
(3) Name, address and zip code of company facility that produced the Item(s).
(4) Include Standard Industrial Classification (SIC) Code, if available.
B1(a)-1
<PAGE>
REIMBURSEMENT AND L/C PROCEDURE A-5 (CA)
Annex B
Exhibit 2
FORM OF SUPPLIER'S CERTIFICATE(1)
[Letterhead of Supplier or Ancillary Supplier]
___________ __, 19__
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571
Re: Eximbank Credit/Guarantee No. ________-[Country]
[Purchaser] ("Purchaser")
Supplier's Certificate
Ladies and Gentlemen:
We the undersigned supplier (the "Supplier") understand that the sale of
the goods and services (the "Items") covered by our enclosed invoice(s), which
are listed below (the "Invoices") may be financed by a credit or guarantee
provided by the Export-Import Bank of the United States ("Eximbank"), an agency
of the United States of America ("United States").
Name and Address of Brief Description of Items,
Purchaser including Standard Industrial
Number Date Amount ("Purchaser") Classification ("SIC") Code
- --------------------------------------------------------------------------------
[complete with respect to each enclosed invoice]
(1) This form should be completed and submitted by Suppliers or Ancillary
Suppliers of all Items (including, without limitation, Items that are
Ancillary Services) except for (i) Special Ancillary Services and (ii) any
local cost items specifically authorized by Eximbank.
B2-1
<PAGE>
We, the Supplier, hereby represent and warrant with respect to the Items that:
1. Cash Payment. In connection with the OECD Arrangement's requirement for
a minimum cash payment from the Purchaser equivalent to 15% of export value,
[check all boxes that are applicable]:
|_| a) We have received a cash payment in the amount of US$_________________
representing ___ percent of the amount of the Invoice(s).
|_| (b) We are financing at market rates of interest the required cash payment
in the amount of US$____________ representing ___ percent of the amount of
the Invoice(s).
|_| (c) We have not received any cash payment with respect to the Invoices.
2. Origin. The Items were either originated or manufactured by us in the
United States or, if not originated or manufactured by us in the United States,
were acquired by us from sources in the United States, and, to the best of our
knowledge and belief, except as disclosed below, no component part or value
added by fabrication, services or otherwise (exclusive of raw materials) was
originated or manufactured outside the United States.
Non-U.S. Foreign Costs
Item Component (U.S. Dollars) Source of Item(2) Country of Origin
- --------------------------------------------------------------------------------
(If none, the word "NONE" must be inserted in order for this Certificate
to be considered complete.)
We understand that (a) all information disclosed in paragraph 2 above must be
satisfactory to Eximbank and (b) Eximbank is under no obligation to support the
sale of any part of the Items that is of non-U.S. origin or manufacture or that
was acquired by us from sources outside the United States.
(2) Provide the name of the entity (whether domestic or foreign) from which
you obtained the foreign item.
B2-2
<PAGE>
3. Production Cost. (indicate if the statements below are true by checking
either the "YES" or "NO" box that follows each statement:3
(a) The aggregate Foreign Cost (as defined below) associated with the
Items is less than 50% of the aggregate Production Cost (as defined below)
of such Items.
|_| YES |_| NO
(b) The Foreign Cost associated with each of the Items is less than 50% of
the Production Cost of each such Item.
|_| YES |_| NO
"Production Cost" shall mean, with respect to any Item, the sum of (i)
direct material and component costs, (ii) direct labor costs and (iii) indirect
costs that can reasonably be attributed to the production of such Item.
"Foreign Cost" shall mean, with respect to any Item, the cost to the
Supplier of such Item or any component of such Item, as the case may be, if such
Item or such component was produced or manufactured outside the United States.
4. Licenses and Purchase Contract. All export licenses, all import
licenses, and all permits required by the Government of the United States or the
Government of [the Purchaser's country] in connection with the shipment of the
Items have been obtained. To the best of our knowledge, as of the date of
shipment, or, where no shipment occurred, as of the date of the work performed,
the contract to sell the Items, and the performance by the parties of their
respective obligations thereunder, did not violate any law then applicable.
5. Shipment. The Items were shipped from the United States to the
Purchaser in [the Purchaser's country] as evidenced by the enclosed
transportation document(s) (e.g., bill(s) of lading) or, in cases that do not
involve the transportation of goods, other evidence satisfactory to Eximbank has
been submitted.
6. Discounts, Allowances and Special Agreements. In connection with the
sale of, or obtaining the contract to sell, the Items or with the establishment
or operation of the Eximbank credit/guarantee (including any letter of interest
or preliminary commitment relating thereto issued by Eximbank), we have not,
directly or indirectly: (a) granted or paid,
(3) In order to obtain financing on a medium-term basis, statement (a) must be
true. In order to obtain financing on a long-term basis, statement (b)
must be true.
B2-3
<PAGE>
agreed or offered to grant or pay, or arranged for, any discount, allowance,
rebate, commission, fee or other payment; or (b) entered into any barter,
buyback, countertrade or offset agreement or other similar agreement except:
(i) Any discounts, allowances or rebates to the Purchaser that are
disclosed in the Invoices;
(ii) Amounts payable to our regular full-time employees to the
extent of their regular compensation;
(iii) Regular commissions or fees paid or to be paid in the ordinary
course of business to our regular sales agents or sales representatives and
readily identifiable on our books and records as to amount, purpose and
recipient;
(iv) Any letter of credit fees paid to commercial banks in
connection with the Eximbank credit/guarantee;
(v) Any payments made to Eximbank in connection with the Eximbank
credit/guarantee;
(vi) Other payments, as follows:
Payee Or Intended Payee Address Purpose
- ----------------------- ------- -------
(If none, then the word "NONE" must be inserted in order for this
Certificate to be considered complete. If any payee is named, a statement
must be attached showing for each the nature and extent of the services
and the method of computation of the payment.)
We understand that all payments disclosed in subparagraph 6(b)(vi) above must be
satisfactory to Eximbank.
(vii) Barter, buyback, countertrade or offset agreement or other similar
agreement:
Type of Agreement Other Parties Goods/Services
----------------- ------------- --------------
(If none, then the word "NONE" must be inserted in order for this
Certificate to be considered complete. If any agreement is disclosed, a
statement must be attached describing the basic terms of the agreement.)
B2-4
<PAGE>
We understand that all agreements disclosed in subparagraph 6(b)(vii) above must
be satisfactory to Eximbank.
7. Munitions List. Only the following goods and services covered by our
invoices are articles, services, or related technical data that are listed on
the United States Munitions List (part 121 of title 22 of the Code of Federal
Regulations):
Item Invoice Amount
---- --------------
(If none, the word "NONE" must be inserted in order for this Certificate
to be considered complete.)
We understand that all goods and services disclosed in paragraph 7 above must be
satisfactory to Eximbank.
8. Suspension and Debarment, etc. We certify that either:
|_| (a) neither we nor our Principals (as defined below) are at present (i)
debarred, suspended, proposed for debarment with a final determination
still pending, declared ineligible or voluntarily excluded (as such terms
are defined in any of the Debarment Regulations referred to below) from
participating in procurement or nonprocurement transactions with any
United States federal government department or agency pursuant to any of
the Debarment Regulations (as defined below) or (ii) indicted, convicted
or had a civil judgment rendered against us or any of our Principals for
any of the offenses listed in any of the Debarment Regulations; or
|_| (b) if we are unable to make the certification set forth in clause (a) of
this Section 8, we have attached a detailed explanation of the grounds for
this failure (including dates, identification of any debarring official or
suspending official (as such terms are defined in any of the Debarment
Regulations) and his or her agency, and details of any proposed or actual
debarment, suspension, declaration of ineligibility, voluntary exclusion,
indictment, conviction or civil judgment).
We further certify that, unless authorized by Eximbank, we will not
knowingly enter into any transactions in connection with the Items with any
person who is debarred, suspended, declared ineligible or voluntarily excluded
from participation in procurement or nonprocurement transactions with any United
States federal government department or agency pursuant to any of the Debarment
Regulations.
We agree that we will provide immediate written notice to Eximbank if at
any time we learn that the certification set forth in clause (a) of this Section
8, if made, was erroneous when made or has become erroneous by reason of changed
circumstances. For the purposes hereof, (i) "Principals" shall mean any officer,
director, owner, partner, key employee, or other person with primary management
or supervisory responsibilities, or any other person (whether or not an
employee) who has critical influence on or substantive control over the
transaction financed by the credit or guarantee provided by Eximbank which is
referred to
B2-5
<PAGE>
above and (ii) the "Debarment Regulations" shall mean (x) the Governmentwide
Debarment and Suspension (Nonprocurement) regulations (Common Rule), 53 Fed.
Reg. 19204 (May 26, 1988), (y) Subpart 9.4 (Debarment, Suspension, and
Ineligibility) of the Federal Acquisition Regulations, 48 C.F.R. 9.400 - 9.409
and (z) the revised Governmentwide Debarment and Suspension (Nonprocurement)
regulations (Common Rule), 60 Fed. Reg.
33037 (June 26, 1995).
9. Acknowledgement of Eximbank Reliance. We acknowledge that the
certifications set forth in this Supplier's Certificate are material
representations of fact upon which reliance will be placed by Eximbank in
connection with the financing of the purchase of the Items and that, if it is
later determined that we knowingly entered into an erroneous certification,
Eximbank may pursue any available remedies, which may include remedies available
to the United States government such as suspension or debarment pursuant to the
Debarment Regulations.
10. Original Certificate. This Supplier's Certificate is the only
Supplier's Certificate that we have issued with respect to the Invoices.
[SUPPLIER](4)
By: ____________________________________
(Signature)(5)
Name: __________________________________
(Print)
Title: _________________________________
(Print)
Address: _______________________________
________________________________________
_____________________________________(6)
(4) List complete name of company and include its Dun & Bradstreet number.
Note: this company must regularly do business in the United States.
(5) This Certificate must be signed by a senior officer of the
Supplier/Ancillary Supplier, such as the President, a Vice President, the
Secretary, the Treasurer or Assistant Treasurer. If any other individual signs,
evidence of his or her authority, in form and substance acceptable to Eximbank,
must be submitted with this Certificate.
(6) Include complete street address, including zip code, of the company facility
that produced Items. This address must be in the United States.
B2-6
<PAGE>
Enclosures
Invoices
Transportation Documents
cc: [Lender]
[Address of Lender]
B2-7
<PAGE>
L/C PROCEDURE A-5(CA)
Annex B
Exhibit 2(a)
EXIMBANK SUPPLIER'S CERTIFICATE (L/C APPLICATION)
(SUPPLIERS AND SPECIAL ANCILLARY SUPPLIERS)
[Letterhead of Supplier/Special Ancillary Supplier]
Date ______________
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571
Re: Eximbank Credit/Guarantee No._________-[Country]
[Name of Purchaser] ("Purchaser")
Ladies and Gentlemen:
We the undersigned supplier (the "Supplier") understand that the Borrower
is requesting [name of L/C Bank] to issue, confirm or advise a letter of credit
("Letter of Credit") in our favor to finance the purchase of [U.S. goods and
services ("Items")]/ [Financial Advisor Services, Technical Consultant Services,
Legal Services or Banking Services related to the above-mentioned
credit/guarantee ("Items")](1), and that the Letter of Credit may be funded by a
credit supported by the Export-Import Bank of the United States ("Eximbank"), an
agency of the United States of America ("United States").
(2)[We understand that Eximbank is under no obligation to support the sale
of any part of the Items that is of non-U.S. origin or manufacture or that was
acquired by us from sources outside the United States.]
We, the [Supplier]/[Special Ancillary Supplier], hereby represent and
warrant with respect to the Items that:
- ----------
(1) The second bracketed text is to be used by Special Ancillary Suppliers who
will issue a Special Ancillary Supplier's Certificate instead of a
standard Eximbank Supplier's Certificate.
(2) Only include this paragraph in certificates executed by Special Ancillary
Suppliers who will issue a Special Ancillary Supplier's Certificate
instead of a standard Eximbank Supplier's Certificate.
B2(a)-1
<PAGE>
(3)[1. Origin. The Items will be either originated or manufactured by us
in the United States or, if not originated or manufactured by us in the United
States, will be acquired by us from sources in the United States, and, to the
best of our knowledge and belief, except as disclosed below, no component part
or value added by fabrication, services or otherwise (exclusive of raw
materials) will be originated or manufactured outside the United States.
Non-U.S. Foreign Costs
Item Component (Dollars) Source of Item(4) Country of Origin
- --------------------------------------------------------------------------------
(If none, the word "NONE" must be inserted in order for this Certificate
to be considered complete.)
We understand that (a) all information disclosed in paragraph 1 above must be
satisfactory to Eximbank and (b) Eximbank is under no obligation to support the
sale of any part of the Items that is of non-U.S. origin or manufacture or that
was acquired by us from sources outside the United States.]
[2.] Discounts, Allowances and Special Agreements. In connection with the
sale of or obtaining the contract to sell the Items or with the establishment or
operation of the Eximbank credit/guarantee (including any letter of interest or
preliminary commitment relating thereto issued by Eximbank), we have not,
directly or indirectly: (a) granted or paid, agreed or offered to grant or pay,
or arranged for, any discount, allowance, rebate, commission, fee or other
payment; or (b) entered into any barter, buyback, countertrade or offset
agreement or other similar agreement except:
(i) Any discounts, allowances or rebates to the Purchaser that are
disclosed in the Invoices;
(ii) Amounts payable to our regular full-time employees to the
extent of their regular compensation;
(iii) Regular commissions or fees paid or to be paid in the ordinary
course of business to our regular sales agents or sales representatives and
readily identifiable on our books and records as to amount, purpose and
recipient;
- ----------
(3) This representation and warranty need not be included in certificates
executed by Special Ancillary Suppliers who will issue a Special Ancillary
Supplier's Certificate instead of a standard Eximbank Supplier's
Certificate.
(4) Provide the name of the entity (whether domestic or foreign) from which
you obtained the foreign item.
B2(a)-2
<PAGE>
(iv) Any letter of credit fees paid to commercial banks in
connection with the Eximbank credit/guarantee;
(v) Any payments made to Eximbank in connection with the Eximbank
credit/guarantee;
(vi) Other payments, as follows:
Payee Or Intended Payee Address Purpose
- ----------------------- ------- -------
(If none, then the word "NONE" must be inserted in order for this
Certificate to be considered complete. If any payee is named, a statement
must be attached showing for each the nature and extent of the services
and the method of computation of the payment.)
We understand that all payments disclosed in subparagraph 2(b)(vi) above must be
satisfactory to Eximbank.
(vii) Barter, buyback, countertrade or offset agreement or other
similar agreement:
Type of Agreement Other Parties Goods/Services
----------------- ------------- --------------
(If none, then the word "NONE" must be inserted in order for this
Certificate to be considered complete. If any agreement is disclosed, a
statement must be attached describing the basic terms of the agreement.)
We understand that all agreements disclosed in subparagraph 2(b)(vii) above must
be satisfactory to Eximbank
[3.] Munitions List. Only the following Items are articles, services, or
related technical data that are listed on the United States Munitions List (part
121 of title 22 of the Code of Federal Regulations):
[List Items]
(If none, the word "NONE" must be inserted in order for this Certificate
to be considered complete.)
B2(a)-3
<PAGE>
We understand that all goods and services disclosed in paragraph 3 above must be
satisfactory to Eximbank.
[4.] Suspension and Debarment, etc. We certify that either:
|_| (a) neither we nor our Principals (as defined below) are at present (i)
debarred, suspended, proposed for debarment with a final determination
still pending, declared ineligible or voluntarily excluded (as such terms
are defined in any of the Debarment Regulations referred to below) from
participating in procurement or nonprocurement transactions with any
United States federal government department or agency pursuant to any of
the Debarment Regulations (as defined below) or (ii) indicted, convicted
or had a civil judgment rendered against us or any of our Principals for
any of the offenses listed in any of the Debarment Regulations; or
|_| (b) if we are unable to make the certification set forth in clause (a) of
this Section 4, we have attached a detailed explanation of the grounds for
this failure (including dates, identification of any debarring official or
suspending official (as such terms are defined in any of the Debarment
Regulations) and his or her agency, and details of any proposed or actual
debarment, suspension, declaration of ineligibility, voluntary exclusion,
indictment, conviction or civil judgment).
We further certify that, unless authorized by Eximbank, we will not
knowingly enter into any transactions in connection with the Items with any
person who is debarred, suspended, declared ineligible or voluntarily excluded
from participation in procurement or nonprocurement transactions with any United
States federal government department or agency pursuant to any of the Debarment
Regulations.
We agree that we will provide immediate written notice to Eximbank if at
any time we learn that the certification set forth in clause (a) of this Section
4, if made, was erroneous when made or has become erroneous by reason of changed
circumstances. For the purposes hereof, (i) "Principals" shall mean any officer,
director, owner, partner, key employee, or other person with primary management
or supervisory responsibilities, or any other person (whether or not an
employee) who has critical influence on or substantive control over the
transaction financed by the credit or guarantee provided by Eximbank which is
referred to above and (II) the "Debarment Regulations" shall mean (x) the
Governmentwide Debarment and Suspension (Nonprocurement) regulations (Common
Rule), 53 Fed. Reg. 19204 (May 26, 1988), (y) Subpart 9.4 (Debarment,
Suspension, and Ineligibility) of the Federal Acquisition Regulations, 48 C.F.R.
9.400 - 9.409 and (z) the revised Governmentwide Debarment and Suspension
(Nonprocurement) regulations (Common Rule), 60 Fed. Reg. 30337 (June 26, 1995).
[5.] Acknowledgment of Eximbank Reliance. We acknowledge that the
certifications set forth in this Supplier's Certificate are material
representations of fact upon which reliance will be placed by Eximbank in
connection with the financing of the purchase of the Items and that, if it is
B2(a)-4
<PAGE>
later determined that we knowingly entered into an erroneous certification,
Eximbank may pursue any available remedies, which may include remedies available
to the United States government such as suspension or debarment pursuant to the
Debarment Regulations.
[NAME OF SUPPLIER/SPECIAL ANCILLARY SUPPLIER](5)
By: _____________________________________
(Signature)(6)
Name: ___________________________________
(Print)
Title: __________________________________
(Print)
Address: ________________________________(7)
- ----------
(5) List complete name of company and include its Dun & Bradstreet number.
(6) This Certificate must be signed by a senior officer of the Supplier or
Special Ancillary Supplier, such as the President, a Vice President, the
Secretary, the Treasurer or Assistant Treasurer. If any other individual
signs, evidence of his or her authority, in form and substance acceptable
to Eximbank, must be submitted with this Certificate.
(7) Include complete address, including zip code, of the company facility that
has produced or will produce the Items.
B2(a)-5
<PAGE>
REIMBURSEMENT AND L/C PROCEDURE A-5 (CA)
Annex B
Exhibit 2(b)
FORM OF SPECIAL ANCILLARY SUPPLIER'S CERTIFICATE(1)
[Letterhead of Ancillary Supplier]
Date________________
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571
Re: Eximbank Credit/Guarantee No._____________-[Country]
[Name of Borrower] ("Borrower")
Supplier's Certificate (Special Ancillary Services)
Ladies and Gentlemen:
We the undersigned supplier (the "Ancillary Supplier") understand that the
sale of services (the "Special Ancillary Services") covered by our enclosed
invoice(s), which are listed below (the "Invoices"), may be financed by a credit
or guarantee provided by the Export-Import Bank of the United States
("Eximbank"), an agency of the United States of America ("United States").
Description of Special
Name and Address Ancillary Services, including
of Borrower Standard Industrial
Number Date Amount ("Borrower") Classification ("SIC") Code
- --------------------------------------------------------------------------------
[complete with respect to each enclosed invoice]
[Each invoice must contain a detailed description of the services provided and
the specific fees and expenses charged with respect to each such service. In
addition, each expense must be separately itemized, with a notation as to the
date, purpose, recipient and amount of such expense.]
- ----------
(1) This form should be completed and submitted by Ancillary Suppliers of all
Items that are Special Ancillary Services. Suppliers or Ancillary Suppliers of
all other Items (including, without limitation, Ancillary Services that are not
Special Ancillary Services) should not complete or submit this form.
B2(b)-1
<PAGE>
We, the Ancillary Supplier, hereby represent and warrant with respect to
the Special Ancillary Services that:
1. Type of Special Ancillary Service: (Please check one):
|_| (a) Banking Services: The attached invoice describes fees charged
by the undersigned in our capacity as a lender guaranteed by
Eximbank with respect to the Eximbank transaction noted above.
Such fees are non- recurring charges that have become due and
payable on or prior to the date which the credit agreement
executed in connection with the transaction noted above
provides is the final date for disbursements (the "Final
Disbursement Date"). Eximbank has indicated that it has found
that such services both are necessary in order for the
underlying action to go forward and cannot be reasonably
obtained in the United States.
|_| (b) Financial Advisor Services: The attached invoice describes
fees and expenses charged by the undersigned in our capacity
as financial advisor to [the Borrower][the
Guarantor][Eximbank][the Lender] in connection with the
Eximbank transaction noted above. Such fees and expenses
relate to services provided in assisting [the
[Borrower][Guarantor] in obtaining, structuring and/or meeting
the requirements of the Eximbank [guarantee][credit] with
respect to such transaction.]/[[Eximbank][the Lender] in its
analysis of the Eximbank [guarantee][credit] with respect to
such transaction, the project and/or the business operations
of the Borrower [or Guarantor]]. Such fees and expenses have
become due and payable on or prior to the Final Disbursement
Date for the Eximbank [guarantee][credit]. [We have been
selected by Eximbank to perform the services to which such
fees relate, and Eximbank has required that the Borrower or
other Person pay for the provision of such services.]
[Eximbank has indicated that it has found that such services
both are necessary in order for the underlying transaction to
go forward and cannot be reasonably obtained in the United
States.]2
|_| (c) Legal Services: The attached invoice describes fees and
expenses charged by the undersigned in our capacity as legal
counsel to [the Borrower] [the Guarantor][Eximbank][the
Lender] in connection with the Eximbank transaction noted
above. Such fees and expenses relate to services provided in
connection with the Eximbank [guarantee] [credit] with respect
to the transaction noted above. Such fees and expenses have
become due and payable on or prior to Final Disbursement Date
for such Eximbank [guarantee][credit]. [We have
- ----------
(2) One of the last two bracketed sentences must be applicable.
B2(b)-2
<PAGE>
been selected by Eximbank to perform the services to which
such fees relate, and Eximbank has required that the Borrower
or other Person pay for the provision of such services.]
[Eximbank has indicated that it has found that such services
both are necessary in order for the underlying transaction to
go forward and cannot be reasonably obtained in the United
States.]3
(d) Technical Consultant Services: The attached invoice describes
fees and expenses charged by the undersigned in our capacity
as a technical consultant to [the Borrower][Eximbank][Lender]
[name any other Person] in connection with the Eximbank
transaction noted above. [Eximbank][the Lender] has required
that a technical consultant with expertise in [describe area
of expertise] be retained in order to assist [Eximbank][the
Lender] in its analysis of the Eximbank [guarantee][credit]
with respect to such transaction, the project and/or the
business operations of a Borrower [or Guarantor]. The
[Engineering Division][Project Finance Division][Aircraft
Finance Division] [name of relevant area division][Lender] has
indicated that it is prepared to accept the undersigned acting
in such capacity. Such fees and expenses relate to services
provided in connection with the Eximbank [guarantee][credit].
Such fees and expenses have become due and payable on or prior
to the Final Disbursement Date for such Eximbank
[credit][guarantee]. [We have been selected by Eximbank to
perform the services to which such fees relate, and Eximbank
has required that the Borrower or other Person pay for the
provision of such services.] [Eximbank has indicated that it
has found that such services both are necessary in order for
the underlying transaction to go forward and cannot be
reasonably obtained in the United States.]4
We understand that Eximbank has the right to evaluate the reasonableness
and appropriateness of each Ancillary Service and each fee and expense
charged in connection with such service and that Eximbank, in its sole and
absolute discretion, may determine not to support one or more Special
Ancillary Services, fees or expenses under said credit/guarantee.
2. Cash Payment. In connection with the OECD Arrangement's requirement for
a minimum cash payment from the Borrower equivalent to 15% of export value,
[check all boxes that are applicable]:
- ----------
(3) One of the last two bracketed sentences must be applicable.
(4) One of the last two bracketed sentences must be applicable.
B2(b)-3
<PAGE>
(a) We have received a cash payment in the amount of US$______
representing ___ percent of the amount of the Invoice(s).
(b) We are financing at market rates of interest the required cash
payment in the amount of US$______ representing ___ percent of the amount
of the Invoice(s).
(c) We have not received any cash payment with respect to the
Invoices.
3. Legality. To the best of our knowledge, the Special Ancillary Services,
and the performance by the parties of their respective obligations under any
agreement relating to such services, do not violate any provision of U.S. or any
other applicable law.
4. Discounts, Allowances and Special Agreements. In connection with the
sale of, or obtaining the contract to sell, the Items or with the establishment
or operation of the Eximbank credit/guarantee (including any letter of interest
or preliminary commitment relating thereto issued by Eximbank), we have not,
directly or indirectly: (a) granted or paid, agreed or offered to grant or pay,
or arranged for, any discount, allowance, rebate, commission, fee or other
payment; or (b) entered into any barter, buyback, countertrade or offset
agreement or other similar agreement except:
(i) Any discounts, allowances or rebates to the Borrower that are
disclosed in the Invoices;
(ii) Amounts payable to our regular full-time employees to the
extent of their regular compensation;
(iii) Regular commissions or fees paid or to be paid in the ordinary
course of business to our regular sales agents or sales representatives and
readily identifiable on our books and records as to amount, purpose and
recipient;
(iv) Any letter of credit fees paid to commercial banks in
connection with the Eximbank credit/guarantee;
(v) Any payments made to Eximbank in connection with the Eximbank
credit/guarantee;
(vi) Other payments, as follows:
Payee Or Intended Payee Address Purpose
- ----------------------- ------- -------
(If none, then the word "NONE" must be inserted in order for this
Certificate to be considered complete. If any payee is named, a statement
must be attached showing the nature and extent of the services and the
method of computation of the payment.)
B2(b)-4
<PAGE>
We understand that all payments disclosed in subparagraph 4(b)(vi) above must be
satisfactory to Eximbank.
(vii) Barter, buyback, countertrade or offset agreement or other
similar agreement:
Type of Agreement Other Parties Goods/Services
----------------- ------------- --------------
(If none, then the word "NONE" must be inserted in order for this
Certificate to be considered complete. If any agreement is disclosed, a
statement must be attached describing the basic terms of the agreement.)
We understand that all agreements disclosed in subparagraph 4(b)(vii) above must
be satisfactory to Eximbank.
5. Suspension and Debarment, etc. We certify that either:
|_| (a) neither we nor our Principals (as defined below) are at present
(i) debarred, suspended, proposed for debarment with a final
determination still pending, declared ineligible or voluntarily
excluded (as such terms are defined in any of the Debarment
Regulations referred to below) from participating in procurement or
nonprocurement transactions with any United States federal
government department or agency pursuant to any of the Debarment
Regulations (as defined below) or (ii) indicted, convicted or had a
civil judgment rendered against us or any of our Principals for any
of the offenses listed in any of the Debarment Regulations; or
|_| (b) if we are unable to make the certification set forth in clause
(a) of this Section 5, we have attached a detailed explanation of
the grounds for this failure (including dates, identification of any
debarring official or suspending official (as such terms are defined
in any of the Debarment Regulations) and his or her agency, and
details of any proposed or actual debarment, suspension, declaration
of ineligibility, voluntary exclusion, indictment, conviction or
civil judgment).
We further certify that, unless authorized by Eximbank, we will not
knowingly enter into any transactions in connection with the Special Ancillary
Services with any person who is debarred, suspended, declared ineligible or
voluntarily excluded from participation in procurement or nonprocurement
transactions with any United States federal government department or agency
pursuant to any of the Debarment Regulations.
We agree that we will provide immediate written notice to Eximbank if at
any time we learn that the certification set forth in clause (a) of this Section
5, if made, was erroneous when made or has become erroneous by reason of changed
circumstances. For the purposes
B2(b)-5
<PAGE>
hereof, (i) "Principals" shall mean any officer, director, owner, partner, key
employee, or other person with primary management or supervisory
responsibilities, or any other person (whether or not an employee) who has
critical influence on or substantive control over the transaction financed by
the credit or guarantee provided by Eximbank which is referred to above and (ii)
the "Debarment Regulations" shall mean (x) the Governmentwide Debarment and
Suspension (Nonprocurement) regulations (Common Rule), 53 Fed. Reg. 19204 (May
26, 1988), (y) Subpart 9.4 (Debarment, Suspension, and Ineligibility) of the
Federal Acquisition Regulations, 48 C.F.R. 9.400 - 9.409 and (z) the revised
Governmentwide Debarment and Suspension (Nonprocurement) regulations (Common
Rule), 60 Fed. Reg. 30337 (June 26, 1995).
6. Acknowledgment of Eximbank Reliance. We acknowledge that the
certifications set forth in this Supplier's Certificate (Special Ancillary
Services) are material representations of fact upon which reliance will be
placed by Eximbank in connection with the financing of the purchase of the
Special Ancillary Services and that, if it is later determined that we knowingly
entered into an erroneous certification, Eximbank may pursue any available
remedies, which may include remedies available to the United States government
such as suspension or debarment pursuant to the Debarment Regulations.
7. Original Certificate. This Supplier's Certificate (Special Ancillary
Services) is the only Supplier's Certificate (Special Ancillary Services) that
we have issued with respect to the Invoices.
[NAME OF SUPPLIER OF SPECIAL
ANCILLARY SERVICES](5)
By: ____________________________________
(Signature)(6)
Name: __________________________________
(Print)
Title: _________________________________
(Print)
Address: _______________________________
_______________________________
____________________________(7)
Enclosures
Invoices
cc: [Name of Lender]
[Address of Lender]
- ----------
(5) List complete name of company and include its Dun & Bradstreet number.
(6) This Certificate must be signed by a senior officer of the Ancillary
Supplier, such as the President, a Vice President, the Secretary, the Treasurer
or Assistant Treasurer. If any other individual signs, evidence of his or her
authority, in form and substance acceptable to Eximbank, must be submitted with
this Certificate.
(7) Include complete street address, including zip code, of the company facility
that produced the Special Ancillary Services.
B2(b)-6
<PAGE>
REIMBURSEMENT PROCEDURE A-5 (CA)
Annex B
Exhibit 3
CERTIFICATE AUTHORIZING REIMBURSEMENT
Date __________
[Name of Lender]
[Address of Lender]
Subject: Eximbank Guarantee No. - [Name of Country] [Name of Borrower]
("Borrower")
Certificate Authorizing Reimbursement No.
Ladies and Gentlemen:
In accordance with the terms and conditions of the Credit Agreement (the
"Agreement"), dated as of __________, 199_, by and among the Borrower, [names of
other parties to the Agreement], and the Export-Import Bank of the United States
("Eximbank"), and with the Borrower's Request for Reimbursement to Account of
Borrower, we hereby authorize the Lender to make a Reimbursement under the
Credit in the amount of U.S.$_________ on or after _______ __, 199_, by paying
[[to Eximbank from the proceeds of the Reimbursement the applicable Exposure Fee
payable to Eximbank in the amount of U.S.$_________, and then paying the balance
of]] the proceeds of the Reimbursement to the account of [identify the
Borrower's account as it is carried on the books of the payee bank] at [complete
name and address of the payee bank].
Further, we hereby acknowledge that the Reimbursement, when so made, shall
constitute a Disbursement under the Credit, and, as such, together with the
interest accrued thereon at the Guaranteed Interest Rate (as defined in the
Master Guarantee Agreement dated as of _________, 199_ (the "Master Guarantee
Agreement"), between the Lender and Eximbank)1, are guaranteed by Eximbank
pursuant to the terms of, and subject to the conditions of, the Master Guarantee
Agreement.
- ----------
(1) If the Eximbank Guarantee for your transaction is documented under a
stand-alone guarantee agreement instead of a Lender's Master Guarantee Agreement
then replace this parenthetical with the following: "(as defined in the
Guarantee Agreement dated as of __________, 199_ (the "Guarantee Agreement"),
between the Lender and Eximbank)" and globally change all references to "Master
Guarantee Agreement" in this document to instead refer to "Guarantee Agreement".
B3-1
<PAGE>
The defined terms in this Certificate shall have the respective meanings
specified in the Agreement.
EXPORT-IMPORT BANK OF THE
UNITED STATES
By: _______________________________
(Signature)
_______________________________
(Name)
_______________________________
(Title)
B3-2
<PAGE>
L/C PROCEDURE A-5 (CA)
Annex B
Exhibit 4
REQUEST FOR LETTER OF CREDIT APPROVAL
Date ________________
[Name of Lender]
[Address of Lender]
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571
Attention: Credit Administration Division
Subject: Eximbank Guarantee No. - [Name of Country)
[Name of Borrower] ("Borrower")
Request for Letter of Credit Approval
Ladies and Gentlemen:
In accordance with the terms and conditions of the Credit Agreement
("Agreement"), dated as of ____________, 199_, by and among the Borrower, [names
of other parties to the Agreement], and the Export-Import Bank of the United
States ("Eximbank"), we enclose for your approval three copies of a proposed
Letter of Credit No. ________ ("Proposed L/C"), prepared by [name of L/C
Bank].(1)
- ----------
(1) If the Eximbank Exposure Fee is to be financed under the Credit, the
following language, or substantially similar language acceptable to Eximbank,
must appear in the subject letter of credit:
This letter of credit is irrevocable, unless we are notified by Eximbank
that an Event of Default (as defined in the Credit Agreement among [the
Borrower], [the Lender] and Eximbank) has occurred, in which event,
following receipt of such notice, the irrevocable amount available to the
beneficiary hereunder for documents presented after receipt of such
notice, the irrevocable amount available to the beneficiary hereunder for
documents presented after receipt of such notice will be limited to the
lesser of (i) US$_________ or (ii) the remaining undisbursed balance of
the letter of credit. The balance of this letter of credit (US$_________)
represents the maximum amount of the Eximbank Exposure Fee, a portion of
which is payable to Eximbank each time that you make a drawing under this
letter of credit.
B4-1
<PAGE>
Identifying data with respect to the Proposed L/C are as follows:
Beneficiary:
Amount: U.S.$
Expiry Date:
Description of Items being purchased:
Reference No. from Acquisition List:
If the terms and conditions of this letter of credit meet with your
approval, please issue your Certificate Approving Letter of Credit in the form
of Exhibit 5 to the Agreement.
CERTIFICATE
We hereby certify that: (i) all the payments to be made under the Proposed
L/C will be made exclusively for the purchase (a) in the United States of goods
and/or services which are of U.S. origin or manufacture (except as disclosed in
the Supplier's Certificate(s) to be presented in support of drawings under the
Proposed L/C), or (b) of Special Ancillary Services, and that in either case
these goods and/or services will be used for lawful purposes in accordance with
the Agreement; (ii) in connection with the acquisition of such goods and/or
services, we have not received or agreed to receive any discount, allowance,
rebate, commission, fee or other payment except as will be disclosed in the
aforementioned Supplier's Certificate(s) (or in Special Ancillary Supplier's
Certificate(s) to be presented in support of drawings under the Proposed L/C);
(iii) in connection with the sale of or the obtaining of any contract to sell
such goods and/or services or with the establishment or operation of the
Eximbank-supported financing (including any letter of interest or preliminary
commitment relating thereto issued by Eximbank), we have not (a) paid or agreed
to pay any commission, fee or other payment or (b) entered into any barter,
buyback, countertrade or offset agreement or other similar agreement and, to the
best of our knowledge and belief, the beneficiary of the Proposed L/C has not
(x) granted, paid or agreed to grant or pay any discount, allowance, rebate,
commission, fee other payment or (y) entered into any barter, buyback,
countertrade or offset agreement or other similar agreement, other than as
disclosed in the enclosed Suppliers Certificate(s) (L/C Application); (iv) as of
the date of this request, no event has occurred and is continuing which
constitutes, or but for the requirement of the giving of notice or lapse of
time, or
- ----------
Prior to your first drawing hereunder, we require as a condition of
payment that you authorize and direct us in writing to charge this letter
of credit and to remit to Eximbank, at the time we honor each draw, the
applicable portion of the Exposure Fee, equal to ___% of the amount of
each draft presented hereunder. Upon receipt of those instructions, we
agree to calculate and remit such fee to Eximbank each time we pay a draft
to you.
B4-2
<PAGE>
both, would constitute, an Event of Default under the provisions of the
Agreement; and (v) as of the date of this request, the representations and
warranties made by us in the Agreement are true.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned thereto in the Agreement.
Very truly yours,
[BORROWER]
By: ____________________________________
(Signature)(2)
Name: __________________________________
(Print)
Title: _________________________________
(Print)
Enclosures
3 copies of Proposed L/C
1 copy of supplier's pro forma invoice,
purchase contract, or other document
covering purchase, and Supplier's Certificate
(L/C Application) (Exhibit 2(a))
- ----------
(2) May only be signed by one of the authorized representatives designated by
the Borrower pursuant to Section 6.01(c) of the Agreement.
B4-3
<PAGE>
L/C PROCEDURE A-5 (CA)
Annex B
Exhibit 4(a)
REQUEST FOR APPROVAL OF
AMENDMENT TO LETTER OF CREDIT
[Name of Lender]
[Address of Lender]
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571
Attention: Credit Administration Division
Subject: Eximbank Guarantee No. (Name of Country)
[Name of Borrower] ("Borrower")
Request for Amendment to Letter of Credit No. ___
Ladies and Gentlemen:
In accordance with the terms and conditions of the Credit Agreement
("Agreement") dated as of ________, 199_, by and among the Borrower, [names of
other parties to the Agreement], and Export-Import Bank of the United States
("Eximbank"), we enclose for your approval three copies of a proposed amendment
("Amendment") to Letter of Credit No. ________ ("Letter of Credit"), prepared by
[name of L/C Bank]. The Letter of Credit needs to be amended because [list
reason(s)].
If this Amendment meets with your approval, please issue your Certificate
Approving Amendment to Letter of Credit with respect to the Letter of Credit, as
amended ("Amended Letter of Credit").
CERTIFICATE
We hereby certify that: (i) all the payments to be made under the Letter
of Credit, as amended (the "Amended Letter of Credit") will be made exclusively
for the purchase (a) in the United States of goods and/or services of U.S.
origin or manufacture (except as disclosed in the Supplier's Certificate(s) to
be presented in support of drawings under the Amended Letter of Credit) or (b)
of Special Ancillary Services, and that in either case that these goods and/or
B4(a)-1
<PAGE>
services will be used for lawful purposes in accordance with the Agreement; (ii)
in connection with the acquisition of such goods and/or services, we have not
received or agreed to receive any discount, allowance, rebate, commission, fee
or other payment, except as will be disclosed in the aforementioned Supplier's
Certificate(s) (or in Special Ancillary Supplier's Certificate(s) to be
presented in support of drawings under the Proposed L/C); (iii) in connection
with the sale of or the obtaining of any contract to sell such goods and/or
services or with the establishment or operation of the Eximbank-supported
financing (including any letter of interest or preliminary commitment relating
thereto issued by Eximbank), we have not (a) paid or agreed to pay any
commission, fee or other payment or (b) entered into any barter, buyback,
countertrade or offset agreement or other similar agreement and, to the best of
our knowledge and belief, the beneficiary of the Amended Letter of Credit has
not (x) granted, paid or agreed to grant or pay any discount, allowance, rebate,
commission, fee other payment or (y) entered into any barter, buyback,
countertrade or offset agreement or other similar agreement, other than as
disclosed in the Supplier's Certificate(s) (L/C Application) furnished to you
when the Letter of Credit was issued; (iv) as of the date of this request, no
event has occurred and is continuing which constitutes, or but for the
requirement of the giving of notice or lapse of time, or both, would constitute,
an Event of Default under the provisions of the Agreement; and (v) as of the
date of this request, the representations and warranties made by us in the
Agreement are true.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned thereto in the Agreement.
Very truly yours,
[BORROWER]
By: _______________________________
(Signature)(1)
_______________________________
(Name)
_______________________________
(Title)
Enclosures
3 copies of proposed Amendment of L/C
1 copy of purchase order or other document
evidencing need for amendment
- ----------
(1) May only be signed by one of the authorized representatives designated by
the Borrower pursuant to Section 6.01(c) of the Agreement.
B4(a)-2
<PAGE>
L/C PROCEDURE A-5 (CA)
Annex B
Exhibit 5
CERTIFICATE APPROVING LETTER OF CREDIT
Date __________
[Name of Letter of Credit Bank]
[Address of Letter of Credit Bank]
Subject: Eximbank Guarantee No. ___________-[Name of Country]
[Name of Borrower] ("Borrower")
Certificate Approving Letter of Credit No. ______
Ladies and Gentlemen:
In accordance with the terms and conditions of the Credit Agreement
("Agreement"), dated as of ____________, 199_, between the Borrower, [name of
Lender] ("Lender"), [names of other parties to the Agreement] and the
Export-Import Bank of the United States ("Eximbank"), and with the Borrower's
Request for Certificate Approving Letter of Credit, we hereby approve the
[issuance, confirmation or advice] by the L/C Bank of Letter of Credit No. __
("Letter of Credit"), in the amount of U.S.$______.
Further, we hereby acknowledge that all payments made under the Letter of
Credit [including any payments to Eximbank of the applicable Exposure Fee],
which are made in accordance with the terms of the Letter of Credit will
constitute Disbursements under the Credit, and, as such, together with interest
accrued thereon at the Guaranteed Interest Rate (as defined in the Master
Guarantee Agreement dated as of ___________, 199__ ("Master Guarantee
Agreement"), between the Lender(s) and Eximbank)(2), are guaranteed by Eximbank
pursuant to the terms of, and subject to the conditions of, the Master Guarantee
Agreement.
- ----------
(2) If the Eximbank Guarantee for your transaction is documented under a
stand-alone guarantee agreement instead of a Lender's Master Guarantee Agreement
then replace this parenthetical with the following: "(as defined in the
Guarantee Agreement dated as of __________, 199_ (the "Guarantee Agreement"),
between the Lender and Eximbank)" and globally change all references to "Master
Guarantee Agreement" in this document to instead refer to "Guarantee Agreement".
B5-1
<PAGE>
The defined terms used in this Certificate shall have the respective
meanings specified in the Agreement.
EXPORT-IMPORT BANK OF THE
UNITED STATES
By: _______________________________
(Signature)
_______________________________
(Name)
_______________________________
(Title)
B5-2
<PAGE>
L/C PROCEDURE A-5 (CA)
Annex B
Exhibit 5(a)
CERTIFICATE APPROVING AMENDED LETTER OF CREDIT
Date____________
[Name of Letter of Credit Bank]
[Address of Letter of Credit Bank]
Subject: Eximbank Guarantee No. ______ -[Name of Country]
[Name of Borrower] ("Borrower")
Certificate Approving Amendment to Letter of Credit No. _______
Ladies and Gentlemen:
In accordance with the terms and conditions of the Credit Agreement
("Agreement"), dated as of ___________, 199_, between the Borrower, [name of
Lender] ("Lender"), [names of other parties to the Agreement] and the
Export-Import Bank of the United States ("Eximbank"), and with the Borrower's
Request for Certificate Approving Amendment to Letter of Credit, we hereby
approve the proposed amendment to Letter of Credit No. _________, ("Letter of
Credit").
Further, we hereby acknowledge that all payments made under the Letter of
Credit, as amended, [including any payments to Eximbank of the applicable
Exposure Fee], which are made in accordance with the terms of the Letter of
Credit, as amended, will constitute Disbursements under the Credit, and, as such
together with accrued interest thereon at the Guaranteed Interest Rate (as
defined in the Master Guarantee Agreement) dated as of _________, 199_ ("Master
Guarantee Agreement"), between the Lender(s) and Eximbank)(1), are guaranteed by
Eximbank pursuant to the terms of, and subject to the conditions of, the Master
Guarantee Agreement.
- ----------
(1) If the Eximbank Guarantee for your transaction is documented under a
stand-alone guarantee agreement instead of a Lender's Master Guarantee Agreement
then replace this parenthetical with the following: "(as defined in the
Guarantee Agreement dated as of ___________, 199_ (the "Guarantee Agreement"),
between the Lender and Eximbank)" and globally change all references to "Master
Guarantee Agreement" in this document to instead refer to "Guarantee Agreement".
B5(a)-1
<PAGE>
The defined terms used in this Certificate shall have the respective
meanings specified in the Agreement.
EXPORT-IMPORT BANK OF THE
UNITED STATES
By: _______________________________
(Signature)
_______________________________
(Name)
_______________________________
(Title)
B5(a)-2
<PAGE>
FORM OF OPINION OF BORROWER'S COUNSEL A-5 (CA)
Annex C
We have been and are acting as counsel for ______________ ("Borrower").
You have requested our opinion as to certain matters concerning the Credit
Agreement (the "Agreement") dated as of ______________, among the Borrower,
__________________, as Lender, ________________, as Guarantor, and the
Export-Import Bank of the United States. Terms not otherwise defined in this
opinion shall have the meanings assigned to them in the Agreement.
In connection with this opinion, we have reviewed such matters of law, and
have examined originals, or copies identified to our satisfaction, of such
agreements, corporate records, public records, communications of public
officials and other documents and instruments, as we have considered necessary
or appropriate.
Based upon the foregoing we are of the opinion that:
(1) Existence. The Borrower is duly organized and validly existing under
the laws of the Borrower's Country. The Borrower's existence is not limited by:
(i) any applicable law; (ii) the terms of any charter, by-law or other similar
document of the Borrower; or (iii) any other agreement, instrument or document
to which the Borrower is a party or by which it is bound.
(2) Authority. The Borrower has the full power, authority and legal right
to own and use its properties and carry on its business as now conducted, and to
execute, deliver, perform and observe the terms and conditions of the Agreement
and the other Borrower Documents. All corporate and other actions have been
taken which are necessary or advisable to: (i) authorize the Borrower to
execute, deliver, perform and observe the terms and conditions of the Agreement
and the other Borrower Documents; and (ii) authorize the officer(s) of the
Borrower who has (have) signed the Agreement and the other Borrower Documents
which have been signed on or before the date hereof to take such action.
(3) Government Authorizations. All consents, licenses, approvals and other
authorizations of, and exemptions by, any Governmental Authority in the
Borrower's Country and, to my knowledge, any governmental authorities within the
United States or elsewhere, which are necessary or advisable: (i) for the
execution, delivery, performance and observance by the Borrower of the Borrower
Documents; (ii) for the validity, binding effect and enforceability of the
Borrower Documents; and (iii) for the execution, delivery and performance of the
Purchase Contract and the importation and use of the Items in the Borrower's
Country, have been obtained and are in full force and effect. Without limiting
the generality of the previous sentence, all legal requirements of the
Borrower's Country with respect to the availability and transfer of foreign
exchange (including Dollars) required to make all scheduled payments due under
the Agreement and the Note(s) have been satisfied.
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<PAGE>
(4) Recordation. To ensure the legality, validity, enforceability,
priority or admissibility in evidence in the Borrower's Country of any of the
Borrower Documents, it is not necessary that any of the Borrower Documents be
registered, recorded, enrolled or otherwise filed with any court or other
Governmental Authority in the Borrower's Country (other than registration of the
Borrower Documents at the Public Registry of Titles and Documents in the City of
Sao Paulo), or be notarized, or that any documentary, stamp or other similar
tax, imposition or charge of any kind be paid on or in respect of any of the
Borrower Documents.
(5) Restrictions. The execution, delivery and performance or observance by
the Borrower of the terms of and consummation by the Borrower of the
transactions contemplated by, each of the Borrower Documents does not and will
not conflict with or result in a breach or violation of (i) the charter, by-laws
or similar documents of the Borrower; (ii) any law of the Borrower's Country or
any other ordinance, decree, constitutional provision, regulation or other
requirement of any Governmental Authority in the Borrower's Country (including,
without limitation, any restriction on interest that may be paid by the
Borrower); or (iii) any order, writ, injunction, judgment or decree of any court
or other tribunal. Further, the execution, delivery and performance or
observance by the Borrower of the terms of, and consummation by the Borrower of
the transactions contemplated by, each of the Borrower Documents does not and
will not conflict with or result in a breach of any agreement or instrument to
which the Borrower is a party, or by which it or any of its revenues, properties
or assets may be bound, or result in the creation or imposition of any Lien upon
any of the revenues, properties or assets of the Borrower pursuant to any such
agreement or instrument.
(6) Conflict of Laws and Enforceability.
(i) Under the conflict of laws principles in the Borrower's Country,
the choice of law provisions of the Agreement and the Note(s) are valid,
binding and not subject to revocation by the Borrower, and, in any
proceedings brought in the Borrower's Country for enforcement of any of
the Borrower Documents, the choice of the law of the State of New York as
the governing law of such documents will be recognized and such law will
be applied, provided that the applicable provisions of New York law are
not in conflict with Brazilian public order, good customs or national
sovereignty. In our opinion, the provisions of the Agreement, although
governed by New York law, are not in conflict with Brazilian public
policy, good customs or national sovereignty. We note, however, that these
concepts have not been clearly and consistently deemed by the courts of
Brazil and that the issue as to whether a conflict exists between
applicable foreign and Brazilian law can, in many instances, only be
determined on a case by case basis.
(ii) The Agreement and the other Borrower Documents which have been
executed on or before the date hereof have been duly authorized, executed
and delivered by the Borrower. Assuming that the Borrower Documents are
legal, valid, binding and enforceable under the law of the State of New
York, each of the Borrower Documents which has been executed and delivered
constitutes, and each of the Borrower Documents which may hereafter be
executed and delivered will
C-2
<PAGE>
constitute, an obligation of the Borrower which is legal, valid and
binding upon the Borrower and enforceable against the Borrower in
accordance with its respective terms, except as such enforceability may be
limited by applicable insolvency, reorganization, liquidation, moratorium
readjustment of debt or other similar laws affecting the enforcement of
creditors' rights generally and by the application of general principles
of equity regardless of whether such enforceability is considered in a
proceeding at law or in equity.
(iii) Notwithstanding paragraph (i) above, if any of the Borrower
Documents were by their terms governed by and construed in accordance with
the law of the Borrower's Country, or if a court in the Borrower's Country
were to apply the law of the Borrower's Country to any of the Borrower
Documents, each of the Borrower Documents which has been executed and
delivered, and each of the Borrower Documents which may hereafter be
executed and delivered, would constitute an obligation of the Borrower
which is legal, valid and binding upon the Borrower and enforceable
against the Borrower in accordance with its respective terms, except as
such enforceability may be limited by applicable insolvency,
reorganization, liquidation, moratorium, readjustment of debt or other
similar laws affecting the enforcement of creditors' rights generally and
by the application of general principles of equity regardless of whether
such enforceability is considered in a proceeding at law or in equity.
(7) Submission to Jurisdiction, etc. The submission to jurisdiction,
appointment for service of process and waiver of security requirements by the
Borrower set forth in Sections 11.02, 11.03 and 11.05 of the Agreement,
respectively, are each effective and irrevocably binding on the Borrower. It is
not necessary that the appointment for service of process described in said
Section 11.03 be registered, recorded or filed with any court or other authority
in the Borrower's Country or be notarized, or that any documentary, stamp or
similar tax, imposition, or charge be paid on or in respect of such appointment.
(8) Commercial Activity. The Borrower Documents and the transactions
contemplated thereby constitute commercial activities (rather than governmental
or public activities) of the Borrower, and the Borrower is subject to private
commercial law with respect thereto. The Borrower has waived, pursuant to
Section 11.04 of the Agreement, any right of immunity which it or any of its
assets has or may hereafter acquire, whether characterized as sovereign immunity
or otherwise, from any legal proceedings in the Borrower's Country to enforce or
collect upon the Credit or the Note(s), or any other liability or obligation of
the Borrower related to or arising from the transactions contemplated by any of
the Borrower Documents, and such waiver is effective and irrevocably binding on
the Borrower.
(9) Legal Form, Judgements, etc. This Agreement, the Note(s) and each of
the other Borrower Documents are in proper legal form for enforcement against
the Borrower, in the Borrower's Country, in the most expeditious manner
available under the law of the Borrower's Country. We note, however, that the
form of the Note does not satisfy the requirements of an extrajudicial executory
title under the law of the Borrower's Country. In the event a final judgment of
any state or Federal court in the United States is rendered
C-3
<PAGE>
against the Borrower under any of the Borrower Documents, the same would be
enforced by the courts of the Borrower's Country without any further review on
the merits, provided that such judgment has been ratified ("homlogado") by the
Supreme Court of the Borrower's Country. Such ratification will occur if the
foreign judgment (a) complies with all formalities required for enforceability
under the laws of the country wherein it was issued, (b) has been given by a
competent court of law in the country wherein it was issued after proper service
of process on the parties or after sufficient evidence of the parties' absence
has been given in accordance with applicable law of the country in which the
judgment was entered, (c) is not subject to appeal in the jurisdiction in which
it was issued, (d) has been authenticated by the Brazilian Consulate in the
country wherein it was issued accompanied by a sworn translation thereof into
Portuguese, and (e) is not contrary to Brazilian sovereignty, public policy and
good customs (as set forth in Section 17 of the law of introduction to the
Brazilian Civil Code). In our opinion, the enforcement of a foreign judgment
relating to any of the Borrower Documents would not be contrary to the law,
public policy or good customs of the Borrower's Country, any international
treaties binding in the Borrower's Country or generally accepted principles of
international law.
(10) Pari Passu. The payment obligations of the Borrower under the
Agreement and the Note(s) rank in all respects pari passu in priority of payment
and in right of security with all other unsecured debt of the Borrower, except,
in the case of the bankruptcy or liquidation of the Borrower, for debts of the
Borrower related to taxes or wages.
(11) Legal Proceedings. No legal proceedings are pending or, to the best
of the undersigned's knowledge, threatened before any court or governmental
agency which might: (i) materially and adversely affect the Borrower's financial
condition, business or operations; (ii) restrain or enjoin or have the effect of
restraining or enjoining the performance or observance of the terms and
conditions of any of the Borrower Documents; or (iii) in any other manner
question the validity, binding effect or enforceability of any of the Borrower
Documents.
(12) No Taxes. There is no Tax imposed on or in connection with: (i) the
execution, delivery or performance of any of the Borrower Documents; (ii) the
enforcement of any of the Borrower Documents; or (iii) on any payment to be made
to the Lender or Eximbank under any of the Borrower Documents.
(13) Licensing & Qualification. Under the law of the Borrower's Country,
neither the Lender nor Eximbank will, by reason of their entering into the
Borrower Documents and performing their obligations and enforcing their rights
thereunder: (i) be required to be qualified, licensed or otherwise entitled to
do business in the Borrower's Country, or be required to comply with any
requirement as to foreign registration or qualification in the Borrower's
Country; (ii) be subject to taxation in the Borrower's Country; or (iii) be
required to make any filing with any court or other governmental authority in
the Borrower's Country prior to any enforcement of any of the Borrower Documents
or performance of any of the transactions contemplated by the Borrower
Documents.
C-4
<PAGE>
FORM OF OPINION OF GUARANTOR'S COUNSEL A-5 (CA)
Annex D
We have been and are acting as counsel for _______________ ("Guarantor").
You have requested our opinion as to certain matters concerning the Credit
Agreement (the "Agreement") dated as of _______________, among the Borrower,
_______________, as Lender, Guarantor and the Export-Import Bank of the United
States. Terms not otherwise defined in this opinion shall have the meanings
assigned to them in the Agreement.
In connection with this opinion, we have reviewed such matters of law, and
have examined originals, or copies identified to our satisfaction, of such
agreements, corporate records, public records, communications of public
officials and other documents and instruments, as we have considered necessary
or appropriate.
Based upon the foregoing we are of the opinion that:
(1) Existence. The Guarantor is duly organized and validly existing under
the laws of the Guarantor's Country. The Guarantor's existence is not limited
by: (i) any applicable law; (ii) the terms of any charter, by-law or other
similar document of the Guarantor; or (iii) any other agreement, instrument or
document to which the Guarantor is a party or by which it is bound.
(2) Authority. The Guarantor has the full power, authority and legal right
to own and use its properties and carry on its business as now conducted, and to
execute, deliver, perform and observe the terms and conditions of the Agreement
and the Note(s). All corporate and other actions have been taken which are
necessary or advisable to: (i) authorize the Guarantor to execute, deliver,
perform and observe the terms and conditions of the Agreement and the Note(s);
and (ii) authorize the officer(s) of the Guarantor who has (have) signed the
Agreement and the Note(s) which have been signed on or before the date hereof to
take such action.
(3) Government Authorizations. All consents, licenses, approvals and other
authorizations of, and exemptions by, any Governmental Authority in the
Guarantor's Country and, to my knowledge, any governmental authorities within
the United States or elsewhere, which are necessary or advisable: (i) for the
execution, delivery, performance and observance by the Guarantor of the
Agreement and the Note(s); (ii) for the validity, binding effect and
enforceability of the Agreement and the Note(s), have been obtained and are in
full force and effect. Without limiting the generality of the previous sentence,
all legal requirements of the Guarantor's Country with respect to the
availability and transfer of foreign exchange (including Dollars) required to
make all scheduled payments due under the Agreement and the Note(s) have been
satisfied.
(4) Recordation. To ensure the legality, validity, enforceability,
priority or admissibility in evidence in the Guarantor's Country of the
Agreement or the Note(s), it is not necessary that any such documents be
registered, recorded, enrolled or otherwise filed
D-1
<PAGE>
with any court or other Governmental Authority in the Guarantor's Country (other
than registration of the Borrower Documents at the Public Registry of Titles and
Documents in the City of Sao Paulo), or be notarized, or that any documentary,
stamp or other similar tax, imposition or charge of any kind be paid on or in
respect of any of such documents.
(5) Restrictions. The execution, delivery and performance or observance by
the Guarantor of the terms of, and consummation by the Guarantor of the
transactions contemplated by, each of the Agreement and the Note(s) does not and
will not conflict with or result in a breach or violation of: (i) the charter,
by-laws or similar documents of the Guarantor; (ii) any law of the Guarantor's
Country or any other ordinance, decree, constitutional provision, regulation or
other requirement of any Governmental Authority in the Borrower's Country
(including, without limitation, any restriction on interest that may be paid by
the Guarantor); or (iii) any order, writ, injunction, judgment or decree of any
court or other tribunal. Further, the execution, delivery and performance or
observance by the Guarantor of the terms of, and consummation by the Guarantor
of the transactions contemplated by, each of Agreement and the Note(s) does not
and will not conflict with or result in a breach of any agreement or instrument
to which the Guarantor is a party, or by which it or any of its revenues,
properties or assets may be bound, or result in the creation or imposition of
any Lien upon any of the revenues, properties or assets of the Guarantor
pursuant to any such agreement or instrument.
(6) Conflict of Laws and Enforceability.
(i) Under the conflict of laws principles in the Guarantor's
Country, the choice of law provisions of the Agreement and the Note(s) are
valid, binding and not subject to revocation by the Guarantor, and, in any
proceedings brought in the Guarantor's Country for enforcement of any of
such documents, the choice of the law of the State of New York as the
governing law of such documents will be recognized and such law will be
applied, provided that the applicable provisions of New York law are not
in conflict with Brazilian public order, good customs or national
sovereignty. In our opinion, the provisions of the Agreement, although
governed by New York law, are not in conflict with Brazilian public
policy, good customs or national sovereignty. We note, however, that these
concepts have not been clearly and consistently defined by the courts of
Brazil and that the issue as to whether a conflict exists between
applicable foreign and Brazilian law can, in many instances, only be
determined on a case by case basis.
(ii) The Agreement and the Note(s) which have been executed on or
before the date hereof have been duly authorized, executed and delivered
by the Guarantor. Assuming that such documents are legal, valid, binding
and enforceable under the law of the State of New York, each of the
Agreement and the Note(s) which has been executed and delivered
constitutes, and each of the Note(s) which may hereafter be executed and
delivered will constitute, an obligation of the Guarantor which is legal,
valid and binding upon the Guarantor and enforceable against the Guarantor
in accordance with its respective terms, except as such enforceability may
be finished by applicable insolvency, reorganization, liquidation,
moratorium, readjustment of debt or other similar laws affecting the
enforcement of creditors' rights generally and
D-2
<PAGE>
by the application of general principles of equity regardless of whether
such enforceability is considered in a proceeding at law or in equity.
(iii) Notwithstanding paragraph (i) above, if the Agreement or the
Note(s) were by their terms governed by and construed in accordance with
the law of the Guarantor's Country, or if a court in the Guarantor's
Country were to apply the law of the Guarantor's Country to any of such
documents, each of the Agreement and the Note(s) which has been executed
and delivered, and each of Note(s) which may hereafter be executed and
delivered, would constitute an obligation of the Guarantor which is legal,
valid and binding upon the Guarantor and enforceable against the Guarantor
in accordance with its respective terms, except as such enforceability may
be limited by applicable insolvency, reorganization, liquidation,
moratorium, readjustment of debt or other similar laws affecting the
enforcement of creditors' rights generally and by the application of
general principles of equity regardless of whether such enforceability is
considered in a proceeding at law or in equity.
(7) Submission to Jurisdiction, etc. The submission to jurisdiction,
appointment for service of process and waiver of security requirements by the
Guarantor set forth in Sections 11.02, 11.03 and 11.05 of the Agreement,
respectively, are each effective and irrevocably binding on the Guarantor. It is
not necessary that the appointment for service of process described in said
Section 11.03 be registered, recorded or filed with any court or other authority
in the Guarantor's Country or be notarized, or that any documentary, stamp or
similar tax, imposition, or charge be paid on or in respect of such appointment.
(8) Commercial Activity. The Agreement and the Note(s) and the
transactions contemplated thereby constitute commercial activities (rather than
governmental or public activities) of the Guarantor, and the Guarantor is
subject to private commercial law with respect thereto. The Guarantor has
waived, pursuant to Section 11.04 of the Agreement, any right of immunity which
it or any of its assets has or may hereafter acquire, whether characterized as
sovereign immunity or otherwise, from any legal proceedings in the Guarantor's
Country to enforce or collect upon the Credit or the Note(s), or any other
liability or obligation of the Guarantor related to or arising from the
transactions contemplated by the Agreement and the Note(s), and such waiver is
effective and irrevocably binding on the Guarantor.
(9) Legal Form, Judgments, etc. This Agreement and the Note(s) are in
proper legal form for enforcement against the Guarantor, in the Guarantor's
Country, in the most expeditious manner available under the law of the
Guarantor's Country. We note, however, that the form of the Note does not
satisfy the requirements of an extra-judicial executory title under the law of
the Guarantor's Country. In the event a final judgment of any state or Federal
court in the United States is rendered against the Guarantor under any of such
documents, the same would be enforced by the courts of the Guarantor's Country
without any further review on the merits, provided that such judgment has been
ratified ("homlogado") by the Supreme Court of the Borrower's Country. Such
ratification will occur if the foreign judgment (a) complies with all
formalities required for enforceability under the laws the country wherein it
was issued, (b) has been given by a competent court of law in the country
wherein it was issued after proper service of process on the parties or
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<PAGE>
after sufficient evidence of parties' absence has been given in accordance with
applicable law of the country in which the judgment was entered, (c) is not
subject to appeal in the jurisdiction in which it was issued, (d) has been
authenticated by the Brazilian Consulate in the country wherein it was issued
accompanied by a sworn translation thereof into Portuguese, and (e) is not
contrary to Brazilian sovereignty, public policy and good customs (as set forth
in Section 17 of the law of introduction to the Brazilian Civil Code). In our
opinion, the enforcement of a foreign judgment relating to the Agreement or the
Note(s) would not be contrary to the law, public policy or good customs of the
Guarantor's Country, any international treaties binding in the Guarantor's
Country or generally accepted principles of international law.
(10) Pari Passu. The payment obligations of the Guarantor under the
Agreement and the Note(s) rank in all respects at least pari passu in priority
of payment and in right of security with all other unsecured debt of the
Guarantor except, in the case of the bankruptcy or liquidation of the Guarantor,
for debts of the Guarantor related to taxes or wages.
(11) Legal Proceedings. No legal proceedings are pending or, to the best
of the undersigned's knowledge, threatened before any court or governmental
agency which might: (i) materially and adversely affect the Guarantor's
financial condition, business or operations; (ii) restrain or enjoin or have the
effect of restraining or enjoining the performance or observance of the terms
and conditions of any of the Agreement or the Note(s); or (iii) in any other
manner question the validity, binding effect or enforceability of the Agreement
or the Note(s).
(12) No Taxes. There is no Tax imposed on or in connection with: (i) the
execution, delivery or performance of the Agreement or the Note(s); (ii) the
enforcement of the Agreement or the Note(s); or (iii) on any payment to be made
to the Lender or Eximbank under the Agreement or the Note(s).
(13) Licensing & Qualification. Under the law of the Guarantor's Country,
neither the Lender nor Eximbank will, by reason of their entering into the
Borrower Documents and performing their obligations and enforcing their rights
thereunder: (i) be required to be qualified, licensed or otherwise entitled to
do business in the Guarantor's Country, or be required to comply with any
requirement as to foreign registration or qualification in the Guarantor's
Country; (ii) be subject to taxation in the Guarantor's Country; or (iii) be
required to make any filing with any court or other governmental authority in
the Guarantor's Country prior to any enforcement of any of the Borrower
Documents or performance of any of the transactions contemplated by the Borrower
Document.
D-4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Credit
Agreement to be duly executed and delivered as of the date first above written.
TVA SISTEMA DE TELEVISAO S.A., as Borrower
By: _________________________________
(Signature)
Name: _______________________________
(Print)
Title: ______________________________
(Print)
TEVECAP S.A., as Guarantor
By: _________________________________
(Signature)
Name: _______________________________
(Print)
Title: ______________________________
(Print)
TEVECAP S.A., as Guarantor
By: _________________________________
(Signature)
THE CHASE MANHATTAN BANK, as Lender
By: _________________________________
(Signature)
Name: _______________________________
(Print)
Title: ______________________________
(Print)
EXPORT-IMPORT BANK OF THE UNITED STATES
By: _________________________________
(Signature)
Name: _______________________________
(Print)
Title: ______________________________
(Print)
D-5
<PAGE>
Exhibit 10.7
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Association Agreement, dated February 15, 1996, among
Tevecap S.A., TVA Sistema de Televisao S.A., TVA Brasil Radioenlaces Ltda.,
Leonardo Petrelli Neto, TV Delta de Curitiba Ltda., TV Cabo Servicos Santa
Catarina Ltda., TV Cabo Servicos Parana Ltda. and TVA Curitiba Servicos em
Telecomunicacoes Ltda.
By: /s/DOUGLAS DURAN
---------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
TVA SUL
ASSOCIATION AGREEMENT
This Agreement is entered into by and between the parties, on one side
TEVECAP S.A. a company with its head office in the City of Sao Paulo, Capital of
the State of Sao Paulo, at Rua do Rocio 313, enrolled with the Taxpayers' List
under CGC/MF nr. 57.574.170/0001-05, registered with the Sao Paulo Board of
Trade under NIRE 35300139623, herein represented by its Directors Jose Augusto
P. Moreira, a Brazilian citizen, married, economist, resident and domiciled in
the city of Barueri, state of Sao Paulo, at Alameda Argentina 606, bearer of
identity card RG nr. 2.944.700 and enrolled with the Individual Taxpayers' List
under CPF/MF nr. 128.701.967-68 and Claudio Cesar D'Emilio, a Brazilian citizen,
married, business administrator, resident and domiciled in the city of Sao
Paulo, capital of the State of Sao Paulo bearer of Identity Card RG nr.
4.493.895 and enrolled with the Individual Taxpayers' List under CPF/MF nr.
273.258.818-00, hereinafter called TEVECAP.
TVA SISTEMA DE TELEVISAO S.A. a company with its head office in the City of Sao
Paulo, Capital of the State of Sao Paulo, at Rua do Rocio 313, 5(degree)
6(degree) 10(degree) e 11(degree) andares, enrolled with the Taxpayers' List
under CGC/MF nr.71.613.400/0001-10, and registered with the Sao Paulo Board of
Trade under NIRE 35300136187 herein represented by its Directors Robert Civita,
a Brazilian citizen, married, editor, resident and domiciled in the City of Sao
Paulo, Capital of the state of Sao Paulo, bearer of Identity Card RG nr.
1.666.785 and enrolled with the Individual Taxpayers' List under CPF/MF nr.
006.890.178-04 and Jose Augusto P. Moreira herein above qualified, hereinafter
called TVA SISTEMA,
TVA BRASIL RADIOENLACES LTDA., a company with its head office in the City of Sao
Paulo, Capital of the State of Sao Paulo at Rua do Rocio 313, conjs. 101 and 111
Parte e Garagem - Parte, enrolled with the Taxpayers' List under CGC/MF nr. 58-
884.4954/0001-49 and registered with the Sao Paulo Board of trade under NIRE
35208317812 herein represented by its attorneys-in-fact Jose Augusto P. Moreira
and Claudio Cesar D'Emilio, herein above qualified, hereinafter called TVA
BRASIL,
sometimes jointly called TVA, and, on the other side,
LEONARDO PETRELLI NETO, a Brazilian citizen, married, telecommunication's
expert, resident and domiciled in the City of Curitiba, Capital of the State of
Parana, at Rua Clovis Bevilaqua 420, apto 701, Cabral, Curitiba/PR bearer of
Identity Card RG nr. 736.678-7 and enrolled with the Individual Taxpayers' List
under CPF/MF nr. 401.596.049-15, hereinafter called PETRELLI;
TV DELTA DE CURITIBA LTDA., a company with its head office in the City of
CURITIBA, Capital of the State of Parana, at Rua Marta Kateiva de Oliveira 49,
enrolled with the Taxpayers' List under CGC/MF nr. 81.731.424/0001-28, with its
articles of association registered with the Parana Board of Trade under NIRE
4120227369-9 on
<PAGE>
January 24, 1990, herein represented pursuant to its Articles of Association by
its director Leonardo Petrelli Neto, herein above qualified, hereinafter called
TV DELTA;
TV CABO SERVICOS SANTA CATARINA LTDA., a company with its head office in the
City of Florianopolis, State of Santa Catarina, at Rua Mauro Ramos 152, enrolled
with the Taxpayers' List under CGC/MF nr. 00.502.313/0001-48 and its articles of
association registered with the Santa Catarina Board of Trade, herein
represented pursuant to its Articles of Association by its Directors: Leonardo
Petrelli Neto, herein above qualified and Marco Correa Petrelli, a Brazilian
citizen, married, business administrator, resident and domiciled in the City of
Florianopolis, State of Santa Catarina, at Av. Rubens de Arruda Ramos 556 apto
1101, Centro, bearer of Identity Card RG nr. 769.475-0-PR and enrolled with the
Individual Taxpayers' List under CPF/MF nr. 510.811.489-34; represented by its
attorney-in-fact herein above qualified, hereinafter called TV CABO SANTA
CATARINA;
jointly called GRUPO PETRELLI;
further having as INTERVENING PARTIES:
TV CABO SERVICOS PARANA LTDA., a company with its head office in the City of
Curitiba, Capital of the State of Parana, at Rua Marta Kateiva de Oliveira 49,
enrolled with the Taxpayers' List under CGC/MF nr. 00.502.314/0001-02, with its
articles of association registered under NIRE 42201954065, herein represented
pursuant to its Articles of Association by its attorney-in-fact Douglas Duran, a
Brazilian citizen, married, business administrator, resident and domiciled at
Alameda das Rosas 444, Alphaville IV, Barueri, state of Sao Paulo, bearer of
Identify Card RG nr. 6.702.950 and enrolled with Individual Taxpayers' List
under CPF/MF nr. 541.326.068-78, and Leonardo Petrelli Neto, herein above
qualified, hereinafter called TV CABO PARANA;
TVA CURITIBA SERVICOS EM TELECOMUNICACOES LTDA., a company with its
head office in the City of Curitiba, Capital of the State of Parana, at Rua
Marta Kateiva de Oliveira 49, enrolled with the Taxpayers' List under CGC/MF nr.
84.938.786/001-82, and registered with the Parana Board of Trade under NIRE nr.
41202681240 herein represented pursuant to its Articles of Association by its
managing partners Douglas Duran and Leonardo Petrelli Neto, as qualifies above,
hereinafter called TVA CURITIBA;
jointly called INTERVENING PARTIES;
NOW, THEREFORE in consideration of the foregoing premises the parties resolved
to enter into this "Agreement for Association" that shall be governed by the
following clauses and conditions:
1. The BUSINESS. The Parties, which are already jointly engaged in the
exploitation of paid TV systems via MMDS, UHF and Cable TV, in Curitiba, state
of Parana, herein called BUSINESS, agree as follows:
(i) to expand the scope of the BUSINESS, adding to such Business the Cable
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TV operations in the cities of Blumenau and Florianopolis, owned by TV CABO
SERVICOS SANTA CATARINA LTDA, state of Santa Catarina;
(ii) to restructure, consolidate and simplify the operations of the involved
companies, and consolidate the assets In all of the operations regarding the
BUSINESS in the city of Curitiba;
(iii) to implement the corporate restructuring of the companies, pursuant to the
annexed Corporate Structure, that shall be an integral part of this Agreement
(EXHIBIT I).
1.1 PETRELLI shall make efforts to discover new market opportunities related to
the BUSINESS in the Southern region of the country, and the Parties hereby
undertake to operate, jointly, under the terms and conditions to be agreed upon,
including, within this plan, the projects involving the acquisition of T.
SAGATTI ROGER & CIA LTDA and of TCC TV A CABO LTDA., which, if implemented,
shall be incorporated into the BUSINESS.
1.2 The operators resulting from such restructuring shall have, pursuant to
terms and conditions to be agreed upon, preference to market Band C or Band Ku
DTH services exploited by TVA within its operation area, by mutual accord, in
due compliance with possible agreements and commitments duly entered into by TVA
with third parties up to the present date.
2. BUSINESS EVALUATION. For purposes of implementing the annexed Corporate
Structure, the parties carried out studies and surveys that they deemed
necessary and concluded that the evaluation of the TVA SUL BUSINESS as a whole
settles the percentages of the shareholding interest of each one of the Parties
in the enterprise resulting from such corporate restructure, pursuant to EXHIBIT
I which shall become an integral part of this Contract.
2.1 The adjustment regarding the BUSINESS evaluation and the definition of the
percentage of the interest took into account PETRELLI's debt corresponding to
his interest in TVA CURITIBA resulting from a loan payable to TVA SISTEMA
included in the spreadsheet (EXHIBIT II), and such debt shall be settled upon
the effective implementation of the corporate restructuring provided for in this
contract; this shall also happens in regard to TVA CURITIBA's outstanding debt
to TVA Sistema, the value thereof being established in EXHIBIT II, and having
September 15, 1995 as a base date. In regard to TVA Sistema's current debt to
Leonardo Petrelli Neto, described in the spreadsheet (EXHIBIT III), one hundred
and sixty thousand Reais (R$160,000,00) shall be paid upon the execution of this
Agreement and the balance thereof shall be used in the implementation of the
corporate restructuring. As from the base date, September 15, 1995, all of the
effects, rights and obligations, as well as further assets variations shall be
governed by the provisions of item 6.1 and other principles, terms and
conditions provided for in this Contract.
2.1.1 The debts referred to in item 2.1 above, provided for in ANNEXES II and
III respectively, shall be considered by the creditors as totally settled as the
corporate
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<PAGE>
restructuring provided for in this Agreement is implemented, or, according to
amendments agreed upon by the Parties, and the Parties shall endeavor their best
efforts to avoid any taxes thereon; however, the parties hereby acknowledge such
debts.
2.2 The company called "TVA PARANA" according to the annexed Corporate Structure
shall incorporate the assets, operations, services and licenses regarding the
BUSINESS, in the state of Curitiba, including the whole consolidated assets
corresponding to TVA SISTEMA branch in said city, the subscribers base in
Curitiba and TVA CURITIBA and TV CABO PARANA respective assets.
2.3 It is hereby agreed upon that as from the date of this Contract, all of TVA
SUL subscribers base shall be totally and immediately incorporated to the assets
of this company or to the assets of any of the operators, individually. Such
transfer shall be carried out without any charge to the assignees.
2.4 Hence, it is agreed upon that every and all of the assets integrating the
TVA CURITIBA operations, and the branch of the TVA SISTEMA in Curitiba shall be
transferred to TVA SUL assets, pursuant to the Report that integrates EXHIBIT
IV.
3. LICENSES FOR TELECOMMUNICATIONS SERVICES. TVA BRASIL, TV DELTA, TV CABO
PARANA, TV CABO SANTA CATARINA are holders of certain authorizations
("Licenses") for the Servico de Distribuicao de Sinais de Televisao por Meios
Fisicos - DISTV (Distribution of Television Signals by Physical Means Service)
which is being converted for the concession of Cable TV services; for TVA-UHF
service concessions; for the permission of MMDS Service, pursuant to the table
included in EXHIBIT V - LICENSES, that shall become part of this Contract.
3.1 LICENSE TRANSFER. Licenses for the exploitation of Cable TV Services, of TVA
Service - UHF and MMDS Service for the region of Curitiba, included in EXHIBIT
V, shall be transferred to TVA PARANA, pursuant to the provisions contemplated
in the regulations applicable to each service modality.
3.2 Licenses for Cable TV in the cities of Florianopolis and Blumenau shall be
directly transferred upon the assignment of the majority of the capital to TVA
SUL, pursuant to the regulation applicable to such service.
3.3 The Parties undertake to obtain previous governmental authorization for the
transfer of licenses and subsequent registration of amendments to the Articles
of Association with the Board of Trade.
3.4 While waiting for the final formalization for the direct or indirect
transfer of the licenses included in EXHIBIT V, the Parties hereby undertake:
(i) to cause the licensed companies to carry out only such activities and
operations that are essential to maintain and keep the Licenses;
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<PAGE>
(ii) to keep such licenses related to joint operations, pursuant to this
Contract, upon Operational Contacts and, basically, to comply with the agreed
upon interests and the computation of results, taking into consideration
consolidation of assets, operations and services resulting from the adjusted
corporate structure;
(iii) to make the current business feasible by other means that are deemed
necessary to its development and the execution of the purposes provided for in
this Contract;
(iv) to make their best efforts to obtain governmental approval that is deemed
necessary for such license transfer so that they remain, directly or indirectly,
under TVA SUL's ownership.
3.5 The implementation of the act resulting from this Agreement shall take into
consideration the previous authorization by the Ministry whenever they imply the
direct or indirect transfer of the licenses.
3.6 Each Party is responsible to the other for the regularization of the status
regarding the license-related proceedings with the Ministry of Communications,
and further undertakes to comply with, with due diligence, any conditions that
may be required by the Public Power.
3.7 The assignment of the required quotas pursuant to this Agreement on behalf
of TEVECAP S.A. shall be made to TEVECAP S.A. or to the person appointed by said
company.
4. PREVIOUS ASSIGNMENTS AND TRANSFERS - Petrelli is responsible for all of the
acts related to the assignment of quotas and/or respective transfer of the
concessions owned by TV Delta de Curitiba and TV Cabo Servicos de Santa Catarina
Ltda.
5. OPERATIONAL CONTRACTS - The parties irrevocably undertake to implement and
cause to be complied with, as of the present date, all of the business,
technical and operational conditions, upon operational agreements that reflect
the same results targeted hereby, while the corporate restructuring and the
license transfers provided for in this Agreement are not carried out.
6. ORGANIZATION OF TVA SUL, SHAREHOLDING INTEREST AND SHAREHOLDERS' AGREEMENT -
Under the proposed corporate restructuring, it is agreed upon that the company
to be called TVA SUL TELECOMUNICACOES S.A ("Holding") shall be organized and the
Parties thereto shall comply with the Articles of Association, as appropriate,
and the provisions of the present Contract, that shall be ratified by TVA SUL as
Shareholder's Agreement.
6.1 Pursuant to the Corporate Structure resulting from this Contract, it is
hereby agreed that the TVA SUL capital stock shall be divided among the parties
as follows: (i) TEVECAP: eighty seven per cent (87%); and (ii) PETRELLI:
thirteen per cent (13%).
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<PAGE>
6.2 In the event that the purposes and results to be agreed upon by the parties
are reached by PETRELLI within sixty days as of the present date in regard to
Petrelli's performance in the management of the BUSINESS, then TEVECAP shall
transfer to Petrelli, without any charges whatsoever - and within sixty days
(60) as of PETRELLI's notice in this regard, evidencing that said purposes and
results were reached - more two percent (2%) of the total voting stock of TVA
SUL, and it is assured that, in the event of the admission of new members they
shall agree with the provisions herein established and renounce to the right of
first refusal as regards the interest herein provided for.
6.3 The Parties agree to adjust the condition for the admission of a new member
and admit that, in this particular case, they shall have their respective
shareholding interests diluted accordingly.
6.4 Notwithstanding the provisions of item 6.3 above, the Parties agree that, in
the event that the minority shareholder's interest is reduced to a level below
eight per cent of the capital stock, the qualified quorum provided for in item
6.5.4 below shall not be required and PETRELLI shall have the option to sell to
TEVECAP and TEVECAP shall have the obligation to purchase, the whole of its
interest by the market value calculated at such time, according to the
evaluation criterion defined in clause 6.5.1.1.
6.5. This Agreement shall be filed in TVA SUL's head office after being duly
established and registered as SHAREHOLDERS' AGREEMENT in regard to the way the
members shall exercise their respective voting rights related to the company's
management and the reciprocal right of first refusal applicable to the disposal
of stocks or the rights inherent thereto and all of the other issues concerning
the Parties' relationship that were deemed appropriate and hereby establishing
the following provisions that essentially shall be complied with by such
shareholders' agreement, as follows:
6.5.1. In the event of the search for new members to integrate the BUSINESS,
TEVECAP undertakes to increase the value of TVA SUL under the concept of "future
market value" and the dilution of shareholding interests shall be admitted
accordingly.
6.5.1.1. Future market value means the projection for the company's growth,
estimated by the cash flow and projected for ten years as from the present date,
upon the adoption of premises to be agreed upon, calculated at the present value
and adjusted according to a discount rate that shall also be agreed upon by the
parties at the time of such appraisal.
6.5.2 Without prejudice in regard to the provisions of item 6.5.1 above, the
Parties agree that they shall define, in common accord, the value, in legal
tender, the volume, the prices and other conditions for announcing in the media
such issues of the interest of the companies of GRUPO PETRELLI, and the result
thereof may be used, on the prices that may be agreed, and upon approval by
Tevecap Board, by PETRELLI for purposes of capital increase and/or amortization
of his debt with Grupo Abril.
6.5.3. The Parties shall undertake to distribute the maximum profits as possible
after the deduction of legal portions, amortization of debts and capital needs
for fixed assets.
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6.5.4. As long as the minority shareholder PETRELLI holds at least eight per
cent of the voting capital, it shall have vetoing power in regard to the
resolutions concerning the following issues:
(i) any decision in regard to merger, split-up, incorporation dissolution or
liquidation of the company;
(ii) purchase, sale, disposal of, encumbrance or lien upon the company's real
estate in an amount higher than fifty thousand Reais (R$50,000.00);
(iii) acquisition, as well as disposal of, for any purposes whatsoever, or the
constitution of real estate security of the company's fixed assets or inventory,
whose value amounts to more than, in each case, fifty thousand Reais
(R$50,000.00);
(iv) disposal of any industrial property rights and/or transference and/or
license to use the trade-marks and/or patents, either registered or not, owned
by the company;
(v) execution of security, pledge or real estate security agreements to be
granted by the company;
(vi) approval of annual programs and budgets in regard to operation, investments
and financing, as well as the approval of the balance sheet and the statement of
profit and loss;
(vii) approval of dividends out of the net income, whose value amounts to more
than 25% of said net income, for each fiscal year; and the approval for the
capitalization of profits and/or reserves amounting to more than the ones
established by the Annual Budgets;
(viii) any and all amendments to the Articles of Association;
6.5.5. In the event of controversies in regard to the above mentioned relevant
issues subject to a qualified quorum, the parties hereby agree to resolve such
controversies between them by binding arbitration in compliance with an
arbitration clause and they hereby expressly waive any solution via judicial
proceedings.
6.5.5.1 The party requiring the arbitration panel shall explain the
controversial issue, in full detail, and the quotaholders hereby agree to
appoint COOPERS AND LYBRAND, an audit company with its head office in the city
of Sao Paulo, state of Sao Paulo, enrolled with the Taxpayers' List under CGC
Nr. 44.038.248/0001-17 as arbitrator and PRICE WATERHOUSE, a company with its
head office in the city of Sao Paulo, state of Sao Paulo, enrolled with
Taxpayers' List under CGC Nr. 61.562.112/0001-20 as Substitute, who shall
present, upon individual or joint request by the quotaholders, an arbitral
award, within fifteen days, resolving on the necessity, convenience, opportunity
and justification of the intended deliberation.
(i) the arbitrage award shall be rendered by the arbitrator as a sole and final
decision, and said arbitrator shall have the power to pronounce decision in
equity, which shall be fully binding on and accepted by the partners as final
and enforced without possibility of
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<PAGE>
appeal to The Judiciary, providing for specific enforcement, according to
Article 641 of the Civil Procedure Code.
(ii) In the event one of the quotaholders files a suit against the other without
duly complying with the arbitration clause herein provided for, it shall be
required to pay a pre established contractual penalty corresponding to 10% of
the value of its participation in the capital stock to the other party.
(iii) the Company shall undertake to pay the arbitration fees and expenses.
7. MANAGEMENT. The company resulting from this Association Agreement shall be
managed by a Board of Offices which shall be formed by three members. TEVECAP
shall appoint two members to hold two of such positions whereas PETRELLI shall
hold the remaining position.
7.1. The Companies shall be jointly represented by two directors, actively or
passively, who shall have the power to represent the company in any acts or
contracts or in any other disposal or pledge of the company's assets, assumption
or release from obligations and appointment of attorneys-in-fact. Whenever such
acts, per se, result in an amount higher than twenty eight thousand Reais
(R$28,000.00), to be monetarily adjusted, as of this date, by the IGPM/FGV
monthly variation, one of the signatures of the pertinent document shall
necessarily be the one of the director appointed by the minority shareholder
PETRELLI.
8. RESPONSIBILITY FOR PREVIOUS DEBTS. Each party shall be liable before the
other for any debts incurred by the respective controlled companies before the
present agreement was entered into.
8.1. TVA SISTEMA is hereby liable for previous obligations resulting from the
transfer of the net assets of the Curitiba branch to TVA PARANA.
8.2 GRUPO PETRELLI is hereby liable for any debts and contingencies of its
subsidiaries involved in the present association, either existing or that may be
payable in regard to facts that occurred up to the date in which TEVECAP was
admitted to the respective company.
9. ASSIGNMENT AND TRANSFER OF QUOTAS. The assignment or transfer by
any quotaholder of its quotas or shares of the capital stock to third parties,
in whole or in part, shall not be permitted without the selling quotaholder
sending a 30 day's written notice to the other quotaholders, who, for the same
price and conditions, shall have the right of first refusal for the acquisition
thereof.
9.1 Assignment shall be preceded by a notice containing a written proposal of
acquisition, in good faith, by a third party, so that the other party shall have
thirty (30) days as of the receipt of the notice to buy the quotas;
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9.2. In the event the preference is not exercised, then the selling party shall
have the right to assign or transfer to third parties, free of charges, its
quotas of the capital stock within ten (10) days and under the same conditions
provided for in the notice. Any assignments and transfers that do not comply
with the term herein established or with the provisions of the initial proposal
his clause shall be considered null and void.
9.3. Each party may assign or transfer, in whole or in part and without any
charges, its quotas of the capital stock to:
(i) a company in which it holds 50% or more of the capital stock;
(ii) a company or individual that directly or indirectly holds 50% of such
party's capital;
(iii) a company whose 50% or more of the capital stock is directly or indirectly
held by the company that owns more than 50% of the capital stock of said party.
10. STATEMENTS AND GUARANTEES. The parties herein mutually state and attest
that:
(i) the stocks or quotas held in the respective companies are free and
unencumbered of any liens, restriction or claims;
(ii) their situation before the Ministry of Communications as regards compliance
with the legislation and inspection of telecommunications system is under
regular conditions;
(iii) all of the fixed assets used by the companies are owned by it and are free
and unencumbered of any liens or pledges of any nature whatsoever;
(iv) no administrative or judicial process exists involving TVA CURITIBA, TVA
CABO SANTA CATARINA, TV DELTA and TV CABO PARANA;
(v) the licenses and approvals for the exercise of their activities are
regularly in force;
(vi) the undersigned companies to this agreement do not participate in any other
companies, except for the ones included in EXHIBIT I, nor have entered into any
participation contracts with third parties which are related to the object of
this agreement;
(vii) PETRELLI does not have any contracts with third parties, except for the
ones required to carry out its ordinary course of business;
11. NON COMPETITION. The Parties herein mutually undertake and agree not to
engage, directly or indirectly, in any other business related to paid TV via
UHF, MMDS transmission or Cable TV in the regions supplied by the operating
companies, except for previous written agreement by the other party.
12. PROGRAM. GRUPO PETRELLI and the operating companies shall have preference
rights in the acquisition of signals and programs to be distributed to the
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maximum number of tradable channels. Except as otherwise authorized by TEVECAP,
GRUPO PETRELLI and the INTERVENING PARTIES shall not distribute signals and
programs pertaining to TVA's competitors. The operating companies shall be given
preference rights, in the region and the transmission systems in which they
operate, to acquire any of the new programs to be marketed by TVA.
13. TAX PLANNING. The Parties shall draw up a tax planning study with the
purpose of, among other, prevent, as much as possible, the practice of taxable
operations among the companies involved in this association.
14. DURATION. This agreement shall be in force for an initial period of ten (10)
years, or for the same term as determined for the licenses of telecommunications
services, the one that is longer, and henceforth, for equal successive periods.
15. Default in the obligations resulting from this agreement, in due compliance
with the provisions of item 6.5.5, shall cause the specific obligation of making
statements by their will, without prejudice to the reimbursement of damages.
16. This agreement is irrevocable and shall be binding upon and inure to the
benefit of the Parties, their heirs and successors.
17. JURISDICTION. Disputes arising out of this Agreement shall be submitted to
the Courts of the City of Sao Paulo, state of Sao Paulo, whose exclusive
jurisdiction the parties hereby accept.
IN WITNESS WHEREOF, the parties have caused this instrument to be signed in five
(5) counterparts of equal tenor and form, before two (2) witnesses.
Sao Paulo February 15, 1996
TEVECAP S.A.
(signed): Jose Augusto P. Moreira
(signed): Claudio Cesar D'Emilio
TVA SISTEMA DE TELEVISAO S.A
(signed): Robert Civita
(signed): Jose Augusto P. Moreira
TVA BRASIL RAIOENLACES LTDA
(signed): Jose Augusto P. Moreira
(signed): Claudio Cesar D'Emilio
LEONARDO PETRELLI NETO
(signed): Leonardo Petrelli Neto
TV DELTA DE CURITIBA LTDA
(signed): Leonardo Petrelli Neto
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TVA CABO SERVICOS SANTA CATARINA LTDA
(signed): Leonardo Petrelli Neto
(signed): Marcelo Correa Petrelli, by proxy, Leonardo Petrelli
TV CABO SERVICOS PARANA LTDA
(signed): Douglas Duran
(signed): Leonardo Petrelli Neto
TV CURITIBA SERVICOS EM TELECOMUNICACOES LTDA
(signed): Douglas Duran
(signed): Leonardo Petrelli Neto
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Exhibit 10.8
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Services Agreement, dated July 22, 1994, among TVA
Brasil Radioenlaces Ltda., Televisao Show Time Ltda., Abril S.A. and Tevecap
S.A. (including amendments).
By: /s/DOUGLAS DURAN
---------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
SERVICES AGREEMENT
This Agreement for the Rendering of Services (the "Agreement") is entered into
by and between:
(i) TVA BRASIL RADIOENLACES LTDA., a company with head office in the City of Sao
Paulo, State of Sao Paulo, at Rua do Rocio, 313, suites 101 and 111, registered
as General Taxpayer under no. 50.884.495/0001-49, hereinafter simply called "TVA
Brasil";
(ii) TELEVISAO SHOW TIME LTDA., a company with head office in the City of Sao
Paulo, State of Sao Paulo, Brazil, at Rua do Rocio 313, suite 113, registered as
General Taxpayer under no. 58.535.477/0001-51, hereinafter simply called "TV
Show Time";
(iii) ABRIL S.A., a corporation with head office in the City of Sao Paulo, State
of Sao Paulo, Brazil at Av. Afonso Bovero, 52, registered as Corporate Taxpayer
under no. 44.597.052/0001-62, hereinafter simply called Abril; and
(iv) TEVECAP S.A., a corporation with head office in the City of Sao Paulo,
State of Sao Paulo, Brazil, at Rua do Rocio 313, suite 101 (part), registered as
Corporate Taxpayer under no. 58.535.477/0001-51, hereinafter simply called
"Tevecap";
WHEREAS TVA Brasil, TV Show Time and Abril (hereinafter collectively called
"Licensees") are the holders or beneficiaries of the licenses and permits
("Licenses and Permits", which definition includes all licenses and permits held
on this date or that may be held in connection with the Business) specified in
the Exhibit hereof;
WHEREAS Tevecap and its Subsidiaries intend to exploit the subscription
television programming and the activities of distribution thereof according to
the terms of the Licenses and Permits and pursuant to the terms and conditions
of this Agreement;
WHEREAS the Licensees and Tevecap intend to make the registration of certain
agreements entered into by them concerning the exploitation of the Business
pursuant to the Licenses and Permits;
The parties have agreed and contracted as follows:
Clause 1. - DEFINITIONS
As used in this Agreement, the following terms shall have the following
meaning:
"Public Authority" shall mean the Ministry of Telecommunications and any
other public body or governmental agency that has regulatory power over the
telecommunication activities carried out in the Brazilian territory.
"Assets" shall mean any and all rights of any nature of TVA Brasil and TV
Show Time, as well as any rights of any nature of Abril that may be held or used
by the Licensees in connection with the Business.
<PAGE>
"MMDS, DTH, VHF and UHF" shall mean the following technologies,
respectively: (i) Multi-Point Multi-Channel Distribution System; (ii) satellite
broadcasting directly to residences (Direct-to-Home); (either in the C Band, Ku
Band or other frequency); (iii) Very High Frequency; and (iv) Ultra High
Frequency.
"MTV Brasil" shall mean the combination of all investments and interests
of Mr. Robert Civita, Abrilcap Comercio e Participacoes Ltda. and related
companies in the Music Television Network developed under license or licenses
granted by MTV Networks, a division of Viacom International, Inc., either by UHF
distribution or by any other type of distribution and all assets (including
transmission and broadcasting equipment) and rights exercised or guaranteed by
said licenses, provided that said rights are not comprised in the definition of
Business and all responsibility and liabilities relating to said activities
(including the ones that may be included in the definition of Business).
"Business" shall mean the activity of distribution of subscription
television (either through MMDS, DTH, cable direct transmission (including
without being limited to coaxial cable and optical fiber cable), VHF, UHF or
other transmission or air emission of signals or any other manner) and all
activities (either creation, development, production, purchase, sale, licensing,
distribution or any other manner) relating to programming that may be
distributed as subscription television, in any hypothesis as negotiated at this
time and in the future, except as to MTV Brasil, except and provided that MTV
Brasil is incorporated into the Business.
"Subsidiaries" shall mean at any specific time any legal entity which has
its matters and policies directly or indirectly controlled by Tevecap, or which
Tevecap has the powers to control, either by virtue of stock participation,
contractual arrangements or due to the powers to elect the members of the
council or by any other reason.
Clause 2. - TRANSFER OF RIGHTS OF USE
Subject to the terms and conditions hereof, Licensees hereby agree to
transfer, as it is hereby transferred with exclusivity and without any costs, to
Tevecap and its Subsidiaries all rights of use and exploitation of the Licenses
and Permits and of the Assets.
Clause 3. - NON-TRANSFERABILITY OF TITLE
Notwithstanding any other express or implied provision hereof, Licensees
shall remain (i) the sole and exclusive owners of the Licenses, Permits and
Assets; (ii) the sole and exclusive contractual parties pursuant to the
agreements entered into with the Public Authority or public acts of the Public
Authority relating to each of the Licenses and Permits; and (iii) solely and
exclusively liable before the Public Authority for any contractual and legal
obligations undertaken before the Public Authority concerning the granting or
concession of each of the Licenses and Permits.
-2-
<PAGE>
Clause 4. - REPRESENTATIONS AND WARRANTIES BY LICENSEES
Licensees jointly and severally declare and warrant to Tevecap that on the
date of this Agreement:
a. Authorization and Representation
Licensees have full powers and are duly authorized by their articles of
incorporation or articles of association to enter into this Agreement and to
carry out the transactions contemplated herein. The execution of this Agreement
by Licensees and the implementation of the transactions contemplated herein were
duly and legally authorized by the Licensees' shareholders or quotaholders and
no other procedure by the Licensees is necessary to authorize the execution of
this Agreement or to authorize the implementation of the transactions
contemplated herein. This Agreement was duly and validly executed, is
individually enforceable by Licensees and constitutes a legal, valid and binding
agreement to each Licensee, enforceable against each of the Licensees pursuant
to its terms.
b. Consents and Approvals
The execution of this Agreement by Licensees or the implementation of the
transactions contemplated herein or compliance with the provisions hereof does
not require that either Licensee makes the registration with or notify or obtain
any license, authorization, consent or approval from any governmental or
regulatory agency or authority including, without being limited to, the Public
Authority.
c. Non-Violation
Execution of this Agreement by Licensees and the assumption of and
compliance with the obligations established herein and undertaken by Licensees
are not in conflict with or result from violation of the charter or by-laws of
the Licensees, laws or regulations and do not constitute default (or fact that
upon lapse of time or notice or both may constitute default) in accordance with
any of the terms, clauses, conditions or provisions of any credit instrument,
negotiable instrument, mortgage, trust deed, license, franchise, permit,
leasing, agreement, contract or any other instrument, commitment or obligation
or any order, decree, injunction or determination to which any of the Licensees
may be a party or by which any of the parties or their respective properties or
assets may be bound.
d. Governmental Authorizations and Regulations
(i) The Licenses and Permits are in full force and effect and the title
thereof is held by Licensees; (ii) to the best of Licensees' knowledge no action
to amend, suspend, revoke, cancel, terminate or in any other manner restrict the
Licenses or Permits is now pending or is threatened to be filed; (iii) all
registrations, notices, communications and other documents necessary to make the
proper renewal or issuance of the Licenses and Permits in due time and as
necessary to carry out the Business as presently conducted and as intended by
Licensees and by Tevecap in the next year were made, sent or in any other manner
given; and (iv) no adverse administrative or governmental action was taken or
may be taken
-3-
<PAGE>
concerning any of the Licenses and Permits. Neither of the Licenses or Permits
were or shall be adversely affected in any manner by or shall expire or
terminate due to any of the transactions contemplated herein. The Licenses and
Permits are held by Licensees pursuant to all applicable laws, rules and
directives and the Licensees have not received any notice of any alleged
violation of any of the above mentioned Licenses and Permits.
e. Validity
The above representations and warranties made by Licensees shall remain in
full force and effect during all the time this Agreement remains in force.
Clause 5. - LICENSEE'S OBLIGATIONS
Licensees jointly and severally undertake the following obligations before
Tevecap:
a. to maintain free and clear from any liabilities, encumbrances and
burden of any nature and effectively to contest and endeavor their best
efforts to terminate and overcome any opposition in connection with all
licenses, authorizations, permits and concessions that may have been
granted or assigned to them or that are held to their benefit; to apply
for and to endeavor their best efforts to obtain from the Federal
Government all licenses, authorizations, permits and concessions that are
or may be required to carry out and expand the Business to Tevecap, its
Subsidiaries or, in the event same cannot be granted to Tevecap or its
Subsidiaries (and held to the benefit of Tevecap and its Subsidiaries) and
should same not be held by Tevecap or its Subsidiaries, said licenses,
authorizations, permits and concessions shall be ipso facto subject to the
terms and conditions thereof;
b. up to December 31, 1994, to take all possible steps to transfer all
Licenses and Permits and Assets relating to MMDS to Tevecap and its
Subsidiaries;
c. to transfer, effective before the governmental authorities including,
without being limited to, the Public Authority and third parties, all
their Licenses and Permits and their Assets, free and clear from any
burden, encumbrance or lien of any nature to Tevecap and its Subsidiaries,
as soon as possible;
d. as soon as possible but in any event not later than July 29, 1994, to
make the registration of this Agreement with the proper Registry of Deeds
and Documents ("Cartorio de Titulos e Documentos"), assuring that all
Licenses and Permits subject to this Agreement cannot be transferred to
any person other than Tevecap and its Subsidiaries;
e. except as to Abril, not to have any employee and business or operation
other than the title to the Licenses and Permits and Assets to the benefit
of Tevecap and its Subsidiaries and to assure that all Licenses and
Permits and Assets are available to Tevecap and its Subsidiaries pursuant
to the terms hereof and in compliance with the provisions of this
Agreement and not to incur in any debt, liability or obligation or acquire
any asset or right other than in accordance with this Agreement;
-4-
<PAGE>
f. upon Tevecap's request, to take any measures that may be reasonably
necessary or advisable to protect the right of Tevecap and its
Subsidiaries of using Licensees' Licenses and Permits and the Assets;
g. upon Tevecap's request, to take all necessary measures, including to
make the registration of the proper documents with the proper public
registration offices in order to make evident that the Licenses and
Permits and the Assets cannot be transferred or assigned to any person
other than Tevecap and its Subsidiaries.
Clause 6. - VALIDITY
a. This Agreement shall enter into force on the date of its execution and shall
remain in force for a period of fifteen (15) years thereafter.
b. In the event there is no written communication by either party through the
Registry of Deeds and Documents on its intent of not renewing this Agreement at
least four months prior to expiration hereof this Agreement shall be
successively renewed for two-year periods.
Clause 7. - JURISDICTION
The parties elect the Courts of the City of Sao Paulo, State of Sao Paulo,
Brazil, to exclusively solve any dispute or claim arising herefrom or in
connection herewith.
Clause 8. - ASSIGNMENT
This Agreement and any of the rights, interests or obligations in
connection with the terms hereof cannot be assigned by either party without the
prior and written consent of the other parties.
Clause 9. - CONSTRUCTION
The headings of the clauses and sections hereof are for reference purposes
only, are not part of the agreement between the parties and in no way affect the
meaning or construction of the provisions hereof.
Clause 10. - SCOPE AND REVOCATION
This Agreement, including the documents, exhibits, certificates and
instruments mentioned herein represent the entire agreement between the parties
concerning the obligations established herein. There is no other restriction,
promise, representation, warranty, commitment or obligation other than the ones
expressly established or mentioned herein or therein. Except as to the powers of
attorney granted by TVA Brasil and TV Show Time on May 31, 1994 and on July 30,
1992, respectively, a copy of which is attached hereto, this Agreement
supersedes and revokes all other prior agreements between the parties in
connection with said obligations including, without being limited to, the
Private Instrument of Operating Agreement for Special Service of Subscription
Television
-5-
<PAGE>
entered into on November 30, 1991, between TVA Brasil, TV Show Time and
Televisao Abril (Abril's predecessor).
And, being thus agreed and contracted, the parties sign this Agreement on the
date first written above.
Sao Paulo, July 22, 1994.
TV BRASIL RADIOENLACES LTDA., by Robert Civita and Claudio Cesar D'Emilio
(follow both signatures).
TELEVISAO SHOW TIME LTDA., by Robert Civita and Claudio Cesar D'Emilio (follow
both signatures).
ABRIL S.A., by Robert Civita and Angelo Silvio Rossi (follow both signatures).
TEVECAP S.A., by Claudio Cesar D'Emilio and Angelo Silvio Rossi (follow both
signatures).
Witnesses: (follow two signatures)
-6-
<PAGE>
FIRST AMENDMENT TO THE SERVICES AGREEMENT
This First Amendment to the Services Agreement (the "Amendment") is entered into
by and between:
(i) TVA BRASIL RADIOENLACES LTDA., a company with head office in the City of Sao
Paulo, State of Sao Paulo, at Rua do Rocio, 313, suites 101 and 111, registered
as General Taxpayer under no. 50.884.495/0001-49, hereinafter simply called "TVA
Brasil";
(ii) TELEVISAO SHOW TIME LTDA., a company with head office in the City of Sao
Paulo, State of Sao Paulo, Brazil at Rua do Rocio 313, suite 113, registered as
General Taxpayer under no. 58.535.477/0001-51, hereinafter simply called "TV
Show Time";
(iii) ABRIL S.A., a corporation with head office in the City of Sao Paulo, State
of Sao Paulo, Brazil at Av. Afonso Bovero, 52, registered as Corporate Taxpayer
under no. 44.597.052/0001-62, hereinafter simply called Abril; and
(iv) TEVECAP S.A., a corporation with head office in the City of Sao Paulo,
State of Sao Paulo, Brazil, at Rua do Rocio 313, suite 101 (part), registered as
Corporate Taxpayer under no. 58.535.477/0001-51, hereinafter simply called
"Tevecap";
WHEREAS the above qualified parties entered into a Services Agreement (the
"Services Agreement") on July 22, 1994, in connection with all Licenses and
Permits held by Licensees;
The parties have agreed and contracted to amend the Services Agreement as
follows:
1. For purposes of construction hereof the terms used but not defined herein
shall have the same meaning established in the Services Agreement.
2. Item 5(b) of the Services Agreement is amended and shall hereinafter read as
follows:
(b) Licensees undertake to submit to the Tevecap's Administrative Council,
up to December 31, 1995 (i) the status of transfer of all Licenses and
Permits and Assets relating to MMDS to Tevecap and/or its Subsidiaries:
(ii) material information and advice to be observed concerning the
transfer of all Licenses and Permits and Assets relating to MMDS to
Tevecap and/or its Subsidiaries;
3. Item 5(c) of the Services Agreement is amended and shall hereinafter read as
follows:
(c) as soon as possible but in any event after termination of the
respective compulsory legal terms that prohibit transfer of title, to
transfer, effective before the governmental authorities including, without
being limited to, the Public Authority and third parties, all their
Licenses and Permits and their Assets, free and clear from any burden,
encumbrance or lien of any nature to Tevecap and/or its Subsidiaries;
<PAGE>
4. The parties hereby give mutual, general, full and irrevocable release of any
non-compliance with or violation of the terms and conditions of Clause 5(b) of
the Services Agreement by either party; and, concerning Clause 5(e) of the
Services Agreement, said release refers exclusively to the acts described in
Clause 4.12 of the document called "Stock Purchase Agreement", signed on this
date.
5. All other terms, clauses and conditions of the Services Agreement remain
unchanged.
6. The parties elect the Courts of the City of Sao Paulo, State of Sao Paulo,
Brazil, to exclusively solve any dispute or claim arising herefrom or in
connection with this Amendment.
And, being thus agreed and contracted, the parties sign this Agreement on the
date first above written.
Sao Paulo, August 23, 1995
TV BRASIL RADIOENLACES LTDA., (follow two signatures).
TELEVISAO SHOW TIME LTDA., (follow two signatures).
ABRIL S.A., (follow two signatures).
TEVECAP S.A., (follow two signatures).
Witnesses: (follow two signatures)
-2-
<PAGE>
SECOND AMENDMENT TO THE SERVICES AGREEMENT
This Second Amendment to the Services Agreement (the "Second Amendment") is
entered into by and between:
(i) TVA BRASIL RADIOENLACES LTDA., a company with head office in the City of Sao
Paulo, State of Sao Paulo, at Rua do Rocio, 313, suites 101 and 111, registered
as General Taxpayer under no. 50.884.495/0001-49, hereinafter simply called "TVA
Brasil";
(ii) TELEVISAO SHOW TIME LTDA., a company with head office in the City of Sao
Paulo, State of Sao Paulo, Brazil, at Rua do Rocio 313, suite 113, registered as
General Taxpayer under no. 58.535.477/0001-51, hereinafter simply called "TV
Show Time";
(iii) ABRIL S.A., a corporation with head office in the City of Sao Paulo, State
of Sao Paulo, Brazil, at Av. Afonso Bovero, 52, registered as Corporate Taxpayer
under no. 44.597.052/0001-62, hereinafter simply called Abril; and
(iv) TEVECAP S.A., a corporation with head office in the City of Sao Paulo,
State of Sao Paulo, Brazil, at Rua do Rocio 313, suite 101 (part), registered as
Corporate Taxpayer under no. 58.535.477/0001-51, hereinafter simply called
"Tevecap";
WHEREAS the above qualified parties entered into a Services Agreement (the
"Services Agreement") on July 22, 1994, in connection with all Licenses and
Permits held by Licensees, which agreement was thereafter amended by means of
the First Amendment to the Services Agreement entered into on August 23, 1995
(the "First Amendment"); and
WHEREAS the parties have decided to amend once more the referred Services
Agreement so as to clarify some obligations established therein and established
in the First Amendment;
The parties have agreed and contracted to amend the Services Agreement as
follows:
1. For purposes of construction hereof the terms used but not defined herein
shall have the same meaning established in the Services Agreement.
2. It is hereby established that up to December 31, 1995, on which date
Licensees shall submit to the Tevecap's Administrative Council the information
set forth in Clause 5(b) of the Services Agreement (with the wording given by
the First Amendment), Licensees shall also submit a definitive timetable for
submission to the Ministry of Communications of the applications for transfer of
all Licenses and Permits relating to MMDS to Tevecap and/or its Subsidiaries. It
is hereby established that in said event said timetable shall establish the
filing of said applications up to December 31, 1995, with the exception of the
MMDS License for Porto Alegre-RS, which shall be transferred after the start-up
of its operations.
3. Further to the provision of Clause 5(c) of the Services Agreement (with the
wording given by the First Amendment thereto) Licensees undertake to endeavor
all efforts to obtain from the Ministry of Communications a special
authorization to transfer to Tevecap and/or its Subsidiaries, as soon as
possible according to the new legislation or according to the
<PAGE>
new laws and regulations that may be enacted in the future, all Licenses and
Permits relating to UHF. The License for open television referring to Channel 32
- - UHF of Sao Paulo - SP granted to Abril S.A./MTV is an exception to this
provision.
4. Licensees also undertake to maintain under their control and subject to the
provisions of the Services Agreement any and all Licenses and Permits that may
have been granted up to the present date to any company directly or indirectly
related to Licensees or their controlling shareholders and/or quotaholders. If
during the life of the Services Agreement any other License or Permit is granted
by the Ministry of Communications to such company directly or indirectly related
to the Licensees' controlling shareholders and/or quotaholders, same shall be
subject to the Services Agreement so that within the scope of the Services
Agreement all Licenses and Permits granted to the parties and that cannot be
immediately transferred to Tevecap and/or its Subsidiaries and/or to Tevecap's
and/or its Subsidiaries' controlling shareholders and/or quotaholders are
maintained under the control of Tevecap and/or its Subsidiaries. The Licenses
and Permits granted to companies in which Tevecap and/or its Subsidiaries or
Tevecap's and/or its Subsidiaries' controlling shareholders and/or quotaholders
have minority interest are not included in this provision; it is however
established that if at any time during the life of the Services Agreement
Tevecap and/or its Subsidiaries or Tevecap's and/or its Subsidiaries'
controlling shareholders or quotaholders come to take control of any of the
referred companies, the Licenses and Permits granted to same shall become
immediately subject to the Services Agreement.
5. The parties agree to maintain the Services Agreement and the Amendments
thereto in force for the time required to achieve the purpose of definitively
transferring to Tevecap and/or its Subsidiaries all Licenses and Permits granted
to the Licensees and/or to their controlling shareholders and/or quotaholders.
6. All other terms, clauses and conditions of the Services Agreement shall
remain unchanged.
7. The parties elect the Courts of the City of Sao Paulo, State of Sao Paulo,
Brazil, to exclusively solve any dispute or claim arising herefrom or in
connection with this Second Amendment.
-2-
<PAGE>
And, being thus agreed and contracted, the parties sign this Agreement on the
date first written above.
Sao Paulo, November 30, 1995
TV BRASIL RADIOENLACES LTDA., (follow two signatures).
TELEVISAO SHOW TIME LTDA., (follow two signatures).
ABRIL S.A., (follow two signatures).
TEVECAP S.A., (follow two signatures).
Witnesses: (follow two signatures)
-3-
<PAGE>
Exhibit 24.1
Powers of Attorney for Tevecap S.A. and each of the Guarantors
(included in signature pages to the Registration Statement)
<PAGE>
Exhibit 99.1
I hereby certify that the exhibit attached hereto is a fair and accurate
English translation of the Authorization of the Central Bank authorizing the
issuance of the Notes.
By: /s/ Douglas Duran
---------------------------
DOUGLAS DURAN
Attorney-in-fact
Date: February 21, 1997
<PAGE>
CENTRAL BANK OF BRAZIL
Fiscalization and Registration of Foreign Capital
PREVIOUS AUTHORIZATION
AUTHORIZATION NO. 10-1-96/00515
Deadline for Entry of the Funds: 12.13.1996
The Central Bank of Brazil, pursuant to the legislation in force, authorizes the
following transaction, as per application submitted on 10.28.1996:
1. DEBTOR:
TEVECAP S.A.
Rua do Rocio, 313, suite 101 (part)
04552-904 - Sao Paulo (SP)
Tel: (011) 821.8711
Fax: (011) 821.8770
Corporate Taxpayer Registration no. 57.574.170/0001-05
Field of Activities: (IBGE classification): 64.20-3
Legal Nature: 41
- -------------------------------------------------------------------------------
2. CREDITOR(S):
CHASE SECURITIES INC. (issuance and placement agent)
New York - United States of America
CHEMICAL TRUST AND BANKING CO. LTD. (JAPAN) (payment agent)
Tokyo, Japan
Legal Nature: 63
- -------------------------------------------------------------------------------
3. GUARANTORS:
TVA SISTEMA DE TELEVISAO S.A.
Sao Paulo (SP)
Corporate Taxpayer Registration no. 71.613.400/0001-10
<PAGE>
TVA BRASIL RADIOENLACES LTDA.
Sao Paulo (SP)
Corporate Taxpayer Registration no. 58.884.495/0001-49
Legal Nature: 42
TVA COMMUNICATIONS LTD.
British Virgin Islands
TVA SUL PARTICIPACOES S.A.
Curitiba (PR)
Corporate Taxpayer Registration no. 01.201.577/0001-24
GALAXY BRASIL S.A.
Sao Paulo - SP
Corporate Taxpayer Registrtion no. 00.497.373/0001-10
TELEVISAO SHOW TIME LTDA.
Sao Paulo - SP
General Taxpayer Registration no. 58.535.477/0001-51
COMERCIAL CABO TV SAO PAULO LTDA.
Sao Paulo - SP
General Taxpayer Registration no. 65.791.444/0001-38
TVA PARANA LTDA.
Curitiba (PR)
TVA ALPHA CABO LTDA.
Curitiba (PR)
CCS CAMBORIU CABLE SYSTEM DE TELECOMUNICACOES LTDA.
Balneario Camboriu (SC)
TCC TV A CABO LTDA.
Curitiba (PR)
TV SUL FOZ DO IGUACU LTDA.
Foz do Iguacu (PR)
- -------------------------------------------------------------------------------
2
<PAGE>
4. CHARACTERISTICS OF THE OPERATION:
Cash loan through issuance of Senior Fixed Rate Notes in the international
market under a Public Placement system. Directive no. 2.384, of November 26,
1993. Purpose: working capital
- -------------------------------------------------------------------------------
5. VALUE:
US$300,000,000.00 (three hundred million United States dollars)
- -------------------------------------------------------------------------------
6. INTEREST:
Up to 14.75% per year, incident upon the outstanding balance of principal as
from the date of entry of the funds into the Country.
- -------------------------------------------------------------------------------
7. OTHER CHARGES:
a) Underwriting Commission: up to 3.25% of the value entering into the
country;
b) Premium for the exercise of the Put Option (5 years): up to 1% of the
repaid value;
c) Premium for redemption at final maturity date (8 years): up to 5% of the
repaid value;
d) General Expenses: reasonable expenses, up to the maximum value of
US$700,000.00 (seven hundred thousand United States dollars) for the total
value of the operation (US$300 million) comprising the expenses in Reais
and in foreign currency.
- -------------------------------------------------------------------------------
8. INCOME TAX AND IOF:
A) INCOME TAX:
A.1.- PAYMENT ON FINAL MATURITY DATE (8 YEARS): not applicable
NOTE: the income tax reduction, in the manner set forth in Directive no. 2.661,
of 02.08.1996, will only be effective if at the time of application for
registration of the present transaction the
3
<PAGE>
applicant submits a Clearing Certificate of Debt issued by the INSS - National
Social Security Institute, proving non-existence of debts to the Social
Security, pursuant to Law no. 8212, of 07.24.1991.
A.2. - SHOULD THE PUT OPTION BE EXERCISED (see item "J" of the field 11. Notes):
by Debtor, incident upon interest and other charges;
B.IOF (Directive MF no. 241, of 10.31.1996): not applicable.
- -------------------------------------------------------------------------------
9. DATE OF ENTRY OF THE FUNDS INTO THE COUNTRY:
Estimated date: November 11, 1996
NOTES:
1) At least five business days prior to the date of entry the above indicated
date shall be confirmed or a new date shall be established, through
correspondence to be sent to fax no. (061) 414.2927, addressed to FIRCE/DIAUT;
2) Should the date not be confirmed or, if confirmed, should the exchange
operation not be carried out, this previous authorization will be automatically
cancelled by SISBACEN;
3) The closing of the exchange operation shall be immediately communicated by
debtor through correspondence to be sent to fax no. (061) 226.3441, to
FIRCE/DIDEX/SUDEM.
- -------------------------------------------------------------------------------
10. PAYMENT CONDITIONS:
10.1 PRINCIPAL
In one single installment, eight years after the date of entry of the funds into
the Country;
Note: see item "J" of item 11. Notes.
10.2 INTEREST:
Semi-annually due;
4
<PAGE>
10.3 OTHER CHARGES:
a) Underwriting Commission: on the date of entry of the funds into the
country;
b) Premium for the exercise of the Put Option (5 years): together with repaid
principal, due only in the event the put option is exercised in the 60th month
as from the date of admittance of the funds into the Country;
c) Premium for redemption at final maturity date (8 years): together with
repaid principal, due only in the event the put option is exercised in the 96th
month as from the date of admittance of the funds into the Country;
d) General Expenses: after issuance of the Certificate of Registration,
through submission of evidence, in reais, except as to the ones incurred into
abroad and that can only be paid in foreign currency.
- -------------------------------------------------------------------------------
11. NOTES
A. For purposes of entry of the funds into the Country the provision of
Article 2 of Circular Letter no. 2491, of 10.19.1994 is applicable to this
authorization.
B. Nature of the operations: 70.425.
C. Any remittance abroad based on this authorization is prohibited, except as
to the Commission (see item 10. Payment Conditions).
D. This operation shall comply with the following special exchange system;
D.1. Contracting of type 3 - exchange (corresponding to entry of 100% of the
funds);
D.2. Contracting of type 4 - exchange (corresponding to payment of the
Commission);
D.3. Liquidation of the types 3 and 4 of exchange operations shall be made
as follows:
TYPE 03:
Upon effective entry of the funds corresponding to 100% of the nominal
value, with deduction of the Commission;
5
<PAGE>
TYPE 04:
Without financial transactions for the portion not corresponding to
effective entry of the funds (Commission).
E. Upon lapse of the deadline for entry of the funds this authorization shall
be returned to this Central Bank to be canceled.
F. The credit instruments relating to this loan shall be issued in the same
currency indicated in this authorization.
G. The registration application shall be submitted up to thirty days after
exchange closing. At the time of submission the applicant shall identify the
dates for payment of the installments of the loan (day, month and year) and
shall submit evidence of the date of entry of the funds into the Country.
H. Origin of the funds: new entry.
I. This authorization is granted based on the statements made and documents
presented by the promising agents and issuer, and this Bank reserves the right
of investigation the correctness and truthfulness thereof, based on Article 62
of Decree no. 55.672 of 02.17.1965. Collection or payment, under any title, in
national or foreign currency, of charges that are not expressly approved by the
Central Bank or any inaccuracy in the statement or documents will automatically
cause the cancellation of this authorization.
J. At the end of the fifth year as from the date of entry of the funds into
the Country the put option (acceleration of maturity of principal by creditor)
may be exercised at the maximum price of 100% of face value. In said event, the
bank intervening in the contracting of the exchange shall have the obligation of
sending to the Central Bank of Brazil - FIRCE/DIDEX (Brasilia - DF), together
with the Certificate of Registration, a copy of the DARF proving payment of the
taxes due (see item 8. Income Tax and IOF).
L. This authorization cancels and supersedes prior authorization no. 10-1-
96/00451, of October 14, 1996.
CENTRAL BANK OF BRAZIL - FISCALIZATION AND REGISTRATION OF FOREIGN CAPITAL
Brasilia, November 13, 1996.
Vilma A. de Araujo Olivieri (follows a signature)
Haroldo Sergio Alves Pereira (follows a signature)
6
<PAGE>
Exchange Operation - Bank - 375 - Place - 5885 - No. 97/000155
Value: US$88,125.00 - Corresponding to R$91,791.00
Income Tax - Receipt - DARF Date: 01.13.1997 Value: R$16,198.41
Nature of the Remittance - Period
Technical Assistance:
Royalties:
Others (Specify) - General Expenses
Place and Date: Sao Paulo, January 13, 1997
Intervening Bank: Bank Fenicia S.A.
Authorized Signature
- -------------------------------------------------------------------------------
Exchange Operation - Bank - 375 - Place - 5885 - No. 97/000467
Value: US$73,125.00 - Corresponding to R$76,269.38
Income Tax - Receipt - DARF Date: 01.27.1997 Value: R$13,459.30
Nature of the Remittance - Period
Technical Assistance:
Royalties:
Others (Specify) - General Expenses
Place and Date: Sao Paulo, January 27, 1997
Intervening Bank: Banco Fenicia S.A.
Authorized Signature
- -------------------------------------------------------------------------------
Exchange Operation - Bank - 375 - Place - 5885 - No. 97/000465
Value: US$95,000.00 - Corresponding to R$99,085.80
Income Tax - Receipt - DARF Date: 01.27.1997 Value: R$17,485.59
Nature of the Remittance - Period
Technical Assistance:
Royalties:
Others (Specify) - General Expenses
Place and Date: Sao Paulo, January 27, 1997
Intervening Bank: Banco Fenicia S.A.
Authorized Signature
7
